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[2021] ZASCA 44
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Attorneys Fidelity Fund Board of Control v Love (170/2020) [2021] ZASCA 44 (14 April 2021)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not Reportable
Case
No: 170/2020
In the matter between:
THE ATTORNEYS FIDELITY
FUND
BOARD OF
CONTROL
APPELLANT
and
RODNEY ADRIAN
LOVE
RESPONDENT
Neutral citation:
The
Attorneys Fidelity Fund Board of Control v
Love
(Case No 170/2020)
[2021] ZASCA 44
(14
April 2021)
Coram:
ZONDI, MOLEMELA and NICHOLLS JJA, CARELSE and
MABINDLA-BOQWANA AJJA
Heard:
1 March 2021
Delivered:
This judgment was handed down electronically by
circulation to the parties’ representatives by email,
publication on the Supreme
Court of Appeal website and release to
SAFLII. The date and time for hand-down is deemed to be 10:00 on 14
April 2021.
Summary:
Civil procedure – lapsing of appeal –
application for condonation – factors to be considered –
condonation
granted – Attorney Fidelity Fund – claims
against the Fund under s 26
(a)
of
Attorneys Act 53 of 1979 – monies paid into firm of
attorneys’ trust account and subsequently stolen –
s
48(1)
(a)
of the Act –
when claimant became aware of the theft.
ORDER
On appeal
from:
Gauteng Division of the High Court,
Johannesburg (Francis and Strijdom JJ and Grant AJ
sitting as court of appeal):
1 The appeal
succeeds with costs.
2
The order of the full court is set aside and replaced with the
following order:
‘
(a)
The plea is upheld with costs.
(b)
The order of the high court is set aside and replaced with the
following order:
“
Condonation
for the late filing of the notice of appeal is granted and the
special plea is upheld with costs”.’
JUDGMENT
Carelse AJA (Zondi, Molemela and Nicholls JJA and
Mabindla-Boqwana AJA concurring)
[1]
The issue in this appeal is whether the appellant, the Attorneys
Fidelity Fund Board of Control (the
Fund) is liable to pay the
respondent ( Mr Love) the sum of R10 million which was
misappropriated after being deposited
into Turnbull and Associates
attorney’s trust account. The Fund is a statutory body
originally established in terms of the
Attorneys Act 53 of 1979 (the
old Act).One of the objectives of the Fund is to reimburse persons
who may suffer pecuniary loss
as a result of the theft of money which
had been entrusted to the attorney.
[1]
The Fund is now regulated in terms of the
Legal Practice Act 28
of 2014
that came into operation on 1 November 2018. Because
Mr Love’s claim arose before 1 November 2018 this appeal
is
governed by the provisions of the old Act.
[2]
Section 48(1)
(a)
of the old Act requires a claimant to notify
the Fund of any claim within three months of the claimant becoming
aware of the theft
of money paid into a trust account.
[3]
On 7 October 2013, Mr Love gave the Fund notice of his R10 million
claim against the Fund. On 4 September
2014, the Fund rejected the
claim on the grounds that Mr Love had failed to give the Fund written
notice of the claim within three
months of him becoming aware of the
theft of the R10 million.
[4]
On 13 August 2013, Mr Love instituted proceedings in the
South Gauteng Division of the High
Court (the trial court)
for payment of the R10 million. In a special plea
,
the Fund pleaded:
‘
2.
Plaintiff’s failure to comply with
section 48(1)(
a
)
of the Attorneys Act, 1979.
. . .
2.7 The
aforesaid accounts clearly show, and the plaintiff would accordingly
reasonably have known, that although no further noteworthy
deposits
were made to the said trust account, the entire R10 000 000.00
deposited by the plaintiff had been stripped out of
that account by
the end of July 2011 and large amounts had been transferred
periodically to the business account of Turnbull &
Associates
[
sic
Incorporated] in the period between 4 April 2011 and 28
July 2011;
2.8
Accordingly, there was clearly an objective basis for the plaintiff’s
stated conviction that Pavoncelli had misappropriated
the R10 000
000.00 that he, the plaintiff, had deposited, which objective basis
and stated conviction establish actual knowledge
of the plaintiff
that the monies he had deposited, as aforesaid, had been stolen;
2.9
Consequently, the plaintiff already knew by no later than 28 November
2012, and probably as early as 15 May 2012, that his monies
had been
stolen by Pavoncelli but only submitted his claim to the defendant on
7 October 2013, well outside of the three months
of him having
acquired actual knowledge of the theft as is prescribed in section
48(1)
(a)
of the Attorneys Act, 1979 and, in the premises, the
plaintiff’s claim did not meet the mandatory requirements of
the said
section and was rightly rejected by the defendant.’
