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[2014] ZASCA 75
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Hepple and Others v Law Society of The Northern Provinces (507/2013) [2014] ZASCA 75; [2014] 3 All SA 408 (SCA) (29 May 2014)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case
No: 507/2013
In
the matter between:
THOMAS WALTER
ROTHWELL
HEPPLE
…........................................................................................................
FIRST APPELLANT
CHRISTIAAN
HENDRIK EARLE
…......................................................
SECOND APPELLANT
HEPPLE
ATTORNEYS
INCORPORATED
...........................................................................................
THIRD
APPELLANT
and
THE LAW SOCIETY
OF THE
NORTHERN
PROVINCES
.........................................................................................
RESPONDENT
Neutral
citation:
Hepple v Law Society
of the Northern Provinces
(507/2013)
[2014] ZASCA 75
(29 May 2014)
Coram:
Mthiyane DP, Ponnan, Saldulker JJA,
Hancke and Mathopo AJJA
Heard:
12 May 2014
Delivered:
29 May 2014
Summary:
Attorneys ─ Misconduct ─
Misappropriating trust funds ─ Attorneys in an incorporated
practice carrying on investment
activities ─ paying interest to
investors out of trust funds ─ resulting in trust deficits ─
Manipulating bank
reconciliation statements to conceal trust deficits
─ Misconduct justifying removal of both from the roll ─
Obligation
to keep proper books of account resting on both ─
Approach to striking off restated.
ORDER
On
appeal from:
North Gauteng High Court,
Pretoria (Wright AJ and Makhubele AJ sitting as court of first
instance):
1 The appeal is
dismissed.
2 The costs are to
be paid jointly and severally by the appellants and are to be taxed
by the first and second appellants on the
scale as between attorney
and client.
JUDGMENT
Mthiyane DP
(Ponnan, Saldulker JJA, Hancke and Mathopo AJJA concurring):
[1]
This is an appeal against an order of the North Gauteng High Court
(Wright AJ and Makhubele AJ), removing the names of the first
and
second appellants from the roll of attorneys and granting other
ancillary relief. The ancillary relief included an order prohibiting
the appellants from handling or operating trust accounts and the
appointing of a
curator
to administer and control the appellants’s trust accounts, to
protect the interests of their trust creditors. The appeal
is with
the leave of the high court.
[2]
The first appellant, Mr Thomas Walter Hepple (Hepple), was admitted
as an attorney by the Free State High Court on 19 February
1998 and
enrolled as an attorney in Gauteng on 17 November 1999. His
co-director, the second appellant, Mr Christiaan Hendrik Earle
(Earle), was admitted by the Free State High Court on 30 October 1980
and was enrolled as an attorney in Gauteng on 23 February
2006. They
both practised in Centurion, Pretoria in an incorporated practice
under the name: Hepple Attorneys Incorporated,
the third
appellant (the firm). There were two other directors of the firm, Mr
Gerhard Barnard and Mr Micheal Johnson both of whom
are not the
subject of the application for removal from the roll of attorneys.
[3]
In terms of s 22(1)
(d)
of the Attorneys Act 53 of 1979 (the
Act), an attorney may ‘on the application by the society
concerned be struck off the
roll or suspended from practice by the
court within the jurisdiction of which he [or she] practises─
. . .
(a)
If he [or she], in the discretion of the court, is not a fit and
proper person to continue to practise as an attorney’.
[4]
The nature of the enquiry we are concerned with in this case, namely
a determination of the question whether the attorneys concerned
are
not fit and proper persons to continue to practise and how a court
should exercise its discretion in that regard, including
the issue of
the appropriate sanction as provided in s 22(1)
(d)
of the Act, was reiterated by Brand JA in
Summerley
v Law Society, Northern Provinces
[1]
as
follows:
‘
It
has now become settled law that the application of s 22(1)
(d)
involves a threefold enquiry (see eg
Jasat
v Natal Law Society
2000 (3) SA 44
(SCA) in para [10] at 51C-I and
Law
Society of the Cape of Good Hope v Budricks
2003 (2) SA 11
(SCA) in para [2] at 13I-14B). The first enquiry is
aimed at determining whether the law society has established the
offending
conduct upon which it relies, on a balance of
probabilities. The second question is whether, in the light of the
misconduct thus
established, the attorney concerned is not a “fit
and proper person to continue to practise as an attorney”.
