Law Society of the Free State v Le Roux and Others (3039/2014) [2015] ZAFSHC 233 (30 November 2015)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Free State High Court, Bloemfontein
SAFLII
>>
Databases
>>
South Africa: Free State High Court, Bloemfontein
>>
2015
>>
[2015] ZAFSHC 233
|

|

Law Society of the Free State v Le Roux and Others (3039/2014) [2015] ZAFSHC 233 (30 November 2015)

IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number:   3039/2014
In
the matter of:
LAW
SOCIETY OF THE FREE STATE
Applicant
and
WERNER
LE
ROUX
First Respondent
BERNARDUS
JACOBUS
VIVIERS
Second Respondent
STELLA
SMITH
Third
Respondent
GOODRICK
& FRANKLIN ATTORNEYS INC
Fourth
Respondent
(Registration
Number:  2003/031198/21)
CORAM:
MOLEMELA, JP, DAFFUE, J et MIA, AJ
JUDGMENT
BY:
MOLEMELA, JP
DELIVERED
ON:
30
NOVEMBER 2015
[1]
Introduction
This
is an application brought by the Law Society of the Free State (“Law
Society”) for an order removing the name of
the first
respondent from the roll of attorneys and granting other ancillary
relief. Against the second and third respondents the
relief sought by
the Law Society is that they be warned, alternatively that they be
suspended or “appropriately sentenced”
but not struck off
the roll.
[2]
Background facts
The
first respondent, namely Mr Werner Le Roux was admitted as an
attorney by this court on 13 October 1987.  The second
respondent
Mr Bernardus Jacobus Viviers was admitted as an attorney
and conveyancer by this court on 10 December 1998 and as a Notary
Public
on 8 July 2004.  The third respondent, namely Ms Stella
Smith was admitted as an attorney on 9 January 1997 and as a
conveyancer
on 7 January 1999.  They were all directors at the
firm called Goodrick and Franklin Inc, which is cited as the fourth
respondent
(“the firm”).
[3]
In its application, the Law Society stated that the offending conduct
which prompted it to approach this court for relief as
follows:
“
There
was a substantial trust deficit in the respondents’ books;
contravention of rules 16 and 16A; respondents’
misappropriation
of trust funds; trust deficits consistently appeared
in the respondents’ bookkeeping over a period of time;
respondents failed
to submit a rule 16B audit report timeously; the
firm’s rule 16 audit report for the period ending February 2011
(1 March
2010 to 28 February 2011) is qualified; the latest audit
report is also qualified; the respondents arguably conducted an
illegal
investment scheme alternatively an illegal investment
practice; the respondents failed to keep proper accounting records in
respect
of their practice and contravened several provisions of the
Attorneys Act (section 78) and the Law Society Rules (Rule 16)
relating
to bookkeeping by the attorneys.”
[4]
Another ground relied upon by the Law Society is that the first,
second and third respondents are guilty of unprofessional,

dishonourable and unworthy conduct. In addition to above, the
following contraventions were raised in respect of the first
respondent:
that he failed to co-operate fully with it (the Law
Society) during its investigation and made conflicting
statements/affidavits
and was, at the time of the launching of the
application, practising without a Fidelity Fund Certificate.
[5]
The offending conduct sketched in the founding affidavit deposed to
by the former president of the Law Society is supported
by a report
emanating from an investigation into the accounting and financial
records of the firm, which uncovered several contraventions
of
certain provisions of the Rules of the Law Society (“the
Rules”) and the Attorneys Act 53 of 1979 (“the Attorneys

Act”).  These included the existence of a trust deficit
over a substantial period of time, misappropriation of trust
funds,
conducting an illegal investment scheme and failure to keep proper
accounting records in contravention of the Attorneys
Act and the
Rules.
[6]
On 2 September 2011, the firm’s auditor, namely
Kotie
Kruger Chartered Accountants,
presented a qualified audit
report to the Law Society.  In that report the auditors
inter
alia
mentioned that as at 30 November 2010 the trust deficit
amounted to R441 846.17 The auditors further stated that on the
28
th
February 2011 there was a trust deficit in the amount
of R917 652.27, which was partially occasioned by trust debits,
and
that payments clearing the deficits were made on 1 March 2011 and
1 May 2011, respectively.  The auditors further mentioned
that
the remaining deficit was occasioned by irregular transfers from the
trust account to the business account.  The auditors
further
reported that a trust creditor’s investment was transferred to
a file opened in the name of the first respondent
in accordance with
an oral loan agreement between the trust creditor and the first
respondent.  The invested amount was then
used to cover the
deficit on 1 May 2011.
[7]
The qualified audit report prompted the Law Society to instruct an
independent firm of Chartered Accountants namely Messrs Newtons

(“Newtons”) to investigate the matter further.
Newtons compiled a report which confirmed that the deficit as
on 28
February 2011 was an amount of R917 652.27. In their report,
Newtons
inter alia
reported that they had scrutinized the
trust records and transfer batches and had found that they could not
match amounts transferred
with the transfer prints.
[8]
A senior chartered accountant of Newtons, who was reputed to have a
wide knowledge of attorneys’ accounting records and
experience
in auditing of practicing attorneys books,
inter
alia
opined that the first respondent
“
was apparently aware of the
misappropriation of trust funds and entered into loan agreements
before actual amounts could have been
obtained from the accounting
records.”
[9]
It is common cause that the Law Society provided all the respondents
with all the findings of the Newton report and requested
each of them
to submit a written explanation to the Law Society.
[10]
The litigation history
The
Law Society brought an application against all the directors of the
firm (Goodrick and Franklin). It prayed for the first respondent’s

striking off and for the second and third respondents to be warned,
alternatively to be suspended from practice. It asserted in
its
papers that it had proven the misconduct against the respondents and
had justified the relief it was seeking. It also asserted
that the
second and third respondents were less culpable than the first
respondent, hence its prayer for a lesser penalty against
them. It
specifically stated that the second and third respondents should not
be struck from the roll of attorneys. In his affidavit,
the first
respondent averred that the management and control of the firm vested
in all three directors and that it would therefore
be unfair if a
harsher sanction were to be imposed on him when all three respondents
were equally liable and had joint responsibility.
In his explanatory
affidavit filed with the Law Society second respondent vehemently
denied that the financial management of the
firm was vested in all
three of them (the directors) and maintained that the first
respondent abrogated to himself the responsibility
of managing the
firm’s financial affairs. Despite the trite principle that an
attorney against whom an application is brought
by the Law Society is
expected to respond meaningfully and furnish a proper explanation of
financial discrepancies
[1]
, the
second respondent initially did not oppose the present application
and thus filed no affidavit. The third respondent opposed
the
application but merely filed a confirmatory affidavit in which she
confirmed the first respondent’s averments insofar
as they
related to her.   The affidavit that she had filed with the
Law Society before the launching of the application
was sketchy and
had no details as to how the firm was managed and how the trust
deficit could have arisen.
[11]
It bears emphasising that when a Law Society brings an application
based on the provisions of section 22 of the Attorneys Act,
it does
so
custos
morum,
as
the
guardian of morals of the attorneys’ profession. It merely
places facts for consideration by the court in the exercise
of its
disciplinary function over attorneys as officers of the court so as
to enable it to exercise its discretion as to the appropriateness
of
a sanction to be imposed in the event the commission of the
transgressions is established
[2]
.
It is trite that partners in a firm of attorneys and directors in an
incorporated company of attorneys are jointly responsible
to keep
proper books of accounts in accordance with the Attorneys Act 53 of
1979 and the Rules of the Law Society. Each director
in an
incorporated company is jointly and personally liable for the acts
and omissions of the company. T
he
fact that one of the directors of a corporate practice is responsible
for the bookkeeping of the practice does not mean that
the other
directors are relieved of their legal responsibility in respect of
the trust account.
[3]
Furthermore, non-involvement of a director with the financial
management of the company is no defence at all.  Compliance
with
the Act and Rules is the duty imposed on all attorneys whether acting
for own account, in partnership or as a director of
a corporate
company.
[4]
[12]
Having read the papers and listened to arguments presented on behalf
of the Law Society and the first respondent, the court
considered the
seriousness of the charges and that they could warrant the imposition
of the same sanction on all the respondents
on the basis that they
were all directors of the firm and jointly liable. The court took the
view that the second respondent’s
decision not to oppose the
matter and third respondent’s failure to file a detailed
answering affidavit may have been prompted
by the less harsh sanction
sought against them. The court thus considered that it would not be
fair for it to, on the basis of
the transgressions proven against
them, impose harsher sanctions without first giving them an
opportunity to respond to the allegations.
[13]
It was against that background that this court decided on 6 February
2015 to give them an opportunity of presenting explanations
in the
form of affidavits. The court accordingly postponed the matter and
granted them leave to file answering affidavits and supplementary

