Summerley v Law Society of the Northern Provinces (270/05 , 270/05) [2006] ZASCA 59; 2006 (5) SA 613 (SCA) (19 May 2006)

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[2006] ZASCA 59
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Summerley v Law Society of the Northern Provinces (270/05 , 270/05) [2006] ZASCA 59; 2006 (5) SA 613 (SCA) (19 May 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
REPORTABLE
Case number : 270/05
In the
matter between :
KEVIN
JOHN ROLLO SUMMERLEY APPELLANT
and
THE LAW
SOCIETY OF THE
NORTHERN PROVINCES RESPONDENT
CORAM : MPATI DP, BRAND, CONRADIE, VAN HEERDEN
et
JAFTA
JJA
HEARD : 2006-05-05
DELIVERED
: 2006-05-19
Summary
: Attorney struck
from the roll by court
a quo
– misconduct not involving
dishonesty – decided that he should rather be suspended from
practice with further restrictions imposed
after expiry of suspension
period.
Neutral
citation: This judgment may be referred to as
Summerley v Law
Society, Northern Provinces
[2006] SCA 59 (RSA)
_____________________________________________________
JUDGMENT
BRAND JA
/
BRAND JA
:
[1] The appellant practises as an attorney in the
province of Gauteng. On application by the respondent (‘the
society’), in terms
of s 22(1)(d) of the Attorneys Act 53 of 1979
(‘the Act’), the Pretoria High Court (Van der Merwe J, with
Els J concurring)
ordered that his name be struck from the roll of
attorneys. Further ancillary orders were made, dealing with such
matters as the
appointment of a curator to administer and control the
appellant’s trust account, with the view to ensuring payment of his
trust
creditors. In accordance with the established custom in matters
of this kind, the respondent was also ordered to pay the society’s
costs of the application on an attorney and client scale. The appeal
against the court
a quo
’s judgment is with the leave of this
court.
[2] 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 has now become settled law that the
application of s 22(1)(d) involves a threefold enquiry (see eg
Jasat v Natal Law Society
2000 (3) SA 44
(SCA) para 10 at
51C-I and
Law Society of the Cape of Good Hope v Budricks
2003
(2) SA 11
(SCA) para 2 at 13I-14B). The first enquiry is aimed at
determining whether the law society has established the offending
conduct
upon which it relies, on a balance of probabilities. The
second question is whether, in the light of the misconduct thus
established,
the attorney concerned is not a ‘fit and proper person
to continue to practise as an attorney’. Although this has not
always
been the position, s 22(1)(d) now expressly provides that
the determination of the second issue requires an exercise of its
discretion by the court (see eg
A v Law Society of the Cape of
Good Hope
1989 (1) SA 849
(A) at 851C-E). As was pointed out by
Scott JA in
Jasat
(at 51E-F), the exercise of the discretion
at the second stage ‘involves in reality a weighing up of the
conduct complained of against
the conduct expected of an attorney
and, to this extent, a value judgment’ (see also eg
Budricks
supra
at 14A). The third enquiry again requires the court to
exercise a discretion. At this stage the court must decide, in the
exercise
of its discretion, whether the person, who has been found
not to be a fit and proper person to practise as an attorney,
deserves
the ultimate penalty of being struck from the roll or
whether an order of suspension from practice will suffice.
[3] As to the appellant’s offending conduct, the facts
were largely common cause. Factual allegations on the papers which
turned
out to be contentious, were not held against the appellant by
the court
a quo
. I propose to do the same. The complaints,
thus established against the appellant on the undisputed facts, fell
into two broad categories.
Firstly, those relating to the
maladministration of his trust account and, secondly, those arising
from other contraventions of the
society’s rules.
[4] Problems relating to the appellant’s trust account
first came to the notice of the society when he failed to submit the
annual
report on the audit of the account – as required by the
rules of the society – for the financial year which ended on 28
February
2001. In consequence, he could not be provided with the
fidelity fund certificate prescribed by s 41(1) of the Act. The
appellant
was therefore practising for his own account without the
required certificate, which in itself constituted a criminal offence
under
s 83(10) of the Act.