Although
this has not always been the position, s 22(1)
(d)
now expressly provides that the determination of the second issue
requires an exercise of its discretion by the Court (see eg
A
v Law Society of the Cape of Good Hope
1989
(1) SA 849
(A) at 851C-E). As was pointed out by Scott JA in
Jasat
(at 51E-F), the exercise of the discretion at the second stage
“involves, in reality, a weighing up of the conduct complained
of against the conduct expected of an attorney, and, to this extent,
a value judgment” (see also, eg,
Budricks
(supra)
at 14A). The third enquiry
again requires the Court to exercise discretion. At this stage the
Court must decide, in the exercise
of its discretion, whether the
person who has been found not to be a fit and proper person to
practise as an attorney deserves
the ultimate penalty of being struck
from the roll or whether an order of suspension from practice will
suffice.’
[5]
The offending conduct which prompted the respondent, the Law Society
for the Northern Provinces (the law society) to bring the
application
to remove Hepple and Earle from the roll of attorneys is sketched in
the founding affidavit deposed to by its President,
Mr Stephens
Anthony Thobane (Thobane), and supported by three reports of an
investigation into the accounting and financial records
of the firm.
These uncovered a number of irregularities amounting to
contraventions of the certain provisions of the Act and the
Rules of
the law society (the Rules). These included the existence of
substantial trust deficits in their books of account;
misappropriation
of trust funds; failure to account to the law
society for interest generated from the trust banking accounts as
required by s 78(3)
of the Act,
[2]
failure
to keep copies of bank reconciliation statements; manipulation of
bank reconciliation statements to conceal trust deficits;
failure to
submit (or submit timeously) the Rule 70 auditor’s report for
the period ending 30 June 2009 to the society; obtaining
a qualified
Rule 70 auditor’s report; conducting an investment practice in
which interest was paid to investors out
of the trust account,
thus creating a trust deficit over many years; failure to keep proper
accounting records in contravention
of the Act and the Rules.
[6]
The investigation was conducted by Mr Vincent John Faris (Faris) a
senior accountant and auditor who is described in the papers
as
someone with a wide knowledge of attorneys’ accounting records
and who has many years’ experience in auditing the
accounting
records of practising attorneys. He is considered to be an expert in
the field.
[7]
Faris’ investigation was initially directed at the period July
2009 until the end of May 2010. But what he uncovered in
his initial
investigation led him to expand its scope to include an examination
of the trust positions and the firm’s accounting
activities to
as far back as 2005. That exercise yielded a number of disturbing
irregularities and contraventions of the Act and
the Rules. They are
documented in three reports, dated 5 July 2010, 31 January 2011 and
11 April 2011, which Faris submitted to
the law society. The first
two reports deal with and include his actual investigation, the
interviews he had with Hepple and Earle
and other relevant persons,
his findings and conclusions. The third report deals with the
responses by Hepple and Earle to his
findings and conclusions.
[8]
The investigation uncovered the following:
(a) Interest on the
overdraft as well as other charges levied on the business banking
account were debited to the trust account.
The firm kept two trust
accounts at the First National Bank; there was a main trust bank
account and a second bank account which
was used to accumulate the
trust bank account interest and charges transferred from the main
trust bank account. On scrutinising
the business bank account Faris
discovered that interest on the overdraft (which should have been for
the firm’s business
account) was debited to the trust account.
The effect thereof was that the amounts due to the law society were
not accounted for
at all or within the time and in a manner
prescribed by s 78(3) of the Act. The trust liability resulting from
the omission to
pay interest in the trust bank account to the law
society amounted to (at the time of the first report) R82 985.10.
