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1990
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[1990] ZASCA 5
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Attorneys Notaries and Conveyancers Fidelity Guarantee Fund v Tony Allem (Pty) Ltd. and Another (274/87) [1990] ZASCA 5; 1990 (2) SA 665 (AD); (2 March 1990)
Case no. 274/87
E du P
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE
DIVISION)
In the matter between:
THE
ATTORNEYS NOTARIES AND CONVEYANCERS
FIDELITY GUARANTEE FUN
D
and
TONY ALLEM (PROPRIETARY) LIMITED
First Respondent
MARIE
KATHLEEN ALLEM
Second Respondent.
Coram: JOUBERT, VAN HEERDEN, NESTADT, MILNE et F H GROSSKOPF JJA.
Heard:
Delivered.
16 August 1989 2 March 1990
2
JUDGMENT
F H GROSSKOPF JA:
In an action brought in the Witwatersrand Local Division the first respondent
claimed payment from the appellant of the sum of R737
000, while the second
respondent claimed R60 000. There were also prayers for interest a
tempore
moraê
and costs. It was alleged by the respondents that the respective
sums of money had been entrusted to an attorney, one Anthony Stein
("Stein"), in
the course of his
practice as an attorney, to enable him to make loans on their behalf to
various borrowers, but that he had stolen these monies. The
respondents claimed
that they had suffered pecuniary loss in these amounts by reason of such theft,
and that the appellant was obliged
in terms of the provisions of section 26 of
the Attorneys Act 53 of 1979 ("the Act") to reimburse them. Section 26(a)
provides as
follows:
3
"Subject to the provisions of this Act, the fund
shall be applied for the purpose of reimbursing
persons who may suffer pecuniary loss as a result
of-
(a) theft committed by a
practising
practitioner, his clerk or employee, of any money or other property entrusted
by or on behalf of such persons to him or
to his clerk or employee in the course of his practice or while acting as
executor or administrator in the estate of a deceased person
or as a trustee in
an insolvent estate or in.any other similar capacity;"
The matter was heard by Coetzee DJP, who
gave
judgment for the first respondent in the sum of
R550 650,64
and for the second respondent in the sum of R57 383,31.
Each respondent
was granted an order for interest
a tempore
morae
at the rate
of 15% per annum from the date of service
of the summons until date of
payment, and for costs. The
appellant appealed against the judgment and order
with leave
of the Court
a quo
.
I shall first give a résume of the facts
4
(together with certain comment thereon) in so far as they may be relevant to
the first respondent's case. The position of the second
respondent will be dealt
with later.
Anthony Joseph Allem ("Allem") was the sole director of the first
respondent. All the shares in the first respondent were held by
A. J. Allem
Holdings (Pty) Ltd ("the holding company") while the shares in the holding
company were held by Allem and the Allem Children's
Trust. Allem was also a
director of the holding company.
Allem used to be a farmer in the Orange Free State,
but he gáve up farming in 1975. He sold his farms and went
to live in Johannesburg where he became a money-lender. In 1976 Allem met a
certain Stanley Sparks ("Sparks"), a director of a company
which carried on
business in Johannesburg as insurance brokers, financial consultants and
financial planners. Allem told Sparks that
he had money available for investment
purposes and Sparks became Allem's financial adviser. Sparks later introduced
Allem to Stein.
5
Stein practised as an attorney in Johannesburg.
He
and a certain Isaacs practised in partnership from 1
December 1977 until 29
February 1980, when Isaacs retired as
a partner. From 1 March 1980 Stein
practised for his own
account, initially under the name of Stein and Isaacs,
and
from 21 July 1983 as Anthony Stein. The evidence shows that
Stein left the country shortly before 20 March 1984. It is
common cause|that his estate was sequestrated very soon
thereafter and that his name was struck off the roll of
attorneys on 5 June 1984. Allem was introduced.to Steih in about 1977.
This
led to an association which lasted for a number
of years and
which came to an end when Stein fled the country in March
1984. It is Allem's evidence that Stein not only handled
certain investments on behalf of the first respondent, but
also acted as his attorney in a number of matters involving
litigation.. Stein was Allem's attorney when he and Mrs
6
Allem, the second respondent, were divorced in August 1980.
The first loan
transaction arranged by Stein was a secured loan by the first respondent to
Stein's mother. Thereafter, sometime during
1978, Stein asked Allem whether the
first respondent would be interested in considering loans to selected clients of
his who would
be requiring móney from time to time. Allem first consulted
his financial adviser, Sparks, who assured him that it would be
quite in order
to entrust monies to Stein's firm for loans to clients of his. Sparks then
arranged a meeting at which the three of
them discussed the proposed scheme.
According to Allem it was agreed that the first respondent would entrust
money to Stein in the course of his practice as an attorney
for the purpose of
making loans on behalf of the first respondent to clients of his. It was part of
the arrangement that Stein had
to consult Allem beforehand with regard to each
one of the proposed loans. Stein was also obliged to inform Allem of the amount
of
the
7
loan, the name of the borrower, the period for which the money would be
required, the rate of interest, the terms of repayment and
any other material
provision of the loan. If satisfied, Allem would send a letter of confirmation
to Stein's firm together with the
first respondent's cheque drawn in favour of
Stein and Isaacs trust account.
Stein was to prepare the acknowledgement of debt in respect of each loan
transaction. He was also responsible for arranging security
for the loans. The
agreement was thak Stein's firm would further be responsible for administering
the scheme on behalf of the first
respondent. This involved the collection of
the borrower s monthly payments in respect of capital and interest and the
payment of
those sums of money every month from the firm's trust account to the
first respondent as lender. In order to facilitate matters it
was agreed that
Stein's firm would hand over a series of post-dated cheques to the first
respondent. These cheques would be drawn
by the firm on its trust account and
would
8
cover the monthly repayment obligations of each borrower in terms of his loan
agreement. Stein assured Allem that his firm's trust
cheques were covered by the
appellant.
The scheme was put into operation and it was carried on
successfully for a number of years without any apparent hitch.
The undisputed
evidence of Allem was that he opened a separate file for each individual
"borrower", and indeed it is clear that he
kept a meticulous record of each and
every repayment by such "borrower". (I have put borrower in inverted commas
since it will become
apparent that I am of
the viéw that Stein in fact stole these monies and that accordingly
there were, in truth, no borrowers. I do not intend to
repeat the inverted
commas hereafter.) It would have been completely unnecessary for Allem to take
all this trouble if the money
had indeed been borrowed by Stein personally, as
contended for by the appellant. In each separate file Allem retained a copy of
the
first respondent's
9
letter to Stein confirming the particular loan and the terms thereof. The
name of the borrower, the amount of the loan and the rate
of interest were set
out in each letter. These letters contained particulars regarding the monthly
repayment instalments, the period
within which the loan had to be repaid and the
securities which were obtained by Stein. In some instances the letter even
mentioned
the purpose for which the loan was required by the borrower. Most of
these particulars would have been of no interest to the first
respondent if the
true borrower had indeed been Stein. The name of the borrower also appeared on
some of the cheques
which were drawn by the first respondent in favour of
Stein
and Isaacs trust account.
