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[2016] ZAKZPHC 85
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KwaZulu-Natal Law Society v Myeza and Another (1083/2015) [2016] ZAKZPHC 85; [2016] 4 All SA 548 (KZP) (19 August 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Reportable
/ Not Reportable
CASE
NO: 1083/2015
In
the matter between:
KWAZULU-NATAL
LAW
SOCIETY
APPLICANT
and
NKOSINATHI
ERASMUS MYEZA
FIRST RESPONDENT
STANDARD
BANK OF SOUTH AFRICA
SECOND RESPONDENT
Coram:
Koen J, Seegobin et Henriques JJ
Heard:
26 February 2016
Delivered:
19 August 2016
ORDER
[1]
The first respondent’s name is
struck off the roll of attorneys of this Honourable Court. The first
respondent is interdicted
and restrained from practicing and/ or
holding himself out as an attorney of this Honourable Court whilst
his name is so struck
off the roll.
[2]
The first respondent is ordered to
deliver and hand over his certificate of enrolment as an attorney to
the Registrar of this court.
[3]
In the event of the respondent
failing to comply with the terms of the order in sub-paragraph (2)
within two (2) weeks from the
date of this order, the sheriff of the
district in which the certificate is kept, is authorised and directed
to take possession
thereof and to hand it to the Registrar of this
court.
[4]
To the extent that the relief prayed
for in the notice of motion dated 24 January 2015 has not been
granted in terms of the order
of Mnguni J of 1 April 2015, orders are
issued in terms of paragraphs 1.4; to 1.12 (excluding 1.12.6), 1.13
and 3 thereof.
[5]
The first respondent is directed to
pay the costs of and incidental to this application on an attorney
and client scale, including
any reserved costs.
JUDGMENT
HENRIQUES
J (KOEN AND SEEGOBIN JJ CONCURRING)
Introduction
[1]
In
the movie “Philadelphia”, Denzel Washington, a personal
injury lawyer is described as an ambulance chaser. In a scene
from
the movie he hands his business card to an injured person and says to
him ‘What do you call a 1000 lawyers at the bottom
of the
ocean’ to which the response is ‘a damned good start’.
It is not surprising that lawyer jokes of this
kind are told,
especially when one has regard to the number of legal practitioners
who are suspended or removed from practice more
often than not for
acts of dishonesty involving trust monies from indigent persons.
[1]
[2]
This
application to strike off the first respondent from the roll of
attorneys in terms of s 22(1)(d) of the Attorneys Act (“the
Act”)
[2]
is opposed by the
first respondent.
[3]
The relevant provisions of s
22(1)(d) of the Act read as follows:
‘
Any
person who has been admitted and enrolled as an attorney may on
application by the society concerned be struck off the roll
or
suspended from practice by the court within the jurisdiction of which
he or she practices - …
(d)
if he or she, in the discretion of the court, is not a fit and proper
person to continue to practise
as an attorney;
’
.
The
test applicable
[4]
The
Supreme Court of Appeal in
Jasat
v Natal Law Society
[3]
held that the section envisaged a three-stage enquiry. The
preliminary question which a court had to decide was whether the
alleged
offending conduct had been established on a preponderance of
probabilities.
[4]
Secondly,
whether in the discretion of the court the person was a fit and
proper person to continue to practice given the conduct
expected of
an attorney. Thirdly, whether in all the circumstances the
practitioner was to be removed from the roll of attorneys
or whether
an order of suspension from practice for a specified period would
suffice.
[5]
This approach has
been endorsed and subsequently followed in a number of decisions.
[6]
[5]
In
deciding whether or not a person is a fit and proper person to
continue to practice as an attorney, the court exercises a discretion
which ‘involves in reality a weighing up of the conduct
complained of against the conduct expected of an attorney and, to
this extent, a value judgment.’
[7]
[6]
At the hearing of the matter, Mr
Choudree
SC,
for the first respondent, conceded that the first leg of the enquiry
as envisaged in
Jasat
had been met. Insofar as the second leg of the enquiry was concerned,
he submitted that given the nature of his conduct, the first
respondent was not a fit and proper person to practice as an attorney
for his
own
account
(my emphasis). Thus, the only issue which this court had to consider
was the third leg of the enquiry, being an appropriate
sanction -
whether it was appropriate to order a strike off of the first
respondent or to suspend him from practice.
[7]
Mr
Choudree
submitted that the conduct of the first respondent did not warrant a
strike off as the sanction to be imposed, but rather a suspension
from practice. Such suspension, he proposed, be wholly suspended
subject to conditions that the first respondent be subject to
the
authority of a
curator
bonis
until such time as he had attended a course in proper accounting
procedures and had been rehabilitated. Whilst on suspension he
would
not have access to a trust account and trust monies. Mr
Choudree
relied on the decision in
KwaZulu-Natal
Law Society v Moodley & another
[8]
in
support of this submission.
