SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in
compliance with the law and SAFLII Policy



IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)

Case No. 15043 /2020

In the matter between:

ITANEX CC Plaintiff

and

LEGAL PRACTITIONERS’ FIDELITY FUND Defendant

Coram: NUKU J
Heard on : 25-6 November 2024
Delivered on: 13 January 2025


JUDGMENT


NUKU, J
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[1] The plaintiff instituted this action against the defendant claiming payment of the
sum of R8 170 305,10 alleged to have been misappropriated by Mr Naushad Gattoo
(Mr Gattoo ) who was an admitted attorney enrolled as such in term of the Attorneys Act
53 of 1979 (Attorneys Act ) prior to 1 November 2018 and from which date he was
enrolled in terms of the Legal Practice Act 28 of 2014 ( Legal Practice Act ).

[2] The plaintiff alleges that during December 20 15, Mr Gattoo, who was a managing
member of the firm Naushad Gattoo Incorporated (Gattoo Inc ) and who conducted a
trust account practice concluded a verbal agreement the plaintiff which was represented
by Mr Fayyaz Moosa (Mr Moosa ), the plaintiff’s sole member and directing mind, in
terms of which the funds that were anticipated to be received by the plaintiff from the
sale of a business and an immovable property would be deposited into the trust account
held by Gattoo Inc to be held in trust pending the plaintiff’s instructions as to the
disbursement thereof.

[3] The plaintiff alleges further that f ollowing the agreement referred to above a total
amount of R15 000 000,00 was paid into the trust account held by Gattoo Inc, which
amount was made up as follows:

3.1 R500 000,00 paid on 1 April 2016;
3.2 R2 000 000,00 paid on 1 April 2016 ;
3.3 R2 500 000,00 paid on 3 April 2016;
3.4 R8 000 000,00 paid on 1 7 November 2016; and
3.5 R2 000 000,00 paid on 17 November 2016;

[4] Of the sum of R15 000 000,00 received into the trust account of Gattoo Inc , the
plaintiff alleges that Gattoo was authorised to disburse a sum of R10 209 694,90 in the
period between 26 April 2016 and 20 March 2018 leaving the balance of R4 790 305,10
standing to the credit of the plaintiff. To this amount the plaintiff alleges that further
deposits were made into the trust account held by Gattoo Inc which brought the amount
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standing to the credit of the plaintiff to R8 170 305,10, this being amount that is alleged
to have been malapportioned by Gattoo .

[5] The defendant denie s that it is liable to reimburse the plaintiff the sum of
R8 170 305,10 claiming that the monies were not placed by plaintiff with Gattoo Inc
subject to trust, as contemplated in section 55 of the Legal Practice Act. This, according
to the defendant is because:

5.1 Mr Moosa, in an affidavit that had been filed on behalf of the plaintiff when
the plaintiff’s claim was submitted to the defendant, had stated that the
sum of R15 000 000,00 was paid into the trust account of Gattoo Inc for
purposes of holding “t hese funds in trust in respect of a transaction I was
still negotiating ” and in respect of a “t ransaction which I was still in the
process of concluding ” on behalf of plaintiff;

5.2 The R15 000 000,00 paid into the trust account of Gattoo Inc comprised of
R5 000 000,00 in respect of the sale of an immovable property paid on 1
April 2016 (in two payments of R500 000,00 and R2 500 000,00 ) and 3
April 2016 (R2 500 000,00); and R10 000 000,00 in respect of the sale of
a business paid on 17 November 2016 (in tw o payments of R8 000 000,00
and R2 000 000,00) ;

5.3 From the date that the amount of R15 000 000,00 was transferred to the
trust account of Gattoo Inc, various amounts totalling R10 209 694 ,90
were disbursed, on plaintiff’s instructions and on plaintiff’s behalf, by
Gattoo Inc to various parties.