Allem kept a cash book and ledger for the first respondent and he entered the
various loans under the names of the individual borrowers.
Stein personally
borrowed money
10
from the first respondent on a number of occasions and his name was therefore
also reflected in the books of account as one of the.
first respondent's
debtors.
During November 1982 Stein persuaded Allem thata so-called
consolidated account should be introduced in the books of account of Stein's
firm whereby the loan accounts of the individual borrowers would be consolidated
into a single account for accounting purposes. Stein
told Allem that such a
consolidated account would reduce his administrative work inasmuch as he would
then no longer be
required/to deal with the borrowers separately or to account
to the first respondent in respect of each individual borrower every month.
According to Allem, Stein also asked him at the same time
whether the first
respondent would be willing to extend the period within which the debtors had to
meet their commitments in terms
of their loan agreements. The reason which Stein
advanced for requesting the extension of time was that a number of his clients
who
had borrowed
11
money from the first respondent were experiencing financial difficulties as a
result of the adverse economic conditions which prevailed
in the country at the
time.
A meeting was held at which Sparks was also present. Stein explained
the position to Sparks who, as Allem's financial consultant,
advised Allem that
the proposed new arrangement would be perfectly in order. It was then agreed
that a consolidated account would
be drawn up and that the first respondent
would grant the borrowers the reguired
extension of time.
It appears from a letter dated 17 November 1982
which Allem wrote to Stein that Stein's bookkeeper, one Dalene Swanepoel, and
Allem actually checked the individual loan accounts
of the various borrowers and
agreed on the total outstanding balance as at 1 December 1982. Allem testified
that this exercise was
carried out after Stein had asked him to verify that the
first respondent's records with regard to the various borrowers coincided
with
the balances
12
set forth in the records of Stein's firm. This shows that Allem, to the
knowledge of Stein, still kept a separate account for each
individual borrower
in the books of account of the first respondent. If Stein was the only borrower
the first respondent would not
have reguired a separate account for each
debtor.
In terms of the new arrangement the total outstanding debt together
with interest had to be repaid over a period of 30 months by way
of 9 quarterly
repayments of
R101 500 each and a final payment of R100 966. Stein
furnished the first respondent in advance with 10 post-dated
chegues drawn on his trust account in respect of these repayments. Stein
further undertook to give Allem a full account at least once
a year showing the
repayments by each individual borrower. Such a statement would hardly have been
necessary if Stein had been the
first respondent's only debtor, as contended for
by the appellant.
The first post-dated chegue for R101 500 had to be
13
paid by 1 February 1983, but before that date Stein had
already asked
Allem whether the first respondent would grant a further extension to 28
February 1983, seeing that Stein was busy arranging
a R120 000 guarantee,
referred to as the Bifco guarantee, in favour of the first respondent in respect
of his personal indebtedness.
The first respondent granted the required
extension, but no payment was made by 28 February 1983. Allem's evidence was
that he had
previously
asked Stein wjhether he could see the acknowledgments of debt
and suretyships which Stein was supposed to have drawn up in favour of the
first respondent, but having been fobbed off with various
excuses he eventually
insisted on seeing these documents. Stein thereupon wrote a letter dated 9 March
1983 to the first respondent.
This letter reads as follows:
"
CONSOLIDATED ACCOUNT
I, the undersigned,
ANTHONY STEIN
do hereby confirm that the persons as set out in
14
the attached list which has been signed by me for purposes of identification,
have completed acknowledgments of debt and suitable
suretyships are held by me
in respect of their indebtedness.
I further confirm that all such persons' indebtedness have now been consolidated
into a single account known as the Consolidated
Account and that the total
amount of the Consolidated Account is the sum of R676 000,00 as at the 1st day
of December, 1982."
Annexed to Stein's letter of 9
March 1983 was a list headed "Consolidated Account". It appears that the
consolidated account was made
up of the loan accounts of the 35 individual
borrowers whose names and outstanding debts
were sétóut in this
list. It is significant that Stein's name did not appear in this list although
he personally owed
the first respondent a substantial amount of money in respect
of loans at the time. If there had been a change in the relationship
between
Stein and the first respondent in November 1982, as was submitted by the
appellant, and if Stein had been substituted as
the first respondent's only
15
borrower, one would have expected only Stein's name to have featured in this
list of borrowers.
The consolidated account of November 1982 eventually
formed the basis of the first respondent's claim against the appellant. The
first
respondent's claim is therefore made up of the balance of the monies
entrusted to Stein prior to 1 December 1982.
The second post-dated cheque for
R101 500, which became due om 1 May 1983, was also not paid on due date. It
is Allem's evidence that he then became worried, but that he had "no reason
to be suspicious or alarmed". Allem sought the advice
of another attorney, but
Sparks told him that there was no reason to be worried. An urgent meeting was
arranged which was attended
by Allem, Stein and Sparks. At this meeting Stein
once again explained that as a result of the economic recession his clients were
experiencing difficulties in meeting their commitments on time, but he assured
Allem that he had full faith in his clients. To show
16
his good faith Stein was prepared to sign as surety and co-principal debtor
for the repayment of all the loans,together with interest,
in a sum of R737 000.
Stein's written undertaking to this effect was subsequently signed on 30 May
1983. It provided for the payment
of this amount as soon as certain assets owned
by Stein had been transferred to the purchasers thereof. Stein also undertook to
provide
Allem with cash or unconditional bank or building society
guarantees by 1 September 1983 in respect of this amount. In addition Stein
undertook to pay the R120 000 covered
by the Bifco guarantee by 30 May 1983, and another R30 000
by 15 June 1983. These two amounts did not form part of the
consolidated account and were in fact paid to the first
respondent during June 1983.
It was further agreed at this meeting that the 10
post-dated cheques which Stein had previously issued in
favour of the first respondent, would be delivered to Sparks
to be held by him in trust. Sparks undertook to hand these
17
cheques over to Allem immediately on Stein's failure to pay in terms of his
undertaking.
Stein's personal undertaking of 30 May 1983 and the payments of
the respective amounts of R120 000 and R30 000 during June 1983 set
Allem's mind
at ease. The next paymênt which Stein was obliged to make in terms of his
personal undertaking was the payment
of the R737 000 by 1 September 1983. On 10
August 1983 Stein wrote a letter to Allem in which he referred to their recent
meetings
and telephone conversations. In this letter Stein confirmed that he had
informed Allem that he was personally encountering financial
difficulties. He further mentioned in the letter that Allem had been prepared
to consider extending the period for the repayment of
the outstanding amount.