[8]
Mr
Chetty
,
who appeared for the applicant, submitted in his heads of argument
that this was an appropriate matter in which the first respondent
ought to be struck off the roll of attorneys. During the course of
argument it became evident that Mr
Chetty
was wavering somewhat from the approach followed in his written heads
of argument and appeared to agree with Mr
Choudree
,
that this was a proper case for a suspension. However, Mr
Chetty
submitted that the suspension be implemented and not further
suspended.
Issue
[9]
The issue before us is whether given
the conduct of the first respondent, he is a fit and proper person to
continue to practice
as an attorney. In other words, should he be
suspended from practice or removed from the roll of attorneys.
[10]
It
is perhaps useful at this juncture to set out the circumstances which
led to the institution of the application and the first
respondent’s
explanation of the conduct complained of.
[9]
It is against this context that the second and third legs of the
enquiry must be determined.
Factual
Matrix
[11]
The first respondent was admitted to
practice as an attorney on 23 November 2001 and was thereafter
employed at the Road Accident
Fund (“RAF”) between 2001
and 2006. Thereafter he resigned and commenced practice for his own
account as Nathi Myeza
& Company in 2006 and was a member of the
RASS Audit Programme. He practiced for a period of approximately nine
(9) years for
his own account prior to the institution of this
application.
[12]
The
auditors finalised an audit for the 2013 accounting period and
certain qualifications were raised by them, one of which included
trust deficits. They raised certain queries with the first respondent
arising from the audit specifically the trust deficits. A
written
response was received from the first respondent on 30 January 2014 in
which he explained the trust deficits arose as a
consequence of
overpayments to his clients and that these had been rectified and the
books were balanced. He submitted proof of
five payments made from
his business bank account into the trust bank account to show that
the deficit had been rectified.
[10]
[13]
The auditors indicated they were not
comfortable merely accepting the payments as proof of rectification
of the trust deficits,
and they returned to the firm to inspect the
2013 books and to verify the written response received from the first
respondent.
A further audit was conducted which revealed further
transgressions in regard to his trust account and trust
deficits involving
a substantial amount of trust money. Of
significance is that at the end of February 2013 there was a deficit
in the first respondent’s
trust account in the sum of R 1
855 822.23.
[14]
An
investigation of the first respondent’s response that the trust
deficits arose due to overpayments made to his clients,
revealed that
it was not true. The auditors found that no clients were ever
overpaid and from a sample of RAF matters, found that
numerous
payments had been received from the RAF, presumably in settlement of
clients’ claims and the entire amount received
was transferred
from the first respondent’s trust account to his business
account as fees. The clients received no money
at all.
[11]
[15]
In
addition, the auditors highlighted certain transactions in their
report
[12]
to the applicant as
follows:
[15.1]
On 7 March 2013 an amount of R 3 322 168 was received from
the RAF for a client T.T. Dlamini.
The deficit was not rectified and
an amount of R 2 400 000 was transferred into the first
respondent’s business
account from these funds received.
Subsequently three (3) EFT transfers were made into the trust account
- R 1 200 000,
R 80 000 and R 500 000 on 15 March
2013, 18 March 2013 and 5 April 2013 respectively. These three
transfers into the
trust account were submitted as proof that the
trust deficits had been rectified.
[15.2]
The RAF paid an amount of R 1 245 854.50 for a claimant to the
first respondent. Fees were debited
in the sum of R 355 868.52.
Two (2) cheques were issued to the claimant in the sum of R
390 785.69 and R 500 000
respectively. Both cheques were
dishonoured and returned to drawer as there were insufficient funds
in the trust account to meet
the cheques. At the end of February
2013, the claimant had not been paid. The claimant was paid from a
suspense account in March
2013.
[15.3]
The RAF made payment to the first respondent in respect of another
claimant in the amount of R 500 000.
An invoice in the client
file reflected that an amount of R 357 500 was to be paid to the
claimant. Only R 57 500 was
paid to the claimant and the
remainder of R 442 500 was passed as fees. The first
respondent’s bill in respect of this
matter was taxed in an
amount of R 69 911.08 and offered as a cost contribution which
the first respondent accepted.
[15.4]
The RAF made payment of R 400 000 in respect of another
claimant. The first respondent’s
fees were taxed in an amount
of R 34 422.60 and awarded as a cost contribution. The sum of R
150 000 was transferred
as fees and R 34 422.60 was
transferred to the first respondent’s business account. The
trust ledger account in respect
of the claimant was overdrawn in the
sum of R 36 000.
[15.5]
The RAF awarded an amount to a further claimant for R 162 597.40.
A perusal of the file indicated
that of this amount, R 150 00
was in respect of capital and R 12 597.40 was a cost
contribution in respect of the first
respondent’s costs. The
first respondent accounted to the claimant for the sum of R 150 000
only and did not declare
the cost contribution. Fees were debited to
the claimant in the sum of R 46 749 in addition to the cost
contribution of R
12 597.40.
[16]
The
auditor’s report resulted in an inspection committee being
formed which interviewed the first respondent and conducted
an
inspection at his offices on 1 April 2014. A report was subsequently
compiled.
