Flionis v Bartlett and Another (546/04) [2006] ZASCA 23; 2006 (3) SA 575 (SCA) ; [2006] 3 All SA 95 (SCA) (22 March 2006)

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[2006] ZASCA 23
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Flionis v Bartlett and Another (546/04) [2006] ZASCA 23; 2006 (3) SA 575 (SCA) ; [2006] 3 All SA 95 (SCA) (22 March 2006)

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IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
CASE NO 546/04
In the matter between
HIRSCHOWITZ FLIONIS
Appellant
and
JULIAN RICHARD NAPIER BARTLETT
First
Respondent
BARTLETTS
INCORPORATED
Second Respondent
________________________________________________________________________
CORAM: HOWIE P, ZULMAN, NAVSA, BRAND et VAN HEERDEN JJA
________________________________________________________________________
Date Heard:
3 March 2006
Delivered:
22
March 2006
Summary: Delict – Aquilian action – legal duty to act
without negligence – Practising attorney under such duty when
dealing
with money in trust account and insufficiently informed as to
the identity of the depositor or the purpose of the deposit.
Neutral
citation: This judgment may be referred to as
Hirschowitz Flionis
v Bartlett and Another
[2006] SCA 24 (RSA).
________________________________________________________________________
J U D G M E N T
________________________________________________________________________
HOWIE P
HOWIE
P
[1] The primary question in this
appeal is whether the appellant firm of attorneys, in whose trust
account the first respondent caused
to be deposited the sum of R3,1
million, owed the latter a legal duty to deal with the money without
negligence. The appeal is against
an order made on trial in the
Johannesburg High Court by Schwartzman J who answered that question
in the affirmative. The learned
Judge went on to find that the
appellant had dealt with the money negligently and was therefore
liable to pay the first respondent
damages in the sum concerned plus
interest from the date of judgment. It was ordered accordingly. With
the necessary leave the appellant
appeals. There is a cross-appeal,
also with leave, against the interest order, the contention being
that interest should have been
ordered to run from a much earlier
date. The judgment of the High Court is reported.
1
I shall call it ‘the reported judgment’.
[2] The litigating parties are
practising Johannesburg attorneys. The first respondent, Mr JRN
Bartlett, cited his professional company,
of which he is sole
director and shareholder, as co-plaintiff. The appellant is a two
person partnership. Only one of the partners,
Mr A Flionis, was
involved in the events with which the case is concerned. The second
respondent had no significant role in those
events and the damages
were awarded to Mr Bartlett only. Therefore, I shall, for
convenience, refer to the protagonists as ‘Bartlett’
and
‘Flionis’ respectively.
[3] Bartlett testified at the trial.
Flionis did not. The facts pertaining to the material events are
established, directly or inferentially,
by Bartlett’s evidence and
the contents of various items of documentary evidence. The truth or
authenticity of some of the documents
or their contents was proved or
admitted. However, certain documents discovered by Flionis were
admitted in evidence on the restricted
basis that they were no more
than what they purported to be. In relation to the documents last
mentioned, Bartlett called the evidence
of a handwriting expert to
question their authenticity and, as regards Flionis’s obligation as
attorney with regard to money in
his trust account, Bartlett led the
evidence of a forensic accountant, Mr V Faris. A full summary of the
facts is contained in the
reported judgment in paras [12] to [39]. I
shall refer only to such evidence as is pertinent to the issues on
appeal.
[4] Bartlett met a woman named Karen
Hardaker in 1998. She lived then in Durban. Early in 1999 Hardaker
mentioned to him a pending
offshore gold bullion transaction
involving the sale of 10 tonnes of gold from an unnamed seller to a
European company that would
on-sell to the Swiss Government.
Implementation involved a spectrum of agents and intermediaries. She
claimed to be an intermediary
between the seller’s agent and the
buyer’s agent and entitled as such to a commission on the eventual
sale price. She went on
to say that if Bartlett put up what was
referred to in evidence as a ‘goodwill’ deposit of US$500 000
an even greater commission
– between US$5 million and US$8 million
- would be payable to him offshore which the two of them could share.
