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2024
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[2024] ZAMPMBHC 57
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Wilson v Du Toit Smuts and Partners Attorneys and Others (3985/2021) [2024] ZAMPMBHC 57 (27 August 2024)
Latest
amended version 3 September 2024.
FLYNOTES:
CIVIL PROCEDURE – Prescription –
Money
held in trust account
–
Deposit
paid for property purchase – Alleged material non-disclosure
– Property sold to another buyer for lower
price –
Difference retained and paid by attorney to close corporation that
sold property – Prescription raised
against claim by buyer
for balance of deposit – Attorney continued to hold funds
for buyer and continued to charge
him – Claim did not
prescribe – Judgment granted in favour of buyer –
Prescription Act 68 of 1969
,
s 12(3).
THE
HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION, MBOMBELA MAIN SEAT
CASE
NO: 3985 / 2021
(1)
REPORTABLE: YES
(2)
OF INTEREST TO OTHER JUDGES: YES
(3)
REVISED.
DATE:
27 August
2024
SIGNATURE
In the matter between:
WAYNE
WILSON
APPLICANT
And
DU
TOIT SMUTS AND PARTNERS FIRST
RESPONDENT
ATTORNEYS
ADRIAAN
SMUTS PROPERTY SECOND
RESPONDENT
INVESTMENT
CC
ADRIAAN
PETRUS SMUTS
THIRD RESPONDENT
JUDGMENT
RATSHIBVUMO J:
Delivered:
This judgment was handed down
electronically by circulation to the parties' representatives by
email. The date and time for hand-down
is deemed to be 14H00 on 27
August 2024.
[1]
Introduction
Nemo
judex in causa sua
is a principle of
natural justice, that forbids one to be a judge over a case in which
he or she has an interest. One needs not
be a judge for the principle
to be applicable. It applies to every situation in which the relevant
person is in a position of authority
and to make a decision on issues
before him/her. Even if one is determined to be impartial,
perceptions cannot be overlooked. Justice
should not only be done,
but should also be seen being done. Facts of this case are a perfect
example and reminder that failure
to adhere to this principle can
leave one caught in a web of conflict of interests. That call is even
louder when one is in the
legal profession.
[2]
The Second Respondent is a close
corporation that involved itself in the sale of immovable properties.
Its sole member is the Third
Respondent who is also an attorney. When
the Applicant entered into an agreement to purchase a property from
the Second Respondent
(the contract), for an amount of R3 390 000.00,
a deposit of R670 000.00 was paid into the interest bearing
trust
account of the attorneys and conveyancers chosen by the Second
Respondent. The First Respondent is the firm of attorneys picked
for
that purpose and to register the property into the names of the
Applicant. The Third Respondent is a member and/or a consultant
of
the First Respondent.
[3]
This entailed that when there were demands
or instructions given to the attorneys revolving around the contract
or the deposit,
the Second Respondent – the seller represented
by the Third Respondent, found itself giving instructions or making
demands
to the First Respondent – the firm of attorneys
represented by the same person – the Third Respondent. Sooner
or later,
it became unavoidable for the seller and the attorneys to
have this kind of conversation. Practically, that meant the Third
Respondent
had to take instructions from himself or instructing
himself to do something in respect of the dispute with the buyer –
the
Applicant.
[4]
In this application, the Applicant seeks an
order that the First and the Second Respondent pay him the sum of
R390 000.00,
calculated at the prescribed rate from 31 March
2017 to date of payment, jointly and severally, the one paying, the
other to be
absolved. The claim is rooted on a contract referred to
above. That contract was entered between the Applicant and the Second
Respondent
on 10 October 2016. The contract was subject to suspensive
conditions which did not materialise. The application is opposed by
all the Respondents, who authorised the Third Respondent to depose to
an affidavit on their behalf. The main reason for opposition
is that
the claim has prescribed in terms of
Prescription Act, no. 68 of
1969
.
[5]
Whether
the contract lapsed or it was cancelled, is the subject of dispute.
It is however common cause that on 17 January 2017,
the Applicant,
through his legal representative, wrote a letter to the Second
Respondent requesting that the contract be cancelled
by agreement due
to material non-disclosure by Second Respondent.
[1]
The Applicant received no response to his letter. The Second
Respondent thereafter proceeded to sell the property to a third party
for R3 million, which was R390 000.00 less than the purchase
price in the contract.
