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[2014] ZAWCHC 119
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Probest Projects (Pty) Ltd v Attorneys Notaries And Conveyancers Fidelity Guarantee Fund (A21/14) [2014] ZAWCHC 119 (15 August 2014)
Republic of South
Africa
In the High Court
of South Africa
(Western Cape
Division, Cape Town)
CASE
NUMBER: A21/14
DATE:
15 AUGUST 2014
REPORTABLE
In the matter
between:
PROBEST PROJECTS
(PTY) LTD
..................................................
APPLICANT
And
THE ATTORNEYS,
NOTARIES AND
CONVEYANCERS
FIDELITY GUARANTEE
FUND
..........................................................................................
RESPONDENT
JUDGMENT
DELIVERED ON 15
AUGUST 2014
MANTAME, J
1 INTRODUCTION
[1] This is an
appeal against the judgment of Irish, AJ that was delivered on 29
April 2013. Appellant filed a claim against the
Respondent for
payment of an amount of R9.1m that was paid over into the trust
account of Izak Minnie Incorporated that was stolen
by an attorney
practising in that firm, Izak Minnie (“Minnie”).
[2] Respondent, in
turn, filed two special pleas, namely that:-
2.1 There was no
entrustment of monies, as contemplated in the “Act”
(Attorney’s Act, 53 of 1979) as the monies
paid over to Izak
Minnie Incorporated were paid over in terms of a business arrangement
entered into between Appellant and Minnie;
and
2.2 Appellant’s
claim against the Fund was time-barred in terms of Section 48(1)(a)
of the Attorneys Act, 53 of 1979 which
provides that:
“(1) No person
shall have a claim against the fund in respect of any theft
contemplated in Section 26 unless –
(a) 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; …”
[3] The court a quo
dismissed the first special plea and upheld the second special plea
on the basis that the respondent had established
that the Appellant
became aware of the theft of its funds by 23 July 2009. It is common
cause that the claim was only lodged with
the respondent on 20
November 2009, which is more than three months after the 23 July.
2.
SUMMARY OF
FACTS
[4] It is common
cause that Messrs William Conly Annandale and René de Matteis
on behalf of the Appellant were approached
by Minnie to invest on
property developments on which some of his clients were experiencing
difficulties in re-selling the units
that have been built due to the
fact that they have been sold and the bonds for some reason were
withdrawn from the purchasers
and would get them at a discount of
between 15% and 20%. Annandale and de Matteis did not view the
properties. Since they had
been dealing with Minnie for about 10
years and had never had difficulties with his dealings, they
entrusted the transactions to
him. De Matteis proceeded to transfer
an amount of R9.1m during 19 January 2009 – 17 March 2009 to
Izak Minnie Incorporated
Trust account. Respondent received no trust
receipts for this amount. Minnie, as agreed with respondent, was to
pay for all transactions
leading to the successful transfer of these
properties.
[5] Respondent
realised that Minnie was delaying in transferring the properties, and
they started to put pressure on him. In April/May
2009, he promised
to finalise the transactions and promised to pay the money back if he
could not finalise same. At some point
Minnie cited delays being due
to the inability to get the clearance certificates from the
municipality. In about June 2009, Minnie
further advised respondent
that his books were behind and would be updated shortly. He was
still dealing with the Law Society.
In the meantime, he offered
respondent some security in the form of properties. On 23 July 2009,
Minnie signed an acknowledgment
of debt and furnished some
suretyships to the respondent. This agreement provided for another
written agreement that was entered
into between Appellant and Minnie
on 4 August 2009. Respondent discovered that there were caveats
registered against those properties
which he had given as security at
about end October, beginning November 2009. Subsequent thereto,
Appellant gave notice to institute
a claim to respondent on 20
November 2009 in terms of Section 48(1)(a) of the Act. Annandale,
who is director of respondent according
to his testimony, was not
aware of Minnie’s financial difficulties and liquidation up
until November 2009.
[6] Respondent
refused to pay the claim on the basis that the notice of such claim
was not given within 3 months after the claimant
became aware of such
theft or by the exercise of reasonable care should have become aware
of the theft.
3.
ISSUES
[7] This court is
now called upon to determine whether the court a quo erred in
upholding the second special plea, and further dismissing
respondent’s claim.