The appellant submitted that this letter by Stein was a further indication that
Stein had indeed been the
true borrower all along. Allem's evidence on the the
other hand, was that Stein wrote this letter because he had by then become
personally
liable in
18
terms of his undertaking of 30 May 1983. Allem assumed at
the time that
Stein had not yet been able to sell or transfer
his assets, as he was obliged
to do in terms of his
undertaking, and that he was accordingly not in a
position
to pay or guarantee payment of the R737 000 by 1 September
1983.
It appears from two further letters dated 19 August
and 30 August 1983 respectively, that Stein informed Allem
that the
debtors whose names were reflected in the
consolidated account had also
requested an extension of time
due to the economic climate. Allem testified that he
received only the letter of 30 August 1983.
Stein proposed that the loans together with
interest be repaid over a period of six years in instalments
of R15 000
per month for the first sixty months with an
additional payment of R10 000 every third month. The
instalments were to increase in the sixth year. Stein
further undertook to hand Sparks six post-dated cheques to
19
be held by him in trust, and to be released to Allem only in the event of
Stein defaulting in respect of any of the monthly payments.
Stein assured
Allem and Sparks that these trust cheques were fully covered by the appellant.
Sparks consulted his attorneys about
the cover provided by the appellant in the
event of an attorney's trust cheque being dishonoured. The letter which Sparks's
attorneys
wrote to him thereafter on 16 August 1983 was also shown to Allem and,
according to these witnesses, it set their minds at ease.
During August 1983
Allem agreed on behalf of the
first respondent to the further extension on
the terms proposed by Stein. It was further agreed that part of each monthly
instalment
of R15 000 would be used to pay the premiums in respect of an
investment endowment policy, which Sparks had arranged in favour of
the Allem
children at the request of Stein.
In August 1983 two further steps were taken in an
20
attempt to secure the first respondent's position. It was agreed that Stein
would hand his passport to Sparks and that Sparks would
become a signatory on
Stein's new bank account. Allem in fact later received the passport; he said,
from Sparks, but Sparks testified
that Stein must have delivered it directly to
Allem.
The monthly instalments were paid from 1 September 1983 to 1 March
1984, and the portion thereof which was allocated tolthe insurance
premiums was
paid over to the insurance company for at least five of the seven months. In
calculatlng its claim the first respondent omitted to allow
the appellant any credit in respect of these premium-
payments. It was agreed between the parties, after judgment
had been delivered, that a total amount of R48 330 (five
monthly payments of R9 666 each) had been paid to the
insurance company and should accordingly have been deducted
by the trial Court from the first respondent's award. The
instalments of R10 000 which had to be paid every three
21
months were also paid on 1 November 1983 and 1 February 1984. Before any
further payments were made, Stein left the country.
I intend dealing with the appellant's argument,as presented by Mr
Schutz
, under a number of headings. 1.
Were the loans made to Stein
personally?
The appellant's main argument was that the
monies
which had admittedly been paid by the first
respondent to
Stein, constituted loans by the first respondent to Stein
personally, and were never intended to be loans by the first
respondent to Stein's clients.
The first respondent's case was that the monies which were entrusted to Stein
in terms of their original arrangement were intended
to be used by Stein for
loans by the first respondent to Stein's clients as the borrowers, and that it
was never contemplated that
Stein himself would be the borrower, except in the
few cases where the first respondent specifically agreed to lend money to
Stein
22
personally. This is borne out by Allem's evidence of the underlying basic
scheme.
In my opinion the contemporaneous documents and the probabilities
lend strong support to the first respondent's version.
I have referred to the
separate files kept by the first respondent for each loan, and the letters
written by the first respondent
to Stein in respect of each individual borrower.
It was submitted on behalf of the appellant that the first respondent would in
any
event have required the
name of the ultimate debtor and some of the other information
contained in these letters in order to identify the
particular loan to Stein. However, on the appellant's
argument it is hard to understand why Stein would have deemed
it necessary to disclose to the first respondent all the
information set forth in those letters, or why the first
respondent would have required all those particulars to
identify its alieged loan to Stein.
23
The point was also made on behalf of the appellant that Allem would have been
interested in the security that Stein had because Stein
was his company's
debtor. But Allem never had any misgivings about Stein's ability to pay. Allem's
interest in the debtors and the
security can, therefore, only be explained on
the basis that these debtors were the first respondent's debtors.
In at least two instances Stein himself undertook
to guarantee a borrower's indebtedness. Logically that could
only have
referred to the borrower's indebtedness to the first respondent. It is
inconceivable that Stein would have guaranteed the
borrower's indebtedness to
Stein's own firm. I agree with Mr
Trengove
, who appeared for the
respondents, that these guarantees by Stein are irreconcilable with the
appellant's case.
In a letter to Stein and Isaacs dated 5 October 1981 Allem
enquired about outstanding securities in respect of a number of loans,
and he
asked Stein to attend to these
24
securities. On the appellant's case Allem would hardly have concerned himself
with outstanding securities.
I have referred to Stein's letter of 9 March
1983 to the first respondent in which he confirmed that all the borrowers whose
debts
were included in the consolidated account had completed acknowledgments of
debt, and that he was holding suitable suretyships in
respect of their
indebtedness. If all the loans had indeed been made to Stein personally, as
contended for by the appellant, Stein
would have had no obligation whatsoever to
give such assurances to the first respondent. Stein wrote this letter after
Allem
had insisted on seeing the acknowledgements of debt and securities. If these
debtors had not been the debtors of the first respondent
Allem would have had no
right to inspect such documents.
The contemporaneous entries in the first respondent's cash book and ledger
reflect the individual borrowers as its debtors, while
repayments were credited
to
25
the accounts of such borrowers. These books of account therefore provide
strong corroboration of Allem's version.
The first respondent's audited
financial statements for the years 1980, 1981, 1982 and 1983 clearly establish
that the first respondent
throughout regarded all the individual borrowers as
its debtors. It should be noted that even after the consolidation of the
debtors'
accounts in November 1982 the names of the individual borrowers were
retained in the first respondent's financial statements for
the year ended 28
February 1983. This is irreconcilable with
the suggestion that there was a change in the relationship
at the time of the consolidation of the accounts and that
Stein then became the first respondent's sole debtor.
It is of some significance that Stein's name also
appears in each one of these financial statements as a
debtor, but then
only as one of a number of borrowers.
Whenever the first respondent intended to make a loan to
26
Stein personally, the letter confirming the loan clearly identified Stein as
the borrower. This is substantiated by a number of letters
written by the first
respondent to Stein during the period 1981 to 1983. One such letter, for
instance, was headed "A. Stein - Loan
Legal Practice". It will be recalled that
loans by the first respondent to Stein personally never formed part of the
consolidated
account or the first respondent's claim against the
appellant.
It was submitted on behalf of the appellant that the arrangement
in terms whereof Stein was obliged to hand the first respondent a
series of
post-dated cheques, clearly showed that it was indeed Stein, and not any client
of his, who was liable as borrower for
the repayment of the loan. It was pointed
out that if anyone of Stein's clients failed to repay the debt on due date,
Stein nevertheless
remained liable to make repayment in terms of his post-dated
cheques. The submission was that Stein's obligation was therefore independent
of
any payments received by him from his clients.