heads of argument. In the interests of fairness, the Law Society was
granted leave to file a supplementary replying affidavit and

supplementary heads of argument if it so required. The second
respondent filed an answering affidavit and heads of argument, while

the first and third respondents filed supplementary affidavits. The
Law Society opted not to file a supplementary replying affidavit
and
instead filed supplementary heads of argument.  The matter was
subsequently enrolled for a re-hearing before three judges.
[14]
The applicable law
The
respondents are charged with various transgressions which have
already been set out earlier in the judgment. It is necessary
to
consider the relevant provisions of the Attorneys Act
[5]
and the Rules that the respondents are alleged to have contravened,
as well as the section of the Attorneys Act that forms the
basis of
the relief sought against them.
[15]
Rule 16A.3 provides as follows:
“
Trust
balances not to exceed trust monies and no trust account to have a
debit balance.”
A
firm shall ensure that
16A.3.1
the total amount of money in its trust banking account in its trust
investment account …
16A3.2
‘that no account of any trust creditor is in debit’;…
16A5
‘Withdrawal from trust banking account’.
[16]
Rule 16A.5 provides-
“
A
firm shall ensure that withdrawals from its banking account are made
only –
16A5.1
‘as transfers to its business banking account, provided that
such transfers shall be made only in
respect of money due to the
firm.’”
[17]
The Law Society’s power to apply for the striking of an
attorney from the roll is embodied in section 22 of the Attorneys

Act.
In
terms of s 22(1)(d), an attorney may, at the instance of ‘the
law society concerned, be struck from the roll or suspended
from
practice by the court . . . – if he, in the discretion of the
court, is not a fit and proper person to continue to practise
as an
attorney’
.
It is trite that when a Law Society brings an application of the
nature contemplated in that section it performs a public duty
[6]
.
[18]
The Supreme Court of Appeal, in the case of
Botha
v Law Society of the Northern Provinces
[7]
re-iterated that section 22 (1) (d) contemplates a three-stage
enquiry; firstly, the court must decide whether the alleged offending

conduct has been established on a preponderance of probabilities.
Second the court must consider whether or not the person
against whom
the application is brought is a fit and proper person to continue to
practise as an attorney.  Thirdly, the court
must inquire
whether in all the circumstances the attorney is to be removed from
the roll of attorneys or whether an order of suspension
would
suffice.  The court also stated that in the adjudication of
applications brought by the Law Society against errant practitioners,

a court exercises its supervisory function over legal practitioners
and is entitled to call for evidence to enable it to do so
properly.
[19]
As
a general rule striking-off is reserved for attorneys who have acted
dishonestly, whilst transgressions not involving dishonesty
are
usually visited with a lesser penalty of suspension from
practice
[8]
.
In
Malan
and Another v Law Society of Northern Provinces,
[9]
Harms JA stated as follows in para [10]:
“
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.”
[20]
In
Hepple
and Others v The Law Society of the Northern Provinces,
[10]
the Supreme Court of Appeal confirmed that the proceedings in
applications to strike attorneys from the roll are not ordinary civil

proceedings but that they are proceedings of a disciplinary nature
and are
sui
generis.
The
court confirmed the duty resting on an attorney in these kinds of
proceedings in the following
dictum
:
“
It
follows, therefore, that where allegations and evidence are presented
against an attorney they cannot be met with mere denials
by the
attorney concerned. If allegations are made by the Law Society and
underlying documents are provided which form the basis
of the
allegations, they cannot simply be brushed aside; the attorneys are
expected to respond meaningfully to them and to furnish
a proper
explanation of the financial discrepancies as failure to do so may
count against them.”
I
Whether the alleged offending conduct has been established on a
preponderance
of probabilities
[21]
Analysis of transgressions and explanations advanced by the
respondents
There
are two transgressions that the Law Society brought against the
respondents but in respect of which it did not, in my view,
present
sufficient facts to establish them. The first relates to a complaint
brought by a certain Ms Borotho against the first
respondent
pertaining to the first respondent’s alleged failure to carry
out instructions and general delays in carrying
out the complainant’s
mandate. The first respondent denied all the allegations pertaining
to this complaint. The second one
relates to the allegation that the
respondents conducted an illegal investment scheme alternatively an
illegal investment practice,
thus contravening the Attorneys Act. The
afore-mentioned transgressions were not proven on a balance of
probabilities and warrant
no further mention.
[22]
With regards to the remainder of the charges, it must be pointed out
from the outset that the contravention of various provisions
of the
Attorneys’ Act and the Rules of the Law Society is not in
dispute. All the directors claimed not to have deliberately

contravened these provisions. It is also not disputed that the firm’s
trust account reflected a trust deficit in the total
amount of
R917 652.27 on 28 February 2011, that the audit report was
submitted late and that it was qualified. However, there
is a dispute
about whether the shortfall arose as a result of dishonesty. There is
also a dispute about the director that has to
shoulder the blame for
misappropriation of trust funds as each respondent points a finger at
the other. The first respondent claims
that the management of the
firm’s financial affairs was his and the second respondent’s
joint responsibility, except
for the period during and after his long
absence as a result of hospitalisation and recuperation from surgical
operations; he claims
that during the latter period, the second
respondent assumed sole responsibility of the firm’s financial
affairs. The third
respondent obliquely supports this averment. The
second respondent on the other hand claims that the first respondent
was at all
material times the director that was responsible for the
management of the firm’s affairs. In the end, the various
disputes
of facts were decided in accordance with the principles laid
down in the seminal judgment of
Plascon
Evans v van Riebeeck Paints
[11]
.
The commission of the transgressions was established largely on the
basis of undisputed evidence. Some factual disputes were raised
but
had no impact on the undisputed facts once the untenable aspects had
been rejected.
(i)
Failure to keep proper accounting
records
[23]
Rule 16.7 expressly provides that a firm making a transfer from its
trust banking account to the business account
shall ensure that the
amount transferred does not exceed the amount due to it, yet the firm
chose to continue transferring huge
sums of money over a period of
more than a year without verifying whether the client ledgers
reflected a credit balance, resulting
in the increase of the deficit.
The first, second and third respondent had a shared responsibility to
keep proper books and records
of their firm in accordance with the
Attorneys Act read with the rules and regulations of the Law Society.
Although Rule 16.5 stipulates
that a firm should regularly and
promptly update its accounting records, it appeared from the Newtons
report that the firm’s
accounting was in disarray as the
postings were three months in arrears, computer-generated amounts did
not tally with the amounts
transferred and funds were apparently
transferred “to cover amounts needed in business”.
[24]
The first respondent sought to rely on a malfunctioning computer
programme as one of the reasons for the firm’s failure
to keep
proper books of account. Even if it were to be accepted that they
encountered problems with the new program, it is difficult
to
understand why the respondents would not have taken any steps to
address the problem from the time of installation of the program
in
November 2009, to the revelation of the deficit in August 2011.
The books of account revealed a continuing pattern of
transfers being
made from the trust to the business account despite the existence of
trust debits. It is not in dispute that in
May 2010, the trust
shortage amounted to R99 899.98.  In August 2010 it
amounted to R26 310.62.  In November
2010 it escalated to
R414 846.17.  By the end of the financial year on 28
February 2011, it had skyrocketed to the sum
of R917 652.27.
It is therefore mind-boggling how any of the three respondents could
have been oblivious to the purported
problems, especially considering
that the firm had an in-house bookkeeper.
[25]
If one accepts the first respondent’s version that the
malfunctioning program was brought to his attention by the firm’s

book-keeper who was a full time employee of the firm the question
that immediately comes to mind is why the respondents did not
take
any steps to bring these problems to the attention of their
accountant or to the Law Society, and why they failed to sort
them
out for a period of more than a year instead of recklessly
transferring large amounts without verifying the availability of

