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[2003] ZAWCHC 90
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Yeats NO and Others v Attorneys Fidelity Fund Board of Control (8205/01) [2003] ZAWCHC 90 (6 May 2003)
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE
OF GOOD HOPE PROVINCIAL DIVISION)
CASE
NO. 8205/01
In
the matter between:
MICHAEL
YEATS N.O.
….......................................................................
First
Plaintiff
WENDY
ELIZABETH YEATS N.O.
…..................................................
Second
Plaintiff
NIGEL
RAYMOND TATHAM N.O.
…......................................................
Third
Plaintiff
and
THE
ATTORNEYS FIDELITY FUND BOARD OF CONTROL
….....................
Defendant
JUDGMENT
: DELIVERED 6th MAY 2003
VAN
HEERDEN J:
Introduction
In
this matter, the three plaintiffs, in their capacities as the
trustees of the Michael Yeats Family Trust
{'the
Trust),
seek
reimbursement from the Attorneys Fidelity Fund
('the
Fund),
of
money allegedly entrusted by the Trust to a practising attorney and
stolen by such attorney when he absconded from South Africa.
The
claim is brought against the defendant, the Attorneys Fidelity Fund
Board of Control, in terms of the Attorneys Act 53 of 1979
('the
Act),
under
section 27 of which Act the Fund vests in and is administered by the
defendant.
The
plaintiffs' case is that money was entrusted to the said attorney in
the course of his practice as such, within the meaning
of section
26(a) (read together with the definition of
'practice'
in
section 1) of the Act. Section 26(a) renders the Fund liable to
reimburse persons who suffer pecuniary loss as a result of theft
by a
practising attorney of such money. The plaintiffs allege further that
the money paid by the Trust to the attorney in question
was to be
invested on behalf of the Trust in an account contemplated by section
78(2A) of the Act, on a temporary or interim basis
pending legal
advice on investment in foreign companies and the implication of
exchange control legislation on such investments.
The
defendant denies that the money was
entrusted
to
the attorney within the meaning of section 26(a) of the Act, but also
contends that, even if it is found that there
was
an
entrustment within the meaning of that section, the plaintiffs' claim
should still fail for the following reasons:
(i)
The
money was not entrusted to the attorney
in
the course of his
practice as an attorney.
(ii)
Alternatively,
if it
was
so
entrusted, the attorney was instructed to
invest the money on
behalf of the Trust in an account contemplated
in section 78(2A)
of the Act; this instruction to invest fell within the
ambit of
section 47(1 )(g) of the Act and, accordingly, the Fund is
not
liable in respect of any loss suffered by the plaintiff as a
result
of the theft of such money. In this regard, the defendant
denies
that the attorney in question was instructed to pay the
money into a
section 78(2A) account on a temporary or interim
basis only pending the conclusion or implementation of a matter or
transaction,
as envisaged in section 47(5)(a) of the Act.
Factual
Background
The
following facts are common cause:
As
at 20 March 2000, one Spyridon Akritidis
('Akritidis')
was
a duly admitted attorney of the High Court and was in possession of
a then current fidelity fund certificate, as envisaged
by section 41
of the Act and issued in terms of section 42 thereof. At that time.
Akritidis practised as a sole practitioner
under his own name in
Sandown, Gauteng.
On
20 March 2000, an amount of R1 million was transferred from the
trust account of Tatham Wilkes & Company, attorneys of
Pietermaritzburg, to a trust account in the name of Akritidis at the
Sandton Branch of Nedbank Limited. This transfer took place
by means
of the deposit of a cheque for the said amount at the
Pietermaritzburg Branch of Nedbank Limited.
Akritidis
subsequently absconded from the Republic of South Africa and his
estate has been finally sequestrated. The trustees
of his insolvent
estate have no personal knowledge of his whereabouts. It would
appear that there are insufficient unencumbered
assets in Akritidis'
insolvent estate in the Republic of South Africa to repay the
abovementioned amount of R1 million to the
Trust. (This last fact
was admitted by the defendant subject to the plaintiffs proving that
Akritidis stole the abovementioned
amount - which is not admitted by
the defendant - and subject also to any dividend accruing to the
plaintiffs from Akritidis'
insolvent estate being deducted from any
amount which this Court might order the defendant to pay to the
plaintiffs.)
The
Trust gave due notice of its alleged claim against the Fund to the
Law Society of the Transvaal and to defendant, as it was
required to
do under section 48 of the Act. However, on or about 27 June 2001,
the defendant gave written notice to the Trust that
it had rejected
the Trust's claim. In terms of section 49 of the Act, the defendant
gave leave to the Trust to institute action
against the Fund, and
such action was instituted within one year of the rejection by the
defendant of the Trust's claim.
The
defendant does not, however, admit the averment made by the
plaintiffs in their particulars of claim to the effect that Akritidis
had a reputation for having an expertise in exchange control
legislation and investment in foreign companies. The defendant also
does not admit the plaintiffs' allegations that, following the
transfer of the R1 million to Akritidis' trust account, the trustees
of the Trust would have given Akritidis further instructions in
respect of this money after receiving and considering Akritidis'
advice on the investment of this amount in foreign companies and the
implication of exchange control legislation on such investments.