[13]
[17]
In their report the inspection
committee found that the transgressions of the first respondent were
serious and that there was ‘strong
evidence of overreaching as
well as rolling over of trust funds’. In addition, on
questioning the first respondent, of concern
to them was the
following report made to them by the first respondent:
‘…
he
allegedly had the permission or consent of clients to use moneys they
were entitled to, to pay out other clients from trust funds
to their
credit.’
[18]
It would thus appear that the first
respondent in response to queries from the inspection team reported
that he had the consent
of clients to utilise their trust money to
pay other clients and these were totally unrelated transactions.
[19]
The report of the inspection
committee served before a meeting of the applicant’s Council on
29 April 2014 and it resolved
unanimously to institute the
application for the strike off of the first respondent. Interim
relief would be sought for a
curator
bonis
to be appointed to take control
of the first respondent’s trust account, client files and
accounting records pending the
strike off application.
[20]
In the affidavit in support of the
application, Pearl Dawn Arnold Mfusi,
the
manager, regulatory affairs of the applicant, indicated that a
perusal of the auditor’s report demonstrates the following
in
relation to the first respondent’s conduct:
‘
10.4.1
The First Respondent has not kept a proper set of trust accounts.
10.4.2
The First Respondent rolled trust funds as and when it pleased
him.
10.4.3
The First Respondent stole or mis-appropriated trust moneys
whilst
overreaching clients perpetually.
10.4.4
The First Respondent allowed because of the manner in which
he
handled the trust accounts, for the trust accounts to be in debit.
10.4.5
The First Respondent did not account properly to clients
and simply
transferred large amounts to his business accounts without there
being good cause to do so; and
10.4.6
The First Respondent has been doing this for a long time
and now
simply mulcted himself in a situation where the trust records are in
absolute shambles.’
[21]
On
12 March 2015 when the matter served before court, the first
respondent notified of his intention to oppose the application and
an
order was issued for affidavits to be filed with costs reserved.
[14]
The matter was adjourned to 1 April 2015 and the first respondent
directed to file an affidavit by 31 March 2015.
[22]
On 1 April 2015, an order was
granted in terms of which a
curator
bonis
was appointed to exercise the
powers and duties set out in paragraph 1.2 of the order, in essence
placing him in control of the
first respondent’s practice,
specifically his trust accounts. No order was issued suspending the
first respondent from practice.
[23]
The
first respondent filed an answering affidavit on 16 February 2016
opposing the strike off application. In such affidavit he
provides an
explanation of the circumstances which led to the application and
makes common cause with what is contained in the
founding affidavit.
He admits his conduct in ‘not adhering to basic accounting
procedures’ was ‘reckless and
in fact demonstrated a lack
of sufficient insight into the management of the business and trust
accounts of his practice’.
[15]
[24]
He accepts culpability for the
management of his business account and for deficits in his trust
accounts, but denies that he misappropriated
or stole any trust
monies belonging to his clients. He indicates the deficit in his
client’s trust accounts had been occasioned
by other factors
which he deals with in detail in the affidavit. In summary, the
explanation provided is the following:
[24.1]
As an indication of his inexperience he joined the applicant’s
Reformed Audit Support System (“RASS”). He understood
that there would be training on how to conduct the management
accounting aspects of his practice but such training did not take
place;
[24.2]
Annual inspections of the accounting affairs of his practice
afforded
practitioners the opportunity to rectify any irregularities in
accounting procedures. Inspections were only conducted
in March 2008
and 2010;
[24.3]
In the first audit inspection in 2008 of the 2007 financial
year, the
auditors informed him that his ledgers were inaccurate and he needed
to rectify them. Thereafter he left his accounting
affairs to be
dealt with by his bookkeeper whom he employed;
[24.4]
In the further audit of 2010, a further trust deficit was
discovered
and he queried it with his bookkeeper who assured him that the
records were correct and there was no deficit;
[24.5]
He was informed by the RASS auditors that a report would
be compiled
and furnished to him and he would be able to identify how the deficit
arose and awaited the report. Such report which
was dated 17 December
2013 was furnished to him via e-mail in January 2014. This identified
a deficit in 2010 and he was requested
to correct his accounting
procedures and refund trust monies in deficit, which he did.
[24.6]
He was absent from his office for long periods of time and
he was
therefore unable to properly monitor and conduct proper bookkeeping
of his accounts and left this to his bookkeeper whom
he employed. His
practice was substantially dependent on RAF claims and often the RAF
failed to timeously pay out claimants’
monies;
[24.7]
He then utilised trust money from one client to pay disbursements
towards the cost of expert reports and other expenses to sustain his
practice. He would immediately pay back these monies as soon
as an
amount was paid in favour of another claimant;
[16]
[24.8]
He failed to draw up a bill of costs to claim fees and as
a
consequence clients’ trust accounts were in debit. He indicates
that he ought to have dealt more efficiently with the management
of
his practice, specifically bookkeeping aspects, but his failure to do
so was due to a lack of full appreciation of what was
being done i.e.
it being inappropriate and wrong. He ‘also lacked the strength
of character at the time to acknowledge and
face up to the
consequences of his conduct.’
