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[2014] ZAGPJHC 364
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Dreyer v Goss and Another (2013/12867) [2014] ZAGPJHC 364 (27 November 2014)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO.:
2013/12867
DATE:
27 NOVEMBER 2014
In
the matter of:
PAUL
DREYER
....................................................................
Applicant
And
ERROL
GOSS
..........................................................
First
Respondent
BLADE V (PTY)
LIMITED
..................................
Second
Respondent
(in Liquidation)
JUDGMENT
GAIBIE,
AJ
[1]
The first respondent is Errol Goss (Goss),
a practising attorney in Johannesburg. Paul Dreyer, the
applicant (Dreyer), was
his client. Goss received monies in trust
from a third party, Plasquip (Pty) Ltd (Plasquip), for Dreyer
pursuant to an agreement
of sale. The issue in this matter is
whether Goss can withhold payment to Dreyer of the monies in his
trust account.
There is no dispute between them, that the
monies in his trust account were received by him for Dreyer and that
he continues to
hold it on Dreyer’s behalf. The dispute
is about whether Goss should or should not release the monies to
Dreyer in
light of the fact that there may be ‘potential’
or competing claims for the money from one Emilio Ganhao (Ganhao) and
the second respondent Blade V (Pty) Ltd (the Company), an entity in
which Dreyer and Ganhao were co-directors and equal shareholders.
(I
refer to the individuals who feature in this narrative by their
surnames for convenience).
[2]
The relevant facts giving rise to this
application can be succinctly summarised as follows:
a)
According
to Dreyer, during September 2009 the Company was unable to pay for
equipment that it had purchased from Plasquip for an
amount of R1,8
million. In the circumstances, he agreed to purchase it provided
that
[1]
: 1) he acquired 50% of
the share capital of the Company; and 2) ownership in the equipment
vested in him until the R1,8 million
had been repaid to him. The
monies had not been repaid to him.
b)
In any event, Dreyer and Ganhao became
co-directors and equal shareholders of the Company. The
relationship between Dreyer
and Ganhao soured over time. That coupled
with their business woes culminated in a special resolution for the
voluntary winding
up of the company which was passed on 29 March 2011
and registered on 7 April 2011.
c)
Thereafter
two significant events occurred. Dreyer concluded: a settlement
agreement with an entity known as GK Mills (Pty) Ltd
(GK Mills); and
an agreement of sale (sale agreement) with Plasquip. The sale
agreement (‘the first event’) preceded
the settlement
agreement (‘the second event’). It is however more
convenient to deal with the settlement agreement
first and then the
sale agreement to achieve a harmonious flow of events. During May
2011, GK Mills instituted action against the
Company and Dreyer (in
his capacity as surety for the Company) for monies owing for arrear
rentals and other charges emanating
from a lease agreement
[2]
.
Upon receipt of the pleadings, Dreyer sought the services of his
attorney, Goss. Presumably on Goss’ advice, Dreyer entered
into
a settlement agreement with GK Mills on or about 7 September 2011. In
terms of that agreement, Dreyer agreed to settle the
Company’s
indebtedness to GK Mills in the amount of R450 000 and the latter
agreed to release him of all of his surety obligations
in respect of
the lease agreement. As part of the settlement, GK Mills also
released into Dreyer’s custody seven machines
that were
situated on the leased premises which included: 4 blow moulding
machines [WL MPO2; WL MPO2; WL MPO2 (dynamic brands-eezipak);
and
Kenplas 4 cavity (including conveying system)] and 3 high pressure
compressors.
d)
In order to raise the amount of R450 000 to
comply with his obligations under the settlement agreement, Dreyer
entered into a sale
agreement with Plasquip on 6 September 2011, a
day before the settlement agreement was concluded. In terms of
that agreement,
Dreyer sold to Plasquip the machines that would be
released into his custody by GK Mills as well as five additional
machines (indicated
as ‘injection machines’ in the sale
agreement) for the sum of R1 100 000 (‘the purchase
price’).