Mr van
der Westhuizen, the firm’s bookkeeper undertook to get
the firm to reimburse the trust bank account by the end of June 2010.
The failure on the part of the firm to pay these amounts resulted in
continuing trust deficits over the period July 2005 through
to May
2010.
(b) The accounting
records indicated the existence of a trust suspense account of
R19 375.05 in debit but the amount was treated
by the firm as
trust funds available. There was however no evidence to support the
existence of funds and this amount was therefore
treated by Faris as
an additional deficit.
(c)
The firm conducted an investment practice whereby funds were borrowed
from investors. Further, the investments made did not
generate the
necessary cash flow to repay the capital and the trust account was
used irregularly to make interest payments. These
investment
activities had been ongoing for a number of years and at the year end
irregular withdrawals were reimbursed into the
trust account to
conceal the true positions from the auditors. Interest to investors
was paid out of the Trust account. According
to a schedule drawn by
Faris a total of R268 479.64 was paid to investors between 24
July 2009 to 3 June 2010. The payment
was made from the Trust account
thus creating a deficit in the trust account in that amount. It is
important to note that the carrying
on of an investment practice is
not proscribed, but strict rules are laid down in Rule 77A of the
Rules relating to the conduct
of an investment practice.
[3]
The
disturbing aspect of the investment activities concerned in this case
is the lack of candour on the part of Hepple and Earle
in respect of
transactions in which they were involved. In the high court mention
is made of a summary of an account headed ‘Consolidated
Summary
of Urban Blue Print Property Holdings (Pty) Ltd’. The court
noted that this was a client of the firm. The account
shows a receipt
of R1, 5 million and trust interest accrued of just over R6 000. It
also shows payments and debits almost extinguishing
the total,
leaving the account in credit in an amount of just over R9 000.
The account also shows payments to Earle of R20 275
and R20 000
to Hepple, who are both described as clients. Nowhere are these
transactions explained in the papers. During argument
in the appeal
before us Mr Davis, for Hepple, submitted that this payment was
authorised by the client. There is no further explanation
of what
this payment was for. There are further similar examples of
activities which also involved the deposit of certain amounts
to the
firm and payments made to the point where the funds were depleted. I
do not however consider it necessary to deal with all
of them.
(d) The
investigation also uncovered discrepancies in the firm’s bank
reconciliation. It was discovered that cashbook balances
were
substantially in excess of the bank statement balances. Faris noted
that under normal circumstances this would indicate the
existence of
outstanding deposits, that is, deposits made into the bank account
and as such captured into the accounting system
but not yet reflected
on the bank statement. Faris found these excesses questionable as it
would be expected that there would be
outstanding cheques, which are
cheques not yet presented to the bank for payment, as opposed to
outstanding deposits. When
questioned about this discrepancy
the firm’s bookkeeper, Mr van der Westhuizen, was unable to
offer any explanation but undertook
to look into the matter and
revert to Faris in due course. Subsequently Mr van der Westhuizen
furnished Faris with bank reconciliation
statements for the years
ended June 2007 through to 2010. He told Faris that the bank
reconciliation statements had not been prepared
or had not properly
been prepared and that he had been obliged to re-perform the bank
reconciliation statements from August 2005
to June 2006, and then
from July 2006 up to the date of his appointment at the firm in 2007.
From the documents furnished it was
clear that bank reconciliation
statements were manipulated at year end to conceal the existence of
trust deficits. The manipulation
was not limited to the year ended
June 2010 but had occurred from as far back as June 2007. Faris
concluded that the firm was aware
of the position and that the bank
reconciliation statements were manipulated in such a way as to
conceal the existence of trust
deficits. Faris furnished the law
society with a summary of trust bank reconciliations from July 2006
to June 2010. In each of
these years, with the exception of the
period March 2009 to June 2009, there was a discrepancy between the
trust bank balance and
the accounting records of the firm indicating
the existence of trust deficits.
