Law Society of Cape of Good Hope v Budricks (141/2001) [2002] ZASCA 51; [2002] 4 All SA 441 (SCA) (24 May 2002)

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[2002] ZASCA 51
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Law Society of Cape of Good Hope v Budricks (141/2001) [2002] ZASCA 51; [2002] 4 All SA 441 (SCA); 2003 (2) SA 11 (SCA) (24 May 2002)

SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case no: 141/2001
Reportable
In the matter between
LAW
SOCIETY OF THE CAPE OF GOOD HOPE
Appellant
and
FRANCOIS
JOHANNES BUDRICKS
Respondent
Coram:
HEFER AP, NIENABER, HARMS, CAMERON,
NUGENT JJA
Heard
: 2
May 2002
Delivered
: 24
May 2002
Summary:
Attorney-misappropriation of trust funds-striking
from the roll.
____________________________________________________________
JUDGMENT
________________________________________________________
HEFER AP
HEFER
AP:
[1]
The respondent practised as an attorney in
Port Elizabeth until December 1996 when, by order of the Eastern Cape
Division of the
High Court, he was interdicted from doing so pending
the decision of an application for the removal of his name from the
roll. The
removal application was filed not much later in the same
court but, for reasons which are not relevant at present, three and
a half
years went by before it was eventually heard. Instead of
striking the respondent’s name from the roll the court (Jennett and
Froneman
JJ) ordered his suspension from practice for two years,
which order was itself conditionally suspended for three years. The
appellant
has now appealed to this court. Its contention is that the
respondent was treated too leniently.
[2]
In terms of s 22(1)(d) of the Attorneys Act
53 of 1979 an attorney may be struck from the roll or suspended from
practice “if
he, in the discretion of the Court, is not a fit and
proper person to continue to practice as an attorney.” The
practical manner
in which the courts exercise their disciplinary
powers is trite. As explained in cases like
Jasat v Natal Law
Society
2000(3) SA 44 (SCA) at 51B-I and
Law Society of the
Cape of Good Hope v C
1986(1) SA 616 (A) at 637E-G the enquiry is
three-fold. The court first decides as a matter of fact whether the
alleged offending
conduct has been established. If the answer is yes,
a value judgment is required to decide whether the person concerned
is not a
fit and proper person as envisaged in s 22(1). And if the
answer is again in the affirmative, the court must decide in the
exercise
of its discretion whether, in all the circumstances of the
case, the person in question is to be removed from the roll or merely
suspended from practice. Since the second and third legs of the
enquiry involve the lower court’s discretion the power of a court
of appeal to interfere is not unlimited.
[3]
The proceedings against the respondent arose
from the way in which he dealt with funds received from the National
Housing Board in
terms of an agreement he had concluded with the
Board as part of the latter’s implementation of a state-subsidised
housing scheme
for indigent persons. The money was received in
monthly instalments over a period of thirteen months and earmarked
for the acquisition
of land and the provision of housing for
successful applicants for subsidies. The respondent was expressly
instructed to pay the
amount due in each case only upon the
registration of transfer. In the meantime he had to invest the money
in a separate interest
bearing account and to pay the monthly
interest to the Provincial Board. In return for “attending to the
transfer of the property
acquired by any particular applicant, and in
return for assisting the National Housing Board in the
administration of payment of
any particular subsidy” he was
entitled to an inclusive fee of R250 per application.
[4]
The court
a quo
found that the
following allegations against the respondent had been established:
(a) For about nine months he failed to open a separate
investment account and simply paid the money received monthly from
the Housing
Board into his general trust account. Interest from that
source accrues to the Attorneys’ Fidelity Fund but the respondent
paid
it the Board.
(b) He appropriated part of each subsidy towards fees he
had debited in excess of the agreed R250. His
modus operandi
and the extent of this practice are described as follows in the court
a quo
’s judgment:
“... immediately or very shortly after the receipt of subsidy funds
substantial fees were debited and transferred to respondent’s
business account ... respondent received 437 subsidy amounts in
respect of which, at the agreed administration fee of R250,00 per
transaction, fees totalling R109 250,00 could properly have been
debited and transferred when respondent became entitled to do so,
whereas in fact respondent had debited and transferred fees totalling
R701 373,17.
