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[2014] ZAWCHC 49
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Fairoak Investments Holdings (Pty) Limited v Chairperson, Attorneys Fidelity fund Board of Control and Another (5127/2012) [2014] ZAWCHC 49 (13 March 2014)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Case
number: 5127/2012
DATE:
13 MARCH 2014
REPORTABLE
In the matter
between:
FAIROAK
INVESTMENTS HOLDINGS (PTY)
LIMITED
..........................................
Applicant
And
THE CHAIRPERSON,
ATTORNEYS’ FIDELITY FUND
BOARD OF
CONTROL
.......................................................................................
First
Respondent
THE ATTORNEYS’
FIDELITY FUND
BOARD OF
CONTROL
...................................................................................
Second
Respondent
JUDGMENT
INTRODUCTION
1. This is an
application by Applicant, Fairoak Investments Holdings (Pty) Limited
(“Fairoak”), against First Respondent,
the Chairperson of
the Attorneys’ Fidelity Fund Board of Control, and Second
Respondent, the Attorneys’ Fidelity Fund
Board of Control (the
“Board of Control”), for an order that:
“1. The
Respondents’ decision rejecting the Applicant’s claim of
11 June 2010 against the Attorney’s Fidelity
Fund, on the
ground that it was not lodged timeously, is set aside.
2. The Respondents
are ordered to consider the Applicant’s claim against the
Attorneys’ Fidelity Fund of 11 June 2010
in accordance with
this judgement.
3. The Respondents,
opposing this application, are ordered to pay the Applicant’s
costs.
4. The Applicant is
granted further or alternative relief.”
2. The Board of
Control rejected Fairoak’s claim in terms of the Attorneys Act,
No 53 of 1979 (“the Act”), that
was lodged with the
Attorneys’ Fidelity Fund (“the Fund”) on 11 June
2010 for the amount of R1 566 000.00 arising
from the theft of its
money, held in trust by an attorney, Mr Izak Minnie (“Minnie”),
who had been removed from the
roll of attorneys by an order of court
on 19 October 2010 after being sequestrated on 9 June 2010.
3. Fairoak’s
claim was rejected by the Board of Control, because according to the
latter written notice of the claim in terms
of section 48(1)(a) of
the Act was not given to the Board of Control within three months
after Fairoak allegedly became aware of
the theft or, by the exercise
of reasonable care, should have become aware of the theft.
OPPOSED MOTION
PROCEEDINGS
4. An applicant who
seeks final relief on motion must, in the event of conflict, accept
the version set up by a respondent, based
upon the admitted facts in
the applicant’s affidavits together with the facts alleged by
the respondent, unless the latter’s
allegations are, in the
opinion of the Court, not such as to raise a real, genuine or bona
fide dispute of fact or are so far-fetched
or clearly untenable that
the Court is justified in rejecting them merely on the papers
(Plascon-Evans Paints Ltd v Van Riebeeck
Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA
623
(A) at 634-635C; Wightman t/a JW Construction v Headfour (Pty)
Ltd and Another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) at 375E-F).
5. The denial by a
respondent of a fact alleged by an applicant may not be such as to
raise a real, genuine or bona fide dispute
of fact. If, in such a
case, the respondent has not applied for the deponent concerned to be
called for cross-examination in terms
of Rule 6(5)(g) of the Uniform
Rules of Court, and the Court is satisfied as to the inherent
credibility of the applicant’s
factual averment, it may proceed
on the basis of the correctness thereof, and include this fact among
those for determination whether
the applicant is entitled to the
relief sought (Ripoll-Dausa v Middleton NO and Others
[2005] ZAWCHC 6
;
2005 (3) SA 141
(CPD) at 151F-152A).
6. A bare denial can
give rise to a real, genuine and bona fide dispute of fact, when
there is no other way open to the disputing
party and nothing more
could be expected of him. When the facts averred are such that the
disputing party must necessarily possess
knowledge of them and be
able to provide an answer or evidence, if they not be true or
accurate, but rests his case on a bare or
ambiguous denial, a finding
that the test is satisfied will be problematic. A legal adviser, who
settles an answering affidavit,
has a serious duty to ascertain and
engage with the facts disputed by a respondent, and to reflect such
disputes fully and accurately
in the answering affidavit, otherwise a
Court is justified in taking a robust view of the matter (Wightman
supra at 375G –
376A).
7. The
aforementioned observations are apposite herein:
7.1. In view of
Fairoak’s allegations inter alia that:
7.1.1. the Board of
Control’s refusal to consider the claim was premised on the
view that Fairoak should have been aware of
the theft by Minnie from
July 2009 and constitutes a material error of fact;
7.1.2. the director
of Fairoak, who dealt with Minnie, was a lay person, who had no
reason until 9 November 2009 to believe that
anything was amiss or to
mistrust Minnie;
7.1.3. the delay
after 9 November 2009, in lodging the claim, was attributable to a
bona fide attempt by Fairoak to comply with
a procedural requirement,
mentioned by the applicable Law Society, as a requisite for the claim
against the Fund;
7.1.4. the Board of
Control rigidly applied the three month statutory time limited,
without regard to the reasons for Fairoak’s
failure to comply
therewith;
7.1.5. the Board of
Control’s decision was not related to the information before
it, moreover, that it did not take relevant
circumstances pertaining
to Fairoak’s explanation for the delay into account, and it
disregarded the purpose of the Fund,
resulting in its decision, which
does not comply with the scope and purpose of the legislation,
establishing the Fund, rejecting
a sound claim on technical and
formalistic grounds.
7.2. When regard is
had to Respondents’ response, namely, that Fairoak’s
abovementioned “allegations constitute
legal submissions which
are disputed and which would be dealt with in legal argument at the
hearing of the application”,
in particular whether Respondents
provided a factual basis for their defence.