[5] As a result of the appellant’s failure to file the
annual audit report, the society instructed a chartered accountant,
Mr Swart,
to investigate the appellant’s management of his trust
account for the 2001 financial year. From the report subsequently
prepared
by Swart, it appeared that, during that financial year, the
appellant had failed to comply with the most basic rules of the
society
pertaining to the administration of trust accounts. Although
in theory the appellant kept a trust account separate from his
business
account, as required by s 78(1) of the Act, his business
account became dormant because he had exceeded the limit of his
overdraft.
When that happened, the appellant simply used his trust
account for both business and trust purposes. This practice brought
him into
perpetual conflict with the society’s rule that money in
an attorney’s trust account not owing to trust creditors, should be
transferred to his or her business account without delay.
[6] The
appellant’s practice of utilising his trust account for dual
purposes also led to difficulties in identifying trust funds.
According to Swart’s report, these difficulties were exacerbated by
the fact that, apart from his bank statements, the appellant
kept no
accounting records whatsoever. So, for example, he could not provide
Swart with a cash book or any ledger of trust creditors
or business
debtors. Nor did he keep any updated list of trust creditors, as
specifically required by the society’s rules. A further
infringement of these rules found by Swart, was that trust cheques
were regularly drawn by the appellant, not crossed in any way
and
made out to ‘bearer’.
[7] Most disturbing to the society, was the finding by
Swart that the appellant’s trust account had been in overdraft on
numerous
occasions. On one such occasion the account was in overdraft
for more than one month. It would appear that, in the society’s
view,
every one of these occasions constituted a breach of its most
fundamental rule, that the total amount in an attorney’s trust
account
must at all times be sufficient to cover the amounts owing to
trust creditors. I do not think this view can be sustained. To me it
seems that these overdraft situations resulted directly from the
appellant’s custom of running his whole business through his trust
account. Once it is clear that all the deposits in the appellant’s
trust account were not trust monies, in the sense that they
were held
on behalf of another person, logic dictates that the rule referred to
would only be contravened by an overdraft on the
trust account if, at
the time of the overdraft, there was money owing to at least one
trust creditor. It is true that in a ‘regular’
attorney’s
practice the existence of at least one trust creditor would be
virtually axiomatic. But, not so for the appellant. From
Swart’s
report it appears that during the financial year investigated by him,
the appellant had handled only one trust transaction.
Though the
appellant did debt collections on behalf of one client, these
collections were paid directly to the client and not into
the
appellant’s trust account. The one trust transaction was a
conveyancing matter where, pending transfer of the property, the
appellant received the purchase price in trust for the seller, who
was his client. As it happens, it was with reference to this
transaction
that the appellant’s most serious transgression
occurred. I will come to that. In the circumstances, it appears that
the other
occasions on which the appellant’s trust account was
found to have been overdrawn did not involve any mismanagement of
trust money
at all.
[8] This brings me to the single trust transaction which
related to the sale of an immovable property by the appellant’s
client,
Mrs Hairs. On 11 August 2000, so Swart reported, the purchase
price of roughly R330 000 was deposited into the appellant’s
trust account. On that day the credit balance in the account was only
about R400. Immediately after 11 August a number of cheques
were
drawn on the account which were unrelated to the trust transaction.
On 23 August 2000 an amount of approximately R270 000
was paid
to Mrs Hairs. The appellant’s trust cheque for the balance of
R30 558 was, however, dishonoured on presentation,
because there
were insufficient funds available in the account. According to Swart,
the cheque was eventually honoured by the bank
after an amount of
R50 000 had been deposited into the account on 31 August 2000.
With regard to the Hairs transaction, the
society was clearly correct
in its conclusion that the appellant had breached its rule that there
should never be any shortfall in
an attorney’s trust account.
Moreover, on the face of it, the appellant on this occasion
appropriated trust funds for purposes
other than those for which they
were intended.
[9] Compared to his
transgressions with regard to the handling of his trust account, and
particularly those resulting from the Hairs
transaction, the
appellant’s other contraventions of the society’s rules were
considerably less serious. In the main, they consisted
of two types.
