Brief Summary

Attorney — Fitness to practice — Appellants, attorneys and conveyancers, suspended for two years by the High Court for chaotic accounting practices and unprofessional conduct — Appellants appealed against suspension, claiming they were fit to practice and sought a lesser penalty — Respondent counter-appealed for striking appellants from the roll — Court held that the appellants were not fit and proper persons to practice due to significant trust account deficiencies and misconduct, upholding the counter-appeal and striking their names from the roll of attorneys and conveyancers.

Comprehensive Summary

Summary of Judgment

Introduction

This matter concerned disciplinary proceedings brought by a provincial law society for the regulation of the attorneys’ profession, seeking orders under the Attorneys Act 53 of 1979 against three practitioners. The proceedings focused on whether the practitioners remained fit and proper to practise as attorneys (and, for two of them, as conveyancers), and what sanction was required to protect the public and the integrity of the profession.

The parties were Conri Botha, Nicolaas Daniël de Jongh, and Cornelius Labuschagne (as appellants in the Supreme Court of Appeal), and The Law Society of the Northern Provinces (as respondent). All three appellants were admitted attorneys; the first and second were also enrolled conveyancers. They practised in partnership under the name De Jongh & Pienaar until disciplinary intervention occurred.

In the High Court, Pretoria (Pretorius J and Raulinga AJ), the law society obtained an order suspending the appellants from practice for two years. The appellants appealed to the Supreme Court of Appeal against that sanction, contending that the High Court had made factual misdirections, incorrectly found them not fit and proper, and imposed an excessive penalty. The law society lodged a counter-appeal, accepting the finding that they were not fit and proper, but contending that the proper sanction was striking off rather than suspension.

The general subject-matter of the dispute was professional misconduct in relation to (i) compliance with statutory and regulatory duties concerning trust accounting and bookkeeping, (ii) alleged touting for work (including payments or benefits linked to referrals), and (iii) broader complaints of unprofessional and dishonourable conduct in the practitioners’ dealings with clients and colleagues.

Material Facts

The court proceeded on the basis that there was little dispute about the primary facts underlying the complaints, but significant dispute about the inferences to be drawn from those facts, particularly in relation to touting and dishonesty. The High Court’s factual findings on many accounting irregularities were largely common cause on appeal, while the appellants contested characterisations such as whether their books were properly described as “chaotic” and whether inferences of dishonesty and touting were justified.

The law society’s case was advanced across three categories of conduct. First, the appellants’ accounting records reflected, at the stage of urgent intervention, a trust shortage exceeding R12 million. Secondly, it was alleged that the appellants were touting for work, including by providing direct financial benefits to estate agents connected to referral of conveyancing and bond registration work. Thirdly, the law society relied on a body of complaints of unprofessional and dishonourable conduct by clients and colleagues, though the Supreme Court of Appeal considered the accounting failures and dishonesty sufficient to determine fitness without analysing each complaint individually.

A chartered accountant, Mr L Marais, was instructed to investigate the firm’s financial records and produced three reports. Those reports reflected that the firm’s books were not properly kept, not up to date, and contained errors on a large scale; that incorrect procedures were followed; that the trust account did not accurately reflect the firm’s trust position; that no trust determination had been done for a period of 15 months by June 2004; that bank reconciliation was incorrectly done; that there were numerous mistakes in the trust creditors’ ledger; and that interest on the trust account had not been paid over to the law society for several months. The reports also reflected multiple payments from the business account for which there was no source documentation.

The appellants at all times acknowledged that they had failed—both jointly and individually—in their obligations to keep proper books of account as required by the Act and the rules. They attributed the state of the books to rapid expansion, implementation of new accounting software allegedly affected by power failures causing data loss, and disruption caused by the bookkeeper’s maternity leave and resignation. The Supreme Court of Appeal treated these explanations as not addressing the core concern identified by the court: a total lack of control, dereliction of duty, and irresponsibility. The appellants nevertheless persisted in denying that their books were “chaotic”, contending they maintained records per matter on file covers.

On the touting component, the record contained material relating to invoices from an estate agent Stefprop Eiendomme, including annotations (“t” and “v”) common cause to refer to transfers and bonds. A particular invoice (number 44) contained two totals corresponding to amounts later reflected in two cheques. The appellants initially denied the inference that payments were made in connection with referred work and asserted that no payments had been made on the invoices. After challenge on the absence of corroborating cheques, two cheques were produced in further affidavits: one business cheque and one trust cheque, each payable to De Jongh Ontwikkeling, matching the invoice totals. The appellants then advanced an explanation tying these payments to settlement of a debt owed in relation to Red Lager (Edms) Bpk, a company connected to their spouses, and to arrangements with the estate agent connected to ongoing referrals of work.

The Supreme Court of Appeal found that these cheques supported the inference originally drawn by the investigator and contradicted the appellants’ emphatic denial that they made payment on the strength of the invoices. The court concluded that the appellants had told blatant untruths, and that any attempt to characterise their denial as technically true (because payment was to a creditor rather than the agent) would amount, at best, to a deliberate half-truth intended to mislead.

