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[2021] ZAKZDHC 48
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Wexdent Properties CC v Vishal Junkeeparsad & Company Inc and Another (D6378/2021) [2021] ZAKZDHC 48 (20 December 2021)
THE
HIGH COURT OF SOUTH AFRICA
KWAZULU–NATAL
LOCAL DIVISION, DURBAN
CASE
NO: D6378/2021
In
the matter between:
WEXDENT
PROPERTIES CC
APPLICANT
and
VISHAL
JUNKEEPARSAD & COMPANY INC
FIRST RESPONDENT
IVAK
INVESTMENTS (PTY) LTD
SECOND RESPONDENT
JUDGMENT
Chetty
J:
[1]
The applicant
seeks judgment against the first respondent, a firm of attorneys in
Umhlanga, KwaZulu-Natal for the amount of R1 556 317,
together with interest and costs on an attorney-client scale. The
amount in question, being the proceeds from the sale of an immovable
property belonging to the applicant, is being ostensibly retained by
the first respondent in its trust account in circumstances
where the
first respondent refuses to pay the proceeds to the applicant
contending that the latter has failed to comply with the
requirements
of the Financial Intelligence Centre Act 38 of 2001 (‘FICA’).
[2]
The factual
background to the application is largely common cause. The applicant
was the owner of a property in La Lucia, Durban
from which one of its
members practiced as a dentist. The applicant entered into an
agreement with the second respondent for the
sale of the property in
the sum of R1 525 000. It was a term of the agreement that
the full purchase price of the property
would be paid into the
seller’s (the applicant’s) account prior to registration
of transfer. Prior to transfer, the
parties changed the firm of
attorneys they engaged to attend to the conveyancing. At the request
of the second respondent, the
first respondent was engaged to be the
conveyancing attorneys for the specific transaction between the
parties.
[3]
On or about
12 October 2018 the purchase price for the property was paid into the
trust account of the first respondent, who then
requested that the
applicant and its members furnish various documents including
verification of their residential addresses (not
older than three
months), as well as a copy of their identity documents. At this stage
the applicant’s members had moved
abroad. The information was
requested by the first respondent to enable it ‘to proceed with
the matter and comply with legislative
requirements’. The
applicant’s members complied with the request by the first
respondent towards the end of 2018. On
24 April 2019 the first
respondent lodged the transfer documents at the Deeds Registry, with
the registration of transfer eventually
taking place on 17 October
2019.
[4]
Despite the
transfer already having taken place, the first respondent wrote to
the applicant’s members on 31 March 2020 requesting
they sign
an indemnity, as well as providing certified proof of their latest
addresses, as required by FICA. Once this was done,
the first
respondent undertook to release the payment. The applicant complied
with the request for FICA documentation on 9 April
2020. Despite
compliance on two occasions, the first respondent had still not paid
over the proceeds from the sale.
[5]
For almost a
year from February 2020 to March 2021 the applicant corresponded with
a member of the first respondent’s office
who provided a litany
of excuses as to why the first respondent was unable to pay the
proceeds of the transfer over to the applicant.
Eventually, the
applicant became exasperated at the reasons being proffered for the
delay in payment and referred the matter to
its attorney. The latter
wrote to the first respondent on 25 March 2021 requesting a final
statement of account and demanded that
payment of the proceeds of the
sale, together with interest, be made to the applicant. Again, the
first respondent raised the issue
of FICA compliance, apparently
alerted by its FICA compliance officer, requesting yet again proof of
residence – this time,
not older than three months – in
respect of the applicant’s members. As with previous
undertakings, the first respondent
promised to make payment once the
‘outstanding information’ was received. The applicant’s
attorney again demanded
an explanation as to why the proceeds of the
sale had still not been paid, despite the applicant having done all
that had been
requested of it, particularly with regard to the FICA
documentation.
[6]
The first
respondent replied to the applicant’s attorney that the amount
of R1 588 306.77 (due to the applicant),
was being held in
a money market account for the benefit of the applicant. The first
respondent provided no further details of
the account or institution
at which the funds were being held, despite requests from the
applicant’s attorney.
[7]
The first
respondent thereafter addressed correspondence to the applicant’s
attorney, relying on the provisions of FICA and
its regulations to
contend that as the holder of an attorney’s trust account, it
was entitled to request verification of
information prior to payment
to any individual, in order to safeguard themselves against fraud and
theft relating to trust monies.