Contraventions of the first type resulted from his persistent failure
to respond to enquiries by the society, emanating
from relatively
minor complaints by some of his clients. The second kind of
contravention consisted of his failure ‘to pay within
a reasonable
time, the fees and disbursements of other legal practitioners in
respect of work that he entrusted to them’.
[10] The appellant’s explanations for his misconduct
were closely tied up with his narrative about the history of his
professional
career. Though he was admitted as an attorney on 16 July
1974, the appellant recounted, he only practised for about six months
as
a professional assistant, at the firm where he served his articles
of clerkship. He thereafter left the profession for more than
18
years, which were largely taken up by his involvement in various
business ventures. In July 1993, the appellant said, he was persuaded
to return to the attorney’s profession. According to the appellant,
over the next ten years, which preceded the striking-off application,
he never succeeded in establishing a financially viable practice. He
always practised on his own. He had very few clients and he
constantly struggled to survive. During those ten years, he moved
office no fewer than eight times because he could not afford the
rental. He mostly did his own typing and administration and his
bookkeeping often fell behind. During 2001, when most of his
non-trust
related transgressions occurred, he worked almost
exclusively for one client who was in financial difficulty, hoping
that he would
be rewarded for his time and effort if the client
survived. Unfortunately that did not happen. Towards the end of 2001,
the ailing
client was finally wound up. Because he had neglected the
rest of his practice, so the appellant said, the liquidation of this
client
left him in an even greater predicament, financially and
otherwise, than he had been before.
[11] Against this background, the appellant gave various
explanations as to how it came about that he managed his trust
account in
a way which, at least on the face of it, seemed to
demonstrate an almost wanton disregard for the rules of the society.
Apart from
the fact that he had to do everything himself while under
pressure to survive, the appellant explained, he was never good at
bookkeeping
and he always had problems with accounting. Moreover, he
said, he actually had very little practical experience to begin with
at
the time of his departure from the attorney’s profession in
1975. When he eventually returned to practice in 1993, he had been
out of what he described as ‘the attorney culture’ for too long.
Although he was therefore aware of the fact that he was administering
his trust account in contravention of the society’s rules, he had
no real appreciation of the seriousness of his transgressions.
So,
for instance, although he knew that he should not use his trust
account for business purposes, he believed that as long as he
only
used funds due to him personally, ‘I could regard the money as
being in trust for myself and that it would not do anyone any
harm’.
With regard to his custom of not crossing trust cheques and making
them payable ‘to bearer’, his explanation was that
these cheques
were always made out to himself as payee; that he had cashed them at
the bank and that he regarded them as ‘merely
transfers of my
money’.
[12] With regard to the Hairs transaction, the appellant
attributed his transgressions to another client, Mr Martin, who had
assured
him ‘at about that time’ that an amount of R50 000
owing to him, had been transferred into his trust account. On the
basis
of this assurance, the appellant said, he wrote out ‘certain
cheques’ until his cheque of R30 558 in favour of Mrs Hairs
was dishonoured. According to the appellant, he only then realised
that Martin’s assurance was not true. To the appellant’s way
of
thinking, his only real mistake was that he accepted Martin’s word
without verification before he started writing out cheques.
In the
end, however, so the appellant contended, Mrs Hairs suffered no
prejudice, because she received the amount owing to her once
Martin’s
deposit of R50 000 was made at the end of August 2000, as was
borne out by Swart’s report.
[13] His other contraventions, not arising from the
administration of his trust account, were essentially blamed by the
appellant
on his struggle during 2001 – when most of these
contraventions occurred – to keep both his practice and his ailing
client alive.
In conclusion, the appellant conceded that he had made
many mistakes and that ‘I have blundered through certain situations
in a
manner that I am not proud of’. Nevertheless, he submitted, he
does not deserve to be struck from the roll, but he should be allowed
to practise as an employee of another attorney, where his inability
to manage a trust account would not be of any consequence. In
support
of this submission he referred to the affidavit of Mr Warwick Jones,
an attorney practising for 26 years, who confirmed that
he was
prepared to take the appellant under his wing, as it were, in the
capacity of a ‘consultant’.
