Brief Summary

Legal Profession — Disciplinary proceedings — Application for striking off attorney from roll — Respondent misappropriated trust funds and failed to maintain proper accounting records — Law Society applied for removal based on conduct deemed unfit for practice — Court held that the respondent's actions constituted a serious breach of professional conduct, warranting removal from the roll of attorneys.

Comprehensive Summary

Summary of Judgment

1. Introduction

This was an unopposed disciplinary application brought by the Law Society of the Northern Provinces (the applicant) seeking the striking off of Louisa Andri Bester (the respondent) from the roll of practising attorneys of the North Gauteng High Court, Pretoria, brought in terms of the Attorneys Act 53 of 1979.

The respondent had been admitted as an attorney on 24 April 2003 and, according to the Law Society’s records, practised for her own account under the name Bester Attorneys in Brits, North West Province. The Law Society’s application was directed at the respondent’s continued fitness to practise, with the stated purpose of placing before the court conduct said to reflect a serious deviation from required professional standards.

The matter followed earlier proceedings in which the Law Society had, during August 2009, launched an application for the respondent’s suspension from practice. The respondent did not participate in that earlier application, and the court suspended her on 22 September 2009. The present striking-off application likewise proceeded without an answering affidavit.

Because the respondent had apparently left practice and her whereabouts were unknown, the Law Society obtained an order for substituted service of the notice of set-down by publication in the press, which occurred. The subject-matter of the dispute concerned alleged misappropriation and mishandling of trust money, substantial and repeated trust deficits, failures of proper bookkeeping, alleged “rolling” of trust funds, and non-cooperation with the Law Society’s regulatory investigation.

2. Material Facts

The court proceeded on the factual material placed before it by the Law Society, including the report of an auditor and chartered accountant, Mr Vincent Faris, who was instructed to inspect the respondent’s accounting records after the Law Society received multiple complaints concerning the respondent’s handling of trust funds. Faris reported in writing to the Law Society on 16 July 2009.

A central factual theme was that, during Faris’s inspection, the respondent’s accounting records were incomplete and in some respects unreliable, and she did not provide Faris with information needed to clarify or reconcile the position. The court accepted that the respondent failed to co-operate with the Law Society and did not hand over complete records necessary to determine trust liabilities across matters.

The complaints summarised by the court included the following material factual allegations and findings arising from Faris’s investigation.

In relation to Mr Wouter Vermeulen, the respondent received proceeds connected to a property transaction, including deposits into the firm’s trust account in September 2008 and December 2008. Vermeulen did not receive payment of the sale proceeds due to him. Faris’s investigation indicated that substantial sums associated with Vermeulen’s funds were transferred to other beneficiaries, and that a business cheque ostensibly forming part of payment arrangements was returned unpaid. Faris also identified that certain payments reflected on the records did not name Vermeulen as beneficiary and that amounts were paid to other entities, supporting the complaint that Vermeulen did not receive the money due to him. Faris concluded that the trust position could not be determined without further information and access to relevant ledgers and files, and he suspected that the respondent rolled trust funds in a manner akin to a Ponzi scheme.

In relation to Regent Bond Discounting (Pty) Limited, a bridging finance complaint alleged that a balance of R816 000 remained outstanding from a total amount said to be payable. Faris traced a deposit of R980 000 into the trust account on 28 July 2008 and found that most of this amount was used for payments to C E Olivier. While Faris could not definitively exclude that such payments might have been justified as part of the bridging arrangement, he indicated that if they were not justified the pattern would reflect rolling of trust funds to cover a trust deficit. Faris further concluded that there could be no doubt that a substantial amount should have been available in the trust account from transfer date onward, but it was not.

In relation to Mr Marcus Jacob, an investor who advanced funds under “investment agreements”, Faris traced multiple deposits totalling R870 000 into the trust account. Faris was unable to determine utilisation without access to the relevant ledger, but stated that the bank statements and the flow of funds reflected that the funds were applied to sustain the rolling process. Faris also expressed the view that, given the wording of the agreements, the transactions were business in nature and should have been processed through the business account rather than the trust account.

A similar inability to determine the complete trust liability arose in relation to Kliek Finance (Pty) Limited, where Faris could not reconcile the trust position due to missing ledgers and files, but stated that deposits totalling R450 000 were made and should have been available from deposit dates until proper repayment.

In relation to P A Pretorius, it was alleged that R503 000 had been received from the Road Accident Fund and that payments were made to Pretorius. Faris could not locate a deposit of R503 000 in the trust bank statements for the relevant period, nor could he locate the alleged payments save for a payment of R125 750 on 29 January 2009.