4.
ARGUMENT BY
THE PARTIES
[8] Mr Van Zyl for
the appellant submitted that in SVV Construction (Pty) Ltd v
Attorneys, Notaries and Conveyancers Fidelity Guarantee
Fund
1993 (2)
SA 577
(C) at 585, the court considered the provisions of Section 48
(1) (a) and stated that knowledge in this context constitutes
personal
knowledge, based on the restrictive interpretation of a
statutory provision of this nature:
“I accordingly
hold that becoming aware in the section imports that actual, personal
knowledge of the claimant.
What then is this
‘knowledge’?
It is not confined
to ‘that mental state of awareness produced by personal
participation in the theft or by information derived
from the actual
thieves, but includes also a conviction or belief engendered by the
attendant circumstances’ (per Watermeyer
CJ in R v Patz
1946 AD
845
at 857, who is also reported to have said (loc cit) ‘(o)n
the other hand mere suspicion not amounting to conviction or belief
is not knowledge’).
What is then
required is the awareness of material facts which would create in the
mind of a reasonable man the knowledge, in the
sense of the belief or
conviction, not merely the suspicion, that a theft had been committed
(by a practising attorney in the course
of his practice).
‘Belief or
conviction’ 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 (OED sv ‘belief’);
‘conviction’
is ‘strong belief on the ground of satisfactory reasons or
evidence’ (OED); just as this is
more, considerably more, than
mere suspicion (however well founded the suspicion may subsequently
prove to be) so also is it stronger
than an impression (cf Feffrey v
Andries Zietsman (Edms) Bpk
1976 (2) SA 870
(T) at 871 E – F)
In other words, the
person in the position of a claimant has to be able to say: ‘with
the evidence at my disposal, I, as a
reasonable man, am satisfied
that the attorney has committed theft’ (cf Gramophone Co Ltd v
Music Machine (Pty) Ltd and Others
1973 (3) SA 188
(W) at 207 F –
G).
Theft is a legal
concept and to this extent, although this is not necessarily so in
all instances (cf R v Thornton and Another
1960 (3) SA 600
(A) at 611
G – H), knowledge, in the sense above set out, ie that the
known facts convey to a reasonable man that theft has
been committed,
is also required.”
[9] Counsel for the
appellant submitted further that, Mr Annandale, the director of the
appellant had no personal knowledge of the
misappropriation of funds
or theft up until November 2009. He was informed by Minnie that
funds were gone which Annandale understood
to have been stolen.
Therefore Minnie misrepresented the factual position as to the theft
of funds. Appellant through its representatives
was not aware of
theft on 23 July 2009 when he entered into those agreements. Besides,
respondent did not rely on knowledge of
theft of trust funds in the
plea, more specifically in relation to the date of 23 July 2009.
Further, respondent did not rely
on the second part of Section 48 (1)
(a) of the Act, to the effect that it was not pleaded that with the
exercise of reasonable
care, the Appellant should have been aware of
the theft.
[10] In response to
the above contention, Mr Oliver for the respondent argued that,
although that was an issue before the court
a quo, it is not an issue
on appeal, since the finding of the court a quo was that the
directors of appellant actually knew on
23 July 2009 that the funds
had in fact been stolen. In any event, respondent pleaded wide
enough to include a defence that appellant
should, through the
exercise of reasonable care, have known that the funds had been
stolen. On the probabilities appellant would
surely have taken
immediate steps in order to recover the money and would have obtained
legal advice in the event of appellant
knowing the money had been
stolen. Further, the attorneys who assisted with the drafting of the
acknowledgment of debt and surety
documents would have advised
appellant to institute a claim with respondent. Appellant therefore
elected not to lodge a claim
but elected to rely on an acknowledgment
of debt. So the only inference that may be drawn from such
circumstances is the Appellant
either knew that Minnie stole the
money, but elected not to institute a claim with the respondent or
attempted to protect Minnie
by rather taking its chances by entering
into the agreements and have Minnie sign an acknowledgment of debt to
repay the stolen
funds.