The first respondent expressed its
concern over the applicant’s reluctance to furnish it with the
information requested,
and that it remained ready to release the
payment on receipt of the requested information. It was also apparent
that the first
respondent was insistent that documents provided by
the applicant should not be older than three months from the date of
issue,
apparently relying on a provision of FICA for this
requirement. In order to avoid further delays and particularly a
debate with
the first respondent as to his interpretation of the
provisions of FICA, the applicant’s attorney in order to hasten
payment
and despite having previously complied, again requested the
applicant’s members to provide proof of their identity and
residence,
as well as their signatures to a resolution authorising
their attorney to receive payment on their behalf from the first
respondent.
Again the first respondent raised issues of
non-compliance with FICA, which the applicant’s attorneys
recorded were simply
delaying tactics to avoid paying over the
proceeds from the sale of property. Not satisfied with the documents
signed by the applicant’s
members, and in particular the
resolution authorising its attorney to receive payment of the funds
due to it, the first respondent
requested that the resolution be
signed before a Notary Public or before an official designated to do
so, at the South African
Embassy in Australia.
[8]
The
contention on behalf of the applicant, in the face of endless demands
for documentation, was that first respondent was misinterpreting
the
provisions of FICA, and even if it was incorrect in its
interpretation, the applicant’s members have complied with the
request to furnish all information as required. Moreover, the
applicant enlisted the assistance of a conveyancer, Samantha Yvonne
van Rooyen who deposed to an affidavit in which she confirmed that in
terms of FICA, the documents requested by the first respondent
were
required
prior
to registration of the transfer. In addition, it was contended that
the transaction for which the services of the first respondent
were
engaged, was for a single business transaction, in respect of which
there was no contractual engagement beyond that of the
transfer and
registration of the immovable property belonging to the applicant. In
the result, it was submitted on behalf of the
applicant that the
first respondent has conceivably resorted to delaying tactics in
order to avoid paying out the proceeds of the
sale to the applicant,
and was consequently unlawfully withholding monies which are lawfully
due to the applicant. On that basis
it was submitted that the
retention of monies by the first respondent, for the reasons
advanced, are spurious and without foundation
in law.
[9]
The first
respondent’s opposition was confined to raising points
in
limine
in which it challenged the authority of the deponent to the founding
affidavit, Dr Hogg, to act on behalf of the applicant, which
is a
separate juristic entity, in the absence of a resolution from its
members. The applicant duly responded to the challenge in
terms of
Uniform rule 7(1) and filed a special power of attorney which
authorised Dr Hogg to act on behalf of the applicant, and
the
applicant’s attorneys to act on its behalf. The first
respondent further requested an authorising certificate from the
Commissioner of Oaths, entitling him or her to authenticate the
affidavit of the deponent under the Laws of Australia. This request
was responded to by the Department of Justice and Attorney-General of
Queensland. These points
in
limine
were not persisted with by Mr
Naidoo
,
who appeared on behalf of the first respondent. However, it behoves
me to say something in relation to these challenges. It is
ironic
that the first respondent, whose office has been liaising with the
applicant’s member, Dr Hogg, for almost two years
in relation
to the conveyancing transaction and the requests for documents
supposedly required in terms of FICA, should later seek
to challenge
his authority (Dr Hogg’s) to act on behalf of the applicant,
knowing full well that he was the
de
facto
contact of the applicant’s members and also that he had taken
up residence in Australia. I find the approach of the first
respondent in these circumstances, as a legal practitioner,
unbecoming, particularly where an attorney-client relationship exists
with the applicant. These points
in
limine
were without merit and fall to be dismissed.
[10]
As to the
merits of the application, the first respondent contends that it is
neither refusing to pay the applicant the proceeds
of the transfer,
nor engaging in delaying tactics. It is insistent that the applicant
and its members comply with the request for
information in terms of
FICA, including the provision of certified copies of their proof of
address, identity, as well as banking
details. The first respondent
furthermore dismisses the view advanced by the practising
conveyancer, Ms van Rooyen, that FICA documents
and proof of banking
details are in the normal course of events provided to a conveyancer
prior
to registration of transfer. Furthermore, in Ms van Rooyen’s
opinion, had the applicant and its members not complied with
the FICA
requirements prior to registration of transfer, the transfer of the
property would not have gone through. In her view,
the sale of a
property as set out in the applicant’s founding affidavit,
constitutes a ‘single transaction’ as
defined in FICA,
requiring the conveyancing attorney to verify the identity of the
parties (in this case the applicant and its
members),
before
transfer is registered.