[5]
The trial was heard by Mokose AJ. In an oral judgment read on 19 June
2017, Mokose AJ dismissed the
special plea and granted judgment in
favour of Mr Love. On 21 September 2017, the Fund applied for
leave to appeal against
the judgment and order of the trial court. On
26 October 2017, it applied for condonation for the late filing of
its notice of
appeal. On 14 December 2017, the trial court dismissed
an application for condonation on the grounds that the Fund had
failed to
give a full explanation for the delay. It accordingly
dismissed the application for leave to appeal on the ground that it
was late
and had no prospect of success.
[6]
On 7 March 2018, on petition to this Court, leave to appeal was
granted to the Gauteng Division of the
High Court, Johannesburg (high
court) sitting as a full court on the following limited issues:
‘
3.1.
The refusal by the High Court to condone the late filing
of the application for leave to appeal and the dismissal by the Full
Court
of the appeal on this issue.
3.2 The grant
of para 1 of the order of the High Court and the dismissal by the
Full Court of the appeal on
this issue.’
Paragraph (i)
of the high court’s order reads:
‘
The
Plaintiff has complied with the provisions of Section 48(1)(
a
)
of the Attorneys Act 53 of 1979 in that he gave notice of his claim
to the Defendant within three months of him becoming aware
of the
theft, and/or the exercise of the reasonable care he should have
become aware of the theft.’
[7]
On 22 October 2019, the full court dismissed the appeal with costs.
Special leave to appeal was granted
to this Court on 5 February 2020.
In what follows I deal separately with the two issues on which leave
to appeal was granted.
The
condonation application
[8]
The trial judge heard evidence from 7 until 9 November 2016. She
reserved judgment, and more than 6
months later on 19 June 2017 she
read out her judgment in open court. In its transcribed form it is a
15 page judgment. On 26 June
2017 the parties were given a copy
of the court’s order. On 29 June 2017 the Fund requested a copy
of the court’s judgment.
[9]
During the period of 3 July to 28 August 2017 Mr
Matsepane, the Fund’s correspondent attorney, contacted Mokose
AJ’s
clerk, the registrar, the appeals clerk, the court manager
and the transcribers in an attempt to obtain the record including a
copy of the trial court’s judgment. On 25 July 2017 Mr
Matsepane received a certified copy of the record. On 4 September
2017 a copy of the judgment was received. On 21 September 2017 the
Fund filed its application for leave to appeal. On 12 October
2017
the registrar told the Fund’s attorneys that it needed to bring
a condonation application for the late filing of the
application for
leave to appeal. This advice was based on rule 49(1)
(b)
of the Uniform Rules of Court which provides that:
‘
When
leave to appeal is required and it has not been requested at the time
the judgment or order, application for such leave shall
be made and
the grounds therefor shall be furnished within fifteen days after the
date of the order appealed against . .
. .
’
[10]
It is common cause that the 15 day period referred to in the rules
had to be calculated from 19 June 2017,
the date on which the
oral judgment was delivered
[11]
A court has a discretion to grant or refuse an application for
condonation. The standard to be applied is the interests
of
justice.
[2]
The principles to be followed were recently restated by Ponnan JA in
Dengetenge Holdings (Pty) Ltd v Southern
Sphere Mining and Development Company Ltd and Others
[3]
in the following terms:
‘
Factors
which usually weigh with this court in considering an application for
condonation include the degree of non-compliance ,
the explanation
therefor, the importance of the case, a respondent’s interest
in the finality of the judgment of the court
below, the convenience
of this court and the avoidance of unnecessary delay in the
administration of justice. . . .’