[25]
He
indicates that after the inspection in April 2014, he anticipated
that the applicant would assist in correcting the shortfalls
in the
management of his accounting procedures. He alludes to the inspection
report
[17]
in which the
inspectors recorded he had a poor understanding of bookkeeping and
accounting procedures.
[26]
Of significance, the first
respondent denies any criminal conduct and denies that any of his
clients were detrimentally affected
or prejudiced by his actions,
which is demonstrated by the fact that no formal complaints were
lodged by his clients. In addition
he submits:
‘
.
. .neither any client nor the Fund has suffered any financial losses
as a result of any misconduct’.
[18]
[27]
The applicant filed a replying
affidavit dealing with certain of the allegations made by the first
respondent. In particular, the
applicant emphasises that there was a
misappropriation of trust funds, a lack of accounting to his clients
in respect of trust
monies received and a theft of trust monies. The
applicant further indicates that the RASS system does not allow for
training,
and practitioners when they join the audit programme are
provided with detailed instructions as to how the programme operates.
Practitioners are obliged to file a
self-certified
audit certificate for such accounting period. Moreover, there is no
annual audit performed of a practitioner’s trust and
business
accounts and practitioners are required to provide a
self-audit
certificate each year confirming that their trust books were in
order.
The
Sanction
[28]
At this juncture I propose to
consider certain of the cases referred to by the respective legal
representatives in respect of the
sanction to be imposed.
[29]
As already mentioned Mr
Choudree
relied on the decision in
Moodley
for submitting whether it was
appropriate or not to suspend the suspension of the first respondent.
In
Moodley’s
case, in imposing the suspension the court remarked as follows:
‘
The
first respondent has demonstrated that he was not fit and proper to
practise as an attorney. However, I think too that the facts
demonstrate that he has learnt a hard lesson and that there is no
reasonable danger of the events recurring. The ultimate professional
penalty would, in my view, be too harsh in all the circumstances of
the case. A suspension from practice, itself suspended for
a period
upon appropriate conditions uncoupled with an Order for the repayment
tendered, would, in my view constitute sufficient
punishment. . . .’
[30]
The
decision in
Moodley’s
case did not involve theft. It involved unprofessional conduct in the
form of over-reaching in respect of the fee charged. The
fee involved
was the sum of R 150 000 which the attorney in question had
undertaken to repay and did in fact repay. In addition,
in
Moodley’s
case, despite initially challenging the strike-off application, at
the hearing of the matter, the approach of the attorney in question
‘focused on an acceptance of his wrong doing’.
[19]
[31]
In
[zRPz]
Botha
v Law Society, Northern Provinces
,
[20]
the attorney’s unprofessional conduct related to contraventions
of the Act and the rules made under the Act relating to books
of
account and trust monies and a failure to give proper attention to
his clients’ matters. The court endorsed a conservative
approach to the sanction, however, emphasised that it was significant
that the practitioner had not been found guilty of any conduct
involving dishonesty. This led to the conclusion that the conduct was
not likely to recur and consequently a suspension was a more
appropriate sanction. The court also took into account that the
attorney had not practiced for his own account for three (3) years
prior to the hearing of the appeal.
[32]
In
Holmes
v
Law Society of the Cape of Good Hope & another
;
Law
Society of the Cape of Good Hope v Holmes,
NC
Erasmus J
[21]
was of the view
that the only appropriate sanction was a strike-off. Apart from the
practitioner’s failure to properly administer
trust funds, the
court was of the view that the fact that the practitioner had failed
to be frank and open in her dealings with
the Society and with the
court, and deceived the Society and court, was inexcusable and
warranted a strike-off. The practitioner
had misappropriated funds
and used this to pay for personal expenses as well. Similarly in
Law
Society, Cape v
Peter,
[22]
the
court ordered a suspension from practice rather than a strike-off of
the practitioner concerned.
[33]
In
Summerley
v
Law Society, Northern Provinces
[23]
there
was a shortfall in the attorney’s trust account in the sum of R
50 000. A trust cheque had also been dishonoured
on
presentation. The explanation provided by the practitioner was that
the cheque was issued on the basis that he had received
an assurance
from the client that the monies had been transferred into the trust
account. The difference in
Summerley’s
decision
was that the practitioner had not used the money for himself. In the
Peters
decision
the practitioner was frank and honest and made a full disclosure
accepting responsibility for her conduct. The court was
of the view
that what counted in the practitioner’s favour was this
disclosure, the fact that the transgression occurred
in a short
period of time and she accepted full responsibility for such conduct,
which was limited. The monies had been used to
pay for practice
expenses. In
Law
Society of the Northern Provinces v Mabaso
[24]
the practitioner did not provide a full and frank explanation
for the misappropriation of funds and attempted to lay the
blame at
someone else’s door. The court was of the view that as the
practitioner failed to take responsibility for his conduct
and
levelled false accusations against others to mislead the court, such
was inconsistent with his duties as an officer of the
court and ought
to be viewed in an extremely serious light, and consequently, was not
a fit and proper person to practice and ordered
a strike off.
