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[2007] ZASCA 36
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Wypkema v Lubbe (138/06) [2007] ZASCA 36; [2007] 4 All SA 1224 (SCA); 2007 (5) SA 138 (SCA) (28 March 2007)
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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Reportable
Case No 138/06
In the matter between:
FREDERICK WILLEM
WYPKEMA
......................
Appellant
and
TOBIAS JOHANNES LUBBE
......................
Respondent
Coram: Harms ADP, Brand, Lewis, JJA and Snyders, Theron
AJJA
Heard: 12 MARCH 2007
Delivered: 28 MARCH 2007
Summary:
Attorney – drawing of cheque on
trust account – acts as principal and not in a representative
capacity.
Neutral
Citation: This judgment may be referred to as
Wypkema
v Lubbe
[2007] SCA
36 (RSA).
J U D G M E N T
SNYDERS AJA/
SNYDERS AJA:
[1] The appellant was refused
provisional sentence in proceedings against the respondent by Van
Rooyen AJ in the Pretoria High Court.
He appeals against that
decision with leave of this court. The respondent is not opposing the
appeal.
[2] The respondent, a practising
attorney, approached the appellant on behalf of a client, Rooihak
Eiendomme (Edms) Bpk (Rooihak),
for a loan as bridging finance for
the acquisition of an immovable property pending the registration of
a mortgage bond over the
property. The appellant agreed to extend a
loan of R1 850 000 at a fee of R350 000. Prior to the money being
advanced in terms of
the loan agreement the respondent, under cover
of a letter dated 13 September 2004, furnished the appellant with a
cheque dated 14
September 2004 drawn by him on his firm’s trust
account in favour of the appellant in the agreed amount of R2 200
000, the
total amount of the loan and the fee of R350 000. This
cheque was duly presented for payment by the appellant on 30
September 2004
when it was dishonoured by non-payment and returned to
the appellant marked ‘effects not cleared’.
[3] The court a quo upheld all the
defences raised by the respondent in his answering affidavit and
found:
‘
.
. . that in terms of the nature of an attorney’s trust account,
the attorney at all times acts as agent on behalf of other
entities
in respect of such trust account and the funds in a trust account of
an attorney never vests in the attorney.’
Flowing from that finding the court
concluded that the respondent issued the cheque in a representative
capacity as agent for Rooihak
and therefore was not personally
liable. On the facts the court found that the respondent had not
bound himself or his firm as surety
and co-principal debtor for the
obligation of Rooihak and that the agreement to repay the loan with
this cheque was subject to the
registration of the mortgage bond on
or before 29 September 2004. All of these findings are attacked by
the appellant.
[4] Section 78(1) of the Attorneys Act
53 of 1979 compels a practising attorney to keep a separate trust
banking account. It reads:
‘
(1)
Any practising practitioner
1
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.’
The money deposited into that account
generally does not form part of the assets of the relevant attorney,
as s 78(7) provides:
‘
(7)
No amount standing to the credit of any practitioners’s trust
account shall be regarded as forming part of the assets of
the
practitioner, or may be attached on behalf of any creditor of such
practitioner: Provided that any excess remaining after payment
of all
claims of persons whose money has, or should have, been deposited or
invested in such trust account, and all claims in respect
of interest
on money so invested, shall be deemed to form part of the assets of
such practitioner.’
[5] The nature of an attorney’s
trust account and the relationships between bank, attorney and the
latter’s client were
summarised in
Fuhri
v Geyser NO
1979 (1) SA 747
(N)
2
at 749C-E as follows by Hefer J:
‘
. .
.
despite the
separation of trust moneys from an attorney’s assets thus
affected by s 33 (7), it is clear that trust creditors
have no
control over the trust account: ownership in the money in the account
vests in the bank or other institution in which it
has been deposited
(
S v
Kotze
1965
(1) SA 118
(A) at 124), and it is the attorney who is entitled to
operate on the account and to make withdrawals from it (
De
Villiers NO v Kaplan
1960
(4) SA 476
(C)). The only right that trust creditors have, is the
right to payment by the attorney of whatever is due to them, and it
is to
that extent that they are the attorney’s creditors. This
right to payment plainly arises from the relationship between the
parties and has nothing whatsoever to do with the way in which the
attorney handles the money in his trust account.’
