SCA overturns precedent-setting cyber-crime judgment

The Supreme Court of Appeal (SCA) has set aside a judgment that opened the door to liability claims against businesses that send their banking details in an unsecured manner to a debtor who falls victim to cyber-crime.
In January last year, the High Court in Johannesburg ordered law firm Edward Nathan Sonnenbergs (ENS) to pay Judith Hawarden R5.5 million, plus interest and costs.
Hawarden lost the money in August 2019 when she transferred the balance owed on a R6m property purchase. Hawarden thought she was paying the money into ENS’s account, but a cyber-criminal had accessed her email account.
The criminal intercepted the emails between Hawarden and ENS’s employees. Hawarden was sent a fraudulent attachment that contained the fraudster’s bank account details. The criminal also created emails that appeared to come from ENS and altered the details on emails that were sent by ENS. As a result, Hawarden paid the money into the criminal’s bank account.
To delay the detection of the fraud, the fraudster intercepted and changed Hawarden’s proof of payment email to ENS. This gave the criminal enough time to withdraw the funds.
Hawarden subsequently instituted action against ENS to recover the R5.5m.
The High Court ruled that ENS owed a duty of care to Hawarden to ensure she did not fall victim to business email compromise (BEC). ENS had failed to perform this duty and was the direct cause of her loss.
ENS did not act wrongfully
But in a judgment handed down on Monday, the SCA found that Hawarden had not established one of the essential elements of a successful delictual claim: wrongfulness (ENS’s conduct was legally objectionable).
The court noted the distinction in South African law between delictual claims to recover a financial loss and those that arise because of damage to property or injury to a person. It is an established principle that persons cannot generally be held liable in delict for losses caused to others by omission.
Conduct that causes pure economic loss is not prima facie wrongful in the delictual sense, and it does not give rise to liability for damages unless considerations of public and legal policy require that the defendant should compensate the plaintiff for the loss suffered.
The judgment, penned by Acting Judge of Appeal Fathima Dawood, said the issue of wrongfulness in this matter needed to be considered with regard to the following:
First, Hawarden was not a client of ENS at the time of her loss, and there was no contractual relationship between Hawarden and ENS.
Second, Hawarden’s loss was not a result of any failing in the “ENS system”, but because hackers had infiltrated her email account and fraudulently diverted her payment.
Third, Hawarden paid the deposit of R500 000 into the trust account of Pam Golding Properties in May 2019. At the time, the estate agency warned Hawarden about the risk of cyber-crime and advised her to phone to verify its banking details. Hawarden did so.
But Hawarden failed to verify ENS’s banking details three months later, and she was unable to explain her failure to do so. She could have sought verification when she phoned two ENS employees while making the payment at a Standard Bank branch, or she could have asked the Standard Bank employee who assisted her.
Hawarden had “ample means to protect herself”, the judgment said.
Fourth, any warning by ENS of the risk of BEC would have been “meaningless”, because the cyber-criminal was already embedded in Hawarden’s email account when the payment occurred. Consequently, the risk had already materialised.
Risk of ‘indeterminate liability’
The SCA expressed its concern that the High Court’s judgment risked setting a problematic precedent. It would extend liability in a manner that could lead to “indeterminate liability” in that all creditors who email their bank details to their debtors might face unlimited claims for unforeseeable economic losses.
The Constitutional Court has recognised the risk of indeterminate liability as the main policy consideration that militates against the recognition of and liability for pure economic loss, AJA Dawood said.
The High Court should have declined to extend liability in this case because of the “real danger” of indeterminate liability.
Creating a legal principle that all creditors in the position of ENS owe a legal duty to their debtors to protect them from the possibility of their email accounts being hacked is “untenable”.
Hawarden could have avoided the loss
The SCA also highlighted “vulnerability to risk” as another important legal principle when determining wrongfulness in claims for pure economic loss. Essentially, the court must decide whether the plaintiff could have taken steps to protect him- or herself from suffering the loss.
In Cape Empowerment Trust Ltd v Fisher Hoffman Sithole (2013), the SCA stated: “If the plaintiff has taken or could have taken steps to protect itself from the defendant’s conduct and was not induced by the defendant’s conduct from taking such steps, there is no reason why the law should step in and impose a duty on the defendant to protect the plaintiff from the risk of pure economic loss.”
AJA Dawood said Hawarden could reasonably have avoided the risk by asking the ENS employees to verify the account details. She could also have enlisted the help of Standard Bank to verify ENS’s account details.
Furthermore, while Hawarden was at the bank branch, she had discussed the option of a bank guarantee instead of a cash transfer. She had elected to forego the bank guarantee.
The SCA set aside the High Court’s decision and upheld ENS’s appeal with costs