A further complaint came from Klagsbrun De Vries & Van Deventer, which reported that a court order required the respondent to pay R1 473 730.71 to Le Grange Attorneys Incorporated by 14 July 2009, with a substantial portion to be paid onward to Klagsbrun. The respondent failed to pay the monies as ordered, leading to concern about misappropriation of trust funds.

In relation to Maria Johanna Grobbelaar, the complaint alleged that the respondent received the purchase price of R800 000 for an immovable property transfer and claimed transfer was registered, but deeds office searches allegedly did not reflect registration in Grobbelaar’s name. The respondent also failed to respond to the Law Society’s correspondence about the complaint. Although the disciplinary process before the Law Society’s committee was initially set down, it was postponed after the respondent requested a postponement on grounds of ill health, supported by a medical certificate.

A complaint from the Department of Justice and Constitutional Development (the Master of the High Court, Bloemfontein) stated that the respondent advised that she had taken over another attorney’s practice and that an administration account in a curatorship estate remained outstanding. The Master reported repeated unsuccessful attempts to obtain responses and undertakings from the respondent, and the respondent likewise ignored the Law Society’s request for comment.

Faris also identified further possible instances of bridging finance and/or investment arrangements from the trust bank statements, including receipts of R330 000 and R130 000 on behalf of S P Barnard, with only limited related payments traceable.

Most significantly, Faris prepared schedules (including an annexure reflecting month-end positions) showing that during July 2008 to February 2009 there were substantial trust deficits at each month end, and (save for November 2008) the deficit exceeded R1 million on each occasion. When confronted, the respondent denied the deficits but provided no substantiating information. The Law Society’s case, as accepted by the court, was that the respondent misappropriated trust funds, maintained inadequate records, and placed the Attorneys Fidelity Fund at serious risk.

3. Legal Issues

The central questions before the court were whether the respondent’s conduct had been established on the evidence, whether that conduct showed that she was not a fit and proper person to continue practice as contemplated by section 22(1)(d) of the Attorneys Act 53 of 1979, and what sanction was appropriate, namely whether striking off was warranted or whether suspension would suffice.

The dispute concerned a combination of fact-finding (whether the alleged offending conduct was established on a balance of probabilities), the application of established disciplinary principles to those facts, and a value judgment inherent in determining fitness to practise and the appropriate sanction. The judgment emphasised that “fit and proper” is not dependent purely on factual findings, but lies within the discretion of the court, exercised on the proved facts.

4. Court’s Reasoning

The court located the matter within the established framework that attorney disciplinary proceedings are sui generis and disciplinary rather than adversarial. It stressed that there is no lis in the ordinary sense between the Law Society and the practitioner; the Law Society acts as custodian of professional standards (curator morum), placing relevant facts before the court, which then determines the appropriate outcome.

The court applied the recognised three-stage inquiry for striking-off or suspension matters. First, it had to determine whether the alleged offending conduct was established on a preponderance of probabilities. Secondly, it had to decide whether, in the discretion contemplated by section 22(1)(d), the practitioner was not fit and proper, which entails a value judgment. Thirdly, it had to decide whether striking off or a lesser sanction such as suspension was appropriate, described as ultimately a question of degree.

The court held that its discretion had to be grounded in the facts placed before it, proved on a balance of probabilities, and assessed in their totality, rather than in isolation. On that approach, the court accepted the Law Society’s presentation of the factual matrix: multiple complaints involving trust monies, the auditor’s inability to reconcile liabilities due to missing or unreliable records, substantial trust deficits over a sustained period, and indications of improper movement of funds between matters.

A major evaluative component of the court’s reasoning concerned the seriousness with which courts view failures to keep proper accounting records and failures to administer trust monies properly. The judgment treated the respondent’s bookkeeping failures, coupled with substantial trust deficits and the apparent use of trust funds for unrelated payments, as conduct inconsistent with the obligations of an attorney as an officer of the court.

The respondent’s non-participation in the proceedings, her failure to provide an answering affidavit, and her lack of co-operation with Faris’s investigation meant that the court’s assessment proceeded on the record placed by the Law Society. The court accepted that the respondent contravened statutory and rule-based obligations relating to the proper maintenance of trust funds and accounting records, and that the cumulative effect of the complaints and audit findings supported the conclusion reached by the Law Society’s Council that she was not fit and proper.

On sanction, the court aligned itself with the Law Society Council’s view that the respondent’s conduct reflected character defects not tolerable in a practitioner and that her behaviour adversely affected the reputation of the profession. The court therefore accepted that the appropriate outcome was removal from the roll rather than a lesser sanction.