(e) Faris also
investigated two complaints against the firm: one by a firm of
attorneys Hatting Basson Archary & Ndzabandzaba
Inc. on behalf of
MBM Technical Services (Pty) Ltd and the other by a Mr van Rooyen. In
regard to the first complaint the firm
had received R1, 5 million
from a firm, Quantum Business Development Limited. The money had been
paid into the firm’s Trust
account. The transaction involved a
loan agreement between Quantum and a private company Urban Blueprint
Property Holdings (Pty)
Ltd (Urban). In terms of the agreement
between the two corporate entities, Earle was given certain powers by
the trust Mandate
agreement between the parties. The deponent for the
law society Thobane, says that payments were in fact made, according
to Earle,
with the full knowledge and approval of all the relevant
parties. Faris provided a consolidated summary of how the funds were
appropriated
and concluded that if Earle’s explanations are to
be accepted, ‘there will be no impact on the firm’s trust
positions’.
Faris does not appear to have taken this complaint
any further.
(f) As to the
complaint relating to Van Rooyen, Faris noted in his report dated 5
July 2010 that R50 000 was paid to Van Rooyen
from the Urban account.
I have not been able to find anything either from the founding
affidavit filed by the law society or from
any of the reports
submitted by Faris to suggest that this payment had any impact on the
firm’s trust position. In any event
Earle gave a full
explanation, in particular that Mr Van Rooyen was not his client; he
was not holding any trust funds for Van
Rooyen and had no mandate
from his client to make any further payment to Van Rooyen, other than
the amount of R50 000 already
paid to him. The two complaints
had nothing to do with Hepple. The complaint involved matters which
were handled by Earle.
(g) According to
Thobane’s affidavit Earle had informed Faris of a trust deficit
of R400 000 as at July 2009 and that
he was in the process of
arranging finance to reimburse the trust banking account. The
shortfall is also admitted by Earle in his
answering affidavit (he
has described it as a ‘replying affidavit’) but Hepple
does not deal with the allegation at
all in his responding affidavit
(which is also described as a ‘Replying affidavit’).
(h)
There were other irregularities relating to payments from the trust
accounts, some of which came to light in the discussions
Faris had
with Ms Deverani Moonsamy, an erstwhile employee of the firm.
[9]
In considering whether a case has been made out against an attorney
sought to be struck from the roll it is necessary to bear
in mind
that the evidence presented by the law society is not to be treated
as though one was dealing with ‘a criminal case’
or ‘an
ordinary civil case’. The proceedings in applications to strike
the name of attorneys from the roll are not
ordinary civil
proceedings. They are proceedings of a disciplinary nature and are
sui
generis
.
[4]
It
follows therefore that where allegations and evidence are presented
against an attorney they cannot be met with mere denials
by the
attorney concerned. If allegations are made by the law society and
underlying documents are provided which form the basis
of the
allegations, they cannot simply be brushed aside; the attorneys are
expected to respond meaningfully to them and to furnish
a proper
explanation of the financial discrepancies as their failure to do so
may count against them. In this regard the remarks
of Harms ADP in
Malan
v The Law Society of the Northern Provinces
[5]
are
apposite:
‘
If
one turns to the bookkeeping charges, the position is simply that
there is no allegation of a realisation of the seriousness
of the
offences. They are brushed off on the basis
that
the society failed to prove a trust shortage
that
the bookkeeper had erred, that they did not know the rules, that
their auditors had erred, or simply by not dealing with the
pertinent
allegations. Furthermore, instead of dealing with the merits of the
allegations, the appellants conducted a paper war
and they attacked
the Society and its officers, they attacked the Fidelity Fund and
they attacked the attorneys who had to take
over the files ─ in
short, their approach on the papers was obstructionist. . . . These
factors are “aggravating”
and not extenuating because
they manifest character defects, a lack of integrity, a lack of
judgment and a lack of insight.’
(My emphasis.)
