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[2019] ZAGPPHC 140
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Law Society of the Northern Provinces v Niehaus (4143/2000) [2019] ZAGPPHC 140 (10 May 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION, PRETORIA)
REPUBLIC OF SOUTH AFRICA
Case Number:
4143/2000
10/5/2019
DELETE
WHICHEVER IS NOT APPLICABLE
(1)
REPORTABLE:
YES
/NO
(2)
OF INTEREST TO OTHER JUDGES:
YES
/NO
(3)
REVISED
In
the matter between:
THE LAW
SOCIETY OF THE NORTHERN PROVINCES
Applicant
And
JOHANN
GEORG NIEHAUS
Respondent
JUDGMENT
JANSE
VAN NIEUWENHUIZEN J
[1]
This
is an application for the striking of the respondent’s name
from the roll of attorneys on the basis that the respondent’s
conduct fell foul of the conduct expected of a duly admitted and
practising attorney.
PARTIES
[2]
The
applicant, the Law Society of the Northern Provinces (“the Law
Society”), has been succeeded by the Legal Practitioners
Council Gauteng, which council was established in terms of the
provisions of the Legal Practice Act, 28 of 2014 (“the Act”).
In terms of the provisions of section 116(2) of the Act, all
proceedings instituted prior to the commencement of the Act,
must be
continued and concluded as if the Attorneys Act, 53 of 1979 has not
been repealed by the Act.
[3]
The
respondent is Johann Georg Niehaus who was admitted as an attorney on
27 January 1976. At the time when the application was
launched during
February 2000, the respondent was practising as a director of the
firm Slabbert, Visser and Schnetler Inc. The
respondent was suspended
from practice in terms of an order of this court on 25 May 2001. When
this application was heard on 14
February 2019, the respondent had
not been practising for a period of approximately 18 years.
INTRODUCTION
[4]
The
complaints
in
casu
occurred
as long ago as 1998 and 1999. The delay in the finalisation of the
application was, in the main, caused by criminal charges
of theft and
fraud the respondent faced in the Regional Court of Gauteng. The
charges related to the respondent’s conduct
in his practice as
an attorney. On 14 September 2016, the respondent was found guilty on
15 counts of fraud and 13 counts of theft.
[5]
The
respondent, who was 68 years at the time, was sentenced to 15 years’
imprisonment wholly suspended for five years on condition
that the
respondent was not found guilty of fraud and theft during the
aforesaid period.
LEGAL
FRAMEWORK
[6]
First
and foremost, this application is an inquiry into the respondent’s
fitness to hold office of an attorney. The inquiry
is
sui
generis
and
distinct from criminal proceedings. The inquiry involves three
stages, namely:
[6.1]
a factual inquiry into the alleged conduct of the respondent;
[6.2]
should the conduct be established beyond reasonable doubt, the court
should determine whether the
respondent is a fit and proper person to
continue practising as an attorney;
[6.3]
once it is found that the respondent is not fit and proper to
continue practising as an attorney,
the court must consider an
appropriate sanction to be imposed. [
Jasat v Natal Law Society
2000 (3) SA 44
(SCA).]
[7]
The
conviction in the criminal proceedings is as a result, only a factor
to be considered in the inquiry and not the basis of the
inquiry.
Factual
inquiry
[8]
The
facts underlying the alleged offensive conduct of the respondent are
not in dispute. The respondent, however, denies that the
facts amount
to dishonourable conduct. In order to establish whether the common
cause facts impact on the respondent’s fitness
to practice as
an attorney, a short summary of the facts will suffice.
[9]
The
respondent formed a close bond with a certain Mr Agrela of Hersch
International Consultants (Pty) Ltd. Mr Agrela became the
largest
client of the respondent’s firm and shared offices with the
firm. Mr Agrela was the mastermind of a fraudulent scheme
in which
large amounts of money were purportedly advanced to prospective
lenders.
[10]
The
respondent’s involvement in the scheme, pertained to monies
paid into the respondent’s trust account for purposes
of costs
associated with the obtaining of offshore finance and interim loans
from Hersch, represented by Agrela. The monies never
eventuated and
upon cancellation of the loan agreements by the prospective lenders,
the respondent failed to return the monies
he held in trust on behalf
of the lenders.
