REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
GAUTENG DIVISION, PRETORIA
(1) REPORTABLE: NO
(2) OF INTEREST TO OTHER JUD
2~ ,~;~;;;a --++-........_ __ ,,,,___
DATE SIGNATURE
In the matter between:
SOUTH AFRICAN LEGAL PRACTICE COUNCIL
and
DAVID ANTHONY SMITH
RAPHAEL & DAVID SMITH INC
Case N umber: 65895/18
First Applicant
First Respondent
Second Re spondent
Delivered: This judgment was prepared and authored by the Judge(s) whose name
is reflected and is handed down electronically by circulation to the Parties/their legal
representatives by ema il and by uploading it to the electronic file of this matter on
Caselines. The date for hand-down is deemed to be 2.S SefrtMJE~ 2.oZ~
1
JUDGMENT
CARRIMAJ
Introduction
[1] This is an application in terms of section 22( 1) of the now repealed Attorneys
Act 28 of 2014 (the Attorneys Act). Section 22(1) conferred a discretion on this
Court to strike off or suspend any person who has been admitted as an attorney if
they are not fit and proper to continue practising as such. The application to strike
the First Respondent off the roll of attorneys was brought by the Law Society of the
Northern Provinces ("the Law Society") on 10 September 2018. The Legal Practice
Council (LPC) established by the Legal Practice Act No . 28 of 2014 (LPA) now
exercises oversight over the conduct of legal practitioners. The LPC continues with
this application.1 For ease of reference, I will refer to the Applicant either as such or
as the LPC, albeit that some of the events occurred prior to the establishment of the
LPC.
[2] The Applicant relies on a report of an investigation conducted by Mr Vincent
Faris2 (the Faris Report) and more than sixty (60) complaints lodged against the
Second Respondent ("the firm") in support of this application.
[3] At least twenty-one (21) grounds of misconduct are levelled against the
Respondents. 3
[4] The relief sought is for Mr David Smith to be struck off the roll of legal
practitioners and for the firm to be placed under curatorship. However, at the end of
the hearing the LPC persisted only with relief against Mr Smith; and none against the
firm.
2
3
As it was entitled and obliged to do under section 116(1) of the Legal Practice Act.
Mr Faris was a chartered accountant and auditor practising under the style of Vincent Faris
Chartered Accountant.
See LPG Note for Argument (the Note) 024-275ff
2
Background and Procedural History
[5] The application was launched in 2018 and was heard almost seven years later
in the week of 5-9 May 2025.
[6] Unlike in most striking off or suspension applications brought by the LPC , the
First Respondents' practice is not that of a sole practitioner.
[7] The First Respondent (hereafter Mr Smith) was admitted to practice in 1986.
He became a partner in his father's law practice in 1992. The partnership was
converted into a professional company in 1997, being the Second Respondent. Mr
Smith and his father were two co-directors. The major component of the firm's work
was litigation against the Road Accident Fund ("RAF"); the cases against the RAF
running into approximately one thousand (1 000) cases per annum.4
[8] Until his death on 13 October 2012, Mr Raphael Sm ith was the managing
director/partner of the firm. The functions carried out by Mr Raphael Smith were
taken over by Mr Smith after the former's demise.
[9] The allegations of misconduct are numerous and some are very serious.
However, curiously and unlike as happens in many applications of this sort, an order
was not sought suspending Mr Smith from practice when the application was
launched in 2018, nor for that matter at any time thereafter.
[1 OJ The procedural history stretches back to an application brought by the
Applicant in 2011 under section 70 of the Attorneys Act ("s70 application") against
Mr Smith and his late father Rapheal Smith compelling them to provide records for
purposes of an investigation of the entire practice based on thirty-one (31) complaints
received against the firm. Prinsloo J granted the order on 22 July 2016.5
[11] Mr Rapheal Smith died prior to the judgment by Prinsloo J ("the Prinsloo J
judgment"). Mr Smith remained a Respondent and he 6 appealed the Prinsloo J
4
5
6
This is an estimate. In the AA dated 24 April 2019 Mr Smith states that the firm had by that stage
handled approximately 30 ooo files.
handled approximately 30 ooo files.
See the judgment at 002-211 Law Society of the Northern Provinces and Raphael Smith, David
Anthony Smith and Rapheal & David Smith Inc
By the two remaining Responde nts but since Mr Smith was the sole director at the time, no
distinction is made between him and the firm for purposes of this discussion.
3
judgment to the Supreme Court of Appeal and ultimately to the Constitutional Court.
He was unsuccessful in both courts.
[12] Mr Smith7 contends that the Applicant's request for inspection and the s 70
application was driven at the time by Mr Bobroff, the President of the Law Society at
the time, and a competitor of Mr Raphael Smith. Mr Smith avers that Mr Bobroffs
actions were motivated by malice. Similar arguments have been resuscitated in
these proceedings with the Respondents arguing that this application is nothing more
than a continuation of the "Bobroff' 8 malice and is motivated by bias and suspicion
on the part of the LPG .
[13] The judgment of Prinsloo J is a matter of public record. In granting the s70
order, Prinsloo J considered these arguments and made short shrift of them. For
purposes of this judgment, it is not considered necessary to decide the veracity of
the claims of malice and bias. 9
[14] After the section 70 order was obtained, the Applicant instructed Mr Faris to
proceed with his investigation. Mr Faris' mandate emanated from the Prinsloo
judgment and was limited to an inspection of the accounting records relating to all
claims handled on behalf of clients against the RAF , the complete office files relating
to such claims, books and/or records relating to the practice of the attorneys and the
records/data of all clients in relation to RAF matters.10
[15) Mr Faris conducted the investigation on 27 June 2017 and delivered his report
to the Applicant on 26 October 2017.
[16) While his mandate extended to all matters in which the Law Society had
received complaints Mr Faris noted in his report that he had not understood his
mandate to investigate all the RAF matters handled by the firm which were in the
region of 2000/3000. For this reason, he investigated a sample of files based on his
years of experience. He also noted that no audits were undertaken, and it was
7
8
Mr Smith was the deponent on behalf of both Respondents. A reference to him includes a
7
8
Mr Smith was the deponent on behalf of both Respondents. A reference to him includes a
reference to the firm unless the context requires a distinction to be made .
It is well-known that Mr Bobroff is a fugitive from justice, and his name has been struck from the
roll of legal practitioners.
9 The record of the s70 proceedings were also filed.
10 002-286 Annexure B to investigation report
4
assumed that other than the matters investigated by him in relation to specific
doctor's accounts no information was given to him of any other complaints lodged
with the Law Society against the firm and it had been accepted by him that the
matters which initiated the mandate in 2006 had been resolved.11
[17] Almost a year later, on 10 September 2018, the LPC launched these
proceedings without first sharing the Faris Report with the Respondents.
[18) The Respondents filed an answering affidavit on 24 April 2019.12 Mr Smith
responded to each complaint attached to the founding affidavit although not a single
one involved him personally.13 In order to fully respond to the concerns raised in the
Faris Report, Mr Smith tasked his auditor Mr Russon,14 a Chartered Accountant, to
prepare a report to answer the concerns raised in the Faris Report. Mr Russon's first
report is dated 22 October 2018. He prepared a further report which is dated 18
March 2019.15 Furthermore, Mr Smith obtained a report from an independent auditor
Mr Selbst16 to comment on Mr Russon's findings.
[19] On 22 June 2020 the Applicant filed a replying affidavit and a supplementary
founding affidavit in which additional or new complaints were attached.17 This was
fourteen months after the answering affidavit had been filed.
[20J A further Russon report and a further Selbst report were commissioned by the
Respondents.18 The Russon report is dated 20 October 2020. Mr Selbst's report is
dated 2 November 2020.
[21] A supplementary answering affidavit was served on 3 December 2020.19
[22] On 9 November 2022, some twenty months after the supplementary
an:;wering affidavit was served, the Applicant meet a supplementary replying affidavit.
11 002-280 Investigation Report
12 Runn ing into more than 500 pages
13 See Annexure AA1. 008-103
14 22 Oct 2018 Russon Factual Findings Report 008 -63
15 008-509
16 Mr Ernest Selbst Report 008-514
17 009-5
18 014-145 and 014-189
19 014-1
5
[23] Ten months later, the Applicant delivered a further supplementary replying
affidavit on 1 September 2023.20
[24] In response to the further supplementary replying affidavit the Respondents
filed an affidavit on 6 October 2023.
[25) Then yet another further supplementary replying affidavit was filed by the
Applicant on 19 January 2024.21 In this affidavit for the first time the passing of Mr
Faris 22is disclosed to the Court and an attempt is made to substitute the late Mr
Faris's opinion with that of Mr Ashwin Reddy.