Respondent’s answer to the aforegoing is that the actual
implementation of the housing subsidy scheme was not straight forward
and that work extraneous to the actual transfer of title in property
was often and, indeed, usually required by the prospective buyers
and
sellers ... In order to cater for this extraneous work respondent
would obtain the express instructions of the prospective purchasers
and sellers that respondent’s fees therefor be debited to them and
respondent would debit fees against the subsidies. In other
words,
despite the terms of respondent’s mandate from the National Housing
Board and in particular clause 6 thereof ... respondent
administered
the subsidy funds on the basis that he was entitled to apply the
subsidies in the manner instructed by his clients
which of course he
was not entitled to do as the subsidy funds remained held for the
benefit of the National Housing Board until
respondent became
entitled to disburse them in terms of his mandate.”
(c) He credited an amount of R379 000,00 received from
the Housing Board, not to the latter’s account, but to the account
of a company
in which he had an interest. His explanation was that
undebited fees due to him in respect of Housing Board matters more
than covered
the amount of the cheque.
(d) He issued two trust cheques for a total amount of
R71 728,97 for payment of his personal commitments but debited the
amounts to
the Housing Board’s account. His only explanation was
that more than the amount in question was due to him in respect of
undebited
fees in subsidy matters.
(e) He made further payments totalling R214 397,10 from
the Housing Board’s account to repay loans made to his firm. Again
his explanation
was that a larger amount was due to him in respect of
undebited fees.
(f) In some of the dealings already referred to the
respondent committed breaches of the appellant’s Rules.
[5]
The court
a quo
’s assessment of the
irregularities was expressed as follows in the judgment:
“On what has been placed before us I am not satisfied that any
shortfall in any particular amount has been shown to exist in
respondent’s
trust banking accounts. I am, however, satisfied that
respondent has committed theft of trust monies, and that to that
extent there
must in consequence have been at the time a shortfall in
his trust banking accounts, and that he has administered trust funds
in
a reckless and cavalier manner and without any regard for his
duties as an attorney ... Respondent, patently, did not administer
trust funds received from the Housing Board in accordance with his
instructions or in accordance with his obligations as an attorney.
Apart from what has already been set out above, section 78(4) of the
Attorneys Act No 53 of 1979 requires the following ... The records
kept by respondent fall short of this requirement and the ‘method
employed in debiting fees as disbursements’ is more than simply
‘unorthodox’ as euphemistically described by Mr Greeff.
(Mr
Greeff was a forensic accountant employed by the respondent).
I am satisfied further that respondent has by his conduct shown
himself to be not a fit and proper person to continue to practise
as
an attorney.”
[6]
The reasons for not
striking the respondent off or suspending him outright appear from
the following passages from the court’s
judgment:
“Turning then to the third inquiry ie whether respondent’s name
should be removed from the roll of attorneys or whether an order
suspending him from practice for a specific period will suffice, it
is important to note that, whatever suspicions one may have,
the
misappropriations which took place and the accounting methods adopted
have not been shown to have caused any actual ultimate
loss to
clients nor does it appear that there was a real risk of loss to
clients. To quote from a comparable situation which prevailed
in
Cape Law Society v Parker
[2000 (1) SA 582
(C)] at p 587 I:
“Although respondent must have known that his conduct in
misappropriating trust monies was unlawful, it can be accepted that
he
did not harbour the intention of committing theft in its ordinary
common law connotation.”
... After much consideration we have come to the conclusion that the
proved circumstances do not require of us an order that respondent’s
name be struck off the roll of attorneys and that an order suspending
him from practice as an attorney will suffice. However, respondent
has been interdicted from practising as an attorney since 12 December
1996 and for all practical purposes he has thus been suspended
from
practice as an attorney for some three and a half years. In these
circumstances it is appropriate that any suspension of respondent
from practice as an attorney be itself suspended for a period.”