[11]
The
following summary of complaints appear from the heads of argument
filed by Mr Groome, on behalf of the Law Society:
“
(a)
Marthinus
Johannes Crous
Mr Crous applied for a
loan from Hersch on behalf of Unique Welding Alloys CC. Mr Agrela
informed him that the loan was approved,
but he had to pay an amount
of R21 000 into the respondent’s trust account to provide
for administration fees, the drafting
of the contract and stamp
duties of R9 000. The loan never paid out and the respondent
failed to return the amount of R21 000
to him.
The respondent says that
he had prepared a loan agreement with bond documents, but does not
annex an invoice and makes no mention
of paying stamp duties.
According to him, the deposit was received for the credit of Hersch
and he advised Mr Crous to collect
his money from Hersch if he had a
claim thereto.
(b)
Barend Jacobus Jordaan Burger
:
Mr Burger paid an amount
of R75 000 into the respondent’s trust account on behalf
of Pro-Soya (Pty) Ltd. Hersch informed
the company that a loan of
US$21 million was approved, but an amount of R75 000 had to be
paid in advance for administration
fees, the drafting of the contract
and stamp duties of R63 000. The loan never paid out and the
respondent failed to return
Mr Burger’s funds to him.
The respondent’s
reply is similar to the matter of Crous. He says that a loan
agreement and bond documents were prepared,
but again annexes no
invoice and makes no mention of paying stamp duties. According to
him, the deposit was received for the credit
of Hersch, and a company
called Protein Extraction would attend to the repayment of the
deposit to Mr Burger.
(c)
Leslie J Marx
:
Mr Marx paid an amount
of R21 000 into the respondent’s trust account on behalf
of Randburg Executives CC. The corporation
had applied for a loan
from Hersch, but an amount of R6 000 had to be paid in advance
for costs and R15 000 for stamp
duties. The contract was never
signed and when he decided to withdraw from negotiations, the
respondent failed to return the amount
of R21 000 to him.
The respondent’s
answer is similar to the other matters. The deposit was received for
credit of Hersch, but there is no invoice
annexed and it does not
appear from the papers that stamp duties were actually paid.
(d)
Leon Toolpart
:
The respondent
misrepresented to Mr Badenhorst, the managing director of a business
called Leon Toolpart, that one of its debtors,
Pro Industries (Pty)
Ltd, had obtained a loan from Hersch in the amount of R600 000.
As a result of the misrepresentation,
Leon Toolpart continued to
supply goods to the debtor on credit. The loan never paid out and the
debtor was eventually liquidated.
The respondent admits
that he signed a payment guarantee on behalf of Hersch, dated 24 July
1998, that was payable upon registration
of a mortgage bond.
By October 1999, when
IDSEO attached the respondent’s files, the bond had still not
been registered.
(e)
Riccardo Rosser Valente
:
Mr Valente applied for a
loan from Hersch on behalf of his company, Erf 332 Chloorkop (Pty)
Ltd. He paid two amounts of R303 361.67
and R45 000 into
the respondent’s trust account to provide for the costs
associated with the loan. As with the other
complaints, the loan
never materialised and the respondent failed to repay the deposits
from his trust account.
The payments were made
on the basis of two pro forma invoices drawn up by the respondent.
The Law Society’s
inspector, Mr Swart, determined that there were no debits raised in
the respondent’s accounting records
for fees or stamp duties.
The amounts were simply credited to Hersch and paid out in seemingly
unrelated transactions.
According to the
respondent, the funds had already been paid to Hersch when the
agreement was terminated, and he tried in vain to
get a refund from
Mr Agrela.
(f)
TK Blaise
:
Mr Blaise paid an amount
of R105 000 into the respondent’s trust account to provide
for the costs associated with a loan
from Hersch. The loan never paid
out and the respondent failed to return the deposit.
According to the
respondent, the deposit was received for credit of Hersch and was
refunded by Hersch to a certain Mr Bezuidenhout,
presumably after the
respondent had paid the funds out to Hersch.
(g)
The Gilson Family Trust
:
The trust lost an amount
of R30 000 that was paid into the respondent’s trust
account to provide for costs associated
with a loan from Hersch.
The respondent says that
the deposit was received for the credit of Hersch.
(h)
AT Moodley & Associates
:
AT Moodley &
Associates lodged a complaint with the Law Society on behalf of their
client, who lost an amount of R12 500
that was paid into the
respondent’s trust account to obtain a loan from Hersch.
