About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Kwazulu-Natal High Court, Pietermaritzburg
SAFLII
>>
Databases
>>
South Africa: Kwazulu-Natal High Court, Pietermaritzburg
>>
2018
>>
[2018] ZAKZPHC 67
|
|
KwaZulu-Natal Law Society v Moodley and Another (6399 /2018) [2018] ZAKZPHC 67 (26 November 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
CASE
NO: 6399 /2018
In
the matter between:
KWAZULU-NATAL
LAW SOCIETY
Applicant
and
KRISHNAN
MOODLEY
First Respondent
NEDBANK
LIMITED
Second
Respondent
Coram: Koen et Ploos van Amstel JJ
Heard: 21 November 2018
Delivered: 26 November 2018
O R D E R
1. Paragraph 1.1 of the Notice of
Motion is amended by the insertion of the words ‘and
conveyancers’ after the word
‘attorneys’.
2.
An order is granted in terms of paragraphs 1.1 (as amended) to 1.13
inclusive of the Notice of Motion.
3.
The Registrar of this Honourable Court is directed to transmit a copy
of the papers in this application to the Director of Public
Prosecutions for a decision as to whether any criminal proceedings
should be instituted against the first respondent.
J
U D G M E N T
Koen
J (Ploos van Amstel J concurring)
[1]
This is an application to strike the name of the first respondent
from the roll of attorneys and conveyancers.
[2]
The first respondent was admitted as an attorney on 12 June 1989 and
as a conveyancer on 2 March 2009.
[3]
The approach to be adopted in applications of this nature has been
stated authoritatively in
Jasat v Natal Law Society
2000 (3)
SA 44
(SCA) at page 51B. Although that judgment specifically dealt
with a court exercising its discretionary jurisdiction in terms of
s
22 of the Attorneys Act No. 53 of 1979, there is no reason to suggest
that the approach should be different where the High Court
is
approached for an order striking an attorney’s name from the
roll as contemplated in
s 40(3)
of the
Legal Practice Act No. 28 of
2014
. In
Jasat
the following was said:
‘
Ultimately,
therefore, what is contemplated is a three-staged enquiry. First, the
Court must decide whether the alleged offending
conduct has been
established on a preponderance of probabilities…The second
enquiry is whether … the person concerned
‘in the
discretion of the Court’ is not a fit and proper person to
continue to practise…The third enquiry is
whether in all these
circumstances the person in question is to be removed from the roll
of attorneys or whether an order suspending
him from practice for a
specified period will suffice.’
[4]
The first enquiry is not controversial in this application. Indeed
the facts on which the application is based are largely common
cause.
[5]
The applicant’s decision to approach this court for the relief
it seeks is founded on:
(a)
A complaint received from Amod Sadek Kareem and his wife Sardia Bibi
Kareem (‘the Kareems’) relating to the first
respondent’s
conduct in the handling of a conveyancing transaction; and
(b)
The results of an investigation which was conducted by an inspection
committee appointed by the applicant consisting of Mr T
K Pearce and
Mr V Badri following upon the complaint of the Kareems, from which it
appeared that the first respondent did not maintain
proper books of
account and
prima facie
misappropriated trust money.
[6]
As regards the former, the facts briefly are that the first
respondent was instructed to attend to the conveyancing
when the Kareems sold
their immovable property for the sum of R1 020 000.00. The
transfer of ownership of that property
into the name of the purchaser
was registered in the Deeds Registry on 30 January 2017. In the
ordinary course, the net proceeds
were required to be paid to the
Kareems on that date. The first respondent however failed to pay the
purchase price upon transfer
and only paid R300 000.00 on 10
February 2017 and R671 210.00 on 7 July 2017. At the time the
complaint was made, the
Kareems still had not received their full
purchase price. The first respondent also did not deposit the money
into an interest
bearing account.
[7]
The first respondent’s version is that he intended to obtain a
loan from one Caroline Chetty for R500 000.00. Confident
that
this loan would be advanced to him he used the Kareems’ moneys
that were in his trust account. Contrary to his expectation
the loan
from Chetty however did not materialise.