27
The legal consequence of this arrangement undoubtedly was that Stein, as the
drawer of the post-dated cheques, became liable to pay
the first respondent.
Stein also remaíned liable on the post-dated cheques irrespective of
whether the borrowers had in turn
paid Stein. The appellant submitted that
Stein's legal position, therefore, was no different in effect from that of a
borrower. It
does not follow, however, as a probable inference, that the parties
had in fact also agreed that Stein would be the borrower. Allem's
evidence is to
the
contrary, and the fact that Stein gave post-dated cheques is
not incompatible with that version. Allem's evidence was that the arrangement
was that Stein would collect the monies from the various
borrowers in his
capacity as the first respondent's attorney, but that Stein would give his
post-dated cheques to the first respondent
in advance in order to facilitate the
administrative work. Viewed against that background one can understand why Allem
testified
that the first respondent would not have sued Stein if any of the
28
post-dated cheques were dishonoured. This is borne out by the fact that the
first respondent indeed never instituted action against
Stein on any one of the
post-dated cheques which had been dishonoured.
On 30 May 1983 Stein bound himself as surety and co-principal debtor and
thereby assumed personal liability for the repayment of all
the loans. This
undertaking would
have been completely unnecessary if Stein had been the
true
borrower all along.
One of the main points of criticism which the appellant levelled at Allem was
that his oral evidence was directly in conflict with
some of the statements set
forth in his affidavit of 7 June 1984. Allem's affidavit was submitted to the
appellant in support of
the first
29
respondent's claim. The background of the financial
arrangement between
Stein and the first respondent was
described by Allem in his affidavit as
follows:
"Stein came to know that I was a financier, that I had moneys available to lend
and he suggested to me that I lend moneys to him
which he in turn would lend to
clients of his who wanted to borrow money, that he would ensure that the loans
were adequately secured,
that he would administer the payment of interest and
capital from his clients, that I need look only to him for payment of the
interest
and capital arising out of the loans that the company would make to his
firm-and he assured me that the money was safe as loans would
be paid into the
trust account of the firm and would be covered by the fidelity fund. Stein
furthermore told me that his firm would
in turn and for its benefit lend such
moneys to clients of his on such terms as he saw
fit."
This statement in the affidavit
cannot be
reconciled with the
viva voce
evidence which Allem gave in
the
Court
a quo
. Yet there are certain other allegations in
Allem's
affidavit which are entirely consistent with his oral
evidence. There is, for
instance, the allegation in the
affidavit that Stein assured Allem that the
first
30
respondent's money would be safe because it would be paid into the trust
account of Stein's firm and accordingly be secured by the
appellant. It is also
stated in the affidavit that Allem made it clear to Stein that the first
respondent would be dealing with him
in his capacity as an attorney, and that
the loans would be paid into his trust account.
There are the further
allegations in the affidavit that Stein was to ensure that the loans were
adequately secured and that he had
to furnish the first respondent in
each
case with particulars of the borrower, the rate of
interest and the period of the loan. I have already pointed
out that it is improbable that such arrangements would have
been made if Stein was the borrower. In the last paragraph
of the
affidavit Allem concluded that the money had been
"entrusted" to Stein whilst he was a practising attorney, but
that he had "stolen" the money. This statement is also
consistent with Allem's oral evidence.
When the affidavit is read as a whole and
31
considered in the light of the contemporaneous documents, one
is driven to
the conclusion that it is the product of some
confusion.
On 9 April 1984, and about two months before
Allem
made his affidavit, his present attorneys
wrote a letter on
behalf of the first respondent and Allem to the
appellant.
The attorneys stated in this letter that their
instructions
were that Stein had been their client's attorney and that
"ov'er a period of time, our clients paid moneys in trust to Stein &
Isaacs to enable the said firm to make loans of money on
proper security to such
borrowers as the said firm will determine."
These statements are entirely consistent with Allem's oral
evidence. Monies are not paid "in trust" to a person who is himself borrowing
such monies. The letter proceeded to allege that Stein
had stolen these monies,
an allegation which is incompatible with the appellant's contention that Stein
had borrowed the monies.
No mention was made in the letter of any loans to
32
Stein personally; the letter clearly implied that the loans were made to the
borrowers on behalf of the first respondent. The contents
of this letter are a
further indication that Allem's affidavit did not accurately set out the terms
of the arrangements between Stein
and the first respondent and the true nature
of the scheme; and, what is more, that the version given by Allem in his oral
evidence
was not one which was thought up for the first time after his claim had
been rejected.
It is Allem's evidence that once he produced his
books of account and other documents to his attorneys, they
realised that the position had been incorrectly described in
the affidafit. The attorneys thereupon wrote a letter dated
22 October 1984 to the appellant in which they recorded that
their client was "amplifying" the affidavit. The corrections
set forth in this letter brought Allem's version in line with
his subsequent oral evidence at the trial (and the version
implicit in the letter of 9 April 1984).
33
I agree with the first respondent's submission that there is no justification
for suggesting that the allegations in Allem's affidavit
should be preferred to
his
viva voce
evidence. Allem testified that the attorney who prepared
the affidavit wrote down what he told him, but that the position is,
nevertheless,
not correctly set forth in his affidavit. Allem's evidence was
that the loans by the first respondent were indeed loans to the various
individual borrowers, and not to Stein personally. Allem's version is
not only consistent with, but is indeed supported by the
contempqraneous documents and the probabilities to which I
have referred above.
Allem was further corroborated in this regard
by
Sparks, whose evidence of the original meeting
and the
proposed scheme confirmed Allem's testimony. It is true that
the evidence of Sparks was rather vague in certain respects
and that he had difficulty in recalling any detail, but it
should be borne in mind that Sparks had to rely on his memory
34
concerning meetings and events which had taken place many years before he was
called upon to give evidence. The trial Court concluded
that the evidence of
Sparks provided "ample corroboration" of Allem's account of the scheme. Judging
from the record I would not
describe Sparks as an impressive
witness, but, on
the other hand there is no reason to believe
that he was not an honest witness.
The learned Judge
a quo
remarked that it was beyond his understanding
how these conflicting statements in Allem's affidavit came to be made. He found
some
of the passages in
the affidavit to be unintelligible, and he described the
affidavit as "an enigmatic document". Despite the differences between Allem's
affidavit and his oral evidence the trial Court found
Allem to be an honest and
reliable witness. This assessment of Allem as a witness was attacked by the
appellant on appeal. It appears
from the judgment that the learned Judge
a
quo
gave careful consideration to the relevant facts and the effect of the
probabilities. In
35
those circumstances a trial Court's finding on credibility should not lightly
be disturbed on appeal.