[10]
In my view the offending conduct on the part of Hepple and Earle was
clearly established if one has regard to the cumulative
evidence of
the contraventions of the Act and the law society rules catalogued
above. Hepple and Earle do not deny that interest
on the trust bank
overdraft and other bank charges were being debited against the trust
banking account each month and that they
failed to account properly
to the law society for the trust interest and bank charges which gave
rise to a trust deficit of R82
484.90, as at the time of
investigation. The explanation that this was as a result of an error
by the bank is far from convincing,
even though it is backed by a
letter to the bank by van der Westhuizen requesting the bank to stop
the practice.
[11]
There was also the existence of a suspense trust account which showed
a continuous trust debit of R19 375.05, which Hepple
and Earle had to
rectify by reimbursing the trust account. The trust deficit had
continued for some time. The trust deficit was
not denied by Earle.
He, however, tried to explain it away by reference to a change that
was introduced to the firm’s accounting
system. He explained
that the suspense account was created when the firm changed from what
he referred to as the ‘AJS system’
of accounting to the
‘Legal Suite System’. He pointed out that all the AJS
files were created on the suspense account
and were then transferred
to the legal suite system. When this was done there was a balance
left. The attorneys were not aware
until the first audit was done
after the exercise. They say everybody accepted that it was an
administrative fault and that it
reflected a credit not a debit.
According to them Faris was the first person to point out that it
reflected a trust debit. Although
Hepple and Earle were still not
convinced that this was the case they, however, reimbursed the
‘shortage’.
[12]
There is also the question of the late submission of Rule 70
auditor’s report for the period 30 June 2009 and the fact
that
it was qualified. The first qualification related to interest on the
overdraft and the other bank charges on the business
bank account
which were debited to the firm’s trust banking account. The
second qualification related to the interest on
the s 78(2)(A) trust
investments. Faris also noted that the Rule 78 auditor’s report
should have been submitted on or before
31 December 2009. It was only
submitted on 8 February 2010. The late submission of the report was
in contravention by the attorneys
of the provisions of Rule 70.3.
[6]
Neither
of the two attorneys dealt with this complaint satisfactorily. Earle
says that he had dealt with it in his previous response.
Hepple on
the other hand says he thought that Rule 70 dealt with investment
practices. This transgression, too, was sufficiently
established by
the law society.
[13]
Of greatest concern is the transgression relating to the investment
practice. In this regard Hepple and Earle were engaged
in investment
activities outside the firm, whereby funds were borrowed from
investors. The investments made had not generated the
necessary cash
flow to repay the capital and consequently the trust funds were used
irregularly to make interest payments. I have
already alluded to the
fact that a summary of the schedule prepared by Faris showed that a
total amount of R268 479.64 in interest
to investors was paid from
the trust account between 24 July 2009 and 3 June 2010. The said
payment resulted in a trust deficit
which would have endured for at
least a year. Earle admitted that the firm borrowed money from
investors. He however claimed that
he was in charge of this and that
this was done at that stage without the knowledge of the other
directors. He alleged that the
other shortages were caused by bona
fide administrative mistakes and that they were also reimbursed. He
also did not deny Faris’s
statement during the interview on 15
September 2010 that the trust account had been in deficit in the sum
of approximately R400 000
since July 2009. He also did not deny
that at the first investigation he had not disclosed the existence of
this trust deficit.
Earle also stated that all the shortages arising
from interest payments from the trust account had been reimbursed in
full out
of his own pockets. He took the blame and sought to absolve
the other directors. He also indicated that he no longer wished to
practice as an attorney.
[14]
In his defence Hepple sought to fall in line with Earle’s
response of attempting to absolve the other directors. He stated
that
at a meeting of directors held on 8 December 2008 it was resolved
that he was to be released from all administrative duties
and that
the said duties would be shared amongst the other directors, though
in fact it appears that from that date it was Earle
who took on the
sole responsibility of the financial management of the firm. But that
of course does not mean that the other directors
of the corporate
practice were relieved of their legal responsibility in respect of
the trust account. It was decided that Hepple
would from then on
focus on commercial civil litigation to generate income for the
practice which was at that stage undergoing
a downturn. According to
Hepple the investment practice should have ceased in 2008 and he
denied any knowledge of the interest
or other payments that gave rise
to the trust deficits.