The ‘goodwill’
deposit, she explained, was required to
demonstrate the seriousness and capability of the buyer and enable it
to initiate the transaction.
The necessary amount or its Rand
equivalent had to be paid into a South African attorney’s trust
account. As Bartlett understood
it, the deposit would remain in the
trust account until the gold was paid for, after which it would be
disbursed on his instructions;
if the transaction failed the deposit
would be returned to him.
[5] Bartlett, a commercial attorney
with about 19 years’ experience, had limited financial means and
could not put up US$500 000
himself. He therefore borrowed it from a
client, one Loewen, and undertook repayment within 60 days of receipt
into his own trust
account. Loewen was due shortly to emigrate and
Bartlett said he would arrange that repayment was effected offshore,
which was attractive
to Loewen.
[6] In further discussion Hardaker
told Bartlett she had a business connection with a man whose broking
company in Helsinki, Allied
Global Securities (AGS), represented a
Liechtenstein company, Amaxa. The latter would take delivery of the
bullion and in turn deliver
it to the Swiss entity.
[7] On 29 January 1999 Bartlett
received a draft agreement faxed from a Helsinki number. It purported
to be a commission agreement
between AGS and Bartlett relating to
what was referred to as ‘Transaction No 90129’. The draft stated
that it involved ‘commodities
to be delivered to Amaxa ... for
import and reverification of delivered quantity and quality with
subsequent payments to Supplier
and the parties herein involved’.
Those ‘parties’ included Bartlett, Hardaker, AGS and Amaxa. It
was Bartlett’s obligation
to ‘obtain the funds of USD 1 million,
or equivalent in another currency to be placed in a Trust Account of
a South African Law
Firm.’ For their respective acts of
participation, 2,5% of the total value of the goods would be due to
‘KAREN’s, Mrs Karen
D Fairbairn-Hardaker and Mr H Cotter’; 2,5%
to AGS; 5% to Amaxa in respect of the first 10 tonnes and 10% for
subsequent quantities;
and to Bartlett 15% for the first 10 tonnes
and 10% thereafter. The supplier was not identified. The draft was
signed on behalf
of AGS.
[8] The draft was silent as to the
purpose of the money that would be put up by Bartlett. It would seem
to have been unnecessary for
the efficacy of any bullion sale that
money be paid into a South African attorney’s trust account,
particularly by someone not
a party to the sale. Moreover it is
unfathomable why Bartlett, a complete stranger to the trade, should
have been earmarked for more
commission than AGS or Amaxa which were,
supposedly, regular participants in the trade.
[9] Bartlett did not sign the draft.
Instead, in a letter to AGS dated 3 March 1999 he drew his own
version of what he thought an
appropriate agreement should contain.
In his draft, although there was reference to an ‘actual supplier’
(again unidentified),
he described himself as ‘seller’ and
Hardaker as ‘seller’s mandate’. Why he referred to himself as
seller he could not
satisfactorily explain in evidence. Patently it
was nonsense. He also made provision for signature by Hardaker and
Amaxa. He stipulated
an offshore banking account into which his and
Hardaker’s commissions had to be paid, as also another offshore
account to receive
repayment of Loewen’s loan. Hardaker’s
commission was made payable not to her and H Cotter as before, but
simply to her. Having
received faxed copies for signature and
refaxing to Bartlett, Hardaker signed (as KD Hardaker) on 3 March and
signatures purportedly
on behalf of Amaxa and AGS were appended on 4
March, all without comment on any of Bartlett’s changes. From
Bartlett’s own trust
account the required ‘goodwill’ deposit,
in the Rand equivalent (R3,1 million), was paid at Hardaker’s
direction into
Flionis’s trust account on 3 March 1999.
[10] Bartlett did not tell Flionis of
the deposit or its purpose. That was because Hardaker told him not to
communicate with Flionis.
She said that she had herself conveyed to
Flionis what the purpose of the deposit was. She urged Bartlett to
trust her. He said he
did. However, he went on to testify that he had
nevertheless written and handed to Hardaker a letter stating the
purpose for which
Flionis was to hold the money. She was supposed to
send the letter to Flionis and told Bartlett she had done so.
