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[2017] ZAFSHC 26
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Van Zyl v Attorneys Fidelity Fund Board of Control (469/2012) [2017] ZAFSHC 26 (2 February 2017)
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Certain
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IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 469/2012
In the
matter between:
LUCAS
CHRISTOFFEL
VAN
ZVL
Plaintiff
(ID
NO:
[6...])
and
THE
ATTORNEYS FIDELITY FUND BOARD OF
CONTROL
Defendant
HEARD
ON:
15
&
16 NOVEMBER 2016
JUDGMENT
BY:
MBHELE,
J
DELIVERED
ON:
02 February 2017
I
NTRODUCTION
AND
BACKGROUND
[1] On 27
March 2007, Kobus Le Roux (Le Roux), a practising
attorney of Kobus Le Roux Attorneys , informed Plaintiff
of his
client who needed cash urgently. He requested Plaintiff
to lend and advance the sum of R270 000 to the
said client. The
money would be returned within two years with interest at 15% per
annum.
[2] The
plaintiff paid an amount of R270 000 into Kobus Le Roux's trust
account with a condition that a mortgage bond be registered
against
the borrower's property, in plaintiff's favour, as
security.
[3] The
plaintiff made an application for separation of issues in terms of
Rule 33(4) which I granted at the beginning of the trial.
The facts
are not in dispute and the matter serves before me to determine
whether the sum paid by the plaintiff into Le Roux's
trust account
constitutes trust funds in terms of the Attorneys Act
[4] This
matter served before me simultanesously with case no 468/2012 where
Hendrik Cristiaan Eksteen is the Plaintiff. The causes
of action and
the facts in both matters are the same. The parties agreed that the
principle applied in Van Zyl will extend to Eksteen.
PLAINTIFF'S
CASE
[4] The
plaintiff testified in support of his case. He testified to the
effect that he met Le Roux in 2005 when he had instructed
him to
collect arrear rental amount from one of his tenants. In 2007 Le Roux
approached him and requested him to lend money to
a client of his,
who was in construction business at 15,5% interest per annum for
a period of 2 years.
He cannot remember the
name of the borrower. Money had to be kept in Le Roux's Trust account
pending registration of a bond
in Plaintiff s favour. On 10
June 2010 Le Roux committed suicide. Upon Le Roux's death he
discovered that no bond was registered.
Le Roux's estate was
insolvent.
[5]
Before Le Roux's death he made several enquiries about
repayment of his money and Le Roux paid him R20 000 as part payment.
SUBMISSIONS
FOR THE
PLAINTIFF
[6] Mr
Rontgen submits for the plaintiff to,
inter
alia,
the effect that the money paid into Le Roux's
trust account by the plaintiff, was trust monies as defined by the
Attorneys' Act.
He contends further that the transaction was a normal
conveyancing transaction in terms of which Le Roux had to register a
bond
in the name of the borrower as security for monies lent. It is
his submission that Le Roux stole the money before the bond could
be
registered. He painstakingly contends that Le Roux was not instructed
to invest the money but to keep it in his trust account
pending
registration of a bond in favour of the plaintiff.
SUBMISSION
BY THE DEFENDANT
[7] Mr
Olivier on behalf of the defendant contends that, the plaintiff must
be regarded as having instructed Le Roux to invest the
money through
an interest bearing loan to the borrower, as contemplated in section
47(1)(g).
[8] He
further contends that section 47(5)(b) of the Act is not
applicable in the circumstances as the plaintiff was introduced
to
the borrower by Le Roux.
APPLICABLE
LAW
[9]
Section 26(1) of the Attorneys Act 53 of 1979, provides
as follows:
"Subject
to
the
provisions
of this
Act,
the
fund
shall
be applied
for
the
purpose
of
reimbursing persons
who may
suffer pecuniary
loss
as
a
result
of
-
(a)
Theft
committed
by a
practising
practitioner,
his candidate
attorney
or
his employee,
of any money or other
property entrusted
by
or on behalf of such
persons to
him or to
his candidate
attorney
or employee in the
course
of
his practice.
(b)
Entrustment
means that
the
attorney
has
a duty to
hold
and
apply the money or
property for the
benefit
of sole
person or for the
accomplishment
of
a
particular
purpose."
[10] The
fund does not reimburse loss suffered as a result of monies handed to
an attorney for investment purposes, nor loans to
an attorney. (See
Section 47(1)(g) of the Act) which reads as follows:
"Limitation
of Liability.