THE RELEVANT
FACTUAL MATRIX
8. The facts, having
regard to the approach on the papers, are set out hereunder.
9. During 2004
Fairoak purchased certain immovable property from Mr S Olivier,
(“Olivier”). A director of Fairoak,
Mr Stephanus Petrus
Hartzer, the deponent to Fairoak’s affidavit (“Hartzer”),
instructed Minnie, of Izak Minnie
Incorporated, a specialist property
lawyer, to act on behalf of Fairoak to facilitate the payment of the
purchase price by issuing
guarantees and liaising with the
transferring attorneys appointed by Olivier.
10. Hartzer, as a
director of Fairoak, had many dealings with Minnie and trusted him as
an honest and professional attorney, who
was engaged in many
transactions by Fairoak, which involved the flow of hundreds of
millions of Rand through Minnie’s trust
account, resulting from
many property transactions, without any problems.
11. Fairoak paid an
amount of R2 556 000.00 to Minnie. The said amount represented the
purchase price of R2 300 000.00, due to
Olivier and also transfer
duties and legal fees, payable in the amount of R256 000.00.
12. The monies were
paid by Fairoak into the trust account of Izak Minnie Incorporated
held with ABSA Bank Limited, to secure transfer
of the property
bought from Olivier.
13. Minnie caused a
guarantee to be issued by ABSA Bank Limited on 22 October 2004. That
guarantee was delivered by Minnie on 29
October 2004 to Olivier’s
transferring attorneys, which occurred out of time, having regard to
the terms of the deed of sale
concluded between Fairoak and Olivier.
14. Olivier
accordingly cancelled the sale, but Minnie assured Hartzer that the
cancellation of the sale was unlawful, having regard
to the
provisions of the deed of sale.
15. Minnie funded
litigation on Fairoak’s behalf to compel Olivier to effect
transfer of the property concerned to Fairoak.
16. The litigation
against Olivier, including attempts to appeal, failed.
17. After Hartzer
had been informed by Minnie that Fairoak failed to obtain transfer of
the property from Olivier, despite litigation,
Hartzer requested
Minnie to refund the amount paid by Fairoak into the trust account of
Izak Minnie Incorporated, as well as any
interest earned thereon.
18. Minnie
thereafter continued to give various reasons why payment to Fairoak
could not be made, such as that he was waiting for
the closing of the
investment, and that the investment could not be closed prior to the
receipt by ABSA Bank Limited of the original
guarantee.
19. Hartzer became
agitated and frustrated with Minnie, but during approximately July
2009 Minnie made payment of R1 000 000.00
to Fairoak and issued 3
post-dated cheques to Fairoak for the balance of R1 656 000.00
namely in the amounts of R250 000.00,
R256 000.00 and R1 150 000.00
respectively, calculated by Minnie to be due and payable to Fairoak
in terms of what was held in
trust.
20. The post-dated
cheques were issued pursuant to a meeting between Minnie and Hartzer,
held on 13 July 2009. Subsequent thereto
Minnie sent a letter dated
15 July 2009 to Fairoak and Hartzer, advising as follows:
“1. Bogemelde
en die vergadering te u kantore Maandag 13 Julie verwys.
2. Soos bespreek
onderneem ons hiermee die volgende:
2.1 Ons sal aan
Fairoak Investment Holdings voor of op 31 Julie 2009 die bedrag van
R1 150 000-00 betaal;
2.2 Daarmee saam sal
‘n bedrag van R250 000-00 ten opsigte van die rente op die
belegging ook betaal word; en
2.3 Die
transportkoste in die bedrag van R256 000-00 sal dan ook aan Fairoaks
betaal word.
3. Ten opsigte van
die balansrente en regskoste sal ons Mnr Minnie en Mnr Faan Hartzer
dan later ‘n vergadering hê.
4. Ons vertrou u
vind bogemelde in orde en bedank u vir die ooreenkoms so bereik.”
21. Fairoak
deposited the cheques. The cheques were returned to Fairoak unpaid,
because Minnie had stopped payment of the cheques.
22. In a letter
dated 31 July 2009 to Fairoak, Minnie explained why payment was
stopped, inter alia, as follows:
“2. U is in
besit van die tjeks getrek op Izak Minnie inc, en vir onderskeidelik
R1 150 000-00, R250 000-00 en R256 000-00,
en gedateer vir vandag, 31
Julie 2009.
3. U is bewus van
die feit dat Izak Minnie inc in likwidasie is.
4. U is ook bewus
van die feit dat skrywer nou as IZAK MINNIE PROKUREURS besigheid
doen.
5. Ons het
aanvanklik met ABSA die verstandhouding gehad dat ons, aangesien die
besigheid van Izak Minnie inc wat nie deur die likwidasie
geraak word
nie, ons nog die trustrekening sal kan gebruik vir die ordelike
oordra van die relevante besigheid.
6. ABSA het egter
nou – in hierdie week – op hulle regsafdeling se
instruksie die rekeninge gevries, en kan die rekenings
en tjeks en
oorplasings nou slegs in samewerking met die likwidateurs geskied.
7. Die nuwe
rekeninge vir Izak Minnie Prokureurs is in die proses, en sal eers
teen Donderdag/Vrydag vg week operasioneel wees (dan
sal ons ook nuwe
tjekboeke hê.
8. Die drie tjeks
moet derhalwe asb nie aangebied word nie, aangesien dit gestop moet
word.
9. Ek sal u sodra
die nuwe rekeninge operasioneel is, dadelik nuwe tjeks gee.”
23. From 31 July
2009 Hartzer continued unsuccessfully to obtain payment from Minnie
who kept stalling him and making promises of
payment from day to day.
24. Minnie remained
Fairoak’s attorney and continued to practice as an attorney
until 17 November 2009, when he was suspended
in his practice.