[8]
He subsequently obtained a loan from proceeds raised by his wife
against an access mortgage bond on their private home, for
which she
would be responsible, apparently for an amount of R700 000.00.
This amount was deposited into his trust account
on 27 July 2017 to
repay what he described as ‘unauthorised loans’ he had
taken from his trust account.
[9]
Specifically in regard to the Kareems’ complaint the first
respondent contends that the surrounding circumstances at the
time
that the complaint was lodged by the Kareems together with his
efforts to remedy the situation, by applying the proceeds raised
from
the loan by his wife, would render a sanction, less than a striking
off, appropriate. He submits that the use of the Kareems’
money
was an error of judgment on his part, not intended to permanently
deprive the complainants of their moneys. He argues that
he had not
prejudiced the complainants for a long period, and that he very
quickly remedied the situation and re-established himself
as a
genuine, complete and permanently reformed attorney (
Swartzberg
v Law Society of the Northern Provinces
[2008] ZASCA 36
;
[2008]
3 All SA 438
(SCA);
2008
(5) SA 322
(SCA)
). It
was contended on his behalf that this lapse of judgment occasioned by
his desperation should not be regarded as a defect in
his character,
that it was of limited duration, that on becoming aware of the error
of his ways he wilfully followed a programme
to rebuild his character
to ensure that such defect was cured, that he begged forgiveness from
the Kareems who forgave him and
withdrew their complaint, that he had
sought counselling and assistance from his Guru and priest in an
effort to develop as a purer
individual, and accordingly that the
temporary defect of character, which may give rise to the perception
that he is not a fit
and proper person to practice as an attorney, no
longer exists. The submission concluded that he will continue to
conduct himself
as an honourable member of the profession and one who
will become to be trusted to carry out the duties of an attorney in a
satisfactory
way insofar as members of the public are concerned. (
Law
Society, Transvaal v Buhrman
1981
(4) SA 538
(A) at 557B – C).
[10]
Mr Winfred on his behalf in this context submitted that the first
respondent’s expression of contrition is genuine and
that his
efforts in repairing the harm were rapid. Further that the first
respondent is deeply embarrassed and remorseful for what
he had done
and that he begged forgiveness from the complainants and was
forgiven. With reliance on
Ex
parte
Aarons
(Law Society, Transvaal, intervening)
1985
(3) SA 286
(T) it was submitted that the character trait that caused
him not to be a fit and proper person, no longer exists, that he had
accepted full responsibility for his wrongdoings, did not dilute
blameworthiness and made a full disclosure of the details leading
up
to the application for his strike off.
[11]
Accordingly it was submitted that he had rehabilitated himself, that
he was a fit and proper person considering the extent
of his
contrition, that he is involved in religious affairs and has become
deeply religious, that he has made attempts to attend
an accounting
course, is willing to attend a practice management course that may be
offered by the applicant or the fidelity fund,
is extremely
remorseful for his conduct, has learned to manage his financial
affairs and realises it is essential that the rules
and ethics of
practice must be strictly adhered to. Finally it was pointed out that
he has furnished a
rule 21
certificate.
[12]
It was further submitted that he had been sufficiently punished for
his error in that he had lost his stature in the community,
suffered
financially, his marriage has broken down, he has developed an
anxiety condition and skin disorder and that he has lost
the respect
of his family. The submissions conclude on the basis that he has paid
his debt to society and that there is no evidence
to support any
contention that the first respondent may repeat his past conduct.
[13]
The aforesaid submissions are not all valid. Inter alia it is
difficult to understand how it can be said that the Kareems had
not
been prejudiced. Furthermore, I am by no means satisfied that the
first respondent had made a complete and full disclosure,
as will be
apparent below. More importantly however, in focusing his comments
primarily on the transaction with the Kareems, the
first respondent
has largely ignored the findings of the investigation committee
appointed in response to the Kareems’ complaint,
consisting of
attorneys Pearce and Badri, whose report revealed a number of
accounting deficiencies and
prima
facie
evidence of the
misappropriation of trust money. The first respondent has not
disputed the allegations made by the applicant in
that regard, but
has provided very little explanation for having acted in the manner
which he did.