[34]
Nugent
JA in
Law
Society of Cape of Good Hope v Peter
[25]
indicated that in deciding on a sanction, the court must consider the
character of the practitioner, and the fact that the applicant
has a
duty to protect the public. In
Malan
& another v Law Society, Northern Provinces
[26]
the court was of the view that a practitioner would have to show
exceptional circumstances warranting the imposition of a suspension
as opposed to a strike off in matters involving dishonesty.
Analysis
[35]
The
attorney’s profession is an honourable one and demands complete
honesty, reliability and integrity from its members. The
aim of the
Act and the responsibility of the court is to ensure that persons who
are not fit and proper to practice are prevented
from doing so. It
may well be that not every attorney who has contravened the Act and
the relevant rules, or who has been dishonest
ought to be removed
from the roll of attorneys. In
[zRPz]Botha
v Law Society, Northern Provinces
[27]
the court held:
‘
It
must be emphasised that dishonesty is not a
sine
qua non
for striking-off. As Harms JA said in
Malan
:
“
Obviously,
if a court finds dishonesty, the circumstances must be exceptional
before a court will order a suspension instead of
a removal . . .
.Where dishonesty has not been established the position is . .
. that a court has to exercise a discretion
within the parameters of
the facts of the case without any preordained limitations.”’
(Footnote omitted)
[36]
The
first respondent’s contraventions can be summarised as follows:
contravening the Act;
[28]
a
failure to adhere to and comply with the society’s rules and
keep proper accounting records;
[29]
misappropriation of funds, maladministration of his trust account and
theft of trust monies.
[30]
[37]
His acts of dishonesty are not
confined to the use of funds but in his dealings with the law
society, the auditors and in not making
full disclosure to this
court.
[38]
In my view, in showing exceptional
circumstances to warrant a suspension as opposed to a strike-off,
being an officer of the court,
the first respondent is required to be
absolutely honest and reliable in dealing with the allegations
against him. By him making
full disclosure in relation to his
conduct, it shows a clear appreciation of the wrongfulness and
severity of his actions and also
that he is sincere in accepting full
responsibility for them.
[39]
A reading of these papers,
specifically the first respondent’s answering affidavit, raises
a concern for me. When the inspection
committee attended at the
offices of the first respondent he indicated that he had permission
from his clients to utilise these
monies. Nowhere in the answering
affidavit is this dealt with. When I raised this aspect with Mr
Choudree
at
the hearing, he acknowledged that this was not satisfactorily dealt
with in the papers but indicated that he could not make submissions
to provide an explanation.
[40]
Mr
Choudree
submits that this issue did not really warrant a response from the
first respondent as the inspection committee of the applicant
chose
not to investigate this further and the applicant chose not to raise
this as an issue in the strike off application. The
approach
suggested by Mr
Choudree
loses sight of the duty of the applicant and the obligation of this
court. ‘As upper custodians of the integrity of the profession,
our Courts are bound to be particularly astute to condemn, in the
strongest terms, any deviation from that standard.’
[31]
[41]
In my view, the first respondent,
must, if he is to be truly remorseful, show a clear appreciation of
his conduct, admit to it and
accept it was wrong. I agree with the
sentiments expressed in
Holmes
that ‘
[t]he
success of our legal system depends not only upon the public having
full confidence in the integrity of members of that profession,
but
also
on our Court being able to depend on the ipse dixit
of its practitioners. As observed by Hefer JA in
Kekana
v Society of Advocates of South Africa
:
Legal
practitioners occupy a unique position. On the one hand they serve
the interests of their clients, which require a case to
be presented
fearlessly and vigorously. On the other hand, as officers of the
Court they serve the interests of justice itself
by acting as a
bulwark against the admission of fabricated evidence. Both
professions have strict ethical rules aimed at
preventing their
members from becoming parties to the deception of the Court.
Unfortunately, the observance of the rules is not
assured, because
what happens between legal representatives and their clients or
witnesses is not a matter for public scrutiny.
The preservation of a
high standard of professional ethics having thus been left
almost entirely in the hands of individual
practitioners, it stands
to reason, firstly, that absolute personal integrity and scrupulous
honesty are demanded of each of them
and, secondly, that a
practitioner who lacks these qualities cannot be expected to play his
part.’
[32]
(Footnote
omitted)
[42]
In his response to the auditors, the
first respondent chose firstly not to make a full and honest
disclosure to them when they raised
the query about the trust
deficits. He then advised the members of the inspection committee
that he had permission from clients
to use their trust monies. He
elected not to take the court into his confidence and deal with these
responses to the auditors and
the inspection committee. This is cause
for concern and raises serious doubts as to whether he has taken the
court into his confidence
by making full and frank disclosure and has
in fact “come clean”. His response to the auditors was
patently false.
[43]
The first respondent appears to have indulged in such activity over a
long period of time. The monies “repaid”
into his trust
account to rectify the trust deficits, was done only when he was
called upon to do so by the auditors and to compound
matters, did not
utilise monies in his business account, but trust monies from
payments made by the RAF on behalf of other clients.