[6]
This shortfall is the amount that was
withheld by the First Respondent when refunding part of the deposit
to the Applicant, as “liquidated
damages” suffered by its
client, the Second Respondent, as a result of the Applicant’s
repudiation of the contract.
This amount (plus interests) was later
paid to the Second Respondent by the First Respondent. This is the
same amount claimed by
the Applicant in this application. The
Applicant disputes that the claim has prescribed for reason that the
deposit was being held
in a trust account. He further submits that
prescription could not have meant that the deposit becomes the First
Respondent’s
property to depose as he wished. The claim against
the Second Respondent is based on undue enrichment.
[7]
Whether the claim had prescribed or not
would require unpacking the facts, in order to tell if there was a
repudiation of a contract
by any of the parties. The contract clauses
would also be visited to establish the motive for the deposit in the
first place.
[8]
Background.
On 10 October 2016, the
Second Respondent, represented by the Third Respondent, and the
Applicant, entered into a written sale agreement
in respect of
Portion 368, White River 64, Registration Division JU, Mpumalanga
(the property), for the value of R3 390 000.00.
There were
inter
alia
, three suspensive conditions to this agreement: sale of the
Applicant’s property at Summer Breeze Estate; successful
purchase
of four other portions of White River 64 being Portions 369,
370, 371 and 372; and the rezoning of all of these properties from
“agriculture” to “resort” by no later than 28
February 2017. If by this date, the suspensive conditions
would not
have been met, the agreement would lapse. However, the parties left
the door open to extend the date further, at the
Second Respondent’s
discretion.
[9]
The
parties also agreed that the Applicant shall pay R670 000.00 as
a deposit towards the property, which he did on 19 October
2016. The
deposit was paid to the First Respondent, a firm of legal
practitioners appointed by the Second Respondent, as conveyancers,
to
oversee the transfer of the property. According to the contract, the
First Respondent was to invest the amount in an interest
bearing
trust account in terms of section 78(2A) of the Attorneys Act no. 53
of 1979, as it applied back then. The money was to
be kept in a trust
account in the names of the Applicant and for his benefit.
[2]
The interests accumulated therein were to be paid to the Applicant.
This money would be transferred to the Second Respondent as
the
deposit for the property upon transfer and registration thereof. In
the event the agreement was to lapse, the deposit would
be
transferred back to the Applicant, unless there are claims against it
as detailed hereunder.
[10]
Clause 12 of the contract provided for the
steps to be taken in case of breach of the contract by either party.
The aggrieved party
was to give notice to the defaulting party and
allow him or her, seven days to remedy the breach. In case the party
in default
does not remedy the breach within that period, the
aggrieved party would have an option to seek specific performance or
to cancel
the contract and claim for damages through the courts. The
manner of service of the notice is also detailed in the clause. It is
common cause however, that no party served or received a notice in
terms of this clause and that none of them approached the court
to
seek an order for specific performance or to claim the damages. The
Respondents however allege in opposition of the application
that the
Second Respondent suffered damages as a result of the Applicant’s
repudiation of contract. They submit that the
Second Respondent took
the said repudiation as a cancellation of a contract which it
accepted.
[11]
What
the Second Respondent refers to as repudiation of a contract is a
letter it received from the Applicant’s legal representative
dated, 17 January 2017.
[3]
The
relevant paragraphs of the said letter read as follows,
“
1.5
On 30 November 2017
[4]
our
client learned that on 09 May 2016 an application by SANRAL for an
environmental authorisation for a construction of bypass,
known as
P166, through White River had been refused by the Department of
Environmental Affairs and that an alternative route, known
as the
White River North Alternative had been authorised.
1.6 The White River North
Alternative for P166 will pass directly adjacent to the property, and
just to its north.
1.7 The P166 will be a
four lane highway. It will be noisy and unsightly and will alter the
rural character of the property in a
fundamental way. It is not
compatible with the purpose for which our client wished to acquire
the property.
1.8 SANRAL has noted an
appeal against the decision but as we understand, a final decision
could be many months away and the outcome
is uncertain. Had our
client known of this approval before the sale, he would not have
entered into the agreement. The agent and
the seller were aware of
the approval but unfortunately it was not disclosed to our client.
2. As you will
appreciate, in view of the approval, our client does not wish to
proceed with the purchase.
3. Our client would like
to cancel the contract by agreement between the parties concerned,
but if that is not possible, will unilaterally
void the contract and
demand restitution on the basis that he was induced to enter into the
contract by misrepresentation.
