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[2015] ZAGPJHC 6
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Mothuloe v Edmno Investments CC and Others (09480/14) [2015] ZAGPJHC 6 (29 January 2015)
REPUBLIC
OF
SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 09480/14
DATE:
29 JANUARY 2015
In
the matter between:
WYCLIFFE
THIPE
MOTHULOE
.......................................................
Applicant
And
EDMNO
INVESTMENTS
CC
...................................................
First
Respondent
SPOOR
&
FISHER
...............................................................
Second
Respondents
MTN
GROUP
LIMITED
..........................................................
Third
Respondent
SUMMARY
Attorney
– investment of trust funds in terms of sec 78(1) of the
Attorneys Act 53 of 1979 (“
the
Attorneys Act
”) – attorney
of record of plaintiff in pending action (“
the
applicant
”), paying security for
costs amount on behalf of plaintiff in satisfaction of court order
granted in terms of Uniform Rule
47(3) out of own funds pursuant to
alleged agreement with client – applicant claiming refund of
security amount from defendant’s
attorneys of record on basis
of negotiorum gestio – security amount already invested in
interest-bearing account by defendant’s
attorneys of record in
terms of sec 78(2)(A) of Attorneys Act pending conclusion of action –
applicant’s claim based
on
negotiorum
gestio
not competent –
transactions by applicant in effecting payment of security amount
possible contravention of sec 78(1) of
Attorneys Act and Rules framed
thereunder – alternatively misleading defendants and court.
J
U D G M E N T
MOSHIDI,
J
:
[1]
This was an unfortunate application which should never have come to
court. The applicant is a practising attorney, and
therefore an
officer of court. So too, are the second respondents. The
matter concerned the payment of funds as security
for costs (“
the
security amount
”) by an attorney
on behalf of a client.
[2]
In the notice of motion the applicant claimed relief in the
following terms:
“
1.
Respondents be and are hereby ordered to refund to the applicant the
sum of R886,563.30, jointly and severally, the one paying
the other
to be absolved, plus interest on the said amount that has accrued
thereon from the date of investment thereof by the
second respondent
in respect of s 78(2)(A) of Act 53 of 1979, to date of payment.
2.
Costs
of suit, such costs to be taxed on the scale applicable between
attorney and client and to include the costs consequent upon
senior
counsel …
”
THE
FIRST AND SECOND RESPONDENTS’ ATTITUDE
[3]
The first respondent and the second respondents did not oppose the
application and filed notices in terms of which they abided
with the
decision of the court.
THE
BACKGROUND FACTS
[4] These are the
background facts: The applicant is an attorney of this Court,
duly admitted, and practising as such under
the name and style,
Mothuloe Attorneys, (“
the applicant
”). The
applicant was the attorney of record for the first respondent, as
plaintiff, in a pending action instituted
against the third
respondent in this High Court. The second respondent, Attorneys Spoor
& Fisher (“
the second respondents
”) are still
acting on behalf of the third respondent. The third respondent
applied for security for costs in terms
of Rule 47(3) of the Uniform
Rules against the first respondent. On 18 May 2010, this Court (Horn
J) granted an order compelling
the first respondent to give security
for costs. The action was also stayed pending the giving of
such security for costs.
The first respondent was ordered to pay the
costs of the application.
[5]
On 12 April 2011, the Registrar of this Court determined the
security for costs in the sum of R886 563,30, to be paid into
the
trust account of the second respondents. It was also ordered that the
said amount be invested by the second respondents in
terms of the
provisions of sec 78(2)(A) of the Attorneys Act 53 of 1979 (“
the
Attorneys Act
”), pending the
outcome of the action. On 1 June 2011, the second respondents
provided the applicant with the Registrar’s
allocatur
and demanded payment from the first respondent of the amount of R886
563,30.
[6]
The applicant contended that when he requested the security amount
from his client, the first respondent, the latter did not
have the
funds available. The first respondent thereafter implored the
applicant to accommodate it and paid the security amount
in order to
prevent its claim from being dismissed. The applicant agreed to
pay the security amount to the second respondents.
This, on the
understanding that it was an interim bridging basis until his client
could raise the required funds or upon the termination
of his
mandate.
[7]
On 27 June 2011, the applicant drew a cheque from his trust account
in the amount of R886 563,30 which he paid into the trust
account of
the second respondents. On the same day, it appeared to be, the
applicant drew a cheque for the same amount from
his personal banking
account in order “
to replace the
amount transferred from my trust account to the second respondent on
the 25
th
June 2011 for the sake of proper records and bookkeeping
”.
