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[2012] ZAWCHC 277
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Centurion Bus Manufactures (Pty) Ltd v The Attorney Fidelity Fund (25357/2010) [2012] ZAWCHC 277 (26 July 2012)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
Case
No: 25357/2010
In
the matter between:
CENTURION
BUS MANUFACTURERS (PTY) LTD
.......................................................
First
Plaintiff
DANTELS
A CC
.........................................................................................................
Second
Plaintiff
and
THE
ATTORNEYS FIDELITY FUND
...................................................................................
Defendant
JUDGMENT DELIVERD ON
26 JULY 2012
ALLlE,
J
[1]
Plaintiff instituted action in terms of section 26 of the Attorneys
Act 53 of. 1979 for reimbursement of money lost by a client
as a
result of its attorney's thisft of such money held in trust.
[2]
Both plaintiffs allege, that their attorney, Mr Dirk Nothnagel,
received payment into his trust account of the amount of R 703
562,
52. Mr Nothnagel subsequently stole the money and was sequestrated.
[3]
On behalf of plaintiffs, notice was given to defendant on 19 March
2010 that a claim for compensation was going to be lodged
with
defendant.
[4]
Defendant raises a special plea in terms of section 48(1) of the Act
which provides that ho one will have a claim against the
defendant
unless written notice of that claim is given to the Board of Control
of the defendant within 3 months after the claimant
became aware of
the theft or by the exercise of reasonable care, should have become
aware of the theft.
[5]
it is the adjudication of the special plea and response thereto that
this court is seized with.
[6]
Plaintiffs filed an application for condonation for the. late notice
to the defendant in the event that the court upheld the
special plea.
[7]
Defendant alleged that plaintiffs became aware of the theft or by the
exercise of reasonable care, ought to have become aware
of the theft
during July 2009.
[8]
Plaintiffs' representative, Mr Vermeulen testified on their behalf as
follows:
8.1.
Mr Nothnagel became plaintiffs' attorney as early as 2006.
8.2.
In April 2009, first plaintiff lent and advanced to Mr Nothnagel the
sum of R800 000 at his request. He would repay the money
by end April
2009. Eventually Nothnagel paid the money at end July 2009. He did
not
consider the late repayment of a personal loan to be indicative of
theft of trust money.
8.3.
First plaintiff paid money into NothnagePs trust account as
occupational rent pending the resolution of a dispute between it
and
the seller of the land' Second Plaintiff paid, money into NothnagePs
trust account as part of the purchase price on an additional
property
purchased.
[9]
Vermeulen found that. NothnagePs conduct in attending to the affairs
of plaintiffs was becoming more and more unprofessional
and by the
end of May 2009, he terminated NothnagePs mandate.
[10]
He asked for his files, an account and for. payment of the balance of
the funds due to the plaintiffs. He sent an email to
Nothnagel on 1
June 2009, demanding payment of all money due to plaintiffs.
[11]
He received a statement from Nothnagel dated 9 June 2009, reflecting
that the amount of R 703 564, 52 was due to plaintiffs
and two
cheques totalling the amount due to plaintiffs.
[12]
On 9 June 2009, Nothnagel requested Vermeulen not to deposit the
cheques.
[13]
On 15 June Nothnagel again asked that the cheques not be deposited as
his bank account had been frozen due to the bank incorrectly
allowing
a cheque to go off from his business bank account. At that stage,
Vermeulen testified, he did not appreciate the distinction
between an
attorney's trust and business account nor that there was a problem of
dishonesty if an attorney's trust cheques could
not be met.
[14]
On 23 and 24 June 2009, Nothnagel sent further emails to Vermeulen
stating that he was in the process of establishing whether
the funds
had: been released.
[15]
On 29 June 2009, Nothnagel informed Vermeulen that if the cheques are
presented for payment and the funds are not available,
he will have
to cease practicing as an attorney. He proposed to settle plaintiffs
with money he would receive from his sister.
[16]
On 29 June 2009, Nothnagel threatened to stop payment of the cheques
in the event that Vermeulen presents them for payment.