[6] In
De
Villiers NO v Kaplan
1960
(4) SA 476
(C), referred to and approved of by Hefer J, the court
stated at 479A-C that the section:
3
‘
.
. . left unimpaired the right of the attorney to direct the bank at
which the trust account is kept to dispose of the amount standing
to
the credit of that trust account in a manner as directed by him. Katz
[the attorney] retained the right to direct the bank to
pay the money
in his trust account to his trust creditors or to persons to whom
such creditors had instructed him to make payment.
He similarly
retained the right if there was a sum in such account in excess of
that required to meet his trust obligations, to direct
the bank to
pay such excess to his personal creditors or to him personally.
Indeed as between himself and the bank, unaware of the
fact that he
was acting in conflict with his trust obligations, he could direct
the bank to pay the amount standing to the credit
of his trust
account to his personal creditors or to himself. Should the bank,
acting on any such directions, pay out the amount
standing to the
credit on his trust account, such amount would, as indicated above,
cease to be amenable to the terms of sec. 33(3).
In effect,
therefore, even although the amount in the trust account was not,
while it was still in such account, an asset belonging
to Katz, he
had a right of disposal over such amount . . .’
[7] The court a quo failed to have
regard to these basic principles and consequently erred in its
conclusion. When an attorney draws
a cheque on his trust account, he
exercises his right to dispose of the amount standing to the credit
of that account and does so
as principal and not in a representative
capacity.
[8] Flowing from that incorrect
premise the court a quo found that the respondent issued the cheque
on behalf of Rooihak. That conclusion
is contrary to the Bills of
Exchange Act 34 of 1964 that provides in s 24(1):
‘
. .
.
if a person
signs a bill as drawer . . . and adds words to his signature
indicating that he signs for or on behalf of a principal,
or in a
representative capacity, or if he signs as drawer and the name of the
principal appears with his signature, he is not personally
liable
thereon . . .’
T
he
respondent’s signature on the cheque is unqualified and appears
below the printed words
‘
TOBIAS
LUBBE ATTORNEY TRUST ACCOUNT ACT 53/1979 SECTION 78(1)’
in the space provided for the drawer
to sign. These words do not qualify the signature of the drawer but
merely identify the bank
account on which the cheque is drawn. There
are no facts that bring the respondent’s signature as drawer
within the ambit of
s 24(1): thus the conclusion follows that he
signed the cheque in his personal capacity.
[9] The finding that the respondent
did not undertake liability as surety and co-principal debtor does
not relate to any of the facts
and issues in the case and is
inconsequential in view of the conclusions reached.
[10] The letter of 13 September 2004
that accompanied the respondent’s cheque to the appellant
formed the basis of the conclusion
by the court a quo that the
agreement underlying the cheque was subject to the registration of a
mortgage bond. The relevant portions
from the body of that letter
reads:
‘
Soos
u bewus is sien ons toe tot die registrasie van ‘n eerste
verband ten gunste van Standard Bank oor die eiendom en is ons
in
besit van die brief van onderneming vir betaling van die gemelde
bedrag teen registrasie van die gemelde verband.
Ons onderneem onherroeplik dat
registrasie van die verband sal plaasvind en dat registrasie sal
plaasvind nie later nie as 28 September
2004, ten einde u terug te
betaal nie later nie as 29 September 2004.
Vind dan hierby aangeheg die volgende:
Afskrif van waarborg van Standard
Bank vir betaling van R2 200 000.00;
Ons trusttjek in die bedrag van R2
200 000.00 met die uitdruklike verstandhouding dat u die tjek slegs
sal aanbied vir betaling
op 29 September 2004 en verlang weer u
onderneming in die verband.