[26) Neither party sought condonation for the filing of all these supplementary
affidavits. The Applicant claimed that it was entitled to put new facts before this Court
without seeking condonation. I am not persuaded that the submission is correct. Be
that as it may, I do not consider it necessary to decide whether the Applicant was
obliged to apply for leave to file the supplementary affidavits or apply to condone
their delivery. In any event, the Respondents have already answered to the
supplementary affidavits.
[27] Prior to the hearing of the matter the parties were asked in a case
management meeting to reduce the volume of paper, narrow the disputes, and to
produce a core bundle. This request yielded no beneficial outcomes whatsoever, the
range of disputes were not narrowed, a core bundle produced by the LPG was
incomplete and page references became confusing. They did not match the page
numbers in the main bundle. All-in-all the manner in which the papers were put
before the court by the dominus litis was disappointing to say the least. Regrettably,
much scarce judicial time had to be expended in trudging through the papers. The
Respondents eventually produced a chronology document which became a useful
tool to navigate this impossibly voluminous record. The record stood at roughly 5000
pages with the evidence relied upon by the Applicant alone spread across a multitude
of affidavits.
20 022-1
21 025-1
22 Sadly, Mr Faris passed away on 12 June 2021.
6
[28] The Respondents allege that the way the LPC conducted itself in this matter
was grossly unfair to them and that they have felt themselves at the receiving end of
a constantly evolving case. They asked that the matter be dismissed on this basis
without considering the merits. This was raised as a type of point in limine. I turn to
consider this issue now .
Point in Limine
[29] The cornerstone of the point in limine raised by the Respondents is that the
LPC conducted the matter in such a grossly unfair manner that this Court should
record its displeasure by simply dismissing it on this basis.23
[30] The Respondents submit that the unfairness attaches not only to the
procedure prior to the launching of court proceedings but also to the conduct of the
Applicant in these proceedings. They submit that the Applicant ought to have first
conducted an internal disciplinary enquiry against Mr Smith and the firm with properly
formulated charges prior to approaching the Co urt. They contend this was indeed
contemplated in the s70 application. They submit that such a process would have
enabled Mr Smith to understand the case against him, cross-examine witnesses and
lead his own evidence. As it stands it is unclear what charges are levelled against
him personally to warrant his striking off. As to the complaints against the firm, the
respondents submit that a disciplinary enquiry would have weeded out unmeritorious
complaints and/or an approach to the Court might not have been necessary at all.
The Respondents argue that the unfairness extends to the conduct of the LPC in
these proceedings. In this regard, they submit that the LPC recycled old complaints
(older than 10 years-contrary to its own directive); it relied on complaints even
though the files relating to those complaints had been closed; dormant complaints
which had already been investigated and included new complaints which had not
previously been sent to the firm. Furthermore, they contend that the filing of
previously been sent to the firm. Furthermore, they contend that the filing of
numerous affidavits, without the leave of the Court, and burdening the court record
unnecessarily with irrelevant material, was unprecedented. They complain that the
application was run in a grossly unfair manner where the Respondents were required
to answer an ever-evolving case. Every time the Respondents answered an
23 A number of other points were raised about the Notice of Motion, but nothing turns on them.
7
allegation, a new one was levelled against them flowing from the answer itself.
According to them, the unfairness also stemmed from the Faris Report in that the
LPC did not follow the recommendations of its own expert, namely Mr Faris's
recommendation that Mr Smith together with the auditor should engage with Mr Faris.
Added to this the Faris report was not shared with the Respondents prior to the
application being launched. They submit that they were severely prejudiced in
having to answer to Mr Faris' findings or concerns within the limitations of motion
proceedings as opposed to in a discussion with Faris and his team who had de facto
knowledge of the firm's accounting systems. In terms of relief that should be granted,
the Respondents submitted that the matter should be dismissed. They argued that
the LPC could, notwithstanding the dismissal of the application, still conduct a proper
disciplinary enquiry against Mr Smith on clearly formulated charges so that the
Respondents know what case they have to meet.
[31) Mr Stocker on behalf of the LPC submitted that the LPC was entitled to
approach the Court directly without first conducting an internal disciplinary enquiry.
He argued that once the LPC had formed the view that a practitioner was not fit and
proper to continue practising, little would be served by holding an internal enquiry.
And proceeding to court directly would be more efficient and would be to the benefit
of the public. He submitted that in this case the LPG had already formed the view
that Mr Smith was not fit and proper and accordingly proceeded directly to Court. He
argued further that the Respondents' point in limine was not a proper legal point and
could not be decided without going into the application.
[32] The question whether the LPG is required to conduct a prior disciplinary
hearing has been considered by the Supreme Court of Appeal. In Law Society of the
Northern Provinces v MorobadP -4 the SCA held that
Northern Provinces v MorobadP -4 the SCA held that
"in general it is correct that the Council may proceed with the application for
the striking off of the practitioner or for his or her suspension without pursuing
a formal charge before a disciplinary committee if, in its opinion, having regard
to the nature of the charges, a practitioner is no longer considered to be a fit
and proper person".
24 (1151/2017) [2018] ZASCA 185 (11 December 2018) at par [25].
8
[33] This principle has also found application recently.25
[34] That this is expressed as a general principle rather than a hard and fast rule,
suggests that there may well be circumstances where proceeding with an application
prior to instituting internal disciplinary proceedings might not be appropriate.
[35] Whether or not the LPC proceeds directly to court or first initiates an internal
disciplinary enquiry is a matter of discretion on its part. However, in exercising its
discretion in favour of a direct approach to court without first initiating an internal
disciplinary enquiry, the LPC might run the risk of a poorly investigated complaint on
its part or be surprised by the evidence that a respondent might lead before the court.
[36] Thus, the decision by the Applicant to proceed to Court without first instituting
an internal disciplinary enquiry and its failure to do so in this instance is not ipso facto
unfair. It was entitled to proceed with this election with all the attendant risks involved
in application proceedings. Would a prior disciplinary process have weeded out
unmeritorious complaints or clarified the case against Mr Smith? Possibly. But any
alleged unfairness to the Respondents can only be considered by having regard to
the application itself.
[37] In this application, even though the LPC 's case against the Respondents was
amplified since the application was first brought, the grievance that Mr Smith could
have understood the case against him if a prior disciplinary enquiry had been held is
not borne out by the papers. Mr Smith has been a party to these proceedings from
inception. At the time of the s70 proceedings he was already a director of the firm
and prior to that a partner.26 He took over the management of the firm and directed
the litigation after his father's death in 2012 all the way to the Constitutional Court.
Mr Smith has filed comprehensive affidavits in response to the averments against
Mr Smith has filed comprehensive affidavits in response to the averments against
the Respondents, albeit that in his view the case against him was not clear.
[38] In the circumstances, while the LPC could have acted differently, we cannot
find that the Respondents did not or could not understand the case against them.
25 South African Legal Practice Council v Selota (43012/2018) [2025] ZAGPPHC 475 (15 Ma y
2025).
26 Appointed on 1 January 2004.
9
[39] However, the unsatisfactory manner in which the LPC has conducted this
matter is taken into account when the issue of costs is discussed.
[40] For these reasons, the point in limine is dismissed and I now turn to consider
the merits of the matter.
The Test
[41] It is trite that applications for the suspension or striking off a legal practitioner
involves a three-stage enquiry. The first stage is determining whether the alleged
offending conduct had been established on a preponderance of probabilities. This is
a factual enquiry. The second stage is to determine whether the practitioner is fit and
proper to continue to practice. This is a discretionary exercise. The third stage is to
determine what sanction should be imposed and whether an order of suspension
from practice would suffice or whether the practitioner should be struck off.27
[42] In Law Society, Northern Provinces v Mogami and Others28 the court stated:
a. "[4] Applications for the suspension or removal from the roll require a three
stage enquiry. First, the court must decide whether the alleged offending conduct
has been established on a preponderance of probabilities, which is a factual inquiry.
Second, it must consider whether the person concerned is 'in the discretion of the
court' not a fit and proper person to continue to practice. This involves a weighing-up
of the conduct complained of against the conduct expected of an attorney and, to this
extent, is a value judgment. And third, the court must enquire whether in all the
circumstances the person in question is to be removed from the roll of attorneys or
whether an order of suspension from practice would suffice".
[43] It is also trite that these applications are a type of disciplinary enq uiry by the
Court into the conduct of the practitioner concerned. Howe ver, while they are brought
on application (motion proceedings) they are sui generis in nature. A Court has an
inherent discretion, over and above the provisions of statute. It is also within a
27
inherent discretion, over and above the provisions of statute. It is also within a
27
Law Society of the Northern Provinces v Magami 201 0 (1) SA 186 (SCA) at par 4 and Summerly
v Law Society of the Northern Provinces 2006 (5) SA 613 (SCA) at par 2.