However, at the
time he gave evidence he accepted she had not done
so. Significantly, he was able to produce copies of all his other
important letters
relative to the case but not this one. He was
unable to explain why.
[11] On 4 March 1999 Bartlett received
an anxious telephone call from Hardaker from Durban to say that the
money was not in Flionis’s
account. He faxed her a sheet of paper
on which was pasted a copy of the relevant bank deposit slip. She
faxed a copy of his document
back to him. On it she had written
‘Urgent Attention: Alex Flionis’ and, underneath, Flionis’s fax
number and a message stating
that the funds referred to in the
deposit slip had been cleared. This document was discovered by
Bartlett, not Flionis. Whether
Hardaker sent Flionis an identical fax
the latter did not establish. As already mentioned, he did not give
evidence. Nor did anyone
else on his firm’s behalf. Transmission
details printed on this document show that Bartlett transmitted at
12:48 and that the return
fax – from ‘HARDAKER’S RESIDENCE’ –
was at ’01:04 PM’.
[12] Also bearing the printed
transmission date 4 March 1999, is a document purporting to be a fax
sent from Zurich by one Charlie
F Gambino to Flionis’s firm. The
transmission printout gives no indication where it was sent from but
the transmission time was
12:47 PM. (Assuming it was sent from Zurich
at 12:47 the time in South Africa would have been 13:47.) It
contains a handwritten
message in broken English with sundry
grammatical and spelling errors. The writer clearly was at pains to
guide the flow of the manuscript
with an object such as a ruler. The
writing appears thus:
[13] A
typed transcript is as follows:
Zurich 4-3-1999 To: Hirschowitz
A Flionif
Attorney’s
Johannesburg
South
Africa
Mr
Flionif,
a amount of R.3.100.000,00 is been
deposit in Your Trust account. the instructions are the follows:
1) a commission of 10% of the amount
must be pay to my intermediary, in S.Africa. Mrs Karin Habekar.
2) a
amount of R5.000,00 must be deduct for your fees.
3) the balance can be convert in
Kruger Rands. I will came to collect the Kruger Rands.
My
regards
Charlie
F Gambino
you
can contact me at the
following
numbers:
0035687955730
– France
0041794270663
– Switzerland
0031621468169
- Nederland
[14] In apparent compliance with the
‘Gambino instructions’ Flionis caused one of his firms’ printed
receipt forms to be completed.
It is dated 4 March 1999 and records
the receipt of R3,1 million from C Gambino, who is allocated a file
or client number G109/99.
According to the file’s ledger entries
Flionis thereafter apparently drew the following cheques on his trust
account which were
debited against the sum deposited by Bartlett:
5.03.99 R310 000 to BR Hardaker
9.03.99 R1
000 930 to Investec
10.03.99 R827
465 to SP Reid
12.03.99 R934
725 To Investec
12.03.99 R13
549.59 to SP Reid
7.04.99 R8
342,46 to SP Reid.
In addition, a fee to the firm of R5
000 was debited on 5 March 1999.
[15] Discovered by Flionis is a
printed Investec ‘KRUGERRAND TRANSACTION ADVICE’ dated 10 March
1999 confirming the sale to his
firm on 10 March 1999 of 553 coins at
R1810 each at a total price of R1 000 930. (This accords with the
cheque drawn on 9 March referred
to above.) Who SP Reid was is not
established but an inference may be drawn from the content of a
further apparent fax message from
Gambino which was transmitted on 10
March at 06:36PM. It was also in printed letters but despite some
similarities of letter formation
there are many differences from the
earlier one. It appears thus:
[16] A typed transcript reads as
follows:
Zurich 10.03.’99
To:
Hirschowitz
A
Flionif
Attorney
Johannesburg
S.
Africa
Dear
Mr Flionif,
concern the “Kruger Rands” ordered
from: Investec Bank and the “Stock Exchange”. I inform you that
the Krugers will be collect
on my behalf from Mr Hofiosky Bryan. He
will came to collect it.
