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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: 12 March 2025
Delivered on: 17 March 2025
JUDGMENT ON THE APPLICATIO N FOR LEAVE TO APPEAL
NUKU, J
[1] The judgment that is the subject of this application for leave to appeal was
handed down just over a month after the Supreme Court of Appeal ( SCA ) delivered
its judgment in Smith1, where in giving what it considered an uncontroversial
example of entrustment within the meaning of section 26 (a) of the now repealed
Attorneys Act 53 of 1979 ( the Attorneys Act ) said “ If for example, a person is in the
process of purchasing an immovable property and paid, in terms of the dee d of sale,
the purchase price into the trust account of a seller’s attorney, there can be no doubt
that the purchaser entrusted the money to the seller’s attorney .”2
[2] In the judgment that is the subject of this application this Court found that
monie s that were paid by Green Spice Investments (Pty) Ltd ( Green Spice ), who
were in the process of purchasing a petrol service station and a convenience store
(the business) and Rebel Star Trading (Pty) Ltd ( Rebel Star ) who were in the
process of purchasing a n immovable property known as erf 4[...] Reservoir Hills,
Durban ( the property ) both of whom paid, in terms of the respective deeds of sale,
the purchase prices into the trust account of a seller’s attorney, Naushad Gattoo
Incorporated ( Gattoo Inc ) were not entrusted within the meaning of section 26 (a) of
the Attorneys Act.
[3] The defendant, who takes no issue with the above example used by the SCA
suggests that there are reasonable prospects of another court coming to a different
conclusion that the monie s that were paid by Green Spice and Rebel Star into the
trust account of Gattoo Inc, which were misappropriated by Mr Naushad Gattoo (Mr
Gattoo) were not entrusted within the meaning of section 26 (a) of the Attorneys Act.
[4] In respect of the monies pa id by Green Spice, the defendant suggests that the
first requirement of entrustment has not been met because “ the funds were not paid
into the trust on behalf of and for the benefit of the plaintiff ” but were paid for the
benefit of Le Mini Project Managem ent and Consulting CC ( Le Mini ) which had sold
the business to Green Spice. The plaintiff having failed to establish the first
requirement of entrustment, the argument goes, that dispenses with the need to
consider the second requirement of entrustment in respect of monies paid towards
the purchase price of the business.
1 Smith v Legal Practitioners’ Fidelity Fund Board (541/2023) [2024] ZASCA 170 (11 December 2024)
2 Smith v Legal Practitioners’ Fidelity Fund Board (541/2023) [2024] ZASCA 170 (11 December 2024)
[5] In respect of the monies paid by Rebel Star, the defendant suggests that it is
the second requirement of entrustment that has not been met because the monies
“were paid into the trust account of Gattoo Inc in circumstances where Mr Moosa,
the plaintiff’s sole member, was still negotiating a transaction on behalf of the plaintiff.
As no transaction had materialised, so the argument goes, there was accordingly no
obligation where the firm was bound to hold and apply the monies for and on behalf
of some other person or persons or for the accomplishment of some special purpose.
[6] The defendant prefaced its argument in relation to the second requirement of
entrustment by stating that “ the issue of entrustment must be judged in light of the
intention of the person who placed the money or property in the possession of the
receiver .”
[7] On the facts of this matter the receiver of the money is Gattoo Inc and the
persons who placed the money in the possession of the receiver, that is Gattoo Inc,
are Green Spice and Rebel Star. The purpose for which the monies were placed in
the possession of Gattoo Inc was to pay for the purchase price of both the business
and the property for the benefit of the plaintiff as the seller of the property and Le
Mini, as the seller of the business. That in my view, establishes the second
requirement of entrustment and this should be the end of the matter in so far as
concerns the monies paid in respect of the sale of the property where there is no
dispute as to the first requirement of entrustment.
[8] The mistake that the defendant makes, is to regard the monies paid in respect
of the purchase price of the property as having been paid by the plaintiff. That is
factually incorrect because the monies in respect of the sale of the property were
deposit ed into the trust account of Gattoo Inc by or on behalf of the purchaser, Rebel
Star.