He went on to
say, at paragraph 15 of his judgment, that the prospects of success
were a further factor to be considered by a court.
[4]
[12]
When Mr Matsepane attended court to note the reserved judgment he
believed that Mokose AJ would, after delivering
her judgment, hand
down a written copy of the judgment. Based on this belief, which in
my view was not unreasonable, he did not
take extensive notes of what
the trial judge was saying. In the absence of a written judgment, the
Fund took the view that it could
not rely on Mr Matsepane’s
notes and therefore could not reach a meaningful decision on whether
to appeal, until it received
a copy of the written judgment. This is,
in essence, the explanation for the delay in failing to apply for
leave to appeal within
the 15 days required by rule 49(1)
(b)
.
The trial court found that this explanation was unreasonable. I
respectfully disagree. I find in the circumstances of this matter,
the absence of a copy of the written reasons for the trial court’s
order adequately explains the delay in applying for leave
to appeal.
When a judgment is appealed against, written reasons are
indispensable. Failure to supply them will be an impediment
to the
appeal process. In dismissing the appeal, the full court found that
there was no basis to interfere with the findings of
the trial court
as it was not persuaded that the trial court misdirected itself on
the facts or that it did not exercise its discretion
judicially.
[5]
The explanation for the failure to note the appeal timeously was not
unreasonable and there are prospects of success on appeal
which I
deal with hereunder.
[13]
I accordingly find that the appeal against the refusal of the
condonation application must be upheld.
Compliance
with Statutory Requirements
[14]
Section 48(1)
(a)
of the old Act provides:
‘
Claims
against fund: notice, proof and extension of periods of claims
.
(1) No person
shall have a claim against the fund in respect of any theft
contemplated in section 26 unless–
(a)
written notice of such claim is given to the council of
the society concerned and to the board of control within 3 months
after
the claimant
became aware of the theft
or by the exercise of reasonable care should have become aware of the
theft
. . . .’ (My emphasis.)
[15]
The meaning of ‘become aware’ and ‘reasonable care’
in the context of s 48(1)
(a)
of the old Act was considered in
SVV
Construction (Pty) Ltd v Attorneys, Notaries and Conveyancers
Fidelity Fund
[6]
where King J held:
‘
To
become aware of something involves a change of condition - the
entering into a new state of condition, here awareness, from a
former
state or condition, here ignorance (compare
Ex
Parte H J Ivens & Co Ltd; Ex parte National Engineering Ltd
1945
WLD 105
at 110), and the state or condition of being “aware”
is to have cognizance of or to know
(The
Oxford English Dictionary(OED)) -
thus to
“become aware” is to acquire knowledge of something not
previously known
[7]
. . .
What
constitutes
“
knowledge” in this
context? In the first instance it is personal knowledge
[8]
. . .
I accordingly
hold that becoming aware in the section imports the actual, personal
knowledge of the claimant.
[9]
. . .
What then is
this “knowledge”?
It is not
confined to “that mental state of awareness produced by
personal participation in the theft or by information derived
from
the actual thieves, but includes also a
conviction or belief
engendered by the “attendant circumstances” (
per
Watermeyer CJ in
R v Patz
1946 AD 845.
. . “(o)n
the other hand mere suspicion not amounting to conviction or belief
is not knowledge”).
What is then
required is the awareness of material facts which would create in the
mind of a reasonable man the knowledge, in the
sense of the belief or
conviction, not merely the suspicion, that a theft had been
committed.
[10]
. . .
The type of
theft with which this case is concerned is that which has come
to be known as misappropriation of trust funds
(as to which see
Law
Society, Cape v Koch
1985(4) SA 379 (C) at
382); it seems to me that the material ingredients of a theft of this
nature are the wrongful (in the sense
of
mens
rea
) dealing by an attorney with or
appropriating to his own use of the moneys which have been
“entrusted” to him - in
the sense of having been required
by the person making over the funds to be placed by the attorney
in his trust account and
that these remain there
until
the happening of some known future event
.’
[11]
(My emphasis.)