My
regards
Charlie
F Gambino
(If coins were bought from the
Johannesburg Stock Exchange SP Reid was presumably a broker.)
[17] While Flionis was conducting
these transactions Bartlett awaited progress reports concerning the
bullion transaction. The bombshell
came on about 2 April 1999.
Hardaker telephoned him from London and said that she had been told
there would be no gold transaction.
On 3 April Bartlett wrote to
Flionis advising that the R3.1 million deposit had been made by him
and what the reason for it was.
In the letter he described the money
as ‘client funds’ and said that unless the gold was delivered by
6 April repayment of the
deposit was required on 7 April. In evidence
he said he meant by ‘client funds’ that they were his own.
[18] Flionis answered by letter dated
6 April denying knowledge of Bartlett’s allegations save that ‘the
monies were deposited
into our trust account and have been paid out’.
He went on to refer Bartlett to ‘our client Mr C Gambino’ and
gave details
of three overseas telephone numbers at which Gambino
could be contacted. (In fact the account was still in credit in the
sum of about
R9 400 and the next day, despite Bartlett’s
intimations, R8 342.46. was paid over to SP Reid.)
[19] On 7 April Bartlett wrote to
Flionis and in the course of the letter said
‘
Kindly call on your client to
refund the monies today together with interest ...’
[20] There was no repayment to
Bartlett by anyone. As a result Bartlett was unable to repay Loewen
who sued him the following year.
That matter went to trial. Bartlett
raised a false defence as to why he did not owe the money, in which
defence he persisted in evidence.
Under cross-examination by Loewen’s
counsel his lies were exposed. He was compelled to consent to
judgment in the amount of the
loan with interest, and costs on the
scale as between attorney and client. In the present case his counsel
conceded, as he had to,
that Bartlett’s general credibility was
compromised by the Loewen trial.
[21] Faris’s over 40 years in
practice have given him a wealth of experience in forensic audits of
attorneys’ trust accounts and
a comprehensive knowledge of the
conduct and management of such accounts. In stating the principles
applicable to an attorney’s
duties in so far as they are material
to this case, he drew, inter alia, on the provisions of the Attorneys
Act 53 of 1979, the Rules
of the Law Society of the Northern
Provinces and the purpose of a trust account. By statute, he said,
money in a trust account is
not the attorney’s property. A
particularly high standard of care is expected of an attorney in
managing the account. Such money
may belong to a client or a third
party. It commonly happens that, without notice to the attorney, a
non-client pays into the account,
for example, a deposit by a buyer
of land pending transfer. It also often occurs that the name of the
depositor is not disclosed
as, for example, where the payment is made
electronically or by bank cheque or (as in this case) by interbank
clearance voucher.
Faris went on to state that when the identity of
the depositor or the purpose of the deposit is unknown the money must
be credited
to a trust suspense account until such identity and
purpose have been established. The money must then be dealt with
according to
the trust creditor’s instructions.
[22] Faris testified that in the
present instance the clearance voucher and the deposit slip would not
have revealed the identity
of the depositor but the learned Judge
found on the evidence
2
that reasonably directed enquiry by Flionis would have established
that the money came from the trust account of Bartlett’s company.
In turn, any ensuing enquiry made of Bartlett would have elicited the
latter’s instructions to retain the money in the trust account.
Appellant’s counsel submitted that Bartlett, faced with such
enquiry, would have adhered to his alleged undertaking not to
communicate
with Flionis. However, in all likelihood, in my view,
Flionis would have had to say that he had instructions from Gambino.
It is
most unlikely that Bartlett would then have kept silent. He
would have realised Hardaker’s duplicity and spoken out.