…
We remain hopeful that
this matter can be resolved amicably and look forward to hearing from
you.”
[12]
The Applicant received no response to the
request contained in this letter. It goes without saying that when a
request is not acceded
to, it means the status
quo
still applies as though the request was refused or there was no
request made at all. Although no response was received by the
Applicant, he did not proceed with what he had intimated, to wit,
that he “will unilaterally void the contract and demand
restitution on the basis that he was induced to enter into the
contract by misrepresentation.”
[13]
On 02 March 2017, the Applicant’s
legal representative wrote a letter to the First Respondent advising
that the contract between
the Applicant and the Second Respondent had
lapsed without the fulfilment of suspensive conditions. The First
Respondent was as
such asked to refund the deposit being held in the
trust account as described in paragraph 9 above. On the same day, the
First
Respondent replied as follows,
“
We
refer to the above and to our letter of the 2
nd
February 2017.
[5]
We confirm that we have
received an amount of R670 000.00 in trust from your client in
respect of a deposit on the purchase
of the above property.
Our client has now
managed to sell the above property for a purchase consideration of
R3 000 000.00. This is an amount
of R390 000.00 less
than the purchase consideration of the repudiated agreement of
R3 390 000.00
The new purchaser has in
the meantime delivered guarantees for the purchase price and we
expect transfer soon.
Our client has
consequently suffered liquidated damages in the amount of
R390 000.00.
We have in terms of the
agreement paid the amount of R390 000.00 from the deposit of
R670 000.00 in full and final settlement
to the seller in
respect of the damages caused by your client’s repudiation of
the agreement.
We have not received any
claims from the estate agent involved regarding possible damages
suffered by them against the deposit held
by us.
Kindly let us have your
trust account details in order to refund the balance (R280 000.00)
of the deposit paid by your client
to you.”
[14]
The email sent to the Applicant’s
legal representative on 02 March 2017, contained two letters; the one
dated 02 March 2017,
and the other dated 02 February 2017. In the
covering email, the First Respondent acknowledged that the letter
dated 02 February
may not have been received by the Applicant’s
legal representative as he could not locate the original sent email
to which
it would have been attached.
[15]
The letter dated 02 February 2017 is a
purported response to the letter from the Applicant’s legal
representative dated 17
January 2027. The relevant paragraphs of the
said letter read,
“
We
refer to the above and to your letter of 17
th
January 2027.
We are not going to
respond to all allegations contained in your letter under reply as we
will do so in due course and in the appropriate
forum should it
become necessary. Our failure to deal with specific allegations
should therefore not be construed as an admission
thereof.
We have discussed the
issue at length with the estate agent and are more than satisfied
that the agent went out of her way and has
inter alia
:
1. Referred the
purchasers to Mr. Ben Steyn, a senior manager at Mbombela Local
Municipality head of Town Planning and Building
Control department to
discuss their intentions with the property and the suitability of the
property for their envisaged use with
him.
…
3. Disclosed and
discussed the possible R40 bypass road to the north of the property
with the purchasers. Your client even enquired
about the possibility
to gain access to the road and indicated to the agent that the road
will be to their advantage as it will
enhance the visibility of their
envisaged water park, resort and bistro.
It is our client’s
contention that your client all along knew about the existence of a
road that might pass to the north of
the property but failed to do a
proper investigation as to the exact lineation of the possible road
further alternatively failed
to do a proper investigation as to the
specific attributes of the property and its surroundings before
entering into agreement.
Our client will proceed to market the
property for the best possible price but will hold your client
responsible for the possible
shortfall should the property be sold
for less than the initial amount.”
[16]
The Applicant believes that letter dated 02
February 2017 was never sent to him or his legal representative by
the First Respondent
as alleged and that it was penned down as an
after-thought, following receipt of the demand made on 02 March 2017.
The fact that
he did not receive the letter and the absence of a
proof of sent email is cited as a reason for this. Although there are
further
reasons forming the basis of this suspicion, this aspect
would not be crucial or relevant for the determination of this
application.
It suffices to state at this stage that on 28 June 2017,
the Applicant, through his legal representative, laid a complaint
with
the Law Society of Northern Provinces (which was later replaced
by the Legal Practice Council (LPC), Mpumalanga) against the Third
Respondent.
[17]
It
became clear in a response by the Third Respondent that at that
stage, no money had been paid to the Second Respondent as claimed
in
the First Respondent’s letter dated 02 March 2017. That payment
was only made on 17 December 2019. The allegation to the
effect that
a payment was already made was a deliberate untruth by the First
Respondent, the purpose of which has not been advanced.
