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[2015] ZASCA 192
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Probest Projects (Pty) Ltd v The Attorneys, Notaries and Conveyancers Fidelity Guarantee Fund (20761/2014) [2015] ZASCA 192 (30 November 2015)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
Reportable
Case
No: 20761/2014
In
the matter between:
PROBEST
PROJECTS (PTY)
LTD
APPELLANT
and
THE
ATTORNEYS, NOTARIES AND
CONVEYANCERS
FIDELITY GUARANTEE FUND
RESPONDENT
Neutral
citation
:
Probest
Projects (Pty) Ltd v The Attorneys, Notaries and Conveyancers
Fidelity Guarantee Fund
(20761/2014)
[2015] ZASCA 192
(30
November 2015)
Coram
:
Cachalia, Shongwe, Tshiqi and Swain JJA and Baartman AJA
Heard
:
19 November 2015
Delivered:
30
November 2015
Summary:
Theft
of trust funds by attorney – s 48(1)
(a)
of the Attorneys Act 53 of 1979 – when claimant became aware of
theft – stated case in terms of Rule 33(1) of the Uniform
Rules
of Court – status of evidence agreed upon – drawing of
inferences from agreed facts as to when claimant became
aware of
theft.
Order
On
appeal from:
Western
Cape Division of the High Court, Cape Town (Mantame J, Hlope JP and
Weinkove AJ concurring) sitting as court of appeal.
The
appeal is upheld with costs and the order of the full court is set
aside and substituted with the following:
‘
The
appeal is upheld with costs and the order of the court a quo is set
aside and substituted with the following:
Judgment
Shongwe
et Swain JJA
(Cachalia
and Tshiqi JJA and Baartman AJA concurring):
[1]
In
this matter the appellant Probest Projects (Pty) Ltd (Probest)
instituted proceedings before the Western Cape Division of the
High
Court (Irish AJ) (the trial court) for payment of the amount of
R9 100 000 by the respondent, the Attorneys, Notaries
and
Conveyancers Fidelity Guarantee Fund (the Fund). The claim was based
upon the theft of these funds by an attorney, Mr Izak
Minnie, to whom
they had been entrusted.
[2]
The
central issue before the trial court and in this appeal is the time
when the representatives of Probest became aware of the
theft of the
funds by Mr Minnie, or when Probest by the exercise of reasonable
care, should have become aware of the theft in terms
of s 48(1)
(a)
of the Attorneys Act 53 of 1979 (the Act).
[3]
These
issues were the subject of a special plea which was successfully
raised by the Fund in answer to the claim of Probest for
payment in
terms of s 26
(a)
of the Act. It was alleged that Probest had failed to institute
action within a period of three months of becoming aware of the
theft
in terms of s 48(1)
(a)
of the Act. An additional special plea that there was no entrustment
of the funds to Mr Minnie, was dismissed by the trial court
and is
not the subject of a cross-appeal by the Fund. Leave was subsequently
granted by the trial court to Probest to appeal to
the full court of
the Western Cape Division of the High Court (the full court), on 20
September 2013. The appeal was dismissed
with costs on 15 August 2014
and it comes before this court as a result of special leave having
been granted.
[4]
In
order to place the issues in context, it is necessary to briefly set
out the historical background. This evidence was common
cause between
the parties as a result of an agreement concluded in terms of Rule
33(1) of the Uniform Rules of Court, before the
commencement of
proceedings in the high court.
[5]
This
agreement provides as follows:
‘
1.
The parties hereby agree upon a written statement of facts in the
form of a special case for the adjudication of the court, as
follows:
a)
The contents of the documents and record of evidence in bundle A
constitute the correct factual position of what occurred between
the
parties inter se and between the parties and Mr Izak Minnie and be
accepted as evidence thereof.
b)
The only issues to be adjudicated are the two special pleas by
defendant, as contained in paragraphs 1 and 2 of defendant’s
plea.’
The
‘record of evidence’ consisted of the transcript of the
inquiry held at the offices of the Law Society of the Northern
Provinces on 23 September 2010, into the claim of Probest at which Mr
William Annandale, the representative of Probest, as well
as Mr
Minnie gave evidence under oath. Affidavits by them also formed part
of the agreed evidence. The Fund accepted that it bore
the onus to
prove the factual basis for the special pleas.
[6]
Mr
Annandale stated that he had known Mr Minnie for almost ten years and
that at the beginning of January 2009, Mr Minnie told him
that in his
capacity as a conveyancer, he had come across developments in which
clients of his were having difficulty in reselling
units, that had
been built and sold. The purchasers were unable to obtain mortgage
bond financing, or had their bond approvals
withdrawn because of the
banking crisis. Mr Minnie said he would be able to assist Probest in
purchasing various units at bargain
prices, which would be good
investments. Probest accordingly transferred funds into the trust
account of Mr Minnie. The amounts
transferred were intended to cover
the prices of the units together with transfer costs by Mr Minnie. Mr
Minnie indicated he would
handle all of the administration and
identify the properties to be purchased.