On costs, the court accepted the Law Society’s submissions that the Law Society should not be left out of pocket for performing its statutory and regulatory functions in disciplining members, particularly in circumstances involving serious trust-account irregularities and non-cooperation. This supported an order of costs on the attorney-and-client scale, together with additional costs related to the inspection and curatorship mechanisms.

5. Outcome and Relief

The court ordered that the respondent’s name be struck off the roll of attorneys of the court.

The court further ordered that relief previously granted by the court (described as the relief in section A of the notice of motion, paragraphs 1.3 to 1.11, granted earlier) would remain in force.

The respondent was directed to pay, in terms of section 78(5) of the Attorneys Act 53 of 1979, the reasonable costs of the inspection of her accounting records, as well as the reasonable fees and expenses of the curator and of any persons consulted or engaged by the curator.

The respondent was also ordered to pay the costs of the application on an attorney-and-client scale.

Cases Cited

Hassim v Incorporated Law Society of Natal 1977(2) SA 757(A)

Law Society, Transvaal v Matthews 1989(4) SA 389(T)

Cirota & Another v Law Society, Transvaal 1979(1) SA 172(A)

Prokureursorde van Transvaal v Kleynhans 1995(1) SA 839(T)

Law Society of the Cape of Good Hope v C 1986(1) SA 616(A)

A v Law Society of the Cape of Good Hope 1989(1) SA 849(A)

Jasat v Natal Law Society 2000(3) SA 44 (SCA)

Law Society of the Cape of Good Hope v Budricks 2003 (2) SA 11 (SCA)

Olivier v Die Kaapse Balie-Raad 1972(3) SA 485(A)

Summerley v Law Society, Northern Provinces 2006 (5) SA 613 (SCA)

Law Society of the Cape of Good Hope v Segall 1975(1) SA 95(C)

Beyers v Pretoria Balie Raad 1966(2) SA 593(A)

Malan and another v The Law Society Northern Provinces [2008] ZASCA 90; [2009] 1 All SA 133 (SCA)

Law Society of the Northern Provinces v Morkel [2003] FOL 10868 (T)

Botha & Others v The Law Society of the Northern Province [2009] 3 All SA 293 (SCA)

Law Society of the Northern Provinces v Setshogoe [2009] JOL 2307 (T)

Legislation Cited

Attorneys Act 53 of 1979, section 22(1)(d)

Attorneys Act 53 of 1979, section 78(1)

Attorneys Act 53 of 1979, section 78(5)

Attorneys Act 53 of 1979, section 78(6)(d)

Rules of Court Cited

No specific rule of court was expressly cited in the judgment, although an order for substituted service by publication was granted.

Held

The court held that attorney disciplinary proceedings of this kind are sui generis and that, on the facts proved on a balance of probabilities and considered cumulatively, the respondent’s conduct in relation to trust monies and accounting records demonstrated that she was not a fit and proper person to continue practising as an attorney.

The court accepted that the evidence before it established substantial and repeated trust deficits, serious failures of proper accounting and record-keeping, and conduct consistent with misappropriation and/or misuse of trust funds, compounded by the respondent’s failure to co-operate with the Law Society’s investigation and failures to account to or pay parties entitled to funds.

The court consequently ordered that the respondent be struck off the roll, that earlier protective relief remain operative, and that the respondent bear specified regulatory and curatorship costs, including the costs of the application on the attorney-and-client scale.

LEGAL PRINCIPLES

The judgment applied the principle that applications to suspend or strike attorneys are disciplinary and sui generis, in which the Law Society acts as curator morum by placing facts before the court, and the court then exercises its own discretion on those facts.

It reaffirmed that whether an attorney is a fit and proper person under section 22(1)(d) of the Attorneys Act 53 of 1979 is a matter for the court’s discretion, involving a value judgment, and is not mechanically determined by factual findings alone.

It applied the established three-stage inquiry in attorney discipline matters: proof of the conduct on a balance of probabilities, determination of fitness to practise as a value judgment, and selection of sanction (striking off or suspension) as a matter of degree in all the circumstances.

It further applied the principle that alleged misconduct and the practitioner’s conduct must be evaluated in totality, and that failures regarding trust accounting, record-keeping, and proper administration of trust funds are treated as serious professional breaches, particularly where they reveal trust deficits, loss of the trust account’s identity, and risk to the Attorneys Fidelity Fund.

Law Society of the Northern Provinces v Bester (53020/2009) [2010] ZAGPPHC 94 (3 August 2010)