[15]
He denied any involvement with the investment practice. He did not
offer any explanation about the transactions which gave
rise to
Faris’ suspicion. The high court found that Hepple benefited
financially from the investment practice in that, at
an absolute
minimum, on at least one occasion he received a payment of R20 000.
I have already alluded to the fact that other
than a statement from
the bar by Mr Davis that the payment was authorised by a client,
nowhere in the papers is there an explanation
concerning this
transaction. Instead he blames Earle, and, to a greater extent
Moonsamy, for some of the firm’s woes. He
accused Moonsamy of
having stolen R900 000 from the firm (over the period September
2007 to August 2010) by making fraudulent
transfers out of the trust
and business accounts.
[16]
Hepple’ s response that the financial administration of the
firm was left entirely to Earle from as far back as December
2008
even though it is backed up by minutes of a director’s meeting
held on 8 December 2008 raises more questions than answers.
Faris
noted that this created the impression that the directors did meet
from time to time, however irregular that may have been,
and nowhere
in his response is any reference made to any other directors’
meetings held subsequent to that meeting. Faris
further noted in this
regard that one would have expected that, given the size of the
practice and the nature of its activities,
meetings would have been
held and that the financial performance and the state of the trust
account would have been placed on the
agenda for discussion, more so
if separate management functions had been allocated to each of the
directors.
[17]
There is yet a further reason why his version is difficult to
sustain. Faris refers to a meeting he had with Hepple at which
Hepple
told Faris that all the directors were fully informed of all business
activities. This was in response to an allegation
by the other
directors Barnard and Johnson that they had not been informed of some
of the activities of the firm. If this was the
case then there is no
reason why any financial problems concerning the trust accounts would
not have been placed on the agenda
for discussion.
[18]
Earle is in an even worse position than Hepple. He accepts full
responsibility for the overall state of the accounting records,
the
fact that bank reconciliation statements were manipulated and the
existence of the deficits. Significantly both Hepple and
Earle do not
offer any comment on the findings by Faris that irregular interest
payments and the manipulation of the bank reconciliation
statements
were not restricted to the year ended 30 June 2010 and that they date
back to previous years, which would include the
period between 2005
to 2008, when Hepple was still involved with the financial management
of the firm.
[19]
In my view one is dealing here, not with trust deficits arising from
simple accounting errors. The books of account of the
two attorneys
reveal a continuous pattern of concealing trust deficits which
demonstrates an element of deceit, inimical to the
honour associated
with the profession of an attorney. The attorney’s’
profession demands of its members ‘complete
honesty,
reliability and integrity’.
[7]
[20]
In the appeal before us Earle admitted his wrong-doing but pleaded
for a lesser sanction. Not so with Hepple. He maintained
that he was
not involved in the financial shenanigans of Earle and gives two
reasons therefor. First, in terms of a resolution
taken by the board
in December 2008 he alleges that he was relieved of the financial
management of the firm. Secondly, he claims
that when he discovered
that Earle was conducting an investment practice, he had asked him to
stop.
[21]
As to the first point, there is the difficulty that he is unable to
explain the trust deficits that had occurred from 2005
to 2008,
whilst he was involved with the financial management of the firm.
Moreover, that he was not involved with the financial
management of
the firm, is no defence at all. The duty to comply with the
provisions of the Act and the Rules is imposed upon every
practising
attorney, whether practising in partnership or not, and no attorney
can therefore be heard to say that under an arrangement
between him
and his partner, the latter was not responsible for the keeping of
the books and control and administration of the
trust account, and
that he was therefore not negligent is his failure to ensure
compliance with the provisions of the Act and the
Rules.