Woman still fighting Home Affairs for ID 10 years later

Primrose Modisane, denied South African citizenship, fights decade-long battle for identity documentation and recognition.
A Gauteng-based woman has been living a life of squalor because she does not have an identity document Primrose Modisane, 36, from Vosloorus in Ekurhuleni, claims she has tried in vain to convince the department of home affairs to issue her documentation as they kept on demanding endless proof that she was South African.
Modisane was born in Zimbabwe, but her maternal family is in South Africa and she was brought to the country as an infant.
Based on matrilineal descent traced back to the matriarch of the family, Modisane and her mother, Phumulani Tshuma, are South African citizens by birth.
Asked to take DNA test

Modisane, whose South African grandmother relocated to Zimbabwe in the early ’50s said in 2016, as well as in 2021, home affairs officials told her she must undergo a DNA test to prove that she is indeed a granddaughter of the South African-born, fully documented Barbara Modisane.

She did undergo the tests and went back to the home affairs. “The officials accused me of reporting my case to lawyers and were reluctant to assist me. It has been more than 10 years since I started to push the department for my documents. This has affected me so badly that I even failed to complete my studies.

“I started my education in Vosloorus at Rebontsheng Primary School and later went to Masithwalisane Secondary School but dropped out in Grade 11 because they wanted me to produce an ID card or birth certificate. The only job I got after that was as a domestic worker.”

The mother of two said her two daughters have managed to obtain birth certificates but her name was not included on their birth certificates as she is still struggling to obtain an ID card.

Last year, she was in and out of the department’s offices in Boksburg, Germiston and Johannesburg without any resolution, until she went to the Lawyers for Human Rights (LHR), who is currently handling her case.

LHR head of the stateless unit Thandeka Chauke said: “We confirm that we act on behalf of our client Primrose Modisane, who has been battling to have her South African citizenship recognised and to obtain documentation for over a decade.

“Her mother, Ms Phumulani Tshuma, suffered the same ordeal and relentlessly pursued their registration until her untimely death in 2023.

“These continuous obstacles, unfulfilled promises by the department, and lack of resolution have left Modisane in a state of limbo. She has been effectively rendered stateless in her own country, deprived of citizenship, dignity, and other human rights.

“This case presents a distressing narrative of the intergenerational struggle for recognition and belonging, characterised by severe administrative obstructionism.”

Chauke said last month the LHR wrote to the department asking them to attend to the matter urgently, but to no avail. Home affairs spokesperson Siyabulela Qoza did not comment.


