About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2015
>>
[2015] ZAGPPHC 125
|
|
Lubbe and Others v S (A586/2014) [2015] ZAGPPHC 125 (3 February 2015)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
GAUTENG
(PRETORIA)
CASE NO:
A586/2014
DATE: 3 FEBRUARY
2015
In the matter
between
LUBBE,
ANTHONY
.................................................................................................
1
st
APPELLANT
CHETTY,
CLARENCE
...........................................................................................
2
nd
APPELLANT
JOY FINANCE
CONSULTANTS
..........................................................................
3
rd
APPELLANT
and
THE
STATE
..................................................................................................................
RESPONDENT
JUDGMENT
MUDAU AJ:
[1] This is an
appeal against the conviction and sentence. The three appellants
appeared before the regional court magistrate, “Specialised
Commercial Crime Court”, Pretoria. They were charged with six
counts of fraud, alternatively, contravening s41 (2) (a) (iii)
read
with
s 54
(1) of the
Auditing Profession Act No 26 of 2005
. All three
were convicted of six counts. Consequently, the first and the second
appellants were fined R30, 000-00 or to undergo
five years
imprisonment’s. The third appellant however, was fined R30,
000-00 which was wholly suspended for five years on
customary
conditions. This court is called upon to make a determination whether
the guilty verdict is supported by the evidence
and the applicable
law. With regard to the question of sentence, whether a wholly
suspended sentence would under the circumstances,
not be adequate.
[2] The facts giving
rise to the conviction of the appellants are not materially in issue
and were not seriously challenged at the
trial. It is therefore not
necessary to traverse the entire body of evidence. The salient
features of the matter are as follows:
the third appellant was at all
relevant times a company registered in terms of the laws of the
Republic, which amongst others,
rendered book- keeping services. The
first and the second appellants were its director and head of the
book-keeping department
respectively. During the trial, the first and
the second appellants appeared in their respective personal capacity
whereas the
third appellant, a legal entity, was represented by the
first appellant (Lubbe, as intended in terms of
s 332
of the
Criminal
Procedure Act, No 51 of 1977
).
[3] The third
appellant was appointed by firms of attorneys (namely C D Tereblanche
Inc., N Xenophontos Attorneys and C J Botha
attorneys) to manage
their accounting records. However none of the appellants were at the
time, registered auditors and accordingly,
not entitled to perform
audits in compliance with relevant statutes or laws.
[4] For the audit
period 2006 and 2007 accountants’ reports were submitted on
behalf of the legal firms under the auspices
of Alan Levitan
& Associates Registered Accountants and Auditors purportedly
in compliance with
Rule 70
read with other relevant rules of the Law
Society of the Northern Provinces (LSNP). It is indeed common
practice that without these
reports, the Law Society is unlikely to
issue a Fidelity Fund certificate to the affected attorney.
[5] In this matter,
the LSNP picked up errors on at least four (initially and later an
additional two) of the audited statements
or reports compiled by the
third appellant albeit under the name of Mr Levitan. In his evidence
Mr Levitan denied that the relevant
reports were compiled and or
submitted by himself or by any member of his staff. Upon being
confronted by Mr Levitan, the first
appellant admitted submitting the
reports to the LSNP. It is Levitan’s testimony that he never
authorised or gave the appellants
permission to use his letterheads
for the reports in issue. It is further his version that he was not
prepared to jeopardise his
name and reputation by authorising someone
else to sign on his behalf.
[6]
From the written heads of argument on behalf of the first appellant
it is admitted that all three appellants
“
completed’
the
relevant “
Rule70
reports".
Further
that they attached a signed letterhead of Levitan to the reports and
also that, “they inserted the details of Levitan
in the spaces
provided in the reports”.
[7] However, it is
the second appellant’s version that he was only concerned with
the bookkeeping functions of the law firms
in question. In addition
that he did not play any part in typing or signing of the necessary
covering letters on the Levitan letterheads.
He was authorised by the
first appellant to use Levitan’s letterhead in the submissions
of the reports .He honestly believed
that there was an association
between the first appellant and Levitan. He was not a director at the
time the reports were submitted
but was the head of the bookkeeping
department. During cross-examination, he admitted however that he was
the one who wrote in
the details of the auditing firm (in this case,
Levitan).
[8]
In argument before us it is contended on behalf of all three
appellants that they lacked the necessary guilty state of mind
and
therefore had no intention to commit the relevant offences under
consideration. It is further contended that the state failed
to prove
the appellants’ guilt beyond a reasonable doubt. It has also
been contended that intention in the form of
dolus
eventualis
is
in this case, insufficient to sustain a conviction for fraud charges.