Furthermore,
the Applicant only realised, on 21 September 2021, when he demanded
full bank records in respect of the trust account
into which the
deposit money was invested, that the trust account was closed on 13
December 2019 and that at the time, the balance
was R433 672.94.
[6]
[18]
The First Respondent claims that the
Applicant’s claim prescribed the date on which he terminated
his mandate to the Town
Planner to rezone the property, being 13
December 2016. The First Respondent claims that such termination was
an act of repudiation
making the suspensive condition impossible to
fulfil. In the alternative, the First Respondent alleges that the
debt became due
on the date the Applicant demanded the refund of the
deposit, which was 02 March 2017. By the time the application was
served on
the Respondents, in October 2021, the claim had prescribed,
calculated from any of the two dates.
[19]
Issues for determination.
The court is to determine
the legal basis of a claim made by the Applicant against the
Respondents. It also has to determine if
the claim against them had
prescribed and in particular, whether the claim for the release of
funds held in trust account can prescribe,
while the funds remain in
the account. The court shall in the process have to determine if the
contract between the Applicant and
the Second Respondent was still in
force as of 02 March 2017 when he demanded the release of funds,
and/or if it was cancelled
or repudiated.
[20]
Trust Account
According to clause 2.1
of the contract, the deposit money was to be invested in an interest
bearing trust account opened in terms
of section 78(2A) of the
Attorneys Act no. 53 of 1979. Sections 2 & 7 of the said Act
provided,
“
(2)
(a)
Any
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.
(b)
Any trust savings or other
interest-bearing account referred to in paragraph
(a)
shall contain a reference to this
subsection.
(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.
(3) The interest, if any,
on money deposited in terms of subsection (1) and the interest on
money invested in terms of subsection
(2) shall be paid over to the
fund by the practitioner concerned at the prescribed time and in the
manner prescribed.
(7) No amount standing to
the credit of any practitioner's trust account shall be regarded as
forming part of the assets of the
practitioner, or may be attached on
behalf of any creditor of such practitioner: Provided that any excess
remaining after payment
of all claims of persons whose money has, or
should have, been deposited or invested in such trust account, and
all claims in respect
of interest on money so invested, shall be
deemed to form part of the assets of such practitioner.
[21]
The above provisions in the Attorneys Act
have since been replaced by
sections 86
and
88
of the
Legal Practice
Act, no. 28 of 2014
.
Section 86(4)
and
86
(5) provide,
“
4.
A trust account practice may, on the instructions of any person, open
a separate trust savings account or other interest-bearing
account
for the purpose of investing therein any money deposited in the trust
account of that practice, on behalf of such person
over which the
practice exercises exclusive control as trustee, agent or stakeholder
or in any other fiduciary capacity.
5. Interest accrued on
money deposited in terms of this section must, in the case of money
deposited in terms of-
(a)…
(b)
subsection (4), be paid over to the person referred to in that
subsection: Provided that 5% of the interest accrued on money
in
terms of this paragraph must be paid over to the Fund and vests in
the Fund.
”
[22]
In
Incorporated
Law Society, Transvaal v Visse and Others (1); Incorporated Law
Society, Transvaal v Viljoen (2),
[7]
the
court held,
“
[
W]hen
trust money is handed to a firm it is the duty of the firm to keep it
in its possession and to use it for no other purpose
than that of the
trust. The position is, however, not the same in a case where a
specific article is handed over which must subsequently
be returned
or accounted for. The firm fulfils its duty if it accounts for or
returns an equivalent amount. It is inherent in such
a trust that the
firm should at all times have available liquid funds in an equivalent
amount. The very essence of a trust is the
absence of risk. I am in
respectful agreement with HATHORN, J, where he states in the case of
Incorporated Law Society v Stalker,
1932 N.P.D. 594
(at p.606), that
it is imperative that trust moneys in the possession of an attorney
should be available to his clients the instant
they become payable
and that they are generally payable before and not after demand. If a
deficit existed in respect of trust moneys
for which the respondents
were not responsible but for which they were liable, they had no
right to use moneys entrusted to them
for a particular purpose, to
satisfy trust creditors in respect of whose moneys the deficit
existed. If they did use it in this
manner they would be guilty of
theft because they would then be using moneys of their clients to
satisfy their own obligations
towards other clients.”
[23]
Discussion.