[14]
The findings of the inspection committee are detailed in the founding
papers. In brief, the inspection of the first respondent’s
books demonstrated various non-compliances. The trust receipt book
had not been written up at the time of their inspection on 19
February 2018 but was only completed up to the end of September 2017.
The dates of receipts were not sequential. This could not
be
explained by the first respondent. Indeed the members of the
inspection committee concluded that the receipt book had only been
written up for the purposes of the inspection. In addition, the first
respondent did not maintain a cash book. He also did not
maintain a
fee journal, nor did he maintain trust and business and transfer
journals. When questioned he reported that he did not
maintain such
books and simply transferred moneys from trust to his business
account as and when he needed funds, treating these
as ‘unauthorised
loans’. That is a startling and disturbing response.
[15]
In addition, the first respondent did not maintain individual ledgers
for trust creditors. He produced a ledger for the period
March 2017
to September 2017 but the first three pages of the ledger were not
forwarded to the inspection committee and it appeared
to the
committee as having been written up as at the end of September 2017.
The first respondent had no other documents in his
possession for the
period from September 2017 to the date of inspection in February
2018. The members of the inspection committee
concluded that the
first respondent had not been frank with them and did not make a full
disclosure of his books although they
had given him notification to
do so. They concluded that he had no accounting records beyond
September 2017 and that from what
they had seen, there were serious
discrepancies which they determined to indicate the misappropriation
of trust funds.
[16]
They also concluded that there was a complete lack of proper
accounting for trust funds and a clear misappropriation of trust
funds from the trust account. Indeed it was discovered that the first
respondent used his trust account to pay
inter
alia
school fees for his
children. An amount of R36 063.00 was also transferred from
trust moneys to pay staff salaries. The inspection
committee
identified three trust accounts which clearly showed that although no
moneys were received into those accounts, substantial
amounts
totalling R419 426.97 had been paid out. This they determined to
be a misappropriation of moneys belonging to other
trust creditors.
[17]
The first respondent generally conducted and treated his trust
creditors’ moneys as unauthorised loans. He admits that
he has
been negligent and remiss in not keeping proper books of account and
understands the prejudice he caused to trust creditors.
[18]
The conduct of the first respondent fell well short of that which can
be expected of an attorney and conveyancer. Regarding
the second
stage of the enquiry, the first respondent is not, in our discretion,
a fit and proper person to practice as an attorney
and conveyancer.
We do not view his conduct as merely negligent, but probably more
correctly as fraudulent.
[19]
What remains is the third inquiry. In
Summerley
v Law Society, Northern Provinces
2006
(5) SA 613
(SCA) at para 19 it was said that a court must satisfy
itself that a lesser penalty – such as a suspension from
practice
– will not achieve the overall purpose. Brand JA
stated that the objectives in this regard are however not only ‘to
discipline and punish errant attorneys [but also] to protect the
public, particularly where trust funds are involved’.
Ultimately
a court makes a value judgment based on all the proved
facts.
[20]
The first respondent contends that a sanction less than a striking
off would be appropriate in all the circumstances outlined
above. His
counsel Mr Winfred referred us to the judgment in
KwaZulu-Natal
Law Society v Moodley and another
[2014]
ZAKZPHC 33,
delivered
on 9 May 2014, where the attorney concerned was suspended from
practice as an attorney for a period of one year, but that
suspension
itself was suspended for a period of three years on certain
conditions. It was submitted to be a matter ‘almost
on all
fours’ with the present matter and we were urged to conclude
that a similar order would be justified in this matter.
I am not
persuaded that the case referred to is
in
pari materia
at all. It is
clearly distinguishable. It involved a complaint relating to
overreaching in respect of a contingency fee arrangement
and the
incompetent handling of a deceased estate. There was no
misappropriation of trust money.