Snyman (Criminal
Law
5ed
(2008)) describes fraud in the following terms:
‘
Fraud
is the unlawful and intentional making of a misrepresentation which
causes actual prejudice or which is potentially prejudicial
to
another.”
It
is trite that the unlawful and intentional making of a
misrepresentation does not have to cause actual loss for it to
constitute
fraud. The definition of
dolus
eventualis
in
CR Snyman
Criminal
Law
5ed
(2008) at 184 is defined as follows:
A person acts
with intention in the form of dolus eventualis if the commission of
the unlawful act or the causing of the unlawful
result is not his
main aim, but:
(a) he
subjectively foresees the possibility that, in striving towards his
main aim, the unlawful act may be committed or the unlawful
result
may be caused and
(b) he reconciles
himself to this possibility. ’
[9] The learned
author goes on to say the following:
‘
Another
way of describing component (b) is to say that X
was
reckless as to
whether the act may be committed or the result may ensue. However, it
does not matter whether component (b) is described
in terms of
“reconciliation with the possibility” or in terms of
“recklessness”.' Snyman gives an example
of where a
person might be held to have dolus eventualis at 185:
‘
If
X has dolus eventualis, it is possible that he may in the eyes of the
law have the intention to bring about a result even though
he does
not wish the result to follow. In fact, dolus eventualis may be
present even though X hopes that the prohibited result
will not
follow. In this form of intention the voluntative element consists in
the fact that X directs his will towards event A,
and decides to
bring it about even though he realises that a secondary result (event
B) may flow from his act. ’
[10]
The learned author points out that there are two requirements for the
existence of
dolus
eventualis:
6
‘
The first
is that X should foresee the possibility of the result, and the
second is that he should reconcile himself to this possibility.
The
first may be described as the cognitive part of the test and the
second as the conative (or volitional) part of the test. ’
[11]
In S v Brown
2015 (1) SA 211
(SCA) where this aspect is discussed ,
it is said at para [120] with reference to Mr Brown that :
although
the absence of dolus directus may well count in his favour it is but
one of the totality of factors to be taken into account".
Mr
Brown was convicted of fraud on the basis of dolus eventualis after
pleading guilty, which the SCA confirmed (at para 101). It
stands to
reason that the argument that conviction for fraud can only follow if
intent in the form of dolus directus has been established
is clearly
without any merit.
[12] The State’s
contention is that Levitan was a truthful witness. He was frank and
consistent throughout his testimony and
not shaken in
cross-examination. His evidence was satisfactory in every material
respect and he answered all questions spontaneously.
He testified
convincingly that he worked extremely hard to build up his practice
and that he was not going to jeopardise his name
and reputation by
giving someone else the right to sign on his behalf. The State’s
submission is that Levitan’s conduct
is definitely not that of
an accomplice. When he was contacted by Patterson from the LSNP, he
immediately denied having signed
the relevant reports. He could
easily have covered up the situation if he was indeed involved, as
the first appellant alleges.
[13] I have read the
court’s judgment carefully. The court a quo found that the
first appellant was an unsatisfactory witness.
The court found that
he was a poor witness. He did not answer questions directly and was
extremely evasive. He was asked during
cross-examination when he
informed his advocate that he did not know that it was necessary to
be a registered auditor to sign off
a
rule 70
report. He still has
not answered that question up to today. He further still has not
answered the question under cross-examination
why his version that he
did not know that it was necessary for a registered auditor to sign
off a
rule 70
report, did not form part of his explanation/affidavit
in the review application which was directed to the National Director
of
Public Prosecutions. It is clear that Levitan never benefited out
of the audit done by the third appellant, although payments were
in
fact made by inter alia Mr Botha, the complainant on counts 1, 2, 5
and 6 for the services rendered. Mr Botha was never refunded
although
he paid for these false reports and eventually received a fine from
the Law Society. Eventually Mr Botha had to pay for
new reports after
obtaining the services of a new auditor. The first appellant conceded
that he never refunded Mr Botha and his
excuse is that Mr Botha never
asked him to be refunded. According to the First Appellant’s
version, he and Mr Levitan then
came to a so-called arrangement that
obviously Mr Levitan cannot be seen to be receiving any money from
Joy Finance and they then
agreed according to the first appellant’s
version, that instead he, the first appellant, will then make certain
donations
on his behalf to charities of his choice. No proof of such
donations was ever given to the court. The version given by the first
appellant is so improbable that it can be rejected without
hesitation. Knowing full-well that he was not entitled to receive any
moneys after being informed by Mr Levitan and having received
knowledge about the investigation of the Law Society, there was no
reason for him to give the money to charities instead of Mr Botha. In
effect, he did not return the money either to Mr Levitan
or Mr Botha.
