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[2017] ZASCA 69
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Wilkinson v Law Society of the Northern Provinces (783/2016) [2017] ZASCA 69 (31 May 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not reportable
Case
No: 783/2016
In
the matter between:
JOSEPH
JOSHUA WILKINSON
APPELLANT
and
THE
LAW SOCIETY OF THE NORTHERN PROVINCES
RESPONDENT
Neutral
Citation:
Wilkinson
v The Law Society of the Northern Provinces
(783/2016)
[2017] ZASCA 69
(31 May 2017)
Coram:
Lewis, Wallis, Saldulker and Zondi
JJA and Coppin AJA
Heard:
12 May 2017
Delivered:
31 May 2017
Summary:
Striking off is an
appropriate sanction for an attorney guilty of misappropriation of
trust moneys and failure to account for funds
entrusted to him: No
reason to interfere with the exercise of discretion.
ORDER
On
appeal from
Gauteng
Division, Pretoria, of the High Court (Makgoka J and Phatudi AJ
sitting as court of first instance):
The
appeal is dismissed with costs and such costs to be taxed on the
scale of attorney and client.
JUDGMENT
Zondi JA (Lewis,
Wallis and Saldulker JJA and Coppin AJA concurring):
[1]
The issue in this appeal is whether the Gauteng Division, Pretoria,
of the High Court (Makgoka J, Phatudi AJ concurring) exercised
its
discretion judicially when it ordered that the appellant’s name
be struck off the roll of attorneys and conveyancers.
It determined
that the appellant had contravened certain rules of the respondent
(the Law Society) relating to the proper keeping
of a trust account
by an attorney, and the duty of an attorney to account to a client
within a reasonable time after the conclusion
of a mandate.
[2]
The issue must be considered against the following factual
background. The appellant is an admitted attorney and conveyancer
practising as such in Pretoria and is a member of the Law Society. He
was admitted as an attorney in 1998 and at the time of the
occurrence
of the events giving rise to these proceedings, he had been
practising on his own account since 2011.
[3]
The Law Society on 20 June 2014 instituted motion proceedings in the
Gauteng Division, Pretoria, of the High Court (to which
I shall, for
convenience refer as the high court) against the appellant, seeking
an order, among others, that his name be removed
from the roll of
attorneys and conveyancers. This was based on two complaints: one of
misappropriation of trust funds and the other
related to the
appellant’s failure to account to his client in contravention
of Rule 68 of the Law Society Rules. Those proceedings
were brought
in terms of s 22(1)(d) of the Attorneys Act 53 of 1979, which
provides that any person who has been admitted and enrolled
as an
attorney may, on application by the Law Society concerned be struck
off the roll or suspended from practice by the court,
if that person,
in the discretion of the court, is not a fit and proper person to
continue to practise as an attorney. As alluded
to above, the high
court determined that the respondent had transgressed the relevant
rules of the Law Society. In the exercise
of its discretion the high
court determined that the respondent was not fit and proper to
continue to practise as an attorney and
a conveyancer. It accordingly
ordered that his name be struck off the roll of attorneys and
conveyancers. The high court granted
further ancillary orders
relating to the appointment of a curator bonis to take control of the
appellant’s accounting records,
files and documents, and to
administer the appellant’s trust account. The appeal is against
that judgment with special leave
of this court.
[4]
It is now settled that an application for the removal from the roll,
or suspension from practice, of an attorney involves a
three-stage
enquiry. (See
Malan
& another v Law Society Northern Province
[2008] ZASCA 90
;
2009
(1) SA 216
(SCA) para 4.) First, the court has to determine whether
the alleged offending conduct has been established on a balance of
probabilities.
It is a factual enquiry. Second, consideration must be
given to the question whether, in the discretion of the court, the
person
concerned is not ‘a fit and proper person to continue to
practice as an attorney’. This involves a weighing up of the
conduct complained of against the conduct expected of an attorney and
is a value judgment. Third, the court is required to consider
whether, in light of all the circumstances, the name of the attorney
concerned should be removed from the roll of attorneys or
whether an
order suspending him or her from practice would suffice. (See
Summerley v Law
Society, Northern Provinces
2006
(5) SA 613
(SCA) para 2 and the cases there cited.)
[5]
The facts underlying the first leg of the enquiry, namely the
offending conduct, are briefly the following. The National Department
of Rural Development and Land Reform (the department) lodged a
complaint with the Law Society against the appellant alleging that
the appellant had failed to account to it in respect of funds it had
entrusted to him. Pursuant to the complaint, the Law Society
wrote to
the appellant seeking a response from him, but the appellant
neglected to answer its correspondence. In consequence the
Law
Society, on 12 November 2013, summoned the appellant to appear before
its Investigating Committee on 28 November 2013. At the
conclusion of
the investigation, the Committee resolved on 18 December 2013 that
charges be brought against the appellant. Following
upon the
department’s complaint, the Law Society had instructed its
auditor, Mr Swart, to inspect the appellant’s accounting
records and to report on any aspects considered irregular or
unsatisfactory and any contravention by the appellant of the
provisions
of the Act and its Rules. This was done and on 6 May 2014
Swart furnished the Law Society with a report disclosing shortfalls
in
the trust account, an absence of proper accounting records and a
number of contraventions of the Law Society’s rules concerning
the maintenance of proper accounting records.