5.4 Plaintiff also deposited further funds into the trust account of Gattoo Inc in
the total sum of R3 380 000,00 to “ ensure that there were sufficient funds
available which would be required for the t ransaction which I was still in
the process of concluding ”;
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5.5 During 2018, approximately two years after the first funds were paid into
the trust account of Gattoo Inc, plaintiff requested the funds remaining in
the trust account be paid over to it , in the amount of R8 170 305,10.

[6] The plaintiff has since abandoned part of its claim in the sum of R3 380 000,00
leaving only the balance of R4 756 105.10.

[7] Only Mr Moosa gave evidence during the trial as the defendant closed its case
without leading any evidence. Mr Moosa’s evidence was relatively straight forward and
can be summarised as follows. He is a businessman with interests in various
businesses. He i s the sole member of the plaintiff a s well as Le Mini Project
Management and Consulting CC (Le Mini ). The plaintiff was the registered owner of erf
4[…] Reservoir Hills, Durban (the property ) at which Le Mini conducted a petrol s ervice
station and a convenience store (the business ). In what he understood to be a
composite transaction, the plaintiff sold the property to Green Spice Investments (Pty)
Ltd for the sum of R5 000 000,00 and Le Mini sold the business to Rebel Star Trading
(Pty) Ltd for the s um of R10 000 000,00 all of which was to be paid into the trust
account of Gattoo Inc , being the firm of attorneys that was advising both the plaintiff and
Le Mini with the process of concluding the transaction for the sale of the property and
the business. He inst ructed Mr Gattoo that the R15 000 000,00 should be held in the
name of the plaintiff .

[8] Mr Moosa’s business interests included share s in ESwift Investme nts (RF) (Pty)
Ltd, a company that had a preference share subscription agreement with RMB in terms
of which it was required, from time to time , to make some substantial payments to RMB .
For this reason, he thought that he should keep some of the proceeds from the sale of
the property and the business so that he could use same to make the aforementioned
payment when it became due.

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[9] Mr Moosa confirmed having authorised Mr Gattoo to d isburse the sum of
R10 209 694,90 from the proceeds of the sale of the property and the business . Mr
Gattoo, however, never paid the balance as he started making excuses whenever he
requested the money to be paid to the plaintiff. At some point in time Mr Gattoo even
provided him with a fraudulent bank statement in an attempt to convince him that the
money was still being held in trust. At some p oint he heard that Mr Gattoo had been
struck off as an attorney . Thereafter he decided to approach attorneys who had been
representing some of the claimants against Mr Gattoo and/ Gattoo Inc. Attempts to
trace Mr Gattoo did not yield any positive results and he even reported the matter to the
police.

[10] Mr Moosa, during cross -examination, was asked about his appreciation of the
fact that some of the money belonged to Le Mini in that these were proceeds from the
sale of the business and not monies belonging to the plaintiff. His response was that he
regard ed the transaction as an indivisible transaction and that he, in any event, had
instructed Mr Gattoo that the entire sum of R15 000 000,00 should be kept under the
plaintiff’s file. When referred to paragraph 9 of an affidavit he had signed in support of
the plaintiff claim, he readily conceded that its contents are not factually correct. This is
the paragraph in which he had stated that ‘ The Claimant concluded an agreement of
sale of business and immovable property with a company known as Green Spice
Investments (Pty) Ltd for the sum of R15 000 000,00 (Fifteen Million Rand) which was
to be paid as follows:… ’ He further confirmed that paragraph 13 of the same affidavit
wherein h e stated ‘ Gattoo therefore held R15 000 000,00 in trust on behalf of the
claimant’ was a correct reflection of the instructions he had given to Gattoo regarding
the proceeds from the sale of the property and the business.

[11] The evidence having established that the misappropriation of the funds occurred
prior to the coming into effect of the Legal Practice Act counsel for both parties were in
agreement that the matter should be determined in terms of the provisions of the
Attorneys Act, and in particular section 26 which reads:

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‘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 or her candidate attorney or his or her
employee, of any money or other property entrusted by or on behalf of such
persons to him or her or h is or her candidate attorney or employee in the course
of his or her practice or while acting as an executor or administrator in the estate
of a deceased person or as a trustee in an insolvent estate or in any other similar
capacity .’

