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2024
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[2024] ZAFSHC 109
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De Lange and Others v South African Legal Practice Council (309/2024) [2024] ZAFSHC 109 (27 March 2024)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case No:
309/2024
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
In
the matter between
:
PAUL
DE
LANGE
First applicant
SHARON
ANN DE
LANGE
Second applicant
ROUX
BARRY
CLOETE
Third applicant
and
THE
SOUTH AFRICAN LEGAL PRACTICE
COUNCIL
Respondent
CORAM
:
MGUDLWA, AJ
HEARD
ON
:
8
FEBRUARY 2024
DELIVERED
ON:
27 MARCH 2024
FACTUAL
BACKGROUND
[1]
This is an urgent application wherein the applicants seek an order to
compel
(Mandamus)
the respondent to issue them with fidelity
fund certificates for the period 1 January 2023 to 31 December 2023
and 1 January 2024
to 31 December 2024. The applicants impugn the
decision of the South African Legal Practice Council (the LPC)
refusal to issue
them with the Fidelity Fund certificate after having
purportedly complied with chapter 7 of the Legal Practice Act,28 of
2014 (the
Act) and request the court to review this administrative
action by way of indirect review.
[2]
The respondent opposes the application on two grounds. Firstly, it
raises the defence
of lis pendens; secondly, it contends that the
refusal to issue a Fidelity Fund Certificate by the respondent
amounts to an administrative
action and consequently, the applicants
ought to have instituted a review application in terms of Uniform
Rule 53.
THE PARTIES
[3]
The three applicants, Paul De Lange (First applicant), Sharon Ann De
Lange
Second Applicant) and Roux
Barry Cloete (Second Applicant) are practicing attorneys duly
admitted by the High Court.
[4]
The respondent is the South African Legal Practice Council (the LPC),
duly established
as a Body Corporate with full capacity in terms of
section 4 of the Legal Practice Act (the Act) with the offices in the
jurisdiction
of this court.
FACTUAL
BACKROUND
[5]
The first and second applicants have been practicing as attorneys in
various legal
firms, however later became partners at De Lange
Attorneys in Bloemfontein.
[6]
Gleaned from the founding affidavit of the first applicant, after
some negotiations
between the first and second applicants together
with Mr. Cloete (Director of Matsepes Inc.), an agreement was reached
in terms
of which De Lange Attorneys would merge with Matsepe Inc.
with effect from 1 March 2021.
[7]
After the merger in 2021, there was a commixture between the trust
accounts of De
Lange Attorneys and Matsepes Inc. Newtons Auditors
were instructed by the applicants to conduct auditing of their
respective trust
accounts. Through the auditor’s representative
they were informed in March 2023 that a wrong process was followed as
a result
of which the Newtons auditors sought guidance from the LPC.
The meeting between Newtons and LPC took place in May 2023. They were
subsequently advised by the LPC to redo all transactions dating from
1 March 2021 until the end of February 2023, in order to split
transactions of De Lange Attorneys from those of Matsepe Inc.
Subsequent to a meeting with the LPC, Newtons auditors required that
all transactions of the erstwhile De Lange Attorneys be separated
entirely from the transactions of Matsepes Inc. and required
that a
separate De Lange attorneys bookkeeping system be created so that it
can be closed.
[9]
On 28 August 2023 an urgent application was lodged by the LPC seeking
suspension of
the applicants from practice, the effective cessation
in the interim of any access they had to the trust banking accounts
of De
Lange Attorneys and Matsepes Inc; the surrender of their
admission certificates as legal practitioners; the appointment of a
curator
to administer and control their trust accounts and an order
obligating disclosure of whatever is necessary for the successful
operation
of what was to be investigated.
[10]
It is further evident from the first applicant’s founding
affidavit
[1]
in this matter and
on notice of motion in case number 4514/2023, that the application
against the applicants is pivoted on the
following:
10.1 Failure
to comply with Section 84 and 85 of the Act.
10.2
Conflation of trust accounts
10.3 That
both first and second applicant appeared before investigations
committee on 16 May 2023 for failure to comply
with auditing of their
trust account and submission of the audited statements.