Statutory
Background
Section
26(a) of the Act provides that the Fund shall be applied for the
purpose of reimbursing persons who may suffer pecuniary
loss as a
result of-
'theft
committed by a practising practitioner, his candidate attorney or his
employee, of any money or other property entrusted
by or on behalf of
such persons to him or to his candidate attorney or employee in the
course of his practice
The
other sections of the Act which are relevant to the matter before me
were conveniently summarised by Cleaver J in the recent
case of
Tollemache
v Attorneys Fidelity Fund
[2003]
1 All SA 364(C)
as follows (at par [17]):
'Section
47(1) creates certain exceptions where the Fund is not liable in
respect of loss suffered,
inter
alia
where
such loss is suffered
"by
any person as a result of theft of the money which a practitioner
has been instructed to invest on behalf of such person
after the
date of commencement of this paragraph."
(Section
47(1)(g))
Section
47(4) provides that, subject to section 47(5), a practitioner must
be regarded as having been instructed to invest money
for the
purposes of section 47(1 )(g) where the person who entrusts the
money to the practitioner, or for whom the practitioner
holds the
money,
G
"instructs
the practitioner to invest all or some of that money in a specified
investment or an investment of the practitioner's
choice."
In
terms of section 78(1), any practising practitioner is obliged to
open and keep a separate trust banking account at a banking
institution in the Republic and to deposit therein the money held
or received by him on account of any person. This is an attorney's
normal trust account and the interest earned on this account is
paid to the Fund (section 78(3)).
In
terms of section 78(2)(a) a practitioner may invest in a separate
trust, savings or other interest-bearing account opened by
him with
any banking institution or building society any money deposited in
his trust banking account which is not immediately
required for any
particular purpose. Interest earned on any such account is paid to
the Fund (section 78(3)) and since the attorney
is dealing with
trust funds which have been pooled in his trust account, no
authority is required from any client to open such
an account. The
section permits interest to be earned for the benefit of the Fund at
a higher rate than would be earned on the
nomial trust account and
attorneys have over the years been encouraged to make use of this
section so as to build up the resources
of the Fund.
Section
78(2A) makes provision for specifically identified funds to be
invested for the benefit of a client. The section reads:
"(2A)
Any separate trust savings or other interest-bearing account -
(a)
which is opened by a practitioner for the purpose of investing
therein, on the instructions of any person, any money deposited
in
his trust banking account; and
(b)
over which the practitioner exercises exclusive control as trustee,
agent or stakeholder or in any other fiduciary capacity,
shall
contain a reference to this subsection."
If
a client instructs his attorney to deposit monies to a section
78(2A) account, this would in ordinary parlance he an instruction
to
invest the money for the client's benefit. It follows that if the
stolen money is money which the client instructed the attorney
to
invest in a section 78(2A) account, the Fund's liability would
normally be excluded. However, liability will not be excluded
if the
provisions of section 47(5) apply.
•
Section
47(5) reads as follows:
"(5)
For the purposes of subsection (1)(g), a practitioner must be
regarded as not having been instructed to invest money
if he or she
is instructed by a person -
(a)
to pay the money into an account contemplated in section 78(2A) if
such payment is for the purpose of investing such money
in such
account on a temporary or interim basis only
pending
the conclusion or implementation of any particular matter or
transaction which is already in existence or about to come
into
existence at the time that the investment is made and over which
investment the practitioner exercises exclusive control
as trustee,
agent or stakeholder or in any fiduciary capacity;
(b)
to
lend money on behalf of that person to give effect to a
loan
agreement where that person, being the lender -
(i)
specifies
the borrower to whom the money is to be
lent;
(ii)
has
not been introduced to the borrower by the
practitioner for the
purpose of making that loan; and
(iii)
is
advised by the practitioner in respect of the terms
and
conditions of the loan agreement; or
(c)
to
utilise the money to give effect to any term of a transaction
to
which that person is a party, other than a transaction
which is a
loan or which gives effect to a loan agreement
that does not fall
within the scope of paragraph (b)."'
As
was the situation in the
Tollemache
case
(supra),
the
plaintiffs' case as pleaded makes it clear that the plaintiffs rely
on the exemption contained in section 47(5)(a) of the
Act. As
indicated above, the plaintiffs allege that the
R1
million was paid to Akritidis with an instruction that it be
invested on behalf of the Trust in an account contemplated by
section 78(2A) of the Act, on a temporary or interim basis pending
legal advice on investment in foreign companies and the implication
of exchange control legislation on such investments.
As
regards the
onus
of
proof in respect of sections 47(1) and 47(5) of the Act, section
47(1) sets out various statutory exceptions to the Fund's
general
liability for pecuniary loss suffered as a result of thefts of the
kind described in section 26. It is thus for the Fund
(the
defendant) to plead and establish the section 47(1) exception on
which it relies. In the present proceedings, it is implicit
from the
pleadings that part of the plaintiffs' case is that the R1 million
in question was to be
invested
by
Akritidis
for
the benefit of the Trust,
thus
bringing into play the ground of exception set out in section 47(1
)(g) of the Act.