[14] Despite these submissions the court
a quo
held, as I have said, that the appellant’s name should be removed
from the roll. It’s
ratio decidendi
seems to be encapsulated
by the following quotation from the judgment of Van der Merwe J:
‘
The
[appellant] now wants this court to allow him to continue his
practice as an attorney, though as a consultant with another firm
of
attorneys, and, for the protection of the public, not to allow him to
maintain or administer an attorney’s trust account.
In
my judgment, an attorney who is a fit and proper person to practise
as an attorney, must also be able to maintain and administer
a trust
account. If he is not able to maintain and administer a trust
account, he is, in my judgment, not a fit and proper person
. . . .
I am satisfied that on the evidence as a whole the
respondent is not a fit and proper person to practise as an attorney.
His name
will therefore be struck from the roll of attorneys.’
[15] In this court it was argued on behalf of the
appellant that the court
a quo
had erred in finding, as a
matter of principle, that an attorney’s inability to maintain a
trust account automatically renders him
or her not a fit and proper
person to continue in practice. In support of this argument it was
pointed out, inter alia, that it is
no requirement for admission as
an attorney that the applicant should satisfy the court of his
ability to maintain a trust account
and that a separate trust account
and a fidelity fund certificate are only required if the attorney
wants to practise in partnership
or for his own account (see s 41(1)
of the Act).
[16] Though this argument is not completely without
merit, it is unnecessary to decide in the abstract whether the view
held by the
court
a quo
can as a matter of principle be
sustained. I say in the abstract, because the case against the
appellant is not simply that he was
unable to maintain and administer
a trust account. Even more disturbing than mere inability is his
degree of non-compliance with
the society’s rules which, in my
view, showed no less than a total lack of appreciation of both the
nature of and the reason for
the institution of a trust account. This
lack of appreciation is accentuated by some of his statements in
mitigation. By way of example
I refer to his statement with reference
to the Hairs transaction, namely, that his only real mistake was that
he had failed to verify
Martin’s statement that the amount of
R50 000 had been transferred to his trust account before he
started writing out cheques.
What he obviously failed to consider was
the question: what would have happened if Martin was unable to meet
his obligation? Or,
what would have happened if the appellant’s
estate was sequestrated before he was eventually paid by Martin? He
therefore failed
to realise that in these situations Mrs Hairs would
clearly have been at risk, while the total absence of risk
constitutes the very
essence of an attorney’s trust account (see eg
Law Society, Transvaal v Matthews
1989 (4) SA 389
(T) at
394B-C).
[17] Added to this are the appellant’s other
transgressions not related to his trust account. Though they may not
on their own have
been serious enough to render the appellant not fit
and proper, this issue must be decided on the totality of all the
evidence. On
the evidence as a whole I am satisfied that the court
a
quo
cannot be faulted in arriving at the conclusion that the
appellant is not a fit and proper person to continue to practise as
an attorney,
as is envisaged by s 22(1)(d) of the Act. In the
light of this finding there were only two options available to the
court
a quo
: to suspend the appellant from practice or to
strike him from the roll (see
Budricks supra
at 16C-E). Merely
interdicting him from practising for his own account, would not
suffice.
[18] This brings me to the third enquiry, namely,
whether the appellant should be removed from the roll of attorneys or
whether an
order suspending him from practice would be an appropriate
sanction. In answering this question sight should not be lost of the
reality
that in its effect the imposition of the former stricture
constitutes a severe penalty. Apart from the ignominy of being struck
off
the roll, the attorney will be precluded from practising his
profession for a substantial period of time. This is so because, as
was pointed out by Galgut AJA in
Law Society of the Cape v C
1986 (1) SA 616
(A) at 640D-E:
‘
Such
an order envisages that the attorney will not be re-admitted to
practise unless the court can be satisfied by the clearest proof
that
the applicant has genuinely reformed, that a considerable period has
elapsed since he was struck off and that the probability
is that, if
reinstated, he will conduct himself honestly and honourably in the
future.’
[19] Before imposing this severe penalty, the court
should therefore 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. These objectives
have been described
as twofold: firstly, to discipline and punish
errant attorneys and, secondly, to protect the public, particularly
where trust funds
are involved (see eg
Budricks supra
at
16E-G).