25. Eventually
Hartzer, a lay person, without legal knowledge, became uncomfortable
with Minnie’s explanations why payment
was delayed. During
November 2009 he consulted an attorney, Mr JJ Badenhorst
(“Badenhorst”) of TG Bosch-Badenhorst
Attorneys,
Conveyancers and Valuers.
26. On 9 November
2009 Badenhorst lodged a written complaint against Minnie with the
Law Society of the Northern Provinces, (“the
Law Society”),
contained in a letter dated 9 November 2009 to which an official
complaint form, duly completed, was annexed.
27. By letter, dated
17 November 2009, Fairoak and Hartzer were informed as follows by
Minnie:
“1. The above
and our previous discussions refer.
2. Regrettably, as
advised telephonically and as is evident from the amplification to
our letterhead, Izak Minnie inc. was placed
in liquidation.
3. As further
advised, we traded under Izak Minnie Attorneys from 1st July 2009,
but it proved not to be viable. Consequently, our
offices is closed
effectively from today.
4. I therefore send
to you, under cover hereof, all the files currently still with us and
pertaining to Featherbrooke, Fairoaks,
Lotti Trading, and Mr Faan
Hartzer.
5. As regards older
files of Commercial, general and Litigation nature, kindly note that
these have been sent to Metrofile as and
when they were finalized.
Should you wish to retain these files, kindly instruct us
accordingly.
6. As regards the
claim against the Attorneys Fidelity Fund, kindly take note that I am
meeting with the Fund’s representatives
in Cape Town next week,
to discuss the various claims. I had a phone call from Mr Hans
Badenhorst a couple of days ago, and I
accept for the moment that he
will be representing you for/with the claim. I will keep you posted
on progress.
7. It was my
pleasure to have been at your service as Attorney through all these
years.”
28. On or about 25
November 2009 the Law Society advised Badenhorst that Minnie had been
suspended from practice as an attorney
in terms of an order of the
High Court, granted on 17 November 2009.
29. The Law Society
thereafter sent a further letter dated 8 December 2009 to Badenhorst
in which it confirmed that Minnie had been
suspended from practice as
an attorney on 17 November 2009, and advised that Mr Johan van Staden
has been appointed as the Curator
Bonis “over the practice”.
Badenhorst was also advised that all claims “against trust
funds” of Izak Minnie
Attorneys had to be submitted against the
Attorneys’ Fidelity Fund. Annexed to the said letter was a
memorandum “…
on the procedure for the presentation of
claims against the Fund, together with a Framework for a sworn
affidavit in support of
a claim against the Attorneys Fidelity Fund”.
In the letter it was specifically noted that “… all the
requirements
set out in the framework must be adhered to …”.
30. The memorandum
outlined the procedure for the presentation of a claim against the
Fund and contained inter alia the following
statements:
30.1. The Fund is a
fund of last resort. If it is apparent that stolen money or property
can be recovered from another source,
the Fund will require a
claimant to first exhaust all available legal remedies against all
persons liable in law.
30.2. Regarding the
procedure for the presentation of the claims against the Fund:
• The claim
should be submitted to the Fund by way of an affidavit.
• The
defaulting attorney’s entire office file (cover and contents)
should accompany the affidavit.
• Except where
the Board of Control has directed that a formal inquiry in terms of
the Fund’s regulations should be held,
consideration of the
claim will be confined to the Affidavit submitted.
• Any
allegations in the affidavit in connection with the amounts entrusted
to the attorney must therefore be corroborated.
31. By 8 December
2009 Fairoak, represented by Badenhorst, was made aware of the
procedure that had to be followed and of the time-frame
for notice of
the claim to the Fund.
32. In view of the
requirements mentioned by the Law Society Badenhorst concluded that
the claim should not be submitted until the
office file of Minnie had
been obtained from the Law Society. He accordingly addressed a
letter dated 7 January 2010 to the Law
Society to obtain the client
file pertaining to Fairoak’s claim.
33. In a letter
dated 12 January 2010 the Law Society referred to Badenhorst’s
aforementioned request and stated in paragraph
2 thereof as follows:
“Kindly note,
that the writer hereof, being the Legal Official of the Curators
Department can be contacted with any enquiries,
and do I confirm that
we will peruse our records to ascertain whether we are in possession
of your client file.”
34. Relying on the
abovementioned undertaking by the legal official from the Law Society
Badenhorst submitted various letters dated
14 January 2010, 25
February 2010, 11 May 2010 and 28 May 2010 respectively, to the Law
Society referring to his request for the
content of the relevant
file.
35. Despite all
these letters to the Law Society, during a period of 5 months, the
latter failed to respond at all, and there was
no compliance with
Badenhorst’s request, namely to provide him with a copy of the
file so that he could complete the affidavit
to submit the claim to
the Fund, in terms of the prescribed procedure.
36. Minnie’s
estate was sequestrated on 9 June 2010.
37. Due to the Law
Society’s failure to respond to his letters Badenhorst
submitted Fairoak’s claim on 11 June 2010
without the content
of the file required in terms of the memorandum by the Law Society.
In a letter dated 11 June 2010 Badenhorst
indicated to the Fund that
the filing of the claim was delayed due to his attempts to obtain the
relevant file from the Law Society.
38. By letter dated
5 July 2010 Mr S D Maile, the Senior Claims Manager of the Fund,
informed Badenhorst that:
“I wish to
advise that I have perused the claim documentation herein. It is my
submission that the claim cannot be sustained
against the Attorneys’
Fidelity Fund as it was not lodged timeously.
It appears that your
client have (sic) known about the problem or ought with the exercise
of reasonable care to have been aware
of the theft as early as July
2009, but he only lodged the claim in June 2010 against the Fund.
