A Gauteng attorney has been ordered accountable to reimburse clients R1.4 million, the profits from the sale of a property they owned that were stolen via “business email compromise.”
Gavin Hartog believed he was moving money to his client’s account, but he was actually paying it into the Standard Bank account of a scammer who had intercepted his email communication.
The fraudster promptly removed the funds, which have never been recovered.
In June 2021, Brigitte Daly, Patrick Daly, and Karin Foulkes-Jones (now deceased), clients of Hartog, obtained an order against him in the Johannesburg High Court.
Hartog filed an appeal. However, Judge Rean Strydom, along with Judge Majake Mabesele and interim Judge Johannes Strijdom, ruled that Hartog had initiated communication with the clients by email and that they had reacted in kind.
By failing to deposit the proceeds of the property sale into Patrick Daly’s account, he “violated the mandate” and remained liable.
The subject property was located in Parkwood. It was sold in June 2018 by Karin and Brigitte, who had owned it. They instructed Hartog to handle the real estate transaction. R100,000 was deposited into Karin’s account, with the remaining R1.4 million to be transferred to Patrick’s Standard Bank account.
Instead, it was deposited by EFT into Mr. Simelane’s Standard Bank account.
ATTORNEY PAYMENT
Judge Strydom stated that Hartog notified Karin and Brigitte through email of the sum owed to them from the sale. He asked them to email him “instructions and bank information.”
Three days later, Patrick emailed Hartog with his normal bank account information.
Hartog sent Patrick a second email verifying the instructions and requesting confirmation of the bank account information.
Patrick stated he responded the same day, however Hartog claimed he never received the email.
Then, Hartog got what he assumed to be another email from Patrick, requesting that he transfer the funds to a different account. A claimed account confirmation from Standard Bank was enclosed.
Hartog stated that he accepted this item’s authenticity and made the payment.
It was later discovered that the email was sent by a con artist.
COURT DISORDER
According to Judge Strydom, Hartog did not enquire further into the cause for the account number change. He stated that neither party made a conscious decision to utilize email, and the question was who should carry the loss risk and how the fraudster received the information to commit the crime.
“The fraudster must have learned that a considerable quantity of money was about to be sent… Additionally, he must have acquired the email addresses of Patrick and Hartog, the judge added.
Hartog argued that the mandate implicitly required his clients to use extreme caution and safeguard the integrity of their emails.
“No evidence suggests that the fraudster received the information from the respondents. Nevertheless, Patrick sent the right instruction, which was received,” the judge stated.
Hartog had requested his clients to submit instructions and bank information. The invitation was sent via email, and the response was also sent via email, according to Judge Strydom.
“It cannot be used to support the existence of this implicit phrase that a fraudster intercepted or received the information that led to the false email and payment. That would be tantamount to employing hindsight to determine what terms should be imputed to the mandate,” the judge stated.
Hartog also requested an order requiring Standard Bank to pay if he was held liable for the stolen funds due to the bank’s negligence.
He stated that there was a factual dispute that could not be resolved on paper and that the case should be sent to trial.
However, Judge Strydom stated that there was no factual disagreement.
The bank stated that Mr. Simelane opened the account after completing the FICA procedure. There was no cause to anticipate that the account would be used for fraudulent purposes, given his identification had been verified and he had provided confirmation of domicile.
The bank said that it was not required to verify account names and account numbers.
Judge Strydom stated that wrongdoing and negligence must be proved to find the bank accountable.
Mr. Simelane was not an anonymous client, and there was no indication that the bank should have performed due diligence on the account or could have prevented cash from being deposited into it.
The judge stated that there was no evidence to establish a judgment of negligent violation of FICA standards.
The appeal of Hartog was denied with costs.
»Attorney ordered to pay client’s R1.4 million theft loss«