[17]
On 6 July 2009, the cheques were dishonoured on the basis that
payment was stopped.
[18]
Vermeulen lodged a complaint with the Law Society in July 2009. The
Law Society cautioned him against making vague and unsubstantiated
statements against Nothnagel, The Law Society aist> cautioned
Vermeulen that he could only make allegations of theft against
Nothnagel and lodge a claim against the defendant once he had
established that Nothnagel had intact stolen the money.
[19]
At the end of July 2009, he consulted another attorney who advised
him to sequestrate Nothnagel.
[20]
During November. 2009, he heard that Nothnagel's sequestration tiad;
been applied for previously but he warded off the application
then
by: paying: the : amount due eventually. He assumed that Nothnagel
would do the same in-his case.
[21]
He applied for the provisional sequestration of Nothnagel which was
granted on 8 December 2009. Thereafter Nothnagel offered
to pay R300
000 as a first payment on 15 December 2009, thereby creating the
expectation that he would once again pay, albeit late.
[22]
Vermeulen said that he initially thought that Nothnagel had just
mismanaged the funds and did not suspect that he stole trust
funds.
He accepted that he may have been naive in believing and trusting
Nothnagel. He approached the bank for information concerning
Nothnagel's account but was told that they could not divulge
information without a warrant or court order. He denied that he had
any means of establishing that Nothnagel had stolen the money.
[23]
He subsequently established towards the end of November 2009, that
the Law Society brought an application to suspend Nothnagel.
from
practice on 28 July 2Q08 and later he learned they only obtained an
order to strike Nothnagel from the roll of attorneys on
24. August
2010.
[24]
Mr Wolmarans at the Law Society did not inform Vermeulen that there
was , a pending application for the suspension of Nothnagel.
[25]
On 8 February 2010. Vermeulen obtained a final order of sequestration
of Nothnagel. At that stage, he learned that there was
another
creditor to who Nothnagel owed R600 000. This led Vermeulen to
conclude that Nothnagel must have stolen money.
[26]
Plaintiffs gave notice to Defendant during March 2010 and allege that
they did so well within the three months prescribed by
section 48(1
)(a) of the Act.
[27]
Quite aside from the services that Nothnagel was meant to provide to
Plaintiffs, first Plaintiff loaned Nothnagel R800 000
in April 2009
which was- repayable;at the end of April but was only paid in full
at
the end of July 2009.
[28]
Vermeulen testified that although his. belief that .Nothnagel would
eventually pay the money he held in trust bn behalf :pf
plaintiffs
was naive , it was informed by the fact that Nothnagel eventually
paid his private debt: to: first plaintiff in full
and so he believed
that although: Nothnagel was dilatory: when he has to pay, he
eventually pays.
[29]
Once he heard that another client of Nothnagel had to bring
sequestration .-y proceedings before Nothnagel paid that client’s
money, Vermeulen: Was strengthened in his belief, that Nothnagel
would pay the money due i to the plaintiffs at some stage at least
before an order of final sequestration was sought
;
and obtained.
[30]
It can readily be accepted that until Vermeulen had obtained the
services : of a new attorney to assist him in recovering the
money
from Nothnagel,- he would not necessarily have understood the
consequences of a dishonoured : cheque drawn on an attorney's
trust
account or an attorney's inability tp: pay funds held in trust.
[31]
Vermeulen himself admits in his founding affidavit that when
Nothnagel said on 15 June 2009 that he will not have sufficient
funds
in his trust account. because the bank "froze” his
account, he should have realised that it was. a lame excuse.
[32]
Once Vermeulen had employed an attorney, Mr Van Staden, by thf end of
July 2009 and had a consultation with Advocate Snyman
and Mr Van
Staden,: Vermeulen alleged he then understood that he might not be
able t6 recover the money.
[33]
By end of July 2009, plaintiffs knew, by logical implication, if the
money was not recovered, then Nothnagel must have either
misappropriated the money or mismanaged it.
[34]
Section 48(1) of the Act requires not only that a claimant must have
beer) aware of the theft of trust funds but the claimant
must, by the
exercise of
:
reasonable care have become aware of such theft.