[23] This broad factual outline is
sufficient preamble to stating the issues on appeal. As will have
become apparent, the suit is
a delictual one for Aquilian damages. It
is not in dispute that Flionis was negligent in disbursing the money
deposited by Bartlett;
that Bartlett suffered damages in the sum of
R3,1 million as a result; and that the necessary factual and legal
causative links existed
between the negligence and the damages. The
issues on appeal are fourfold:-
(1) whether
Bartlett entrusted the money to Flionis;
(2) whether there was a legal duty on
Flionis to deal with the money without negligence;
(3) whether
Bartlett was contributorily negligent and, if so, what apportionment
is appropriate; and
(4) whether
interest should have been ordered to run from a date earlier than the
date of judgment in the court below.
[24] As to (1), counsel for the
appellant argued that the legal duty in (2) could not be held to have
existed unless there had been
‘entrustment’. First, said counsel,
that necessitated Bartlett’s having informed Flionis of his
identity as depositor and the
purpose of the deposit. Without proof
of Bartlett’s alleged letter to Hardaker or proof that her return
fax of 4 March to him was
copied to Flionis, the necessary
communication, so it was said, was never established. Second, given
the purpose of the deposit as
alleged by Bartlett in this case, it
was improbable he intended to entrust it. On this point his
credibility was crucial and, his
having given untruthful evidence in
the Loewen case, nobody could be satisfied he was telling the truth
now. Furthermore, so it was
argued, not all money that finds its way
into a trust account is trust money and in the instant matter a
correct analysis of the
contractual context in which the deposit was
made (assuming the gold transaction to have been genuine) showed that
it was intended
to be part payment, on behalf of the buyer, of the
price of the bullion. It was made to Flionis, in effect, as seller’s
agent.
[25] Manifestly counsel’s first
contention is good. Bartlett’s identity and purpose as depositor
were never conveyed to Flionis
in any manner until Bartlet’s letter
of 3 April 1999. However, there is no basis for the second
contention. If there really was
a genuine gold transaction pending,
in which Bartlett was to be involved (as he contemplated), it is a
more than extraordinary coincidence
that within an hour of Bartlett’s
fax to Hardaker confirming clearance of the money the first Gambino
fax arrived, purporting to
give instructions in respect of the very
money deposited by Bartlett. That fact renders it impossible to
accept that there was ever
a genuine bullion transaction or at least
one in which Bartlett was intended by the contracting parties to
participate as some sort
of guarantor or intermediary. There can be
no doubt that an elaborate fraud was perpetrated on Bartlett.
Nevertheless there can
also be no doubt that despite the cloud that
hung over his credibility he believed that a bullion transaction was
in the offing and
that the deposit would enable him to receive a huge
commission as intermediary in respect of this transaction. The
confusion of replies
he gave in cross-examination in this case and in
the Loewen trial as to the nature and effect of the deposit cannot
serve to have
transformed Flionis into the unknown seller’s agent
or the deposit into a down payment. What Bartlett remained steadfast
about
was that the money was to receive the benefit of treatment as
trust money and to remain in Flionis’s trust account until the gold
transaction was complete, at which stage he would have given Flionis
instructions as to disposal or disbursement. Moreover, counsel
put it
to Bartlett that the appellant’s case was that Flionis believed the
money to have emanated from Gambino. It is not open
to the appellant
to enlist in aid a construction that was neither Bartlett’s case
nor its own.
[26] Does it matter that the origin
and purpose of the deposit were not communicated to Flionis until, in
effect, it was too late?
The court below thought not. Relying on
authority that ‘entrust’ does not have a technical legal
meaning,
3
the learned Judge considered that Bartlett’s deposit was entrusted
because, in the light of Faris’s uncontested evidence, Flionis
could not properly deal with the money until the true depositor’s
purpose and instructions had been ascertained. It was, therefore,
in
accordance with the ordinary dictionary meaning of ‘entrust’,
4
in Flionis’s care in the interim.
5
[27] There is much to be said for that
conclusion. However, for purposes of this case (and whatever might be
the correct interpretation
of ‘entrust’, say, in proceedings
against the Attorneys Fidelity Fund where theft occurs of money
‘entrusted’ to an attorney)
the issue of legal duty for delictual
liability (the element of wrongfulness) can, in my view, be decided
in this matter without
the antecedent finding that there was
entrustment. True, Bartlett’s case on wrongfulness as pleaded was
founded on there having
been entrustment but the evidence led,
particularly that of Faris, ranged widely enough to allow for a full
canvassing of the relevant
questions even if wrongfulness were to be
determined solely by reason of the fact that the money was deposited
in the trust account.