[6]
The department’s complaint against the appellant was that,
pursuant to a sale agreement it concluded with Willbo Investments
4
(Pty) Ltd (Willbo) for the purchase of land in respect of which a
claim had been lodged by a certain community in terms of the
Restitution of Land Rights Act 22 of 1994
, it paid R28.8 million into
the trust account of the appellant. The appellant was appointed by
Willbo to attend to the transfer
of the land from Willbo to the
department. In terms of the sale agreement, the department instructed
the appellant to invest the
funds into a separate bank account in
terms of s 78(2A) of the Act (the section 78(2A) investment) pending
registration of the
transfer of the property with the interest
thereon to be credited to the department. After transfer of the
property, the department
wrote to the appellant requesting an account
for the interest accrued on the deposit and details of when and where
it had been
paid to the department. The appellant failed to furnish
the required information to the department.
[7]
Swart stated in his report that he inspected the appellant’s
accounting records on three occasions. He confined his inspection
to
the period 1 March 2012 to 14 October 2013. His report revealed that
the trust balances of the firm’s trust clients were
not kept up
to date and reconciled monthly. It further stated that, as at 14
October 2013, the trust account of the appellant had
a shortage of
R10 561 599,37 in contravention of s 78(1) of the Act read with
the relevant rule of the Law Society Rules,
which requires the firm
to ensure that no account of any trust creditor is in debit.
[8]
As regards the department’s complaint the appellant alleged
that he had an agreement with the department’s Chief
Director,
Mr Bogatsu, to keep the interest earned on the funds he invested on
the department’s behalf, as security for the
payment of his
fees for work he claimed to have performed on its behalf. In support
of the allegation that he had such agreement
the appellant sought to
rely on a transcript of the conversation he secretly recorded in a
meeting he had with an employee of the
department, Ms Kgomotso
Sefalo. The appellant also produced a pro forma account detailing his
fees and disbursements in the amount
of R954 735.26, which he
alleged the department owed him for the work he performed pursuant to
the agreement.
[9]
As regards the trust account deficit, the appellant admitted that
there was a shortage, but denied that it was to the extent
suggested
by the Law Society. He contended that the deficit was about R30 000
which he alleged he had since rectified. In
support of this
contention, the appellant relied on a report compiled by Mr Wium, an
auditor he appointed to report on the status
of his firm’s
accounting records. In that report Wium stated that the unaudited
reconstructed Winlaw trial balance indicated
a shortage of
R30 143.35. The appellant conceded that his trust accounting
records were in a state of disarray, but blamed
it on his erstwhile
bookkeeper, Ms Nel, whom he alleged had deleted all the electronic
files containing the financial records,
and on two lightning strikes
of 13 November and 5 December 2013 which corrupted electronic files
containing his accounting records.
[10]
In its judgment the high court found that the appellant had failed to
account to the department for the interest on the money
entrusted to
him for investment and that the appellant’s allegation that
there existed an agreement between him and the department
in terms of
which he could set off his fees against the interest earned, was
unsubstantiated. Finally it held that there was a
shortage in the
appellant’s trust account at all times during the period under
consideration.
[11]
The findings of the high court cannot be faulted. They are based on
facts which were either common cause or were not seriously
disputed
by the appellant.
[1]
As
far as the department’s complaint is concerned, the allegation
that the appellant failed to account for the interest on
the deposit
that should have been placed in an interest bearing account for its
benefit was undisputed. Had the appellant invested
the money in a
separate trust account as instructed by the department, he would have
been able to provide proof of such investment
by showing a bank
statement confirming the investment of the funds concerned. This the
appellant failed to do. He could not in
any event have invested the
funds because the accounting records inspected by Swart revealed that
the appellant dissipated a substantial
portion of the funds. Within
two weeks he withdrew R10 million for his own benefit and before
transfer of the property he paid
R10 million to one of the directors
of Willbo from the total amount of R28.8 million. The appellant
alleged in his answering affidavit
that the latter payment made prior
to transfer was authorised by the seller and Bogatsu on behalf of the
department. But he does
not provide proof of such authority. He also
contends that no one suffered any loss as the interest payable to the
department was
calculated as if the money had been invested. However,
the appellant fails to state the amount of interest and he has never
produced
a calculation showing the interest that accrued to the
department. In these circumstances, the conclusion is ineluctable
that the
appellant did not invest the department’s funds nor
did he reimburse it for the interest that it lost.