Ons vertrou dat u voormelde in orde vind
en bevestig dat u met ontvangs van die dokumentasie ons sal voorsien
van u tjek in die bedrag
R 1 850 000.00, alternatiewelik elektroniese
oorplasing na ons rekening . . . .’
[11] Nothing in this letter suggests
the suspensive condition found by the court a quo. The only term
apparent from the letter is
that the cheque was delivered subject to
it not being presented for payment before 29 September 2004.
[12] None of the grounds upon which
provisional sentence was refused can be
upheld. However, a question arose
during the hearing of the appeal whether the agreement to take a
trust cheque as security for repayment
of a loan when the funds from
which that cheque was meant to be paid were not yet in the trust
account was not contra bonos mores
and therefore unenforceable.
[13] It is a fundamental principle of
our law that an agreement to commit an unlawful act or serve an
unlawful purpose is invalid.
The maxim
ex
turpi causa non oritur actio
operates
against any attempt to enforce an unlawful agreement.
4
[14] The question of unlawfulness has
arisen primarily because of the following allegations in the
appellant’s replying affidavit:
‘
4.3
At all relevant times I was induced to enter into the loan agreement
by the defendant’s proposal that he provide me with
his trust
account cheque for the sum of R2 200 000,00, subject to the condition
only that it be deposited by me on the 29
th
September 2004. By this
act the defendant guaranteed to me that I would receive full payment
of the sum of R2 200 000 on the 29
th
September 2004.’
‘
8.1
I submit that the mere fact that the defendant placed me in
possession of a cheque drawn on his trust account, an utterly
irregular
act, the unlawfulness and consequences whereof the
defendant was undoubtedly aware, refutes any suggestion of a
suspensive condition.’
[15] If there were sufficient funds
which were held on account of other parties – excluding Rooihak
– to meet the cheque,
it would have been proper to deduce that
the underlying agreement had been entered into with an unlawful aim.
This is because the
bank would have honoured the cheque using funds
destined for third parties and the Fidelity Fund would then,
ultimately, have had
to finance any shortfall. On the other hand, if
there were insufficient funds in the trust account to meet the
cheque, irrespective
of whether they were held on account of others
presentation thereof would simply have resulted in the cheque being
dishonoured, as
did happen, with no real disturbance to the funds in
the trust account because it would not have been possible to execute
against
the trust account.
[16] The only facts before us that
reflect on the state of the respondent’s trust account at the
time that the cheque was presented
are that it did not contain
sufficient funds to meet the cheque and the expected proceeds from
the mortgage bond were never deposited.
It is not known what the
state of the trust account was at the time that the agreement was
entered into, nor the extent of the trust
creditors at that time or
at the time that the cheque was presented. It is therefore not
possible to conclude that an agreement was
entered into with an
unlawful aim or purpose.
[17] Aside from establishing the
nature of the agreement it is relevant to establish whether either of
the parties intended to perform
the agreement in an unlawful way.
5
There exists a presumption in law that
parties intend to perform agreements in a lawful manner. In
Claasen
v African Batignolles Construction (Pty) Ltd
1954
(1) SA (O) at 556H-557A that presumption was expressed as follows:
‘
.
. . a contract perfectly valid on the face of it may stipulate for
the performance of an act which is illegal at the time the contract
is entered into and then it is void
ab
initio
.
A contract, however, is not necessarily illegal merely because it may
be performed in a manner contrary to law. There is a presumption
that
the parties intend to act lawfully, and a contract which may be
performed in two ways, one lawful, the other unlawful, will
not be
void except on proof that it was intended to perform it in the
illegal way.’
6
[18] The appellant was assured, in
language which was clear in its intent, in the letter of 13 September
2004 that registration of
the mortgage bond that was to provide the
proceeds from which the cheque was to be paid, was to have been
registered no later than
28 September 2004. He was also told that the
respondent was mandated to register the mortgage bond and was in
possession of a letter
of undertaking from the prospective mortgagee,
a bank, to pay the money into the respondent’s trust account
upon registration
of the mortgage bond.