[12] Regarding the interpretation of section 26 of the Attorneys Act, plaintiff’s counsel
referred this court to the judgment of the then Witwater srand Local Division in BIC
Southern Africa (Pty) Ltd v Attorneys Fidelity Fund Board of Control1 where the
requir ements to establish liability of the defendant were stated in the following terms:

‘… the essential elements of the action brought in terms of the section are:

1. There must have been a pecuniary loss.
2. The loss must stem from theft.
3. The theft must occur by a practising attorney.
4. It must be in a sum of money.
5. The money must have been entrusted to the attorney.
6. It must have been in the course of his practice.’

[13] Plainti ff’s counsel further referred this court to the decision of the Supreme Court
of Appeal ( SCA ) in Legal Practice Fidelity Fund v Marshall (Marshall )2 in suppor t of
his argument that (a) the concept of “deposit” and “entrustment” were not necessarily
distinct and separate, (b) entrustment is a broader concept than “ impressing with a trust
in the legal technical sense ” and (c) the plaintiff is entitled to be the sole beneficiary .


1 2003 (6) SA 757 (W) at para [2]
2 2023 (5) SA 409 (SCA)
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[14] It was submitted on behalf of the plaintiff that all the requirements for liability o f
the part of the defendant had been established in that :

14.1 It is not disputed that there has been a pecuniary loss of R4 756 105.10,
and the only issue is whether it is the plaintiff which suffered loss or some
other third party.

14.2 It was admitted that the loss stemmed from theft .

14.3 the theft was committed by Mr Gattoo who was a practising attorney at the
time when the theft was committed.

14.4 what was stolen is the sum of R4 756 105.10.

14.5 the money was entrusted to Mr Gattoo, a practising attorney, and

14.6 Mr Gattoo had been advising the plaintiff and Le Mini regarding the
transaction for the sale of the property and the business.

[15] It was submitted on behalf of the defendant tha t the plaintiff is not entitled to
include the sum of R10 000 000 in the computation of its claim as this amount belonged
to Le Mini as the proceeds from the sale of business. The argument went further that
the plaintiff could not have suffered any pecuniary loss because Mr Gattoo had
disbursed more than the R5 000 000 that he had received in respect of the sale of t he
property .

[16] It was further submitted on behalf of the defendant that the funds stolen by Mr
Gattoo were not placed by the plaintiff with Gattoo Inc , subject to trust as contemplated
in section 26 of the Attorneys Act because the elements of entrustment ha d not been
established . In this regard, counsel for the defendant placed great reliance on the
decision of the SCA in International & Commercial Factors v Attorneys Fidelity
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Fund (ICF)3 for the proposition that the test to prove entrustment comprises two
elements, namely (a) to place in the possession of something , (b) subject to trust, and
that the latter connotes that the person entrusted is bound to deal with the property or
money concerned for the benefit of others . In short, the argument was that the import of
the ICF judgment is that section 26 of the Attorneys Act makes provision for
reimbursement to either (1) the person by whom the has been entrusted or (ii) the
person on whose behalf the money has been entrusted , provided that such a person
has suffered pecuniary loss.

[17] In dealin g with the facts of this matter, it was sub mitted that the first element of
entrustment had been pro ved only in relation to the R5 000 000 which was in respect of
the proceeds of the property by the plaintiff. Regarding the second element of
entrustment, it was submitted that the plaintiff had failed to prove this because there
was no obligation on the p art of Gattoo Inc to hold and apply the money for the benefit
of some person or persons or for the benefit of accomplishment of some special
purpose because the money was kept in the trust account of G attoo Inc because Mr
Moosa ‘required attorneys Gattoo to hold these funds in trust in respect of a transaction
I was still negotiating on behalf of the claimant ’. Thus , so goes the argument, the
plaintiff used the trust account of Gattoo Inc as a general transactional account and not
for the purposes contemplated in the Attorneys Act , that is to hold monies on behalf of
clients for specific legal purposes such as property transfers, the settlement of legal
claims or the safeguarding of funds during disputes.