[7]
Counsel for the appellant submitted, and I
agree, that this is a case in which a reconsideration of the order is
justified. Reading
the court
a quo
’s judgment as a whole
leaves one with no doubt that, in considering an appropriate order,
the court was more concerned with the
personal circumstances of the
respondent than with the protection of the public. The suspension of
his suspension from practice
is entirely incompatible with the
finding that he was not a fit and proper person to continue
practising and resulted in the anomalous
situation that a person who
had explicitly been pronounced unfit to do so, was allowed to
continue his practice. (Logically, a striking
off order or an order
of suspension from practice should only be suspended if the court
finds that the attorney concerned is a
fit and proper person to
continue to practice but still wishes to penalize him.) Moreover,
as appears
inter alia
from the judgment in
Jasat
’s
case at 51H-I, the courts exercise supervisory powers over the
conduct of attorneys, not only in order to discipline and punish
errant practitioners, but also, and more importantly (particularly in
cases like the present one where trust money was misappropriated),

in order to protect the public. This is mainly why the possibility of
a repetition of the conduct complained of must be taken into
account
when it comes to deciding upon an appropriate penalty for proven
misconduct. In the present case the court found that the
respondent
had misappropriated trust moneys and had administered trust funds in
a reckless and cavalier manner without any regard
for his duties as
an attorney. The respondent, on the other hand, insisted all along
that he had only done what he was entitled to
do. The nature of his
conduct and his protestations of innocence rendered a repetition a
distinct possibility. Yet there is no indication
in the judgment that
this and the interests of the public were ever considered. In my
judgment there is ample reason for reconsidering
the court’s
decision and I proceed to do so.
[8]
In this court the respondent challenged
neither the court
a quo
’s factual findings nor its
assessment of his conduct or its conclusion that he was not a fit and
proper person to continue practising
as an attorney. His counsel
submitted, however, that the penalty imposed was quite appropriate. I
do not agree; but before I furnish
the reasons for my disagreement
the reasons advanced by the court
a quo
for not striking the
respondent from the roll or at least suspending him outright have to
be dealt with. Apart from the fact that
he had already been
interdicted from practising for three and a half years (with which I
have dealt) those reasons are (1) that none
of his clients had
suffered a loss and there was no real risk of that happening, and (2)
that he did not harbour the intention of
committing theft “in its
ordinary common law connotation”.
[9]
While it is correct that none of the
respondent’s clients have been shown to have suffered an actual
loss, it is patently incorrect
to say that there was no real risk of
that occurring. The Housing Board was at risk from the first day
when a debit was passed
in respect of work done on behalf of a
subsidy buyer or seller and the amount transferred to the business
account. Each of these
debits was passed in the expectation that the
client in question would become entitled to payment of the subsidy
on registration
of transfer. But what if the anticipated transfer
did not go through after the debit had been passed and the amount
transferred?
And what if the respondent’s estate had been
sequestrated? Cases in which no fees were actually debited but trust
cheques issued
and the Housing Board account debited, and the one
instance where money due to the Board was credited to a private
account, were
even worse. It is obvious, as the court
a quo
itself found, that there must have been a shortfall in the funds
which in effect belonged to the Board.
[10]
The reference to the absence of an
intention to commit theft “in the ordinary common law connotation”
was unfortunate, to say
the least. It is difficult to avoid the
impression that the court in
Parker
’s case (whence the
notion of this rare species of the intention to steal derived), was
at pains to let the offending attorney
off lightly. None of the
factors used in mitigation in that case can really impress anyone
(such as the fact that Parker had stolen,
not for his personal
benefit, but rather for the benefit of members of his family, and
that the stolen trust money had been used
to finance loans against
post-dated cheques which Parker believed would be met). And to
construe a less than real intention to
steal on the facts of the
case was equally generous. To say that Parker did not strictly
commit theft because he “merely anticipated
the time for payment
of fees” misses the point: what was really offensive about
Parker’s conduct was that he used trust money
not authorised for
that purpose to pay those fees. As the court itself observed
elsewhere (at 587G-H),
“the principle, as it emerges from the cases, is that the
utilisation of the funds in a trust account without the authority of
the person on whose behalf the funds are held for purposes which do
not benefit him and in circumstances where he has not authorised
such use, amounts to misappropriation of trust money, which in turn
is a form of theft.”