The enquiry remains whether there was a legal
duty on Flionis, even then, to deal with the money without
negligence. Put another
way: if he was negligent should the law
impose on him liability for such negligence?
[28] This being an instance of mere
economic loss resulting from omission (Flionis’s negligent omission
to query Gambino’s patently
suspicious ‘instructions’ or to
trace the true depositor was, as I have indicated, not in dispute on
appeal) the incidence of
the legal duty to act without negligence is
a matter of legal policy. The decision whether the duty exists
depends on various factors
including prevailing ideas of justice and
where the loss should fall.
6
This enquiry involves applying the general criterion of
reasonableness having regard to the legal convictions of the
community as
assessed by the court.
7
[29] For the appellant it was
contended that a good reason for denying delictual liability in this
case was the consideration that
Bartlett could have protected himself
by way of an appropriate contractual stipulation. I disagree. The
situation is not comparable
with or analogous to that, for example,
in
Lillicrap Wassenaar and Partners v Pilkington Brothers SA (Pty)
Ltd
8
where the parties were involved in a contractual relationship from
the outset and could therefore have readily amplified their contract
by adding suitable provisions to fashion their contractual remedies.
According to Faris it is commonplace that non-clients make
deposits
into an attorney’s trust account in the course of fulfilling their
contractual obligations to third parties. It is not
suggested that
there is any need or reason for the depositor to form a contractual
relationship with the attorney. Moreover, these
payments occur
without the attorney being aware until after the deposits that they
have in fact been made. Consequently I do not
think that contractual
protection is commercially feasible.
[30] On the contrary, there are a
number of considerations which, in my opinion, compel the conclusion
that Flionis was indeed subject
to the legal duty under discussion.
First and foremost, the appellant, as recipient, was a firm of
practising attorneys. As such
it proclaimed to the public that it
possessed the expertise and trustworthiness to deal with trust money
reasonably and responsibly.
Second, Bartlett relied on that and
particularly on the fact that the money would be in the appellant’s
trust account until he
instructed otherwise. Faris’s exposition of
an attorney’s obligations in properly managing a trust account
demonstrate that Bartlett’s
reliance on the money being safe in a
trust account was reasonable even if, as I shall point out, his
failure to communicate with
Flionis was not. Third, even where an
attorney discovers an anonymous and unexplained deposit it requires
minimal management to transfer
the money to a trust suspense account.
It is then a task of no difficulty to trace the depositor with the
aid of the firm’s own
bank. After that one need merely leave the
money where it is until receipt of instructions by or on behalf of
the depositor or the
person for whose benefit the deposit was made.
Fourth, unreasonable conduct that might put the money at risk would,
as a reasonable
foreseeablility, cause loss to the depositor or
beneficiary. The legal convictions of the community would undoubtedly
clamour for
liability to exist in these circumstances.
[31] I accordingly find, as regards
the second issue on appeal, that Flionis was under a legal duty to
deal with the money without
negligence. (I should emphasise that it
was never Bartlett’s case that Flionis was a party in any respect
to the fraud.)
[32] The third issue on appeal is
whether Bartlett was contributorily negligent. Contributory
negligence was pleaded as an alternative
defence coupled with
reliance on the Apportionment of Damages Act 34 of 1956. The learned
Judge did not deal with this defence and
awarded Bartlett the full
amount of his damages. As I understood the parties’ counsel (their
respective leading counsel both appeared
at the trial, as did
Bartlett’s junior counsel) this aspect of the case was simply not
argued in the court below.
[33] The crux of the appellant’s
allegations of negligence against Bartlett is that he failed to
inform the appellant of the fact
of the deposit or to provide
instructions concerning it.