[8]
As
to the second point ─ knowing that his co-director had engaged
in serious
misconduct
Hepple simply asked him to stop. One would have thought
that
such a discovery would have caused him to be more vigilant and not
to
simply continue with his unquestioning behaviour.
[22]
In the high court Earle also accepted some responsibility. He
admitted being responsible for the trust account deficits. The
high
court however rejected his statement that the other directors knew
nothing about his conduct as unconvincing especially insofar
as
Hepple was concerned. The high court held that if Earle knew more
than Hepple of the unlawful activities being perpetrated it
was not
very much more and was certainly insufficient to attract a different
sanction. I do not consider that the high court misdirected
itself in
its assessment of the evidence in relation to the question whether
the offending conduct had been established on a balance
of
probabilities against Earle and Hepple. I am satisfied that there was
overwhelming evidence based on the investigation by Faris
to justify
the conclusion that the offending conduct had been established on a
balance of probabilities.
[23]
I turn to the question whether in the light of misconduct ─
which I have found to have been established in respect of
both Hepple
and Earle ─ they are therefore not fit and proper persons to
continue to practise as attorneys. In the high court
this question
was answered in favour of the law society and against the two
attorneys. In so doing the court exercised a ‘discretion’
in the strict sense, which this court would only be entitled to
interfere with if we are convinced that the high court ‘failed
to bring an unbiased judgement to bear one the issue; did not act for
substantial reasons; exercised its discretion capriciously,
or
exercised its discretion upon a wrong principle or as a result of a
material misdirection.’
[9]
[24]
The high court found that both attorneys were not fit to continue to
practise as attorneys. It found that Earle’s conduct
was
dishonest and at the minimum potentially prejudicial to trust
creditors. It held that the law society had succeeded in showing
on a
balance of probabilities that Hepple was as involved in the
wrong-doing as Earle. It found that Hepple’s moral culpability
was not any less than Earle’s. The high court said that, even
assuming that he was presently practising as an attorney employed
at
a firm other than Hepple Attorneys Incorporated and was not handling
trust money, it was not satisfied that he could be trusted
to
practise at all as an attorney. The overwhelming body of evidence to
which I have alluded above is supportive of the conclusion
reached by
the high court. The court also noted that the fact that Earle has
decided not to practise any longer was not a factor
to be weighed in
his favour when deciding whether or not to strike his name from the
roll. I agree. There is no basis whatsoever
to interfere with that
conclusion.
[25]
This brings me to the third leg of the enquiry, namely whether Hepple
and Earle should be removed from the roll of attorneys
or whether an
order suspending them from practise would be an appropriate sanction.
It is never easy to impose the ultimate sanction
on an attorney as it
has the effect of terminating his or her means of livelihood, with
adverse consequences to himself/herself
and his/her family. Before
imposing such a sanction a court should be satisfied that the lesser
stricture of suspension from practise
will not achieve the court’s
supervisory powers over the conduct of attorneys. These objectives
have been described as twofold:
first, to discipline and punish
errand attorneys and, secondly, to protect the public, particularly
where Trust funds are involved.
[10]
[26]
The high court meticulously considered the guidance offered in
Summerley
[11]
as
to the imposition of sanction. The court noted that Hepple nowhere
accepts responsibility for the wrongdoing perpetrated at this
firm.
He failed to deal convincingly with the serious allegations which
called for a detailed and convincing response. There was
nothing
before the high court to indicate that in the future he would act as
the court, the law society and the public at large
are entitled to
expect of him. There was no evidence to suggest that he had seen the
error of his ways and taken steps to tread
a more careful path. The
court was not satisfied that he is capable of dealing responsibly
with trust money. The court also alluded
to the vague and wholly
unacceptable way in which Hepple dealt with the allegations and
relied for this proposition on the decision
of this court in
Botha
v Law Society, Northern Provinces
.
[12]
[27]
As to Earle the court noted that he had accepted some responsibility
for trust deficits. It rejected his statement that other
directors
knew nothing and found it unconvincing particularly insofar as Hepple
was concerned. It found that Earle knew more about
the unlawful
activities being perpetrated but concluded that it was not very much
more and was certainly insufficient to attract
a different sanction.