Citing this very passage the court
a
quo
said in the present case:
“Until such time as any particular subsidy money was paid over to
a seller in terms of such seller’s entitlement thereto the
subsidy
remained Housing Board money, ie money held by the respondent for
the benefit of the Housing Board and the respondent was
not entitled
to use such money to pay himself fees due to him by either the
prospective purchasers or sellers.”
[11]
Neither of the court’s reasons can
accordingly be supported and, in any event, I take a much more
serious view of the respondent’s
conduct. Not only did he treat
the Board’s instructions with disdain but in the process committed
about the worst professional
sin that an attorney can commit by
misappropriating trust funds. He did so methodically over a
substantial period of time and in
respect of large sums of money. It
does not avail him to say that he merely misused the Housing Board’s
money to pay fees he
had earned or in anticipation of fees he would
still have earned; for it is quite clear that he regarded his
agreement with the
Board as a stroke of good fortune enabling him
to establish a lucrative practice amongst a large group of people
entirely free
of risk by using the Board’s money as a handy
source for the prompt payment of his fees. Moreover, we must not
lose sight of
the fact that he misused public money earmarked for
the upliftment of the poor; nor that he maintained all along that he
had done
no wrong until he accepted the court
a quo
’s
findings in opposing the application for leave to appeal , and that
there was not a word of contrition in his opposing affidavit.
Bearing in mind further that the possibility of a repetition of his
conduct if he were to be allowed to continue practising has
not been
excluded, the only appropriate penalty will in my view be to strike
him from the roll despite the dire consequences of
such a step to
him.
[12]
The appellant’s counsel asked for
attorney and client costs if the appeal were to be upheld. Since
this is the usual order in
cases where an attorney’s name is
struck from the roll and the respondent’s counsel raised no
objection, such an order will
be made. I may mention that the court
a quo
made a similar order against the respondent in respect
of the proceedings in that court.
[13]
The appellant has also asked that our order
- including the usual order appointing a curator to administer and
control the respondent’s
trust account(s) and listing the
curator’s powers and duties - be made applicable to both the
practice he conducted at the time
when the interdict was granted and
to any practice conducted by him after the date of the court
a
quo
’s
suspended order of suspension. The respondent’s
contention is that such an order will be inappropriate since there
is no suggestion
that there is anything untoward in his present
practice and no reason why his present clients should be handled by
the curator
and not by other attorneys. His request is that he be
allowed to appoint an attorney of his choice to wind up his present
practice.
I do not think his request should be granted. The curator
must obviously wind up what may conveniently be called the old
practice
and I know of no reason why the winding up of the present
practice should be entrusted to someone else. Present clients’
rights
will be protected in the order proposed by the appellant.
[14]
I accordingly make the following order:
I. The appeal is upheld with costs on the attorney and
client scale.
II. The court
a quo
’s order is set aside and
replaced with the following order:
The respondent’s name is struck from the roll of
attorneys of the High Court of South Africa (Eastern Cape
Division).
(a) The respondent is ordered to surrender and deliver
to the Registrar of the High Court of South Africa (Eastern Cape
Division)
his certificate of enrolment as an Attorney.
(b) Should the respondent fail to comply with the
provisions of the preceding paragraph of this Order within two weeks
from date
hereof, the Sheriff for the district in which such
certificate of enrolment is, is empowered and directed to take
possession of
and deliver the same to the Registrar of the High
Court of South Africa (Eastern Cape Division).