[44]
In addition, it appears from the documents filed in this application
that despite the fact that this irregularity was initially
uncovered
in February of 2010, it was only at the end of February 2013 that
these errors were rectified. This was not a once off
error in
judgment by the first respondent but appears to be a pattern of
activity over a prolonged period of time.
[45]
In addition, when called upon to provide the auditors with an
explanation of the trust deficits, the first respondent’s
explanation was that it arose as a consequence of overpayments to
clients. This clearly was not true and he appears to have lied
in his
explanation to the auditors. It is only in this application that he
discloses for the first time that he utilised clients’
monies
to meet “expenses” and disbursements.
[46]
However, this explanation is also downplayed in my view and the first
respondent also engages in a finger pointing exercise,
once again,
never assuming full responsibility for his conduct. Even though he
knew there were problems with the accounting procedures
and trust
deficits he did not take an active role in resolving these but sat
back and “waited for someone to get back to
him”.
[47]
Having signed contingency fee agreements with the clients, he clearly
knew that what would have been owed to him was limited
to 25% of the
capital paid by the RAF, excluding any fees and costs contribution.
He could not have laboured under any misapprehension
that he was
entitled to transfer the entire amount paid by the RAF for a client,
yet he did so.
[48]
I have considered the authorities referred to by both legal
representatives. These all deal with different transgressions and
those which involved theft, on the facts of them are distinguishable
from the present.
[49]
What is the cause of concern for me is the fact that the first
respondent embarked on this conduct over a period of time. The
pattern was consistent. He had an opportunity to limit himself to
fees due as envisaged in the contingency agreements signed by
the
respective claimants, but chose to merely transfer what in my view
are large sums of money which he was not entitled to. This
was theft
and blatant dishonesty. Moreover, he has not repaid all these monies
and has through his attorneys agreed on a repayment
plan with the
applicant to repay the sum of R 1,8 million.
[50]
Mr
Choudree
at the hearing also indicated that what mitigates
against a strike off is the fact that the integrity of the first
respondent’s
trust account was not seriously compromised as
none of his clients lodged formal complaints. He indicated that he
did not commit
acts of a criminal nature and neither did he act
intentionally to the detriment of his clients.
[51]
This submission in my view simply cannot hold water. The fact is the
integrity of the first respondent’s trust account
has indeed
been compromised. There is a deficit in his trust account which on
his own admission he has undertaken to repay-that
means that clients
have been prejudiced and have not received monies owed to them.
Significantly, the first respondent has stolen
monies which he now
undertakes to repay.
[33]
[52]
I have also considered the attempts that the first respondent has
made to redeem himself. I accept that any sanction will not
only
cause him immense personal upheaval but also upheaval to his family.
[53]
However, as was said in
Jasat
[34]
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 need to protect the public.’
[54]
I am mindful that in certain cases,
[35]
the courts have remarked that the sanction of a strike off is
reserved for those cases involving dishonesty and a suspension for
those not involving dishonesty is the general approach followed by
the courts, however, it is not ‘an inviolable rule’.
[36]
[55]
I align myself with the sentiments expressed by the Supreme Court of
Appeal in
Law
Society of the Northern Provinces v Mabaso
[37]
where it held:
‘
What
mattered was the conduct of the respondent complained of, his
responses and attitude thereto, and whether from that it may
be
concluded that he should remain in what is known as an honourable
profession. . . .’
[56]
On the facts before us, I cannot accept that the first respondent’s
conduct is attributable to his lack of knowledge
of accounting
procedures. He admits to using funds from one client to pay
disbursements and other expenses. Looking at the actual
amounts
transferred, these are large sums, rounded off and cannot be said to
be for disbursements alone. In addition, he knew what
he was doing
and made a conscious decision to use monies belonging to clients. In
my view, this was not a mere rolling of trust
funds but theft of
trust monies.
[57]
It is not, on his own admission, confined to a lack of knowledge of
proper accounting procedures. In any event his lack of
knowledge,
inexperience and training cannot count in his favour. In
Holmes
[38]
the court remarked as follows:
‘
Likewise,
plaintiff's lack of knowledge due to inadequate training and
inexperience cannot mitigate in her favour. As explained
in
Die
Prokureursorde van die Oranje-Vrystaat v Schoeman
an attorney, and particularly a practising attorney, has a duty to
apply himself/herself not only to attending to his/her
clients
interests, but also to those of his/her Society, and if he/she does
not take the trouble to become conversant with his/her
Society's
Rules and his/her obligations, as contained therein and consequently
goes astray, he/she does not deserve much
sympathy in his/her
punishment.’ (Footnote omitted)
[58]
The following must be borne in mind:
[58.1]
The first respondent has been practicing since 2006, a period of
approximately nine (9 years). In terms of the RASS audit
programme he
was signing certificates for each accounting period certifying his
trust books of account were in order knowing this
to be false.