This claim seems not
to have been lodged in accordance with the provisions of Section 48
of the Attorneys Act 53 of 1979 as amended.
I propose closing my
file. However, should you feel strongly that this is a good claim
please advice accordingly. I will then
refer the matter to the
Fund’s Board of Control to be finalised.”
39. On 9 July 2010
Badenhorst requested in writing that the matter be referred to the
Board of Control for its consideration and
final decision.
40. By letter dated
5 August 2010 one S Matthews, the Claims Administrator of the Fund,
advised Badenhorst that:
“… the
Fund’s (sic) claim in this matter has been referred to the
members of the Fund’s Board of Control
for consideration and
decision”.
41. Badenhorst
informed the Fund in a letter dated 13 August 2010 that it was
“impossible to file the claim earlier as we
had attempted to
recover the files from the Law Society which to date we have not yet
been able to do.”
42. On 18 August
2010 Mr S D Maile, the Senior Claims Manager of the Fund, replied as
follows in a letter:
“I refer to
previous correspondence herein and would advise that the Fund’s
Board of Control resolved to reject this
claim on the grounds that:
1. The claim was not
lodged in terms of Section 48(1)(a) of the Attorneys Act 53 of 1979,
as amended.
The reason for the
rejection of the claim as set out above are (sic) not necessarily
exhaustive, and the Fund’s rights are
fully reserved in the
event that it might appear at a later stage that additional grounds
for rejection, or any other defences,
exist.”
43. On 21 October
2010 Badenhorst was informed by the Law Society that Minnie had been
removed from the roll of attorneys by an
order of court, granted on
19 October 2010.
44. On 4 February
2011 Badenhorst again wrote to the Fund, advising that Minnie’s
file had not yet been received from the
Law Society and contended
inter alia that:
“5. One of the
reasons for the delay was that we awaited the file which in terms of
your own claim form, had to be annexed
to the claim.
6. We require
another 14 (fourteen) days to submit a fully motivated application to
you in terms of Section 48(2) of the Act.
7. Should you be of
the opinion that the decision of 18 August 2010 is final we need your
response and advises in this regard by
not later than Wednesday 9
February 2011.
8. The reason is
that our client will then be compelled to bring an application for
the review of the decision (only if it was a
final decision) and
there remains very limited time for such an application.
9. We therefore
appeal to you to grant our client’s request and to afford us
the further period of 14 (fourteen) days to submit
the request in
terms of Section 48(2).
10. We understand
that there are approximately 180 claims against this Attorney.”
45. By letter dated
11 February 2011 Mr S D Maile, the Senior Claims Manager of the Fund,
responded as follows:
“I refer to
your letter dated the 4 February 2011.
Kindly note that the
claim has already been considered and finalised. Your application
now in terms of section 48(2) of the Act
seems odd therefore.
However claimants
have been allowed to submit further representation to the Board where
a claim was rejected, even though the Act
does not make provision for
a review.
You are therefore at
liberty to make such further submissions upon receipt of which I will
refer them to the Board.”
46. In a lengthy
letter dated 25 February 2011 Badenhorst relied inter alia on the
following aspects for consideration by the Board
of Control:
46.1. “It is
our view that the Board might not have had the opportunity to
consider all the relevant circumstances which we
intend to set out in
detail hereunder.”
46.2. “We
intend to explain the delay in submitting the claim to the fund with
reference to two distinct periods. The first
being the period from
July 2009 to November 2009 and the second from November 2009 to June
2010 when the claim was filed with the
Fund. The first period was
during the time when Hartzer dealt with the situation on his own and
the second when this office became
involved.
46.3. “As a
starting point the relationship between Mr. Minnie (“Minnie”)
and his client should be understood.
Hartzer, through his company
Fairoak developed properties in the Roodepoort and other areas for
many years. He used Minnie as
a specialist property lawyer for many
years and trusted him with his affairs. Through the years he and
purchases (sic) of properties
paid hundred of millions of rand into
the trust account of Minnie without any comebacks or problems. He
had no reason to believe
that he would become a victim of blatant
theft by the person he trusted. It should also be considered that
when he confronted
Minnie, Minnie, as a smooth and convincing
operator was quick to alley any suspicions and fears Hartzer might
have had and to assure
him that he would be paid.
46.4. “As at
July 2009 Fairoak decided to require from Minnie a refund, plus
interest, from trust monies in the account of
Izak Minnie Inc. The
total of R2 656 000.00 (TWO MILLION SIX HUNDRED AND FIFTY SIX
THOUSAND RAND), including interest, was due
to Fairoak by Minnie. R1
000 000.00 (ONE MILLION RAND) was paid creating the impression that
monies was still available. (see:
par 6.12 of the affidavit). A
meeting was held on 13 July 2009 between Hartzer and Minnie during
which meeting Minnie came up
with all kind of excuses and promises
that payment was forthcoming. Pursuant to this meeting 3 (three)
postdated cheques were
issued by Minnie for the balance owing.
Hartzer was still confident that the monies would be paid.
On the same day
these cheques were presented for payment by Fairoak’s bankers
Minnie delivered a letter to Fairoak advising
that the cheques had to
be stopped as Izak Minnie Inc was in liquidation but that payment
would be effected when his new firm’s
(Izak Minnie Attorney)
trust account was in operation. He apparently had an arrangement
with the bank (see the letter from Minnie
attached hereto for easy
reference dated 31 July 2009, marked “F”). This version
was still credible to a layman who
was unscrupulously led up the
garden path by the person he trusted. The fact that these cheques
were “stopped” and
not merely referred to drawer gave
credence to Minnie’s version who belief (sic) that a transfer
of one trust account to
another had to take place. At that stage
Minnie was still allowed to practice as an attorney. It was only on
or about 25 November
2009 when writer was informed by the Law Society
that Minnie was suspended in his practice as an attorney by the High
Court on
17 November 2009.”
46.5. “After
31 July 2009 Minnie kept on making promises and kept on stalling
Hartzer until November 2009 when Hartzer came
to see the writer for
assistance. There were numerous discussions on a weekly basis
between Hartzer and Minnie and numerous excuses
why the payment was
delayed. As stated before Minnie was still practicing and there was
no reason to doubt his reasons why, due
to the liquidation of the one
entity, the funds could not be transferred to the trust account and
why payment could not be made
to our client.”