[9] The defendant, proceeding from that incorrect premise, then looks to the
plaintiff to establish the purpose for which the monies were placed in the possession
of Gat too Inc and finds the plaintiff wanting in that regard. Had the defendant heeded
its own statement that “ the issue of entrustment must be judged in light of the
intention of the person who placed the money or property in the possession of the
receiver ” and correctly located the identity of the person who placed the monies in
the possession of the receiver (Gattoo Inc), it would have realised that the argument
that the second requirement of entrustment has been dispensed with is a non -
starter.
[10] Turnin g to the argument that the first requirement of entrustment has not been
met in respect of monies paid by Green Spice, the argument that this requirement
has not been met, conflates the issues and seems to address a different issue,
namely the identity of the person for whose benefit Gattoo Inc was required to deal
with the money. Incidentally, this is the issue raised as a second ground of appeal,
namely that the plaintiff does not have the legal standing to claim in respect of the
loss arising from the mi sappropriation of the proceeds of the sale of business
because those monies belong to a separate entity, Le Mini. I turn to that issue after
dispelling any notion that Gattoo Inc was not placed in possession of the proceeds of
the sale business.
[11] Green Spice, as the purchaser of the business, paid the sum of R10 000
000.00 into the trust account of Gattoo Inc in terms of a deed of sale for the sale of
the business. It is therefore self -evident that Green Spice placed the money in the
possession of Gat too Inc and no evidence has been led to contradict that. That puts
paid to any notion that the first requirement has not been established. Any issue
regarding the claim by the plaintiff and not Le Mini, is the issue I turn to next.
[12] As is apparent fr om above, there were two transactions that were concluded
simultaneously for the sale of the business and the sale of the property. The
purchase price for both these transactions were paid into the trust account of Gattoo
Inc, the attorneys acting for the sellers in both transactions. This was R5 000 000 in
respect of the sale of the property and R10 000 000 in respect of the sale of
business.
[13] The evidence of Mr Moosa, the sole director of both the plaintiff and Le Mini
was that he instructed Mr Gatto o to allocate everything into the plaintiff’s file. Having
so instructed Mr Gattoo, Mr Moosa would from time to time instruct Mr Gattoo to pay
certain disbursements from the funds that were held in the trust account of Gatoo Inc.
In fact, prior to the disc overy of Mr Gattoo’s misappropriation, Mr Gattoo had paid a
sum of R10 243 894.90 on Mr Moosa’s instructions.
[14] In submitting the claim to the fund, Mr Moosa, on behalf of the plaintiff
regarded the monies in the trust account as belonging to the plai ntiff hence only the
plaintiff submitted the claim and not both plaintiff and Le Mini.
[15] The defendant advanced a defence that the plaintiff has no locus standi to
claim the loss relating to the R10 000 000.00 paid in respect of the business. This,
however, cannot assist the plaintiff because there is no separate claim for R10 000
000 but one claim by the plaintiff for the sum of R4 756 105.10 which is well within
the amount that was paid in respect of the sale of the property. But that was not the
plaintiff’s case, because Mr Moosa regarded the entire R15 000 000 which he had
instructed Mr Gattoo to allocate into the plaintiff’s file, as plaintiff’s property. And of
that R15 000 000.00, R4 756 105.10 was misappropriated by Mr Gattoo. In my view,
the def endant’s ground of appeal based on the lack of locus standi is bad in law and
enjoys no reasonable prospects of success.
[16] The third and final ground of appeal relied upon by the defendant, is that there
is a compelling reason why leave to appeal shoul d be granted as the order’s
practical implications for the public arises from its potential abuse of attorneys’ trust
accounts being used as transactional accounts to settle clients’ liabilities and
expenses.
[17] This ground of appeal, in my view, proce eds from the same erroneous factual
basis of regarding the monies that were paid into the trust account of Gattoo Inc, as
having been paid by either the plaintiff or Le Mini for no purpose other than to enable
Mr Moosa to pay liabilities unrelated to the t ransactions on which Mr Gattoo had
been advising. As already stated above, that is factually incorrect as the monies
were paid by the two purchasers who were in the process of purchasing the
business and the property.
[18] For all the above reasons, I am not satisfied that the appeal would have a
reasonable prospect of success, or that there is some other compelling reason why
the appeal should be heard. The application for leave to appeal must, therefore fail.
Order
[19] In the result I make the followi ng order:
The application for leave to appeal is refused and 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
Instructed by: Shaheed Dollie Inc, Johannesburg
For defendant: H Cassim
Instructed by: Abrahams Kiewitz Inc, Cape Town