Brief Summary

Legal Profession — Legal Practice Act 28 of 2014 — Interpretation of trust accounts — Whether bank accounts related to an investment practice conducted by a firm of attorneys are trust accounts as defined in s 86(4) of the Legal Practice Act — Appeal by Maree & Bernard Attorneys against the High Court's finding that disputed bank accounts must be audited before a fidelity fund certificate can be issued — High Court had declared the accounts as trust accounts requiring compliance with s 85 — Appeal upheld, declaring the accounts not to be trust accounts and ordering the issuance of a fidelity fund certificate for the relevant period.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal to the Supreme Court of Appeal against an order granted by the Free State Division of the High Court, Bloemfontein. The appeal concerned the regulatory consequences of a firm of attorneys conducting an investment practice in addition to its legal practice, and in particular whether certain bank accounts associated with that investment practice had to be treated as trust accounts for purposes of audit compliance and the issuing of a fidelity fund certificate.

The appellants were Maree & Bernard Attorneys Incorporated (first appellant) and Mr Nicolas Petrus Maree (second appellant), the sole director of the incorporated firm and a practising attorney. The respondents were the South African Legal Practice Council (first respondent, the regulator) and the Attorneys Fidelity Fund (second respondent).

Procedurally, the matter arose after the Legal Practice Council (LPC) took steps relating to alleged non-compliance concerning an asserted “second trust bank account”, including earlier suspension-related proceedings that were settled on terms. The LPC ultimately refused to issue the appellants with a fidelity fund certificate for the year ending December 2020, despite an unqualified audit report in relation to the firm’s trust account for that year. The appellants then approached the high court for declaratory and mandatory relief. The LPC opposed and filed a counter-application seeking disciplinary-type relief, including suspension and an interdict.

The general subject-matter of the dispute was the interpretation and application of the Legal Practice Act 28 of 2014 and the Legal Practice Council Rules, particularly whether the bank accounts used in the firm’s investment practice fell within the statutory trust account regime (and thus audit requirements) and whether any failure in that regard justified refusal of a fidelity fund certificate and/or findings affecting fitness to practise.

2. Material Facts

It was common cause that Mr Maree was the sole director of the incorporated firm, which followed the winding up of a prior partnership between Messrs Maree and Bernard. The firm’s auditors, ARC Sakhile Chartered Accountants and Auditors Inc (ARC), produced a qualified audit report for the period March 2017 to February 2018 because certain investment bank account(s) were considered to be a second trust bank account that had not been audited. ARC reported that the account was not captured on the firm’s trust accounting system but on the system used by the earlier partnership, and recorded that Mr Maree maintained that the account was not a trust account.

It was also accepted that the LPC resolved in May 2019 to suspend Mr Maree and launched proceedings in the high court to that end, pending investigation into the alleged second trust account. The suspension application was later withdrawn on agreed conditions, including that the appellants would make full disclosure and open their books for inspection by an independent auditor. An independent auditor, Mr Kotie Kruger, was appointed by agreement to investigate. His investigation was not completed as intended, and he reported that he could not investigate the contentious account(s) as contemplated, but stated that the firm was conducting an investment practice.

A central contested fact in the broader dispute was the characterisation of the bank accounts: the LPC maintained that they were trust accounts (or trust investment accounts) falling under the Legal Practice Act’s trust account regime, while Mr Maree maintained that they were accounts for a separate investment business conducted by the firm, “totally removed from the attorneys’ business”. The judgment recorded that the contested accounts had been in operation for more than six years with a large volume of transactions (2613 transactions valued at approximately R66.5 million).

The record further reflected that the bank statements had contained an inscription suggesting “trust account”, which Mr Maree asserted was a bank error that was corrected by the bank upon instruction. Despite the appellants having an unqualified trust audit report for the year ending December 2020 (in respect of their acknowledged trust account), the LPC refused to issue a fidelity fund certificate for that period, maintaining that the investment-related account(s) also required audit compliance.

In the high court proceedings, Mr Maree sought a declarator that the contentious bank account(s) were not trust accounts requiring audit under s 85 of the Legal Practice Act, and an order compelling the LPC to issue a fidelity fund certificate for the year ending 31 December 2020. The LPC counter-applied for suspension, an interdict preventing operation of the accounts, and orders requiring an audit and delivery of various records to the LPC.