The respondent is ordered to deliver his books of
account, records, files and documents containing particulars and
information
relevant to-
3.1 any moneys received, held or paid by the
respondent for or onaccount of any person;
3.2 any moneys invested by the respondent in terms of
section 78(2) and/or section 78(2A) of Act No 53 of 1979;
3.3 any interest on moneys so invested which was paid
over or credited to the respondent;
3.4 any estate of a deceased person, or any insolvent
estate, or any estate placed under curatorship of which the
respondent is
the executor, trustee or curator or which the
respondent is administering on behalf of the executor, trustee or
curator of such
estate; and
3.5 the respondent’s practice as an Attorney,
to the curator appointed in terms of paragraph 9
hereof, provided that as far as such books of account, records,
files and documents
are concerned the respondent shall be entitled
to have access to them, but always subject to the supervision of
such curator or
a nominee of such curator.
Should the respondent fail to comply with the
provisions of the preceding paragraph of this Order within one
week after service
thereof upon him or after a return by the person
entrusted with the service thereof that he has been unable to
effect service
thereof on the respondent, as the case may be, the
sheriff for the district in which such books of account, records,
files and
documents are, is empowered to take possession of and
deliver them to such curator.
Such curator shall be entitled to hand over to the
persons entitled thereto all such records, files and documents as
soon as he
has satisfied himself that the fees and disbursements in
connection therewith have been paid or satisfactorily secured or
that
same are no longer required by the curator.
A written undertaking by a person to whom the records,
files and documents referred to in paragraph 5 above are handed to
pay
such amount as may be due to the respondent, either on taxation
or by agreement, shall be deemed to be satisfactory security for
the purposes of the preceding paragraph hereof provided that such
written undertaking incorporates a
domicilium citandi et
executandi
of such person.
Such curator is empowered to require that any such
file, the contents of which he may consider to be relevant to a
claim, or possible
or anticipated claim, against him and/or the
respondent and/or the respondent’s clients and/or the Attorneys’
Fidelity Fund
(herein referred to as “the Fund”) in respect of
money and/or other property entrusted to the respondent, be
re-delivered
to such curator.
The respondent is interdicted and prohibited from
operating on his trust account(s) as defined in paragraph 9 hereof.
The Director, failing whom the Deputy Director, for
the time being of the Applicant, is appointed as curator to
administer and
control the trust accounts of the respondent
comprising the separate banking accounts opened and kept by the
respondent at a
bank in terms of section 78(1) of the said Act No
53 of 1979 and/or any separate savings or interest-bearing accounts
as contemplated
by section 78(2) and/or section 78(2A) of the said
Act No 53 of 1979, in which moneys from such trust banking accounts
have
been invested by virtue of the provisions of the said
sub-section or in which moneys in any manner have been deposited or
credited
(the said account(s) being herein referred to as “trust
accounts”) with the following powers and duties:
9.1 subject to the approval of the Board of Control
of the Fund, to sign and endorse cheques and/or withdrawal forms and
generally
to operate upon the trust account(s), but only to such
extent and for such purpose as may be necessary to bring to
completion current
transactions in which the respondent was acting
at the date of this Order;
9.2 subject to the approval and control of the Board of
Control of the Fund to recover and receive and, if necessary in the
interests
of persons having lawful claims upon the trust accounts(s)
and/or against the respondent in respect of money held, received
and/or
invested by the respondent in terms of section 78(1) and/or
78(2) and/or section 78(2A) of the said Act No 53 of 1979
(hereinafter
referred to as “trust moneys”), to take legal
proceedings which may be necessary for the recovery of money which
may be due
to such persons in respect of incomplete transactions in
which the respondent may have been concerned and which may have been
wrongfully
and unlawfully paid from the trust account(s) and to
receive such moneys and to pay the same to the credit of the trust
account(s);
9.3 to ascertain from the respondent’s books of
account the names of all persons on whose account the respondent
appears to hold
or to have received trust moneys (hereinafter
referred to as “trust creditors”) and to call upon the
respondent to furnish
him, within thirty days of the date of this