[12]
The appellant’s suggestion that he was entitled to retain the
interest earned on the funds entrusted to him as fees for
the work he
alleged he had performed in terms of the agreement between him and
the department, does not bear scrutiny. In the first
place, in
relation to the transaction in issue, he acted for the seller not the
department, and therefore he could not have expected
the department
to pay him. The transcript of the conversation the appellant
surreptitiously recorded in the meeting with Ms Sefalo
belies his
claim that he had an agreement with Bogatsu to retain the interest
earned on the R28.8 million to cover his fees. The
transcript shows
that Ms Sefalo asked him about payment of the interest on more than
one occasion during the meeting. She also
made it clear that it was
for him as the attorney to invest the money and to account for the
interest. Secondly, the appellant
failed to produce a letter, to
which he referred during his conversation with Ms Sefalo, confirming
the details of the agreement
he allegedly concluded with Bogatsu.
Thirdly, the conversation made it clear that he was talking about the
fees his client, Willbo,
had refused to pay for attending to the
transfer of the property, but the pro forma bill of costs that he
produced after the Law
Society commenced these proceedings was for
entirely different costs. The pro forma bill of costs on which the
appellant relied
to establish that he did some work for the
department, did not support his claim. He noted in that bill of costs
that his first
consultation with the department was on 20 October
2011. This could not be correct, because the sale agreement in terms
of which
he was instructed to invest R28.8 million on behalf of the
department was concluded during March 2012. It is apparent from these
facts that the alleged agreement on which the appellant seeks to rely
to justify his retention of the interest accrued on R28.8
million
does not exist and is contrived.
[13]
This conclusion is borne out by the fact that when the department on
26 November 2012 asked him to account for the interest
he never
suggested that he had a right to retain it. In fact, his reply to the
department left it with a question. By letter dated
28 November 2012
he informed the department as follows:
‘
.
. .
2.
The interest on the 90% deposit purchase price can be calculated
easily by yourselves with regards to the date of payment to
our trust
account and to the date of registration. The percentage of interest
is stipulated in the Deed of Sale for your easy reference.
3.
With regards to the payment of the interest to yourselves, we refer
you to Mr
Bogatsu for the terms and the conditions between the
parties.’
[14]
The fact that the appellant’s trust account had a deficit is
not disputed. As I mentioned earlier, what is disputed is
the extent
of that deficit. Swart alleged that the deficit was over R10 million.
The appellant rejects Swart’s report as
unreliable on the
ground that it is based on insufficient information. He says that
Wium’s report must be accepted as reliable.
In my view, one
cannot place any reliance on Wium’s report. It is qualified.
Wium concluded in his report that due to the
lack of internal
controls in the appellant’s accounting system, and insufficient
accounting records having been made available
to him, he was unable
to express an opinion on whether the appellant’s trust accounts
for the year ended 28 February 2014
were maintained, in all material
respects, in compliance with the Attorneys Act and the Rules. In the
circumstances Wium’s
report does not take the appellant’s
case any further and does not provide a basis on which Swart’s
findings can be
rejected. Therefore, Swart’s conclusion, that
the deficit in the appellant’s trust account was over R10
million at
the relevant time, remains undisputed and must accordingly
stand.
[15]
In light of all the transgressions the appellant was found to have
committed, the high court concluded, correctly in my view,
in
relation to the second leg of the enquiry that he was no longer a fit
and proper person to practise as an attorney and conveyancer
of the
court. But this is not the end of the matter, because the next
question, which is part of the third leg of the enquiry,
is whether
the appellant’s transgressions were such that they should be
visited with an order striking his name off the roll,
or whether he
should be suspended from practice. This court held in
Jasat
v Natal Law Society
2000
(3) SA 44
(SCA) para 10 that the appropriate order will ‘depend
upon such factors as the nature of the conduct complained of, the
extent
to which it reflects upon the person’s character or
shows him to be unworthy to remain in the ranks of an honourable
profession
. . . the likelihood or otherwise of a repetition of such
conduct and the nature and the need to protect the public.’
[16]
In
the
Law Society of the Northern Provinces v Mabaso
(20252/14)
[2015] ZASCA 109
(21 August 2015) para 14 this court held, with
reference to
Vassen
v Law Society of the Cape of Good Hope
[1998] ZASCA 47
;
1998
(4) SA 532
(SCA) at 537F-G, that in exercising its function in
respect of the third enquiry, namely, considering what sanction
should be visited
on the person, the court is called upon to exercise
a strict discretion which means that this court, on appeal has a
limited power.