Big loss for Home Affairs in South Africa

The Department of Home Affairs has lost its legal battle over Zimbabwean Exemption Permits (ZEPs).
The Helen Suzman Foundation and the Consortium for Refugees and Migrants in South Africa (CoRMSA) previously took the Minister of Home Affairs Aaron Motsoaledi to court over his termination of the ZEP under the Promotion of Administrative Justice Act, 2000 (PAJA).
The challenge was based on the grounds that the Minister’s decision was unlawful and unconstitutional and would impact over 175,000 Zimbabwean nationals holding ZEPs.
Many Zimbabweans live and work in South Africa due to their ZEPs, and many have lived there for over a decade.
In June 2023, the Pretoria High Court ruled in favour of the applicants, starting by finding Minsiter’s decision procedurally unfair and infringing on the constitutional rights of ZEP holders.
The court said that the Minister failed to conduct a fair “notice and comment” process, which meant that the decision was uniform and procedurally irrational.
“The High Court’s decision was set aside and remitted back to the Minister to conduct a fair process that considers the views and interests of ZEP holders and the broader society,” said Norton Rose Fulbright, which represented CoRMSA in their case.
Although the minister appealed the High Court’s decision, with applications to the High Court and the Supreme Court of Appeal, the Constitutional Court dismissed the application for special leave to appeal on 18 June 2024.
The highest court in South Africa said that the application had no reasonable grounds for success.
“The Minister of Home Affairs is now required to comply with the High Court’s order. Any future decisions regarding the ZEP must be made in a fair and just manner, ensuring that the views and interests of ZEP holders are adequately considered,” said the experts.
“The ZEP will remain effective until 29 November 2025.”


The real culprit behind SA’s immigration woes .

Proposed changes to the Citizenship Act fail to deal with the most serious problem: the department of home affairs
The final white paper released recently by the home affairs ministry has brought SA’s immigration landscape into sharp focus. While it highlights several areas of concern within the present immigration framework, it fails to address the deeper issue at hand: the department of home affairs itself.
A recurring theme throughout the white paper is the prevalence of fraud and exploitation in the immigration system, often facilitated by criminal syndicates. Who enables these nefarious activities to flourish? The answer clearly lies within the very institution entrusted with safeguarding the integrity of SA’s borders.
The minister’s assertion that legislation is outdated and contradictory overlooks the root cause of the problem. Instead of addressing internal inefficiencies and corruption, the focus is diverted towards proposed changes to laws and regulations. However, as history has shown, new laws alone cannot eradicate entrenched malpractice.
The paper laments the overburdening of the asylum system and the conflation of asylum seekers with economic migrants, yet it conveniently overlooks bureaucracy and prolonged processing times, which worsen the situation. The department’s failure to efficiently handle applications and appeals only serves to compound delays and perpetuate backlogs.
The revelation of widespread corruption and misconduct within the department, as outlined in the paper, underscores the urgent need for accountability and reform within the department. While disciplinary measures may be a step in the right direction, they fail to address the systemic issues that allow such misconduct to thrive.
Proposed changes to the immigration framework offer little solace if the underlying issues persist. Without fundamental reform within the department any attempt to overhaul the immigration system is destined to fall short.
Calls for the establishment of the long-overdue Immigration Advisory Board, immigration courts and separate appeal boards are positive steps towards improving accountability and transparency. Still, without a genuine commitment to upholding the rule of law and respecting judicial decisions, these measures may amount to little more than lip service.
Serious discrepancies
An analysis of the white paper reveals a concerning lack of progress and a failure to address key issues, as illustrated by the persistence of critical numerical discrepancies and flawed arguments.
In scrutinising the figures presented in the white paper, these become glaringly apparent. For instance, the document states that on December 2023 there were 113,007 refugees granted refugee status, as well as 81,086 active asylum seekers and 828,404 inactive asylum seekers. However, a simple arithmetical error results in a total of 1,334,174 asylum seekers and refugees, when it should be 1,022,497. This not only raises questions about the accuracy of the data; it also undermines the credibility of the entire narrative.
Moreover, the characterisation of “inactive” asylum seekers is deeply flawed. These individuals are defined solely by their absence, suggesting they may have left the country, died or obtained another status. Thus, including them in the total count of asylum seekers and refugees skews perceptions of the situation. Adjusting for this error, the total number of asylum seekers and refugees in SA is about 194,093, significantly lower than previously stated and insignificant in a country of 60-million people.
Similar numerical inaccuracies mar the discussion on citizenship. The comparison between the current Citizenship Act and its 1949 counterpart is undermined by a failure to accurately assess the data. The document claims the act is a replica of the 1949 act, yet fails to provide substantive evidence to support this assertion. In addition, the emphasis on specific provisions such as section 4(3) fails to address broader issues within the citizenship framework. A mere faction of people qualify under section 4(3) — why is this offered as the flagship example of what is wrong with the Citizenship Act?
The discussion on immigration raises further concerns. The minister seems to imply that exemptions are the primary vehicle for migrants to enter SA, when this is not the case. Nine pages are dedicated to the history of exemptions and no real reforms or new proposals are made, save perhaps to note that the minister is wasting further resources by appealing the Zimbabwean exemption permit (ZEP) judgments to the Constitutional Court. Why is this even in the white paper?
Further proposed changes, such as the abolition of certain visas and the introduction of new categories, raise questions about their efficacy and rationale. Why are useful visas such as relatives’ visas and ICT work visas being abolished without explanation?
Contradiction
What is a “limited-duration permanent residence visa” and how can it be simultaneously limited duration and permanent in nature? How will it differ from visas other than in name? How will it add impetus to economic stimulus to close down channels for immigration, and how or why will it curtail fraud?
Why should visas have their duration shortened, creating the need for more applications to be submitted to home affairs for processing more regularly? These proposals, lacking clear justification and rationale, only add to the confusion and raise doubts about the direction of SA’s migration policy.
The “final” white paper on migration policy fails to address critical numerical discrepancies and flawed arguments, undermining its credibility and effectiveness. Despite expectations for substantial revisions, the document persists in perpetuating inaccuracies and proposing questionable measures.
As stakeholders continue to scrutinise the document it becomes increasingly evident it falls short of delivering real reform. In fact, it may even be worse than the draft, further worsening concerns about the direction of migration policy in SA.
Only through genuine introspection and decisive action can SA hope to reclaim the integrity of its immigration system. Until then the veil of blame-shifting and evasion will continue to obscure the true culprit behind the nation’s immigration woes — the department of home affairs itself.