[16]
The Fund filed a special plea in which it pleaded that
Mr Love:
‘
[K]new
by no later than 28 November 2012, and probably as early as 15 May
2012, that his monies had been stolen by Pavoncelli but
only
submitted his claim to the [Fund] on 7 October 2013, well
outside of the three months of him having acquired actual knowledge
of the theft as prescribed in section 48(1)(
a
)
of the Attorneys Act, 1979 and, in the premises, the plaintiff’s
claim did not meet the mandatory requirements of the said
section and
was rightly rejected by the defendant.’
[17]
Mr Love did not file a replication. At the trial it was
Mr Love’s case that the claim was not time barred because it
was only
on 13 September 2013 when he saw the business bank accounts
of Turnbull and Associates, that he had proof of the theft of the R10
million. On 7 October 2013 Mr Love notified the Fund of his claim.
[18]
The trial court found that before September 2013 Mr Love ‘had a
suspicion that a theft had occurred and could
not prove it until such
time as he had had access to the bank statements. In
Probest
Projects (Pty) limited v The Attorneys, Notaries and Conveyancers
Fidelity Guarantee Fund
[2015] ZASCA 192
our courts took the view
that to have a suspicion of theft is insufficient’.
[19]
The trial court went on to find that
:
‘
The
evidence that the plaintiff only became aware of the facts after he
had received the business bank statements stands uncontradicted.
It
is clear that the monies were stolen not when the money was
transferred from the trust account, but when the money was placed
into the business account. The plaintiff could not have known this
without the benefit of the information
In view of
the uncontradicted information of the plaintiff, I am of the opinion
that this special plea is dismissed.’
[20]
What the trial court and the full court failed to deal with were the
background facts giving rise to Mr Love only
notifying the Fund on
7 October 2013 of his claim. What the facts show is set out
hereunder.
[21]
In the early part of 2011 Mr Love met Mr Pavoncelli. They discussed
an investment by Mr Love in a company known
as Sword Fern Trading
(Pty) Ltd (Sword Fern). In April 2011 in anticipation of an
agreement being reached, Mr Love paid the
R10 million into Turnbull
and Associates’ trust account. According to Mr Love this
amount was only to be released after
a written agreement for the
purchase of shares in Sword Fern was signed by all concerned. In
anticipation of an agreement, Mr Love
lent Sword Fern over R4
million. Sometime in June 2011 Mr Love and Mr Pavoncelli fell out and
all negotiations for the purchase
of shares in Sword Fern came to an
end. Mr Love then demanded the repayment of his R4 million loan and
the R10 million held in
trust. Neither demand was met. On a date that
does not appear from the record, Mr Love ascertains that Turnbull and
Associates
no longer had the R10 million in its trust account.
[22]
On 31 October 2011 Mr Love brought an application to wind-up Sword
Fern based on its failure to repay the loan
amounting to over R4
million. He also brought an action against Turnbull and Associates
claiming payment of the R10 million. His
main claim is based on an
allegation that the R10 million was paid out in breach of his tacit
agreement with Turnbull and Associates.
In an alternative claim,
reliance is placed on a duty of care which was breached by Turnbull
and Associates when it ‘intentionally
alternatively
paid out the R10 million to one Lorenzo Pavoncelli and or his
nominee’.
[23]
In the winding-up application Sword Fern failed to
timeously file its answering affidavit. Mr Love opposed its
condonation application.
In his affidavit dated 23 February 2012 in
relation to the R10 million, he said ‘I do not know when the
amount of money was
transferred and Pavoncelli as well as Turnbull
and Associates have refused to disclose when the amount of money was
paid to Pavoncelli
. . . I have a strong suspicion that it occurred
in April 2011’.
[24]
On 15 May 2012 and to avoid Sword Fern’s liquidation
Mr Pavoncelli signed an undertaking in which he
undertook to pay
Mr Love the debt owed by Sword Fern and the R10 million that Mr
Love had paid into Turnbull and Associates’
trust account.
He also undertook to pay the attorney client costs incurred by Mr
Love in his action to recover the R10 million
from Turnbull and
Associates.
[25]
Mr Pavoncelli failed to make payments in terms of the undertaking.