Order or such further period as he may agree to in writing, with the
names, addresses
of and amounts due to all trust creditors;
9.4 to call upon such trust creditors to furnish such
proof, information and affidavits as he may require to enable him,
acting
in consultation with, and subject to the requirements of the
Board of Control of the Fund, to determine whether any such trust

creditor has a claim in respect of money in the trust account(s)
and, if so, the amount of such claim;
9.5 to admit or reject, in whole or in part, subject to
the approval of the Board of Control of the Fund, the claims of any
such
trust creditor, without prejudice to such trust creditor’s
right to access to the civil courts;
9.6 having determined the amounts which he considers
are lawfully due to trust creditors, to pay such claims in full, but
subject
always to the approval of the Board of Control of the Fund;
9.7 in the event of there being any surplus in the
trust account(s) after payment of the admitted claims of all trust
creditors
in full, to utilise such surplus to settle or reduce, as
the case may be firstly, any claim of the Fund in terms of section
78(3)
of the said Act No 53 of 1979, in respect of any interest
therein referred to and, secondly, without prejudice to the rights
of
the creditors of the respondent, the costs, fees and expenses
referred to in paragraphs I, 10 and 12 of this Order, or such
portion
thereof as has not already been separately paid by the
respondent to the applicant, and, if there is any balance left after
payment
in full of all such claims, costs, fees and expenses, to pay
such balance, subject to the approval of the Board of Control of the
Fund, to the respondent, if he is solvent, or, if the respondent is
insolvent, to the trustee(s) of the respondent’s estate;
9.8 in the event of there being insufficient trust
moneys in the trust account(s) to pay the claims of trust creditors
reflected
in the books of account of the respondent in full;
9.8.1 subject to the approval of the Board of Control
of the Fund, to close the trust account(s) and pay the credit
balance(s) to
the Fund and to require the credit balance(s) to be
placed to the credit of a special trust suspense account in the name
of the
respondent in the Fund’s books;
9.8.2 to refer the claims of all trust creditors to
the Board of Control of the Fund to be dealt with in terms of the
provisions
of the said Act No 53 of 1979; and
9.8.3 to authorise the Board of Control of the Fund to
credit the credit balance(s) referred to in 9.8.1 above to its “Paid
Claims
Account” when the Fund has paid, in terms of section 26 of
the said Act No 53 of 1979, admitted claims of the trust creditors
in excess of such credit balance(s), provided that, notwithstanding
the aforegoing, the said Board shall be entitled, in its discretion,
to transfer to its “Paid Claims Account” the amount or amounts
of any claim or claims as and when admitted and paid by it;
9.9 subject to the approval of the Chairman of the
Board of Control of the Fund, to appoint nominees or representatives
and/or consult
with and/or engage the services of attorneys and/or
counsel, and/or accountants and/or other persons, where considered
necessary,
to assist such curator in carrying out the duties of
curator; and
9.10 to render from time to time, as curator, returns
to the Board of Control of the Fund showing how the trust account(s)
has (have)
been dealt with, until such time as the said Board
notifies him that he may regard his duties as terminated.
10. The respondent is hereby directed-
10.1 to pay the fees and expenses of the curator, such
fees to be assessed at the rate of R300 per hour, including
travelling time;
10.2 to pay the reasonable fees and expenses charged by
any person(s) consulted and/or engaged by the curator as aforesaid;
10.3 within one year of him having been requested to do
so by the curator, or within such longer period as the curator may
agree
to in writing, to satisfy the curator, by means of the
submission of taxed bills of costs, or otherwise, of the amount of
the fees
and disbursements due (to the respondent) in respect of his
former practice, and should he fail to do so, he shall not be
entitled
to recover such fees and disbursements from the curator
without prejudice, however, to such rights, if any, as he may have
against
the trust creditor(s) concerned for payment or recovery
thereof.
The respondent is ordered to pay the costs of the
application on the attorney and client scale.
III. The terms of this order shall apply both to the
practice conducted by the respondent at the time of his being
interdicted
from practice, namely 12 December 1996, and any practice
conducted by him subsequently to the date of the judgment of the
court
a quo
, namely 20 June 2000.
_________________
JJF
HEFER
Acting
President
Concur:
Nienaber
JA
Harms
JA
Cameron
JA
Nugent
JA