I have been referred to a
number of authorities in particular by the First Respondent, which
although I agree with them, I hold
a view that they are all
distinguishable from the facts of this case. To the extent that it
may be argued that they do find application
in this case, it appears
to me it would be on narrow technicalities that do not promote the
interests of justice, fairness and
equality before the law, but
borders on encouraging theft, fraud and bullying members of the
public through taking the law into
one’s own hands or treating
their assets as
res nullius
. I now proceed to unpack the
factual matrix that make me reach the conclusion above.
[24]
Everything seemed to be flowing well in
respect of the contract between the Applicant and the Second
Respondent, until the Applicant’s
discovery of a fact that
until then, was unknown to him, to wit, a road that had been approved
to be constructed adjacent to the
property he was due to purchase, in
the contract. This was not disclosed to him. In fact, he believed it
was concealed from him.
Although the Second Respondent attaches
little weight to this aspect, the National Road Agency regarded it to
be of great value
to the owners of the properties adjacent to where
the road would pass, to the extent that they decided to inform them.
[25]
The
Second Respondent does not dispute that he was aware of this fact
when he entered into a contract with the Applicant. He however
avers
that the Applicant was verbally informed of this, something that the
Applicant denies. It is common cause though that such
a fact appears
nowhere in writing, be it in the contract or email conversations
between the parties. I therefore accept the Applicant’s
version
in this regard. Moreover, this aspect is immaterial on issues to be
decided by the court pertaining to the contract so
much that even
with a dispute on whether there was any disclosure, it would not
alter the court’s finding.
[8]
[26]
The reason I hold a view that this dispute
is immaterial is that what remains important and relevant is what the
Applicant did as
a result of his discovery. It is his conduct that
would answer if he repudiated the contract. Even if the Applicant had
been informed
of the road in writing, hypothetically speaking, the
letter he wrote to the seller through his legal representative falls
short
of repudiation. In the letter, he makes it clear that he was
requesting that they should agree to terminate the contract amicably.
He further indicated that he was looking forward to hearing from the
seller over this request. He also intimated in the same letter
as to
what he intended to do in case they do not reach the agreement he
sought.
[27]
No response was forthcoming from the Second
Respondent regarding this request. This prompted the Applicant to
revert back to the
terms of the contract which remained intact as the
request to terminate it amicably was not acceded to. The belated
response which
did not even reach the Applicant on the date it was
allegedly penned down (02 February 2017) does not help the situation
as it
does not respond to Applicant’s request: to accept the
amicable cancellation of the contract or to decline. What the
response
does is to dispute having concealed the information about
the road. It also raises issues of possible damages rather in a
bizarre
manner that is not founded in the contract.
[28]
The
issue of damages is raised by the Second Respondent when it hints on
a possibility to sell the property at a value less than
the amount
agreed to with the Applicant and that if that happens, it would claim
damages from him as he repudiated the contract.
The strangeness of
this letter is rooted on the fact that the contract it alleges was
repudiated by the Applicant did not provide
for the damages as a
result of sale at a lesser value than the one agreed therein. The
contract could not have provided for this
because, clause 11.3
allowed the Second Respondent to keep the property in the market, for
as long as all the suspensive conditions
under clause 11.1 and 20
were not yet met.
[9]
Clearly,
clause 11.3 was meant to prevent any possible damages resulting from
keeping the property exclusively for purchase the
Applicant, thereby
missing out on other possible lucrative offers.
[29]
In refusing to pay the deposit money back
to the Applicant, the Second Respondent alleges that the repudiation
emanates from the
Applicant’s conduct in making the fulfilment
of the suspensive condition impossible. The contract however had a
clause on
what should happen in case of a party thereto, breaching it
by not performing what is expected of him. Clause 12 is the only
bridge
through which one can claim damages or specific performance.
Before the aggrieved party can claim damages, it has to put the
defaulting
party
in mora
by giving it a seven-days’ notice which can only be served in a
particular manner and at a specific address; within which
to rectify
the breach.
[30]
The contract does not specify the type of a
breach nor is there any mention on how the aggrieved party would have
learned of it.
There is however no doubt that failure to attend to
the rezoning of the property (or withdrawal of the mandate to do so
from the
Town Planner) would also be the breach of contract, if the
Applicant had a duty to attend to it. The Second Respondent not only
failed to give the Applicant the seven days’ notice, but also
failed to send a notice of its election to accept the repudiation
of
the contract to the Applicant. I say this mindful of the fact that
the contract made no provision of acceptance of repudiation
in any
manner other than within the ambit of clause 12. This clause also
makes it clear that any option to be exercised to cancel
the contract
and claim for damages would be done through court proceedings. To
this end, the contract makes provision for the scale
on what costs
shall be applicable in case of that option.