However,
as indicated above, section 47(5) of the Act in turn creates certain
exclusions from the general ground of exception
contained in section
47(1 )(g). This being so, both Mr
Rogers
SC,
who appeared for the defendant, and Mr
Dickson
SC,
who appeared for the plaintiffs, submitted that it was for the
plaintiffs
to
allege and prove that the exception contained in section 47(1 )(g)
of the Act is
not
applicable
because of the presence of one or other of the qualifications stated
in section 47(5) -
in
casu,
that
the R1 million was paid to Akritidis in the circumstances specified
in section 47(5)(a). In my view, this submission accords
with the
general principles for determining the incidence of the
onus
of
proof (as set out in, for example,
Eskom
v First National Bank of Southern Africa Ltd
[1994] ZASCA 186
;
1995
(2) SA 386
(A) at 390B-394E) and is clearly correct. As was pointed
out by Mr
Rogers,
the
Fund administers monies to which all practitioners contribute, and
members of the public who suffer a loss at the hands of
dishonest
attorneys are given a statutory remedy which they would not
ordinarily have. In most cases, however, the facts giving
rise to
this statutory claim would not be within the knowledge of the Fund,
but would rather be within the peculiar knowledge
of the claimant
concerned. In particular, the section 47(5) qualifications of the
section 47(1 )(g) exception to the Fund's general
liability in
respect of theft of the kind described in section 26. all relate to
matters which would ordinarily be peculiarly
within the knowledge of
the claimant. It is thus in accordance with policy and fairness that
the
claimant
should
be required to allege and prove the applicability of one or other of
those qualifications. (Cf, in this regard,
Santam
Bank Ltd v Voigt
1990
(3) SA 274
(E) at 279B-F.)
The
Evidence before this Court
The
only witnesses called on behalf of the plaintiffs were Michael Yeats
('Yeats'),
the
first plaintiff and one of the trustees of the Trust, and one
Stephen Leith Anticevich, one of the two joint trustees of
Akritidis' insolvent estate. Yeats testified that the Trust was
created (and registered in 1993) for the purpose of investing
money
for the benefit of the Trust beneficiaries, such beneficiaries being
himself, his wife (the second plaintiff, Wendy Elizabeth
Yeats, who
is also a trustee of the Trust), and their two children. The third
trustee of the Trust, Nigel Raymond Tatham
('Tatham'),
the
third plaintiff, is an old friend of Yeats and also his attorney.
Tatham is not a beneficiary of the Trust.
Yeats
is a building project manager and also a property developer. After
completing a building management degree at the University
of Cape
Town, he worked for three years in the building industry before
going into business (a wholesale cash and carry business)
with three
colleagues in 1983. While his colleagues were responsible for the
trading side of the business, Yeats was responsible
for finding
appropriate premises in various urban centres and, having done so,
setting the business up at such premises. Until
1989, Yeats managed
the business in Pietermaritzburg. From that year, he dedicated about
50% of his working time to the business,
doing freelance property
management work for the rest of his time.
By
1999, the wholesale business set up by Yeats and his colleagues had
18 branches across South Africa and also in Windhoek (Namibia).
In
that year, the Trust - which apparently held
Yeats'
portion'
of
the shares in the trading company through which the wholesale
business operated - sold such shares to a company known as
'Massmarf
for
a price of R14 million. Yeats did not, however, sell to Massmart his
shares in the company which owns the business properties,
and he
still holds such shares.
R2
500 000.00 of the price of R14 million was paid out in June 1999,
the balance being paid out somewhat later. As the Trust did
not have
a bank account in its name at that time, the R2,5 million was
deposited into the trust account of Tatham Wilkes &
Company.
Part of this amount was utilised to pay off the mortgage bonds on
the Yeats family residence and holiday homes, as well
as the balance
owing to Stannic in respect of certain motor vehicles, leaving an
amount of between R1,7 million and R1.8 million
in the Tatham Wilkes
trust account. A bank account in the name of the Trust was
subsequently opened at Standard Bank (Pietermaritzburg
Branch) and
the balance of the purchase price paid by Massmart was deposited
into this account.
Yeats
said that he told one Justin van Maasdyk
{'Van
Maasdyk),
while
playing golf with the latter, that he (Yeats) wished to invest money
belonging to the Trust in foreign companies. Van Maasdyk
is an old
friend of Yeats' father who worked for Stannic in the 1980's,
through which company Yeats' wholesale business did a
lot of its
vehicle and equipment financing. Van Maasdyk later moved from
Stannic to the NBS and, by 1999, he had retired. A short
while after
the abovementioned conversation between Yeats and Van Maasdyk on the
golf course. Van Maasdyk telephoned Yeats to
tell him about a
certain Mark Tingle
{'Tingle').
Tingle
allegedly knew of an attorney in Johannesburg by the name of
Akritidis who might be able to assist Yeats in investing money
in
foreign companies. Yeats was interested in this suggestion -
according to him, exchange conlrol in South Africa was being
relaxed
at that time and he needed to determine the available options for
overseas investment.
Yeats
therefore telephoned Tingle and arranged a meeting with him and Van
Maasdyk at the latter's home in Durban. At this meeting,
which took
place on 17 March 2000, Yeats told Tingle that the Trust was
desirous of investing R1 million in foreign companies
through legal
channels Tingle informed Yeats that Akritidis, an attorney in
Johannesburg, would be able to advise Yeats in this
regard and that
Akritidis had
'a
Reserve Bank approved scheme'.
Tingle
spoke very highly of Akritidis, stating that he (Tingle) had
consulted him on numerous occasions. Moreover, Yeats believed
that
Van Maasdyk, at whose home the meeting was held and who was present
at the said meeting, would not advise Yeats to do anything
which was
detrimental to the interests of the Trust.