This had two results. First, on 12 June 2012
Sword Fern was wound-up.
Secondly, Mr Love issued a provisional sentence summons against Mr
Pavoncelli based on the undertaking
to pay the R10 million. In his
answering affidavit dated 28 November 2012 Mr Love
inter alia
said that:
‘
2.5 .
. . I have only subsequently established that the defendant . . . had
signing powers on the account and in fact utilised the
R10 000
000.00 which was paid into the said trust account. During our
negotiations I made it clear that I had had enough of
the defendant’s
shenanigans and that I insisted on payment and an admission of
liability in respect of all amounts owing
to me failing which my
instructions were to proceed with the liquidation application.
. . .
15.1 . . .
However, the defendant undertook to make payment of the R10 000
000,00. The reason why he has undertaken to make
payment of this
amount, is because he
has personally misappropriated the R10 000
000,00
as will appear from I set out hereunder.
15.2 . . . I
further refer the Court to the various transfers into the account of
Turnbull, and respectfully submit that it is clearly
demonstrated
that the amount paid into the attorney’s trust account,
being administered by the defendant, was improperly
used by the
defendant. In any event, the defendant undertook to make payment of
the said amount and there is no reason why he should
not be held to
his undertaking.
. . .
25 . . . The
truth of the matter is, as far as I could ascertain and after having
obtained the bank statement of the trust account
is that the
defendant unlawfully utilised the monies in the trust account on his
own version. That is probably the reason why he
undertook to make
payment of the R10 000 000.’
(My
emphasis.)
[26]
In an affidavit deposed to by Mr Love on 19 February 2013 in his
action against Turnbull and Associates he said
that on 22 November
2012 he met Mr Trapido, the only attorney in the firm of
Turnbull and Associates, and he had given him
copies of the trust
account bank statements. These showed the dates on which the R10
million was paid out of the trust account.
[27]
Mr Love obtained judgment against Turnbull and Associates and in the
provisional sentence action against Mr Pavoncelli
writs of execution
were issued. In both instances
nulla bona
returns were issued.
[28]
On 13 September 2013 Mr Love saw a copy of Turnbull and Associates’
business account which he said showed
the disbursement of money from
the business account. This, he asserts, was when he first knew that
Mr Pavoncelli had stolen the
R10 million. On 7 October 2013 some
three weeks thereafter, he notified the Fund of his claim.
[29]
Having notified the Fund of his claim, he gave evidence on 24 July
2014 at an enquiry arranged by the Fund. In
response to a question by
the Fund’s representative he said that on 15 May 2012, the date
on which Mr Pavoncelli undertook
to pay the R10 million as well as Mr
Love’s attorney and client costs in the action against Turnbull
and Associates, it was
quite clear to him that the R10 million was
not in the trust account.
[30]
At the Fund’s enquiry when asked to explain what the Fund
suggested was a two year delay in making a claim
against the Fund, he
said that he relied on legal advice and that although he had
suspicions that the R10 million had been stolen,
it was only on
receipt of Turnbull and Associates’ business bank statements
that he had evidence of the theft. This was the
tenor of his evidence
at the trial. As appears hereafter this is a flawed explanation.
[31]
Mr Love’s version is that the R10 million had to remain in the
trust account until signature of the agreement
for the purchase of
shares in Sword Fern. By June 2011 negotiations had broken down.
No written agreement was ever signed.
A demand to repay the R10
million was ignored.
[32]
On 31 October 2011, Mr Love sued Turnbull and Associates for the R10
million. It is clear from the particulars
of claim that he knew that
the R10 million was no longer in trust. In his alternative claim he
alleged that the R10 million had
been paid to Mr Pavoncelli. There is
no evidence why these allegations were made at this point in time. On
15 May 2012
Mr Pavoncelli undertook to pay the R10 million
to Mr Love. The only reasonable inference to be drawn from this
undertaking is that
Mr Pavoncelli had misappropriated the R10 million
from the trust account. At his meeting with the Fund, Mr Love said
that when
he got the undertaking it was clear that the R10 million
was not in the trust account. On 22 November 2012 Mr Love
was
given copies of the trust account which confirmed that the R10
million had been paid out of the trust account in 2011. On 28
November
2012 and in the affidavit Mr Love signed in the provisional
sentence proceedings he said that Mr Pavoncelli gave him the
undertaking
to pay the R10 million ‘because he has personally
misappropriated the R10 million as will appear from what is said
hereunder’.