The fund
shall not be liable in respect of any loss suffered by any person as
a result of theft of money which a practitioner has
been instructed
to invest on behalf of such person.
Section
47(5)(b) and (c) provide for a situation where monies should not be
regarded as an investment in terms of section 47(1 )(q))."
[11]
Section 47(5)(b) and (c) reads as follows:
"For
the purpose of subsection (1)(g) a practitioner must be regarded as
not having been instructed to invest money if he or
she is instructed
by a person
(b)
to
l
end
money on behalf of that person to give effect to a loan agreement,
where
that
person,
being
the
lender
(i)
Specifies
the
borrower
to
whom
the
money
is
to
be
lent;
(ii)
has
not
been
introduced
to
the
borrower
by
the
practitioner
for
the purpose
of
making
that
loan; and
(iii)
is
advised by
the practitioner in
respect
of
the
terms and
conditions
of
the
loan agreement, or
(c)
to
utilise the
money to
give
effect
to
any term
of
a transaction
to
which that
person
is a
party,
other than
a transaction
which
is a
loan or which gives
effect
to
a
loan
agreement
that
does
not
fall
within
the
scope
of paragraph
(b)."
[12] The
indemnity against the loss for which the Act Provides is not
unlimited in its scope. It does not provide indemnification
against
any kind of loss suffered as a result of any conceivable kind of
knavery in which an attorney may indulge in the course
of his or her
practice. (See
Attorneys
Fidelity
Fund
Board
of
Control v
Mettle
Property Finance (499/2010)
[2011] ZASCA 133
(16/09/2011)
APPLICATI
ON OF THE
LEGAL PRINCIPLE
[13] It
is apparent from undisputed evidence and submissions by the parties
that the money was paid into Le Roux's trust account
as a result of a
loan agreement to which plaintiff was a party. The underlying
transaction was a loan agreement in which the borrower
was specified
and introduced to the plaintiff by Le Roux.
[14] The
plaintiff's intention was to employ his money to
generate profit through an interest bearing loan to
Le Roux's
client.
[15] The
argument that the money was put into Le Roux's account in a normal
course of a conveyancing transaction, as argued by Mr
Rontgen, is
misplaced. The money was placed in Le Roux's trust account to fulfil
the terms of a loan agreement between the plaintiff
and Le Roux's
client. Bond Registration was not the underlying transaction it was a
mere condition attached to the loan agreement.
[16]
Section 47(1)(g) removes protection from claimants who suffered loss
as a result of theft of monies which a practitioner has
been
instructed to invest on behalf of the person giving instruction.
[17]
Section 47(5)(b) and (c) goes further to provide for
situations where the money lent should not
be regarded as
an investment.
[18] In
the current matter the money lent does not meet the conditions set
out in sections 47(5)(b) and (c). The plaintiff did not
specify the
borrower nor introduce the borrower as contemplated by subsection
(b). The underlying transaction was a loan
agreement in which
the plaintiff was a party, contrary to the
provisions of subsection (c).
[19] It
is clear from section 47(1)(g) that the legislature intended to
prevent a situation where parties would burden Attorneys'
trust
account with risky and reckless lending schemes. The section was
aimed at dealing with attorneys and clients who use attorneys'
trust
accounts for the purpose it was not intended for. Although the
attorneys' Fidelity Fund is aimed at providing protection
to people
who suffered loss as a result of theft occurring in the attorney's
normal course of practice, it is impossible for the
fund to be made
available to cover for all the ills and dishonourable acts attorneys
may get up to. The section discourages attorneys
from acting as loan
brokers and using trust accounts to further their dishonourable acts.
In the current matter the Plaintiff risked
his money to generate
profit and it proved to be a dangerous exercise.
[20] In
view of the above, I come to a conclusion that the plaintiff's claim
falls outside the claims protected by the Act and it
cannot succeed.
There is
no reason for costs not to follow the event.
ORDER
[21]
Plaintiff's claim is dismissed with costs, including the costs of one
counsel.
______________________
N
M MBHELE, J
On
behalf of the plaintiff:
Mr. Rontgen
I
nstructed
by:
Rontgen
&
Rontgen
Inc.
Pretoria
and
c/o
Mcintyre Van Der Post Attorneys
Bloemfontein
On behalf
of the defendant:
Adv. Olivier
I
nstructed
by:
Cengcani & Associates
Bloemfontein