Constitutional Court dismisses application for leave to appeal Zimbabwe permit decision

The Constitutional Court refused Home Affairs leave to appeal Zimbabwe permit decision.

The Constitutional Court dismissed an application for leave to appeal a ruling that the ZEP programme had been unlawfully terminated.
•    The court ordered the home affairs minister to meaningfully consult with the affected permit holders.
•    The matter was brought to court by the Helen Suzman Foundation.
The Constitutional Court dismissed an application by the home affairs minister for leave to appeal a June 2023 Gauteng High Court in Pretoria ruling that the Zimbabwean Exemption Permit (ZEP) programme had been unlawfully terminated.
The court ordered the minister to meaningfully consult with the 178 000 affected permit holders, according to GroundUp.
The matter was brought to court by the Helen Suzman Foundation, which argued that the minister had not taken into account the profound impact of the termination of the ZEP programme on those who had been living and working in South Africa, legally, for more than a decade.
The Supreme Court of Appeal previously refused to entertain then home affairs minister Aaron Motsoaledi's attempt to appeal the ruling.
The Constitutional Court this week similarly declined to hear arguments in the minister's appeal.
In a unanimous decision, it simply refused leave to appeal, making no order as to costs.
In a statement this week, the foundation said: "The June 2023 judgment was unequivocal in holding that the minister is obliged to follow a fair consultation process, which duly considers the rights of those affected by terminating the ZEP, before he be lawfully allowed to do so.
"The Constitutional Court's order affirms with finality that this most basic of legal duties binds the minister, notwithstanding changes in office that may occur once a new government is formed, when deciding the ZEP's future," the foundation said.
"It is a vital affirmation – for ZEP holders and South African citizens alike – that principles of fair hearing and rational government are indispensable to our constitutional democracy."