In terms of the sale agreement, and specifically
clauses 1 and 2 thereof, Plasquip agreed that it would prior to the
delivery of
the machines, deposit the full purchase price into the
Goss’ trust account, and upon delivery of the equipment to
Plasquip,
the latter would authorise Goss to pay the moneys to
Dreyer. Delivery occurred at the point at which the machinery
was loaded
onto Plasquip’s trucks and prior to the departure of
the trucks from the premises where they were situated. Plasquip
complied with its obligations. On 6 September 2011, it paid the
purchase price into Goss’ trust account, and on 7 September
2011 after it had taken delivery of the machines, it no longer laid
any claim to the monies paid over to Goss, and duly instructed
Goss
to release the monies to Dreyer. Goss was aware of this
arrangement, as he drew up both the settlement and the sale
agreements.
e)
On
7 September 2011, Dreyer instructed Goss to transfer the amount of
R470 000 to GK Mills to comply with his obligations in
respect
of the settlement agreement. Goss did so and at that point the
amount of R630 000 was left in his trust account.
From
that point onwards, and despite demand, Goss refused to pay the
balance of the trust monies to Dreyer, mainly on the basis
that there
may be ‘potential claims’ for such monies. But Goss
was quite confused about who the claimant would
be or indeed who the
claim would be against. His version about these aspects
underwent various mutations. During 2011,
when he was rendering
legal services to Dreyer in relation to the settlement and the sale
agreements, Goss was of the view that
Dreyer’s intention to
settle the debt owed to GK Mills with the proceeds of the sale of
equipment ‘
was
problematic since
he
would be utilising funds that rightly belonged to Ganhao in terms of
the written deed of cession in order to secure
his
personal release
under the terms of the written suretyship
’
[3]
.
At this stage, Goss was of the view that Dreyer was inadvertently
placing himself, rather than Goss’ firm, at risk by selling
the
equipment and using the proceeds thereof for the settlement of his
debt to GK Mills. That is why he promptly carried
out Dreyer’s
instructions to transfer the amount of R450 000 from his trust
account to GK Mills in terms of the settlement
agreement.
f)
Approximately one year later, Goss had a
different view about who the potential claimants would be, and he
steered away from articulating
precisely why his firm, rather than
Dreyer would be at risk in respect of such claims. The change in his
attitude was captured
in a letter that he had sent to Dreyer on 5
October 2012:
‘
We
have taken advice on the potential claims for entitlement to the
trust monies by the liquidator of Blade V (Pty) Ltd .... yourself
and/or Mr Ganhao.
We
have a well grounded apprehension that our firm is
under potential
liability and it may be sued for payment over the monies
held by
any one or more of the parties mentioned. The advice received
confirms the well grounded apprehension.
.......
we proceed to commence interpleader proceedings with the object of
obtaining an order of court regarding which of the abovementioned
parties is entitled to the monies held. The papers will be
served on the relevant parties shortly’
[4]
.
(my emphasis)
g)
In essence therefore, and as at that date,
Goss had refused to effect payment of the
balance
of the trust monies
to Dreyer on the
basis that there may be a claim against his firm in respect of this
money by third parties, such as, Ganhao and
the Company.
h)
And even though Goss repeatedly made the
assertion that there may be competing claims against his firm for
such monies, no such
claim has been received by his firm for more
than three years. In any event, and to the extent that he suggests
that he has a ‘well
grounded apprehension’ that his firm
may be ‘
under the potential
liability and it may be sued for payment over the monies
’
if he releases the monies to Dreyer, he does not articulate the legal
basis on which he makes that assertion in his correspondence
with
Dreyer or in his answering affidavit in this matter. Perhaps
more significantly, although Goss repeatedly indicated
his intention
to launch interpleader proceedings in respect of such monies, he did
not do so until 24 October 2014, which was three
days before the
hearing of this matter, and more than three years from the date on
which he has held the monies in trust.
If Goss had simply stood
back, caught his breadth and thought about the facts in this matter,
he would have realised that his legal
duty emanated solely from his
relationship with Dreyer, and that if there were any other competing
claims they would have existed
amongst and between Dreyer, Ganhao and
the liquidators of the Company.
i)
Approximately three months later, Goss had
yet another view about who was entitled to the balance of the monies
in his trust account.