funds from the client’s ledgers.  It is evident that the
malfunctioning program cannot be the reason for the entire
deficit.
It is also clear from all the facts of this case that the substantial
trust deficit could not have been as a result of
simple accounting
errors. In any event, the first respondent blames other factors like
the recession and his long illness for the
deficit. The reasons
advanced by the first respondent as an explanation of the shortfall
are simply untenable and fall to be rejected.
I am satisfied that the
commission of this transgression has been established by the Law
Society.
(ii)
Trust deficit
[26]
Numerous affidavits were filed by the first respondent. He admits
that the audit was done on 24 August 2011, that
a qualified audit
report was presented to the Law Society on 31 August 2011, and that
when he returned to Bloemfontein after a
long period of absence due
to surgical operations that he had undergone in Cape Town, he was
advised of a shortfall of R917 652.45
in the trust account.
He elaborated as follows on this aspect:-
“
Only
thereafter I returned to Bloemfontein and it was during my sick leave
at home when I was informed that a trust shortage of
an unknown
amount is anticipated for the 2011 financial year.  I was at the
same time informed that my co-directors feel that
in view of my long
absences from the firm and as I was also apparently the only director
with security that I must accept liability
for a loan to extinguish
the trust shortage.  I could not immediately think of a way to
obtain the loan until Mr Viviers,
my co-director, pointed out to me
that my old friend, Mr B M Z, paid in a substantial amount of money
into the firm.  I asked
Mr Viviers to please approach Mr Z for a
loan.  Mr Z consented to the loan and a written loan agreement
was later presented
by Mr Viviers for signing.  It was for an
amount of R850 000.00.  I cannot recall when exactly did I
sign the aforesaid
acknowledgment of debt, it could have been on,
before or after 28 February 2011.”
[27]
Many explanations were offered as a cause of the shortfall. The first
respondent asserted that the firm had started using a
new accounting
program during November 2009 and information had to be transferred
from the old program to the new program.
According to him, the
process “took months and created chaos.” He further
stated as follows:
“
As a direct
result of the trust shortage it is unfortunately necessarily so that
trust cheques were issued without sufficient funds
available because
of the system being so many months in arrears, this was not done
knowingly.”
In an affidavit deposed
to at a later stage, he attributed the shortage to the fact that the
firm was, in his absence, managed by
inexperienced directors.
He again mentioned that at that stage the firm had to do without the
income normally generated
by him.
[28]
The following concessions made by the first respondent are of
significance:
“
I humbly submit that
it was unfortunately a direct result of the shortage that trust
cheques were issued without sufficient funds
therefor.  I have,
however, explained here above that due to the program problem the
system was months in arrears and therefore
cheques were issued under
the wrong belief that there were funds available whilst in fact there
were not.  At no stage were
trust cheques issued with the
certainty that a shortage indeed exist.  I humbly submit that
the shortage occurred as a result
of basically 2 reasons, namely the
fact that I was for months absent from the firm and not able to
generate fees and on the other
hand the recession.  We have in
the meantime been able to overcome these problems in the sense that I
am now again full time
back with the firm and furthermore the firm
has succeeded in cutting its expenses as well as increasing its
income to overcome
any shortage.”
[29]
It is evident from the above that even though various reasons were
advanced for the shortfall, the existence of the shortfall
was common
cause as well as the duration thereof. This contravention was
therefore sufficiently established against all the respondents.
(iii)
Failure to submit an audit report timeously and later submission of a
qualified audit report (Rule 16B certificate)
[30]
It is not in dispute that the audit rep
ort for the year ending
on 28 February 2011 was qualified. The audit report in respect of the
year ending 28 February 2012 was also
qualified. It is common cause
that the firm submitted the Rule 16B certificate late. The first
respondent shifted some of the blame
for the firm’s failure to
submit the rule 16B certificate to his accountants.  He fails to
appreciate that the responsibility
to see to it that accounting
records are timeously audited and submitted to the Law Society, lies
with an attorney, not with the
appointed accountant.
[31]
Rule
16B.3 provides that “A firm shall ensure that the report to be
furnished by an accountant in terms of Rule 16B.4 is so
furnished
within the required time or on the required date…”
It
was thus incumbent upon all the directors of the firm to have ensured
that the firm’s appointed accountant or auditor complied
with
the firm’s mandate. None of the respondents advanced a
plausible explanation for the firm’s failure to timeously

furnish the audit report.  I am satisfied that the Law Society
sufficiently established this transgression. Contrary to what
some
practitioners may believe, failure to provide the Law Society with an
annual audit report is not a petty transgression.
It is often
the first tell-tale sign of more serious underlying problems.
Not only does practising without a fidelity fund
certificate
prejudice the public but it actually constitutes a criminal
offence
[12]
.  It is clear
that
practising
without being in possession of a fidelity fund certificate is a
serious breach of an attorney’s duty.
[32]
Directors of law firms are obliged to present an unqualified trust
audit report to the Law Society annually. It is common cause
that the
audit report that was presented on behalf of the firm in respect of
the year ending February 2011 was qualified. This
transgression has
thus been established. In my view, a Law Society that has been
furnished with a qualified audit report must simply
not issue a
fidelity fund certificate pending the Law Society’s
investigation, for this entitles the attorney to continue
receiving
money from members of the public which may increase the Fidelity
Fund’s loss if the investigation reveals impropriety
on the
part of such attorney.  Rather, the Law Society, with all its
resources, should expedite the investigation so that
the root cause
of the problem can be identified quickly.
[33]
As it is turns out in this matter, the firm had a substantial trust
shortage of close to a million Rand, yet the
first respondent seems
to consider the Law Society’s issuance of the fidelity fund
certificate, albeit qualified, as a sign
of how insignificant the
transgression was.
(iv)
Conflicting statements made by the first respondent
[34]
As strange as this may sound, the first respondent disputes having
given conflicting statements notwithstanding the fact that
he was
confronted with specific averments he made in various affidavits
which were contradictory. Various accounts have been given
by the
respondents regarding how this deficit came about. In his affidavit
deposed to in May 2013 and submitted to the Law Society
as part of
his written representations the first respondent stated as follows:
“
At
this point I wish to explain about my friend, Mr Z.  He was a
high ranking official in the old Department of Roads of the

Provincial Administration.  After gross irregularities with
tenders, a political witch-hunt ensued in the said department
during
the course of 2010.  Mr Z assured me that he had nothing to do
with any of the tender irregularities and that despite
that, he was
seriously investigated and some of the guilty people are not being
investigated at all.  Eventually he decided
to resign from the
post.
To be on the safe side he also
decided to rid himself of all assets and requested me to take
transfer of his townhouse known as
10 Monte Video as well as a sum of
money, the amount of which he was not sure of
…
After I gave Mr Viviers the background of the situation, he did the
transfer of the property onto
my
name.  Mr Z also paid in a R1 million as well as the transfer
fees and costs as requested by Mr Viviers.  Mr Z is fully
aware
that the house can now be returned to him
but
has not yet instructed us to do so
.”
[35]
This version is quite different to what he asserted in his second
affidavit submitted to the Law Society, where he stated that
“
As
far as the Z transaction is concerned, I confirm that I instructed Mr
Viviers to handle the transfer. Because of the unique nature
thereof,
I had to give Mr Viviers full background
of the transfer
….”
(my
emphasis).
This also varies markedly from
what he later asserted in the answering affidavit he filed in his
sequestration application, where
he stated as follows:-
“
This
property still belongs to Mr Z. During the writer’s long
sickbed absences from the firm and due to unclear instructions
by Mr
Z it was accidentally transferred by the conveyancer from Mr Z to me
instead…..I made it clear in my opposing affidavit
that the
property was registered in my name because of wrong instructions
given by Mr Z to the conveyance.  As Mr Z gave wrong

instructions he obviously must pay for the transfer of the property
to one of his trusts.”
[36]
It is evident from the latter affidavit that the first respondent
tried hard to salvage the townhouse that Mr Z had transferred
into
his name. In an affidavit he deposed to in the sequestration
proceedings, he stated that the property in question had actually

been transferred to him in error. He stated that the property was
supposed to have been registered in the name of a trust but was

erroneously transferred into his name. The improbability of his
assertion that the firm had not yet transferred the property to
the
trust due to the fact that it was waiting for Z to pay transfer costs
is proven by the fact that Z was already a trust creditor
of the firm
who had even lent money to the first respondent. He simply could not
have waited for Mr Z’s payment in respect
of transfer costs,
when Mr Z had, on his own version, already given him all his money
and even lent him an amount close to R1 000 000.00
There is
no reason why the property would have remained in the first
respondent’s name for another two years before the error
was
rectified. It is in any event highly unlikely that the firm could
have expected him to pay for the rectification of an error
that the
firm itself had committed.
[37]
It is clear from the first respondent’s own version that the
money received from Mr Z was not linked to any specific
matter that
he had mandated the firm to do for him.  It is more likely that
the money was intended to be hidden away on his
(Mr Z’s) behalf
in the firm’s account so as to mislead authorities about Mr Z’s
financial position lest he be
linked to tender fraud and thus making
the amounts susceptible to forfeiture to the state.
Notwithstanding his assertion
that he assured Mr Z that he could not
hide his assets anyway, the first respondent’s complicity in
such shady dealings constituted
highly unprofessional conduct.
[38]
A simple comparison of these statements, both made under oath, makes
it evident that the first respondent gave conflicting
versions to
this court on the specific aspect of how Z’s property ended up
being registered in his name. In trying to explain
the discrepancy,
he said that he had believed the second respondent when the latter
informed him that Mr Z wanted his townhouse
transferred into his
(first respondent’s) name.
[39]
The first respondent claims that it was during a later thorough
consultation with Mr Z that he learnt that Mr Z’s mandate
was
for the townhouse to be registered in the name of a trust that was to
be established on behalf of his family.  He seems
to have
forgotten that in an affidavit he had previously deposed to, he
asserted that the consultation pertaining to the transfer
of the
townhouse into his name took place between Mr Z and him
personally
and not between Mr Z and the second respondent.  There could
therefore not have been any misunderstanding about Mr Z’s