[35]
Section 48(1 )(a) reads as follows:
“
48. Claims
against fund: notice, proof and extension of periods for claims.
(1)
No person shall have
a
claim against the fund in
respect of any theft contemplated in section 26 unless -
“
written
notice of such claim is given to the council of the society concerned
and to the board of control within 3 months after
the claimant became
aware of the theft or by. the exercise of reasonable care should have
become aware of the theft and;"
[36]
From his evidence, it would seem that Vermeulen was so: intimidated
by the warning of the Law Society that he failed to lodge
a complaint
with
:
the;SAPS.;
He alleged that he attempted to exhaust all legal remedies before tie
established that there had indeed been theft of
trust money and
before lodging ;a
;
clatim; with; the defendant. Section 49(1) of the Act provides that
no action may be brought against the defendant unless all available
legal remedies against the practitioner have been exhausted.
[37]
Section 26(a) of the Attorneys Act 53 of 1979 reads as follows:
"Purpose
of the Fund
Subject
to the provisions of this Act, the fund shall be applied for the
purpose of reimbursing persons who may su ffer pecuniary
loss as a.
result of:
(a)
theft committed by a practising practitioner, his candidate attorney
or his: employee, of any money or other property entrusted
by or on
behalf of such persons to him or to his candidate attorney or
employee in the course of his
practice
or while acting as executor or administrator in the estate of
a
deceased
person or as a
trustee in an insolvent estate or in any other similar capacity; and
b)
...............
"
[38]
Section 48(1) non suits a claimant who attempts to claim in terms of
section 26 where due notice has not been given. Section
48(3),
however provides the board of control of the defendant- with the
discretion! to extend the period in which notice has to
be given
under subsection (1).
[39]
The role played by the Law Society in general in claims based on
section 26 cannot be diminished. The reason for. notice to
the Law
Society is clear. As the governing body vested with the statutory
authority to investigate the financial affairs of an
attorney in
terms .of Section 71 of the. Act, they would clearly be best placed
to pronounce upon whether there has been theft
of trust monies. In
this case, they simply failed in their duty to establish in July 2009
whether there had been theft of trust
monies and failed to
communicate any finding in this regard to the plaintiffs.
[40]
Defendant's board of control comprise, serving presidents of ai! the;
Law Societies and three members of each Law Society yet
defendant
provided the court with no information about why Vermeulen's
complaint to the Law Society of the Northern Provinces in
July 2009,
did not raise any warning signs for the Law Society and did not move
them to immediately investigate the state of Nothnagel's
trust
account when they had already brought an application .in 2008 to
suspend Nothnagel from practice.
[41]
In SW Construction v Attorneys, Notaries & Conveyancers Fidelity
1993 (2) SA 577
(C) the court found that section 48(1) requires that
the claimant must have personal knowledge of the theft, because that
is what
the words: “to
become
aware of"
mean. The court also
concluded that the section should be ; restrictively interpreted. The
court proceeded to; discuss what is
the knowledge that is required
and found that it is awareness of the material facts which would ::
:
create in the mind of the reasonable man the belief or conviction,
not merely the : suspicion, that a theft had been committed.
The
court went on tb analyse belief:: or conviction and held that
conviction is strong, belief on the grounds of satisfactory reasons
or evidence. The court found that the type of theft involved : in
these cases is wrongful dealing by an attorney with or appropriating
for his : own use, money which has been entrusted to him. The court
accepted thiat a debit balance on an attorney's trust account
do not
in all instances lead one to! the conclusion that the funds have been
misappropriated because it could be ;the result of
miscalculations
and errors or reckless dealing. In that case, the court accepted that
although the possibility of theft did occur
to the claimant, it had
no means of turning that suspicion into an awareness as the police
were still
:
investigating a complaint of theft against the attorney and the
claimant Only became aware of the theft when the prosecutor in
the
criminal case against; the attorney showed the claimant bank
statements of the attorney. The court
rejected
the defendant's defence that the claimant failed to file a notice of
the complaint timeously and that it failed to take
reasonable steps
to become aware of the theft.