Quite
a while before this meeting with Tingle, in November 1998, both
Yeats and his wife had each invested R400 000.00 offshore,
the then
maximum personal allowance permitted in terms of the Exchange
Control Regulations. (See, in this regard, the expert
summary in
respect of Mr W F Grassman, a Section Head in the Investigations
Division of the Exchange Control Department of the
South African
Reserve Bank
('SARB'),
filed
by the defendant in terms of Rule 36(9)(b) of the Uniform Rules of
Court, and admitted by the plaintiffs as evidence, thus
obviating
the need for the defendant to call Mr Grassman as an expert
witness.)
During
March 2000. Yeats and his wife each invested a further R100 000.00
offshore, although Yeats was unable to recall whether
this was done
prior to or after the meeting with Tingle on 17 March 2000. (As
appears from Mr Grassman's expert summary, the
permissible offshore
investment for a
private
individual
resident in South Africa had been increased from R400 000.00 to R500
000.00 on 23 February 1999. and was further increased
to R750 000.00
on 23 February 2000.) The persons who assisted Mr and Mrs Yeats with
their offshore investments in November 1998
and March 2000 were
their accountant (Mr Mitchell of Mitchells Chartered Accountants
Pietermaritzburg, who is also the accountant
of the Trust), the
Pietermaritzburg Branch of BDO Financial Services CC, and the
Standard Bank (Pietermaritzburg Branch), with
which Mr and Mrs Yeats
each have personal bank accounts. Yeats testified, however, that,
despite this previous assistance in
investing offshore, he did not,
prior to the meeting with Tingle, approach any of these persons for
advice in respect of the
options (if any) whereby the Trust might
legally invest money in foreign companies. According to Yeats, his
impression was that
'insurance
investment advisors'
in
Pietermaritzburg (with one of whom he had shared an office) worked
with a limited range of companies, and would not have had
the
necessary expertise to furnish him with the advice he required in
respect of the Trust.
It
is interesting to note that, under cross-examination, Yeats stated
that, in April 2001, he and his wife each invested a further
amount
of R250 000.00 offshore (thereby bringing their personal offshore
investments up to the limit of R750
000.00
each, which limit had applied since 23 February 2000). Once again,
they were assisted in remitting these additional funds
offshore by
BDO Financial Services CC (Pietermaritzburg Branch). At much the
same time (April 2001), BDO Financial Services CC
arranged for the
'sniff
of
the amount of R250 000.00, which had been remitted offshore in March
2000 and invested in Yeats' name in a fund known as
'Templeton
US Dollar Liquid Reserve',
to
a fund known as
'Templeton
Global Growth Fund
(in
which latter fund the abovementioned amount of R250 000.00, remitted
overseas on Yeats' behalf in April 2001, was also invested).
On
Yeats' version, he simply informed Tingle at their meeting on 17
March 2000 that the Trust was seeking advice on the lawful
investment of R1 million in foreign companies. Tingle's only role
was to provide Yeats with an introduction to Akritidis. This
Tingle
would apparently have done by contacting Akritidis and communicating
the Trust's requirements to Akritidis. Yeats expected
that Akritidis
would thereafter contact him (Yeats) to take the matter further.
On
18 March 2000 (the day after the meeting between Yeats. Tingle and
Van Maasdyk), Tingle sent Yeats a letter by telefax transmission
(addressed to
'MrM
Yates'),
which
letter formed part of Exhibit
'A,
the
plaintiffs' Bundle of Documents for Trial). Under the letterhead
Berween
Decks
Investment CC (CK 97/11231/23), Computer and Technology Investment
Services',
this
letter reads as follows:
'Hi
Mike
f
confirm our conversation of the 1
7'"
March
00 and detail the following. The amount paid will be deposited into
the following attorney's trust account either by inter
bank transfer
or bank guaranteed cheque. We shall acknowledge receipt of the
moneys on sight of the deposit slip or sight of
the moneys in the
trust account.
Name
of Trust Account : SPYRIDON AKRITIDIS Attorneys
Nedbank
Trust Account
Name of Bank
Nedbank
Bank
Account
1970748605
Branch
Name
:
Sandton
Branch
Number
:
8197-005.
These
moneys will be held and invested in terms of Section 78(2)A
[sic]
of
the attorneys trust account act
[sic],
until
confirmation by yourselves or a
[sic]
appointed
representative that we have performed our obligations to yourselves,
whereupon the aforesaid funds will be paid over
to our client. Kind
regards Mark Tingle'
As
was submitted by Mr Rogers, this letter dated 18 March 2000. in at
least four respects, bears no relation to what Yeats testified
was
discussed between himself and Tingle at their meeting on the
previous day:
Tingle's
letter
stated
that
we'
(ie
Tingle and/or Between Decks Investment CC) would acknowledge receipt
of the sum of R1 million on sight of the deposit slip
or sight of
the said sum in Akritidis'
trust
account.