mandate to him. Furthermore, he had personally signed the Deed of
Sale in which he (first respondent), and not the trust, was described

as the buyer of the property in question. He would therefore have
known that the property was being transferred to him in his personal

capacity and not to the trust. Considering that he is a practising
attorney of long standing, I find the assertion that he signed
the
Deed of Sale in question and the supporting transfer documents
without reading them extremely improbable.
[40]
Realising that he had contradicted himself on the issue pertaining to
the transfer of the property into his name, he, in his
supplementary
affidavit, tried to explain the discrepancy as follows:-
“
Wat
betref die inhoud van paragrawe 29.12 tot 29.15 vestig ek die Hof se
aandag daarop dat my weergawes bloot verskil in die sin
dat ek
aanvank[l]ik onder die indruk verkeer dat Mnr [Z] opdrag gegee het
aan 2de respondent om die eiendom oor te dra na my in
plaas van die
trust en na my gedetailleerde konsultasie met hom van oordeel was dat
daar ‘n misverstand tussen hulle onstaan
het en dat as gevolg
van die vermelde misverstand die eiendom na my oorgedra is. In my
aanvanklike eedsverklarings aan die Applikant
was ek oortuig dat die
tweede respondent se weergawe korrek is, naamlik dathy opdrag ontvang
het om die eiendom oor te dra na my.
My gedetailleerde gesprek met
Mnr [Z] het eers plaasgevind lank na die laaste eedsverklaring aan
die Applikant [Prokureursorde]
verstrek is.”
This
attempt at justifying the discrepancy was an effort in futility
because he had expressly stated in his first affidavit that
the
discussion about the transfer of Z’s assets, including the
townhouse, into his name was between Z and him, which means
that the
instruction was given directly to him.
The
versions remain irreconcilable and no amount of explaining will
change this fact.
[41]
With regards to a payment of an amount of R111 857.94 from the
trust account, which was debited on the first respondent’s
WLR
891 file, and paid to the firm Hill Mc Hardy and Herbst, the first
respondent tendered the following explanation in his supplementary

affidavit:-
“
Daar
is een debiet van 21 November 2011 vir ‘n betaling aan Mnre
Hill McHardy & Herbst vir R111 857.94 wat besonderde

vermeding verdien. Hierdie debiet hoort glad nie op my naam nie.
Boedels, ongeag wie aangestel was as ekseketeur / eksekutrise,
is
behartig deur ene Christa Reinders. Sy het aanvanklik onder die
beheer gestaan van 2de respondent en later 3de respondent. Hoe
dit
ookal sy, sy het in die betrokke boedel versuim om sekere dokumente
te lewer aan Mnre Hill McHardy & Herbst en het hulle
‘n
aansoek teen 4de Respondent geloods vir die lewering daarvan. Hulle
was suksesvol daarmee en is ‘n kostebevel van
R111 857.94
verleen teen die 4de Respondent. Dit is dus du[i]delik dat die
vermelde bedrag nie op die 891 Miscellaneous lêer
tuishoort
nie. Die bewering dat ek na Augustus 2011 sou voortgegaan het om
gelde vir “eie gewin en voordeel” te onttrek
het, is
derhalwe ‘n infame leuen. Die agbare hof sal merk dat die
boekhouster slegs fooie geskryf het op die betrokke rekening.

Laastens dien daarop gelet te word dat die rekening afgesluit is met
‘n kredietsaldo van R47749.36.”
[42]
An affidavit filed by the second respondent and deposed to by an
attorney from the firm Hill McHardy and Herbst exposed the
first
respondent’s above mentioned assertion to be one of his many
attempts of leading the court down the garden path. In
his affidavit
Mr Verwey attached supporting documents and explained that the
payment in question was in fact in respect of a compensation
award
made by the Commission for Conciliation Mediation and Arbitration
against the first respondent and two other entities arising
out of an
unfair dismissal dispute that had been successfully instituted
against them by their former employee. The second respondent
has
confirmed that this payment indeed had nothing to do with an estate
matter. The first respondent has not refuted this averment.
It is
therefore clear that he gave this court an untruthful account of
events. It is consequently also clear that the trust deficit
from
file 891 WLR is much more than the amount of R31 741.67 which
the first respondent was prepared to acknowledge.
[43]
Another untruthful account he gave under oath pertains to some
payments made from the file known as the WLR 891 Miscellaneous
file.
It is common cause that the file in question is the first
respondent’s file. The first respondent admitted that the
file
was at some stage used by him for his personal business. He, however,
asserted that it was later used for both his personal
business as
well as various other matters pertaining to the firm. As proof that
the file with reference number WLR 891 miscellaneous
was not his
personal account he mentioned that numerous transactions which “could
not be easily fitted under any other heading”
were posted to
that file.
[44]
First of all, one cannot understand why any payments into or from the
trust account could not be noted under any other ledger
except the
one associated with the first respondent. Two cheques bearing no
client reference and totalling a whopping R342 000.00
were paid
from that ledger. Furthermore, it has been shown, through the
affidavit of an independent third party that a large payment
has been
made by the first respondent in respect of a compensation award made
by the Commission for Conciliation Mediation and
Arbitration against
an entity that the first respondent was associated with.
Clearly, his assertion that the second respondent
authorised such a
payment was untenable. The Law Society correctly pointed out that the
first respondent made conflicting statements.
Courts take a very dim
view of a deponent that misleads the court. Worse still, if the
deponent in question is an attorney, for
an attorney is an officer of
the court and has a responsibility to disclose true facts to a court.
An attorney who has no qualms
in presenting an untruthful account of
events to a court under oath has no integrity and is simply not fit
and proper to practice
as one. If deceit had to be graded according
to degrees that would count amongst the worst forms of deceit.
I am satisfied
that the Law Society has sufficiently established that
the first respondent gave conflicting statements.
(v)
Unprofessional Conduct
[45]
The first respondent sees absolutely nothing wrong with the fact that
money deposited into his trust account ended up being
lent to him for
purposes of extinguishing a trust account shortfall.  He seems
to think that there was nothing wrong with
Mr Z’s account being
debited simply because he (Z) happened to be his friend.  The
fact of the matter is that in the
process of extinguishing the
deficit via this loan, various Law Society rules were breached,
especially rule 16A.5, which provides
that payments from trust
accounts must be made only to a trust creditor. The firm was not Mr
Z’s creditor and there was thus
no justification for the loan
amount being debited in Z’s trust ledger and as a cross
reference, being credited into the
firm’s trust account (in the
first respondent’s WLR miscellaneous client ledger). This was
clearly a transaction that
was meant to mislead the accountant and
the Law Society.
[46]
Furthermore, sight must not be lost of the fact that by his own
admission, the first respondent agreed to accept transfer of
Z’s
cash and fixed property to assist him to evade an investigation being
made by a government department in respect of tender
fraud. Being an
attorney and thus aware of the provisions of the law pertaining to
forfeiture of assets that were gained from illegal
activities, he
agreed to be a party to Mr Z’s disposition of his assets. In
order to facilitate this, he signed a Deed of
Sale that was intended
to disguise the transaction as a legitimate sale agreement, when it
was not. By so doing, he rendered himself
guilty of unprofessional
conduct.
[47]
The first respondent’s statement to the effect that he warned
Mr Z that a claim could still be made on the assets he
had disposed
of does not mitigate the gravity of that misconduct. As a legal
practitioner, he would have known that the risk in
assuming ownership
of someone else’s property was that the assets transferred,
being assets registered in his name, would
form part of his insolvent
estate in the event of his sequestration. As fate would have it, that
is exactly what happened. He was
sequestrated and Z unfortunately
suffered a huge loss, for which he cannot be compensated by the
Fidelity Fund since he brazenly
stated that he was aware that the
loan amount would not be subject to the protection of the Fidelity
Fund.
[48]
The first respondent blames the firm’s accountant for not
timeously informing him that a deficit had arisen. This criticism
is
unfair given the fact that the firm had an internal bookkeeper who in
all probability detected the deficit and notified him
about it. This
explains why the exact amount of the deficit was borrowed from Z and
paid into the account months before the auditor
commenced with the
audit.
[49]
He also blames his co-directors for the manner in which they managed
the firm’s affairs during his illness. Surprisingly,
some of
the blame was imputed to the recession insofar as it resulted in the
firm receiving a reduced income. He also blamed the
Law Society for
the manner in which it went about making its enquiries from the
directors and equally blamed Newtons for the manner
in which it had
compiled its report.
[50]
The first respondent also attributes his firm’s loss of income
and its removal from banks’ panels on the Law Society’s