10.4 On 2
June 2023 the investigating committee recommended that the LPC should
institute an urgent application for
the suspension of the applicants
because of their failure to comply with the rules dealing with the
closure of De Lange Attorneys
practice.
[11]
The applicants opposed the matter that was heard by Loubser, J and
Molitsoane, J under case number
4514/2023 in this court. I interpose
to mention that at the time of the hearing of this application, the
aforementioned court had
already reserved judgment.
[12]
While the application by the LPC was already due for hearing on 2
November 2023, on 27 October
2023 the separated audit reports
[2]
in respect of both De Lange Attorneys and Matsepes Inc. were issued
by the Newtons auditors.
[13]
These reports were qualified in that the legal practitioners trust
accounts were not maintained
in compliance with the Act and the
Rules
[3]
on the following basis:
13.1 De
Lange Attorneys audit report:
13.1.1
As instructed by the LPC in July 2023 they commenced posting the
accounting records
as a separate entity as from 01 March 2021.
13.1.2
The firm did not ensure that adequate internal controls were
implemented to ensure
compliance with the rules due to
the fact that all the transaction were included in Matsepe Inc. and
only separately accounted
for after the LPC instructions.
13.1.3
During the period 01 March 2021 to 28 February 2023, a negative
difference of R61 592,
97 between the bank balances and the
accounting records occurred. The amount of R89 288, 56 was paid
on 30 August 2023 to
correct the trust shortage. This amount was paid
on the advice of their bookkeeper as soon as the possibility of a
discrepancy
was identified.
13.1.4
Due to combining of the accounting records amounts were received in
Matsepes Inc. and
transfers of fees were transferred from De Lange
Attorneys Standard Bank which resulted in a difference between the
actual Standard
Bank account records of R61 592,97.
13.1.5
The audit was not finalized within 6 months after the annual closing
of the accounting
records for the financial year ended in September
2022.
13.2
Matsepes Inc. audit report:
13.2.1
Matsepes Inc. only started maintaining separate accounting records
from September 2023,
before this date the ABSA Bank was accounted for
in Matsepe Inc. and no accounting records were maintained for
Standard Bank.
13.2.3
The firm did not ensure that adequate internal control was
implemented to ensure
compliance with the rules due to the fact that
all the transactions were included in Matsepe Inc. and only
separately accounted
for after the LPC insisted on this.
13.2.3
As at 30 September 2022, there was a negative difference of
R403,139,63 between
the ABSA bank balance and the accounting records,
R406,139,10 being paid on 31 August 2023 to correct the trust
shortage. It is
recorded on the report that the amount was paid on
the advice of their bookkeepers as soon as the discrepancy was
identified.
13.2.4
It was found that transfers were made to the business banking account
which were
not due to the firm and that fees had not been debited in
its accounting records to a trust creditor, this resulted in a
difference
between the actual ABSA bank account and the accounting
records of R403,139,63 as mentioned above.
13.2.5
The audit was not finalized within 6 months after the annual closing
of the accounting
records for the financial years ended 28 February
2022 and 28 February 2023.
[14]
Subsequent to the issuing of the qualified reports by the Newtons, on
8 November 2023 the applicants
submitted reasons to the LPC as
envisaged by rule 54.30 explicating the qualified reports and setting
out the steps they had taken
to rectify the deficiency that was in
the Matsepes Inc. going forward.
[15]
On the 4 December 2023 the LPC wrote them a letter in response to the
qualified audit reports
and their correspondence dated 8 November
2023. This letter recorded that the reasons for the qualifications as
they had provided
could not be accepted by the council and that the
council had resolved that an independent auditor be appointed to
conduct an audit
of the applicants trust accounts. Furthermore,
council had also resolved not to issue them with a Fidelity Fund
certificate.
[16]
After the refusal to issue the Fidelity Fund Certificate the LPC
instructed Kotie Kruger as an
independent auditor to carry out the
envisaged investigations.
[17]
As a result of the administrative decision taken by the LPC on 4
December 2023, the applicants
alleged that they complied with the
provisions of rule 47.5 and 54.29 and 30. According to them, the LPC
failed to afford them
an opportunity of addressing any shortcomings
in the explanation that had been proffered to it concerning the
qualification reasons.