2s 2010 (1) SA 186 (SCA).
10
Court's discretion to impose an appropriate sanction in the circumstances of each
case.
[44) In Wild v Legal Practice Council, it was stated that:
a. "Therefore an application to suspend or strike an advocate (or an attorney) from
the roll was not the pursuit of a cause of action in the true sense,_ The applicant merely
submitted to the Court facts which it contended constitute unprofessional conduct
and then left it to the Court to determine how it should deal with the respondent in
question. These were in fact sui generis or distinctive proceedings as opposed to
ordinary civil litigation (see van Blommestein, Professional Practice for Attorneys.
(1965), p 89 where this is explained with reference to the previous Law Societies as
applicants, but the same principle also applied to the Bars as applicants, and still
applies today)." 29
[45) The LPC , as an applicant, acts as the custos morum of the legal profession.
It places facts before a court for a decision. It is for the court to weigh up those facts
and decide whether the practitioner is fit and proper to remain in practice.
[46] Even though these types of proceedings are invariably brought on application,
the usual approach to motion proceedings where a dispute of fact arises are
generally not appropriate. The Plascon Evans principle has been found to be
inappropriate.
[47] In this regard in Van der Berg v General Council of the Bar of South Africa
(per Nugent J) it was observed:
a. 'Proceedings to discipline a practitioner are generally commenced on notice of
motion but the ordinary approach as outlined in Plascon-Evans is not appropriate to
applications of that kind. The applicant's role in bringing such proceedings is not that
of an ordinary adversarial litigant but is rather to bring evidence of a practitioner's
misconduct to the attention of the court, in the interests of the court, the profession
and the public at large, to enable a court to exercise its disciplinary powers.' 30
and the public at large, to enable a court to exercise its disciplinary powers.' 30
29 [2023) ZAGPPHC 2086; 31130/2019 (24 April 2023) para [62).
30 [2007] ZASCA 16; [2007] SCA 16 (RSA}; [2007] 2 All SA 499 at [12)
11
The Alleged Conduct
[48] The LPC relied on more than sixty complaints31 from clients against the firm
and the findings in the Faris Report to justify a striking off. But it also relied on the
Prinsloo J findings and the conduct of the Respondents in these proceedings to level
additional charges of obstructionism and dishonesty against Mr Smith.
[49] The Applicant conveniently dealt with the charges against the Respondents
thematically under the following headings:
(i) Touting;
(ii) Failing to advise clients on costs involved;
(iii) Taking undue advantage of clients and pressurising clients to agree to a fee
and to waive the right to demand the taxation of the fees charged;
(iv) Entering into illegal contingency fee arrangements;
(v) Overreaching;
(vi) Misappropriating money owed to clients;
(vii) Failing to properly account to clients,
(viii) Delaying Payments to Clients
(ix) Failing to address correspondence to clients and keep them updated on the
progress in their case;
(x) Findings against the First Respondent by Prinsloo J;
(xi) Failing to keep proper accounting records (based on the findings in the Faris
Report},
(xii) Debit balances in the firms' trust creditors' accounts and the failure to report
these;
31 Number of complaints = 56 (see Annexure AA 1 ). Number of 'new ' com plaints in Supplementary
FA= 13. (SAA A4-1366). Total= 69, reduced to 60 in the Note. Further reduced during argument
12
(xiii) Trust Deficits and the failure to report these to the Law Society;
(xiv) Issuing Trust Cheques to Cash ;
(xv) Failing to exercise proper supervision and control over employees;
(xvi) Failing to respond to correspondence either timeously or at all;
(xvii) Failing to carry out the client's mandate with the necessary skill,
(xviii) Dishonesty in this application;
(xix) Refusing to withdraw as the client's attorney notwithstanding the mandate
being withdrawn;
(xx) Procuring from clients the withdrawal of complaints lodged by them with the
LPC; and
(xxi) Destroying records.
[50) During argument Mr Stocker on behalf of the LPC, elected not to persist
against Mr Smith for having practised without a Fidelity Fund Certificate (FFC) on
three occasions in the distant past for very short periods of time. 32 He persisted only
with 43 complaints listed in his additional Practice Note ("the Note").33 The number
of touting complaints were also further reduced.34
[51] At the end of the hearing two critical facts emerged: the first was that Mr Smith
had not been issued with his FFC since 201835 when these proceedings were
launched (and could not effectively practice as an attorney) and the second, a new
director, Ms Amalia Smith had been appointed as director on 11 December 2018.36
Mr Stocker confirmed that because of these new facts the LPC would not be seeking
relief against the firm.
32 1 March 1995-31 Dec 1995, 1 Jan 1996-2 Oct 1996, 1 Jan 2006-13 Jan 2006. A charge levelled
against him in the FA at 002-124 at [14.4)
33 024-372
34 Transcript 9 May 2025 page 151 In 4.
35 033-2
36 033-10
13
[52] I turn to consider the merits of the matter in the following manner. I first deal
with the clients' complaints. I then deal with the Faris Report and finally the issue of
Contingency Fees and Related Matters. The issues of relief and costs are dealt with
at the end before the order is granted.
The Client Complaints
[53] This section relates to the behavioural type of conduct (failure to account,
failure to respond to queries, correspondence, ema ils of clients and colleagues,
delayed payments, procuring withdrawal of complaints and the like). Included in
these discussions are also the allegations of touting and residual complaints of
dishonesty and obstructionism.
[54] In the founding affidavit the LPC alleges that it received more than four
hundred (400) complaints against the firm. The impression created by this manner
of pleading is that there were a multitude of complaints against the Respondents,
which justify immed iately striking off Mr Smith and placing the firm under
curatorship. 37
[55] The LPC then attached fifty-two (52) complaints to the founding affidavit. The
LPC provides no analysis of the comp laints based on age (how old), status (whether
ongoing or closed), whether it had been investigated and/or whether it had been
shared with the firm.
[56] In the answering affidavit Mr Smith provides an analysis of the complaints
based on status, age, dormancy and whether it had been shared with the firm before
being included in these proceedings.38 A response to each complaint can be found
in annexure AA 1 .39
37 Those were apparently shared with the firm during these proceedings but nothing more was said
about them.
38 Para [7] of AA
39 008-103
14
[57] The LPC then attached additional complaints (called 'new' by the
Respondents) to the supplementary founding affidavit.40 A detailed response to these
was provided by the Respondents in the supplementary answering affidavit.41
[58] In his Note, Mr Stocker relied only on forty-three (43) of the sixty (60)
complaints. This number decreased to thirty-four (34) during the hearing because
nine (9) complaints relating to alleged touting were dropped.
[59] An initial analysis of the remaining thirty-four (34) complaints shows the
following:
a. Complaints against Mr Sm ith personally = O (nil)
b. File closed by LPC = 8 (eight)
c. Complaints older than 10 (ten) years = 4 (four)
d. Not clients of the firm = 1 {perhaps 2 because one is unclear)
e. Complaints not seen by the firm before these proceedings = 9 (nine)
[60] The analysis above shows that of the thirty-four (34) complaints relied upon
by the LPC, none are against Mr Smith personally. In all cases the com plaint is
against an employee of the firm. Additionally, many of these complaints have been
closed, several are more than 10 years old, or dormant, and some were not sent to
the firm before this application was brought.
[61] One would expect the LPC to explain w hy it is relying on complaints, which it
closed as well as those older than 5-1 0years, despite its own directive that it would
not inspect old complaints "due to a long tim9 having sxpir9d before a complaint had
been lodged with the Law Society".42 Likewise in the case of dormant complaints.
40 010-5
41 014-3
42
Law Society of Northern Provinces Circular "Kindly take note that in terms of the Rulings of the
Law Society of the Northern provinces, it has been resolved by the Council that the Society would
not proceed with an investigation of a complaint if the Society was of the view that it would be
unfair to a practitioner to deal with the matter, due to a long time having expired before a
complaint had been lodged with the Law Society.•
15
[62] Mr Stocl<er during argument submitted that the LPG was 'entitled to re-open a
complaint'. That might be so, but then as a matter of fairness it should explain to Mr
Smith, and this Court, why it has decided to do so. None has been given.
(63] In relation to the complaints not shared with the firm Mr Stocker submitted that
the LPC was entitled to place new evidence of the Respondents' conduct before the
Court and that they now had an opportunity to respond to it. Again, this is not per se
impermissible; the LPC is entitled to put new evidence before the court. Howev er
there should be an explanation why the evidence was not placed before the court in
the first place, and also why the information was not placed before the court as soon
as it came to hand. Apart from this, one would expect a regulator, such as the LPC ,
to tell the court whether it investigated the veracity of the new evidence and if it did
not, why not.