[58.2]
Even though he attempts to blame the lack of knowledge of proper
accounting procedures and relying solely on the accountant
he
employed, this does not excuse him from liability. In any event, this
explanation cannot be true, as on his own version
he
, not his
accountant, was using trust money belonging to a client to pay
disbursements and settle other expenses. In addition, when
payment
was received from the Fund in respect of another client he would then
make good the deficit. This was irregular and he
clearly knew this.
[58.3]
Even though he “made good” the deficit of R 1 855 822.23
these were from trust monies that were payable
to a claimant T. T.
Dlamini. Of the R 3 332 168 paid by the RAF in respect of the
claimant T. T. Dlamini, the first respondent
knew he was not entitled
to payment of R 2 400 000 as fees and this was done to
“make good” the trust deficit
thereby compounding the
theft. He blames his conduct on the lack of knowledge of accounting
principles and ‘a lack of sufficient
insight into management of
the business and the trust accounts of his practice’. This
clearly is not the truth.
[58.4]
He utilised trust monies of certain clients to pay for expenses of
others. This amounts to a misappropriation of trust funds.
When this
was queried he indicated that he had permission to do so, yet he does
not disclose which client gave him permission to
utilise their trust
monies and one must again conclude that he is being economical with
the truth.
[58.5]
He allowed trust accounts to have debit balances and allowed trust
cheques to be returned as there were insufficient funds
in the
account. This means that certain clients were not paid monies due and
received by the RAF for their account.
[58.6]
Most of, if not all the thefts related to monies received from the
Road Accident Fund. This is a public entity established
to compensate
the road accident victims, most of whom are indigent. He thus appears
to have stolen money from poor people.
[59]
What I have also noted is that the surname of the first respondent in
his answering and supplementary affidavits appears to
have changed
and he does not provide an explanation for this at all.
[39]
In addition, he does not deal with any of the allegations in the
replying affidavit filed by the applicant and these are thus
unchallenged and not disputed.
[60]
In my view deciding on the sanction to impose is a most difficult
task – not only because the first respondent is affected
by it,
but whatever sanction this court imposes affects him, his family and
his employees. In my view the sanction ought not to
be lightly
imposed and it is something which has weighed heavily with the court.
[61]
I agree that theft of and misappropriation of funds is ‘amongst
the most serious offences of which an attorney may make
him or
herself guilty of since it undermines the very core of the
relationship between attorney and client.
[40]
As
aptly stated by Hefer AP in
Law
Society of the Cape of Good Hope v Budricks
,
a misappropriation of trust funds is “about the worst
professional sin that an attorney can commit”.’
[41]
[62]
I have in deciding on an appropriate sanction considered the option
of a suspension and I am of the view, that given the nature
of the
transgressions, the first respondent’s attitude and the
explanation provided, it will not be the appropriate sanction.
On the
facts of the matter, despite the supervisory nature of the RASS
system, the first respondent knowingly issued self-certified
audit
certificates and knowingly used trust monies to pay his practice
expenses. He has also not been frank and honest with the
auditors,
his society and the court.
[63]
Given the objectives of the court which are to discipline and punish
errant attorneys and to protect the public, particularly
where trust
funds are involved,
[42]
in my
view on the facts of this matter a strike-off is justified. On the
application of a value judgment I am persuaded that in
the
circumstances the penalty of a strike-off is not too severe. What
weighs heavily with me apart from the dishonest conduct is
the fact
that the first respondent failed to own up to such dishonesty and
take responsibility for his actions and make full disclosure
to the
court in relation thereto.
[64]
In the premises the following orders will issue:
[64.1]
The first respondent’s name is struck off the roll of attorneys
of this Honourable Court. The first respondent
is interdicted and
restrained from practicing and/ or holding himself out as an attorney
of this Honourable Court whilst his name
is so struck off the roll.
[64.2]
The first respondent is ordered to deliver and hand over his
certificate of enrolment as an attorney to the Registrar
of this
court.
[64.3]
In the event of the respondent failing to comply with the terms of
the order in sub-paragraph (2) within two (2) weeks
from the date of
this order, the sheriff of the district in which the certificate is
kept, is authorised and directed to take possession
thereof and to
hand it to the Registrar of this court.
[64.4]
To the extent that the relief prayed for in the notice of motion
dated 24 January 2015 has not been granted in terms
of the order of
Mnguni J of 1 April 2015, orders are issued in terms of paragraphs
1.4; to 1.12 (excluding 1.12.6), 1.13 and 3
thereof.
[64.5]
The first respondent is directed to pay the costs of and incidental
to this application on an attorney and client scale,
including any
reserved costs.
_________________
HENRIQUES
J
_________________
KOEN
J
_________________
SEEGOBIN
J
Case
Information
Date
of hearing
: 26
February 2016
Date
of judgment
: 19
August 2016
Appearances
Counsel
for the applicant
:
Mr SN
Chetty
Instructed
by
: Siva Chetty
& Company
378
Langalibalele Street
Pietermaritzburg
(Ref:
Mr SN Chetty/Shalina/KZN187)
Counsel
for the first respondent
:
Adv.
RBG Choudree SC with
Adv.