The court said that the conduct of Hepple and Earle was such as to
leave a mere suspension from practice
as an unsatisfactory sanction.
[28]
The court found Earle’s conduct to be dishonest and at a
minimum potentially prejudicial to trust creditors. Hepple was,
the
court found, as involved in the wrongdoing as Earle. Hepple’s
moral culpability is no less. Hepple is currently practising
─
not on his own account ─ but as an employee at another firm of
attorneys and is not handling trust money. In the
light of his
involvement in the misconduct as described above the high court
considered that he cannot at all be allowed to continue
to practise
as an attorney. He and Earle failed to take the court into their
confidence. It has been said that a court of appeal
has limited
powers to interfere with the decision of a court of first instance.
[29]
In
Malan
[13]
it
was said: ‘if the court finds dishonesty the circumstances must
be exceptional before a court will order a suspension instead
of a
removal.’ Neither counsel drew our attention to any factors in
this case which constitute exceptional circumstances,
such as those
for example which Brand JA found in
Summerley.
[30]
In the result the following order is made.
1. The appeal is
dismissed with costs.
2. The costs are to
be paid jointly and severally by the appellants and are to be taxed
by the first and second appellants on the
scale as between attorney
and client.
K
K Mthiyane
Deputy
President
Appearances
For Appellant: N
Davis SC (with him C van der Merwe)
Instructed
by:
Van Zyl’s
Attorneys, Pretoria
Bezuidenhouts
Incorporated, Bloemfontein
For
Respondent: J Leotlela
Instructed by:
Rooth & Wessels
Attorneys, Pretoria
Phatshoane Henney
Attorneys, Bloemfontein
[1]
Summerley
v Law Society, Northern Provinces
2006 (5) SA 613
(SCA) at 615B-F.
[2]
‘78 Trust Accounts. . .
(3)
The interest if any, on money deposited in terms of subsection (1)
and the interest on money invested in terms of subsection
(2) shall
be paid over to the fund by the practitioner concerned at the
prescribed time and in the manner prescribed.’
[3]
Under
Rule77A.1.1 of the rules of the Law Society, a firm shall for the
purpose or the rule be deemed to be carrying on the business
of an
investment practice if it invest funds on behalf of a client or
clients or if it controls or manages, whether directly
or
indirectly, such investment by the collection of interest or capital
redemption payments on behalf of investment clients.
[4]
Cirota
& another v Law Society Transvaal
1979 (1) SA 172
(A) at 173A.
[5]
Malan
& another v Law Society, Northern Provinces
[2008] ZASCA 90
;
2009 (1) SA 216
(SCA) para 27-28.
[6]
‘70.3 Firm’s duty to ensure report issued
A
firm shall ensure that the report to be furnished by an accountant
in terms of Rule 70.4 is so furnished within or at the required
time; provided that the council may in its discretion and on such
conditions as it may stipulate, on written application by a
firm
relating to a particular report, condone a failure by that firm to
comply with this requirement.’
[7]
Vassen
v Law Society of the Cape of Good Hope
[1998] ZASCA 47
;
1998 (4) SA 532
(SCA) at 538G.
[8]
Incorporated
Law Society (O.F.S.) v V
1960 (3) SA 887
(O) at 891G-H;
Incorporated
Law Society, Transvaal v K & others
1959 (2) SA 387
(T);
Incorporated
Law Society, Transvaal v Visser
1958 (4) SA 115
(T);
Incorporated
Law Society, Cape v Koch
1985 (4) SA 379 (C).
[9]
See
Malan
(above)
para 13.
[10]
See
Summerley
at para 19.
[11]
Para 19 et seq.
[12]
[2008] ZASCA 106
;
2009
(1) SA 227
(SCA) para 10.
[13]
para 10;
See
also
Malan
(supra) at 221 D-F.