Had the LPC requested them in writing to favor
clarity, they would have done so. According to them the LPC’s
decision in
this regard was taken in a procedurally unfair manner, it
is arbitrary and capricious, unlawful and motivated by an ulterior
motive
and purpose. Furthermore, the applicants seek indirect review
of the administrative action.
[18]
The respondent resists the relief sought on the basis of two
preliminary and dispositive points.
Firstly, that a mandamus
application is entirely incompetent in the present matter where the
LPC’s refusal to issue Fidelity
fund certificate to applicants
amounts to administrative action. Secondly, there are pending
proceedings between the parties involving
substantially the same
issue which give rise to a special plea of
lis pendens.
[19]
The facts of this case are largely common cause and the better
part thereof is not in dispute
. It is common
cause that LPC has taken an administration action against the three
applicants not to issue them with a fidelity
fund certificate and
that the audit reports submitted on 27 October 2023 by Newtons were
qualified. Lastly, there is a pending
application for the suspension
of the first and second applicants under case number 4514/2023.
ISSUE FOR
DETERMINATION
[20]
The issues for determination in this regard can simply be identified
as follows:
20.1
Special plea of
lis pendens
.
20.2
The LPC’s refusal to issue Fidelity Fund Certificate to the
applicants firstly, “for Reasons
as yet wholly undisclosed”
and secondly that it has done so “unlawfully”. Whether
this administrative action
can be reviewed by way of indirect review.
20.3
Mandamus application.
LEGAL POSITION
Special plea of
lis
alibi pendens
[21]
The LPC resist this application on the basis that there are pending
proceedings before this court
in case number 4514/2023, which
concerns the same parties, where the same dispute of applicants
practicing without Fidelity Fund
Certificates is at issue and
concerns the same subject matter.
[22]
It is trite law that a party wishing to raise a
lis alibi pendens
defence bears the onus of alleging and proving the following:
“
(a)
a pending litigation.
[4]
(b)
between the same parties or their privies,
[5]
(c)
based on the same cause of action (the requirement of the same cause
of action is satisfied
if the other proceedings involved
determination of a question that is necessary for the determination
of the present case and substantially
determinative of its
outcome),
[6]
and
(d)
in respect of the same subject matter. (This does not mean that the
form of relief claimed must
be identical.)”
[7]
[23]
The onus of proving the requisites rests on the party raising the
defence.
[8]
Once
they have been established, a factual presumption arises that the
second proceedings must satisfy the court that despite all
the
elements being present, the balance of convenience and equity require
the case to proceed. A court has an overriding discretion
to order a
stay even if all the elements are present.
[9]
[24]
The proceedings under case number 4514/2023 were brought on an urgent
basis by the LPC in terms
of section 43 of the Act seeking an order
for the suspension
[10]
of
the first and second applicants for practicing without Fidelity Fund
Certificates, whereas in the instant matter the applicants
seek this
court to review and set aside the decision of the LPC to refuse to
issue them with the Fidelity Fund Certificate and
compel it to issue
same.
[25]
I deem it apposite to mention that the application by the LPC in case
number 4514/2023 was lodged
purely on the basis that the first and
second applicants were practicing without the Fidelity Fund
Certificate and non-compliance
with section 84 of the Act.
[26]
Section 84 of the Act provides as follows:
“
Obligations
of legal practitioner relating to handling of trust monies
(1)
Every
attorney or any advocate referred to in
section
34
(2)(b), other than a legal practitioner in the full-time employ
of the South African Human Rights Commission or the State as a state
attorney or state advocate and who practices or is deemed to
practice-
(a) for his or her
own account either alone or in partnership; or
(b) as a director
of a practice which is a juristic entity, must be in possession of a
Fidelity Fund certificate.
(2)
No legal practitioner referred to in
subsection (1) or person employed or supervised by that legal
practitioner may receive or hold
funds or property belonging to any
person unless the legal practitioner concerned is in possession of a
Fidelity Fund certificate.