[11]
It is
pertinent to point out that despite the contention of Ms van Rooyen
that the conveyancing transaction constituted a ‘single’
transaction and not a ‘business relationship’ which FICA
envisages as a ‘regular’ or on-going relationship,
the
first respondent was adamant that conveyancing (being the nature of
its mandate in the present matter) constituted a ‘business
relationship’ rather than a ‘single’ transaction
where there is no expectation of further or on-going engagement
between the client and the accountable institution. On the facts
before me, there is no suggestion that the applicants had any
intention of fostering a long-term engagement with the first
respondent. Mr
Naidoo
submitted that conveyancing, by its nature, encompasses an element of
time and constant engagement with the client. The reason
for taking
this line of argument was to bring the transaction under the ambit of
a ‘business relationship’, in my view,
is to ensure that
an on-going verification exercise of the applicant can be justified,
validating the repeated demands made on
the applicant by the first
respondent. On the other hand, in the case of a ‘single
transaction’, as contended for by
Mr
van
Rooyen
,
who appeared for the applicant, the verification and identification
of credentials takes place at inception – or prior to
accepting
the mandate to act on behalf of a client. Hence s 21 of FICA
refers to a ‘
prospective
client’
.
Also s 21B refers to a single transaction or the establishment of a
business relationship and sets out the compliance requirements
when
dealing with legal persons. On the other hand, s 21C refers to
ongoing due diligence, but crucially, this obligation is limited
to
an ongoing business relationship. It was submitted by the applicant,
correctly in my view, that s 21C(
b
)
contemplates an ongoing verification exercise, but only where there
is an established business relationship. I am in agreement
with
counsel for the applicant that the transaction in question, for the
first respondent to attend to the transfer of a property,
can be
nothing other than a single transaction for the purposes of FICA. To
suggest otherwise would be straining the language of
FICA, for a
purpose that would only suit the first respondent and provide a
justification for its demands made on the applicant’s
members.
[12]
During the
course of argument, Mr
Naidoo
also attempted to justify the first respondent’s repeated
demands for copies of identity and proof of address not being older
than three months. There is nothing in the Guidance Notes issued by
the Financial Intelligence Centre that bears reference to such
a
requirement. While this may have developed into a norm in certain
spheres of business, I have not been able to find any authority
(nor
has counsel for the first respondent referred me to any) that
requires an identity document or proof of address to be not
older
than three months, in order to be valid. What alters the validity of
the document a day after three months? I am in agreement
with the
views expressed by Ms van Rooyen in her affidavit where she asserts
that the first respondent’s repeated requests
for certification
of documents not older than three months, is not a requirement
imposed by FICA.
[13]
The
first respondent relies on the provisions of s 21(1) of FICA for its
submission that the obligation on the ‘accountable
institution’ (meaning a person referred to in
Schedule
1, including an attorney)
[1]
to
identify its client, extends beyond the verification done at
inception of the relationship. According to the first respondent,
this mandatory obligation does not ‘abruptly end’ after
the initial verification and a relationship is established.
In this
regard, the first respondent submits that s 21B of FICA imposes
additional due diligence measures where an attorney is
acting on
behalf of a trust.
[14]
In terms of s 21(1) of FICA, an
‘accountable institution’ must establish various facts
about a ‘prospective client’.
This must be done ‘
in
the course of concluding
’ a
transaction or establishing a business relationship. This is evident
from the language employed in the section wherein
reference is made
to a ‘prospective client’ – providing the strongest
indication that the identity of the client
must be verified
before
a mandate is concluded. The section reads as follows :
‘
21.
Identification of clients and other persons.
—
(1)
When an accountable institution engages with a
prospective
client
to enter into a single
transaction or to establish a business relationship, the institution
must, in the course of concluding that
single transaction or
establishing that business relationship and in accordance with its
Risk Management and Compliance Programme—
(
a
)
establish and verify the identity of the client;
(
b
)
if the client is acting on behalf of another person, establish and
verify—
(i)
the identity of that other person; and
(ii)
the client’s authority to establish the business relationship
or to conclude the single transaction on behalf of that
other person;
and
(
c
)
if another person is acting on behalf of the client, establish and
verify—
(i)
the identity of that other person; and
(ii)
that other person’s authority to act on behalf of the client.’