46.6. “It was
only when Minnie himself wrote to Fairoak and Hartzer on 17 November
2009 indicating that he has thrown in the
towel that Fairoak and
Hartzer in fact knew that they won’t get any money back from
Minnie.”
46.7. “Considering
the above circumstances it is submitted that any decision premised on
the fact that Fairoak knew or ought
to have known by the exercise of
reasonable care, as from as early as July 2009 that the money was
stolen would be wrong (see the
letter from Minnie (In Liquidation)
dated 17 November 2009 attached hereto marked “G”.
According to the letter of
Mr. Maile dated 5 July 2009 (“A”)
the Fund concluded that Fairoak knew or should have known about the
theft from July
2009 onwards. It seems that the Board took the same
stance.”
46.8. “We
would ask the Board to reconsider this which should lead to the
conclusion that this date is to be moved forward
to 17 November 2009,
alternatively, 9 November 2009.”
46.9. “Shortly
after Hartzer came to see writer during early November 2009 about his
problems with Minnie writer assisted
Hartzer to lodge a complaint,
dated 9 November 2009, against Izak Minnie of Izak Minnie Inc with
The Law Society of the Northern
Provinces (“the Law Society”).
It should be noted that at that stage writer was wrongly under the
impression that
by lodging the said complaint a claim was
simultaneously lodged with the fund. This wrong impression is
evidenced by writers (sic)
reply to the letter from Izak Minnie inc
(In Liquidation) dated 17 November 2009, already attached hereto
marked “G”.
In reply to paragraph 6 of this letter where
Minnie stated, “As regards the claim against the Attorneys
Fidelity Fund, kindly
take note that I am meeting with the Fund’s
representatives in Cape Town next week, to discuss the various
claims”,
writer replied in his letter dated 20 November 2009 as
follows: “We have in the interim lodged a claim with the
fund”.”
46.10. “In a
letter dated 8 December 2009, which writer only perused after the
December holiday period on 5 January 2010,
the Law Society responded
to the letter of complaint dated 9 November 2009. It was only when
writer perused this letter from the
Law Society that writer was made
aware of the legal requirement that a separate detailed claim would
have to be made against the
Attorneys Fidelity Fund complying with
their requirements. Attached to this letter was a memorandum on the
procedure for presentation
of claims against the Fund, together with
a framework for a sworn affidavit in support of the claim. Writer
was also informed
that Mr Johan Van Staden was appointed as the
Curator Bonis over the practice of Izak Minnie Inc.”
46.11. “Writer
perused the memorandum and concluded that regardless the three month
requirement it was stated in the document
that it was essential to
obtain the defaulting attorney’s entire office file to have it
available to be able to dispatch
it together with the sworn
affidavit. Unfortunately writer did not peruse section 48 of the Act
independently and only relied
on the contents of the memorandum. The
content of the memorandum lead to some confusion to (sic) the mind of
the writer. Writer
labored under the wrong impression that the 3
(three) month period had been interrupted by the prior lodging or
would only start
to run once the file of Minnie was obtained.
Moreover, notice of a complaint against Minnie was already given to
the Law Society.
Writer further understood the memorandum to state
that the Fund “is empowered to waive compliance with this
section”.”
46.12. “Writer
started to follow up immediately to obtain the file required for the
claim. This is evidenced by the fact
that on 7 January 2010 writer
wrote to the Law Society as follows: “Can you please let us
have the contact details for Mr.
Johan Van Staden as we need to
obtain all the files pertaining to our clients claim.” In
reply to this letter, on 12 January
2010, the Law Society stated that
they would follow up.”
46.13. “On 14
January 2010 writer replied to the Law Society that “We look
forward to hearing from you in due course”.
This was repeated
in a letter dated 25 February 2010. The file was never sent. On 11
May 2010 writer wrote to the Law Society
yet again and enquired “as
a matter of extreme urgency”. Again on 28 May 2010. No reply
was forthcoming, not even
to state that the file could not be
obtained or located.”
46.14. “When
writer realized that the claim process was now being delayed
unnecessarily it was decided by writer to file the
claim and
affidavit without the file. This took place on or about 11 June
2010. In Hartzer’s affidavit in support of his
claim, he
stated as follows explaining why the file was not included as part of
the claim documents: “7. As no response
was received from the
law Society I am not in a position to annex the entire file of
Minnie”.”
46.15. “Considering
that the delay was occasioned by the attempt to provide the Fund with
the file, as was stipulated in the
memorandum as a requirement, the
claim, it is submitted, was furnished as soon as practicable. As
such the Board would be asked
to exercise its discretion to extend
the required 3 (three) month period for a sufficient period to cover
the period in which Fairoak
submitted written notice of its claim
against the Fund.”
46.16. “We are
aware that there exist many claims relating to trust monies embezzled
by Minnie and that the Fund had knowledge
of similar claims long
before Fairoak submitted its claim. As such the lateness of this
claim certainly would not have delayed
any investigation into the
affairs of Izak Minnie Inc.”
46.17. “Accordingly,
we would ask the Board, having regard to all the circumstances that
has been placed before it previously
and now, to reconsider to accept
Fairoak’s claim.”