It can only interfere if the discretion was not
exercised judicially. In other words, this court can only intervene
where the high
court is found to have exercised its discretion
capriciously, or upon a wrong principle or where it has not brought
its unbiased
mind to bear on the question.
[2]
[17]
In arriving at the sanction ultimately imposed, namely the striking
off, the high court took account of the fact that the appellant’s
transgressions were very serious and their seriousness was
exacerbated by his apparent lack of insight into the seriousness of
his shortcomings, and the fact that he did not take the court into
his confidence.
[18]
It was submitted on behalf of the appellant that in the absence of a
finding of dishonesty on the part of the appellant, the
high court
should not have ordered his striking off, but should have ordered
that he be suspended from practice. The appellant
relied on
Summerley
for this proposition. In
Summerley
(para 21) the following
was said regarding the absence of dishonesty and its effect on the
penalty to be imposed:
‘
The
further argument on behalf of the appellant was that, as a general
rule, striking-off is reserved for attorneys who have
acted dishonestly,
while transgressions not involving dishonesty
are usually visited with the lesser penalty of suspension from
practice. Although
this can obviously not be regarded as a rule
of the Medes and the Persians, since every case must ultimately be
decided on its
own facts, the general approach contended for by the
appellant does appear to be supported by authority... This
distinction is
not difficult to understand. The attorney's profession
is an honourable profession, which demands complete honesty and
integrity
from its members. In consequence dishonesty is generally
regarded as excluding the lesser stricture of suspension from
practice,
while the same can usually not be said of contraventions of
a different kind.’
But
this court made it clear in
Malan
,
(para 10) that where dishonesty has not been established a court has
to exercise a discretion within the parameters of the facts
of the
case without any proclaimed limitations.
[19]
In
Summerley
this
court ordered a suspension from practice rather than striking-off.
There the appellant had fully explained the reasons for
the shortfall
in the trust account concerned. In the present case the appellant
proffered a far-fetched explanation for his failure
to pay to the
department the interest accrued on the funds it had instructed him to
invest on its behalf. He relied on a contrived
agreement to justify
his omission. It is apparent from the conversation that the appellant
had with Ms Sefalo, which the appellant
secretly recorded, that at
the time he was more worried about a Law Society investigation and
the effect it probably would have
on his reputation should it
proceed. For this reason he did not want to come clean. As regards
the deficit in his trust account,
again the appellant sought to
defend it by advancing defences that were clearly untruthful.
[20]
He attacked the findings in Swart’s report on the ground that
they were based on insufficient information. But the attack
is
without any basis, if regard is had to the fact that the appellant’s
own auditor found that there was a shortage in the
appellant’s
trust accounts. Secondly, the suggestion that some of the firm’s
accounting records were corrupted when
the computer in which they
were stored, was struck by lightning in November and December 2013,
cannot be correct if proper regard
is had to the following facts.
Swart’s inspection which was carried out in March/April 2014
was confined to the period 1
March 2012 to 14 October 2013. In his
report Swart stated that as at 14 October 2013 the shortage in the
appellant’s trust
account was R10 561 599.37. This
means that the shortage in the appellant’s trust account was
already in existence
when the alleged lightning strikes occurred.
Swart’s report contains no mention of any difficulty with the
accounting records
occasioned by a lightning strike. It is therefore
clear that the appellant’s explanations for failing properly to
keep his
accounting records, were untruthful. This conduct, in
itself, is wholly inconsistent with the appellant’s duties as
an officer
of the court, which demand complete honesty and integrity.
[21]
In any event the premise underpinning this argument is fallacious.
While the high court made no express finding of dishonesty,
the
actions of the appellant in taking R20 million from the funds that he
was obliged to invest in a s 78(2A) trust account for
the benefit of
the department can only be characterised as theft of trust money. No
lawful justification has been proffered for
taking this money. The
appellant was clearly guilty of dishonesty.
[22]
It follows therefore that the high court did not misdirect itself in
the exercise of its discretion when it ordered the striking
off of
the appellant’s name from the roll of attorneys and
conveyancers.
[23]
In the result the following order is made:
The
appeal is dismissed with costs and such costs to be taxed on the
scale of attorney and client.
________________
D
H Zondi
Judge
of Appeal
Appearances
For
the Appellant:
A J Murphy (with him J A
Klopper)
Instructed
by:
Spies
Bester Potgieter Attorneys, Pretoria
Symington
& De Kock Attorneys, Bloemfontein
For the Respondent:
C Tshavhungwa (with him Ms S L Magardie)
Instructed by:
Damons
Magardie Richardson Attorneys, Pretoria
Phatshoane
Henney Attorneys, Bloemfontein
[1]
Malan
and another v Law Society of the Northern Provinces
[2008]
ZASCA 90
,
2009 (1) SA 216
(SCA) para 12.
[2]
Malan
para 13.