In addition, the appellants made further payments to estate agents without source documentation; five such payments were never explained. The court noted that these payments were posted to ledger categories such as “bad debts”, “drawings” and “miscellaneous office expenses”, which the court treated as indicative of an intention to hide and deceive. Although the law society’s case did not include an allegation that the appellants appropriated trust funds for personal benefit, the court treated the accounting failures and dishonesty as sufficient to establish unfitness.

Legal Issues

The central legal questions were those arising from a disciplinary application under section 22(1) of the Attorneys Act 53 of 1979, namely whether the appellants’ conduct was established on the evidence, whether that conduct demonstrated that they were not fit and proper persons to continue to practise, and what sanction was appropriate in the circumstances.

The dispute involved a combination of fact, application of law to fact, and evaluative judgment. The first stage required factual findings on whether the alleged conduct occurred. The second and third stages required the exercise of discretion: the value-laden assessment of fitness to practise and the choice between striking off and suspension as protective measures. A further legal issue concerned how motion-proceeding principles (including the approach associated with Plascon-Evans) applied to disputes of fact on affidavit, particularly where denials were alleged to be untenable.

On appeal, the appellants sought to overturn both the finding of unfitness and the sanction, proposing instead a finding that they were fit and proper coupled with a fine and a wholly suspended suspension. The law society’s counter-appeal placed in issue whether, given the findings, the High Court’s sanction of suspension (rather than striking off) represented a misdirection in the exercise of discretion.

Court’s Reasoning

The Supreme Court of Appeal approached the matter through the three-stage inquiry mandated by section 22(1) of the Attorneys Act 53 of 1979, as summarised in Jasat v Natal Law Society 2000 (3) SA 44 (SCA) [2000] 2 All SA 310 (SCA). It emphasised that the first stage is essentially factual, while the second and third stages entail discretionary judgments that may be interfered with on appeal where discretion was not exercised judicially. Although many first-stage findings were not contentious, the court proceeded on an assumption favourable to the appellants that alleged misdirections justified reconsideration of the second-stage conclusions.

On the bookkeeping and trust-accounting obligations, the court relied on established statements of principle that the Attorneys Act and rules require proper records and books of account in accordance with generally accepted accounting practice, with trust and business transactions clearly distinguishable, and with trust money details appearing in the narrative of book entries without needing to resort to files. The court treated the appellants’ suggestion that file-cover records could substitute for proper accounting books as inconsistent with professional requirements. It regarded the description of the books as chaotic as justified on the evidence, and considered the appellants’ continued denial of that characterisation to show a lack of insight and responsibility.

The court considered the trust position that initially reflected a R12 million trust shortage and later a trust surplus to be symptomatic of defective accounting systems and an inability to determine trust liabilities accurately, reinforcing the seriousness of the accounting failures. The court did not treat the absence of a direct allegation of personal misappropriation of trust funds as dispositive. Instead, it treated the combination of prolonged non-compliance, large-scale errors, absence of proper determinations and reconciliations, and failures regarding interest payments as establishing a profound dereliction of duties designed to protect the public.

On touting and dishonesty, the court focused on the Stefprop Eiendomme invoices and the later-produced cheques that matched the invoice totals. It treated the appellants’ initial emphatic denial that any payments were made as incompatible with the documentary record subsequently placed before the court. The court concluded that the appellants had been dishonest in their affidavits and explanations, and it also considered that the posting of unexplained payments to misleading ledger categories supported an inference of intent to conceal. In this context, the court referred to the professional expectation of openness in disciplinary proceedings, citing Prokureursorde van Transvaal v Kleynhans 1995 (1) SA 839 (T) for the proposition that broad denials, evasions and obstructionism are inappropriate where the court must have full facts for a fair assessment.

The court rejected reliance on Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A) to secure acceptance of the appellants’ denials. It held that the denials were so untenable that they were correctly rejected on the papers. Having regard to the accounting failures and dishonesty, the court considered that it was unnecessary to analyse in detail the wider body of individual client and colleague complaints in order to reach a conclusion on fitness.

On the second stage of the inquiry—fitness and propriety—the court concluded that, on the facts established, the High Court was correct that the appellants were not fit and proper persons to practise. It treated dishonesty, lack of integrity, lack of openness, and lack of insight into wrongdoing as fundamentally incompatible with the standards expected of attorneys.

On the third stage—sanction—the court treated the primary purpose of the disciplinary order as protection of the public rather than punishment. It considered that the High Court had overlooked this protective function and had approached the matter as if imposing sentence by weighing aggravation and mitigation. The court also held that it was incorrect to find that the appellants fully cooperated with the investigation, given the dishonesty identified. The court drew attention to the incompatibility between a finding of unfitness and an order that in effect allows continued practice, referring to Law Society of the Cape of Good Hope v Budricks 2003 (2) SA 11 (SCA), which stated that suspending a suspension is logically inconsistent with a pronouncement that an attorney is unfit to practise.