(emphasis added)
[15]
To
the extent that the first respondent relies on s 21B as giving rise
to some on-going due diligence obligation or monitoring standard,
[2]
it is necessary to have regard to the wording of the section to
ascertain whether the first respondent’s conduct in refusing
to
release the proceeds of the sale are consistent with its obligations
in the statute. The high watermark of the first respondent’s
obligations in terms of s 21B, it seems to me, extend no further than
establishing the nature of the client’s business (s 21B(1)(
a
))
and the ownership and control structure of the client, (s21B(1)(
b
))
if it is a legal person. The section requires of the accountable
institution to ‘take reasonable steps to verify the identity
of
the beneficial owner of the client’ (if applicable). There is
nothing in the scope of s 21B that mandates an accountable
institution to do anything further, and certainly not to bring a
commercial transaction to a halt because of non-compliance.
[16]
Even where,
subsequent
to entering into a transaction, the accountable institution has
doubts as to the veracity of previously obtained information, it
must
repeat the steps in s 21 and 21B (that is, establishing the identity
of the client, proof of address) in terms of s 21D.
[17]
There is nothing in the wording of FICA that
supports the first respondent’s conduct of withholding payment
to the applicant
for the reasons it has advanced. It is for this
reason that the applicant in its reply contends that the first
respondent appears
to have ‘cobbled’ together his own
requirements for compliance and due diligence, abrogating to itself a
role not envisaged
in the legislation.
[18]
Moreover, the
reliance of the first respondent that in terms of s 21E(1)(
c
)(ii)
he may somehow be permitted not to give effect to a transaction on
behalf of a client, is with respect, misplaced. The relevant
section
provides that:
‘
21E.
Inability to conduct customer due diligence.—If an accountable
institution is unable to —
(a)
establish and verify the identity of a client or other relevant
person in accordance with section 21 or 21B;
(
b
)
obtain the information contemplated in section 21A; or
(
c
)
conduct ongoing due diligence as contemplated in section 21C,
the institution—
(i)
may not establish a business relationship or conclude a single
transaction with a client;
(ii)
may not conclude a transaction in the course of a business
relationship, or perform any act to give effect to a single
transaction;
or
(iii)
must terminate, in accordance with its Risk Management and Compliance
Programme, an existing business relationship with a
client, as the
case may be, and consider making a report under section 29 of
this Act.’
[19]
On any
interpretation of the aforementioned section the first respondent’s
conduct in withholding payment to the applicant
is without
foundation. Any steps taken by the accountable institution should be
done
prior
to the establishment of a business relationship or conclusion of a
single transaction. It is common cause that in the present matter
the
first respondent only raised the spectre of FICA non-compliance
after
the registration
of transfer of the immovable property into the name of the second
respondent. It is not disputed that no report has been made to
the
Financial Intelligence Centre (‘the Centre’), which is
the entity statutorily entrusted to act against a client
in the event
of a suspicious transaction report or where there has been
non-compliance with any of the requirements for verification
in terms
of s 21. Furthermore, there is nothing on the papers before me, or as
may be alleged by the first respondent, that would
constitute the
‘trigger’ for the reporting of the applicant to the
Centre as contemplated in s 29. Invoking a report
under s 29 is
predicated on the first respondent having known or suspected that
its:
‘
(a)
. . . business has received or is about to receive the proceeds of
unlawful activities or property which is connected to an
offence
relating to the financing of terrorist and related activities;
(
b
)
a transaction or series of transactions to which the business is a
party—
(i)
facilitated or is likely to facilitate the transfer of the proceeds
of unlawful activities or property which is connected to
an offence
relating to the financing of terrorist and related activities;
(ii)
has no apparent business or lawful purpose;
(iii)
is conducted for the purpose of avoiding giving rise to a reporting
duty under this Act;….’
The
first respondent’s affidavit is significantly silent as to any
allegation that would bring the applicant or its members
within the
ambit of activities that include money laundering or the financing of
terrorist and related activities.