[18] The defendan t’s argument that the plaintiff is not entitled to claim any monies
beyond the R5 000 000 which was paid as the proceeds from the sale of the property
ignores the undisputed evidence of Mr Moosa that he had given instructions to Mr
Gattoo that the entire amount of R15 000 000 mu st be held in trust in the name of the
plaintiff. Consistent with this instruction, Mr Moosa , acting on behalf of the plaintiff,
instructed Mr Gattoo to disburse the sum of R10 209 694,90 .


3 1997 (1) SA 136 (SCA) at 150B -C
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[19] It is also significant that Mr Moosa is the sole member of both the plaintiff as well
as Le Mini and as the directing mind of both entities, the defendant had not suggested
that there was any prohibition that would have prevented him from directing the funds
paid in respect of the sale of the business to be held in trust on behalf of the plaintiff.
After Mr Moosa gave the instruction that the money be held in trust on behalf of the
plaintiff, which instruction appears to have been actioned by Mr Gattoo in light of the
fact that he disbu rsed more than R5 000 000 which was the proceeds from the sale of
the property, Le Mini could no longer lay any claim to any of the proceeds of sale. In a
much as Le Mini is a separate corporate entity from the plaintiff, it is the instruction that
was given by Mr Moosa, as the sole member of Le Mini that is determinative . The
defendant’s argument that that the plaintiff’s claim has been extinguished has no merit.
That leaves the argument relating to th e requirements of entrustment to which I turn
next.

[20] The gist of the defendant’s argument revolves around what Mr Moosa stated in
his affidavit in support of the plaintiff’s claim that he intended the moneys to be held in
trust in respect of a transaction that he was still negotiating on behalf of the plaintiff.
Reference was also made to the fact that Mr Moosa had instructed Gattoo Inc to pay
various disbursements which had nothing to do with the plaintiff and that this is
indicative of the fact that Mr Moosa or the plaintiff intended to use the trust account of
Gattoo Inc as a general transactional account.

[21] My reading of the SCA judgment in Marshall is that it is no longer a requirement
of section 26 (a) of the Attorneys Act that the person entrusted with the property or
money is bound to deal with such property or money for the benefit of others, a point
which the defendant seems to rely heavily on. As point ed out on behalf of the plaintiff,
the SCA in Marshall endorsed the majority decision of the full court when it stated ‘ In
light of the decision in ICF it must follow that the concept of entrustment for the
purposes of section 26 (a) does not connote that the person entrusted is bound to deal
with the property or money concerned for the benefit of others, in the sense that it does
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not include moneys deposited by a depositor such as the respondent who will provide
instructions as to the application of such f unds in trust in due course .’

[22] Thus, it was open to the plaintiff or Mr Moosa to give instructions as to the
application of the funds that had been paid into Gattoo Inc’s trust account from time to
time and that would not take such funds outside of the ambit of the protection of section
26 (a) of the Attorn eys Act. In my view, the plaintiff has satisfied the requirements of
section 26 (a) of the Attorneys Act and as such is entitled to be reimbursed the sum of
R4 756 105.10 that was stolen by Mr Gattoo.

[23] The plaintiff has been successful, and, in my view, costs should follow the result.

ORDER

[24] In the result I make the following order:

24.1 Defendant is liable to pay plaintiff the sum of R4 756 105.10 with interest
at the prescribed rate from the date of judgment to date of payment ;

24.2 Defendant shall pay the costs of suit on scale B and such costs shall
include the costs of one counsel .


__________________________
L.G. Nuku
Judge of the High Court


APPEARANCES

For plaintiff: N Cassim SC and M Karolia
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Instructed by: Shaheed Dollie Inc, Johannesburg

For defendant: H Cassim
Instructed by : Abrahams Kiewitz Inc, Cape Town