47. Approximately 7
months later, by letter dated 23 September 2011, Ms V Dondolo, the
Claims Manager of the Fund, informed Badenhorst
as follows:
“Please be
advised that your client’s claim was rejected because it was
not lodged timeously in terms of Section 48(1)(a),
as it was lodged
with the Fund almost a year after the claimant became aware of the
problem . Furthermore, the reasons given were
not helpful at all to
convince us to consider condonation of the compliance with Section
48(1)(a).”
48. Fairoak’s
notice of motion was issued on 16 March 2012 and served on
Respondents on the same date.
49. Respondents did
not dispatch a record of the proceedings of the Board of Control or
reasons relating to any decision by the
Board of Control under review
to the Registrar in terms of Rule 53(1)(b).
50. An opposing
affidavit by Mr Jerome Losper (“Losper”), the Claims
Director in the employ of the Board of Control,
on behalf of
Respondents, was delivered on 9 May 2012, in response to Hartzer’s
founding affidavit.
51. Losper referred
in his affidavit to the decision by the Board of Control, sought to
be reviewed by Fairoak. He did not aver
that he had been present
during any meetings by the Board of Control when the relevant issues
were considered and decided upon.
He also did not deal with the
circumstances discussed and considered, including the weight attached
thereto, by the Board of Control
prior to any decision by the latter.
In general Losper advanced reasons why, according to him, Fairoak’s
claim was lodged
outside the required three month period. He averred
that Respondents have declined to grant an extension of the three
month period,
“… as the Applicant has not submitted
sufficient grounds to justify the Respondents granting such an
extension under
section 48(2) of the Act”.
52. It was not
alleged on behalf of Respondents that notice of Fairoak’s claim
on 11 June 2011 could cause any prejudice to
the Fund or that the
latter’s investigation and/or the procedure arising from the
claim, is as a result thereof affected
in any manner whatsoever.
CLAIMS AGAINST
THE FUND IN TERMS OF THE ACT
53. A person who has
suffered a pecuniary loss, stemming from the theft of money by a
practising attorney entrusted to him in the
course of his practice,
has in terms of section 26(a) of the Act a claim against the Fund,
if:
53.1. written notice
of the claim is given to the Council of the Society concerned and to
the Board of Control within three months
after the claimant became
aware of the theft or by the exercise of reasonable care should have
become aware of the theft (section
26 and 48(1)(a) of the Act); and
53.2. within six
months after a written demand has been sent to him or her by the
Board of Control, the claimant furnished the Board
of Control with
the proof which it may reasonably require (section 48(1)b) of the
Act).
54. The provisions
of section 48(1)(a) of the Act, in particular the meaning of “became
aware” and “reasonable
care” were considered by
King J in SVV Construction (Pty) Ltd v Attorneys, Notaries and
Conveyancers Fidelity Fund
1993 (2) SA 577
(C) (584B-I). The
relevant findings are summarised as follows:
54.1. The effect of
section 48(1)(a) of the Act is to deprive a person of a claim (in
terms of section 26(a) of the Act), unless
notice in writing is given
within the prescribed period. Such provision should be strictly
construed (584B and 585C).
54.2. To become
aware of something involves a change from a state or condition of
ignorance to awareness. It imports the actual,
personal knowledge of
something previously unknown by the claimant (584J-585D).
54.3. The required
knowledge is not confined to the mental state of awareness, produced
by personal participation in the theft or
by information derived from
the actual thieves, but includes a conviction or believe engendered
by the attendant circumstances.
Mere suspicion not amounting to
conviction or knowledge is not knowledge (585E).
54.4. An awareness
is required of the material facts which would create in the mind of
the reasonable man the knowledge, in the
sense of the belief or
conviction, not merely the suspicion, that a theft had been
committed. That connotes something less than
certainty in the mind,
but at least that which amounts to mental acceptance of a
proposition, statement or fact, as true, on the
ground of authority
or evidence, which is considerably more than mere suspicion or
impression. A claimant has therefore to be able
to say “with
the evidence at my disposal I, as a reasonable man, am satisfied that
the attorney has committed theft”
(585F-H).
54.5. Theft is a
legal concept. Knowledge that theft has been committed is therefore
required. The type of theft involved in casu
is misappropriation of
trust money. The material ingredient of such theft is the wrongful
(in the sense of mens rea) dealing by
an attorney with or
appropriating to his own use of the monies entrusted to him (585I –
586C).
54.6. A debit
balance in the trust account of an attorney is not necessarily
indicative of theft. Reckless dealing with trust money
does not
necessarily amount to theft. Deficiencies in a trust account leading
to a debit balance, resulting in dishonoured cheques,
can be due, not
to dishonesty, but to errors and miscalculations resulting from a
failure to keep proper books of account (586D-E).
54.7. The exercise
of reasonable care means acting as a reasonable prudent person would
have done in the particular circumstances
of a matter. A person must
not have been negligent in failing to take whatever steps were
reasonably open to him, steps whereby
he should have become aware of
the theft, i.e. if reasonable care had been exercised he would have
become aware of the theft (586I-587B).
55. If the Board of
Control is satisfied that, having regard to all the circumstances, a
claim or the proof required by it has been
lodged or furnished as
soon as practicable, it may in its discretion extend any of the
abovementioned periods. Section 48(2) of
the Act, which gives that
power to the Board of Control, reads as follows:
“(2) If the
board of control is satisfied that, having regard to all
circumstances, a claim or the proof required by the board
has been
lodged or furnished as soon as practicable, it may in its discretion
extend any of the periods referred to in subsection
(1)”.
56. No action can
without leave of the Board of Control be instituted against the Fund
unless the claimant has exhausted all available
legal remedies
against the practitioner in respect of whom the claim arose or his or
her estate and against all other persons liable
in respect of the
loss suffered by the claimant (section 49(1) of the Act).