[21]
The first respondent also contends that he had previously operated
his accounting system manually but that he was at the time
of
deposing to the answering affidavit converting his practice
‘digitally’ and that using the new system will minimise
any further mistakes. He maintained that he did not foresee any
discrepancies in regard to an audit which was required and due
to be
finalised on or before the 28
th
September 2018.
[22]
In our view the first respondent did not act diligently, and indeed
acted criminally in misappropriating moneys, euphemistically
referring to them as ‘unauthorised loans’ belonging to
trust creditors to their prejudice whether actual or potential.
The
first respondent appears to have lost sight of the important
objective that the best interest of clients cannot take a back
seat
to any temporary personal difficulties that he may have experienced.
He cannot use trust funds as if it is his own.
[23]
A reading of the allegations summarised in the brief factual account
earlier in this judgment, leads to the irresistible inference
that
the ‘unauthorised loan’ of the Kareems’ funds was
not an isolated incident. What was found by the inspection
committee
would suggest a rolling of trust funds as he practised. There is
nothing to suggest that such conduct would not have
continued if his
conduct had gone undetected.
[24]
Proper bookkeeping is a primary responsibility and obligation of any
practising attorney. The lack of bookkeeping post September
2017
could not be inadvertent. The first respondent would have realised
that his books were not being written up as the accounting
records
were being kept manually. He would also have realised where he was
transferring moneys from trust to his business account
that he was
acting unlawfully and fraudulently. When confronted with the
inferences drawn by the inspection committee and recorded
in the
founding affidavit the first respondent was content simply to admit
those allegations, attributing them to negligence on
his part which
he says he will not repeat, but not recognising that they were
prima
facie
intentional
fraudulent acts. That lack of insight on his part is concerning and
reflects seriously on his fitness to remain on
the roll of attorneys
and conveyancers.
[25]
The founding affidavit sketches a comprehensive account of a
practitioner who did not keep proper accounting records, who could
not but have been aware that he was failing in his duty in that
regard, and who exploited the lack of proper bookkeeping to use
trust
funds by transferring the funds from the trust account for his own
use as and when required, all to the prejudice or potential
prejudice
of trust creditors. As much as the first respondent has and is
seeking to address his shortcomings, these were not addressed
spontaneously when he should have realised that his accounting
system, especially as it was a manual one, was not being maintained
up to date. He nevertheless did nothing until his conduct was
detected. His conduct reveals a deep seated flaw in his professional
character as an attorney which renders him unfit to practise, and
which apart from any effect of a sanction it may have on him,
requires a striking off in the best interest of and to protect the
public. Profuse apologies and the ‘mitigatory’ factors
advanced by him do not excuse the serious of the contraventions of
which he is guilty. These would have continued had his conduct
not
been detected. It renders him manifestly unfit to practise. As and
when he has addressed these adequately and rehabilitated
himself
fully, he can apply for readmission if he is then able to discharge
the onus of proving that he is a proper and fit person
to be
readmitted.
[26]
The first respondent’s conduct
prima
facie
amounts to a theft of
trust money, which should be investigated by the Director of Public
Prosecutions to determine whether any
criminal prosecution should
follow.
[27]
The following order is granted:
1.
Paragraph 1.1 of the Notice of Motion is amended by the insertion of
the words ‘and conveyancers’ after the word
‘attorneys’.
2.
An order is granted in terms of paragraphs 1.1 (as amended) to 1.13
inclusive of the Notice of Motion.
3.
The Registrar of this Honourable Court is directed to transmit a copy
of the papers in this application to the Director of Public
Prosecutions for a decision as to whether any criminal proceedings
should be instituted against the first respondent.
Appearances
For
the Applicant:
MR
S CHETTY
Instructed
by:
Messrs Siva
Chetty & Company
Ref.:
Mr S N Chetty/shalina/KZN366
Tel.:
033 – 342 9636
For
the First Respondent:
MR N G WINFRED
Instructed
by:
Messrs Vincent
Moodley & Associates
c/o
Dev Maharaj & Associates
Ref.:
Sahil Singh
Tel.:
033 – 342 2794