[31]
The option to approach the court is
appropriate in the circumstances of this case wherein the Third
Respondent turned out to be
the referee and the player at the same
time. Whenever the First Respondent wrote that it received
instructions from the Second
Respondent, the said letter was signed
by Mr. A Smuts, and the instructions he would be referring to, would
be coming from Mr.
A Smuts, as the sole member / owner of the Second
Respondent. When the letter from the conveyancing attorneys says, “I
have
paid my client the liquidated damages,” it would be Mr. A
Smuts, having deposited money to himself or to the close corporation
he owns. Consultation between the First Respondent (attorneys) and
the Second Respondent (seller), can practically and literally
take
place with Mr. A Smuts seated alone, and it appears this is what
happened in this case. As indicated, no party sent or received
a
breach notice, and the courts were not approached for an appropriate
remedy by anyone who may have felt aggrieved. This was the
case until
the contract lapsed, and it was not renewed.
[32]
With
the above in mind, I now proceed to deal with the question of
prescription. The need for
Prescription Act, no. 68 of 1969
must have
been informed by the desire to have finality in litigations and
claims. A debt cannot remain open indefinitely. A creditor
against
whom a debt is due needs to institute a claim within a particular
period, or else it would prescribe. Judging by a number
of
authorities the First Respondent came up with, one can tell that this
is the terrain it must be familiar with. For example,
in
Du
Toit and Others v Du Toit Smuts and Partners and Another
[10]
,
the first respondent who coincidentally is the First Respondent in
this case, found itself embroiled in the same issue involving
prescription of a claim over money paid as a deposit for the sale of
property.
[33]
In that matter, Mashile J dismissed the
claim against the first respondent holding that it had prescribed.
The court referred the
judgment to the LPC for investigations over
what it considered an ethical obligation on the part of a law firm to
inform the aggrieved
party about the looming prescription. What makes
the difference between that case and the one at hand is that the
seller in that
case was not the same person or members of the
conveyancing attorneys. Moreover, the person who paid the cash
deposit for the property,
was not the applicant (trustees), making
the link between the depositor and the claimants to be non-existent.
[34]
In
casu
,
the Applicant submitted that the payment of the deposit money to the
Second Respondent, by the First Respondent was unlawful as
the
Applicant, for whose benefit the money was held, had not given
consent for the payment. The Applicant’s claim against
the
Second Respondent was therefore based on undue enrichment. The First
Respondent relied on
De
Villiers NO v Kaplan
[11]
in submitting that the only right that the trust creditors have is a
right to payment by the attorney of whatever is due to them
and it is
to that extent that they are the attorney’s creditors, just as
it was held that “money paid to attorney by
a client to be held
and dealt with for the client clearly becomes the attorney’s
property even although it might be paid
into a trust account.”
[35]
In
Van
Wyk Van Heerden Attorneys v Gore and Amother NNO
,
[12]
the SCA distinguished Kaplan when it held,
“
It
is clear that attorneys operate on their trust accounts as principals
and not as agents. This is because they, and only they,
can instruct
a bank to dispose of amounts to the credit in that bank account since
clients have no legal relationship with the
bank concerning that
account. When attorneys operate on a trust bank account in accordance
with their instructions, however, they
may function at two levels. In
the first place, because only they have the right to dispose of funds
to the credit in that account
pursuant to the banker – customer
relationship, they do so as principal. In the second place, however,
if they give effect
to a mandate from the client in whose name the
moneys are held in trust, they do so as agent. What is relevant for
present purposes,
however, is that the power to operate a trust
account does not determine whether a deposit into that account
amounts to a disposition
to the attorney. The contention of the
liquidators to this effect must therefore be rejected.”
[36]
The
contract between the Applicant and the Second Respondent forms the
basis of the payment of the deposit money. It also provided
that the
deposit shall be kept in a separate interest bearing trust account
for the benefit of the Applicant. The only circumstances
under which
the deposit could be paid to the Second Respondent is upon transfer
of the property or what is covered under clause
12; all of which did
not take place until the contract lapsed. Trust property which
is registered in the name of a trust
account practice, or jointly in
the name of an attorney or trust account practice and any other
person in a capacity as administrator,
trustee, curator or agent,
does not form part of the assets of that attorney or trust account
practice or other person.