[20]
To the
extent that the first respondent contends in the counter-application
that the applicant is obliged to comply with his request
to re-submit
all documents to enable him to verify the identity and proof of
residence of the applicant’s members (as set
out in paragraph 3
of its email to the applicant’s attorneys dated 7 April 2021),
the applicant contends that it has complied
with the requirements of
FICA on no less than three occasions, and that even if it did not,
there is no justification in FICA which
entitles the first respondent
to withhold the payment from the sale of its property.
In
terms of s 33 of FICA, transactions
may
be continued with
despite the making of
a report in terms of s 28 (where amounts are above a certain limit)
and s 29 (property associated with terrorist
activities).
‘
33.
Continuation of transactions.- An accountable institution, reporting
institution or person required to make a report to the
Centre in
terms of section 28 or 29, may continue with and carry out the
transaction in respect of which the report is required
to be made
unless
the
Centre directs the accountable institution, reporting institution or
person in terms of section 34 not to proceed with the
transaction.’
(emphasis added)
[21]
In terms of s 34, it is only if the Centre
has reasonable grounds to suspect a transaction involves, inter alia,
the proceeds of
unlawful activities or property, that it may direct
the accountable institution in writing not to proceed with the
transaction,
but for a period not longer than ten (10) days, to allow
it to investigate the matter. Even on the assumption that the first
respondent
had reasonable grounds to suspect that the applicant or
its members were engaging in suspicious conduct or activity, on the
wording
of s 34, it has no authority to halt or interrupt a
transaction. Even if it did, which is patently inconsistent with the
most generous
interpretation of s 34, this interruption could not
have lasted for more than ten (10) days. In the present matter, the
first respondent
through its unilateral actions, has halted payment
to the applicant since October 2019 when transfer of the property was
registered.
On that basis, roughly 720 days would have passed and the
first respondent has still not paid over the proceeds from the sale
to
the applicant.
[22]
In
Ospoort
Boerdery CC and Another v Freyson Attorneys and Another
(15637/2018) [2018] ZAGPJHC 696 (13 November 2018) the court
interpreted s 34 to the effect that a firm of attorneys was found
to
only be permitted to withhold a deposit of money made to it if the
Centre directed it to. In that case the firm of attorneys
refused to
repay a deposit to the applicant after it reported the matter to the
Centre in terms of s 29. The attorneys maintained
that they were
entitled to retain the deposit pending a directive issued by the
Centre authorising payment to the client. One of
the purposes of
intervention by the Centre is to prevent the dissipation of funds or
property which may be the proceeds of unlawful
activity. No such
allegation is made by the first respondent in the matter before me.
In concluding that the attorneys in
Ospoort
Boerdery
had no authority to demand a
directive from the Centre to intervene (s 34), and that the retention
of monies by the attorneys could
not be sustained, the court relied
on
South African Petroleum Energy Guild
(NPC) v RMB Private Bank
(2014/27890)
[2014] ZAGPJHC 368 (5 December 2014), where a bank had frozen funds
on suspicion that the funds were the proceeds
of illegal activity.
The bank contended that its right to do so arose from a tacit or
implied term that it was entitled to freeze
funds on suspicion that
the funds were the proceeds of illegal activity, and that it had
certain duties that included refraining
from allowing its facilities
for being used for unlawful means. Sutherland J held that no such
duty arose from FICA, and said:
‘
[28]
. . . the term sought to be imputed and its radical intrusion on the
rights of a client far exceed what FICA authorises the
Centre to do.
What is sometimes overlooked is that even criminals have rights; the
more basic of which is to be convicted before
being punished. . . .
[29]
. . . the respondent
claims a term that entitles it to freeze R5 million of a business for
over five months, and further claims
it may continue to do so until
the applicant convinces a court that the bank’s belief in its
wickedness is unreasonable.
In my view to imply such a term is
untenable.’