57. On payment by
the Fund of money in settlement in whole or in part of any claim
under the Act, the Fund is subrogated to the
extent of that payment
to all the rights and legal remedies of the claimant against any
practitioner or any person in relation
to whom the claim arose, or in
the event of his or her death or insolvency or other legal
disability, against any person having
authority to administer his or
her estate (section 50 of the Act).
58. The Board of
Control consists of the serving presidents of all Law Societies, and
three members of each Society elected annually
by the Council of the
Society (section 28(1)(a) and (b) of the Act).
59. A decision of
the majority of the members of the Board of Control present at any of
its meetings is the decision of the Board
of Control (section 34 of
the Act).
60. The Board of
Control may appoint one or more committees to assist in the carrying
out of its duties, the performance of its
functions and the exercise
of its powers. The Board may assign to a committee so appointed
those of its powers as it may deem
fit but will not be divested of
any power which it may have assigned to a committee and it may also
amend or withdraw any decision
of any such committee. The purpose of
such a committee is to either generally or specifically enquire into
and to advise the Board
of Control of any matter in relation to the
duties, functions or powers of the Board (section 34A(1)(a), 34A(2)
and 34A(3) of the
Act).
61. On a proper and
purposive interpretation of section 48 (2) read with section 48(1) of
the Act the Board of Control should have
done the following in terms
of the Act:
61.1. It had to
determine when Fairoak became aware of the theft or when, by the
exercise of reasonable care, it should have become
aware of the
theft, to establish whether the required written notice was given to
it within three months after such date;
61.2. If the
required notice was not received within the three month period, it
had to have regard to all the circumstances, to
decide whether notice
of the claim, despite being lodged late, has been given as soon as
practicable.
62. Rampai J
remarked in Sunet van den Berg N.O. v The Attorneys’ Fidelity
Fund and others, an unreported decision in the
Free State High Court,
Bloemfontein, Case No: A166/2012 at paragraphs 32 and 35 that the
Fund “was created for the prime
and exclusive purpose of
protecting innocent members of the public from abuse and thieving
attorneys. Once it has been ascertained
that the money has indeed
been stolen by an attorney… then dictates of justice demand
that the victim be compensated. To
repudiate a clearly proven claim
merely because the requisite notice in terms of section 48(1) was
belated seems to be repulsive
and inimical to the ethical norms which
are deeply rooted in the moral and philosophical foundation of the
relevant legislation.
Moreover, the board of control must appreciate
that the relatively short period of three months … was
primarily inserted
… to take appropriate steps to prevent
further thieving, to retrieve, where possible, the proceeds of
thieving and to prevent
an incriminated attorney from dissipating
misappropriated funds or concealing such funds or assets acquired by
means of trust
funds.” I am in agreement with those remarks.
63. In Northern
Provence Development Corporation v Attorneys Fidelity Fund Board of
Control 2003(2) SA 284 (TPD) at 297E Moseneke
J (as he then was)
expressed the view, with which I agree, that there is no doubt that
when the Board of Control exercises the
statutory function conferred
on it by section 48(2) of the Act, such conduct would be subject to
normal review by the High Court
and that the Court may direct that
the Board of Control takes such steps as may be fair and just, regard
being had to all the circumstances
related to the dispensation which
the affected party seeks.
64. From the letters
referred to in paragraphs 38, 42, 45 and 47 above it appears that the
Fund’s approach to the matter was
that Fairoak became aware
during approximately July 2009 of the theft of the trust money held
by Minnie. That resulted in the Fund’s
decision to reject
Faroak’s claim, because the reasons advanced by Faroak’s
did not convince the Fund to consider condonation.
65. I referred in
paragraphs 49 and 51 above to the fact that no record of the
proceedings of the Board of Control was dispatched
in terms of Rule
53(1)(b) by Respondents nor did the opposing affidavit disclose what
circumstances were in fact considered by
the Board of Control,
including the weight accorded thereto.
66. No proper
factual basis exists for the Fund’s decision that Fairoak had
been aware during July 2009 already that Minnie
had stolen the money
entrusted to him by Fairoak. In this regard the following summary of
facts will suffice for the finding that
based upon the evidence at
Fairoak’s disposal, it is unlikely that the latter could have
been aware during July 2009 that
Minnie has committed theft:
66.1. There was at
all relevant times, including July 2009, a long relationship of trust
between Minnie and Hartzer;
66.2. Minnie
advanced reasons to Hartzer why the total amount held in trust by him
could not immediately be paid to Fairoak, which
Hartzer believed,
because he trusted Minnie;
66.3. During July
2009 when Hartzer became agitated and frustrated, Minnie paid an
amount of R1 000 000.00 to Fairoak and furnished
it with three
post-dated cheques for the balance, in the total amount of R1 656
000.00;
66.4. Before the
cheques could be deposited, Minnie stopped payment thereof. He
explained to Hartzer why those cheques would be
replaced, although
that never occurred;
66.5. Since July
2009 Hartzer continued unsuccessfully to obtain payment from Minnie;
66.6. Minnie
remained Fairoak’s attorney until November 2009. The latter
continued to practice as an attorney until 17
November 2009 when he was suspended in his practice;
66.7. During
November Hartzer, a lay person, without legal knowledge, consulted
Badenhorst, who lodged Fairoak’s claim with
the Law Society on
9 November 2010, when Minnie was still an attorney;
66.8. No office file
or transaction record of Minnie was available to Fairoak, despite
Badenhorst’s various written requests
to the Law Society
therefor. That remained the position until 11 June 2010, when
Fairoak’s claim was also lodged with the
Fund, two days after
Minnie’s estate was sequestrated on 9 June 2010;
66.9. In the absence
of a file or a transaction record pertaining to Minnie’s
practice it is unlikely that Fairoak would have
been aware of
Minnie’s dealings with trust money from which it could be
ascertained whether trust monies were dealt with
wrongfully or
misappropriated by Minnie, to satisfy the legal concept of theft of
trust monies;
66.10. Even if
Hartzer consulted an attorney earlier than November 2009, when he
approached Badenhorst, there is nothing to show
and it is unlikely
that access to Minnie’s relevant records would have been
obtained before the claim was lodged with the
Fund on 11 June 2010;
67. In view of the
above the Board of Control committed a material error of fact when it
based its decision upon the fact that Fairoak
became aware (or should
have become aware by the exercise of reasonable care) during July
2009 already that Minnie committed theft
of trust money. The Board of
Control should have found that in the absence of access to Minnie’s
records it is unlikely that
Fairoak could have been aware (during
July 2009) that Minnie wrongfully dealt with trust money or
misappropriated such money, because
mere suspicion, not amounting to
conviction or knowledge, is not enough for a finding that Fairoak
“became aware” of
the theft for purposes of section
48(1)(a) of the Act.