[7]
Mr
Annandale stated that he trusted Mr Minnie as he had handled
Probest’s affairs very competently over the years. Mr Minnie
had to prepare the documentation for the transfer of these properties
to Probest. He stated he was waiting for this documentation
and
pressured Mr Minnie for it, but Mr Minnie said there were delays in
getting rates clearance certificates from the municipalities.
Mr
Annandale accepted this explanation, because he had experienced
similar delays. In response to this pressure in April 2009,
Mr Minnie
said that he would finalise the transactions, or pay the money back,
if he did not.
[8]
In
June or July 2009, Mr Minnie told Mr Annandale that the delay was
caused by his books of account being behind, and whilst they
were
being sorted out, he would furnish security. The security that was
furnished was an acknowledgment of debt signed by Mr Minnie
on 23
July 2009, as well as suretyships from three companies and a trust,
all of which he said he controlled. None of this documentation
was
however placed before the high court. Thereafter, Mr Minnie signed an
Agreement and Option to Purchase on 4 August 2009, which
was referred
to during the inquiry. The chairman requested Mr Minnie to produce
this document which then formed part of the documents
before the high
court.
[9]
The
option recorded that in terms of the acknowledgment of debt signed by
Mr Minnie on 23 July 2009, and the suretyships signed
by certain
named companies securing the indebtedness of Mr Minnie, various
properties would be transferred to Probest by these
companies, in
part settlement of their surety obligations to Probest. This document
described Probest as care of Attorneys Viljoen,
French and Chester.
Mr Annandale said he had engaged the services of these attorneys for
this purpose. Mr Annandale stated that
problems arose when he was
advised by these attorneys at the end of October, that there were
caveats registered against these properties,
so they could no longer
be used as security. Mr Minnie stated that the object was for these
properties to stand as security and
then be sold to Probest, as value
for the money received. He told Probest that although there were
bonds over the properties, there
was sufficient equity in the
properties. At that stage the properties were not subject to any
caveats and could be transferred.
Mr Minnie stated that it was due to
the actions of other creditors, that caveats were subsequently
registered against these properties.
Mr Minnie stated that ‘the
bubble burst’ when third parties laid claim to these
properties, which forced him to confess
to Mr Annandale and admit
that there was a trust deficit.
[10]
The
evidence of Mr Annandale and Mr Minnie at the inquiry as to their
interaction during this period, as well as the time when Mr
Annandale
became aware that Probest’s money had been stolen, has to be
considered against this background.
[11]
Mr
Annandale said he only became concerned at the end of October when
the firm of attorneys he had engaged, advised him of the caveats
registered against the properties and that there was something wrong.
He was only informed in November that Mr Minnie’s firm
had been
liquidated; and when he asked Mr Minnie about this, he replied there
was no problem as he was now acting independently
as an attorney,
‘Izak Minnie Attorney’ and it had all been sorted out.
Until he found out the funds had been stolen,
he was reassured by Mr
Minnie that he was busy sorting everything out. Mr Minnie at no stage
admitted he had stolen the money.
Even when Mr Minnie furnished him
with an affidavit to advance his claim against the Fund, Mr Minnie
only said that he did not
have Probest’s consent to use the
funds for his own benefit.
[12]
Mr
Minnie said that he only told the representatives of Probest during
October or November that he had misappropriated their money.
He never
told them this when he offered them security and denied that he had
confessed to them at this stage. It was only when
the problems he
faced became clear that he told them. He agreed with the evidence of
Mr Annandale that he only heard in December,
that there was a
specific problem. He stated that Probest was not aware of any
financial problems until the end of 2009.
[13]
The
evidence of Mr Annandale and Mr Minnie was that Probest only acquired
knowledge that Mr Minnie had stolen the funds at the end
of November
or December 2009, because that is when Mr Minnie told Mr Annandale.
The terms of the stated case were that it was agreed
between the
parties that the record of evidence was ‘the correct factual
position of what occurred between the parties’.
The parties
accordingly agreed that the evidence of Mr Annandale and Mr Minnie as
to when Mr Annandale heard and Mr Minnie told
him that the money had
been stolen, was at the end of November or December.
[14]
The
crucial inquiry accordingly is whether there is other evidence
falling within the ambit of the evidence agreed upon by the parties,
which is sufficiently reliable and cogent, to enable a court to find
on a balance of probabilities, that the Fund has proved that
both Mr
Annandale and Mr Minnie have not told the truth. It would have to be
demonstrated that other evidence proved that Mr Annandale
to the
knowledge of Mr Minnie, knew about it at an earlier stage.
[15]
The
high court concluded that ‘the only reasonable inference to be
drawn from the evidence set out above is that, by 23 July
2009, the
plaintiff’s directors knew that their money was gone from the
trust account where it ought to have been’.
This was the date
when Mr Minnie furnished the acknowledgment of debt to Probest.
[16]
The
evidence relied upon by the high court was the following:
a)
The
explanation by Mr Minnie that the funds could not be paid back
immediately
because his firm’s accounting records were behind
and had been seized by the Law Society.
b)
The furnishing
of security by Mr Minnie in the form of immovable properties
that
Probest would acquire from companies, which were unknown to Probest.
c)
By 23 July
2009 Probest had engaged another firm of attorneys through
whom the
initial offer of security from Mr Minnie was made.