By contrast, Yeats testified that he would not have entrusted any
money whatsoever to either Tingle or his close corporation;
that he
would not have deposited any money belonging to the Trust in any
account other than an attorney's trust account; and
that his
intention was simply to transfer the sum of R1 million from one
attorney's trust account to another such account. Yeats
himself
conceded under cross-examination, however, that this statement in
Tingle's letter (viz
'we
shall acknowledge receipt
...')
was not reconcilable with his (Yeats') version of his discussion
with Tingle and his alleged view that Tingle was simply
'the
conduit to
put
Yeats into contact with Akritidis. In his letter, Tingle also stated
that the sum of money in question would
'be
held and invested
in
Akritidis' trust account until confirmation
'by
yourselves or a
(sic]
appointed
representative that
we
[ie
Tingle and/or his close corporation]
have
performed
our
obligations to yourselves'
(my
emphasis). According to Yeats, however, Tingle's only role was to
provide an introduction to Akritidis and he (Tingle)
had
no
other
obligations
to
Yeats or the Trust. Neither Tingle, nor his close corporation, was
going to give Yeats or the Trust any advice, and the Trust
certainly
had
no contract with Tingle or his close corporation. Any
'confirmation'
in
respect of further dealings with the R1 million deposited into
Akritidis' trust account would only have been given - to Akritidis
-
after Yeats had received advice from Akritidis and had consulted his
fellow trustees and Mr Mitchell. Yeats also said that
he needed to
be satisfied, prior to giving any such
'confirmation*,
that
the proposed overseas investment was a legal one, with the necessary
SARB approval, and that the money of the Trust would
be safely and
wisely invested. In this regard too, Yeats conceded under
cross-examination that the content of Tingle's letter
was totally at
odds with his (Yeats') version of his discussion with Tingle at
their meeting. Tingle concluded his letter of
18 March 2000 by
stating that, after the said
'confirmation'
had
been furnished, the money deposited into Akritidis' trust account
'will
be paid over to
our
client
(emphasis
added). On Yeats' version, no money would have been destined for any
client of Tingle or of his close corporation, nor
had there been any
discussion whatsoever along those lines. Yeats testified, however,
that the words
'our
client
in
the concluding paragraph of Tingle's
letter
could
possibly have been a reference to a
'foreign
company'
registered
either overseas or in South Africa, in which the money of the Trust
might have been invested, or to any one of a number
of other
(unspecified) possibilities. According to Yeats, he did not really
concern himself with the meaning of these words upon
reading
Tingle's letter - he required a lot more information before he
committed the
Trust
to any investment, and he expected that this information would in
due course be furnished to him by Akritidis.
The
overall tenor of Tingle's letter suggests strongly that some
arrangement or
'deaf
had
been reached between Tingle and Yeats at their meeting on 17 March
2000. a material term of which was that the Trust would
make a
payment of R1 million to the specified Akritidis' trust account.
Under cross-examination, however, Yeats testified that
no
such
arrangement or
'deaf
was
struck between himself and Tingle at their meeting and that,
although the possibility of the Trust's paying the said sum to
Akritidis before Yeats had consulted with Akritidis was discussed at
his (Yeats') meeting with Tingle (viz that there had been
some
discussion of
'the
possibility of the process to be followed).
Yeats
himself made the decision to deposit the said sum into Akritidis"
trust account. He testified that he would have made
this decision
very shortly after his meeting with Tingle and, in any event, some
time between such meeting and 20 March 2000,
ie the date upon which
the money was transferred into Akritidis' trust account.
Yeats
testified further that his decision to transfer the money to
Akritidis' trust account was motivated by two considerations,
namely
(i) to demonstrate his
bona
fides
to
Akritidis; and (ii) that Akritidis was able to get a slightly better
interest rate on moneys in his trust account than the
interest rate
applicable to moneys deposited in the Tatham
Wilkes
trust account. As was pointed out by Mr
Rogers,
however,
Yeats mentioned only the second of these considerations in the
affidavit which he made in support of the Trust's claim
against the
defendant. Furthermore, under cross-examination, Yeats was
apparently unable to recall whether he ever disclosed
to Tingle what
interest rate was then applicable to the moneys of the Trust in the
Tatham Wilkes trust account. Yeats also said
that Tingle did not
actually inform him, at their meeting, of what interest rate would
be earned on the Trust's money should
it be deposited into
Akritidis' trust account - all Tingle apparently told Yeats in this
regard was that the Trust's money would
earn interest at a
'slightly
better rate'
with
Akritidis than with Tatham Wilkes & Company. According to Yeats,
no
'actual
figures'
in
respect of the respective interest rates on the two attornies' trust
accounts were discussed at the meeting on 17 March 2000.
When
cross-examined as to whether, at the time he received Tingle's
letter, Yeats noticed the discrepancies between the contents
of the
letter and his discussion with Tingle the previous day, Yeats
testified that he could not remember; that the
'important
thing*
in
his view was the advice which he would obtain from Akritidis and the
'end
result
of
such advice, and not the
'details
of the process'
to
be followed in obtaining such advice. As far as he (Yeats) was
concerned, money invested in an attorney's trust account was
as safe
as money invested in a bank, and the R1 million in question was
simply moving from one attorney's trust account to another.
The
first tranche of the purchase price (viz R2.5 million) had been
deposited into the Tatham Wilkes trust account in July 1999
and was
being held in such account on an indefinite basis until the Trust
decided what to do with this money. Although a bank
account in the
name of the Trust was opened some six weeks after this initial
payment, and although the Trust's money thereafter
invested
'on
calf
with
the bank was earning interest at a slightly higher rate than the
Trust's money in the Tatham Wilkes trust account, Yeats
did not
transfer the money from the latter to the former account, as he did
not regard the difference in interest rate as
significant.