[34] It is not surprising that
Bartlett was unable to call Hardaker as a witness so as to attempt to
demonstrate to the learned Judge
the qualities of honesty and
reliability which he ventured to suggest impressed themselves upon
him to the extent that he left it
to her to convey the necessary
explanations to Flionis. Hardaker got away with 10% of Bartlett’s
money and was probably more instrumental
than anyone else in causing
his overall loss. If she did not orchestrate the fraud she was a
major player in its commission. She
was unlikely to be available as a
witness and even if available was unlikely to support Bartlett in the
present respect.
[35] Bartlett was obviously
susceptible to her persuasion, particularly given his modest
financial situation. He was nevertheless
profoundly remiss in falling
for her story of the bullion transaction and the extraordinary
commission that was said to be due to
come to him, a complete unknown
in the international bullion trade, for minimal effort. And that it
was for him, through the ‘goodwill’
deposit, to demonstrate the
buyer’s ability to perform financially, given who the supposed
buyer was, borders on the ridiculous.
Of course the question now is
not whether he was negligent in putting up the deposit but negligent
in not telling Flionis what it
was all about, given the size of the
amount and its importance to his personal financial position.
[36] Bartlett said in evidence, as I
have mentioned, that Hardaker told him not to communicate with the
appellant and that she had
arranged everything. He said he had been
dealing with her on a fairly frequent basis for the best part of a
year beforehand. She
was well spoken, he got on with her and he had
no reason to distrust her. He therefore believed her assurances.
Asked by the learned
Judge whether he had ever met her, he revealed
that he had met her only once.
[37] Bartlett’s evidence reveals
that he fully realised the importance of telling Flionis of the fact
and reason for the deposit.
That he believed the bullion sale story –
which clearly he did – supports his assertion that he believed
Hardaker when she said
she had told Flionis all about the deposit.
But just as he erred to an absurd degree in believing he would earn
(at then exchange
rates) about R48 million for putting up a R3.1
million deposit, so he erred in trusting Hardaker’s assurance about
her alleged
communications with Flionis. A reasonable person in his
position would not have accepted those assurances on such an
important issue
from someone he really only knew over the telephone.
Such person would have put Flionis in the picture so as to avoid any
risk. That
was especially so bearing in mind how big a sum he was
depositing and the fact that he would not have been able to repay his
loan
to Loewen if the money was not securely dealt with while in
Flionis’s trust account. In the result, in my view, the appellant
established
contributory negligence on the part of Bartlett.
[38] As to the related issue of
apportionment, it is trite that there is no accurate measure by which
departure from the standard
of conduct of a reasonable person can be
expressed. The conduct of Flionis and Bartlett both fell below that
standard to a substantial
degree. Flionis should not have accepted
the Gambino instructions at face value. It could possibly be inferred
that Hardaker was
in touch with Flionis before 5 March 1999 because
somebody must have told him to make her commission cheque payable to
BR Hardaker
not KD Hardaker. However, there is no evidence from
Flionis that Hardaker somehow introduced Gambino or that Gambino was
an existing
client of the firm. On the proved facts the Gambino
‘instructions’ could just as well have come out of the blue. And
they purported
to request a transaction that would more appropriately
have been implemented by a bank or broker than an attorney. As
against that,
the depositor’s identity and instructions could have
been obtained relatively easily.
[39] It seems to me that Flionis and
Bartlett were about equally at fault in so far as the deposit and its
receipt into the trust
account were concerned. Nothing occurred after
that (until 2 April) which should have caused Bartlett to rethink the
matter. However
something more did occur in so far as Flionis was
concerned. On 10 March 1999 the second Gambino letter was faxed.
Although the formation
of some of the letters is similar in both that
fax and the one of 3 March, there are obvious differences when it
comes to other letters
and some numerals. In addition, the general
appearance of the writing clearly differs in the later fax. One does
not need expert
evidence to discern these features. And the issue is
not whether the writer was in fact the same but whether the mere
appearance
of the writing should have put Flionis on his guard.
Flionis nevertheless proceeded to pay out nearly R1 million more
after 10 March.