At the trial Mr Love said that
he gave no mandate to release the R10 million from the trust account,
yet the money had been withdrawn
in 2011. He also admitted that the
R10 million was withdrawn from the trust account within a space of
two months. This he knew
from the trust account bank statements.
[33]
There was no need for Mr Love to wait until September 2013 when he
got the copies of the bank statements of Turnbull
and Associates’
business account before notifying the Fund of his claim. How the
Trust money was spent is irrelevant to his
claim. From what is set
out above it is apparent that Mr Love knew in October 2011 or at
the latest 28 November 2012 that
there had been a wrongful dealing or
appropriation by Turnbull and Associates, alternatively Mr
Pavoncelli, of the money entrusted
to them in the sense of them
having been required by Mr Love to keep the money in the trust
account until the happening of some
known future event.
[12]
This event did not occur.
[34]
For the above reasons I find that the Fund’s special plea on
the issue of non-compliance with the old Act
should have been upheld
by the trial court. In the result the trial court and the full court
erred in refusing to grant condonation
for the late filing of the
application for leave to appeal and dismissing the special plea.
[35]
The following order is made:
1
The appeal succeeds with costs.
2
The order of the full court is set aside and replaced with the
following order:
‘
(a)
The appeal is upheld with costs.
(b) The order
of the high court is set aside and replaced with the following order:
“
Condonation
for the late filing of the notice of appeal is granted and the
special plea is upheld with costs”.’
Z CARELSE
ACTING JUDGE OF
APPEAL
Appearances
For appellant:
G Oliver
Instructed by
Brendan Müller Inc, Cape Town
Van der Merwe & Sorour, Bloemfontein
For respondent:
A P Bruwer
Instructed by
Malherbe Rigg & Ranwell Inc, Boksburg
Symington & De Kok, Bloemfontein
[1]
Section 26 of the Attorneys Act 53 of 1979 provides as
follows:
‘
26
Purpose of fund
Subject
to the provisions of this Act, the fund shall be applied for the
purpose of reimbursing persons who may suffer pecuniary
loss as a
result of-
(a)
theft
committed by a practising practitioner, his or her candidate
attorney or his or her employee, of any money
or other property
entrusted by or on behalf of such persons to him or her or to his or
her candidate attorney or employee in
the course of his or her
practice or while acting as executor or administrator in the estate
of a deceased person or as a trustee
in an insolvent estate or in
any other similar capacity
. . . .’
[2]
Van Wyk v Unitas Hospital and Another
[2007] ZACC 24
;
2008
(2) SA 472
(CC) para 20.
[3]
Dengetenge Holdings (Pty) Ltd v Southern Sphere Mining and
Development Company Ltd and Others
[2013] ZASCA 5
;
[2013] 2 All
SA 251
(SCA) para 11 and 15.
[4]
In
Dengetenge Holdings
supra para 15 the following was said:
‘
. . .
But,
faced with some explanation, albeit one that appeared inadequate and
perhaps even lacking in candour, counsel was directed
to address the
merits of the appeal so as to enable us to assess
Dengetenge’s
prospects of success and to weigh that together with the other
factors.’
[5]
Dobsa Services CC v Dlamini Advisory Services (Pty) Ltd
and
Another; Dlamini Advisory Services (Pty) Ltd and Another v Dobsa
Services CC
[2016] ZASCA 131
para14.
[6]
SVV v Construction (Pty) Ltd v Attorneys, Notaries and
Conveyancers Fidelity Guarantee Fund
1993 (2) SA 577
(C) at
584I-585A.
[7]
SVV
supra at 584J
[8]
SVV
fn 6 at 585B.
[9]
SVV
fan 6 at 585D.
[10]
SVV
fn 6 at 585D-F.
[11]
SVV
fn 6 at 586B-C.
[12]
See
SVV
fn 6 at 586B-C.