I
am inclined to agree with Mr
Rogers'
contention
that, given that Yeats had not previously dealt with either Tingle
or Akritidis, and that the amount involved was substantial,
it does
seem most unlikely that Yeats, as a seasoned businessman, would not,
upon reading Tingle's letter, immediately have been
struck by the
fact that (on Yeats' version) the contents of such letter bore
little relation to the discussion which he had had
with Tingle the
previous day. This notwithstanding, however, Yeats did not contact
Tingle and ask for an explanation; on the
contrary, it seems that he
decided to transfer the sum of R1 million from the Tatham Wilkes
trust account to the Akritidis' trust
account without conducting any
further investigation into either Tingle or Akritidis, not even to
the extent of requesting his
co-trustee, regular attorney and
longstanding friend, Tatham, to make any enquiries in this regard.
For the reasons set out below,
however, it is not necessary for me
to make any finding on this point.
Yeats
testified further that he had sent Tingle's letter by telefax
transmission to Tatham and had instructed the latter to transfer
the
amount of R1 million of the Trust's money from the Tatham Wilkes
trust account to the Akritidis' trust account, details of
which
latter account were set out in Tingle's letter. This transfer then
took place, as indicated above, on 20 March 2000. Tingle's
letter
was sent to Tatham by telefax transmission without any accompanying
letter from Yeats - according to Yeats, he was in
constant contact
with Tatham and would have
briefed
Tatham
on
'what
was going on'.
He
(Yeats) forwarded Tingle's letter to Tatham simply in order further
to
'enlighten'
Tatham
and to furnish Tatham with the details of the relevant Akritidis'
trust account.
It
is common cause that, after the transfer of the R1 million on 20
March 2000, there was no progress whatsoever in the matter
until
late July 2000, when Yeats heard from Tingle that Akritidis had
ceased practice and had absconded from South Africa, apparently
having stolen the money in his trust account (including the
abovementioned R1 million). Yeats stated that, during this
four-month
period, he contacted Tingle telephonically every two or
three weeks to ask him when he (Yeats) would be meeting with
Akritidis
and/or when he would be receiving further information from
Akritidis. Yeats' understanding was apparently that Tingle would
communicate
the Trust's requirements to Akritidis and that Akritidis
would then contact Yeats to set up a meeting, possibly sending
documentation
to Yeats to read before such meeting. During the
telephonic communications between Yeats and Tingle in this
four-month period,
Tingle apparently repeatedly assured Yeats that
he (Tingle) would
'sort
everything out,
but
none of the
'promises'
made
by Tingle in this regard came to anything.
Despite
the lack of any communication from Akritidis, Yeats made no attempt
whatsoever to contact Akritidis
direcMy
during
this four-month period. His explanation for this failure was that he
was
'working
through Tingle'
who
kept reassuring him that
'something
would happen'.
In
the meantime, he (Yeats) had no cause for concern as the Trust's R1
million was in an attorney's trust account, earning interest.
Yeats
nevertheless conceded under cross-examination that one of the
purposes of investing the Trust's money offshore was as a
hedge
against currency depreciation and that, this being so, the lapse of
time was not unimportant. The depreciation of the rand
over the four
months in question would indeed steadily have reduced the value of
any offshore investment ultimately made by the
Trust. However,
according to Yeats, he wanted to
'diversify
his investments',
and
it was difficult to invest R14 million wisely in a relatively short
period of time.
Finally.
Yeats testified that, as far as he was concerned, Akritidis would
not only advise him on the investment of the Trust's
money in
foreign companies and the implication of exchange control
legislation on such investments. In addition, if Akritidis'
advice
was to the effect that it was possible legally to make such
investments in foreign companies, and if the trustees of the
Trust
accepted his advice in this regard, Akritidis would have been asked
by the trustees to take whatever steps were necessary
in order
legally to arrange the investment transaction(s) decided upon by the
trustees.
Stephen
Leith Anticevich
('Anticevich'),
one
of the two joint trustees of Akritidis' insolvent estate, testified
that the Trust had proved a claim against the said insolvent
estate,
being one of a number of creditors (with claims totalling
approximately R45 million) to have submitted claim documents
to the
trustees of the insolvent estate. The Akritidis' account into which
the Trust's R1 million had been transferred on 20
March 2000 was the
attorney's
'ordinary
trust
banking account (referred to in section 78(1) of the Act), but this
amount was no longer in either this account, nor in
any other
account in the name of Akritidis in South Africa. Akritidis
apparently had many trust accounts, held at various different
banks,
as well as operating a business account from time to time. After the
sequestration of his estate, Anticevich and his co-trustee
did not
find significant funds in any of these accounts, most of which had
either been closed or were in overdraft.
According
to information furnished to Anticevich, it would appear that, over
the
2Vz
year
period prior to his absconding from South Africa, Akritidis had
remitted a total of approximately R580 million offshore;
it is
estimated that some R200 million of this total amount was remitted
by Akritidis during the six/seven month period from
January to July
2000. By far the greater portion of the funds
'moved
by
Akritidis out of South Africa were remitted illegally, although it
would appear that some of the monies remitted offshore did
reach
their
'proper
foreign destination',
ie
as required by the parties in South Africa on whose behalf Akritidis
had remitted these funds. Although there were instances
where
Akritidis had utilised
'genuine
import documentation'
to
legally remit funds overseas, these instances were very rare.
According
to Anticevich, many of the clients who had advanced monies to
Akritidis claim to have dealt with Akritidis on the basis
that he
would obtain the necessary SARB approval on their behalf legally to
remit such monies offshore. However, in Anticevich's
view, some of
the persons who advanced monies to Akritidis for transfer offshore
knew that these funds were being remitted illegally.