(i)
Tim
Du Toit & Kie Incorporated
:
Tim Du Toit Inc lodged a
complaint with the Law Society on behalf of Duwill Properties CC, who
lost an amount of R270 000 that
was paid into the respondent’s
trust account to obtain a loan from Hersch.
It appears from
annexures to the complaint that the respondent signed a ‘Joint
Venture Profit Sharing Agreement’ as
‘agent’ and
indemnified the investors against loss of the deposit if no bond is
issued.
According to the
respondent, a bond was indeed issued. However, he relies on hearsay
evidence and does not attach a copy of the
bond to his papers.
(j)
Klagsbrun De Vries Attorneys
:
Klagsbrun De Vries
lodged a complaint with the Law Society on behalf of Mr JW Wallace,
who paid two amounts of R270 000 and
R155 000 into the
respondent’s trust account. When Mr Wallace withdrew from
negotiations with Hersch, the respondent
failed to return the funds.
Mr Wallace signed a
written mandate that appointed the respondent to act as an attorney
on his behalf.
The
respondent admits that the amounts were paid, but says that he
received the deposits for the credit of Hersch.
”
[12]
The
respondent’s insistence that the monies he received in trust
from lenders were for the credit of Hersch, is not borne
out by the
facts
supra
.
The respondent did not provide one shred of evidence, be it an
allegation of an oral or written mandate from the depositor/client,
to support his version of events.
[13]
It
is trite that monies held on trust by an attorney on behalf of the
depositor/client remains the money of the depositor/client.
An
attorney, in terms of the applicable rules and regulations pertaining
to his/her profession, must keep proper record of each
and every
amount so received and of each and every debit raised against the
money held in trust.
[14]
In
the present instance, the monies were paid into the respondent’s
trust account by the lenders for a specific purpose, i.e.
the
drafting of loan agreements and the payment of stamp duties.
[15]
Save
for the rules and regulations pertaining to an attorney’s trust
account, the mere receipt of money in “
trust”
implies
a fiduciary duty towards the depositor/client to properly, accurately
and honestly deal with the money on instructions of
the depositor.
The respondent failed to account to the trust creditors in respect of
each and every transaction debited against
the monies he held in
trust on their behalf. The respondent failed to return the
depositor/client’s money on request. This
does not only amount
to misappropriation of trust funds but also to theft.
[16]
The
respondent, who represented himself at the hearing of this
application and upon a question from the court as to why the
prospective
lenders did not pay the amounts directly to Hersch, if
the money was in actual fact due to Hersch, could not provide a
coherent
or satisfactory answer.
[17]
Upon
further questions raised by the court, the respondent intimated that
in “
hindsight”
his
conduct might not have been of the standard expected of an attorney.
The respondent, however, steadfastly denied that he intended
to
defraud the depositors.
[18]
As
alluded to
supra
,
in these proceedings the respondent’s intention is of little or
no consequence. The respondent as an admitted attorney was
at all
relevant times bound by the rules and regulations pertaining to his
profession. The respondent’s conduct amounts to
at least the
misappropriation of trust monies, which, without a doubt, is one of
the most serious transgressions an attorney could
be found guilty of.
[19]
A
further complaint pertains to guarantees the respondent issued on
behalf of ABSA, without being mandated to do so. The respondent
acted
on behalf of ABSA in property transactions and had a written mandate
to issue guarantees on behalf of ABSA up to a certain
amount.
[20]
During
February 1998, it came to ABSA’s attention that the respondent
had issued guarantees on behalf of ABSA without being
mandated to do
so. The guarantees were irregularly issued and suffered the following
defects:
[20.1]
there were no property transactions in terms of which the guarantees
could be issued;
[20.2]
the guarantees were issued for amounts substantial larger than the
amounts authorised by ABSA;
[20.3]
the guarantees did not have a bank account number and were undated;
[20.4]
some of the guarantees were signed by Agrela.
[21]
The
irregular and unauthorised conduct of the respondent was discovered
when one of the guarantees was presented at a Durban branch
of NBS
Bank for payment.
[22]
According
to the respondent, an ABSA employee was present during a meeting in
his offices with Agrela. The bank official confirmed
orally that the
guarantees may be issued. This explanation emanating from an
experienced attorney who had been issuing guarantees
on behalf of
ABSA for a substantial amount of time and had intimate knowledge of
ABSA’s business practice, defies all logic.