[64] During argument Mr Stocker was asked to deal with each complaint he relied
on, the Respondents' response thereto, the LPC 's reply thereto and where in the
record these could be found. The Cou,rt's request was not accommodated . Instead,
a broad thematic approach only occasionally touching on details of a complaint to
support the alleged misconduct was pursued. A complaint was relied upon for more
than one type of alleged misconduct.43
[65] The LPC's approach here is "volume-based". It seems to be an attempt to
show that over the years a large number of similar com plaints of misconduct were
lodged against employees of the firm and that the sheer volume of the complaints
proves that the firm, and Mr Smith, have contravened provisions of the LPA , the
Attorneys Act and/or Rules. Because the conduct complained of related to
employees of the firm, and not Mr Smith himself, the only approach that could be
adopted was a thematic categorisation of the misconduct complained of against the
firm's employees, and then occasionally latch onto something in a complaint, or a
firm's employees, and then occasionally latch onto something in a complaint, or a
statement in, or some aspect of the Faris Report to support charges lumped together
under one or other theme.
[66] The Respondents on the other hand, followed a "details-hearsay approach",
pointing to each complaint to show that Mr Smith was not implicated in any of these,
43 See the Note
16
and argued that the complaints amounted to hearsay evidence against him. They
also argued the alleged conduct had to be evaluated in accordance with the Mogami
test and that this Court has to make factual findings on each complaint on a balance
of probabilities.
[67] It is improper for the LPC - without explanation - to burden this Court with
complaints about files that it itself closed, or about conduct stretching back more than
10 years ago, and dormant files in respect of which it remained silent or took no steps
against the implicated attorneys at that time and then ask this Court in exercising its
oversight functions to have regard to them for a striking off or suspension of Mr Smith.
[68] The LPC has not taken any steps against the implicated employees in a
particular complaint, instead it has taken a broad thematic approach, relying on
complaints lodged against individuals in the firm, to make its case against Mr Smith.
This is why a slavish application of the Mogami test to each complaint -as argued by
Mr Van der Spuy on behalf of the Respondents -to assess Mr Smith's conduct is not
appropriate in this matter. This is also why the details of each complaint relied upon
by the LPC will not be considered in this judgment and a broad thematic approach
will be followed to assess whether on a balance of probabilities Mr Smith's conduct
constitutes a contravention of the Act and/or the rules that is so egregious as to
warrant a striking off. However, some details might be referred to for purposes of
context or a theme.
[69] Thrown in the mix was a debate about whether Plascon-Evans had application
in the event of a factual dispute. The Respondents argued that the Plascon - Evans
principle applied in applications of this sort, with Mr Stocker arguing that because
these were sui generis proceedings it did not. This was an unhelpful debate because
it has already been settled in Van der Berg v General Council of the Bar of South
it has already been settled in Van der Berg v General Council of the Bar of South
Africa that the Plascon-Evans approach might not be appropriate in matters of this
nature.
[70] The LPC is no longer persisting with relief against the firm. Thus, the only
Respondent in the room is Mr Smith.
17
Mr Smith's position
[71] It is common cause that Mr Smith was not personally involved in any of the
complaints and that the conduct complained of involves other employees of the firm.
[72] Mr Stocker submitted that because Mr Smith was a director of the firm since
2004, he should be held personally accountable for the conduct of his employees for
all complaints going back to 2007.
[73] However, while Mr Smith has been a director of the firm from January 2004,44
Mr Raphael Smith was the managing director until his death on 13 October 2012. Mr
Smith has set out how the firm was managed by Mr Raphael Smith who also dealt
with any complaints from the LPC . To some extent this is confirmed by Mr Ngwenya
in his complaint where he sets out his dispute with Mr Raphael Smith.45
[74] Mr Smith took over the management of the firm after his father's death. Until
the appointment of Ms Amalia _Smith as director in 201846 he was the sole and
managing director of the firm. He was thus the controlling mind of the firm from 2013
(from the time he became managing director) to 2018.
[75] In Legal Practice Council v Mkhize47 (the case involved an advocate) the Court
held that
a. "Counsel cannot hide behind the conduct of those that assist them in practice,
to avoid the binding principles of their profession. It would counteract the
accountability the LPC 's code seeks to create and the ethics of the profession."
[76] In Limpopo Provincial Council of the South African Legal Practice Council v
Chueu Incorporated Attorneys and others, the SCA dealt with the issue of the liability
of all directors of a law firm, when financial misconduct had allegedly been committed
by only one director. The SCA held that every director has a fiduciary duty towards
the company of which they are a director.
44 033-10
45 002-1192
46 033-10
47 2024 (1) SA 189 (GP)
18
[77) I would say that the same principle applies here. A director and more so a
managing director of a law firm cannot transfer blame onto his employees and permit
them to flout the ethics and standards of the profession, with impunity.
[78) Whether he was the managing director or an ordinary director, Mr Smith still
bears both legal and professional responsibility for the conduct of his employees
including the professional assistants of the firm.
[79) The complaints under consideration during Mr Smith's tenure as co-director
with Mr Raphael Smith were reduced to thirty-four (34). An age analysis of the thirty
four (34) complaints reduces the comp laints under Mr Smith's watch as managing
director to fifteen (15).48 Of these the number reduces further to twelve (12) because
three (3) are no longer persisted with by the LPC .49 This is still a number large
enough to raise a few concerns. As to the alleged misconduct, these complaints
cover the range alleged by the LPC such as failure to respond to calls,
correspondence, failure to account, delayed payment and the like.50
[80) In his answering affidavit, Mr Smith explains how he manages his professional
staff.51 He states that he does not micromanage them because in his view the
professional assistants are all capable of independently running their own accounts.
Their track records with the firm attest to reliability, stability and excellence. Not even
one of them has ever been found guilty of misconduct. Over the years their level of
independence and autonomy has been vindicated because:
a. The firm consistently obtains favourable settlements or judgments for its clients
in RAF matters.
b. In the past fifteen years, the firm has not lost the merits of a single RAF matter
and has never failed to beat an RAF offer wh ich it has asked the Court to test in a
quantum dispute.
c. The firm has never let a matter prescribe.
48 2013-209 being the last complaint
49 024-377. #1 , 2, 3 on Mr Stoker's Note.
48 2013-209 being the last complaint
49 024-377. #1 , 2, 3 on Mr Stoker's Note.
50 See the Note. Compla ints 14, 15, 16, 17, 24, 25, 31 , 32, 33, 42, 43.
51 Consisting of 9 attorneys at the time .
19
[81] He sets out how things work in the firm: the professional assistants have
autonomy when dealing with clients, colleagues, court officials and all and any of the
other incidents of the attorney-client relationship. They deal with both High Court
and Magistrates' court litigation with complete independence from the very inception
of a matter to its conclusion. This includes either agreeing on a fee with client, or, if
agreement is not possible, instructing a costs consultant to draw up and tax an
attorney and own client account.
[82] The only time his attention is drawn to a matter handled by another attorney
is in the event of a difficulty being escalated for his attention. All LPG complaints are
referred to him. He assesses the complaint and obtains a full report from the attorney
and depending on the LPG 's response the matter may be escalated to him again.
[83] Thus, the firm is run with a combination of autonomy for experienced
professionals and light touch supervision by the managing director.
[84] However, this firm is not an ordinary attorney's practice. The large bulk of its
work involves RAF matters, not ordinary commercial matters or private civil disputes.
For the most part it holds money in Trust on behalf of vulnerable clients -victims or
their dependants -in a fiduciary capacity.
[85] It was submitted by Mr Van der Spuy on behalf of the Respondents that
despite the large number of complaints relied upon by the LPG these constitute a
small fraction when considered as a percentage of the large volume of matters that
the firm deals with. There was also a suggestion that the type of work done by the
firm namely RAF matters involves many 'unsophisticated' clients who do not
necessarily understand how things work.
[86] The earlier argument would be more appropriate to a FMCG 52 firm, selling
large volumes of consumer goods, and reporting its performance to shareholders.
Not to an attorney's firm rendering services to vulnerable members of the public. As
Not to an attorney's firm rendering services to vulnerable members of the public. As
for the latter argument, the fact that a large proportion of the client base may be
unsophisticated is precisely the reason why attorneys who act in a fiduciary capacity
for vulnerable individuals should be held to higher professional and ethical standards.
52 Fast moving consumer goods
20
It would seem to me that in such circumstances more is required from the managing
director to ensure that employees of the firm - attorneys, paralegals and assistants
alike - show a greater degree of sensitivity and courtesy to their clients, from whose
awards their fees are earned.