In my view the court a quo correctly accepted the evidence of Mr
Levitan. The court also correctly rejected the evidence
of the first
appellant as false. In my view the evidence of the first appellant is
so farfetched that no value can be attached
to it. I therefore accept
that the court a quo correctly found that Mr Levitan never gave the
third appellant a carte blanche to
act under his name, neither did he
hand them blank letterheads to be used for their own purposes as they
deem fit.
[14] I now return to
the position of the second appellant. At the time when the offences
were committed the second appellant was
a bookkeeper of the third
appellant. The court a quo found that the second appellant “falls
around in his evidence”.
The second appellant conceded that he
was aware of the existence and the provisions of
rule 70
and that it
requires the certificate of a qualified auditor. However, according
to the second appellant’s version, he conceded
that he
completed some of those forms and then left it on the desk of the
first appellant and that it was the first appellant’s
obligation, according to what he was thinking, to sort it out with Mr
Levitan once he has checked this. In contrast thereto, the
first
appellant testified that he was relying on the second appellant to do
this as he was in charge of that section. It is quite
clear that the
first and second appellants’ are trying to put the blame on
each other. In contrast thereto Mr Levitan was
unaware that the third
appellant, through its directors was using his letterhead to confirm
that a proper audit was conducted.
It is clear from Mr Levitan’s
evidence that there was no business relationship between his firm and
that of the third appellant.
The court a quo found that neither the
first or second appellants proved their bona fides and acted under
the belief that Mr Levitan
would sign the necessary reports. The
court a quo found that both the first and second appellants purported
to certain people that
they are allowed to do certain work, which
they did, to the detriment of those people to act to a loss of
themselves. In reaching
this conclusion the court a quo took into
account that both the first and second appellants have been involved
in this type of
business at Joy Finance for many years. They knew
exactly what they were entitled to do and what was disallowed by law.
[15] The format of
rule 70
reports that were completed and submitted to the LSNP by the
appellants is structured and worded in such a way that it is totally
improbable that the appellants did not know that only a registered
auditor was allowed to sign off the reports. The second appellant
knew that they were not auditors. Therefore they could not and were
not allowed to conduct an audit on attorneys’ firms or
books in
terms of
rule 70
as auditors. At the time of the commission of the
offence the second appellant, a BCom graduate with relevant work
experience,
was the head of the bookkeeping department of Joy Finance
(third appellant) for about three to four years. According to the
second
appellant’s evidence in chief, he confirmed that he
indeed completed Exhibits A, C, and E respectively. The three
exhibits
relate to the audit reports of Xenophontos Attorneys,
Terreblanche Incorporated, and Botha Attorneys respectively. The
three reports
are in fact the official reports on the official form
to be completed by an independent auditor which is then after
completion
forwarded to the LSNP. The form starts off with the
provisions of the Attorney’s Act as well as the provisions of
the rules
applicable to audits as specified in the rules of the LSNP.
There is a clear reference in the document that such audit was done
in accordance with the statements of the South African Auditing
Standard applicable to special purpose audit engagements and the
guide issued by the South African Institute of Chartered Accountants
on “Guidance for Auditors: The Audit of Attorneys’
Trust
Accounts in terms of the Attorney’s Act no. 53 of 1997 and the
applicable rules of the provincial Law Societies”.
Taking into
account that the second appellant made a concession that he completed
these forms, one must have regard to the fact
that during the State’s
case, no specific individual could be linked to the physical
completion of the relevant reports and/or
the covering letters until
Mr Levitan was requested by the second appellant’s legal
representative during Mr Levitan’s
cross-examination, to fetch
his office file to refresh his memory in connection with certain
documentation. The matter then stood
down and the court proceeded
with the evidence of another witness. When Levitan returned to court
he gave evidence of a business
card with the second appellant’s
handwriting on it, which he coincidentally found in the file. He
confirmed that, although
he is not a handwriting expert, the
handwriting which appeared on Exhibits A, C, and E was similar to
that of the second appellant.