Discussion
As
indicated above, the defendant denies that the R1 million was
entrusted
to
Akritidis within the meaning of section 26(a) of the Act.
In
Industrial
and Commercial Factors (Pty) Ltd v Attorneys Fidelity Fund Board of
Control
[1996] ZASCA 84
;
1997
(1) SA 136
(A) it was held that, in order to
'activate'
the
liability of the Fund to reimburse persons who have suffered
pecuniary loss as a result of thefts of the kind described in
section 26(a), the claimant must show that:
'(1)
he suffered pecuniary loss;
(2)
by reason of theft committed by a practising attorney:
of
money entrusted by or on behalf of the
[claimant]
to
the
attorney;
in
the course of his practice as such'
(at
140E).
The
mere fact of the payment of money into an attorney's trust account
is not sufficient to show that such money is trust money
(see the
Industrial
and Commercial Factors
case
{supra)
at
1431-J). In this case, the majority (per F H Grosskopf JA) cited
with approval (at 144B-C) a passage from the judgment of Nicholas
J
in the case of
Provident
Fund for the Clothing Industry v Attorneys, Notaries and
Conveyancers Fidelity Guarantee Fund
1981
(3) SA 539
(W) at 543E-F, where the learned judge had held that the
concept of
'entrustmenf
('to entrust')
comprises
two elements, namely (a) to place in the possession of something,
and (b) to subject to a trust. The latter element,
it was said,
connoted that the person entrusted is bound to deal with the
property or money concerned for the benefit of others.
According
to the majority judgment in the
Industrial
and Commercial Factors
case
(supra),
the
notion of
'entrustmenf
in
section 26(a) of the Act (the Afrikaans - signed - text of which
uses the word
'toevertrou')
does
not imply that the handing over of the money concerned
'has
to be subject to a trust in the technical legal sense of the word
(at
144D-I)). Furthermore, the majority held that section 26(a) makes
provision for reimbursement to either (a) the person
by
whom
the
money has been entrusted; or (2) the person
on
whose behalf
the
money has been entrusted; provided of course that such person has
suffered pecuniary loss (at 145E-F).
Mr
Rogers
submitted
that an
'entrustmenf
as
contemplated in section 26(a) cannot be found to have been
established where there has been no proof of any communication
between the claimant (whether in person or represented by an agent)
and the attorney in question as to the purpose of the payment
or the
basis on which the money is to be held. It is indeed so that, if the
client manifests to the attorney an intention to
subject the money
to a trust, the element of entrustment is not defeated merely
because, at the time of receiving the money,
the attorney had the
concealed and dishonest intention of stealing the money (see, in
this regard, the
Industrial
and Commercial Factors
case
(supra)
at
142B-H). Mr
Rogers
contended,
however, that the client's intentions must at least have been
communicated to the attorney, either by the client himself
or
herself or through the client's agent.
In
my view, Mr
Rogers'
contentions
in this regard are entirely sound. Such contentions are supported
not only by the approach adopted by the majority
in the
Industrial
and Commercial Factors
case
(supra),
but
also with the approach adopted in the minority judgment (per Marais
JA), in which the concept of
'entrustment
is
analysed with reference to
'the
understanding
1
or
'the
arrangement
which
exists between the attorney and his or her client (at 149H-1501). Mr
Rogers'
contention
are also consistent with the approach adopted to the interpretation
of section 26(a) of the Act in
SVV
Construction (Pty) Ltd v Attorneys, Notaries and Conveyancers
Fidelity Guarantee Fund
1993
(2) SA 577
(C). In this latter case, King J pointed out that section
26 of the Act provides for the reimbursement of a person who suffers
pecuniary loss as a result of the theft of money entrusted to a
practising attorney by the person himself or herself or by by
someone else acting on his or her behalf (at 588H-I). According to
King J:
'The
phrase
"by
on or behalf of"
in
this context connotes or caters for two contingencies: a person
places money with an attorney, entrusts it to him, for himself
or on
his own behalf or he does so on behalf of another; here
"on
behalf of
could
presumably encompass the concepts
"as
agent for"
and
"for
the benefit of,
provided
that the person on whose behalf the money is placed acquires a legal
right
vis-a-vis
the
attorney because the money is held for him. Thus, if A places money
on his own behalf in trust with an attorney, he is the
person who
has entrusted it and is entitled to reimbursement; if he places it
on behalf of, say, his wife, she is the person
on whose behalf the
money has been entrusted and she is entitled to reimbursement'
(at
590B-D).
As
argued by Mr
Rogers,
the
plaintiffs pleaded that Tingle was the person who acted on behalf of
the plaintiffs in communicating with Akritidis. Thus,
in the
plaintiffs' replication to the defendant's plea, the plaintiffs
stated that the transfer of the R1 million to the Akritidis'
trust
account on 10 March 2000
'was
accompanied by the express alternatively implied alternatively tacit
instruction by
M.A.