Finally, having been told by Bartlett in his letter
of 3 April who the true depositor was and having answered Bartlett by
letter
dated 6 April, Flionis nonetheless proceeded on 7 April to
make a final payment out of the trust account. And overarching all of
this is the fact that while Bartlett, like any individual, was bound
to take reasonable steps to safeguard his own interests, Flionis
was
burdened with the obligation to exercise special care, responsible,
as he was, for the safeguarding of others’ money in his
trust
account.
[40] Quantifying the parties’
respective degrees of fault as best one can, I conclude that
Flionis’s conduct departed more from
the reasonable person standard
than did Bartlett’s. I assess that Flionis was 60% at fault in
relation to Bartlett’s loss and
the latter 40%. The award of
damages made by the Court below must therefore be reduced from R3,1
million to R1,86 million.
[41] Turning to the fourth issue, the
mora
date which is the subject of the cross-appeal, there are
two possible dates earlier than the date of judgment from which
interest
could, under
s 2A
of the
Prescribed Rate of Interest Act 55
of 1975
, have been ordered to run. One was 7 April 1999 when Bartlett
wrote to Flionis in response to the latter’s disclosure that the
money had been disbursed in accordance with the instructions of his
client, Gambino. The salient part of the letter quoted above,
called
upon Flionis to call upon Gambino to repay. It was not a demand on
Flionis to repay. The section requires the
mora
date to be
‘the date on which payment of the debt is claimed by service on the
debtor of a demand’, plainly meaning that the
demand must be
directed to the debtor. The letter of 7 April 1999 was not a demand
within the meaning of the section. Accordingly
the only earlier date
which could have been employed was the date of the service of the
summons. That was 15 February 2002. On the
basis that that was the
mora
date the cross appeal was conceded. It was not in dispute
that the applicable interest rate in the absence of proof of any
other
appropriate rate, was 15,5%. As indicated, Bartlett’s award
of damages must be reduced to R1.86 million. Interest on that sum at
15,5% from 15 February 2002 until 29 July 2004 (the date of judgment
in the court below) amounts to R696 725. The recovery of additional
interest in that amount represents substantial success. The costs of
the cross-appeal must therefore be paid by the appellant.
[42] Reverting to the appeal, the
remaining question concerns the costs of appeal and costs in the
court below. Reduction of the trial
court’s award to R1,86 million
constitutes substantial success for the appellant entitling it to the
costs of appeal. However,
there is no reason to alter the costs order
in the court below. The parties were agreed that the case warranted
the costs of two
counsel and no reason suggests itself why such costs
should not be ordered.
[43] The appeal succeeds with costs
and the cross-appeal succeeds with costs. In each instance the costs
will include the costs of
two counsel.
Paragraph
1 of the order of the court below is altered to read as follows:
‘
1. R1
860 000 plus
mora
interest at 15,5% from the date of service
of the summons until the date of payment.’
____________________
CT
HOWIE
PRESIDENT
SCA
CONCUR
:
Zulman JA
Navsa
JA
Brand
JA
Van
Heerden JA
1
Bartlett
and Another v Hirschowitz Flionis
[2005] 2 All SA 567
(W).
2
Para
[53] of the reported judgment.
3
Industrial
and Commercial Factors v Attorneys Fidelity Fund
[1996] ZASCA 84
;
1997 (1) SA 136
(SCA) at 144D-I.
4
Of
the Oxford English Dictionary’s various definitions the most
apposite is ‘(t)o confide the care or disposal of (a thing ...)’.
5
Paras
[45] to [48] of the reported judgment.
6
Knop
v Johannesburg City Council
1995 (2) SA 1
(A) 27G-H;
Minister of Safety and Security v Van
Duivenboden
2002 (6) SA 431
(SCA) at 441F-442E.
7
Knop
supra
27I;
Minister van Polisie v Ewels
1975 (3) SA
590
(A) at 596H-597F.
8
1985
(1) SA 475
(A); see too, the as yet unreported judgment in this
court in
Trustees for the time being of Two Oceans Aquarium Trust
v Kantey and Templer (Pty) Ltd
delivered on 25 November 2005,
Case 545/04, at para 21.