In a letter dated 11 December 2012, Goss
wrote to Dreyer’s newly appointed attorneys, Fluxmans
Attorneys. He took a
decisive but unexplained view as to who
owned the property that was the subject of the sale agreement, and he
once again indicated
that he intended to launch inter-pleader
proceedings in respect of this matter. The relevant part of the
letter reads as follows:
‘
The
machinery purchased by Plasquip (Pty) Ltd was the property of Blade V
(Pty) Ltd.
Mr
van der Westhuizen of Tutor Trust, the liquidator of Blade V (Pty)
Ltd has advised us that they intend laying a claim to the
monies in
our trust account and Mr Crouse of Crouse Incorporated has requested
us to serve the inter-pleader application on their
offices
[5]
.
Kindly
advise whether you are authorised to accept service of the inter
pleader application.’
[6]
[3]
In
the absence of any interpleader proceedings being instituted by Goss,
Dreyer instituted this application during April 2013. Despite
these
proceedings, Goss has persistently refused to comply with Dreyer’s
instructions in respect of the balance of the monies
in his trust
account. The jurisprudence developed by our courts in respect of an
attorney’s duty in relation to monies held
by him in trust are
clear. In Areoquip SA v Gross & others
[7]
,
Southwood J cited with approval the following dictum in Law Society,
Transvaal v Matthews
[8]
:
“
I
deal now with the duty of an attorney in regard to trust money.
Section 78(1) of the Attorneys Act obliges an attorney to
maintain a
separate trust account and to deposit therein money held or received
by him on account of any person. Where trust
money is paid to
an attorney it is his duty to keep it in his possession and to use it
for no other purpose than that of the trust.
It is inherent in
such a trust that the attorney should at all times have available
liquid funds in an equivalent amount.
The very essence of a
trust is the absence of risk. It is imperative that trust money
in the possession of an attorney should
be available to his client
the instant it becomes payable. Trust money is generally
payable before and not after demand.”
[4]
In
Aeroquip
[9]
, Southwood J also
stated that an attorney does not become personally liable for the
payment of a debt where he fails to pay over
to a client’s
creditor an amount held by him on behalf of his client in his trust
account. In this regard he stated
that –
“
The
applicant has not referred to any authority that an attorney becomes
personally liable for payment of a debt where he fails
to pay over to
a client’s creditor an amount held by him in trust. The
contrary appears to be true. An attorney
who holds an amount of
money in his trust account on behalf of a client is obliged to use it
for no other purpose than he is instructed
by the client. It is
trite that it must always be available to the client.”
[5]
In adopting an attitude in contravention of
these legal principles, Goss was confused about his duty to Dreyer on
the one hand,
and the mistaken impression of his duty towards third
parties such as Ganhao or the Company. Even if one were to
assume that
Ganhao or the Company had unimpeachable claims against
Dreyer either on the basis of a cession of equipment to Ganhao, or on
the
basis of the law of insolvency in respect of the Company or its
liquidators, they would have no legal entitlement to the monies
in
the trust account and their claims would be against Dreyer, and not
Goss.
[6]
At
the hearing of this matter, I was informed by the counsel for Dreyer
and the Company that they had reached an agreement in terms
of which
the monies held in trust by Goss (on behalf of Dreyer) should be paid
over to the Company. On behalf of the Company
it was submitted
that in consequence of its winding up process, Dreyer and Ganhao
completed annexure CM100 to its ‘statement
of affairs’
which is a reflection of a full statement of its assets and
liabilities as at the date of winding up, which preceded
both the
settlement and sale agreements. It appears therefrom, and
particularly annexure ‘C’ thereto, that the Company
owns
assets and liabilities in the form of machinery to the value of
R900 000 without specifying the details thereof, and
that
Dreyer’s loan account in the amount of R1.8 million rands is
reflected as an unsecured loan. In the circumstances,
it was
contended, that the machinery that was sold to Plasquip in fact
vested in the insolvent estate and that the proceeds of
the sale
thereof rightfully belongs to that estate
[10]
.
It was, presumably, in this context that Dreyer reached agreement
with the Company that the balance of the monies held in
trust should
be paid over to the Company. That seems to me to have been the
honourable thing to do.