The high court refused to accept the late Kruger report, rejected an argument that Mr Maree should have pursued review under PAJA first, and held that the disputed accounts were trust accounts requiring audit under s 85; it further held that Mr Maree was not fit and proper to practise, suspended him, interdicted use of the accounts, and made extensive compliance and delivery orders. The appeal lay against that order.

3. Legal Issues

The central legal questions were whether the bank accounts used for the appellants’ investment practice were trust accounts (or trust investment accounts) as contemplated by the Legal Practice Act, such that they were subject to audit requirements under s 85 and thus constituted a prerequisite for the issuing of a fidelity fund certificate.

A further legal question was whether the high court was correct to conclude that Mr Maree was not fit and proper to practise as an attorney, in circumstances where the dispute before it was framed principally around the audit status and classification of the bank account(s), and where the LPC had not pleaded a case directed at a fit-and-proper enquiry in the disciplinary sense.

These issues primarily involved questions of law (statutory and rule interpretation), and the application of those legal provisions to the established facts, particularly the distinction between statutory trust account mechanisms under the Legal Practice Act and an “investment practice” as regulated by Rule 55 of the LPC Rules.

4. Court’s Reasoning

The Supreme Court of Appeal addressed the LPC’s preliminary contention that the appeal had become moot because the appellants had ceased practising. The Court rejected this, reasoning that the high court order remained in force and continued to carry significant consequences, including a general finding about the auditing of investment practice accounts and a specific finding that Mr Maree was not fit and proper.

On the fit and proper finding, the Court distinguished between (i) the statutory and regulatory regime governing entitlement to a fidelity fund certificate and (ii) the broader evaluative enquiry whether a person is fit and proper to be admitted or remain in practice as a legal practitioner. The Court referred to the established three-stage approach to misconduct complaints, as set out in South African Legal Practice Council v Kgaphola and Another, emphasising that such findings require a properly pleaded and established case. It noted that the LPC had not sought to make out a fit-and-proper case in the manner required and that it was unclear how the high court arrived at that conclusion. The SCA held that the high court’s finding that Mr Maree was not fit and proper could not be sustained.

The SCA then considered the core issue: whether the investment business bank account(s) fell within s 85 of the Legal Practice Act, requiring audit as a precondition to issuing a fidelity fund certificate. The Court set out the statutory context by referring to the earlier Attorneys Act regime (particularly the former s 78 trust account and trust investment account provisions) and explained how the Legal Practice Act now regulates trust accounts and investments through ss 84 to 87. It highlighted that the Legal Practice Act provides for trust account practices to invest funds (including under s 86(3) and s 86(4)), with accompanying record-keeping obligations under s 87.

The Court then analysed Rule 55 of the LPC Rules, which regulates an “investment practice” carried on by a firm when it invests funds on behalf of clients and controls or manages those investments. The Court reasoned that Rule 55 investment practices are clearly distinct from investments regulated under the trust account provisions of the Legal Practice Act. It identified, first, that Rule 55 expressly excludes certain categories of investments typically associated with trust account practice investments, including those made pursuant to s 86(3), temporary conveyancing/litigation-related investments, and certain investments made in fiduciary capacities governed by other enactments.

Secondly, the Court relied on Rule 55.4, which requires an investment mandate containing an acknowledgement that monies invested under the investment practice do not enjoy the protection of the Fidelity Fund. This feature was treated as reinforcing the separation between Rule 55 investment practice funds and the trust-account regime designed to support fidelity fund protection.

In dealing with the LPC’s submissions, the Court noted that the LPC’s heads of argument referenced numerous alleged non-compliance provisions (including several rules and s 86(4)), but held that this was not the case the appellants were required to meet in the high court. The dispute, as framed, was whether the accounts were trust investment accounts requiring audit under s 85 as a prerequisite for a fidelity fund certificate. The SCA held that neither Chapter 7 of the Legal Practice Act nor Rule 55 required that an investment practice bank account be audited for purposes of issuing a fidelity fund certificate. Accordingly, the high court’s conclusion to the contrary was not sustainable.