(3)
The provisions of subsections (1) and (2)
apply to a deposit taken on account of
fees or disbursements in
respect of legal services to be rendered.
(4)
A Fidelity Fund certificate must indicate
that the legal practitioner concerned is obliged to practice subject
to the provisions
of this Act, and the fact that such a legal
practitioner holds such a certificate must be endorsed against
his or her enrolment
by the Council.
(5) A legal
practitioner referred to in subsection (1) who-
(a) transfers from
one practice to another; or
(b) ceases to
practice, must give notice of this fact to the Council and comply
with the Council’s relevant requirements
in relation
to the closure of that legal practitioner’s trust account and
in the case of paragraph (b) return
his or her certificate to the
Council.
(6)
The Council may withdraw a Fidelity Fund
certificate and, where necessary, obtain an interdict against the
legal practitioner concerned
if he or she fails to comply with the
provisions of this Act or in any way acts unlawfully or unethically.
(7)
The provisions of this section do not apply
to a legal practitioner who practices in the full time employ of
Legal Aid South Africa
on a permanent basis.
(8)
An
advocate, other than an advocate referred to in section
34(2)(b), may not receive or hold money or property belonging to
any
person in the course of that advocate’s practice or in
respect of any instruction issued to the advocate by an attorney or
a
member of the public.
(9)
No legal practitioner in the full-time
employ of the South African Human Rights Commission or the State as a
state attorney, state
advocate, state law adviser or in any other
professional capacity may receive or keep money or property belonging
to any person,
except during the course of employment of such legal
practitioner with the State or the South African Human Rights
Commission and
in such case only on behalf of the South African Human
Rights Commission or the State and for no other purpose.”
[27]
Having assessed the application before me, the applicants firstly
submitted qualified audit reports
to the LPC
[11]
and
complied with Rule 54.30 by augmenting the said reports with three
affidavits explaining the qualified finding.
[28]
Rule 54.30 provide as follows:
“
Where
the audit or inspector’s report in respect of the trust account
of the firm is qualified by the auditor or inspector,
as the case may
be, the firm shall provide the Council with such information as the
Council may require to satisfy itself that
the firm’s trust
account is in good order, that the trust account practitioner remains
fit and proper to continue to practice
and that Fidelity Fund
certificates may be issued to the members of the firm.”
[29]
In my view the applicants’ case is pivoted purely on the basis
that, notwithstanding their
compliance with the legal frame work
regulating issuing of Fidelity Fund Certificate, the LPC’s
administrative action is
unlawful thus seeks indirect review (by way
of mandamus) of the LPC decision.
[30]
As can be gleaned from above, I find both matters to be distinctly
different legal proceedings.
Thus the special plea of
lis pendens
should be dismissed.
INDIRECT REVIEW
[31]
Section 33 of the Constitution,1996 grants everyone the right to just
administrative action.
[12]
The
right is protected by administrative law and is given effect by the
Promotion of Administrative Justice Act 3 of 2000 (PAJA).
Administrative law’s primary diagnostic and corrective
mechanism is judicial review. This is a procedure through which
administrative
action may be scrutinized and invalidated by a
court.
[13]
[32]
These two remedies are mentioned in the much cited dictum of Innes CJ
in
Johannesburg
Consolidated Investment Co v Johannesburg Town Council
[14]
.
[33]
A court can review administrative action directly or indirectly.
[15]
In
direct review proceedings, the validity of administrative action is
the court’s main subject of the adjudication. These
proceedings
are initiated by a litigant whose purpose in approaching the court is
to impugn the administrative action in question.
In indirect-review,
dissimilarly, the validity of administrative action is incidental to
the court’s main subject of adjudication.
[34]
Pertinent to the procedure of indirect review, in his body of work,
JR de Ville
[16]
says:
“
Before
the enactment of PAJA, direct review of administrative action
occurred in terms Rule 53 of the Uniform Rules of the Court
Although
appears to have been some uncertainty in this regard in the past, the
procedure prescribed in Rule 53 need not be followed
in instances of
indirect review. In these instances, (for example where an interdict,
declaration of rights or spoliation is sought),
the applicant
(plaintiff) can proceed either by way of application or by way of
summons, depending on the presence or absence of
dispute of fact.”
