Edward Nathan Sonnenberg Inc v Judith Mary Hawarden (421/2023) [2024] ZASCA 90 (10 June 2024)

Ms Hawarden purchased a property from the Davidge Pitts Family Trust for R6 million. Pam Golding Properties (PGP), the estate agent, sent her an email congratulating her on the purchase and requesting a deposit of R500,000 into its trust account. The email warned of cybercrime risks and advised verifying banking details. Ms Hawarden made the deposit after verifying the details telephonically. ENS, the Trust's conveyancers, confirmed receipt of the deposit and began the transfer process.

Later, Ms Hawarden received fraudulent emails with altered banking details purportedly from ENS. Despite warnings in previous emails about cybercrime risks, she transferred the balance of the purchase price to the fraudster's account. The fraud was discovered after the funds were withdrawn, and attempts to recover the money were unsuccessful.

Ms Hawarden claimed R5.5 million in damages from ENS, alleging they failed to warn her adequately about cybercrime risks and verify banking details. ENS denied liability, stating they were not aware of the fraudulent emails and that Ms Hawarden could have taken steps to protect herself. The case focused on whether ENS's omission constituted wrongfulness in causing pure economic loss to Ms Hawarden. The court analyzed the duty of care, vulnerability to risk, and the reasonableness of imposing liability on ENS.

Ultimately, the court found that Ms Hawarden had means to protect herself, such as verifying bank details with ENS or her bank, but failed to do so. The court concluded that ENS was not liable for the loss suffered by Ms Hawarden due to her failure to take reasonable precautions. The appeal was upheld, and the high court's decision in favour of Ms Hawarden was overturned.

The core legal principle underlying the decision is that in cases of pure economic loss caused by an alleged wrongful omission, the wrongfulness of the defendant's conduct depends on the existence of a legal duty. The imposition of this legal duty is determined by judicial consideration of public and legal policy in accordance with constitutional norms. The court stressed that liability for pure economic loss caused by omission is not prima facie wrongful, and liability should only be imposed if public or legal policy considerations necessitate holding the defendant liable for the resulting damages. The court highlighted the importance of vulnerability to risk as a criterion for determining wrongfulness, stating that if a plaintiff could have reasonably taken steps to protect themselves from the defendant's conduct and was not induced by the defendant to refrain from doing so, there may be no basis for imposing a duty on the defendant. In this case, the court found that the plaintiff had means available to protect herself from the risk of cybercrime but failed to do so, leading to the dismissal of her claim against the defendant.

The court relied on the case of Country Cloud Trading CC v MEC, Department of Infrastructure Development, Gauteng [2014] ZACC 28 in its reasoning process. This case is cited to underscore the risk of indeterminate liability as a policy consideration against recognising and imposing liability for pure economic loss. The court in this case recognised the importance of vulnerability to risk as a criterion for determining wrongfulness in claims for pure economic loss. The court highlighted that if a plaintiff could have reasonably taken steps to protect themselves from the defendant's conduct and was not induced by the defendant to refrain from doing so, there may be no basis for imposing a duty on the defendant.