[23]
In
Houtbosplaas (Pty) Ltd and another v Nedbank Limited
[2020]
JOL 46663
(GP), Nedbank (which, being a financial institution is also
an ‘accountable person’ in terms of FICA) restricted
access
to an account on the basis that its client allegedly failed to
provide it with the necessary documents to allow the bank to identify
it in terms of FICA. The court, in paragraph 21, held that this was
simply not permissible:
‘
A
business relationship between a financial institution and a customer
does not entitle the former to restrict or freeze access
to the
account of the latter, even in instances where there is a suspicion
that the transaction involves unlawful activity. Section
29 of FICA
provides for suspicious and unusual transactions. That would include
transactions relating to offences such as money-laundering
or money
used to further terrorist activities or those that appear to be
involved in unlawful activity. The courts have frowned
upon the
freezing of accounts
even in more serious cases
w[h]ere
unlawful activities or a suspicion thereof was conducted in those
accounts. It is common cause between the parties that
the identity
verification
in this case had absolutely nothing to do with
unlawful activity or a suspicion thereof conducted in the applicants'
accounts.’
(emphasis added).
[24]
The essence of Mr
van
Rooyen’s
argument on behalf of the applicant is that the first respondent has
misinterpreted the provisions of FICA as to the extent of
his
obligations under the statute. He is not a policing agent assuming
responsibility for compliance with the provisions of FICA.
As I have
stated earlier, the first respondent’s duty of verification of
the personal details of the applicant and its members
was to take
place
prior
to accepting the instruction to act as conveyancing attorney. At the
very least, this verification exercise must be completed ‘
in
the course of concluding that single transaction or establishing that
business relationship’ (s 21).
The
applicant’s members in any event say that they have complied
with the FICA requirements, asked of them three times over.
FICA
provides that where a client fails to comply with the requirements
set out therein, an accountable institution (such as an
attorney) may
refer the matter to the Centre for further steps to be taken pursuant
to the provisions of Part 3 of FICA. FICA confers
no powers on an
accountable institution in the face of a recalcitrant client. That
duty to ensure compliance is passed on to the
Centre.
Section
33 of FICA provides:
‘
An
accountable institution, reporting institution or person required to
make a report to the Centre in terms of sections 28 or 29,
may
continue with or carry out the transaction in respect of which the
report is required to be made
unless
the Centre directs the
accountable institution, reporting institution or person in terms of
section 34 not to proceed with the
transaction.’ (emphasis
added)
[25]
Section 33 makes it clear that it is the Centre and not the
accountable institution that determines whether the latter may
proceed to continue with the transaction. See
Guidance Note 4
on Suspicious Transaction Reporting, GN 301,
GG
30873, 14
March 2008 issued by the Centre.
The role of an
accountable institution, or attorney as in the present matter, who
over-steps the mark, is perhaps best described
by Sutherland J in
South African Petroleum
in
paragraph 27:
‘
It
seems to me that the obligations of a bank to initiate action about
money laundering are wholly regulated by statute. There is
no space,
and indeed no need that is discernible in this regard, to imply
additional duties on the bank …
The
respondent’s role in combatting money laundering is already
spelt out in the legislation: in essence to be vigilant
about
possible unlawful activity and report it when it is noticed and if
lawfully instructed to put a hold on funds, to do so.
There is no
scope to develop a role for what would be a cousin of the Lex
Commissoria to add to the battalions arrayed against
rich crooks.’
[26]
Borrowing the phrase used in
South African
Petroleum
in paragraph 30, Mr van Rooyen submitted that
the reality is that the first respondent ‘
is
not the sheriff in a frontier town.’ He has no powers, under
the common law or statute, to retain the proceeds of the sale
or to
refuse to account to the applicant where precisely such monies were
invested and what rate of interest has accrued thereon.
I am not
persuaded by Mr
Naidoo’s
retreating submission that if I find that the first respondent was
not entitled to act as he did, I should nonetheless find that
he
acted ‘innocently’ and this could be traced back to a
misinterpretation of the provisions of FICA. The conduct of
the first
respondent in refusing to pay the proceeds due to the applicant is a
deliberate and considered act. He was alerted by
the applicant’s
attorneys to his misinterpretation of the provisions of FICA. He was
adamant that he was entitled to act
as he did. Even at that late
stage it would have been open to the first respondent to have sought
guidance from the Centre as to
whether his own conduct, as an
accountable institution, was consistent with FICA. He did not do so.
Instead, he rode roughshod
over the rights of the applicant to
receive payment without delay once transfer had been registered into
the name of the second
respondent. It is noteworthy that one of the
purposes of intervention by the Centre is to prevent the dissipation
of funds or property
which may be the proceeds of unlawful activity.