[13]
[37]
Had the First Respondent been telling the
truth when he claimed that the balance of the deposit was paid to the
Second Respondent,
debt would in my view have become due there and
then as the deposit in the trust account would have become a debt and
payable.
But this was untrue as the deposit remained in the trust
account until 13 December 2019. For all this period, the money was
still
being held for the Applicant and for his benefit irrespective
of his request that the funds be released to him. The funds were
still being held for him and would not accrue to anyone without his
consent or at least through a claim sanctioned by a court. Once
a
payment was made to the Second Respondent, clearly it was no longer
being held for him and for his benefit. I have also noted
that the
payment was made to the Second Respondent without any claim being
lodged by it against the deposit. This payment could
not have been
lawful. There is no justification or even an explanation for it,
other than that the First Respondent was conflicted.
[38]
In
as far as
Ramdin
v Pillay and Others
[14]
was decided to conclude that once a claim is made by a creditor or
trustee of the money held in the trust account, prescription
would
start running, I respectfully cannot agree. In circumstances of this
case where the money was kept in the trust account of
a legal
practitioner, who deliberately waited for prescription in his
calculations in order to do as he pleased with substantial
amount of
money which does not belong to him and to which he had no legal right
or authorisation; to allow prescription would promote
theft and fraud
in that legal practitioners would then be authorised to do what they
could not lawfully do, but for the prescription.
If this was to be
allowed, what would then happen to the funds still held in the trust
account? Would they become
res
nullius
for anyone to pick and own? Prescription does not change the
character and ownership of money being held in the trust account.
[39]
The other reason I find it difficult to
accede to the notion that the debt could have become due and payable
from the date the Applicant
requested the funds to be released is
that in this case, the First Respondent continued to deduct or charge
a monthly administration
fee from the interests accumulating in the
account, without failure. Although the Applicant submitted that these
charges should
be seen as interruption of prescription- through debt
acknowledgement, I think this argument stretches it too far. While
acknowledgement
of debt interrupts prescription, it is the
unequivocal acceptance of liability which is regarded as
acknowledgement of debt, not
a simple charging of a handling fee,
that can interrupt prescription. The charging of a fee however is in
my view another reason
that the First Respondent was conscious that
it continued to hold the funds for the Applicant and for his benefits
and continued
to charge him for that even during that period. This
makes it impossible for the Applicant’s claim to prescribe.
[40]
Having found as above, it follows therefore
that the payment made by the First Respondent to the Second
Respondent of the balance
of the deposit money, was unlawful and it
unduly enriched it (Second Respondent). I have taken note of the
Applicant’s averment
that he delayed in issuing the application
in this matter because the LPC would not have agreed to hear his
complaint, for as long
as there was pending litigation in courts. The
court was informed that the complaint resulted in a disciplinary
hearing, the outcome
of which was delivered in 2020 and that the
Third Respondent has since noted an internal appeal. The said appeal
has been pending
since 2020. The snail pace at which the complaint
has progressed so far is disconcerting.
[41]
Calculation of interest.
If the debt only became
due on the date on which money was paid from the trust account to the
Second Respondent, as the Applicant
argues, there is no basis for the
interest in the amount to be calculated from March 2017. The interest
should be calculated from
the date the debt became due which is
December 2019. The amount owed though, had been accumulating interest
as it was kept in the
interest bearing trust account. As of 13
December 2019, the total amount in the trust account was R433 672.94.
[42]
Costs.
For the Applicant to have
to resort to court to get what is rightfully his, is deplorable. It
has been eight years now since the
deposit was made towards the
purchase of the property. At some point, the Applicant approached the
First Respondent requesting
an undertaking that they will not raise
prescription as he was still pursuing a complaint with the LPC. He
required some sort of
an undertaking in the form of interruption of
the running of prescription. That letter went unanswered. The manner
in which the
Applicant, a natural person for that, was literally
pushed from pillar to post, ignored and treated with disrespect over
his own
money, deserves a show of disapproval by the court.
[43]
Although the Third Respondent’s
conduct in the disciplinary hearing before the LPC should have no
bearing in the outcome of
this application, I could not help but
notice that there was (and still is) no sense of urgency on his part.
If the Third Respondent
had it his way, the hearing would not have
even proceeded beyond calling for his response today. This I say
because in his response
to the LPC, he gave an explanation whose
purpose was for the LPC to close the file and that if he they were
not closing it, he
would need further particulars from the
complainant before responding. The hearing proceeded in his absence
as he needed a postponement
on the date scheduled for hearing.
