consideration and directed the Fund and the Board to bear the costs of this
application.
[2] The Legal Practitioners Fidelit y Fund ( LPFF) seeks leave to appeal to the
Supreme Court of Appeal, alternatively, to the Full Court of this Division. The
respondent, Laher Construction, opposes the application.
The legal test for Leave to Appeal
[3] The application is brought in terms of section 17(1)(a) and (ii) of the Superior
Courts Act, which provides that leave to appeal may only be granted where the
judge or judges concerned are of the opinion that the appeal would have a
reasonable prospect of success, or there is some other compell ing reason why
the appeal should be heard.
[4] Our courts have consistently applied the test for whether leave to appeal should
be granted. Courts’ liberal approach to granting leave is discouraged as
inconsistent with s17 of the Act. For instance, in Mothule Inc Attorneys v The
Law Society of the Northern Provinces and Another, 9213/160 [2017] ZASCA 17
(22 MARCH 2017), the Supreme Court of Appeal stated as follows regarding the
trial court’s liberal approach to granting leave to appeal:
“It is important to mention my dissatisfaction with the court a quo’s granting of leave to
appeal to this court. The test is whether there are any reasonable prospects of success
in an appeal. It is not whether a litigant has an arguable case or mere possibility of
success.”
[5] The applicant raised several grounds of appeal that the court erred in fact and/
or in law, as follows:
5.1. The court correctly found that Section 55(1) of the Legal Practice Act, Act 28
of 2014, states as follows: "The Fund is liable to reimburse persons who suffer
pecuniary loss, not exceeding the amount determined by the Minister from time to
time by notice in the Gazette, as a result of theft of any money or other property
given in trust to a trust account practice in the course of the practice of the attorney,
given in trust to a trust account practice in the course of the practice of the attorney,
if the theft is committed by an attorney in that practice, or any person employed by
that practice or supervised by that attorney".
5.2. The court correctly found that in accordance with Section 55(1) of the Legal
Practice Act, Act 28 of 2014, the elements applicable for a
successful claim against the First and Second Applicants are:
(a)That there must be pecuniary loss
(b)The loss must result from theft
(c)The theft must be money or property given in trust to a trust account practice
(d) The theft must be committed by an attorney in that practice or an employee
under their supervision.
5.3. The court correctly accepted the following common cause, undisputed
facts:
(a) That the Applicant (Respondent herein) deposited R 1 950 000-00 into the trust
account of the Third Respondent.
(b) That these funds were entrusted to the Third Respondent for a specific
purpose, namely, to be held in trust and transferred to the seller exclusively
upon transfer of the property.
(c) Without the Applicants’ authorisa tion and contrary to the explicit terms of the
sale agreement, the Third Respondent transferred the funds to Misty Blue.
(d) The property was never transferred, and the Applicant did not receive the
funds.
(e) The Third Respondent’s actions were not merely neglig ent or a breach of
contract; he intentionally disbursed funds to his own client, Misty Blue, in direct
contravention of the mandate provided by the Applicant.
(f) The fact that the third respondent also represented Misty Blue does not absolve
him of his fiduciary duty to the Applicant as the depositor of the trust funds.
(g) The agreement acknowledged (the initial agreement and the settlement
agreement) that the funds were in the trust account. It did not authorize their
release to Misty Blue prior to the transfer of the property or the alternative
payment made by Misty Blue. Although Misty Blue might be held liable under
contractual obligations, the direct cause of the applicant's loss was the third
respondent’s release of the trust funds.
(h) The fund does not serve as a guarantor against commercial risks; rather, it
(h) The fund does not serve as a guarantor against commercial risks; rather, it
functions as a guarantor against the theft of funds by legal practitioners.
5.3. Acting Madam Justice Mogale erred in law by finding that on the common
cause facts referred to in paragraph 1.2 supra, the Third Respondent
committed theft as envisaged in Section 55 of the Act.
5.4. The court erred in law by finding that on the common cause facts referred
to in paragraph 1.2 supra, the Third Respondent committed theft as envisage
in Section 55 of the Act.
5.5. The court should have found that the Third Respondent, a director of Misty
Blue (and his client) committed fraud when he, in his capacity as transferring
attorney, transferred the applicants funds to Misty Blue more specifically when
it is considered that the Third Respondent as attorney promised through an
agreement to keep the applicants funds on his trust account and to register an
immovable property that should have been developed by Misty Blue, which it
either could not or did not do in accordance with the agreements).
5.6. If the court correctly applied the law to the common cause facts as
aforesaid, the court ought to have rejected the Applicant in the main
application’s claim, because Section 55 of the Act as aforesaid strictly covers
incidents and/or commissions of theft by an attorney and not fraud.
Evaluation of the grounds of appeal
[6] The LPFF claims that the facts it accepts indicate fraud rather than theft. They
argue that the whole transaction was flawed by a fraudulent scheme from the
beginning. However, this point was never argued in the LPFF's case. It was
neither pleaded nor discussed in their arguments or during trial. The evidence
never supported or revealed the factual basis needed for such a fraud claim
against Laher Construction.
[7] It is well-established that a party is generally not permitted to raise a new point
on appeal that was not pleaded or argued in the court below. While there is an
exception for points of law covered by the pleadings and the evidence that
cause no prejudice, this is not such a case.
[8] The distinction between fraud and theft is not a mere technicality; it involves
different constituent elements and would have required a different defence
from Laher Construction. As the respondent correctly points out, to now
from Laher Construction. As the respondent correctly points out, to now
characterise the conduct as fraud would raise factual questions about
misrepresentation and intent that were never in issue.
[9] The question for the purposes of section 55(1) was whether Laher
Construction suffered a pecuniary loss because of the theft of any money or
other property given in trust to a trust account practice. The undisputed facts,
now accepted by the LPFF, speak directly to this. Money was given in trust to
Mr Pillay's practice. He was mandated to hold it until the property was
transferred. Instead, he intentionally and dishonestly disbursed it without
authority, to his own client. This is the very essence of the theft of trust funds.
[10] I find that the LPFF is seeking to use this application for leave to appeal to
reconstruct the basis for its decision. It rejected the claim because it said the
transfer was authorised. That case has failed. It cannot now, after the event,
invent a new rationale for the decision. As the Constitutional Court held
in National Energy Regulator of South Africa and Another v PG Group (Pty)
Ltd, (CCT131/18) [2019] ZACC 28, reasons formulated after an administrative
decision has been made cannot be relied upon to render the decision rational,
reasonable, and lawful.
[11] In my view, the LPFF has failed to demonstrate a reasonable prospect
that another court would reach a different conclusion. The sole ground of
appeal is a newly constructed argument that is both procedurally inadmissible
and substantively defective. The proposed appeal does not address the actual
reasons for my judgment but instead attempts to reframe the LPFF's case on
appeal.
[12] The LPFF has not provided any convincing reasons for why the appeal
should be heard, as required by section 17(1)(a)(ii). The legal issue they aim to
raise is neither of public importance nor a matter that needs resolution by a
higher court. The fundamental legal principle that knowingly misappropriating
trust funds amounts to theft is widely recognised.
[13] In the circumstances, I find that the application for leave to appeal has no
prospects of success. For these reasons, I am persuaded that leave to appeal
should be dismissed.
[14] In the premises, the following order is made:
a. The application for leave to appeal is dismissed with costs.