[34]
In this matter the main issue for determination brought by the
applicants is an order to compel
LPC to issue them with the Fidelity
Fund certificate but the decision taken by the LPC stands in the way
of the relief sought and
is incidental to the court’s main
subject of adjudication. By seeking to compel the LPC to issue the
Fidelity Fund Certificate,
the applicants indirectly impugn the
administrative action of the LPC.
ARGUMENTS AND
ANALYSIS
[35]
I now turn to scrutinize the administrative action taken by the LPC
on 4 December 2023. In an
attempt to avoid prolixity, I will briefly
refer to the most contentious issues. Firstly, Adv. Steenkamp
in his arguments
[17]
with
regards to discretion refers to Section 84(6)
of
the Act as the only provision which grants the LPC authority to
withdraw Fidelity Fund Certificate and consequently allows them
to
apply for an interdict against a practitioner concerned for
non-compliance with the Act. According to him, the applicants
submitted
qualified reports to the LPC and complied with rule 54.30.
Therefore, Section 85(6) becomes applicable and it imposes upon the
LPC a positive obligation to issue the Fidelity Fund Certificate “
if
it is satisfied”
.
The “if it is satisfied” requirement is only fenced off
to the four considerations contained in the provision which
are the
following:
“
Upon
receipt of an application in terms of subsection (1) the Council
must, “
if it is satisfied”
that the applicant has:
(a)
complied with the provisions of this
Chapter;
(b)
paid the required contribution to the Fund;
(c)
discharged all liabilities in respect of
enrolment fees; and
(d)
completed the application form as
determined in the rules in every respect, immediately issue to the
applicant a Fidelity Fund certificate
that is determined in the
rules.”
[36]
I deem it apposite at this stage to deal with the contextual meaning
of “
if
it is satisfied”
and what could be the meaning of “
must”
contained in the letter of section 85(6). I hasten to mention that
the literal meaning
[18]
of
“
satisfied”
is
to make somebody pleased by doing or giving what they want. Whereas,
Hoexter
[19]
with
reference to “is satisfied” refers to a case of
Kabinet
van die Tussentydse Regering vir Suiwes-Afrika v Katofa
[20]
,
where
Rabie CJ took the view that the words “
is
satisfied”
appearing
in delegated legislation conferred a subjective discretion on the
Administrator.
[37]
In
Bertie
Van Zyl (Pty)(LTD) v Minister for Safety and Security
[21]
,
Mokgoro, J held that our Constitution requires a purposive approach
to statutory interpretation. In my view the words “must
issue…if it is satisfied” must be interpreted in the
light of their context. Additionally, a contextual and purposive
reading of a statute must of course remain faithful to the actual
wording of the statute. In my considered view the meaning
that
can be attached to “must” is that the obligation to issue
Fidelity Fund Certificate only follows after LPC is
satisfied that
the applicants have met all four considerations listed in section
85(6) of the Act. In exercising its subjective
discretion, the LPC
must consider whether the applicants surmounted the threshold of
section 85(6) (a) to (d). The broader consideration
is section
85(6)(a) which requires compliance with chapter 7 of the Act
[22]
.
These provisions clearly circumscribe the LPC’s role to be
satisfied that the application complied with the relevant lawful
requirements. It is also axiomatic from the letter of section
85(6) that the LPC has a subjective discretion to issue the
Fidelity
Fund Certificate and if not satisfied, they can withhold or decline
issuing thereof. I interpose to mention that the administrative
action to be taken must have regards to the ambit and purpose of the
Act
[23]
and
most importantly be in accordance with the principles of
administrative law. Similarly, with rule 54.30 being a supplementary
subordinate regulation, it behoves the LPC to exercise its judgment
on whether the firm’s trust account is in good order
and that
the trust account practitioners remain fit and proper to continue to
practice. In this case, the three affidavits
submitted by the
applicants which purport to explicate the qualified findings must
“satisfy” the LPC of the aforementioned
two
considerations listed in rule 53.30. Mere submission of the
affidavits or even still, an explanation by the applicants per
se is
not enough, such submission and or explanation must still pass the
threshold of satisfying the LPC.