[44]
In this hearing, the court was informed
that the sanction imposed (to suspend him as a legal practitioner)
cannot be put into operation
because it was suspended when he lodged
an appeal. This is the fourth year since the appeal was lodged with
the LPC, and the closure
appears to be still distant, while the
complainant, a member of the public awaits the outcome. This delay
cannot be condoned.
[45]
For the aforesaid reasons, I make the
following order.
[45.1] The First and the
Second Respondents are ordered to pay R390 000.00 (the capital
amount) plus interest accumulated as
of 13 December 2019
(R43 672.94), totalling R433 672.94 plus interest
calculated at the prescribed rate from 17 December
2019, to the date
of payment.
[45.2]
The First and the Second Respondents are ordered to pay the costs of
this application on attorney and client scale, jointly
and severally,
the one paying, the other to be absolved.
[45.3] The Chief
Registrar of this Division is directed to bring this judgment to the
attention of the LPC – Mpumalanga.
TV RATSHIBVUMO
ACTING DEPUTY JUDGE
PRESIDENT
MPUMALANGA
FOR
THE APPLICANT;
ADV.
C BESTER
INSTRUCTED
BY:
RICHARD
SPOOR INC
C/O:
CHRISTO SMITH INC
MBOMBELA
FOR
THE RESPONDENT:
ADV.
R DU PLESSIS SC
INSTRUCTED
BY:
DU
TOIT SMUTS & PARTNERS INC
MBOMBELA
DATE
HEARD:
23
JULY 2024
JUDGMENT
DELIVERED:
27
AUGUST 2024
[1]
See
Annexure WW3 on p. 34 of the paginated bundle.
[2]
See
clause 2.1 of the Deed of sale agreement (WWR1) on p. 199 of the
paginated bundle.
[3]
See
WW3 on p. 34 of the paginated bundle.
[4]
This
was clearly a typo as October 2017 was still in the future. The
author must have meant, 2016.
[5]
For
more on this letter, see paragraphs 14 & 15 below.
[6]
This
information is contained in a supplementary affidavit filed by the
Applicant after the initial opposition to its filing by
the
Respondents, in an interlocutory application.
[7]
1958
(4) SA 115
(T) at 118F-H.
[8]
See
National
Director of Public Prosecution v Zuma
[2009] ZASCA 1
;
2009 (2) SA 277
(SCA) at para 26, where it was held,
“
[M]otion
proceedings, unless concerned with interim relief, are all about the
resolution of legal issues based on common cause
facts. Unless the
circumstances are special they cannot be used to resolve
factual issues because they are not designed
to determine
probabilities. It is well established under the
Plascon-Evans
rule that where in motion proceedings disputes of fact arise on the
affidavits, a final order can be granted only if the facts
averred
in the applicant's affidavits, which have been admitted by the
respondent, together with the facts alleged by the latter,
justify
such order. It may be different if the respondent's version consists
of bald or uncreditworthy denials, raises fictitious
disputes of
fact, is palpably implausible, far-fetched or so clearly untenable
that the court is justified in rejecting them
merely on the papers.”
[9]
Clause
11.3 provides, “Pending fulfilment of 11.1 [the suspensive
condition of sale of the purchaser’s house at R4 500 000.00]
and 20 the seller shall be entitled to continue to market the
property, and should prior to the fulfilment of this condition,
a
bona
fide
offer (herein referred to as “the competing offer”) for
the property be received, which but for this agreement the
seller
wishes to accept, the seller may do so subject to the following
11.3.1 a copy of the
competing offer shall be delivered to the purchaser, who shall be
given 72 hours from delivery, to waive
the condition mentioned in
Clause 11.1…”
[10]
(4748/2021)
[2023] ZAMPMBHC 22 (12 April 2023)
.
[11]
1960
(4) SA 476
(C) at 477E-F.
[12]
2023
(1) SA 80
(SCA) at para 23.
[13]
See
section 88(2)
of the
Legal Practice Act.
[14
]
2008
(3) SA 19
(D) at paragraphs 22-23, where it was held that
a
claim for repayment of moneys held in an attorney's trust account
constitutes a 'debt' as contemplated in
s 10(1)
of the
Prescription
Act 68 of 1969
. Such debt becomes 'due', as contemplated in s 12(1)
of the Act, upon demand by the client and prescribes three years
later.