protracted investigations and its refusal to issue the firm with a
“letter of good standing”, which according to him,

eventually led to the third respondent’s resignation. He does
not seem to realise that the investigations were necessary
given the
qualified audit report and the reasons advanced by the firm’s
accountant. While fixated on imputing blame to others,
he chooses to
pay no regard whatsoever to the undisputed averments about how he
deceived this same director (the third respondent)
by secretly
issuing trust cheques to the firm’s employees in order to earn
extra income for himself and the second respondent
and, in the
process, deceiving SARS about his real income. He does not take
responsibility for his actions. He tries to justify
it by shifting
the blame.
[51]
The following remarks by Harms ADP in
Malan
v The Law Society of the Northern Provinces
[13]
are apposite:-
“
Furthermore,
instead of dealing with the merits of the allegations, the appellants
conducted a paper war and they attacked the Society
and its officers,
they attacked the Fidelity Fund and they attacked the attorneys who
had to take over the files- in short their
approach on the papers was
obstructionist. …These factors are ‘aggravating’
and not extenuating because they
manifest character defects, a lack
of integrity, a lack of judgment and a lack of insight”.
In
a later judgment
[14]
, the same
judge observed that it had become a common occurrence for persons
accused of a wrongdoing to accuse the accuser and seek
to break down
the institution involved instead of properly confronting the
allegations. He pointed out that courts cannot countenance
that
strategy.
I
echo the same sentiments in respect of the first respondent’s
attitude.
[52]
(vi)
Misappropriation of trust funds
It
bears mentioning that a file which, according to the firm’s
auditor, seemed to have processed a number of questionable

transactions is a file opened by the respondent, which was referred
to as the 891 WLR Miscellaneous accounts file. The firm’s

auditor reported as follows:
“
According
to the bookkeeper, account of Mr W le Roux is used to receive
payments from the collection files which he brought in his
personal
capacity.  …Client trust account balances are manipulated
by using journal entries to conceal debit balances
by transferring
amount to another trust account.  Trust cheques are issued
without sufficient funds available therefore trust
monies are used to
finance clients.”
[53]
It is evident from the auditor’s report that a number of trust
cheques that were issued to the first respondent were
debited from
the first respondent’s file WLR 891.  The client ledger in
respect of the same file reveals that the trust
cheques alone, issued
to the first respondent over a period of nine months, amount to a
total sum of R513 000.00. No payments
from that file were made
to either the second or the third respondents. Whether the payments
made to the first respondent were
the first respondent’s income
from his collection matters or not is inconsequential, for Rule 16
clearly stipulates how an
attorney’s fees are to be paid. An
attorney’s fees are not paid to him with a trust cheque; they
have to be transferred
into the attorney’s business account.
Once that has happened, the attorney’s remuneration (drawings)
can then be paid
from the firm’s business account.
[54]
The first respondent made much of the fact that even though there
were trust debits, there were no trust cheques that were
dishonoured
by the bank. In mitigation, he emphasized that no trust creditors
were actually prejudiced as “no person suffered
a loss as a
result of the shortage on trust account”.  He completely
misses the point and seems oblivious to the potential
prejudice that
the trust creditors were exposed to.  He also seems ignorant of
the fact that Rule 16A.3.2 expressly provides
that a firm shall
ensure that no account of any trust creditor is in a debit. This
demonstrates his complete lack of insight into
an attorney’s
obligations with regard to a trust account and the rationale behind
such obligations or his disregard thereof
completely.
[55]
The first respondent also seems to think that the fact that he repaid
the shortfall somehow exonerates him.  For him,
the fact that he
borrowed a large sum of money from a client, that he involved himself
in a simulated transaction and that he was
declared insolvent before
he had repaid even a quarter of the amount seems to be of no
significance.
[56]
Although the first respondent vehemently denied manipulating balances
to conceal debit balances, the payment of Z’s money
into that
account and how the first respondent subsequently dealt with it
thereafter serve as proof that he did in fact tried to
conceal the
firm’s debit balance.
[57]
Pursuant to the investigations made by Newtons, which revealed that
about R917 000.00 had been debited from the account
of Z, the
Law Society contacted Z and requested him to explain the
circumstances under which the money was transferred to the first

respondent. In response to the Law Society’s enquiries Z
informed the Law Society that he had lent the money in question
to
the first respondent.  He stated as follows:
“
The
loan was a once off loan made in good faith and was motivated by my
very old friendship with Mr Le Roux and nothing else.
The loan
was not made to Mr Le Roux in his official capacity as director but
was
a private loan to him
.
I am aware that the loan as such does not enjoy the protection of the
Attorneys Fidelity Fund.  I did not give the
money with the
instructions or intention that it be invested.  As already
pointed out, I gave the money as a loan to Mr Le
Roux in his personal
capacity and for that reason alone.
It
is therefore irrelevant, as far as I am concerned, whether Goodrick &
Franklin Inc. has an investment practice and whether
or not they
complied with the rules applicable to investment practices.”
(my emphasis).
[58]
It is clear from Z’s affidavit that the loan was being advanced
to the first respondent and not the firm. It is also
clear from the
loan agreement that the first respondent signed a loan agreement
which described him, and not the firm, as the debtor.
It is
common cause that the trust deficit of R917 652.26 was
extinguished with the money that the first respondent borrowed
from
Z. It is also clear from the ledger of the file 891 WLR Miscellaneous
that the bulk of the payments made from that file were
made to the
first respondent personally and not to the other directors. Although
a former employee was not a trust creditor, she
was paid with trust
cheques. These payments were also processed from the 891 WLR
Miscellaneous file.
[59]
As stated before, the deficit occurred mainly in the ledger of a file
that was under the first respondent’s control,
namely the 891
WLR Miscellaneous file. Dubious transactions took place in that
account.  The first respondent was responsible
for all files
under his control and the transactions pertaining to them. A
significant number of trust cheques were issued
to the first
respondent
with the relevant debits being reflected in his file’s
ledger. The first respondent thus allowed payments to be made to him

from the trust account which payments should have been made from the
business account. The trust cheques issued to him constituted
a
contravention of Rule 16A of the Law Society Rules.
Significantly, the amount that was used to distinguish the deficit

was credited in this very file’s ledger. The loan agreement in
respect of the amount that was used to extinguish the deficit
was
entered into between the lender and the first respondent alone.
Having signed the loan agreement in question, he, on his own
version,
later undertook to pay the amount to the lender in instalments of
R24 000.00 per month. The activities from this
file conclusively
show that first respondent misappropriated substantial amounts of
trust funds using this particular file to facilitate
such
misappropriation.
[60]
Apart from the above, a number of questionable activities are
discernible from the firm’s books of account. These should
have
deeply troubled all the directors. As stated before, trust cheques
for huge sums of money were issued to the first respondent.
It is
common cause that all the directors had access to the firm’s
banking accounts and had the authority to do electronic
transfers.
Obviously, one look at the firm’s account would have reflected
these payments and would have raised any of the
two directors’
eyebrows. Furthermore, there is a former employee of the firm, namely
Ms Cronje, who remained on the firm’s
payroll till 2012 despite
having resigned in 2007 already. At some point she was paid with
trust cheques. These payments, too,
should also have the second and
the third respondents’ eyebrows.
[61]
Furthermore, Mr Z deposited an amount of R995 000.00 in cash on 2
December 2010. The next day he transferred a further R5000.00

directly into the firm’s bank account. On 21 December 2010 he
deposited a further R50 000.00 in cash. There is evidence
that
the amount deposited at the bank had an unexplained shortfall of R3
000.00. On 1 September 2010, a separate amount of R1 000 000.00