[42]
Having obtained a final order of sequestration, against Nothnagel,
plaintiffs then knew that Nothnagel clearly no longer-had
control or
possession of their funds entrusted to him as he would have
reimbursed them rather than have his estate finally sequestrated.
At
that stage in February 2010, plaintiffs then had evidence from which
they could conclude that Nothnagel had misappropriated
trust funds as
the probabilities weighed in favour of that conclusion more then than
it did at the stage of the provisional sequestration
when Nothnagel;
was still ; promising to repay the money and the possibility existed
then that he may still have access to funds
that were badly managed,
[43]
Applying the test enunciated in the SW Construction case, the
evidence supports the plaintiffs contention that only on 8 February
2010, did plaintiffs suspicion that Nothnagel had stolen trust money
become sufficiently fortified to the extent that it became
a strong
belief that Nothnagel had in fact stolen trust money and had not
merely mismanaged it.
[44]
By the time plaintiffs applied for the provisional sequestration of
Nothnagel, on 8 December 2009, the Law Society ought to
have formed
at least a
prima facie
view based on an inspection of Nothnagel's books which should
have
been undertaken by then, yet they failed to inform the plaintiffs
even then . that there was a likelihood of theft of trust
money.
[45]
The purpose of the fund is clearly to protect persons who
entrust-money to attorneys that have subsequently stolen that .money.
The time period within which notification of claims must be made.is
itself subject to an extension within; the discretion of the
defendant precisely because the legislature envisaged that if a
role-player who is meant to perform its functions in terms of the
Act
fails to dp so, the board may grant an extension of time to a
claimant who was not wilfully in default.
[46]
Once plaintiffs lodged a complaint with the Law Society, consulted a
new attorney and an advocate and tried to obtain information
about
Nothnagel's bank : account, there was very little more he could do,
save for lodging a complaint of:; suspected theft with
the SAPS. In
casu, the delay in plaintiffs notifying defendant : and the Law
Society that they intend to lodge claims was due entirely
to the
:
dilatory conduct of the Law Society.
[47]
Since the Law Society who is an interested party in these proceedings
and who must be aware of the proceedings by virtue of
their
representative who serves on the Board of Control of defendant, has
remained silent, I cannot/ establish what their attitude
is toward
the plaintiffs not having given them formal notice that they intend
to lodge a claim with the defendant.
[48]
Plaintiffs have asked that the court condone their failure to give
notice to the Law Society by virtue of the
society
Already having
brought an
application to; strike Nothnagel from the roll of attorneys when
notice was given
1
to
the defendant.
[49]
Notice to the Law: Society concerned fulfils the purpose of alerting
the governing body of the attorney's profession to the
fact that
sufficient material facts exist to believe that an attorney has
stolen trust funds so that the ;statutory powers of
the Law Society
can be used to investigate the attorney concerned and bring the
necessary court application to prohibit the attorney
from
practising. Notice in this instance would clearly be superfluous as
the Law Society had already commenced an application
to suspend
Nothnagel from practice in 2008 and proceeded with an application to
have him struck, from the roll of attorneys thereafter.
[50]
I have no allegations before me that explain why compliance with
notice to
;
the Law Society in substance, i.e, the notice of a trust shortfall
given by plaintiffs in July 2009, when the complaint was lodged,
is
insufficient.
[51]
Concerning notice to the defendant, I find that the plaintiffs took
reasonable steps to become aware of the theft and were
unable to
become aware of the theft prior to 8 December 2010. Having become
aware of the theft once more material facts came
to their attention
on 8 February 2010, I find; that plaintiffs notice to the defendant
was timeously given.
[52]
The special plea of the defendant that plaintiffs failed to file a
notice to lodge a claim timeously and: failed to take
reasonable
steps to become aware of the theft of trust money is dismissed.
[53]
Since the plaintiffs have been successful in resisting the. special
plea, costs should follow the result.
IT
IS ORDERED THAT:
The
special plea is dismissed with costs.
ALLIE, J