[87] The culture of the firm and the attitude of its professional employees, whether
these be attorneys, paralegals or clerks, flow directly from the leader of the
organisation. Given the history of this litigation, I find it surprising that Mr Smith had
not - when he took over as managing director-conducted a review of the firm's
controls - whether these relate to the conduct of the attorneys or financial employees
- to assess the strengths and weaknesses thereof and to find improvements in an
effort to reduce risk. While he implemented a new financial reporting system
(discussed below) he simply continued with this light touch approach to his legal
professional staff, being reactive rather than pro-active in his role as managing
director.
[88] On the whole, I find that Mr Smith as director and/or managing director of the
firm during 2004-2018 failed or neglected to exercise proper control and supervision
over the employees of the firm as is required by a senior attorney of his experience
and standing in contravention of Rule 49.3 of Rules for the Attorneys Profession
which provides that a member shall exercise proper control and supervision over his
or her staff and offices.53 I discuss the issue of sanction later bearing in mind that Mr
Smith has not been practising since 2018 and that the conduct we are dealing with
is more than seven years old.
Touting, Obstructionism and Dishonesty
[89] In relation to touting, the LPC eventually relied on two complaints name ly
Ngwenya 54 and P Sehlolo.55 Mr Ngwenya was an employee of the firm. In his
complaint dated 28 January 2009, he alleges that he started working for the firm in
1997. His job was to bring them motor vehicle accident victims to their offices, and
1997. His job was to bring them motor vehicle accident victims to their offices, and
he was paid for each victim he brought. He was then given a clerical job (no date
given). He describes his job as helping clients in the wa iting room, interpreting and
53
Rules for the Attorneys' Profession, Government Gazette No. 39740 26 February 2016.
54 002-1192. #11 on the Note
55 002-1192 #9 on the Note
21
delivering files. Most of the time was spent in the waiting room attending to clients
who came to check their claims and medical appointments. He then had a dispute
with Mr Raphael Smith. An internal disciplinary hearing was heard on 23 November
(no date given, assume 2007) which resulted in his dismissal. He took the matter to
the CCMA , but it was dismissed. He took the matter to the Labour Court where it
was also dismissed. He went to the Legal Aid Board for professional help on 8 May
2008 but was still waiting for assistance from them. He asks that the Law Society
"assist him to get compensated for the damages caused by the above-mentioned
entities" and that he was prepared to go to the Minister of Labour and to the media.
From this 2009 complaint-which is clearly a labour dispute -the LPC formulated a
touting complaint against the Respondents. The LPC did not attach any update on
this complaint, nor are Mr Ngwenya 's recent whereabouts provided.
[90] According to Mr Smith this complaint was not shared with the firm at the time
and only emerges in the founding affidavit and is in any event directed at Mr Rapheal
Smith comprising a labour dispute.56
[91] The Sehlolo complaint is referred to as the PS Mofokeng complaint in the
Respondents' papers. 57 Ms Sehlolo filed a complaint with the LPC on 12 September
2011. The complaint is directed at Ms T, who according to the complainant, has not
responded to her enquiries for the last 1 O years. The complaint is about her receiving
too little money. The RAF advised her to speak to Ms T. According to the
complainant, her mother was recruited by Sipho Ngwenya at Baragwanath hospital.
On the complaint itself no dates are given by Ms Sehlolo. The LPC relied on this
complaint as supporting evidence of touting on the part of the firm.
[92] The Respondents explain in Annexure AA 158 that the matter was attended by
Ms K who left the firm over 15 years ago. The complaint served in the s?0
Ms K who left the firm over 15 years ago. The complaint served in the s?0
proceedings,59 and the matter had been finalised well before the third s?0
proceedings. No records were available. Ms T took over the file after the settlement
of the matter in an effort to obtain a medical undertaking from the RAF which had not
56 008-171
57 008-160 and 021-282
58 008-161
59 021-282
22
been given by the RAF . Ms Thad provided a comprehensive response to the Law
Society in 2011, but nothing further was heard.
[93] In summary , the evidence on the alleged touting shows that Mr Ngwenya 's
complaint was really about a labour dispute with Mr Raphael Smith. His role in
bringing clients to the firm in 1997 was not clarified with him by the LPC and no further
information was obtained from him by the LPC . Ms Sehlolo's complaint was about
the Jack of a response from Ms T. In this complaint she makes a passing reference
to Mr Ngwenya - that her mother who appears to be deceased - was recruited by
him. Again, no details are given about Mr Ngw enya's position in the firm by the LPC
but on the face of it from his complaint it seems that he was an employee. Both these
complaints lack any facts to support the allegation of touting. Moreover, they relate
to events that occurred more than ten (10) years ago.
[94] The touting allegations cannot be sustained by such weak evidence. I cannot
find on a balance of probabilities that Mr Smith or the firm was engaged in any touting
for clients.
[95] As to Mr Smith being obstructive and dishonest in these proceedings, it
appears that these allegations have just been tacked on by the LPC as an
afterthought. The obstructionist charges stem from Mr Smith's decision to appeal
the Prinsloo J judgment in 2016. In these proceedings Mr Smith has been anything
but obstructionist, he has responded to each, and every allegation put up by the LPC
in its very many affidavits. Furthermore, in Mr Faris' view Mr Smith gave him his full
cooperation during the investigation. The dishonesty allegations stem from one
statement made by Mr Smith, in a record spanning almost 5000 pages, in response
to the Peters complaint60 where he says that he does not know Ms Field the daughter
of Mr Peters who was the client. It later turned out that Ms Field was known to Mr K I
the attorney handling the Peters matter. These allegations have simply been made
the attorney handling the Peters matter. These allegations have simply been made
up on the hoof. In my view, it has not been shown on a balance of probabilities that
Mr Smith has been obstructionist or dishonest in these proceedings.
The Faris Report
60 010-56
23
[96] This section focuses on the outcome of the investigation done by Mr Faris and
on the internal accounting controls of the firm. Some aspects of the Faris Report and
some client complaints were relied upon by the LPC in support of illegal contingency
arrangements, misappropriation, undue advantage, overreaching. These are also
discussed in the next section.
[97] The genesis of the Faris Report61 was dealt with earlier. Mr Faris and his
team62 proceeded to conduct the investigation after the Prinsloo order was obtained.
The procedure included interviews with Mr Smith, the bookkeeper and a review of
the accounting and supporting records, subsidiary and source books, and
documents, administrative, operational and financial systems in order to express an
opinion and report on whether:
a. the firm has complied with the relevant provisions of Section 78 of the Attorneys
Act, and if not, the identification and disclosure of the extent of any contraventions
and/or irregularities;
b. the firm has complied with the relevant provisions of the Law Society's Rules
68, 69 and 70 ("the Rules"), (Rule 35 of the New Rules), and if not, the identification
and extent of any contraventions and / or irregularities; and
c. the existence of any other irregularities and/or contraventions of the Act and the
Rules which may manifest themselves during the course of the investigation, the
identification and disclosure of the extent of any such contraventions and/or
irregularities.
[98] The investigation was limited only to RAF aspects of the firm's practice and
did not deal with the client complaints that had initiated the mandate because it was
assumed that these had been resolved. The content of the report and the supporting
Annexures was claimed to be confidential and intended only for the LPC 's use.
[99] Mr Faris provided details of several transactions in w hich inter alia large
amounts were transferred from the Trust account to business, frequent debit
61 002-230
62
amounts were transferred from the Trust account to business, frequent debit
61 002-230
62
It is assumed that a team of people and not Mr Faris on his own conducted the investigation
because the report refers to them in the plural.
24
balances were found in Trust accounts, frequent credit balances in the Business
account and many unspecified journal entries one of which was a large amount in
the account Unallocated Payments Account (SUNALLO) . The SUNALLO account
consists of payments from the RAF into the firm's Trust account which could not
immediately be allocated to specific clients. An analysis of a sample of individual
client accounts was also done. It was also alleged that the firm held over clients'
party-party costs as part of its fees.
[100] The following concerns were identified in the report:
a. "The firm's Trust and Business accounting records have been properly kept,
are up to date and have been properly balanced. In determining the true state of the
Trust account and the Trust positions our main concerns and questions relate to the
following:
i.
ii.
iii.
iv.
V.
vi.
VII.
viii.
The fact that the Unallocated Payments Account has not been
properly reconciled; *03
The existence of clients' trust debit balances;*
The existence of client's Business credit balances; *
Whether the firm is subject to the provisions of the CPA ; *
The charging of 30% on the capital awards as fees and the
subsequent reduction thereof to 25% ; *
The failure to keep proper time records to be able to support and justify
the fee charges to clients;
The possible failure to account to clients for the party and party fee
component of the costs contribution; *
Whether Annexure NIM can be regarded as a fee agreement. *
63
The • indicates that these are also discussed under the heading Contingency Fees and Related
Matters
25
ix.