was deposited into the WLR without a narration, save for referring to
the entry as a “deposit”.
[62]
Each one of the three respondents seems to have had something to do
with the Z file. As stated before, the first respondent
borrowed the
money from him and signed the loan agreement. He also took transfer
of some of his assets. The second respondent is
the conveyancer that
attended to the transfer of Z’s property. Notwithstanding a
deed of sale that provided that the transfer
would be effected
against the payment of the purchase price, he, being a qualified
conveyancer, went on to finalise the transfer
even though no purchase
price had been paid by the first respondent. This is one of the
aspects that were queried by Newtons. The
second respondent on this
aspect vaguely stated that
“
na die
oordrag was daar ongeveer R1000 000.00 beskikbaar vir uitbetaling aan
Mnr Z. Hy het my dan opdrag gegeee om dit te belê,
wat ek
gedoen het. Die lêer is daarna op versoek van Le Roux na hom
oorgeplaas, alhoewel die lêerverwysing nie verander
is nie. Ek
het daarna nie enigsins op die lêer gewerk nie.”
[63]
Furthermore, although the second and third respondents vehemently
denied having had a hand in the firm’s financial management,

they did not deny that there were numerous occasions during which the
first respondent was away from the firm for long periods
of time on
account of his illness and surgical operations. According to the
third respondent, during such periods the firm was
under the second
respondent’s financial management. The second respondent denied
this and maintained that the bookkeeper
(Mrs Robarts) continued to
effect payments and transfers even in the first respondent’s
absence. She would apparently do
this on the first respondent’s
instructions. It is not disputed that all the directors of the firm
were authorised to do
electronic transfers. It turns out that the
second respondent did attend to some electronic transfers. It is now
common cause that
when trust cheques were issued to personnel for
purposes of cashing them in order to top up the first and second
respondent’s
remuneration, it was the second respondent who
issued such cheques.
[64]
In the financial year in which the deficit arose, i.e. 1 March 2010
to 28 February 2011, the first respondent was absent for
about fifty
eight days. All things considered, I find it highly unlikely that
both the second and third respondents would choose
to effectively
leave the financial management of the firm to a bookkeeper for such a
long period despite their awareness of the
first respondent’s
absence. When all the evidence is taken into account, it would seem
that while the second and third respondents
may have been more
involved in the financial management and the bookkeeping of files
that were under their control, they did appraise
themselves of the
firm’s financial affairs and thus had a general overview of the
financial position of the firm. This explains
why the third
respondent, being suspicious of the second respondent’s
financial mismanagement of the business account, went
to the extent
of laying criminal charges against him in 2009.
[65]
According to the second respondent, the third respondent is the one
that later authorised the electronic transfer of Z’s
investment
into first respondent’s file. The third respondent has not
disputed this averment. We now know that the same investment
is the
one that was later used to extinguish the firm’s trust deficit.
Having considered all the afore-going evidence, I
conclude that all
three respondents had an involvement of varying degrees in the
financial management of the firm’s financial
affairs. They must
all carry the can for the misappropriation of the firm’s trust
funds. This, however, is not to say that
all acted dishonestly. I
will return later to this aspect.
[66]
What remains clear from all the circumstances that have been sketched
is that the first to third respondents are guilty of
all forms of
misconduct that prompted the Law Society to bring this application.
This takes me to the second leg of the enquiry:
whether the first,
second and third respondents are persons that are fit to continue
practising as attorneys.
II
Are the respondents fit and
proper to continue practising as attorneys?
[67]
It has been held in a plethora of cases that misappropriation of
trust funds constitutes serious misconduct that justifies
a
conclusion that the perpetrator is not fit and proper to continue
practising as an attorney. The transgressions that the respondents

have been found guilty of have already been dealt with in detail in
earlier parts of the judgment and need not be repeated here.
I am
satisfied that all the directors of the fourth respondent firm are
not fit and proper to continue carrying on an attorney’s

practice. This is especially so given the fact that they have all
been shown to have made themselves guilty of misappropriation
of
funds.
[68]
I must hasten to add that even if I were to find that the first
respondent was solely responsible for the management of the
firm’s
financial affairs and was on that score solely responsible for
misappropriation of funds, the second and third respondent
would
still not be exonerated from a finding that they are not fit and
proper to practice as an attorney, given the gravity of
their
misconduct. In my view, the fact that one of many directors is tasked
with the financial management of the firm’s affairs
does not in
itself entitle the other directors to be ignorant about the financial
position of the firm.
[69]
It bears emphasis that all the respondents were grossly negligent
with regards to compliance with the Law Society’s Rules
as well
as provisions of the Attorneys Act pertaining to the proper keeping
of a firm’s books of account. It was these lapses
that
facilitated the existence of large trust deficits over a period of
more than a year. This put members of the public at risk.
Their
transgressions, cumulatively viewed, justify a conclusion that the
first, second and third respondents are not fit and proper
for an
attorney’s office.
III
IS STRIKING OFF THE APPROPRIATE SANCTION?
[70]
I now turn to the third leg of the enquiry, namely whether the three
respondents should be removed from the roll of attorneys
or whether
an order suspending them from practice or any other sanction would be
an appropriate sanction. It is trite that a removal
from the roll
does not automatically follow a finding that the attorney in question
is not fit and proper to practise as an attorney.
The court has
a discretion to consider the appropriate sanction.
[71]
In the case of
Summerley
v Law Society of the Northern Provinces
[15]
the Supreme Court of Appeal stated that before imposing the severe
penalty of striking off, the Court should be satisfied that
the
lesser stricture of suspension from practice will not achieve the
objectives of the Court’s supervisory powers over the
conduct
of attorneys. The Court found that in all the circumstances of that
case the attorney, who had been found to be unfit to
practise as an
attorney, did not deserve the ultimate penalty of striking off. The
court took into account that his mismanagement
of his trust account
involved no dishonest misappropriation of trust money for himself.
The Court ordered that he be suspended
from practice for a period of
a year and that he be restricted from practising for his own account.
I agree with the principle
laid down in that case. At the end of the
day, every case has to be decided on its own facts.
[72]
The role played by the respective respondents in the commission of
the various forms of misconduct has a bearing on the sanction
that
has to be imposed. It is on the basis of this principle that each
director’s conduct warrants scrutiny. As stated before,

misappropriation of trust funds is a serious offence. This is more so
the case if it was carried out with dishonesty. An attorney
that
dishonestly appropriates trust funds to himself or for his own
benefit is not fit and proper to continue practising as an
attorney
and deserves the ultimate sanction of a strike-off. I have already
alluded to the fact that the first, second and third
respondents are
all guilty of misappropriation of trust funds. The respective roles
each respondent played in the misappropriation
of trust funds and
other contraventions will now be considered.
[73]
With regards to the first respondent, trust cheques were issued to
him and he obviously personally benefitted from this. Apart
from the
trust cheques that he issued to himself, he also settled his own
personal liability when he paid R111 857.94 for
compensation
from the firm’s trust account. He used his file, namely 891 WLR
to facilitate this payment. He thus deliberately
manipulated trust
funds to pay for his own personal liability. The misappropriation was
clearly motivated by self-interest and
dishonesty. To put it bluntly,
he stole trust funds. All this evidence tips the probabilities
overwhelmingly in favour of a conclusion
that the first respondent
knowingly misappropriated trust funds for his personal benefit. His
denials are simply untenable. I am
satisfied that the Law Society has
sufficiently established that the first respondent’s misconduct
justifies an order striking
him off the roll of attorneys.
[74]
With regards to the second and the third respondent, no trust cheques
were issued to any of them. The second respondent’s
explanation
that the trust cheques that were issued to other personnel were
obtained from fees that had already been earned but
not transferred
to the business account was not disputed. His conduct was
reprehensible but did not, without more, constitute a
theft of trust
monies. It cannot be categorised as a misappropriation of trust funds
that was committed with dishonesty.
[75]
The second and third respondents asserted that they learnt about the
trust deficit after the completion of the audit report.
It behoved
them to thereafter take remedial action to see to it that a similar
situation would not eventuate, especially since
they knew that
co-directors are jointly liable for the liabilities of the firm.
Despite being aware of the substantial deficit
and why it had
resulted, they simply did not take steps to actively involve
themselves in the management of the firm’s financial
affairs
but simply focussed on financial affairs of the specific departments
that they had always been in charge of. It was simply
business as
usual. As things turned out, further contraventions of the Rules
occurred, albeit of a lesser magnitude, resulting
in the issuance of
yet another qualified auditors’ report.
[76]
As co-directors of the company the first, second and third
respondents had a joint responsibility to ensure the proper keeping