On costs, the Court considered the LPC’s argument that, as a regulator with statutory duties, it should be awarded costs even if unsuccessful, relying on authority to that effect. However, the Court concluded that the circumstances justified a departure from that approach, reasoning that the LPC had been alerted repeatedly to the nature of the account(s) and had not properly evaluated its stance with reference to Rule 55. It considered that a just and fair result was no order as to costs.

5. Outcome and Relief

The Supreme Court of Appeal upheld the appeal and made no order as to costs.

It set aside the high court’s order and substituted it with an order declaring that the first appellant’s investment accounts held with ABSA and FNB (identified by account numbers in the order) were not trust accounts requiring compliance with s 85 of the Legal Practice Act 28 of 2014.

The Court ordered the LPC to issue the applicant with a Fidelity Fund Certificate for the period ending in December 2020, dismissed the LPC’s counter-application, and made no order as to costs in the substituted order.

Cases Cited

South African Legal Practice Council v Kgaphola and Another [2025] ZASCA 66

General Council of the Bar of South Africa v Geach and Others, Pillay and Others v Pretoria Society of Advocates and Another, Bezuidenhout v Pretoria Society of Advocates [2012] ZASCA 175; [2013] 1 All SA 393 (SCA); 2013 (2) SA 52 (SCA)

Malan and Another v Law Society of the Northern Provinces [2008] ZASCA 90; 2009 (1) SA 216 (SCA); [2009] 1 All SA 133 (SCA)

Jasat v Natal Law Society [2000] ZASCA 14; 2000 (3) SA 44 (SCA); [2000] 2 All SA 310 (A)

Kekana v Society of Advocates of SA [1998] ZASCA 54; 1998 (4) SA 649 (SCA); [1998] 3 All SA 577 (SCA)

Vassen v Law Society of the Cape of Good Hope [1998] ZASCA 47; 1998 (4) SA 532 (SCA); [1998] 3 All SA 358 (A)

Mabaso v Law Society of the Northern Provinces and Another [2004] ZACC 8; 2005 (2) SA 117 (CC); 2005 (2) BCLR 129

Giddey NO v JC Barnard & Partners [2006] ZACC 13; 2007 (5) SA 525 (CC); 2007 (2) BCLR 125 (CC)

Law Society of the Northern Provinces v Sonntag [2011] ZASCA 204; 2012 (1) SA 372 (SCA)

Legislation Cited

Legal Practice Act 28 of 2014

Attorneys Act 53 of 1979

Promotion of Administrative Justice Act 3 of 2000

Financial Advisory and Intermediary Services Act 37 of 2002

Rules of Court Cited

None cited in the judgment.

Held

The Supreme Court of Appeal held that the bank accounts associated with the appellants’ investment practice under Rule 55 of the Legal Practice Council Rules were not trust accounts requiring audit compliance under s 85 of the Legal Practice Act as a prerequisite to the issuance of a fidelity fund certificate.

The Court further held that the high court’s finding that Mr Maree was not fit and proper to practise could not stand, because such a finding required a properly pleaded and established case directed at that enquiry, which was absent on the papers and in the manner the dispute had been litigated.

LEGAL PRINCIPLES

A finding that a legal practitioner is not fit and proper is part of a structured misconduct enquiry and must be preceded by a properly pleaded and established case; it is not an automatic consequence of regulatory disputes regarding the issuing of a fidelity fund certificate.

The handling of trust monies and entitlement to a fidelity fund certificate are governed by the statutory requirements in ss 84 and 85 of the Legal Practice Act and the applicable LPC Rules requiring an audit certificate for trust accounts; those requirements do not extend to accounts that fall outside the trust account regime.

An investment practice conducted in terms of Rule 55 of the LPC Rules is treated as distinct from statutory trust account investments regulated under s 86, including because Rule 55 excludes various trust-related investment categories and requires that clients acknowledge that monies invested under the investment practice do not enjoy Fidelity Fund protection.

Where the governing statute and rules do not impose an audit requirement for certain accounts as a condition for issuing a fidelity fund certificate, a regulator’s insistence on such an audit cannot be sustained on the basis advanced in the judgment.

Maree and Bernard Attorneys and Another v South African Legal Practice Council and Another (914/2023) [2025] ZASCA 140 (29 September 2025)