Mr
Schutz
submitted that it was strange indeed
that the two Allems, who had been divorced for some years, and whose
transactions with Stein
had been quite separate from one another, should have
made the same mistake in the words that they used in their respective affidavits
when describing the history df their dealings with Stein. It is true that both
the Allems testified that their attorney had written
down what they had told him, but one should not lose sight of the fact that
it was the same attorney who prepared both affidavits.
A further improbability which was raised by Mr
Schutz
is the strange
coincidence that some 35 debtors, all of whom were supposedly well known to
Stein and who were reputed to be men of
financial standing, would
simultaneously
36
experience financial embarrassment. Allem's testimony was that when the
consolidated account was proposed in November 1982 Stein told
him that a number
of his clients who had borrowed money from the first respondent were unable to
meet their commitments on due date
as a result of the economic recession in the
country. On Allem's evidence, therefore, only some of the borrowers, and not all
of
them, experienced financial difficulties at the time. According to Allem's
testimony it was not a question of those debtors being
unable
to pay at all; it was only that they could not pay in time.
Allem is supported in this regard by Sparks
who
confirmed'that Stein had also told him of
borrowers who were experiencing difficulty in meeting their commitments.
According to Sparks
this was the reason which Stein advanced for asking
fór an extension of time for the repayment of the debts. Sparks testified
that Stein further mentioned to him that he was reluctant to take action against
these people who were not only his clients, but
also his friends.
37
Allem may be criticized for believing this story of Stein, but it seems clear
that that was indeed the excuse which Stein used to
obtain an extension of time.
It is accordingly not a case of Allem being dishonest in this regard. One should
also guard against
judging Allem's credulity with the benefit of hindsight.
Allem had implicit faith in Stein who, after all, was his attorney. Whenever
Allem became worried that payment was not forthcoming, Sparks would allay his
fears. Allem may have been naive, but Stein on the
other hand appears to have
been a very plausible character.
The appellant has not succeeded in persuading me that the trial Judge was
wrong in finding Allem to be an honest and reliable witness.
Allem's version of
the financial arrangement between the first respondent and Stein is borne out by
Sparks and supported by the contemporaneous
documents and the probabilities. I
conclude therefore that Allem established that the loans were to be made to
38
individual borrowers and not to Stein personally.
2.
Were the monies
entrusted to Stein in the course of his
practice as an
attorney
?
Section 26(a) of the Act provides for the reimbursement of
stolen money which has been entrusted to an attorney in the course of his
practice.
The meaning of the word "entrust" was considered by
Nicholas
J
in
Provident Fund for the Clothing Industry v. Attorneys, Notaries and
Conveyancers Fidelity Guarantee
Fund
1981(3) SA 539(W), in which
he held as follows at 543 E-F:
"From these definitions it is plain that 'to entrust' comprises two elements:
(a) to place in the possession of something, (b) subject
to a trust. As to the
latter element, this connotes that the person entrusted is bound to deal with
the property or money concerned
for the benefit of others (cf
Estate Kemp and
Others v. McDonald's Trustee
1915 AD 491
at 499).
'(The trustee) is bound to hold and apply the property for the benefit of
some person or persons or for the accomplishment of some
special purpose'
(
ibid
at 508.)'"
39
On Allem's version, which was in my opinion rightly accepted by the Court
a quo
, there can be no doubt that the first respondent entrusted its
money to Stein as an attorney.
The appellant maintained, however, that the
Court
a quo
erred in finding that the first respondent had entrusted the
money to Stein in the course of his practice as an attorney. For the
purpose of
its argument in this connection the appellant assumed, in favour of the first
respondent, that the agréement between
Stein and the first respondent had
been that the first respondent would pay money to Stein and that Stein would
lend such money to
clients of his on behalf of the first respondent. The
appellant submitted that the first respondent had failed nevertheless to show
that it fell within the scope of an attorney's work in the course of his
practice to assume personal responsibility for the repayment
of such money
together with interest, and to issue post-dated cheques in respect of his
personal liability.
40
It is certainly not unusual for an attorney to lend money to a third party on
behalf of his client who has entrusted the money to
the attorney for that
purpose. Such. an attorney would, without doubt, be acting in the course of his
practice as an attorney. On
Allem's version that is exactly what Stein had been
doing since 1978 with the money entrusted to him by the first respondent.
Allem's
evidence was that Stein and the first respondent also agreed
that
Stein would hand the.first respondent a series of post-dated
cheques in advance to cover the borrowers' monthly
repayments. According to Allem the parties did not thereby
intend to burden Stein with personal liability, but to facilitate Stein's
administrative work. The fact that Stein issued these post-dated
cheques in
those circumstances did not, in my opinion, change the nature of the loan
transaction which otherwise fell within the
course of an attorney's
practice.
I am, in any event, not persuaded that the
41
assumption of personal liability by Stein for his clients' debts changed the
nature of the loan transaction so as to remove it from
the scope of an
attorney's work in the course of his practice as such. It should be borne in
mind that Stein also stood surety for
a number of his clients who borrowed money
from the first respondent, thereby assuming personal liability for the repayment
of such
loans. It was
never argued that Stein's suretyship would have caused the
transaction to fall outside the scope of an attorney's work
in the course of his practice. I do not regard it as unusual
for an attorney who uses one client's money to grant a loan to another client
and friend of his, to protect the interests of the lender
by standing surety for
the borrower. I agree with Mr
Trengove
's submission that Stein had in any
event always assumed professional or at least moral responsibility for the
debtors and their ability
to pay.
Stein's assumption of personal liability in May 1983 came long after the
money had been entrusted to him, and
42
in my judgment it could not then have changed the nature of the transaction
so as to take it outside the scope of an attorney's work
in the course of his
practice as such. In any event, and ás will appear, the money had by then
already been stolen.
The appellant further relied on the following
dictum
of
Kuper, J
in
Paramount Suppliers (Merchandise) (Pty)
Ltd v. Attorneys, Notaries and Conveyancers Fidelity Guarantee Fund Board of
Control
1957(4) SA 618(W) at 625 F-
G:
"It does not follov however from the fact that an attorney pays a sum of
money into his trust account that that sum of money is in
fact either trust
money held by that attorney, or money paid to that attorney in the course of his
practice as an attorney."
In that case money was paid into an attorney's trust account
in connection with a transaction described by the learned
Judge as
"illegal or immoral". It appears that the money was
paid to the attorney on the basis that he was to use his
43
"influence" in order to obtain import permits which all the persons concerned
knew should not be obtained. The money was accordingly
paid to that attorney in
respect of work clearly falling outside the scope of an attorney's work in the
course of his practice as
such. The facts of the present case, on the other
hand, show that Stein received the money in connection with transactions which
ordinarily fall within
the scope of an attorney's work in the course of his
practice. I therefore agree with the finding of the Court
a quo
that the first respondent entrusted the monies to Stein
in the c'óurse of his practice as an attorney.
3.
Was the first respondent's claim time-barred
in terms of section 48(1)(a) of the Act
?