of accounting records and compliance with relevant legal prescripts.
Having become aware of such a substantial deficit, one would
have
expected them to be more vigilant, but they shirked their
responsibility and adopted a supine attitude.
[77]
Having learnt about the trust deficit the second and third
respondents went back to their silos and assumed that the first

respondent’s promise to see to it that the deficit did not
ensue again was enough. Once they had learnt about the deficit
and
the mismanagement, they could no longer claim to be in darkness about
the financial affairs of the firm. They needed to have
taken active
steps to take effective control of financial affairs and the
bookkeeping of the firm’s books. Where necessary,
they should
have tried to obtain proper advice with regards to putting control
measures in place. Their resignation as directors
of the firm, which
took place after yet another qualified report was furnished, was
rather belated.
[78]
In determining an appropriate sanction for the first respondent, it
must be noted that he has been found guilty of the same

transgressions as the second and third respondents but has, in
addition, been found guilty of the more serious misconduct of
misappropriation
of funds where he was shown to have acted with
dishonesty. The statements he made in an attempt to exonerate himself
exposes his
serious lack of insight into what an attorney’s
obligations pertaining to a trust account entail.  The manner in
which
he ran the practice is simply shocking. He was generally
reckless.
[79]
The first respondent blew hot and cold in explaining the wrongdoing
that happened at his firm and refused to accept responsibility
even
in respect of irregularities which were identified from the ledger of
the file that was under his personal control. He tried
to justify all
the wrongdoing at every turn. He tried to shift the blame to the
second respondent, attacked his chosen accountant
for not having been
more helpful and for not conducting the audit timeously, criticised
the Law Society for inordinate delays and
for refusal to issue him
with a letter of good standing. He also accused the Law Society of
not having held a formal disciplinary
hearing, this despite the fact
that he deposed to two affidavits and submitted them to the Law
Society. He was then invited to
make oral or written
representations.  In this court he has filed three affidavits.
Each affidavit introduced an additional
explanation in respect of the
same thing. One thing for sure is that he has been given enough
opportunity to present his side of
the story.
[80]
The first respondent makes false statements without flinching and
takes no responsibility for his actions.  This court
takes a dim
view of an officer of the court who has no qualms in being untruthful
to a court, for it demonstrates a lack of two
important qualities
that are the very essence of an attorney’s profession:
honesty
and integrity.
The
attorney’s profession is indeed
“
an
honourable profession, which demands complete honesty and integrity
from its members. In consequence, dishonesty is generally
regarded as
excluding the lesser stricture of suspension from practice, while the
same can usually not be said of contraventions
of a different
kind.”
[16]
[81]
His misconduct is therefore of a far more serious nature than that of
the second and third respondents. He generally acted
recklessly. He
undoubtedly deserves a harsher sentence than the second and third
respondents. Members of the public must be protected
from attorneys
of his ilk.
The first respondent’s
failure to be accountable and his lack of
honesty are seriously aggravating and have a bearing on the sanction.
Having considered
all the circumstances of the case, I have no doubt
that the only appropriate sanction for the first respondent is for
his name
to be struck from the roll of attorneys.
[82]
Unlike the first respondent, the second and third respondents both
played open cards and admitted their errors. I am persuaded
that in
as far as their misconduct is concerned, there is justification for a
lesser sanction than a striking off
[17]
.
I have taken into account that the second respondent acted ‘in
cahoots’ with the first respondent when they
both abrogated
additional remuneration to themselves through devious means in order
to deceive third respondent about their drawings.
They issued
trust cheques to the firm’s employees, had the cheques cashed
and then received the money as their additional
remuneration.
In doing so, even though the cheques were issued only from the
ledgers where sufficient fees had been earned
but had not been
transferred to the business account, the first and second respondents
contravened the Law Society rules that enjoin
them to keep trust
monies and business monies apart, that provide that fees earned must
first be transferred to the business account
before they can be paid
to the directors as drawings and that proscribe the issuance of trust
cheques to persons that are not the
firm’s trust creditors.
[83]
The second respondent’s involvement in devious ways of
receiving additional remuneration by making improper payments
from
the trust account to personnel of the firm is a serious aggravating
factor. What serves as mitigation on this point is the
undisputed
evidence that these cheques were all issued in instances where fees
had already been earned but not been transferred
to the business
account so as to meet these payments. This misconduct can therefore
not be categorised as a dishonest misappropriation
of trust funds and
does not warrant a striking off. The second and third respondent’s
transgressions, cumulatively considered,
are of such a nature as to
warrant their suspension from practice. Their co-operation with the
investigations and their honesty
and frankness with regards to their
own omissions counts as a mitigating factor and calls for their
suspension from practice to
be conditionally suspended.  However,
considering that the second respondent’s conduct was more
reprehensible than that
of the third respondent, he deserves a
slightly harsher sanction than the third respondent.
[84]
Wherefore the following order is made in respect of the first
respondent:-
1.
The First Respondent’s name is struck
off the roll of attorneys of the Free State High Court, Republic of
South Africa.
2.
(1)     First
Respondent is ordered to surrender and deliver to the Registrar of
this Court his certificate
of enrolment as an attorney.
(2)
Should First Respondent fail to comply with the provisions of the
preceding sub-paragraph of this order
within 2 (two) weeks from date
thereof, the Sheriff of the district in which such certificate of
enrolment is found, is empowered
and directed to take possession
thereof and deliver same to the Registrar of the Free State High
Court, Bloemfontein, Republic
of South Africa.
3.
Fourth Respondent is ordered to deliver
books of account, records, files and documents containing particulars
and information relevant
to:
3.1
any moneys received, held or paid by the Fourth Respondent for or on
account of any person;
3.2
any moneys invested by the Fourth Respondent in terms of Section
78(2) and/or Section 78(2)(A) of Act 53 of
1979 (“the Act”);
3.3
any interest in moneys so invested, which was paid over or credited
to the Fourth Respondent;
3.4
any estate of a deceased person, or any insolvent estate, or any
estate placed under Curatorship which the
Fourth Respondent is
administering on behalf of the Executor, Trustee or Curator of such
estate; and
3.5
the Fourth Respondent’s practice
to
the Curator appointed in terms of paragraph 9 hereof, provided that
as far as such books of account, records, filed and documents
are
concerned, the Fourth Respondent shall be entitled to have access to
them, but always subject to the supervision of such Curator
or a
nominee of such Curator.
4.
Should the Fourth Respondent fail to comply
with the provisions of the preceding paragraph of this order within 1
(one) week after
service thereof upon him, or after a return by a
person entrusted with the service thereof that he has been unable to
effect service
thereof on the Fourth Respondent, as the case may be,
the Sheriff of the district in which such books of account, records,
files
and documents are, is empowered to take possession thereof and
deliver them to such Curator.
5.
Such Curator shall be entitled to hand over
to the persons entitled thereto all such records, files and documents
as soon as he
has satisfied himself that the fees and disbursements
in connection therewith have been paid or satisfactorily secured or
that
same are no longer required by the Curator.
6.
A written undertaking by a person to whom
the records, files and documents referred to in paragraph 5 above are
handed, to pay such
amount as may be due to the Fourth Respondent,
either on taxation or by agreement, shall be deemed to be
satisfactory security
for the purpose of the preceding paragraph
hereof, provided that such written undertaking incorporates a
domicilium citandi
of such person.
7.
Such Curator is empowered to require that
any such file, the contents of which he may consider to be relevant
to a claim, or possible
or anticipated claim, against him and/or the
Fourth Respondent and/or the Fourth respondent’s clients,
and/or the Attorneys’
Fidelity Fund (herein referred to as “the
Fund”) in respect of money and/or other property entrusted to
the First Respondent,
be re-delivered to such Curator.
8.
The Fourth Respondent is interdicted and
prohibited from operating on its trust account(s) as defined in
paragraph 9 hereof.
9.
The Chief Executive Officer, failing which,
the Executive Officer of the Applicant, is appointed as Curator to
administer and control
the trust account(s) of the Fourth Respondent,
comprising of the separate banking accounts opened and kept by the
Fourth Respondent
at a bank in terms of Section 78(1) of the said Act
and/or any separate savings or interest-bearing accounts as
contemplated by
Section 78(2) and/or Section 78(2)(A) of the said
Act, in which moneys from such trust banking accounts have been
invested by virtue
of the provisions of the said sub-section or in
which moneys in any manner have been deposited or credited (the said
accounts being
herein referred to as “The trust account(s)”)
with the following powers and duties:
9.1
Subject to the approval of the Board of Control of the Fund to sign
and endorse cheques and/or withdrawal
forms and generally to operate
upon the Trust account(s), but only to such extent and/or for such
purpose as may be necessary to
bring to completion current
transactions in which the Fourth Respondent was acting at the date of
this order.
9.2
Subject to the approval and control of the Board of Control of the
Fund to recover and receive and, if necessary
in the interest of
persons having lawful claims against the Trust account(s) and/or
against the Fourth Respondent in respect of
moneys held, received
and/or invested by the Fourth Respondent in terms of the aforesaid
Sections (hereinafter referred to as “Trust
moneys”), to
take legal proceedings which may be necessary in respect of
incomplete transactions in which the Fourth Respondent
may have been
involved and which may have been wrongfully and unlawfully paid from
the Trust account(s) and to receive such moneys
and to pay same to
the creditor of the Trust account(s).
9.3
To ascertain from the Fourth Respondent’s book of account the
names of all persons on whose account
Fourth Respondent appears to
hold or to have received Trust moneys (hereinafter referred to as
“the Trust Creditors”)
and to call upon Fourth Respondent
to furnish him within 30 (thirty) days from the date of this order,
or such further period as
he may agree to in writing, with the names,
addressed of and amounts due to all Trust Creditors.
9.4
To call upon such Trust Creditors to furnish such proof, information
and affidavits as he may require to enable
him, acting in
consultation with and subject to the requirements of the Board of
Control of the Fund, to determine whether any
such Trust Creditor has
a claim in respect of moneys in the Trust account(s) and if so, the
amount of such claim.
9.5
To admit or reject, in whole or in part, subject to the approval of
the Board of Control of the Fund, the
claims of any such creditors,
without prejudice to such Trust Creditors’ right of access to
the Civil Courts.
9.6
Having determined the amounts which he considers are lawfully due to
Trust Creditors, to pay such claims in
full, but subject always to
the approval of the Board of Control of the Fund.
9.7
In the event of there being any surplus in the Trust account(s) after
payment of the admitted claims of all
Trust Creditors in full, to
utilize such surplus to settle or reduce, as the case may be,
firstly, any claim of the Fund in terms
of Section 78(3) of the said
Act in respect of any interest therein referred to and secondly,
without prejudice to the rights of
creditors of the First Respondent,
the costs, fees and expenses referred to in this order, or such
portion thereof as has not already
been separately paid by the First
Respondent to the Applicant and, if there is any balance left after
payment in full of all such
claims, costs, fees and expenses, to pay
such balance, subject to the approval of the Board of Control of the
Fund, to the Fourth
Respondent  if it is solvent, or, if the
Fourth Respondent is insolvent, to the liquidator of its insolvent
estate.
9.8
In the event of there being insufficient trust moneys in the Trust
account(s) to pay the claims of Trust Creditors
reflected in the
books of account of the Fourth Respondent in full –
9.8.1
subject to the approval of the Board of Control of the Fund to close
the Trust account(s) and pay the credit balances
to the Fund and to
require the credit balances to be placed to the credit of a special
Trust suspense account in the name of the
Fourth Respondent’s
in the Fund’s books;
9.8.2
to refer the claims of all Trust Creditors to the Board of Control of
the Fund to be dealt with in terms of the
provisions of the said Act,
and
9.8.3
to authorise the Board of Control of the Fund to credit the credit
balances referred to in sub-paragraph 9.8.1
above to its “Paid
Claims Account” when the Fund has paid, in terms of Section 26
of the said Act admitted claims of
the Trust Creditors in excess of
such credit balances, provided that, notwithstanding the afore-going,
the said Board shall be
entitled in its discretion, to transfer to
its “Paid Claims Account” the amount or amounts of any
claim or claims as
and when admitted and paid by it.
9.9
Subject to the approval of the Chairman of the Board of Control of
the Fund to appoint nominees
or representatives and/or consult with
and/or engage to the services of attorneys and/or counsel and/or
accountants and/or other
persons, where considered necessary, to
assist such Curator in the execution of the duties of the Curator,
and
9.10
To render from time to time, as Curator, returns to the Board of
Control of the Fund, showing how the Trust
account(s) have been deal
with, until such time as the said Board notifies him that he may
regard his duties as terminated.
10.
The Fourth Respondent is hereby directed
10.1
to pay the fees and expenses of the Curator, such fees to be assessed
at the rate of R710,00 per hour, including
travelling time;
10.2
to pay the reasonable fees and expenses charged by any persons
consulted and/or engaged by the Curator as
aforesaid;
10.3
within 1 (one) year of him being requested to do so by the Curator,
or within such longer period as the Curator
may agree to in writing,
to satisfy the Curator, by means of the submission of taxed bills of
costs, or otherwise, of the amount
of the fees and disbursements due
to the First Respondent in respect of his former practice, and should
he fail to do so, he shall
not be entitled to recover such fees and
disbursements from the Curator without prejudice, however, to such
rights, if any, as
he may have against the Trust Creditors concerned
for payment or recovery thereof.
[85]
(i)    The second respondent is suspended from
practice for one year and the suspension is suspended
for three years
on condition that the second respondent does not render himself
guilty of unprofessional conduct.
(ii)
In addition, the second respondent is
precluded
from practising as an attorney for his own account, either as
a
sole practitioner or in partnership or in association or as a
director of a private company for a period of two years from the
date
of this order. This means that for this two year period the second
respondent may practice as an attorney only in the capacity
as a
professional assistant.
(iii)
Should the second respondent, after the
expiry of the period referred to in (ii) above elect to practise in
the manner set out in
that paragraph, he shall satisfy the High Court
within the jurisdiction of which he then practises that he should be
permitted
to practise for his own account.
[86]
The third respondent is suspended from practice for one year, and the
suspension is suspended for three years on
condition that the third
respondent does not render herself guilty of unprofessional conduct.
[87]
All the respondents are jointly and severally ordered to pay the
costs of the application, including the costs
previously reserved,
on  the attorney and client scale.
__________________
M.B.
MOLEMELA, JP
I
concur.
______________
J.P.
DAFFUE,J
I
concur.
_____________
S.
MIA, AJ
On
behalf of the applicant:

Adv. D. M. Grewar
Instructed
by:
Azar &
Havenga Inc.
BLOEMFONTEIN
On
behalf of the 1
st
, 3
rd
and 4
th
respondents:      Adv. H. van Eeden SC
Instructed
by:
Steenkamp,
De Villiers & Coetzee
BLOEMFONTEIN
On
behalf of the 2
nd
respondent:

Adv. C. D. Pienaar
Instructed
by:
Honey
Attorneys
BLOEMFONTEIN
[1]
Hepple
v The Law Society of the Northern Provinces
2014 (3) SA 408
at para
[9]
[2]
Hassim
v Incorporated Law Society of Natal
1977
(2) SA 757
(A)
at 767C-G.
[3]
Hepple
and Others v The Law Society of the Northern Provinces above at para
[14].
[4]
Hepple
and Others v The Law Society of the Northern Provinces above at para
[21].
[5]
Section
78(1) – 78(4) of the Attorneys Act provides as follows:
“
78
Trust Accounts
(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.
(2)
…
.
(3)
…
.
(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.”
[6]
Incorporated
Law Society of Natal v JJ & FM Hillier
1913 (34) NLR 237
at
250-251; Incorporated Law Society v Taute
1931 TPD 12
at 17; Solomon
v Law Society of the Cape of Good Hope 1934 (AD) 401 at 408-409.
[7]
2009
(3) SA 329
(SCA) para 4.
[8]
Summerlev
v Law Society,
Northern
Provinces
2006
(5) SA 613
SCA
at para [21].
[9]
2009
(1) SA 216 (SCA).
[10]
2014
(3) All SA 408
(SCA) at para [9].
[11]
Plascon
Evans Paints v van Riebeeck Paints 1984(3) SA 623 (A) at 634H-635C;
[12]
Section
83(10)
of
the Attorneys Act  provides that any person who directly or
indirectly purports to act as a practitioner in his own account
or
in partnership without being in possession of a fidelity fund
certificate shall be guilty of an offence.
[13]
[2008] ZASCA 90
;
2009
(1) SA 216
(SCA) paras [27] –[28].
[14]
Law
Society of Northern Provinces v Mogami
2009 ZASCA 107
at para
[26]
,
delivered on 22 September 2015.
[15]
Summerley
v Law Society Northern Provinces at para [19]
[16]
Summerley
v Law Society of the Northern Provinces (supra) at para 21
[17]
Summerley
v Law Society of the Northern Provinces at para [25]