[16] There is no
doubt in my mind that the second appellant, being aware of the
existence and the contents and provisions of
rule 70
, was fully aware
of the fact that neither himself, the first nor the third appellants,
were entitled or allowed to conduct an audit
on the books of
practicing attorneys. The act is abundantly clear. Only a registered
and qualified auditor is allowed to do such
an audit. The second
appellant’s so-called reliance on a working relationship
between the first appellant and Levitan is
of no consequence. None of
them were entitled to do the work that they did. A working
relationship to do an audit would be contra
bones mores and therefore
of no force and effect. According to the second appellant’s
version he never discussed with the
first appellant the arrangement
and/or process that should follow once the third appellant had
completed the figures in the
rule 70
report. He would just leave it
on the desk of the first appellant. He must have known that no
auditor would sign off an auditor’s
report taking personal
responsibility for what he has signed if he has no knowledge of what
took place during the audit. An auditor
signing of such a report
without having any knowledge would take personal responsibility for
any shortcomings in the report if
and when it is discovered. Common
sense dictates that if the second appellant was responsible for the
audit as head of the bookkeeping
department, he would have discussed
his audit with the first appellant before the signing of the reports
in order to complete the
process. It is highly improbable that there
could have been this big silence between the first appellant and the
second appellant
who was the head of the bookkeeping department. It
is furthermore highly improbable that the second appellant believed
that the
signing off of the reports was being dealt with properly
according to
rule 70.
No arrangements were made between him and the
first appellant for the auditor who was going to sign off the reports
(whether it
was Levitan or another auditor) to liaise with him on
some level or other in order to do spot-checks or examine on a test
basis
the accounting records of the attorneys before signing it off
by the auditor. The improbabilities in the defence’s version
are supported by Mr Levitan’s complete denial of any working
relationship between himself and any of the appellants.
[17] To my mind the
appellants knowingly made a false representationthat they were Alan
Levitan and Associate Auditors whereas in
truth, they were not. In
addition they wilfully persisted in their operations. To my mind this
operation constituted wilful deceit
by them.
[18] Similarly the
argument that the books were in order and therefore no real or
potential prejudice was suffered is certainly
without any merit.
There was always a danger that had the books not been in order, the
good name of Alan Levitan and Associate
Auditors’ might fall
into disrepute. In this case however, the affected legal firms had to
resubmit other audited statements
by properly registered firms of
auditors in compliance the law and the relevant statute. In this
regard fees had to be paid. To
this extent therefore, they suffered
real prejudice. In addition, the fact that Fidelity Funds
certificates could not be issued
at that point in time caused them
further prejudice. The conviction is in order.
[19]
It remains to deal with the question of sentence. The principle of
our law applicable in this regard is simple. The trial court
retains
discretion in imposing a sentence (or sentences) that is suitable
given the peculiar circumstances of each case. In S
v
Ingram
1995
(1)
SACR
1
(A)
at 8i-9b, Smalberger JA said.
'It
is trite that the determination of an appropriate sentence requires
that proper regard be had to the triad of the crime, the
criminal and
the interests of society. A sentence must also, in fitting cases, be
tempered with mercy.... Circumstances, however,
vary and the
punishment must ultimately fit the nature and seriousness of the
crime. The interests of society are not best sen/ed
by too harsh a
sentence
;
but equally so
they are not properly served by one that is too lenient. One must
always strive for a proper balance. In doing so
due regard must be
had to the objects of punishment.
’
[20] In mitigation
it was placed on record that first appellant is 52 years of age,
married and a father to three children one of
whom was still a
dependent minor. The second appellant was 43 years of age at the
time, divorcee but a father to a minor child.
None of them had
previous convictions.
[21] I am not
persuaded that the sentences imposed on the appellants, given the
scale and circumstances under which these offences
were committed,
are shockingly inappropriate or that they induce any kind of shock.
In the contrary, they border on the lenient
side. It is clear from
the evidence that this elaborate fraudulent scheme was well thought
out and planned. The fraudulent conduct
endured repeatedly and for a
lengthy period of time.
[22] In the result I
propose the following order:
1. The appeal
against conviction and sentence by all three appellants on the 6
counts of fraud is dismissed.
MUDAU
TP
ACTING
JUDGE OF THE HIGH COURT
I agree and it is so
ordered.
DE VOS J
JUDGE OF THE
HIGH COURT
Date
of Hearing: 3 February 2015
Date
of judgment: 3 February 2015
APPEARANCES:
For
the appellants:
Mr
G H Ferrar
: Mr G Gioia
For the respondent :
Adv L Koch
: NPA