Section 48(1)(a) of the Act provides that written
notice of any claim must be given within three months after
the claimant became aware of the theft, or by the exercise
of reasonable care should have become aware of the theft.
It is common cause that notice of the first
44
respondent's claim was given to the appellant and the Council of the Law
Society of the Transvaal in writing on 9 April 1984. It was
not seriously
contended that Allem or the first respondent had actually become aware of the
theft before 10 January 1984, and in
my opinion it is inconceivable that they
would have done nothing if they really knew of the theft. The appellant did
however submit
that by the exercise of reasonable care they should have become
aware of the theft long before 10 January 1984.
I have already dealt with the appellant's argument
that the'alleged simultaneous financial embarrassment of some
35 debtors in November 1982 was so improbable that no reasonable man would
have believed it. One should not lose sight of the fact
that over the preceding
four to five years Allem, acting on behalf of the first respondent, and Stein
had built up a successful business
relationship involving mutual trust. During
that period Stein had also acted as Allem's attórney in his divorce
action and
in other matters
45
involving litigation. In those circumstances there is no reason to reject
Allem's evidence that he had implicit faith and trust in
Stein. Even if this
trust wavered subsequently he was more easily reassured than he would have been
if he had been dealing with a
stranger.
It was submitted on behalf of the
appellant that Allem should have asked Stein in November 1982 to ensure that all
future payments
received from the borrowers should be paid to the first
respondent, or that the borrowers should be instructed to pay direct to the
first respondent. The
fact of ,the matter was that the first respondent after all
those years
had become used to receiving Stein's post-dated cheques in repayment of the
loans. It should further be borne in mind
that an agreement had been reached in
November 1982 which provided for an extension of time and regular repayments
every three months
by means of Stein's post-dated cheques. In view of the
extension provided for there would have been nó reason for Allem to
assume that any of the 35
46
borrowers would continue to make payments to Stein in terms of their original
undertakings, or that Stein wóuld be receiving
substantial repayments
from those borrowers which could be paid over to the first respondent, as was
suggested by the appellant.
It was further submitted on behalf of the appellant that the first respondent
should have considered claiming payment direct from
the borrowers or their
sureties. That would have entailed a number of court cases against debtors,some
of whom were allegedly experiencing
financial
difficulties. The first respondent apparently decided instead to enter into
the November 1982 agreement. Once this agreement had been
reached the first
respondent could no longer sue the borrowers or their sureties.
Stein, in breach of the provisions of the November 1982 agreement, failed to
pay the two quarterly instalments due on 1 February 1983
and 1 May 1983. Stein
offered a number of excuses and craved further indulgence, but Allem
47
became worried at that stage as no repayments had been made for a number of
months. It does not follow, however, that Allem should
have contemplated a theft
by Stein. Allem's evidence was that he never even thought of the possibility of
theft and there is no reason
to disbelieve him in this regard.
It was
submitted that Allem, as a reasonable man, should have become suspicious of a
possible theft, but there were a number of factors
which allayed his suspicion
and put his mind at rest, i.e.: (i) Stein's willingness to assume
personal liability in May 1983; (ii) the subsequent payments
of R120 000 and R30 000 respectively,which were made in June
1983 in pursuance of Stein's undertaking; (iii) Sparks's
assurances throughout to Allem that Stein was a man of
integrity; (iv) the seven monthly payments of R15 000 each
which were made by Stein during the period 1 September 1983
to 1 March 1984 in terms of Stein's August 1983 undertaking;
(v) the further two payments of R10 000 each on 1 November
48
1983 and 1 February 1984 in terms of the August 1983
undertaking; (vi)
Stein's repeated assurances that the first
respondent's money in his trust
account enjoyed the
protection of the appellant.
It was submitted on behalf of the appellant that
Allem was not able to
give a convincing reason for impounding
Stein's passport during August 1983,
and it was suggested
that Allem had done so because he had a suspicion that Stein
had stolen
tHe first respondent's money. A more likely
reason why Allem required Stein to hand over his passport,
was because Allem wanted to secure Stein's presence so
that he could fulfil his personal obligations with regard to
the repayment of the monies.
Section 48(1)(a) of the Act in any event requires
more than a mere suspicion. The test is whether the claimant
"should have become aware of the theft" if he had taken
reasonable care. In my judgment the Court
a quo
was correct
in finding that it was not established that Allem had become
49
aware, or by the exercise of reasonable care should have become aware of the
thefts prior to 10 January 1984. 4.
Did the first respondent prove that all
its money was stolen by Stein
?
The appellant submitted in the alternative that the first respondent had
failed to show which part of its money, if any, had been
stolen by Stein.
The
first respondent relied on certain admissions made in thisiconnection at the
trial to establish that monies were never paid over
to the alleged debtors by
Stein. From
these admissions it appeared that at least 15 persons shown as debtors in the
consolidated account actually existed. They were approached
and it then
transpired that they were all persons who knew Stein, but who had no knowledge
of Allem or the first respondent and who
never borrowed money from them. The
Court
a quo
found that the combined cogency of these independent
circumstances made it overwhelmingly probable that the names which Stein had
given to Allem as the
50
so-called borrowers, were names of existing persons which Stein falsely used
or just names thought up by him.
The witness Van der Westhuizen, who
testified for the first respondent, was one of these so-called borrowers. He
knew Stein but denied
that he ever borrowed money from Stein or from the first
respondent through Stein. His evidence was that the signature which purported
to
be his on an acknowledgement of debt, was in fact a forgery.
Stein's repeated assurances to Allem and Sparks that all monies paid into his
trust account were covered by
the appellant, show how his mind must have been working at
the time. I also agree with Mr
Trengove
's submission that
Stein's subseguent conduct is consistent only with his having
stolen the monies. He suddenly abandoned his office and
departed from South Africa, leaving insufficient funds in his
trust account. Thereafter he took no steps to prevent the
sequestration of his estate or the removal of his name from
the roll of attorneys.
51
I regard it as highly unlikely that Stein would devise this elaborate
fraudulent scheme, and then use it to steal only part of the
first respondent's
money, while faithfully investing the balance on behalf of the first respondent.
There was in any event nothing
to show that there had ever been a single client
of Stein who had borrowed money from the first respondent.
The most probable inference in my judgment is that the monies wh'ich were
entrusted to Stein, as reflected in the
consolidated account, were never used
for the purpose of
making loans on behalf of the first respondent to clients of
Stein, but were all stolen by Stein.
5.
Did the first respondent suffer the full loss
?
The appellant
submitted that the Court
a quo
should have
deducted a sum of R113 533 from the outstanding capital
amount shown on the consolidated account inasmuch as this
amount was owing to the holding company and not to the first
respondent.'
52
Allem testified that his auditors required him to show some business for the
holding company as the holding company was paying him
director's fees. In order
to overcome this difficulty Allem advised Stein that the monies advanced to a
number of specified borrowers
were to be treated as loans by the holding
company. The appellant submitted that Allem's evidence that the first respondent
nevertheless
remained the lender, cannot be accepted.