[19] On the strength of these
assurances there is no reason why the appellant was not entitled to
accept that the respondent was issuing
and delivering the cheque with
no risk to any of his trust creditors or the Fidelity Fund. In fact,
as a general proposition one
would be entitled to accept, in the
absence of knowledge to the contrary, that when an attorney issues a
trust cheque, he acts lawfully
and in accordance with the rules of
his profession. To be given a trust cheque by an attorney is
therefore an added assurance that
the cheque is likely to be met.
[20] The events that followed on the
delivery of the cheque suggest that there was no unlawful agreement:
(a) the cheque was dishonoured;
(b) the respondent wrote a letter to
the appellant after the cheque was dishonoured that the payment of
the funds by the mortgagee
into his trust account was imminent;
7
and (c) the respondent never raised
the defence that the appellant intended an unlawful consequence when
he took a trust cheque as
security for payment of the loan.
[21] There is one outstanding aspect.
The respondent issued a cheque that was dishonoured, he made promises
of the imminent availability
of funds which implied the registration
of a mortgage bond when that had never taken place. This conduct and
the propriety of issuing
what was in effect a post-dated cheque on a
trust account, should be investigated.
[22] For these reasons:
The appeal is upheld with costs.
The order of the court a quo is set
aside and replaced with an order for provisional sentence in the
following terms:
Payment of the amount of R2 200
000;
Interest on the amount of R2 200
000 at the rate of 15,5% per annum from 1 October 2004 until date
of final payment;
Costs of suit.
The Registrar is requested to refer
this judgment to the Law Society of the Northern Provinces.
__________________________
S SNYDERS
ACTING JUDGE OF APPEAL
CONCUR:
HARMS ADP
BRAND JA
LEWIS JA
THERON AJA
1
‘
Practitioner’
is defined in s 1 as meaning ‘any attorney, notary or
conveyancer’.
2
The
principles were approved on appeal by the full court in
Fuhri
v Geyser NO
1980
(1) SA 598
(N)
.
The matter related
to an attorney’s trust account in terms of s 33(3) of the
Attorneys Act 23 of 1934 the predecessor to the
current Act which
section was worded in essentially the same terms as s 78(7).
3
Again
a reference to s 33(3) of Act 23 of 1934 and the comments made in fn
2 above are applicable. See also
Crowther
& Pretorius v Warda Butchery BK t/a R S Butchery
1999
(1) 847 (N) at 852A; Cameron
et
al Honore, SA Law of Trusts
pp
293, 336 para 209 and 569 para 352.
4
Jajbhay
v Cassim
1939
AD 537
;
Visser
v Rousseau en andere NNO
1990
(1) SA 139
(A).
5
In
Archbolds
(Freightage) Ltd v S Spanglett Ltd (Randall Third Party)
[1961]
1 All ER 417
(CA)
one
of the effects of illegality on an agreement was summarised as
follows:
‘
If at the time of
making the contract there is an intent to perform it in an unlawful
way, the contract, although it remains alive,
is unenforceable at
the suit of the party having that intent; if the intent is held in
common, it is not enforceable at all.’
This was quoted with
approval in
Essop
v Abdullah
1986
(4) SA 11
(C) at 15F.
6
See
also
Kirsten
v Bankorp Ltd
1993
(4) SA 649
(C) at 661I-J;
Karstein
v Moribe
1982
(2) SA 282
(T) at 291C-F;
Juglal
NO v Shoprite Checkers (Pty) Ltd
2004
(5) SA 248
(SCA) para 12.
7
This
letter implies that the mortgage bond was registered, but in
contrast, the respondent in his answering affidavit alleges, rather
vaguely, that the ‘. . . transaction, in terms whereof the
funds would have been received to be paid from the trust account
was
cancelled/alternatively did not proceed. . . .’