[20] It was argued on behalf of the appellant that he
did not deserve the ultimate penalty of striking-off, because he was
never found
to be dishonest. Factually this argument appears to be
well founded. None of the appellant’s transgressions seems to
reflect on
his honesty and integrity. Although his trust account was
in debit on a number of occasions, these mostly did not involve trust
funds
at all. It is true that on the one occasion where he was called
upon to manage trust funds, he did in effect use those funds for
unauthorised purposes. But even on this occasion he cannot be said,
in my view, to have misappropriated trust money, in the sense
of
dishonestly using it for himself. His explanation is that he did so
inadvertently because he acted on the assurance of a client
that
sufficient funds had previously been transferred to his trust
account. It is true that his explanation was rather vague, but
it is
not gainsaid by any direct evidence. On the contrary, his version is
to some extent borne out by the investigation of Swart.
It is, at
least indirectly, supported by both Martin and Hairs.
[21] The further argument on behalf of the appellant was
that, as a general rule, striking-off is reserved for attorneys who
have
acted dishonestly while transgressions not involving dishonesty
are usually visited with the lesser penalty of suspension from
practice.
Although this can obviously not be regarded as a rule of
the Medes and the Persians, since every case must ultimately be
decided
on its own facts, the general approach contended for by the
appellant does appear to be supported by authority (see eg
A v Law
Society of the Cape of Good Hope
1989 (1) SA 849
(A);
Reyneke
v Wetsgenootskap van die Kaap die Goeie Hoop
[1993] ZASCA 161
;
1994 (1) SA 359
(A);
Law Society of the Cape of Good Hope v King
1995 (2) SA 887
(C) at 892G-894C;
Vassen v Law Society of the Cape of Good Hope
[1998] ZASCA 47
;
1998 (4) SA 532
(SCA) at 538I-539A;
Law Society, Cape of Good
Hope v Peter
[2006] SCA 37 (RSA) para 19). This distinction is
not difficult to understand. The attorney’s profession is 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.
[22] Though not contending that the appellant had been
dishonest, the essential theme of the argument on behalf of the
society was
that the appellant’s transgressions were so serious
that they show him to be unworthy to remain in the ranks of the
attorney’s
profession. Inter alia, it was contended, his misconduct
displayed a complete inability to distinguish between the true nature
of
trust funds and funds in a business or private account, which lack
of insight can only be ascribed to a reckless disregard for the
most
basic rules of the society aimed at the protection of trust funds. In
any event, so the society argued, the appellant had failed
to
demonstrate a misdirection by the court
a quo
which would
warrant an interference with the exercise of its discretion to strike
the appellant off the roll.
[23] With reference to the society’s last argument, it
is, of course, a well-established principle that, in an appeal
against the
exercise by a court of a discretion, the appeal court has
a limited power to interfere; that it cannot do so merely because it
would
have exercised that discretion differently (see eg
Budricks
supra
at 14B). My problem is, however, that it does not appear
from the court
a quo
’s judgment in this matter that it had
exercised its discretion in a proper manner. From the statement that
I have quoted (in para
14 above) the court seemed to suggest that,
because it had found the appellant not to be a fit and proper person,
his striking-off
should follow as a matter of course. That would mean
that the third enquiry under s 22(1)(d) had been passed over
entirely.
The only alternative meaning that can, in my view, be
ascribed to the court’s statement, is that, if an attorney is found
unable
to administer and conduct his trust account, his striking-off
should follow automatically. For reasons that are, in my view,
self-evident,
such a broad statement cannot be sustained. Either way,
the court’s statement therefore reflects a misdirection which
obliges this
court to exercise its discretion anew.