[38]
Having found that the LPC has a discretion in both section 85(6) and
rule 54.30, this brings
me to a question of whether the
administrative decision taken on 4 December 2023 is procedurally
unfair, unlawful, arbitrary and
capricious and or is motivated by
ulterior motives and purpose. The applicants further attack the LPC
for not affording them an
opportunity of addressing any shortcomings
in the explanation that had been proffered to it concerning the
qualification.
[39]
Adv. Steenkamp has argued that qualified reports were submitted and
that section 85(6) and rule
54.30 have been complied with in that the
affidavits were filed by the applicants in an attempt to explain and
clarify the qualified
finding. There is no evidence of
misappropriation because the deficits are corrected and the money has
been paid back. Further,
measures were taken to rectify the
deficiency in their accounting department. Furthermore, in as far as
chapter 7 of the Act and
rule 54.30 are concerned, the applicants
were in compliance and the LPC failed to give them audience by
seeking further explanation.
Despite compliance, LPC took a
decision not to issue them with the Fidelity Fund Certificate. They
were not informed as to how
this decision was taken and an
independent auditor was appointed for investigations into their trust
accounts.
[40]
Adv. Mohapi in his arguments controverted the allegation by the
applicants to the effect that
the letter falls short of giving
reasons as to why the decision was taken and why the Fidelity Fund
Certificate was not issued.
According to him, the letter does not
only inform the applicants that their explanation cannot be accepted.
It also informs them
that LPC wants further investigation.
Furthermore, the last paragraph of the letter informs them that due
to the fact that they
failed to inform the court
[24]
of
the deficit in their trust account while being aware of the same.
According to him LPC could not have been clear as to why the
administrative action was taken. Furthermore, Applicants are well
aware of the significant amounts that are in deficit and most
certainly cannot be attributed to “incorrect posting” or
“accounting errors”.
[25]
[41]
In my view, the latter argument is correct more especially when one
considers the fact that Newtons
auditors advised the applicants about
a commixture and or a wrong process that was followed by the De Lange
attorneys and Matsepe
Inc in March 2023. The LPC then gave the
applicants a lifeline by advising them to split transactions dating
back from 1 March
2021 until the end of February 2023.
[26]
Subsequently
on 2 June 2023 a resolution was passed by the investigation committee
that the LPC institutes urgent application for
the suspension of both
first and second applicants. This resolution was taken
notwithstanding the fact that the applicants wrote
a letter
[27]
to
the LPC explaining transgressions and requesting that any further
disciplinary steps be put on hold until end of June 2023. On
August
2023, an urgent application was lodged, calling for both first and
second applicants to be suspended. I interpose to mention
that
deduced from the conduct of the LPC in proceeding with the
application for suspension, the only ineluctable inference is that
the explanation proffered by the applicants fell short of
“satisfying” the LPC.
[42]
Furthermore, gleaned from the letter
[28]
applicants
attribute further complications to the bookkeepers who left the
employment of Matsepe Inc. during 2022. I deem it apposite
to mention
that chapter 7 of the Act significantly places an obligation on the
legal practitioner in as far as compliance is concerned.
I could not
glean any provision from the Act suggesting that a bookkeeper also
has such an obligation. Thus, I find the explanation
about
bookkeepers leaving employment to be unfathomable and inexplicable in
as far as transgressions are concerned.
[43]
On top of all that, on 31 October 2023 the Newtons submitted a
qualified reports for period 1
March 2021 and 28 February 2023 and
identified five instances in which the applicants did not comply with
the provisions of the
Act and the rules on each report. Attached to
the reports the applicants filed three affidavits as envisaged by the
requirements
of rule 54.30. Gleaned from these affidavits, the
applicants attribute the transgressions to incorrect posting and
accounting errors
and they conceded to non-compliance with rule
54.14.10 in their affidavits
[29]
on
the basis that everyone lost sight of this requirement.