No such allegation is made by the first respondent in the matter
before me. The
first respondent’s conduct in placing obstacles
in the path of the applicant from being paid out the proceeds from
the sale,
ostensibly in the name of compliance with FICA, is
worrisome. It smacks, in my view, of conduct designed to delay
payment and accountability
by an attorney to its client.
[27]
I turn now to the involvement of the second respondent in this
matter, in circumstances where no relief is sought against it
by the
applicant in its notice of motion. The second respondent was merely
cited as an interested party, inasmuch as it was the
purchaser of the
property which belonged to the applicant. It is not in dispute that
the second respondent duly paid the full purchase
price for the
immovable property, and acted at all times in compliance with the
agreement of purchase and sale. Upon receipt of
the application
papers, the second respondent filed a notice to abide by the decision
of the court in respect of the relief sought
by the applicant in
paragraphs 1 and 2 of the notice of motion. The second respondent
however chose to file a detailed affidavit,
ostensibly in order to
place ‘all relevant facts before the court’, as it was
‘shocked’ upon being served
with a copy of the papers by
the Sheriff of this court. Propelled by this state of shock, the
second respondent proceeded to contact
an employee in the office of
the first respondent to enquire why the purchase price had still not
been paid over to the applicant.
The second respondent then proceeded
to offer a commentary on the prejudice which has befallen the
applicant, and laments the conduct
of the first respondent in not
paying over the proceeds of the sale.
[28]
I found the content of the affidavit by the second respondent to be
misplaced and simply burdensome given the length of papers
that had
to be considered by this court in determining the issue between the
parties. The second respondent seems to be desirous
of involving
itself in litigation which does not concern it. Mr
Manikam
who
appeared on behalf of the second respondent submitted that the second
respondent was surprised when it discovered that the
money which it
had paid pursuant to the purchase and sale agreement for the
immovable property, had still not been paid over to
the sellers (the
applicant) despite a significant lapse of time.
[29]
The first respondent took issue with the allegations levelled against
him by the second respondent, contending that its affidavit
contains
averments which are scandalous, vexatious or irrelevant. It is
unclear what may have generated the animosity between the
first and
second respondents. Whatever the cause of that animosity, I am
satisfied that it is not a matter which requires this
court’s
attention, and does not in any way contribute to the resolution of
the dispute which is before me. The first respondent
submits that the
affidavit of the second respondent be struck out with costs.
Undeterred, the second respondent filed an answering
affidavit in
response to the affidavit of the first respondent, in circumstances
where none was strictly necessary. It appears
to me that the second
respondent was desperate to immerse itself in the litigation between
the applicant and the first respondent,
even though no relief is
sought against it. The deponent to the second respondent’s
affidavit, Dr Naidoo, bemoans the fact
that he has been forced to
engage attorneys despite his intention not to become involved in the
litigation. In my view the second
respondent has shown the propensity
to be a legal busybody. It has no interest in the litigation, and the
issues raised its affidavits
are nothing more than a sideshow or
distraction. Counsel for the second respondent submitted that if the
applicant is successful,
costs should be awarded in favour of the
second respondent, to be paid by the first respondent. Counsel for
the applicant submitted
that the court should not strike out the
affidavits of the second respondent, as its allegations are
indicative of the true facts
in the matter, albeit fuelled by some
underpinnings of animosity towards the first respondent. As stated
earlier, the averments
by the second respondent did not contribute
anything towards the resolution of the dispute before me, save that
in his heads of
argument, Mr
Manikam
referred to the decision
of
Houtbosplaas (Pty) Ltd and another v Nedbank
Limited
[2020] JOL 46663
(GP)
as
providing guidance for the interpretation of the material provisions
of FICA which occupies the attention of this court. The
remainder of
the written submissions are devoted to supporting the position of the
applicant.
[30]
Counsel for the applicant sought attorney-client costs against the
first respondent, submitting that the latter has misinterpreted
the
provisions of FICA, deliberately or otherwise, resulting in a
significant delay of almost two years for the payment of the
proceeds
of the sale to be paid over. It was submitted by counsel that
punitive costs should be awarded against the first respondent
based
on its intransigent approach to the request made on behalf of the
applicant to release the monies flowing from the transaction.
Indeed,
as set out above, there was no basis in law for the first respondent
to have halted payment of the amount due to the applicant.
[31]
The extraordinary lengths that the first respondent has put the
applicant’s members through, supposedly on the basis
of
ensuring compliance with FICA, would suggest an element of nastiness.