X.
The failure to have a fee agreement at the commencement of the
mandate:*
The existence of long outstanding Trust credit balances places doubt
on the reliability and accuracy of the true Trust liabilities". 64
[101] In Mr Faris' view all these concerns led him to conclude that proper accounting
records have not been kept in accordance with the provisions and intentions of the
Act and the Law Society's Rules
[102) Finally, the report notes in conclusion that it is the opinion of the team that the
firm has contravened the following sections of the Attorneys Act and the provisions
of the Rules:
a. Section 78(1) of the Act in that it failed to hold and keep sufficient monies in its
Trust banking account to cover its obligations to Trust creditors. This conclusion is_
based on the unreliability of the Unallocated Payments account balance, the
existence of the Trust debit balances, the existence of the Business credit balances
and the impact that the reduction of the fee debits has on the Trust liabilities;
b. Section 78(4) read together with Section 78(6)(d) of the Act in that it has failed
to keep proper accounting records as required by the sub-sections. This conclusion
is also based on the unreliability of the Unallocated Payments account balance, the
existence of the Trust debit balances, the existence of the Business credit balances
and the impact that the reduction of the fee debits has on the Trust liabilities;
c. Rule 69.3.1 of the Rules in that it failed to hold and keep sufficient monies in its
Trust banking account to cover its obligations to Trust creditors for the same reasons
set out in (a) above.
[103] The conclusion records that -
a. "Depending on the outcome of further information and explanations from Mr
Smith relating to our concerns expressed in paragraph 15. 1. 3 above, the possibility
of the contravention of Rule 68. 8 of the Rules relating to accounting to clients within
64 Para 15.1.4.
26
a reasonable time cannot be excluded. Until the true Trust positions can be
established and whether the firm is subiect to the CFA we are of the opinion that
Attorneys Fidelity Fund is at risk. Both Mr Smith and his bookkeeper have given us
their complete co-operation and assistance throughout the inspection." 65(own
emphasis)
[104] Mr Faris records however that he is not qualified to express any opinions on
the professional conduct of the firm or the quantum of fees charged (overreaching
and I or overcharging). He records that they find it difficult to accept that Mr Smith
did not have knowledge of the existence of the Unallocated Payments account or the
existence of the long outstanding credit balances. He seems to have relied on the
firm's bookkeeper and auditor. In this regard they would've expected Mr Smith to
have sight of the Trust transfer reports which would have disclosed the existence of
the Trust debit balances and the Business credit balances.
[105] A few observations can be made from the Faris Report. The first is that
nowhere in the report does Mr Faris make conclusive findings. The concerns and
findings are all provisional and clearly contemplate more information and further
engagement with Mr Smith and the auditor. The second is that he makes no
recommendations of immediate remedial steps or suspension or striking off. The risk
to the Attorney's Fidelity Fund is only contemplated as a possibility depending on the
outcome of further information.
(106) In his answering affidavit, Mr Smith expressed surprise about the concerns
raised by Mr Faris, especially in relation to the Trust positions. He alleges that Mr
Faris' views were never discussed with him in the way they have been formulated in
his report, nor were they discussed with Mr Russon.66 Mr Smith deals with all of Mr
Faris' concerns, including concerns about individual client accounts, cash cheques,
frequent debit balances in the Trust accounts, Business credit balances, and claims
frequent debit balances in the Trust accounts, Business credit balances, and claims
that Mr Faris knew the amount of R 4 637 508.00 listed on 10 May 2013 in the
SUNALLO ledger was not a physical payment.
65 002-283
66 008-62 at (150), 008-62 at [152]
27
(107] He admits that he does not have a lot of experience in accounting issues which
he conveyed to Mr Faris and relied to a large extent on his bookkeeper. However,
he points to the fact that the firm had never received a qualified audit in its lifetime
and had in fact received awards for its Trust positions
[108] In an effort to respond to specifics of the Faris Report he requested Mr
Russon, the firm's auditor and later Mr Selbst to address the concerns raised.
[109] Mr Jonathan Russon is the firm's auditor and is a chartered accountant, with
his own practice Russon & Associates.67 Mr Edwin Selbst is an independent
chartered accountant at the firm of W Technical Consulting Risk and Governance).68
His report was obtained by Mr Smith lest Mr Russon be accused of bias. Mr Selbst
confirms Mr Russon's approach and findings.
[11 O] The salient aspects of the Russon report and Mr Smith's responses are as
follows:
a. The accounting system had been changed in 2013 from Lexpro to AJS . A
number of problems had been experienced in moving from the one system to the
other. In fact the consultant for the new system had to be called for an explanation
when the Faris team was doing its investigation. Mr Faris did not understand some
features of the system.
b. Mr Russon conducted a review of the transactions that the Faris team had relied
on for their conclusions and found inter alia that several errors had crept into the
system either because of its design or because of human error. The Trust debit
balances, and Business credit balances were due to such errors.
c. The Unallocated Payments account (SUNALLO) had now been reconciled.
d. The actual Trust position in the Trust bank account reconciled to the Trust
account. The Trust ledger were journal entries to enable the bookkeepers to continue
the next month's processing.
67 008-205. Mr Russon was asked to do a second report found at 008-509.
68 008-514
28
e. The amount R4 637 508.0069 recorded was not an actual, it was fictitious i.e.
no money had actually been withdrawn from the Trust bank account. (my emphasis)
f. There was approximately R17m in the Trust account which the firm had
retained and not utilised improperly for its own benefit.
[111] The LPC attempted to fashion a response in its supplementary replying
affidavit, the further supplementary affidavit and then in its last supplementary
replying affidavit, to the Russon and Selbst reports.
[112] In the further supplementary replying affidavit of 1 September 2023 the LPC
provided detailed responses to the Russon and Selbst reports as if it were the views
and opinions of Mr Faris. The views attributed to Mr Faris were not confirmed by
him.70
[113] It is only in the further supplementary replying affidavit of 19 January 2024,
that the LPC advises the Court that Mr Faris had passed away on 12 June 2021.
However, it appears that the Russon and Selbst Reports were considered by Mr
Faris, and his comments and responses thereto were detailed in the LPC affidavit of
1 September 2023 but that he had not signed a confirmatory affidavit before his
passing.71
[114] Mr Ashwin Reddy's views were then obtained by the LPC ex post facto as a
substitute expert for Mr Faris in the further supplementary replying affidavit of 19
January 2024. His opinions about Mr Faris' opinions are based on a review of the
various affidavits and reports in record and he confirms that he is satisfied with the
accuracy of the content thereof.
[115] The Respondents objected to Mr Reddy's affidavit on the basis that it was ex
post facto expert evidence. Unlike Mr Faris who attended at the premises, inspected
files and documents, gained insights into the accounting systems of the firms, Mr
Reddy, a chartered accountant, was not part of the investigation, nor does he have
insight into the Respondents' accounting systems in use at the time. Admittedly the
insight into the Respondents' accounting systems in use at the time. Admittedly the
69 Faris noted a debit raised on 10 May 2013. However, no payment from the trust account could
be identified to support the debit entry.
70 An unsigned confirmatory affidavit of Mr Faris was attached.
71 025-5 paras 10-13
29
difficulties occasioned by Mr Faris' demise were beyond the control of the LPC and
it had been placed in an invidious position.
[116] However, w hen all the dust from the flurry of supplementary affidavits has
settled there is an inescapable conclusion that can be drawn from Mr Russon's
report, and this is that it actually serves to confirm some of Mr Faris' concerns
because Mr Russon inter alia:
a. confirms that a number of Trust debit balances and Business credit balances
ought not to have occurred but attributes their occurrence inter alia to system and
human error
b. confirms that the Unallocated Payments had to be reconciled.
c. confirms that the amount of R4 637 508.00 recorded in the Trust ledger as
w ithdrawals was fictitious i.e. no money had actually been withdrawn.
[117] What this confirms is that large amounts of money were moved around
through a number of unexplained journal entries suggesting poor internal controls.
[118] During argument Mr van der Spuy made mu ch of the first sentence in para
15.1. 4 in the Faris Report which states:
a. "The firm's Trust and Business accounting records have been properly kept,
are up to date and have been properly balanced. In determining the true state of the
Trust account and the Trust positions our ma in concerns and questions relate to the
following:"
[119] Indeed, many an accounting book can be properly balanced, but the true
financial position of a firm may still not be evident from books so finely balanced. The
true state of finances of any firm can only be gleaned from a forensic investigation
such as the Faris type.
(120] Unexplained fictitious transactions from Trust to business presents huge risks
to firms and clients alike. There is no suggestion here that M r Smith or any of his
senior associates had personally benefited from these transfers. Howe ver weak
30
internal controls and messy accounting has led to many firms being fleeced of Trust
funds by their own employees.