[17]
Certain
inferences were then drawn by the high court from these facts. It was
inferred that it was extraordinary and unacceptable
that Probest’s
directors believed that the money could not be paid out simply
because Mr Minnie’s books were behind.
If they did believe
this, why enter into the arrangement to acquire immoveable properties
in lieu of repayment? A reasonable director
would have contacted the
Law Society to find out whether the release of the funds could be
expedited. Accordingly, so the reasoning
went, it was improbable that
the true nature of the misappropriation would not have been
established very quickly. As regards the
role of Probest’s
other firm of attorneys, the high court reasoned it was inconceivable
that they would have accepted Mr
Minnie’s explanation for being
unable to pay. They would have advised Probest of the unlikelihood of
this. The full court
endorsed the reasoning of the trial court.
[18]
A
distinction, must be drawn between inferences and assumptions. As
stated in
S
v Naik
1969 (2) SA 231
(N) at 234C-D:
‘
If
the court, on the evidence before it, were to come to that
conclusion, it would be making an assumption rather than drawing an
inference, for the facts necessary for the drawing of an inference
are lacking.’
In
addition, as Lord Wright observed in
Caswell v Powell Duffryn
Associated Collieries Ltd
1939 (3) All ER 722
at 733:
‘
Inference
must be carefully distinguished from conjecture or speculation. There
can be no inference unless there are objective facts
from which to
infer the other facts which it is sought to establish. . . . But if
there are no positive proved facts from which
the inference can be
made, the method of inference fails and what is left is mere
speculation or conjecture.’
As
noted, the facts agreed upon by the parties included the evidence
under oath of Mr Annandale and Mr Minnie, that Mr Annandale
only
acquired knowledge of the theft at the end of November or December
2009. The trial court as well as the full court, however,
ignored
this evidence and the status it held, which the parties had conferred
upon it by agreement. It must be emphasised that
it was agreed that
it constituted ‘the correct factual position of what occurred
between the parties inter se and between
the parties and Mr Izak
Minnie and be accepted as evidence thereof’.
[19]
In
the face of this direct evidence under oath by Mr Annandale and Mr
Minnie, the conclusion drawn by the high court amounts to
an
assumption, conjecture or speculation and not a valid inference. In
addition, when the fact in issue (which in this case is
knowledge by
Mr Annandale, that Mr Minnie had stolen Probest’s money), is
sought to be proved by the use of circumstantial
evidence (as set out
in para 16), then the inference sought to be drawn (ie knowledge by
Mr Annandale), must be consistent with
all of the proved facts
[1]
.
In addition, the inference sought to be drawn in favour of the Fund
(which bears the onus to prove Mr Annandale’s knowledge
of the
theft), must be the most likely of the probable inferences
[2]
.
The inference drawn that Mr Annandale had knowledge of the theft by
23 July 2009, is not consistent with all of the proved facts
and not
the most likely of the probable inferences, to be drawn on all of
these agreed facts.
[20]
Insofar
as the assumption made by the high court that Probest should have
become aware of the theft by the exercise of reasonable
care, by
contacting the Law Society, this is contradicted by the evidence of
Mr Annandale. He said he was told by Mr Minnie he
was busy sorting
out his books, he offered security for them to relax and assured him
that everything was in order. According to
Mr Annandale’s
evidence he believed Mr Minnie. Again the parties agreed this
evidence constituted the correct factual position
of what occurred
between Mr Annandale and Mr Minnie.
[21]
In
the result both the trial court and the full court erred in finding
that the Fund had discharged the onus of proving that Probest
had
knowledge of the theft by 23 July 2009. On the evidence of Mr
Annandale and Mr Minnie, Probest only acquired this knowledge
by the
end of November 2009. It is common cause that the Fund was advised of
the theft by way of a letter dated 20 November 2009.
The provisions
of s 48(1)
(a)
of the Act, were accordingly complied with.
[22]
In
the result the trial court and the full court erred in upholding the
special plea in favour of the Fund.
[23]
We
accordingly make the following order:
The
appeal is upheld with costs and the order of the full court is set
aside and substituted with the following:
‘
The
appeal is upheld with costs and the order of the court a quo is set
aside and substituted with the following:
The
special plea is dismissed with costs’.
J B
Z Shongwe
Judge
of Appeal
K G
B Swain
Judge
of Appeal
Appearances:
For the Appellant:
M M W Van Zyl SC
Instructed
by:
Dawie
Beyers Attorneys, Wynberg
Honey
Attorneys, Bloemfontein
For the Respondents:
G A Oliver
Instructed
by:
Brendan
Müller Inc, Cape Town
EG
Cooper Majiedt Attorneys, Bloemfontein
[1]
R v Blom
1939 AD 188
at 202-203.
[2]
Govan v
Skidmore
1952 (1) SA 732
(N) at 734C-D;
Joel
Melamed & Hurwitz v Cleveland Estates
1984 (3) 155 (A) 164G-165C.