Tingle (acting in so doing on behalf of Plaintiffs) to AKRITIDIS to
invest it in an account contemplated by Section 78(2A)
of the Act'
Yeats
testified that he himself had no communication whatsoever with
Akritidis. Although apparently available, Tingle was not
called as a
witness for the plaintiffs and the plaintiffs did not attempt to
adduce hearsay evidence as to what Tingle told Akritidis
(if
anything). There is no evidence before me as to whether Tingle
communicated with Akritidis in respect of the R1 million transferred
into the Akritidis' trust account. Even if one assumes, in favour of
the plaintiffs, that Tingle
did
communicate
with Akritidis in this regard, there is no evidence before the Court
as to what Tingle told Akritidis. Thus, it is
impossible to
determine whether what Tingle said to Akritidis (if anything) was
such as to convey to the mind of Akritidis that
the R1 million had
been
'impressed
with a trust
for
the benefit of
the
Trust. (See, in this regard, the
Industrial
and Commercial Factors
case
(supra)
at
145D-F, and the
SVV
Construction
case
(supra)
at
589G).
Tingle's
letter dated 18 March 2000 does not take this aspect any further; on
the contrary, it could be said that certain sentences
in this letter
(as analysed above) point in the opposite direction to any
contention that Tingle communicated to Akritidis the
fact that the
R1 million transferred or to be transferred was to be
'impressed
with the trusf
for
the benefit of the Trust.
It
follows that I am in agreement with Mr
Rogers'
submission
that the plaintiffs have failed to prove, as they were required to
do in terms of section 26(a) of the Act, that the
R1 million in
question was
'entrusted
by or on behalf of [the
Trust]
to'
Akritidis.
For this reason alone, the plaintiffs' claim must in my view be
dismissed This being so, it is not necessary for me
to deal with Mr
Rogers'
contention
- and with Mr
Dickson's
attempted
rebuttal of this contention - that Yeats' evidence was
unsatisfactory, inconsistent with the inherent probabilities
and
lacking in credibility. It is also unnecessary for me to deal with
the defendant's contention that the R1 million was not
entrusted to
Akritidis
'in
the course of his practice'
as
an attorney, as required to establish the defendant's liability in
terms of section 26(a) of the Act. (On this requirement,
see
Tollemache
v Attorneys Fidelity Fund (supra)
at
paras [12-16], a part of the judgment of Cleaver J which is very
relevant to the facts of the present case)
Even
if, however, I am wrong in my conclusion that the plaintiffs have
failed to establish the requisite
'entrustmenf
of
the money in question in terms of section 26(a) of the Act, there is
another reason why the plaintiffs' claim cannot, in my
view,
succeed. It is this: the plaintiffs rely on section 47(5)(a) of the
Act and. as indicated above, it is the plaintiffs who
are required
to prove the existence of the circumstances set out in this section.
In particular, the plaintiffs must prove that
Akritidis was
instructed, either by the plaintiffs or on their behalf, to pay the
R1 million into a section 78(2A) trust account
'for
the purpose of investing such money in such account on a temporary
or interim basis only pending the conclusion or implementation
of
any particular matter or transaction which is already in existence
or about to come into existence at the time that the investment
is
made
As
submitted by Mr
Rogers,
in
seeking to bring the matter within the ambit of section 47(5)(a),
the plaintiffs are confronted by an insuperable evidential
obstacle
to establishing that Akritidis was
'instructed
in
the manner set out in this section. The plaintiffs' pleaded case is
that the Trust's instructions were conveyed to Akritidis
by Tingle.
However, since Tingle was not called as a witness and since the
plaintiffs made no attempt to adduce hearsay evidence
as to what
Tingle told Akritidis (if anything), there is no admissible evidence
before me as to whether the instructions (if
any) given to Akritidis
fell within the ambit of section 27(5)(a). It is not enough that the
plaintiffs themselves had the intention
that Akritidis
should
be
so instructed. The plaintiffs have not proved that such instruction
was conveyed to Akritidis.
Moreover,
even if it is assumed in favour of the plaintiffs that Akritidis
was
instructed
in this manner, it would appear that any such instruction would not
have fallen within the scope of the qualification
set out in section
47(5)(a). As cogently argued by Mr
Rogers,
the
only thing which could in the present notionally qualify as a
'particular
matter or transaction'
was
the proposed investment of the Trust's money in foreign companies.
Such proposed investment was plainly not a matter or transaction
'already
in existence'.
It
also seems clear that it was not a matter or transaction aoouf fo
come ;nfo ex/sfence', within the meaning of section 47(5)(a).
I
agree with Mr
Rogers'
submission
that the phrase 'abouf
to
come
/nfo
ex/stence' ('tvaf op
die
pwnf
is
om te
on/sfaan'
in the Afrikaans (signed) text) must entail something more than
merely a transaction which
may
possibly
come into existence at some indeterminate time in the future.
For
the purposes of the present case, it is not necessary for me to
determine what the precise meaning of the phrase 'aoouf
to
come into
ex/sfence'
in section 47(5)(a) of the Act is - in easy, the foreign companies
in which the investments might be made had not been
identified;
there had been no negotiations with such companies; and the form
which the investments might take was entirely iknown.
Indeed,
whether there would ultimately be any such investment at all s
allegedly dependent upon legal advice which Akritidis
was still to
give. It cannot be said, by any stretch of the imagination, that the
plaintiffs have Hshed \hat the investment of
the Trust's R1 million
in the relevant Akritidis' CCOUttt was
made
on
a
temporary basis pending the conclusion or
7
<atton
of a matter or transaction which is already in existence or is .
0
me
into existence as contemplated in section 47(5)(a). For this the
plaintiffs have failed to establish their case and their claim
must
in smissed.
Order
In
the circumstances, the plaintiff's claim is dismissed with cost
B
J VAN HEERDEN