[121] The financial records of an attorney's firm are as much the responsibility of the
director or managing director. Trust funds held by a firm on behalf of vulnerable
clients places a greater duty on the shoulders of directors to ensure books of account
are properly managed and these funds are not placed at risk by weak internal
controls.
[122] Having regard to all the above I find that Mr Smith as director and/or managing
director has failed to maintain adequate internal controls in contravention of Rule
35.13.7.1 - 3513.7.4 of the Rules for the Attorneys Profession.72
[123] I turn now to consider the allegation of illegal contingency fee arrangements
and related matters drawn from both client complaints and the Faris Report.
Contingency Fee Arrangements & Related Matters
[124] Under this heading I deal with all the issues that arise from an assumption by
the LPC that the firm concludes contingency agreements with clients and is in
contravention of the Contingency Fee Act in several ways. Linked to these are the
allegations of misappropriation of trust funds, overreaching, taking undue advantage
of clients and the like. The LPC relies on client complaints and findings or concerns
raised in the Faris Report for these allegations.
[125] The LPC submits that from the client complaints it is obvious that the firm
operates on contingency fee arrangements. Many clients complained that the firm
was supposed to charge only 25% contingency fees but instead charged more than
that, at times almost 50% .
72
Rule 35.13. 7 provides: Internal controls 35.13. 7.1 that adequate internal controls are
implemented to ensure compliance with these rules and to ensure that trust funds are
safeguarded; and in particular to ensure -35.13. 7 .1.1 that the design of the internal controls is
appropriate to address identified risks; 35.13. 7.1.2, that the internal controls have been
appropriate to address identified risks; 35.13. 7.1.2, that the internal controls have been
implemented as designed; 35.13.7.1.3 that the internal controls wh ich have been implemented
operate effectively throughout the period ; 35.13. 7.1.4 that the effective operation of the internal
controls is monitored regularly by designated persons in the firm having the appropriate authority;
No. 39740 GOVERNMENT GAZETTE , 26 FEBRUARY 2016
31
[126] During his investigation Mr Faris noted that at times a fee of more than 25%
was taken from the capital amount (payment from RAF) paid to client. He was also
concerned that party-party costs recovered from the RAF were not paid over to the
client. This latter issue was addressed by Mr Russon in his report where he finds
that this was not the case. 73
[127] Mr Faris did however record that it was not within his expertise to express the
view that the Contingency Fee Act74(CFA) had been contravened. But he does
record that in the sample of client files inspected by Mr Faris very little information
was contained in them relating to hours spent on a matter.
[128] He expressed doubts whether a document given to him could be properly said
to comply with the requirements of a client fee agreement or mandate.
[129] Mr Stocker relies on these transactions for the allegations of misappropriation
arguing that the firm was withdrawing money from clients' capital amounts held in
Trust without being authorised to do so.
(130) The Respondents deny all these allegations and insist that they are lawfully
entitled to conduct the practice in the way they do.
(131] Their practice (business model) in respect of RAF matters, found in different
parts of the record,75 can be summarised as follows:
a. The firm does not do work based on contingency fee arrangements. At the
same time, it does not seek to recover fees from clients when the prospects of
recovery are low or non-existent.
b. When a client is taken on, the client is required to sign a client mandate and a
fee agreement. The fee agreement sets out the hourly rate and an explanation of
the type of costs. They are not able to provide an estimate of costs at inception to
the client because often it is difficult to predict how much work would be involved.
73 008-205
74 Contingency Fees Act 66 of 1997.
75 See Mr K's response to LO Peters complaint at 014-250, Smith SAA 014-99
32
c. The client is also required to sign a special power of attorney in terms of which
the firm is entitled to deduct its fees from the capital paid by the RAF.
d. If the client does not agree to sign these documents the client will not be taken
on. In addition, the firm only takes on matters with reasonable prospects of success
because of the costs involved.
e. When the RAF pays out the capital amount, this is paid directly into the Trust
account of the firm and not in the firm's business account. The firm may deduct a
'provisional' fee in a particular case at that time from this capital amount. These are
the type of transactions that were observed by Mr Faris and which the LPC describes
as misappropriation. They submit that they are entitled to deduct a fee in this manner
because the client has given them a special power of attorney.
f. At the end of a matter, an explanation of the costs and the fees are provided to
the client. If the client is unhappy with the fee, the bill of costs is taxed. In all cases
the taxed bill shows a reasonable fee was charged by the firm. In some cases a
portion of the provisional fee is written back to the Trust account depending on
whether the client was unhappy, and this might explain some of the transactions
observed by Mr Faris.
g. If the client agrees, the client signs an acknowledgement which contains a
breakdown of RAF payments, professional fees taken by the firm and third-party
costs. In this acknowledgement the client also waives the right to have the fees
taxed.
h. In smaller matters the fee is often higher percentage (30-45%) of the capital
amount to cover the costs of running the litigation. At times though especially when
the capital amount is very small, they have taken a very small fee. In larger matters
where the capital payments run into millions the fees hover at the 25% level because
the amounts are large enough to cover the firm's own costs (not third-party costs)
the amounts are large enough to cover the firm's own costs (not third-party costs)
but they could be below this percentage and are not to be conflated with the cap
contained in section 2(2) of the CFA.
i. Fees are raised for all matters and there was sufficient information in each file
to draw a bill of costs if so required.
33
[132] The LPC submits that this fee arrangement is still effectively a contingency fee
arrangement because the firm does not require any upfront costs from the client and
does not provide an estimate of the costs that would be involved in the case. On its
own version, because the Respondent only recovers fees on success and waives
any fees that might be 'due' by a client this is a type of 'no win no fee' arrangement.
Furthermore, the client's relative bargaining position is weakened because fees are
only negotiated on success after the RAF has paid out the capital into the firm's
account. This allows the firm to take undue advantage of the client, to overreach and
charge a fee more than 25% in contravention of the CFA. When the firm deducts a
fee from the client's capital am ount it is effectively misappropriating funds from the
Trust account. Retaining the party-party costs recovered from the RAF or a portion
thereof is also an act of misappropriation.
[133] A fair amount of time was spent by Mr Van der Spuy during argument about
why a contingency fee arrangement occurred at the beginning of an attorney-client
relationship, but this was rather unhelpful because the LPC 's case is not that there
was a contingency fee arrangement in place which the firm had contravened but that
the fee arrangement in place was effectively a contingency fee arrangement and not
in compliance with the CFA.
[134] The LPC has mounted a case of illegality - namely that the firm is engaged in
contingency fee arrangements in contravention of the CFA. The Respondents. on
the other hand, deny that they are in contingency fee arrangements and say that they
are justified in charging fees higher than the cap in the CFA because their costs run
much higher than the cap imposed by the CFA. On their version, they are operating
outside and not within the confines of the CFA, and in compliance with the relevant
rules. They argued further that their business model/practice has been approved by
the SCA.
rules. They argued further that their business model/practice has been approved by
the SCA.
[135] In Majope and Others v The Road Accident Fund76 the SCA had occasion to
consider a similar fee agreement and found that it does not require judicial approval.
In that case, the court a quo was concerned that an unemployed plaintiff had no
contingency fee agreement with the attorneys of record.
76 [2023J ZASCA 145 (8 November 2023)
34
[136] A similar concern was raised by Legodi J in Thobile Khethiw e Mucave/e obo
Mpho Siboniso Mucavele v The MEC of Health (Mucavele).77 In that case, the court
refused to make a settlement agreement concluded between the plaintiff and her
legal representatives a court order because it was of the view that a fee agreement
which they had concluded was a contingency fee agreement which did not comp ly
with the provisions of the CFA. The matter was overturned on appeal to the SCA on
similar grounds to that in Road Accident Fund v Taylor and other matters78 on the
basis that the fee agreement was unrelated to the litigation.
[137] Majope and Mucavele cannot be relied upon as blanket approval by the
Respondents for their fee arrangements in general.
[138] A significant difficulty that emerges in this debate is that none of the individual
comp laints relied upon by the LPC were investigated further in a disciplinary enquiry
and no further evidence was sought from them for purposes of this application. The
one-line references to '25%' or 'contingency fee' in a complaint document or a
paragraph that says something along the lines that 'the firm was only entitled to take
25% but they took more' cannot be elevated to conclusive proof. Such broad
statem ents made at a particular point in time, without the benefit of insights gained
during an investigation or cross-examination, are only suggestive of a problem that
requires further investigation. It would have assisted the LPC 's case greatly if it had
obtained further details from these comp lainants about the fee discussions at the
time their matter was taken on.