It.appears that the cheques relating to these
specified borrowers were always drawn by the first respondent
on its banking account, and never by the holding company.
The money was therefore entrusted to Stein by the first respondent and not by
the holding company. The books of account of the first
respondent also support
Allem's version and reflect the specified borrowers as loan debtors of the first
respondent. I am, therefore,
of the opinion that the Court
a quo
was
correct in refusing to deduct the sum of R113 533.
53
The parties have agreed, as mentioned before, that the capital sum for which
judgment was given in favour of the first respondent
should be reduced by the
sum of R48 330, being the amount referred to above which was paid in respect of
insurance premiums. 6.
Is the appellant liable to pay interest a tempore
morae?
The main submission of Mr
Schutz
was that
section
47(2) precludes the payment of interest.
Section 47(2)
provides as follows:
"(2) A claim for reimbursement as contemplated in
section 26 shall be
limited, in the case of money
entrusted to a practitioner, to the amount
actually
handed over, without interest, "
Mr
Schutz
pointed out in this connection that section
45(1)(a) of the Act, read with section 45(2), shows that the
Board of
Control may in its discretion pay an amount out of
the fund as interest on the amount of any judgment obtained,
provided that
such interest shall not run from a date earlier
than the date on which the Board received notice in writing
54
of the claimant's claim against the fund. Section 45(1)(a)
and (2) read as follows:
"(1) Subject to the provisions of this Act, the fund shall be applied for the
following purposes, namely -
(a) all claims, including costs, payable in terms of this Act, and interest
as provided in subsection (2);"
" (2) The board of control may in its discretion
pay an amount out of the fund as interest on the amount of any judgment obtained
or of any claim admitted against the fund: Provided
that-
(a) such interest shall not run from
a
| date earlier than the date on which
the board of control received notice
in writing by or on behalf of a claimant of his claim against the fund;
and
(b) the rate of interest shall not
exceed the prevailing rate of
interest prescribed under section 1(2) of the Prescribed Rate of Interest
Act, 1975 (Act No. 55 of 1975)."
The appellant submitted that sections 45(1)(a) and
45(2), read with section 47(2), in effect provide that the
fund shall not be applied for the payment of interest except
in those instances where the Board of Control, in the
55
exercise of its discretion, decides to make an
ex gratia
payment in
respect of interest. On the appellant's interpretation, therefore, the Court
would not be entitled to order the payment
of interest by the appellant at all,
not even from the date of judgment.
Section 47 (2) of the Act does contain a
limitation in respect of a claim for interest against the appellant. The
claimant cannot
claim reimbursement for the loss of interest which he may have
suffered as a result of the theft; his claim is limited to the actual
amount of
money entrusted to the attorney, without interest. In my opinion it does not
follow from these provisions that the appellant is accordingly relieved from
paying
mora
interest where the appellant has wrongfully withheld payment
due and owing to the first respondent. It is "a claim for reimbursement
as
contemplated in section 26" which is limited by the provisions of section 47(2).
A claim for interest against the appellant which
flows from the appellant's own
mora
is
56
not such "a claim for reimbursement."
The Board's power to pay interest is
derived from the provisions of section 45(1)(a) of the Act, read with section
45(2). It is a
discretionary power, subject to certain conditions, to pay an
amount out of the fund as interest. The fact that section 45(1) of
the
Act
grants the Board the power to apply the fund for particular purposes, as
set out in that subsection, does not in my
opinion release the Board from its liability to make other payments out of
the fund, should it become legally obliged
to do so. The obligation to pay interest
a tempore morae
in given
circumstances is an obligation which arises
ex leqe
, and the Board cannot
avoid the liability to pay such interest in the absence of an express provision
to that effect. As indicated
above, section 47(2) does not contain such an
express provision.
The appellant's alternative submission was that the Court
a guo
erred
in ordering it to pay interest
a tempore morae
as from the date of
service of the summons.
57
Mr
Schutz
argued that interest on an unliquidated cliam can only run
from the date of judgment according to common law, and that there was
nothing in
the Act to change this position.
The first respondent's claim in the present
case was not an unliquidated claim. The claim was for a specific sum of money
which was
reflected in the consolidated account, and the fact that the claim was
based on a theft did not, in
my judgment, change the position. It was decided
by this
Court in
Kleynhans v Van der Westhuizen, N.O.
1970(2) SA
742(A) that a claim based on the theft of a specific sum of
money was/a "liquidated claim" for the purposes of section
9(1) of Act 24 of 1936. In the course of his judgment
Wessels JA
held as follows at 750 A-B:
Dit kom my as vanselfsprekend voor dat waar die skuldenaar h vaste som geld
van 'n applikant gesteel het, die bedrag van laasgenoemde
se vordering, wat op
die pleging van die diefstal gegrond is, uiteraard met sekerheid bepaal is. Die
bedrag behoef geen bepaling
deur h hof of ooreenkoms met die dief nie, aangesien
dit met sekerheid
58
'andersins' bepaal is. Waar bewys is dat die diefstal geleeg is, is die bedrag
van skadevergoeding eweneens bewys, en daardie bepaalde
bedrag is onmiddellik na
die diefstal opeisbaar. Die dief is vanaf die datum van die diefstal in
mora
(Wessels,
Law of Contract in S.A
., 2de. uitg., para
2864)."
See further
Colrod Motors (Pty) Ltd v.
Bhula
1976(3) SA
836(W).
In my opinion the appellant was liable to pay
mora
interest, and I
agree with the order made by the Court
a quo
in this regard.
In my judgment the appeal in respect of the first respondent should
accordingly be dismissed with costs, including the costs consequent
upon the
employment of two counsel. The capital sum for which judgment was given in
favour of the first respondent should however
be reduced by an amount of R48
330, as agreed.
I now propose to deal with the second respondent's claim. The second
respondent ("Mrs Allem") testified that she met Stein at their
home before she
and Allem were
59
divorced in August 1980. She went to see Stein after the divorce in order to
collect certain money which was due to her in terms of
the settlement agreement
in the divorce action. Stein then suggested to her that she should lend the
money to clients of his as they
would pay her a high rate of
interest on her
investment, while he would draw up the necessary legal documents. Mrs Allem told
Stein that she intended buying a
townhouse later on and that she required the
money for that purpose. She was, however, willing to lend the money to Stein's
clients
on a short-term basis in the meantime. Thereafter Stein informed her
whenever he had a client ,who wished to borrow money. Mrs Allem
would then draw
a cheque in favour of Stein and Isaacs as soon as Stein informed her that he had
obtained the necessary security.
In return for her cheque Stein would give Mrs
Allem his firm's post-dated chegues in payment of capital and interest. Mrs
Allem testified
that Stein acted as her attorney in these matters.