[44]
I deem it necessary to mention that the submission of these
affidavits were preceded by numerous
correspondences between the
applicants and respondent. In a replying affidavit
[30]
in
respect of the other matter, JJ Hefer SC succinctly outlined the
attitude of the LPC towards the Newtons’ qualified reports.
Furthermore, Roux Barry Cloete submitted an affidavit
[31]
explaining
the basis for qualified findings and the steps taken to rectify the
situation. The LPC responded to this correspondence
through a letter
opined by its director
[32]
specifying
the reason for their dissatisfaction and requesting more
clarifications. Over and above this request for more clarification,
I
interpose to mention that Hefer’s affidavit in paragraph 13
states as follows:
“
Before,
I deal with the audit report, the LPC submits that Mr. Cloete’s
explanation is vague, if it is an explanation at all.
It does not
even pretend to make any attempt to truly explain what caused the
trust accounts deficits of R403 139,63 between
the trust account
balances and the accounts records during the financial year ending 30
September 2022. It, with respect, will
require the LPC to investigate
the real cause of the trust deficit in Matsepes Inc. and similarly
with the De Lange Attorneys in
their deficit of R61 592,97.”
[45]
In my view gleaned from the aforementioned correspondences, the LPC
pertinently explained what
should be explicated by the applicants
through their affidavits as required by rule 54.30. The argument by
the applicants to the
effect that they were not given audience after
submitting their affidavits instead the LPC just took a decision not
to issue them
with the Fidelity Fund Certificate can only find favor
if the three affidavits
[33]
and
the letter dated 4 December 2023 were the only correspondences
between the applicants and the LPC (being the administrator in
this
instance). I also deem it necessary to reiterate that I am satisfied
that the letter succinctly explains why the Fidelity
Fund certificate
could not be issued and why further investigations will be conducted
by the council. I am not oblivious of the
fact that the
administrative decision was taken on 4 December 2023. It is apposite
to mention at this stage that the rest of the
correspondences were
dealing with the same subject matter emanating from the Newtons
qualified findings.
[46]
In my view the LPC’s administrative decision is buttressed by
the preliminary report dated
22 January 2024 from Kotie Kruger
[34]
calling for further requested documents. Perhaps it is necessary to
mention inter alia in his conclusion Kotie Kruger in paragraph
4.2
says:
“
(i)
Limitation. No accounting records were maintained of a bank account
(Standard Bank Account).
(ii)
No details of posting errors.
(iii)
No details of transgressions referring to
transfers from trust
bank account to business
bank account and withdrawals from trust banking account.
(v)
No breaking down of R406,535.10 transferred to rectify the deficit as
it appears that the
deficit originated from a combination of posting
errors and amounts erroneously transferred.
(iv)
Not sure why posting errors have been
corrected by transferring funds instead of adjusting journals.”
[47]
It is axiomatic from the preliminary report that the affidavits
submitted by the Applicants in
terms of rule 54.30 fall short of
adequately accounting for the transgressions.
[48]
The submission by the applicants that there is no misappropriation
and that money has been paid
back into the trust account therefore by
that conduct, ipso facto, entitles them to be issued with the
Fidelity Fund Certificate
while the process of investigation was
under way is misplaced. In my view this argument loses sight of
the fact that LPC
as
custom morum
of the legal profession is
duty bound to regulate the professional conduct of the legal
practitioners so as to ensure accountable
conduct. It must protect
the public interest and preserve the public trust in the legal
profession by ensuring that the measures
adopted by the Legislature
in its wisdom to ensure that trust moneys and property is competently
and professionally handled and
the public is protected and
indemnified from theft thereof.
[49]
I am also satisfied that the administrative decision taken by them on
4 December 2023 was regular
and made in compliance with the
principles of administrative law.
[50]
Molitsoane, J in Maree & Bernard Attorneys case at paragraph 30
held that such decisions
are not final in effect as the respondent
can overturn its decision. I align myself with this finding.
Additionally, in my view
in casu
the applicants are afforded
an opportunity to give proper account of the transgressions and if
the LPC is satisfied with the explanation,
it can overturn its
decision by simply issuing the Fidelity Fund Certificate. This can
only be achieved once the LPC is not prevented
from carrying out its
functions as a statutory supervisor of the legal practitioners.