[139] In my view, this is precisely the type of matter that warrants an internal
disciplinary enquiry by the LPC before bringing it to Court. Through that process the
LPC could've obtained more factual evidence directly from clients rather than rely on
this Court to make factual findings from outdated, limited and contested evidence on
paper.
this Court to make factual findings from outdated, limited and contested evidence on
paper.
[140] There was a suggestion by Mr Van der Spuy in argument that the firm's fee
arrangement was an acceptable practice in the profession. If that is the case, then
a fuller market-w ide enquiry might be required. The LPG if it considers this practice
11 [2022] ZAM PMBHC 33
78 (2023] ZASCA 64; 2023 (5) SA 147 (SCA )
35
to be a contravention of the CFA that enables overreaching ought not to be waiting
on Courts to make decisions on a case-by-case basis. It, as the regulating body for
the profession has a statutory mandate to provide guidance to practitioners and to
protect the public from unscrupulous practitioners. It enjoys investigative powers and
has the appropriate institutional mechanisms to conduct a properly constituted
inquiry. Through this mechanism it could call for submissions from members of the
profession, the public and policy makers alike and viva voce evidence to make
recommendations for the profession or call for legal reform.
[141] In relation to the retention of party-party costs, Mr Russon in his report dated
22 October 2018 attempted to show that this was not the case. In this report entitled
Factual Findings Report, Mr Russon goes through each of the transactions identified
in Mr Faris's report in an effort to understand and explain the entries. He also deals
with specific client ledgers. His further report dated 20 October 2020 also attempts
to reconcile the specific client ledgers and gremlins that had plagued the previous
accounting system.79 Unfortunately, Mr Faris could not contest any of this due to his
passing. Mr Reddy was not involved in the investigation and could not reliably deal
with any of the accounting entries investigated by Mr Faris at the time or Mr Russon's
responses. 80 The accounting system has been changed since then. Again, this issue
might have benefited from a disciplinary enquiry at the time - rather than in
application proceedings almost seven years later - where the records could have
been properly interrogated.
[142] Due to the insufficiency of the evidence before us I cannot find on balance
that the Respondents' business model contravened the CFA. A disciplinary process,
with the leading and cross examination of witnesses might have yielded a better
outcome. As a result, I am unable to find on a balance of probabilities that the
outcome. As a result, I am unable to find on a balance of probabilities that the
allegations such as misappropriation, overreaching, taking undue advantage of
clients, retention of party-party costs contravened the CFA.
79 01-145
80 Mr Stocker in argument made a valiant effort to go through the details of individual client accounts
contained in Mr Faris' report. This was just evidence from the Bar. Mr Stocker was not a member
of the Faris team at the inspection in loco and could not attest to the accuracy or otherwise of
any of these transactions.
36
[143] First Respondent has, however, contravened Rule 49.3 and Rule 35.13.7.1-4
of the Rules for the Attorneys Profession
Sanction
[144] The LPC sought an order for striking off. During argument, the Court
canvassed the possibility of alternative relief with Mr Stocker. Other than a possible
suspension very little else was placed before the Court.
[145] In terms of the Mogami test, this Court is required to make factual findings on
a balance of probabilities and then assess against these whether the practitioner is
fit and proper, the latter being a weighing-up exercise and a judgment call. However,
as has been demonstrated this case is unusual. In the factual enquiry no complaint
attaches to Mr Smith and the most that we can conclude is that he failed to supervise
his employees properly and was in contravention of Rule 49.3 and Rule 35.13.7.1 -
35.13.7.4 of the Rules for Attorneys Profession.
[146] Does this contravention warrant a striking off or a suspension? In Jasat v
Natal Law Society81 the Supreme Court of Appeal held, that a three-stage enquiry is
envisaged in applications of this nature. First, the Court is required to make factual
findings as to whether the alleged offending conduct has been established on a
balance of probabilities. Second, decide whether in the discretion of the Court, the
person concerned is a fit and proper person to continue to
practice. The exercise of this discretion involves a weighing up of the conduct
complained of against the conduct expected of a legal practitioner. This inquiry
entails a value judgment.
[147] The first factor to consider in this matter is that the contravention and the
alleged misconduct occurred more than seven years ago. In relation to the firm's
internal accounting records, this was a mere snapshot of the books of account at a
particular time. Since then, the systems have changed again.
[148] A second factor to consider is that the LPC did not seek an urgent suspension
[148] A second factor to consider is that the LPC did not seek an urgent suspension
order against the Respondents in 2018 and they were allowed to continue
unhindered for seven years. One can assume therefore that it did not consider the
81 2002 (2) ALL SA 310 (A)
37
alleged conduct to be so egregious as to warrant a striking off, or a suspension, of
Mr Smith.
[149) Third, Mr Smith is a senior attorney in practice for a long time. He alleges a
fact not denied by the LPC that he has had only three complaints against him
throughout his many years of practice, one which he self-reported of Trust fund
deficits. He has also effectively been suspended since 2018 because he was not
issued with an FFC since then. There is also no suggestion that he had
misappropriated any Trust funds for his own benefit.
[150] Fourth, the fact that the LPC is not seeking relief against the firm means that
the firm is allowed to continue providing services to members of the public,
irrespective of Mr Smith's position. Nor has the LPC sought relief against any of the
implicated employees which means they are at liberty to continue unhindered. An
order striking off Mr Smith in these circumstances will not address any possible harm
to the public caused by the firm or its employees in the event of any misconduct on
their part.
[151] While nothing could be gained from striking off Mr Smith, much could be
gained from requiring Mr Smith to take some time to reflect on his conduct, as a
senior attorney and a director of a large firm, and whether adequate controls ought
to have been put in place by him to prevent a recurrence of these contraventions and
to ensure-when he resumes practice - that he exercises closer and improved
supervision over his employees.
[152] Accordingly, a more appropriate order would be to suspend Mr Smith for 1
(one) year from date hereof and to require him to attend a practice management
course which would include an accounting course.
[153] In addition, it would go a long way for the reputation of the firm and the public
at large if steps were taken against the implicated employees. However, such an
order was not sought by the LPC , so it is hoped that Mr Smith will ensure that
order was not sought by the LPC , so it is hoped that Mr Smith will ensure that
improved systems and a better culture is implemented in the firm going forward when
he resumes practice.
38
Costs
[154] The manner in which the LPC has run the matter has been highly
unsatisfactory. It has provided very little assistance to the Court in navigating a
voluminous record. It allowed the matter to run for so long that the relief sought
against the firm and/or Mr Smith served little value. It attempted to bring in evidence
of Mr Reddy ex post facto rather than take the Court into its confidence when Mr
Faris had passed away. In the course of the proceedings, it attempted to expand the
allegations of misconduct levelled at Mr Smith from the very answers and
explanations provided in the papers, thus engaging in a strategy of an ever-evolving
case. It provided no explanations for why it relied on complaints that had been closed
by it or those more than 10 years old.
[155] The LPC is the body entrusted with oversight of professional ethics and
standards. While it has no private /is against the Respondents it cannot adopt a
neutral or passive stance in applications which at the core are disciplinary
proceedings. As the guardian of professional standards and ethics, it has a duty to
actively investigate matters thoroughly and to ensure that it obtains the best evidence
to place before the Court. At times when events are beyond its control like in this
case where the death of Mr Faris posed a serious conundrum for the LPC , it should
not shy away from going back to the drawing board.
[156] Perhaps this is why in matters such as this one it would've been more
appropriate for the LPC to pursue an internal enquiry to obtain more information or
evidence before approaching the Court directly.
[157] The Respondents on the other hand could have done a lot more to bring
matters to a quick resolution. They could have for example offered to settle the
matter by providing undertakings along the lines of the order granted below.
[158] Hence, an appropriate order in these circumstances is for each party to bear
its own costs.
39
Order
(a) The First Respondent is hereby suspended for a period of 1 (one) year from
date hereof.
(b) Should the First Respondent w ish to commence/resume practice as a legal
practitioner (attorney) after the expiry of the period of suspension referred to
in paragraph (a) above, he must satisfy the Applicant that subsequent to this
order he completed the legal practice management training course
contemplated in rule 27 (1) of the South African Legal Practice Council Rules
made under section 95(1) of the Legal Practice Act, Act No . 28 of 2014
(c) A certificate of attendance provided to the Applicant on affidavit will suffice as
proof of compliance.
(d) The respondent may not resume/commence practice unless he has complied
with the provisions of paragraph (b) above
(e) The parties are to bear their own costs.
I AGREE, AND IT IS SO ORDERED
Appearances:
For the Applicant: Mr R Stocker
YCARRIM
ACTING JUDGE OF THE HIGH COURT
GAUTENG DIVISION, PRETORIA
SK HASSIM
JUDGE OF THE HIGH COURT
GAUTENG DIVISION, PRETORIA
For the Respondents: Adv C van der Spuy
40