68. The following
circumstances should also have been considered by the Board of
Control in terms of section 48(2) of the Act, to
the extent that
Fairoak became aware of the theft of money, held in trust by Minnie,
more than three months before the Board of
Control received written
notice on 11 June 2010 of Fairoak’s claim:
68.1. Fairroak
established, at least prima facie, that it has a valid claim in terms
of section 26(a) of the Act for the balance
in the amount of R1 556
000.00 against the Fund;
68.2. Fairoak
managed to recover R1 000 000.00 of its money from Minnie during the
period preceding its claim against the Fund;
68.3. Hartzer
trusted Minnie, who continued to act as Fairoak’s attorney
until November 2009;
68.4. Hartzer was at
all relevant times mislead by Minnie and the former did not have
access to any records or facts indicating
that Minnie dealt
wrongfully with or misappropriated the trust money held on behalf of
Fairoak;
68.5. Minnie was
allowed to practice as an attorney until 17 November 2009;
68.6. Written notice
of Fairoak’s claim was given to the Law Society on 9 November
2009;
68.7. On 8 December
2009 the Law Society required of Fairoak to submit its claim to the
Fund by way of an affidavit accompanied
by the entire office file of
Minnie;
68.8. Despite an
undertaking on 12 January 2010 by the Law Society to provide
information about the required file to Badenhorst,
the former failed
for a period of 5 months to respond and/or comply with Badenhorst’s
request therefor, resulting in a delay
of at least five months from
January to May 2010;
68.9. No prejudice
at all was caused to, or alleged by the Fund, arising from any time
lapse before Fairoak’s claim was lodged
with the Fund on 11
June 2010;
68.10. Minnie was
sequestrated on 9 June 2010, two days before Fairoak’s claim
was lodged with the Fund, and he was removed
from the roll of
attorneys on 19 October 2010, four months after Fairoak’s claim
had been received by the Fund.
69. In summary, it
is clear therefore that Fairoak furnished a proper explanation to the
Board of Control for any delay, moreover
it has a valid claim against
the Fund in terms of section 26(a) of the Act, no prejudice was
caused to the Fund by any delay, which
was undoubtedly of a
relatively short duration and the Fund was aware of all relevant
facts and circumstances long before Minnie
was removed from the roll
of attorneys. Those circumstances, in conjunction with the aspects
referred to in paragraph 66 above,
called for a decision by the Board
of Control that the claim, assuming that it was late, was still
lodged as soon as practicable
and that Fairoak is entitled to
condonation for any non-compliance with the provisions of section
48(1)(a) of the Act.
70. It is so that
the distinction between an appeal and a review should not be blurred.
A review is concerned with whether a functionary
performed the
function, with which he was entrusted. The role of a Court is to
ensure that the decision-maker has performed that
function. A review
is therefore not concerned with the correctness of a decision made by
a functionary. (MEC for Environmental
Affairs and Development
Planning v Clairison’s CC
2013 (6) SA 235
(SCA) at 239I –
240A).
71. If the Board of
Control performed its statutory function in terms of section 48(2) of
the Act, by considering all the circumstances,
it would have extended
the period in which notice had to be given, to include 11 June 2010.
72. The Board of
Control did not only commit a material error of fact in deciding that
Fairoak became aware, or should have been
aware by the exercise of
reasonable care, during July 2009 already that Minnie committed theft
of trust money. Thereafter the
Board of Control rigidly applied the
three month statutory time limit without considering all the
circumstances, in particular
the reasons why Fairoak’s claim
was lodged on 11 June 2010. The decision of the Board of Control is
therefore unrelated to
the information available to it, because it
failed to take all the circumstances into account, resulting in a
failure to apply
its mind properly or at all, in disregard of its
purpose as a functionary in terms of the Act. That failure resulted
in an irrational
decision, to the effect that simply because it
regarded Fairoak’s claim as being lodged more than three months
after becoming
aware of the theft, Fairoak’s otherwise valid
claim falls to be rejected.
73. In the result
Fairoak’s application for the review and setting aside of the
decision by the Board of Control in respect
of Fairoak’s claim
in terms of section 26(a) of the Act succeeds.
74. I accordingly
order as follows:
74.1. Respondents’
decision rejecting Applicant’s claim lodged on 11 June 2010 in
terms of section 26(a) of the Attorneys
Act No 53 of 1979 (“the
Act”) against the Attorneys’ Fidelity Fund is set aside;
74.2. Respondents,
including the Attorneys’ Fidelity Fund, are ordered to consider
Applicant’s claim in terms of section
26(a) of the Act on the
basis that sufficient notice was given thereof in terms of section
48(1)(a) read with section 48(2) of
the Act;
74.3. Respondents,
jointly and severally, are directed to pay Applicant’s costs of
the application.
J W OLIVIER, AJ
13 March 2014.