Its request had no foundation in law and led to unnecessary
litigation, which could have been averted. Over and above any of the
concerns expressed by the first respondent as to FICA compliance,
a
significant factor in determining costs is that there has been no
suggestion whatsoever that the applicant’s members have
been
engaged in any suspicious conduct which would cause the first
respondent to have responded in the manner in which it did.
In the
circumstances, I am satisfied that the conduct of the first
respondent warrants a punitive order of costs. I however am
not
persuaded that the second respondent is entitled to benefit in
relation to costs from the applicant’s success. I also
am of
the view that the conduct of the first respondent warrants the
attention of the Legal Practice Council, KwaZulu-Natal.
[32]
In the result I make the following order:
(a) the first respondent
is ordered to pay the applicant the sum of R1 556 317.00,
together with such interest as may
have accrued thereon from such sum
being held in a trust investment banking account for and on behalf of
the applicant, together
with all interest accruing thereon until date
of final payment;
(b) the first respondent
is directed to pay the applicant’s costs of this application on
an attorney-client scale;
(c) a copy of this
judgment is referred to the Legal Practice Counsel (KwaZulu-Natal)
for consideration insofar as the conduct of
the first respondent is
concerned.
M
R CHETTY
Appearances
For
the applicant:
Mr van Rooyen
Instructed
by:
Daly Morris Fuller Inc. Attorneys
Ref:
Chantal Schutzler/PR/MAT/3185
Email:
Chantele@dmfinc.co.za
For
the First Respondent:
Mr M R Naidoo
Instructed
by:
Kushen Sahadaw – Attorneys at Law
Address:
Suite 5 Walls Avenue
Stamford Hill Durban
Tel:
031 303 8102
Email:
Vinesh.kslaw@iafrica.com
Ref:
Kushen Sahadaw/Vinesh/civ
For
the Second Respondent: Mr Manikam
Instructed
by:
Logan Pillay & K Padayachee
Ref:
LMP/SH/130
Email:
Logan@Ipkattorneys.co.za
Date
of Judgment reserved:
28 October 2021
Date
of delivery:
20 December 2021
[1]
In
terms of Schedule 1 an accountable institution includes a
‘practitioner who practices as defined in section 1 of the
Attorneys Act, 1979 (Act No. 53 of 1979)’.
[2]
‘
21B.
Additional due diligence measures relating to legal persons, trusts
and partnerships.
—(1)
If a client contemplated in section 21 is a legal person
or a natural person acting on behalf of a partnership,
trust or
similar arrangement between natural persons, an accountable
institution must, in addition to the steps required under sections
21 and 21A and in accordance with its Risk Management
and Compliance Programme establish—
(a)
the nature of the client’s business; and
(
b
)
the ownership and control structure of the client.
(2)
If a client contemplated in section 21 is
a legal
person
, an accountable institution must, in addition to the
steps required under sections 21 and 21A and in
accordance
with its Risk Management and Compliance Programme—
(
a
)
establish the identity of the beneficial owner of the client by—
(i)
determining the identity of each natural person who, independently
or together with another person, has a controlling ownership
interest in the legal person;
……
(
b
)
take reasonable steps to verify the identity of the beneficial owner
of the client, so that the accountable institution is satisfied
that
it knows who the beneficial owner is.
(3)
If a natural person, in entering into a single transaction or
establishing a business relationship as contemplated in section
21, is acting on behalf of a partnership between natural persons, an
accountable institution must, in addition to the steps required
under sections 21 and 21A and in accordance with
its Risk Management and Compliance Programme—
(
a
)
establish the identifying name of the partnership, if applicable;
(
b
)
establish the identity of every partner, including every member of a
partnership
en commandite
, an anonymous partnership or
any similar partnership;
(
c
)
establish the identity of the person who exercises executive control
over the partnership;
(
d
)
establish the identity of each natural person who purports to be
authorised to enter into a single transaction or establish
a
business relationship with the accountable institution on behalf of
the partnership;
(
e
)
take reasonable steps to verify the particulars obtained
in
paragraph
(
a
)
;
and
(
f
)
take reasonable steps to verify the identities of the natural
persons referred to in
paragraphs
(
b
)
to
(
d
)
so
that the accountable institution is satisfied that it knows the
identities of the natural persons concerned.