[24] That the appellant’s transgressions were serious,
particularly when viewed in their totality, cannot be gainsaid. The
question
whether they were serious enough to warrant the extreme
penalty of striking-off, ultimately depends on a value judgment. On
the application
of that value judgment, I am persuaded that in all
the circumstances the penalty of striking-off is too severe. What
weighs heavily
in the appellant’s favour is the consideration that
I have already referred to, namely, that he was not guilty of
dishonesty. The
society’s contention was that, though a finding of
dishonesty may not be warranted, the appellant’s misconduct
displayed a complete
lack of insight into an attorney’s obligations
with regard to his trust account. I agree. What I do not agree with,
however, is
the inference sought to be drawn by the society that this
lack of insight must be attributed to a reckless disregard for its
rules
aimed at the protection of trust funds. On the appellant’s
version, which cannot be rejected, his lack of insight resulted from
a dearth of knowledge and experience. Though these answers will
rarely be acceptable from an attorney such as the appellant, who
must
be approaching middle age and who has been practising for more than
ten years, his situation appears to be quite exceptional.
He
had no experience of note before he left the attorney’s profession
for about 18 years and he has hardly had any exposure to trust
transactions since his return. Because he always practised on his
own, he never benefited from the guidance of more experienced
colleagues
and, because he was always struggling to survive, he was
unable to employ knowledgeable assistance.
[25] The next question is whether protection of the
public requires that the appellant be struck from the roll. Again I
think not.
The appellant has clearly learnt a hard and painful
lesson. In the circumstances, the probabilities are, in my view, that
if he is
suspended from practice for a period of one year, he will no
longer suffer from the lack of insight into the nature of an
attorney’s
trust account which now renders him unfit to continue
his practice. Moreover, the appellant’s declared intention is to
practise
as an employee for an experienced attorney and not in
partnership or for his own account. I propose to secure that
undertaking by
way of a court order. That, I think, will as far as
humanly possible, eliminate any residual public risk. In the end, the
type of
order made by the Cape High Court and recently endorsed in a
majority judgment of this court in
Peter (supra),
seems to be
eminently suitable for this case. Though Ms Peter was found to be
unfit to practise as an attorney, because she had dishonestly
misappropriated trust money for her own purposes, the majority agreed
with the Cape High Court that she did not deserve to be struck
off
the roll and that an order suspending her from practice for a period
of one year would suffice. Writing for the majority, Farlam
JA then
proceeded as follows (at paras 22-23):
‘
I
am also of the view that it was appropriate for the court
a quo
to impose a further restriction on the respondent after the expiry of
the period of suspension, namely that for a minimum period
of one
year she should not practise for her own account.
At
first blush it may appear illogical to impose such a restriction on a
person as to whose fitness to practise one is satisfied,
but this is
in my opinion a case where it is preferable to err on the side of
caution. Although a repetition is unlikely there is
always, by the
very nature of things, uncertainty. The respondent has shown herself
to be naïve and immature, lacking in experience
and insight. It
therefore seems to have been a wise precaution for the court
a quo
to have restricted her from practising for her own account for a
further period after the expiry of her suspension so that she has
the
opportunity to gain the necessary insight and maturity, the lack of
which led to her present predicament.’
[26] I believe, however, that whereas Ms Peter was
precluded from practising independently for a period of one year
after the expiry
of her suspension, that period should, as an
additional precaution, be extended to two years in the appellant’s
case. Otherwise
I also propose to follow the precedent in
Peter
by
ordering that, after that period of two years, he will only be
allowed to practise for his own account if he can satisfy the court
that it would be appropriate to allow him to do so. Apart from the
changes to the court
a quo
’s order which are necessitated by
what I have said above, that order can for the rest be confirmed.
[27] For
these reasons the following order is made:
1. The
appeal is upheld with costs.
2. Paragraph 1 of the order of the court
a quo
is
set aside and replaced by the following:
‘
1(a) Kevin
John Rollo Summerley (hereafter referred to as the respondent) is
suspended from practice as an attorney for a period of
one year.
(b) The
respondent is precluded from practising as an attorney for his own
account, either as principal or in partnership or in association
or
as a director of a private company for a period of two years from the
expiry of the suspension in (a) above.
(c) Should
the respondent, after the expiry of the period referred to in (b)
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.’
3. For
the rest, the order of the court
a quo
is confirmed.
………………
.
F
D J BRAND
JUDGE
OF APPEAL
Concur
:
MPATI DP
CONRADIE
JA
VAN
HEERDEN JA
JAFTA
JA