In deciding between suspension and striking off, the court reasoned that suspension may be appropriate where there is a basis to expect that an attorney’s deficiencies can be remedied and that the public will be protected after a period of suspension. In this case, given the appellants’ dishonesty and absence of insight, the court held it was not possible to be satisfied that they would overcome these character traits within a defined time. The “logical and sensible” course, in the court’s reasoning, was that they should be prevented from practising until they could later persuade a court that they had reformed sufficiently.

The court considered post-sanction developments raised by the appellants—completion of a bookkeeping course, disbanding of their practice, and employment as professional assistants—but held that these facts did not redeem them or provide adequate protection for the public. It also declined a late request to differentiate between the appellants in the sanction, noting that the appellants had conducted their case collectively without distinction and without providing a basis for differential treatment.

Finally, the court addressed costs, noting agreement that the High Court had overlooked inclusion of the investigator’s qualifying fees (Mr L Marais) in its costs order. It also recorded that the appellants tendered costs on an attorney-and-client scale, including two counsel, irrespective of outcome.

Outcome and Relief

The Supreme Court of Appeal dismissed the appeal against the High Court’s order.

The court upheld the counter-appeal and set aside the High Court’s suspension order, replacing it with an order that the appellants’ names be struck from the roll of attorneys, and that the first and second appellants’ names be struck from the roll of conveyancers. The appellants were ordered to hand their certificates of enrolment to the registrar, failing which the deputy sheriff was authorised to attach and deliver them.

The appellants were ordered, jointly and severally, to pay the costs of the appeal and counter-appeal on the attorney-and-client scale, including the costs of two counsel. They were also ordered, jointly and severally, to pay the costs of the application (including the costs of the application on 6 August 2004) on the attorney-and-client scale, including the qualifying fees of Mr L Marais. The time period relating to attachment of certificates ran from the date of the Supreme Court of Appeal’s order.

Cases Cited

Jasat v Natal Law Society 2000 (3) SA 44 (SCA) [2000] 2 All SA 310 (SCA).

Malan v Law Society, Northern Provinces [2008] ZASCA 90; 2009 (1) SA 216 (SCA).

Botha v Law Society, Northern Provinces [2008] ZASCA 106; 2009 (1) SA 227 (SCA).

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

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

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A).

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

Incorporated Law Society, Transvaal v Visse; Incorporated Law Society, Transvaal v Viljoen 1958 (4) SA 115 (T).

Legislation Cited

Attorneys Act 53 of 1979 (including sections 22(1), 18(1), 78, and 78(3)).

Rules of Court Cited

No rule of court was expressly cited in the judgment as such; the court considered the motion-proceedings approach associated with Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A).

Held

The court held that the appellants’ established misconduct—particularly the sustained failure to keep proper accounting records in compliance with statutory and professional rules, together with dishonesty in their explanations and denials—demonstrated that they were not fit and proper persons to practise as attorneys. In respect of sanction, the court held that suspension was inadequate to protect the public given the appellants’ lack of integrity and insight, and that striking off was the appropriate protective measure.

LEGAL PRINCIPLES

The judgment applied the principle that disciplinary proceedings under section 22(1) of the Attorneys Act 53 of 1979 require a three-stage inquiry: establishing the offending conduct on a balance of probabilities; determining, in the court’s discretion, whether the practitioner is not fit and proper; and deciding whether the appropriate sanction is striking off or suspension, with the latter stages involving discretionary judgments.

It reaffirmed that attorneys are under stringent professional obligations to keep proper books of account in accordance with generally accepted accounting practice, clearly distinguishing trust and business transactions and recording trust money particulars within the accounting records themselves. Reliance on file documentation as a substitute for compliant books is inconsistent with these requirements, and an “undigested mass of figures” is not proper bookkeeping.

The judgment applied the principle that dishonesty, evasiveness, and lack of candour are fundamentally incompatible with the standards of the attorneys’ profession, and that in disciplinary proceedings respondents are expected to provide candid assistance so that the court is placed in possession of the full facts necessary for a fair evaluation.

On motion proceedings, it applied the principle that where denials are clearly untenable on the papers, they may be rejected notwithstanding general deference to respondents’ versions in affidavit disputes.

In relation to sanction, it applied the principle that the dominant purpose of disciplinary orders is protection of the public and the integrity of the profession rather than punishment. It further applied the principle that an order that effectively permits a practitioner to continue practising is incompatible with a finding of unfitness; logically, suspending a striking-off or suspension order is appropriate only where the practitioner is found fit and proper but a penalty is still warranted.

Botha v Law Society of the Northern Provinces (50/08) [2009] ZASCA 13; 2009 (3) SA 329 (SCA) [2009] 3 All SA 295 (SCA) (19 March 2009)