In a stern warning to the property sector, the Supreme Court of Appeal (SCA) of South Africa delivered a punitive judgment against an estate agent who used a complex web of companies to defraud a client. The case, Groundswell Developments Africa (Pty) Ltd v Brown, concluded with the Court confirming a punitive costs order on the "attorney and client" scale against the agent, Jean Pierre Nortje.
The fraud centered on a property in Cape Town owned by Ms. Catherine Judy Brown. Nortje, mandated to sell the property, breached his fiduciary duties by suppressing legitimate offers from third parties. Instead, he engineered a sale to "Groundswell Developments," a company he secretly owned. To conceal his conflict of interest, he used a "letter of authority" to grant signing powers to a third party. Compounding the scheme, Nortje used another of his entities to sign a renovation agreement with the purchasing company, creating a "builder's lien" over the property. This lien, valued at more than the purchase price, allowed him to hold the property hostage and live there rent-free while denying the seller access.
The SCA utilized the doctrine of "piercing the corporate veil" to dismantle Nortje’s defense. While South African law generally respects the separate legal personality of companies, the Court found that Nortje used his companies solely as "instruments of fraud." Consequently, the sale agreement was declared invalid due to the violation of rules against self-dealing, and the builder's lien was voided as a sham.
The Court’s supplementary judgment emphasized the "unconscionable" nature of the scheme. By ordering punitive costs, the judiciary ensured the victim was fully indemnified for her legal expenses and signaled that professionals cannot hide behind corporate structures to exploit unsophisticated clients.
Source: Biz Community