[8]
The applicant continued to allege that, “
the
payment and transfer by me of the said amount to the second
respondent was not by reason of any obligation upon me and due to
the
second respondent and/or third respondent, but merely by way of
accommodation of first respondent on the terms as agreed between
myself and first respondent
”.
[1]
The applicant continued to allege that:
“
The
second respondent as stakeholder of the money has no greater rights
to the money than the first respondent. The second respondent
acquired no greater right to the money than the rights first
respondent acquired thereto and subject to the same conditions as
those agreed to between myself and the first respondent.
”
[2]
In
addition, the applicant alleged in the founding affidavit that:
“
If
the money is repaid to me there can be no prejudice to the other
parties as the consequences would be that first respondent will
still
be bound by the order should put up security, failing which it could
have its claim dismissed. And pending provision of the
necessary
security, it cannot proceed with its case.
”
[3]
[9]
On 8 January 2014 (nearly 30 months after paying the security
amount), the applicant served on the second respondents a notice
of
withdrawal as attorneys of record of the first respondent. At
the same time, the applicant addressed a letter of demand
to the
second respondents, demanding repayment of the security amount.
The response from the second respondents, which was
later mirrored
substantially in the answering papers, was that, that there was no
legal basis upon which they should pay the money
to the applicant’s
firm, as demanded. In a subsequent letter dated 21 January
2014, the second respondents stated:
“
The
money that we have in Trust in this matter is earmarked for the
defendant’s costs in the event of the plaintiff not being
successful with its claim. We have a duty not to deplete these
funds unless for the purpose so earmarked. The fact
that you
have paid the money on your erstwhile client’s behalf, i.e. you
have loaned the money to the plaintiff, is irrelevant
at this point
in time as to whether we should pay the amount held in trust as
security for the defendant’s costs, to yourselves.
A
refund by ourselves to yourselves prior to a cost order from the High
Court, apart from anything else, might be regarded as a
waiver by our
client of security or might give rise to an argument that our client
is estopped from claiming security from the
plaintiff …
”
[4]
THE
THIRD RESPONDENT’S ANSWERING PAPERS
[10]
The third respondent opposed the application through an affidavit
filed by Mr Hugh Melamdowitz of the second respondent. The
main
contentions in the answering papers may be summarised as follows:
The applicant’s allegation that the security
amount was paid by
him, “
as an accommodation party
for the first respondent …
”
was confusing and irrelevant; that the first respondent was ordered
by the court to pay the security amount which amount
was paid into
the trust account of the second respondents without any reservation
and/or condition; that the applicant failed to
take the court into
its confidence regarding the precise “
accommodation
”
and “
arrangement
”
with his client (first respondent), and the precise details giving
rise to the deposit into his trust account; that
the security
amount was deposited into the second respondents’ trust account
at Standard Bank, which money has lost its identity
due to
commixtio
,
and is now the property of Standard Bank; and that the security
amount, paid pursuant to a court order, and held as security,
not on
behalf of the applicant, but for costs which may be due to the third
respondent in the event that the first respondent’s
pending
action against the third respondent failed.
THE
REPLYING PAPERS
[11]
The applicant filed a replying affidavit which was out of time, and
for which he applied for condonation. The condonation,
which was not
seriously opposed, ought to be granted, in my view, which I hereby
do.
[12]
The replying affidavit did not really advance the applicant’s
cause in any material respect. He repeated the contention
that he
made the payment of the security amount on behalf of his client (the
first respondent) in terms of what he termed, an agreement
between
himself and the first respondent. This was subject to a
resolutive condition that if the applicant’s mandate
as
attorney of record for the first respondent be terminated, the
payment would be refunded to the applicant, with the result that
the
first respondent would satisfy the court order himself. The
applicant went on to contend that the second respondents
knew at all
times that the security amount had not been paid by the first
respondent, but by the applicant as attorney of record
of first
respondent. I must observe that the latter allegation was not
borne out by any credible evidence. What came
as an surprising
contention from the replying papers, was the applicant’s
assertion that the court order for payment of the
security amount did
not apply to him, neither did it give the second respondents any
right to the money as currently invested in
an interest-bearing
account. In his view, the security amount was invested for a
specific purpose, and therefore has a separate
and specific identity
under the control of the second respondents, and not Standard Bank.
The applicant insisted on a refund
of the security amount.