[7]
There
is however one last issue that warrants consideration. In addition to
the various mutations of Goss’ reasoning as to
why he has
consistently refused to release the monies in trust to Dreyer, his
counsel relied on the decision of the Supreme Court
of Appeal (SCA)
in
Nissan
v Marnitz
[11]
at the hearing of this matter for the proposition that Dreyer is in
much the same position as the holder of a bank account who
is
mistakenly credited with monies. In that regard the SCA held the
following in paragraphs 23 and 25 of the judgment:
‘
..........
If stolen money is paid into a bank account to the credit of the
thief the thief has as little entitlement to the credit
representing
the money so paid into the bank account as he would have had in
respect of the actual notes and coins paid into the
bank account.’
And
‘
The
position can be no different where A, instead of paying by cheque,
deposits the amount into the bank account of B. Just
as B is
not entitled to claim entitlement to be credited with the proceeds of
a cheque mistakenly handed to him, he is not entitled
to claim
entitlement to a credit because of an amount mistakenly transferred
to his bank account. Should he appropriate the
amount so
transferred, ie should he withdraw the amount so credited, not to
repay it to the transferor but to use it for his own
purposes, well
knowing that it is not due to him, he is equally guilty of theft.’
[8]
Reliance by Goss on this case is in my view
misplaced. That case dealt with an account holder’s right to
monies mistakenly
transferred into an account. It was never contended
by Goss that the monies were mistakenly transferred into his trust
for Dreyer,
or that the monies represent the proceeds of theft,
because if he had so contended he would have been complicit in those
arrangements.
In any event, and to the extent that Dreyer is not
entitled to the monies in Goss’ trust account, he has now
reached an agreement
with the liquidators of the Company in that
regard, an agreement that Goss should have embraced. Instead, he
persisted with his
view to retain the monies presumably until the
interpleader proceedings (launched in another court) has run its
course, an approach
that has generated unnecessary litigation (in
both courts) at great cost to the other parties.
[9]
For completeness it is necessary to record,
that I was advised at the hearing of this matter that the amount in
Goss’s trust
account was R716 322,59 as at 1 October 2014.
Based
on the draft order provided to me by counsel acting for the applicant
and the Company, it is ordered as follows –
(1)
The first respondent is ordered and
directed to pay to the second respondent the sum of R716322,59
together with interest at the
rate of 9% per annum from 1 October
2014 to date of payment.
(2)
The first respondent is ordered and
directed to pay the applicant’s costs of this application,
including the cost of senior
counsel.
(3)
The first respondent is ordered and
directed to pay the second respondent’s costs of this
application occasioned subsequent
to 14 March 2014 including the cost
of counsel.
Appearances:
For
the Applicant
: Adv J Peter SC
Instructed
by: Fluxmans Inc Attorneys
Tel:
(011) 328-1700
Fax:
(011) 880-2261
E-Mail:
cshapiro@fluxmans.com
For
the First respondent
: Adv Myburgh
Instructed
by: Errol Goss Attorneys
Tel:
(011) 447-1979
Fax:
(011) 447-4641
E-Mail:
cristina@gossattorneys.com
For
the Second Respondent
: Adv J Hershensohn
Instructed
by: Crouse Incorporated
Tel:
(012) 346-5942
Fax:
(012) 346-5166
E-Mail:
daniese@crouseinc.co.za
Date
of Hearing: 27 October 2014
Date
of Judgment: 27 November 2014
[1]
Paras
8 – 9 pg 7 FA
[2]
Para
10 pg 8 FA
[3]
Para
12 page 34 of the Answering Affidavit
[4]
Page
18 FA
[5]
See
letter from Crouse Inc dated 29 Oct 2012.
[6]
Pg
22
[7]
[2009]
3 All SA 264
(GNP) at 273
[8]
1989
(4) SA 389
(T) at 394
[9]
See
fn 7 at para 13 pgs 272 - 273
[10]
See
in particular
section 83(1)
of the
Insolvency Act 24 of 1936
which
sets out the basis upon which security for any claim may be realised
by a creditor.
[11]
2005
(1) 441 (SCA). This decision was previously relied upon by the
Company in its heads of argument.