[23]
Confronted
with the aforesaid dilemma, the respondent stated that in “
hindsight”
he
should not have trusted the mere say so of Agrela and the bank
official. The fact of the matter is that the respondent acted
outside
the scope of his written mandate received from ABSA in circumstances
that is unacceptable and unbecoming of an honest and
diligent
attorney.
[24]
In
the premises, I am satisfied that the facts in support of the
complaints against the respondent have been established on a balance
of probabilities.
Fit and
proper
[25]
The
second stage of the inquiry involves a value judgment, which in turn
involves the weighing up of the unprofessional and improper
conduct
of the respondent against the conduct expected of an attorney.
[26]
The
conduct expected of an attorney was succinctly summarised by
Eksteen JA in
Vassen
v Law Society of the Cape of Good Hope
[1998] ZASCA 47
;
1998
(4) SA 532
(SCA) at page
537F-G
of the judgment:
“
In
this regard it must be borne in mind that the profession of an
attorney, as of any other officer of the Court, is an honourable
profession which demands complete honesty, reliability and integrity
from its members; and it is the duty of the respondent Society
to
ensure, as far as it is able, that its members measure up to the high
standards demanded of them. A client who entrusts his
affairs to an
attorney must be able to rest assured that that attorney is an
honourable man who can be trusted to manage his affairs
meticulously
and honestly. When money is entrusted to an attorney or when money
comes to an attorney to be held in trust, the general
public is
entitled to expect that that money will not be used for any other
purpose than that for which it is being held, and that
it will be
available to be paid to the persons on whose behalf it is held
whenever it is required. Here once again the respondent
Society has
been created to ensure that the reputation of this honourable
profession is upheld by all its members so that all members
of the
public may continue to have every confidence and trust in the
profession as a whole.
”
[27]
The
respondent’s conduct does not only fall dismally short of the
high standard of conduct expected of an attorney, but also
led to him
being found guilty of fraud and theft. Both charges contain an
element of dishonesty. An attorney who has been convicted
of
dishonest conduct in his dealings with his clients, could never be
found to be a fit and proper person to continue in his practice.
[28]
In
the premises, I am satisfied that the conduct of the respondent
renders him unfit to continue to practice as an attorney of this
court.
Sanction
[29]
The
respondent pleaded with this court not to strike his name from the
roll of attorneys. The respondent submitted that he had already
suffered severely as a result of his conduct. He has lost his house,
his family is in financial dire straits and he was subjected
to a
criminal trial that lasted almost eight years. He has nothing left.
[30]
The
main aim of imposing an appropriate sanction, is, however, not to
penalise the attorney in question, but to protect the public
from
unscrupulous attorneys. The fact that the respondent will in all
probability not practise as an attorney in future is cold
comfort to
the complainants who lost large sums of money due to respondent’s
conduct.
[31]
As
long as the respondent’s name is reflected on the roll of
attorneys, he remains a potential danger to the public at large.
The
court can simply not countenance the respondent’s conduct by
allowing him to remain in the honourable profession of an
attorney.
To do so, would make a mockery of the very essence of the profession,
namely honesty and integrity.
[32]
The
court would be neglecting its duty towards the profession and the
public, if the respondent is allowed to continue in his practice
as
an attorney.
ORDER
[33]
In
the premises, I propose the following order:
1.
The
name of
JOHANN
GEORG NIEHAUS
(the Respondent) is hereby struck from the roll of attorneys of this
Court.
2.
Paragraphs
2 to 11 of the court order, dated 25 May 2001, remain in full force
and effect.
3.
The
respondent is ordered to pay the costs of the application, including
the costs previously reserved on 20 March 2006, 1 October
2007 and 17
April 2009, on the scale as between attorney and client.
N. JANSE
VAN NIEUWENHUIZEN
JUDGE OF
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
I agree and
it is so ordered.
T.M.
MAUMELA
JUDGE OF
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
DATE
HEARD
14
February 2019
JUDGMENT
DELIVERED
March
2019
APPEARANCES
Counsel
for the Applicant:
Mr.
L Groome
(012
452 4024)
Instructed
by:
Rooth
& Wessels Inc
(012 452
4000)
Ref:
A BLOEM/rd/MAT31650
Appearance
for the Respondent:
Mr
J.G. Niehaus (In person)