D. Pillay
Instructed
by
: Mrs TE
Mhlambo
c/o
Ngwane Attorneys
234
Hoosen Haffejee Street
Pietermaritzburg
(Ref:
Myeza/M135)
[1]
Enquiries
with the office of the Registrar, Pietermaritzburg revealed that
there have been 21 matters involving strike off applications
since
2014 and 43 applications for the suspension of practitioners for the
same period.
[2]
Act
53 of 1979.
[3]
2000
(3) SA 44
(SCA).
[4]
Jasat
supra
at 44D–E.
[5]
Jasat
at 51C-I.
[6]
Malan
& another v Law Society, Northern Provinces
[2008] ZASCA 90
;
2009 (1) SA 216
(SCA);
Law
Society of the Cape of Good Hope v Budricks
2003 (2) SA 11
(SCA) para 2.
[7]
Jasat
supra
at 51E–F.
[8]
(3072/2012)
[2014] ZAKZPHC 33 (9 May 2014).
[9]
These
have been obtained from the affidavits and annexures filed.
[10]
Five
(5) payments from the business bank account to the trust bank
account to rectify this deficit were made as follows:
i)
28 May 2010
R 151 500.00
ii)
Unknown date
R 50 000.00
iii)
15 March 2013
R 1 000 200.00
iv)
18 March 2013
R 80 000.00
v)
5 April 2013
R 500 000.00.
[11]
PDAM
3, page 25. In respect of 3 matters the entire amount paid by the
RAF was transferred as fees to the first respondent’s
business
account and no monies paid to the claimants.
[12]
PDAM
2 to PDAM 4, pages 24 to 26 of the indexed papers.
[13]
PDAM
5 to PDAM 8, pages 28 to 30 is the Inspection report. Pages 30 to 86
of the indexed papers is the Auditors report and annexures.
[14]
Page
91 of the indexed papers, court order dated 12 March 2015.
[15]
Para
4, page 109 of the answering affidavit.
[16]
Para
16, page 113 of the indexed papers.
[17]
PDAM
5 to PDAM 64.
[18]
Para
32(a), page 121 of the papers.
[19]
Moodley
supra
para 19.
[20]
2009
(1) SA 227 (SCA).
[21]
2006
(2) SA 139 (C).
[22]
2009
(2) SA 18
SCA.
[23]
2006
(5) SA 613 (SCA).
[24]
2015
JDR 1695 (SCA).
[25]
2009
(2) SA 18 (SCA).
[26]
2009
(1) SA 216 (SCA).
[27]
[2008] ZASCA 106
;
2009
(1) SA 227
(SCA) para 3.
[28]
Section
78(1) of the Attorneys Act provides that:
'(1)
Any practising practitioner shall open and keep a separate trust
banking account at a banking institution in the Republic
and shall
deposit therein the money held or received by him on account of
any person.'
Section
78(4) reads:
'(4)
Any practising practitioner shall keep proper accounting records
containing particulars and information of any money received,
held
or paid by him for or on account of any person, of any money
invested by him in a trust savings or other interest-bearing
account referred to in subsection (2) or (2A) and of any
interest on money so invested which is paid over or credited to
him
or her.'
[29]
Rules
of the law society inter alia provide that trust accounts may not be
in debit; that withdrawals only be effected for trust
creditors;
which prohibits the transfer of moneys with respect to fees until
the fee has been correctly debited in the firm's
accounting record;
and
that
the total amount in an attorney's trust account must at all times be
sufficient to cover the amounts owing to trust creditors.
[30]
An
attorney is obliged to
maintain
a separate trust account and to deposit therein money held or
received by him on account of any person. Where trust money
is paid
to an attorney it is his duty to keep it in his possession and to
use it for no other purpose than that of the trust.
It is inherent
in such a trust that the attorney should at all times have available
liquid funds in an equivalent amount. . .
. It is significant that
in terms of s 83(13) of the Attorneys Act a practitioner who
contravenes the provisions relating to
his trust account and
investment of trust money will be guilty of unprofessional conduct
and be liable to be struck off the roll
or suspended from practice.
[31]
[zRPz]Holmes
v Law Society of the Cape of Good Hope & another
;
Law
Society of the Cape of Good Hope v Holmes
2006 (2) SA 139
(C) para 32.
[32]
Para
21.
[33]
The
first respondent, through his current attorney of record has
undertaken to make payment of the deficit of R 1 855 822.23
over a period of time.
[34]
Supra
para 10.
[35]
[zRPz]Summerley
v Law Society, Northern Provinces
2006 (5) SA 613 (SCA).
[36]
Summerley
supra
headnote .
[37]
2015
JDR 1695 (SCA) para 17.
[38]
Para
23.
[39]
The
papers refer to the first respondent as being “Nkosinathi
Erasmus Myeza”. In the supplementary answering affidavit
he is
referred to as “Nkosinathi Erasmus Mngoma (former Myeza)”.
[40]
Holmes
supra
para
32.
[41]
Law
Society of the Cape of Good Hope v Budricks
2003
(2) SA 11
(SCA) at 17I-J.
[42]
Budricks
at 16E–G.