[51]
I am unable to agree with the applicants that they have made out a
case for the relief sought.
I thus accordingly order as follows:
ORDER:
51.1 That
the application for mandamus is dismissed with costs.
51.2
The Applicants are ordered to pay the costs of the application on an
attorney and client scale jointly and
severally, the one to pay the
others to be absolved.
S T MGUDLWA, AJ
On
behalf of the Applicants:
Adv S
Grobler
Instructed
by:
Peyper
Attorneys
BLOEMFONTEIN
On
behalf of the Respondent:
Adv
SL Mohapi
Instructed
by:
Amade
& Company Inc
BLOEMFONTEIN
[1]
Paul De Lange Founding Affidavit, page 10 of
25. Page 14
of the
bundle.
[2]
Attached as PL1 (pages 30 to 35) and PL2 (pages 36 to 41 of the
bundle).
[3]
De Lange audit report found non-compliance with rule 54.6; 54.10;
54.14.7.1; 54.14.8; 54.14.12; 54.14.13 and 54.24. Matsepe Inc.
audit
report found non-compliance with rule 54.6; 54.10; 54.14.7.1;
54.14.8; 54.14.12; 54.14.13 and 54.24.
[4]
RSA
Faktor Bpk v Bloemfontein Township Developers (Edms) Bpk
1981 SA 141(O).
[5]
Ceasarstone
Sdot-Yam Ltd v The World of Marble and Granite 2000 CC and Others
[2013] 4 All SA 509
SCA, 2013 (6) SA 499 (SCA).
[6]
Nestle
(SA) (Pty) Ltd v Mars Inc
[2001] 4 All SA 315 (A), 2001 (4) SA 542 (SCA).
[7]
Marks &
Kantor v Van Diggelen
1935 TPD 29.
[8]
Dreyer
v Tuckers Land and Development Corporation (Pty) Ltd
1981 (1) SA 1219
(T) p.1231.
[9]
Caesarstine
Sdot-Yam Ltd v The World of Marble and Granite 200 CC and others
[2013] 4 All SA 509 (SCA). 2013 (6) SA 499 (SCA).
[10]
See. Section 84 act 28 of 2014.
[11]
See.
Supra
,
paragraph 12.
[12]
See.
State
Information Technology Agency SOC Ltd v Gijima Holdings (Pty) Ltd
2018 2 SA 23
CC. (para.18 -19 & 27).
[13]
C Hoexter
Adminstrative
Law
2
ed (2012) 113.
[14]
1903 TS 111.
[15]
See note 14
supra
.
Pages 518 – 519.
[16]
Judicial Review of Administrative Action in South Africa-revised 1
st
ed. Page 297.
[17]
See. Page 2-3 of Heads of argument.
[18]
Collins English Dictionary.
[19]
Cora Hoexter Administrative Law in SA, Second Edition, page 299.
[20]
1987 (1) SA 695 (A).
[21]
Case number: CCT 77/08
[2009] ZACC 11
, Paragraph 21.
[22]
Legal Practice Act 28 of 2014
.
[23]
Act 28 of 2014.
[24]
The other pending matter- Case number: 4514/2023.
[25]
De Lange affidavit page 3, para.7.
[26]
See. Para 11.9, page 9 of FA.
[27]
Page 70-75 of the trial bundle, Letter dated 18 May 2023 in case
number 4514/2023.
[28]
See. Paragraph 11 of the letter referred to in footnote 27.
[29]
Page 50 of trial bundle, paragraph 11 of 1
st
applicant affidavit and page 60, paragraph 3 of Cloete Affidavit.
[30]
See. Page 299 to 307 of the trial bundle in case number 4514/2023,
Josephus Johannes Francois Hefer affidavit dated 1 November
2023.
[31]
See page 345-347 of the other trial bundle. Affidavit dated 27
October 2023.
[32]
Letter dated 31 October 2023, written by Margarette Kwakye,
Director.
[33]
Filed on the 8 November 2023 in compliance with rule 54.30.
[34]
Page
128 TB,AA3.