Authored By: Tselane Johannah Moatshe
University of South Africa
- Case Title & Citation
The full case name is Edward Nathan Sonnenberg Inc v Hawarden \ [2024] ZASCA 90; 2024 (5) SA 9 (SC).1
- Court Name & Bench
The Supreme Court of Appeal of South Africa decided the matter. 2 The coram consisted of Tlaletsi and Dawood AJJA, Ponnan, Dambuza, and Goosen JJA.3
- Date of Judgment
The appeal hearing took place on May 8, 2024.4
The judgement was given electronically on June 10, 2024, at 11:00.5
4. Parties Involved
A law firm of attorneys called Edward Nathan Sonnenberg Inc. (ENS) was the appellant.6
Ms Judith Mary Hawarden was the respondent.7
The Johannesburg High Court’s Gauteng Division filed this appeal (Mudau J).8
- Facts of the Case (chronological)
On May 23, 2019, Ms Hawarden consented to pay R6 million to buy a property from the Davidge Pitts Family Trust.9
In an email sent that morning, Pam Golding Properties (PGP) asked her to transfer R500,000 into its trust account and specifically warned her about cybercrime, recommending that she confirm her banking information over the phone.10 Before making the deposit that same day, she called Mr Prince Lukhele at PGP to confirm the account.11
Communication with Ms Hawarden about the transfer documents was copied, and the buyer engaged ENS as a conveyancer.12
Ms Hawarden received a letter from Ms Eftyhia Maninakis, an ENS secretary, on August 20, 2019, including the necessary ENS banking information. However, the correspondence was intercepted by a cybercriminal who had already gained access to Ms Hawarden’s email account.13
On August 21, 2019, Ms Hawarden got a phoney email claiming to be from Ms Maninakis, which contained fictitious “ENS” financial information.14 That day, she called Ms Maninakis to discuss payment options in the event that guarantees could not be provided by September 3, 2019, and she was informed that a direct transfer would be acceptable.15
Ms Maninakis later sent an email containing ENS information and a FNB cybercrime warning on August 21, 2019, but Ms Hawarden did not receive it; instead, the fraudster sent her a spoof follow-up email.16
The attachment deleted the cybercrime warning and replaced it with fake financial information, and the spoof address changed “africa” to ” afirca.”17 A Standard Bank representative informed Ms Hawarden that a guarantee would take 14 working days when she went there for help on August 22, 2019, and they also talked about guarantees versus EFT.18
When she asked Mr Arshad Carrim, an ENS associate, about interest on deposits while she was in the bank, he informed her that Standard Bank’s money market rate was higher than ENS’s trust rate.19
She then used the fake details to arrange a payment while she was still at the bank, transferring R5.5 million into the fraudster’s FNB account without first calling to confirm ENS’s information.20
The money was irretrievably lost when her following proof-of-payment email was intercepted and changed, postponing detection.21
August 29, 2019, was the date the fraud was uncovered.22
- Issues Raised
For a delictual claim resulting from an omission that caused pure economic loss, the SCA limited its analysis to determining whether the respondent had proven wrongfulness.23
- Arguments of the Parties
Ms Hawarden argued that ENS had a legal obligation to warn about BEC dangers, provide advice on safer payment methods (such as bank guarantees), and demand or assist verification by secure means instead of standard email for high-value transactions.24
Given her relative susceptibility and the sophistication of ENS and the ubiquity of BEC, she argued that it was acceptable to impose a legal duty.25 In its defence, ENS claimed that the hack happened in Ms Hawarden’s email account and not ENS’s systems, argued that the seller had appointed it, and stated that payment could be made by guarantee or acceptable commitment.26 Instead, ENS claimed contributory negligence and denied wrongfulness and negligence.27
- Judgment / Final Decision
The SCA maintained the appeal along with costs, including legal fees.28 It overturned the ruling of the High Court and substituted an order rejecting Ms Hawarden’s claim together with costs, including two counsels’ fees.29
- Legal Reasoning / Ratio Decidendi
Pure economic loss claims are not often recognised by South African law, and careless causing of such damage does not automatically constitute wrongdoing.30 Different from the fault inquiry, wrongfulness is based on a court policy determination consistent with constitutional norms of whether it is appropriate to impose liability for the defendant’s actions.31
The Court underlined the policy danger of indeterminate liability in the event that creditors who email debtors their banking information were also held liable.32 It emphasised the standard of a plaintiff’s susceptibility to risk, pointing out that in cases where a plaintiff could have prevented harm, that factor is weighed against wrongfulness.33
In this case, Ms Hawarden’s loss was caused by a breach in her email account; she had previously received a warning about BEC from PGP and had successfully confirmed the deposit details.34
Before completing the EFT, she could have easily confirmed ENS’s account with Ms Maninakis or Mr Carrim (or through the bank staff helping her), giving her plenty of protection.35
Since the cybercriminal was fully integrated into her email account by the time of the pertinent communications, the risk had already materialised, making any further warning from ENS “meaningless.”36
Considering these factors, there was no solid policy foundation to impose a legal obligation on ENS for the omission, and ENS should not be held accountable instead of the payer.37
- Conclusion / Observations
The SCA declined to extend delictual liability for pure economic loss in cases where the plaintiff had means to avoid risk and were recognizing such a duty could trigger indeterminate liability in routine email practices.38
11.Bibliography
- Edward Nathan Sonnenberg Inc v Hawarden \ [2024] ZASCA 90; 2024 (5) SA 9 (SCA).
1 Edward Nathan Sonnenberg Inc v Hawarden \ [2024] ZASCA 90; 2024 (5) SA 9 (SCA) (neutral citation and report).
2ibid (Delivery).
3ibid (Coram).
4ibid (Heard: 8 May 2024).
5ibid (Delivered: 10 June 2024; time).
6ibid (appellant described).
7ibid (respondent described).
8ibid (appeal from Gauteng Division; Mudau J).
9ibid \ [2] (R6 million purchase).
10 ibid \ [2] \ [[3] cybercrime warning by PGP.
11 ibid \ [3] (deposit paid after verification).
12 ibid \ [3] (ENS appointment & communications).
13 ibid \ [4] (email & interception).
14 ibid \ [4] (fraudulent email).
15 ibid \ [4] (telephone discussion).
16 ibid \ [5] (cybercrime warning email).
17 ibid \ [5] (spoofed email details).
18 ibid \ [6] (Standard Bank guarantee discussion).
19 ibid \ [6] (call to ENS associate).
20 ibid \ [7] \ [[8].
21 ibid \ [8] \ [[11].
22 ibid \ [11] (discovery date).
23 ibid [16] (focus on wrongfulness).
24 ibid \ [12] \ [[14] (duties alleged, including (a)–(j)).
25 ibid \ [13] (Hawarden’s vulnerability argument).
26 ibid \ [14] (ENS’s denial & alternative options).
27 ibid \ [15] (ENS’s defence posture).
28 ibid, Order para 1.
29 ibid, Order para 2.
30 ibid \ [17] \ [[18].
31 ibid \ [18] \ [[19].
32 ibid \ [21] \ [[22].
33 ibid \ [23] \ [[25].
34 ibid \ [20] (loss due to compromise of respondent’s email; earlier PGP warning and verification).
35 ibid \ [20], \ [[25\ [\ [[26].
36 ibid \ [20] (warning would have been “meaningless” once hacker embedded).
37 ibid \ [26].
38 ibid [21]– [27] (policy emphasis and concluding remarks)