[13] In the heads
of argument the applicant made several submissions. These may
be summarised as follows: There is
no
vinculum juris
between
the applicant and the second respondents; that the security for costs
order obtained by the third respondent against the
first respondent
has no application to the applicant; the applicant’s case
against the first respondent was a clear cut matter
of contract
subject to a resolutive condition which had now occurred entitling
the applicant to payment of the security amount
paid to the second
respondents on behalf of the first respondent; the security amount in
the hands of the second respondents as
stakeholders has not lost its
identity since it is clearly earmarked and identifiable in the
investment account in terms of sec
78(2)(A) of the Attorneys Act;
by instructing second respondents as its attorney of record to defend
the pending action against
it by first respondent, third respondent
incurred an obligation and liability in respect of legal costs toward
second respondents;
and that by paying the security amount on behalf
of first respondent to second respondents as security for cost (fees)
of third
respondent, the applicant was in fact also managing the
affairs/interests of third respondent for the benefit of third
respondent,
which brought the situation squarely within
negotiorum
gestio
.
SOME
LEGAL PRINCIPLES
[14]
The starting point seemed to be the provisions of sub-secs 78(1) and
(2) of the Attorneys Act, which provide as follows:
“
(1)
Any practising practitioner shall open and keep a separate trust
banking account at the banking institution in the Republic
and shall
deposit therein the money
held
in or received by him or her on account of any person
.
(a)
Any
practitioner may invest in a separate trust savings or other
interest-bearing account opened by him or her with any banking
institution or building society any money deposited in his or her
trust banking account which is not immediately required for any
particular purpose.
(b)
Any
trust savings or other interest-bearing account referred to in
paragraph (a) shall contain a reference to this sub-section.
(2A)
Any separate trust savings or other interest-bearing account –
(a)
which
is opened by a practitioner for the purpose of investing therein, on
the instructions of any person, any money deposited in
his or her
trust banking account; and
(b)
over
which the practitioner exercises exclusive control as trustee, agent
or stakeholder or in any other fiduciary capacity,
shall
contain a reference to this subsection.
”
(underlining
added)
[15]
For his reliance on the
negotiorum
gestio,
the
applicant relied on the contents of LAWSA, Vol 17 Part 1 paras 19 to
21
[5]
. However, the
applicant omitted to refer to para 22 of the same authority
[6]
.
The latter para reads in part that:
“
The
dominus must be absent or
,
if not absent, at least
unaware
and ignorant of the fact that his or her affairs are being managed by
another. If the dominus is aware of or consents to
it
,
it is no longer negotiorum gestio but may be mandate. The very
essence of negotiorum gestio is that there can be no authority
of any
nature granted to the conduct of affairs, albeit by way of implied or
tacit consent …
”
(underlining
added)
As
to the other requirements of
negotiorum
gestio
,
see
Turkstra
v Massyn
[7]
.
See also
Amler’s
Precedents of Pleadings
[8]
,
where it is repeated that one of the essentials of
negotiorum
gestio
is that:
“
The
domunus must have been ignorant of the fact that he or his affairs
are being managed.
”
From
the above, and when regard is had to the common cause facts and the
founding affidavit, the argument based on the
negotiorum
gestio
must be dismissed for lack of merit. On his own version, the
applicant paid the security amount as “
an
accommodation
”,
and pursuant to an alleged loan agreement between him and the first
respondent. The details of the alleged agreement were
very sketchy,
and highly questionable, to say the least. The alleged
agreement was in any event, peculiar to the applicant
and his client,
and any notion of
negotiorum
gestio
is inapplicable to the circumstances of this case. The security
amount was paid to the second respondents pursuant to a court order
in terms of an application brought under Uniform Rule 47(3). In
fact, the security amount was not paid by the applicant,
but by the
first respondent in accordance with a court order. In these
circumstances, there was simply no basis upon which
the applicant
could contend that he intended to ‘manage the affairs’ of
either the second or third respondents, as
was correctly, in my view,
argued by the third respondent. At best for the applicant, he
may have a claim against his client
based on,
inter
alia
,
unjust enrichment. See in this regard,
Odendaal
v Van Oudsthoorn
[9]
.
[17]
In addition, and in my view, there was something worrisome about how
the applicant handled the transactions in question.
He
transferred funds from his own business banking account, into his
trust account. Thereafter he issued a trust cheque for
the
security amount paid to the second respondent. It was unclear from
the founding papers which transaction occurred first.
It
appeared that “
trust
funds
”
were transferred before the applicant replaced the security amount
with his own funds. Whichever way one looked at it, the
conduct
described appeared to be not in accordance with the provisions of sec
78(1) of the Attorneys Act (
supra
)
quoted above. The latter sec provides that a practitioner, like
the applicant, “
shall
open and keep a separate trust banking account … and shall
deposit therein the money held or received by him
or her on account
of any person
”.