60
Mrs Allem's claim is based on four cheques which she issued during 1983 in
this connection, viz. a cheque for R30 000 dated 5 February
1983, a cheque for
R18 000 dated 20 June 1983, a cheque for R2 000 dated 11 August 1983 and a.
cheque for R6 000 dated 14 December
1983. Mrs Allem testified that these monies,
totalling R56 000, were entrusted to Stein in order that he could make
short-term
loans on her behalf to clients of his. She received
post-dated cheques from Stein s firm in payment of the
capital sum and interest in respect of each of these loans.
During January 1984 Mrs Allem informed Stein's
office that a few of the firm s post-dated cheques for
interest had been dishonoured. Stein's bookkeeper thereupon
telephoned Mrs Allem and asked her to return all the
post-dated cheques, and she in turn undertook to let Mrs
Allem have Stein's cheque for R60 000 in respect of capital
and interest. No such cheque was received.
Ih January 1984 Mrs Allem telephoned Stein and told
61
him that she needed her money since she had found a suitable townhouse to
buy. She also asked Stein to let her have a document confirming
that she had
paid the money over to him. In response to her request Stein wrote her the
following letter dated 15 February 1984:
"
Your investment of R60 000,00
We refer to the above matter and wish to confirm that as per your instructions,
we are holding the sum of R60 000, 00 in trust, having
cashed out your
investments.
Our cheque will be following shortly."
Towards the end of March 1984 Mrs Allem heard
that
Stein had left the country. She never received
the promised
cheque or any payment from Stein.
Mrs Allem's attorney, who also acted for Allem and
the first respondent in the present case, later submitted an
affidavit to the appellant in support of Mrs Allem's claim.
The affidavit was signed by Mrs Allem on 4 June 1984. Like
62
Allem, Mrs Allem also stated in her affidavit that she had lent the money to
Stein. There are, however, other allegations in Mrs Allem's
affidavit which are
consistent with her oral evidence and to the effect that she entrusted the money
to Stein in the course of his
practice as an attorney. As in the case of the
first respondent, her attorney also wrote a letter dated 9 April 1984 to the
appellant.
This letter, which preceded her affidavit, stated that Mrs Allem had
invested monies in trust with Stein in order to enable him to
make investments.
The contents of this letter are in accordance with Mrs Allem's oral testimony
and lend support to her evidence
that the affidavit did not correctly set out
the terms of her arrangement with Stein.
Stein's letter of 15 February 1984 quoted above further corroborates Mrs
Allem's evidence in this regard,irrespective of whether the
letter be regarded
as true or false. The Court
a quo
held that the letter was admissible to
show the manner in which the loan had been
63
handled by Stein. I do not, with respect, share the view of the learned Judge
a quo
that this letter truly reflected Stein's handling of the money, but
if true, it certainly confirmed that Stein did not personally
borrow the money
from Mrs Allem. In my opinion, and for reasons which will follow later, the
letter was indeed false, but the fact
that the lie took a form consistent with
Mrs Allem's version of the arrangement, supports her oral evidence with regard
to the scheme.
Mrs Allem's version of her arrangement with Stein is further borne out by the
fact that Stein followed basically the same
modus operandi
in her case as
in the case of the first respondent; and it has been established that the first
respondent did not advance the money
to Stein personally, but entrusted the
money to Stein in the course of his practice as an attorney.
The trial Court found Mrs Allem to be an honest and reliable witness, despite
the fact that certain allegations
64
in her affidavit were in conflict with her oral evidence. I have considered
further criticism of her evidence, but in my judgment
there is no reason to
disturb such finding.
The remaining question is whether Mrs Allem has proved
that Stein in fact stole her money. She relied on the letter of 15 February
1984
to establish her version that Stein had invested the money on her behalf, but
that letter also alleged that Stein had "cashed
out" her investments and that he
was holding the sum of R60 000 in trust. The submission was made on behalf of
the appellant that
there is no evidence at all as to the state of Stein's trust
account at the'time that he absconded. If the allegations in the letter
were
true Mrs Allem's money, or at least part thereof, may still have been in Stein's
trust account when he left the country. A small
dividend of R261,69 was
subsequently paid to Mrs Allem, but this dividend was received from the trustees
in Stein's insolvent estate
and not from a
curator bonis
appointed to
control and administer Stein's trust
65
account. The Court
a quo
did not specifically deal with this aspect of
theft in the case of Mrs Allem, but gave judgment in her favour in the sum of
R57 383,31.
I have indicated above that I am of the view that Stein's letter
of 15 February 1984 was false. If Stein really had been holding Mrs
Allem's R60
000 in trust, as alleged in his letter, he could have enclosed his firm's cheque
for R60 000 straightaway. He knew that
she required the money. He promised her,
nevertheless, that his cheque for R60 000 would be following shortly. This
he
failed to do, and one can only conclude that he never
intendéd to send her his cheque as promised in the letter.
Stein eventually absconded more than a month later without
paying Mrs
Allem at all. In view of these circumstances it
is more likely than not that Stein did not have Mrs Allem's
money in his
trust account, as alleged in his letter, and
that he never intended to send her his cheque for R60 000,
as promised in the letter. The conclusion is justified that
66
the letter was a mere pretence, meant to mislead Mrs Allem into believing
that her money was forthcoming.
Many of the letters which Stein had written
to the first respondent were proved to have been false. If that had been Stein's
modus operandi
in the case of the first respondent, one can more readily
accept that he would have followed the same course when dealing with Mrs
Allem.
Once it is accepted that Stein's letter of 15 February 1984 was false,
the inference becomes irresistible that Stein had never lent
Mrs Allem's money
to any client of
his, but had misappropriated it. Stein's failure to pay
her
the money, which he knew she needed, further leads to the
conclusion that he had stolen her money. The first
respondent has proved that Stein was a thief. Stein's
arrangement with Mrs Allem was basically the same as that
which existed between Stein and the first respondent, and it
is more likely than not that Stein would have stolen Mrs
Allem's money as well. The circumstances under which Stein
left the country are consistent with his having stolen money.
67
All these considerations justify the conclusion that Stein also stole Mrs
Allem's money. In my judgment, therefore, Mrs Allem has
proved that she suffered
pecuniary loss as a result of theft committed by Stein.
In view of the provisions of section 47(2) of the
Act referred to above, Mrs Allem's claim for reimbursement is limited to the
capital amount of R56 000 actually handed over to Stein,
and she is not entitled
to the R4 000 interest allegedly earned on her investment. The amount of R261,69
received by Mrs Allem from
the trustees in the insolvent estate of Stein should
further be deducted from her loss in terms of section 47(3), leaving a balance
of R55 738,31.
68
The following order is made:
The appeal is dismissed with costs, such costs to include the costs of two
counsel, but the capital amounts awarded by the Court
a quo
to the first
respondent and second respondent are respectively reduced to R502 320,64 and R55
738,31.
F H GROSSKOPF JA.
JOUBERT JA
VAN HEERDEN JA
NESTADT JA Concur.
MILNE JA