On the papers before me, there was admittedly no funds ‘received’
or ‘held’ by the applicant
on behalf of the first
respondent when he wrote out the trust cheque to the second
respondents in satisfaction of the security
amount. In the same
breathe, there was no way in which the second respondents, on receipt
of the trust cheque, could have
known or reasonably suspected that
the funds belonged, not to the first respondents, but to the
applicant as attorney of record.
If the latter was the case,
surely the second respondents could not have accepted the security
amount which was subject to a suspensive
condition between applicant
and his client. It simply made no sense at all to now demand a
refund from the second respondents.
The transactions described
may easily be construed as a violation of Rules 68.3 and 68.6.1 of
the Law Society Rules framed under
the Attorneys Act. However, I was
unable to make a definitive finding in this regard. What was
clear, however, was that the
security amount, once paid into the
second respondents’ trust account at Standard Bank, lost its
identity due to
commixtio
,
and is now the property of Standard Bank. See in this regard,
Louw
NO and Others v Coetzee and Others
[10]
.
[18]
Before I conclude, there was one other matter that needed mention.
This was that, the applicant appeared to be completely
unaware of the
purpose and reasons for payment of security for costs. Rule 47(3) of
the Uniform Rules provides that:
“
If
the party from whom security is demanded contests his liability to
give security or if he fails or refuses to furnish security
in the
amount demanded or the amount fixed by the registrar within ten days
of the demand or the registrar’s decision, the
other party may
apply to court on notice for an order that such security be given and
that the proceedings be stayed until such
order is complied with.
”
This
is exactly what transpired in the present matter. The applicant for
security for costs, such as the third respondent, must
have a valid
reason to make such application which is a matter in which the court
has a discretion. As for the purpose of
the applicable
provisions, the Court in
Kini
Bay
Village
Association v Nelson Mandela Metro
[11]
said:
“
These
provisions are intended to protect persons against liability for
costs relating to litigation instituted by impecunious companies
by
deterring such companies from litigating vexatiously or in
circumstances where they have poor prospects of success, thus
exposing
their opponents to unnecessary irrecoverable legal
expenses. The party seeking security must, however, first
establish, by
credible testimony, that its opponent, if unsuccessful,
will be unable to meet an adverse costs order.
”
The
validity of the court order in respect of the security amount was not
challenged in the present matter. It was also common
cause that
the action between the first respondent and the third respondent was
still pending. In fact, the first respondent
had done nothing
significantly so far to have the action finalised. Should the
applicant’s claim for the refund of
the security amount be
allowed, this would clearly defeat the whole purpose of the court
order requiring that security for costs
be given.
CONCLUSION
[19]
For all the above reasons, I concluded that the application had no
merit at all, including any claim for further or alternative
relief,
as relied on in closing argument.
COSTS
[20]
I deal briefly with the question of costs which is a discretionary
matter. As stated at the commencement of this judgment,
this
matter ought not to have been brought to court in the first place.
The respondents opposing the application asked for costs
on the
attorney and client scale. However, I did not agree that such
order was justified in the circumstances of the case.
Both
counsel appearing were in agreement that costs to be awarded should
include the costs consequent to the employment of senior
counsel. I
agreed.
ORDER
[21]
In the result I make the following order:
1.
The application is dismissed with costs.
2.
The costs shall include the costs occasioned by the employment of
senior counsel.
D
S S MOSHIDI
JUDGE
OF THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
COUNSEL
FOR THE APPLICANT D P J ROSSOUW SC
INSTRUCTED
BY MOTHULOE ATTORNEYS
COUNSEL
FOR THE THIRD
RESPONDENT
M M ANTONIE SC
INSTRUCTED
BY SPOOR & FISHER HUGH
MELAMDOWITZ
ATTORNEYS
DATE OF HEARING 8
NOVEMBER 2014
DATE
OF JUDGMENT 29 JANUARY 2015
[1]
See
para 8.10.2 of the founding affidavit.
[2]
See
para 8.10.4 of the founding affidavit.
[3]
See
para 8.10.5 of the founding affidavit.
[4]
See
Bundle p 36.
[5]
At
pp 19 to 21.
[6]
See
LAWSA,
ibid
,
p 24.
[7]
1959
(1) SA 40
(T) at 47.
[8]
7ed
at 296 to 297.
[9]
1968
(3) SA 433
(T).
[10]
2003
(3) SA 329
(SCA) para [12].
[11]
[2008]
4 All SA 50
(SCA) para [12].