[11] Mr Oliver
further contended that appellants avoided making the original
acknowledgment of debt documents available to the court
a quo at all
cost. The implication is that appellant was avoiding the contents of
such documents coming to the knowledge of the
court, as it would be
clear that the directors of the appellant knew that the monies have
been stolen. Once there is actual knowledge,
as the court a quo
found, the first part of Section 48 (1) (a) applies. Therefore, he
argued that the appellant failed to make
out a case for misdirection
on the part of the court a quo and that the appeal should be
dismissed with costs.
5.
ANALYSIS OF
EVIDENCE AND THE APPLICABLE LAW
[12] At the start of
the hearing, in the court a quo, parties agreed that evidence would
be adduced by way of affidavits and a bundle
of documents would be
prepared which would also serve as part of evidence. Evidence in
this matter most unfortunately turns out
on the evidence that was
tendered by appellant (Annandale at the Law Society inquiry and his
affidavit) and Minnie (at the Law
Society inquiry and his affidavit).
No evidence was tendered by the respondent.
[13] Appellant
submitted that there were no facts that were placed in the court a
quo justifying a finding that appellant knew or
should have known
that the money was stolen.
[14] I now turn to
deal with the evidence that was before the court a quo. Annandale
testified at the Law Society inquiry that
their panic levels about
Minnie’s behaviour towards his lack of delivery to their
mandate started to rise at about June /
July 2009. Even though
Annandale gave evidence and filed affidavits about the steps they
have taken to find out about the monies
that were paid into Izak
Minnie Inc’s trust account, no specific dates were furnished
precisely of what happened where and
when. The only dates available
is when the monies were transferred into the trust account over the
period 19 January 2009 –
17 March 2009. There are no dates on
which appellant sought advice, and/or instructed Viljoen French and
Chester Inc, Randburg
to prepare acknowledgment of debt and
suretyship agreements that were signed on 23 July and 4 August 2009
respectively. I agree
with the inference that was drawn by the court
a quo that appellant had a firm of attorneys involved by 23 July
2009. Having regard
to the evidence that was led at the law society
inquiry and the new law firm instructed by appellant being
conveyancers, it should
have occurred to the said attorneys that
something was seriously wrong with Minnie’s trust account. It
would have immediately
rang a bell into an attorneys ear, immediately
a client comes with the version such as that of the appellant to
start probing deeper
into what happened with Izak Minnie Inc. The
only reason why those attorneys prepared an offer of security,
instead of reporting
the matter to the law society was that the
directors of the appellant wanted to protect Minnie against the law
society as they
had a long standing relationship. Further, the court
a quo was correct in finding that by the 23 July 2009, appellant’s
directors
knew that their money was gone from the trust account and
therefore their funds were stolen. It is furthermore inconceivable
that
appellant’s attorneys did not know about Izak Minnie Inc’s
liquidation from June 2009 until November 2009 when Minnie
broke the
news himself and when the same attorneys discovered that certain
caveats were registered against those properties.
[15] Appellants
submitted that there were no facts placed before the court a quo
justifying a finding that appellant knew or should
have known that
the monies were stolen. If the court a quo had to determine the time
period of which the claim was to be lodged,
it surely had to deal
with the requirements of Section 48 (1) (a) and ascertain if the
claim was lodged within the said time periods.
Besides, for the
second special plea raised by the respondent to be determinable, the
judge had to trace the footsteps backwards
as to when the appellant
became aware of the theft. In my view, the appeal ground raised by
the appellant is mischievous. It
cannot be disputed that the first
agreement that was concluded on 23 July 2009 between appellant and
Minnie had the clear implication
that appellant must have known, and
therefore did know that Minnie had misappropriated the monies for
investment in his own projects.
If appellant believed that his
monies were still in the trust account, he would not have concluded
the agreements he had on 23
July 2009 and 4 August 2009 respectively.
Those agreements were basically entered into by the parties in order
to secure repayment
of monies that were paid in Izak Minnie’s
trust account.
[16] Minnie, at the
Law Society Inquiry, pages 146 – 147 of the record testified
that:-
“Mr Molefe:
Now how did this affidavit come about?
Mr Minnie: When I
advised Probest of the apparent problem regarding the funds and that
stage a possible trust shortfall, I also
advised them what the
procedure would be for them to lodge a claim and to assist in lodging
a claim I had the duty to at least,
to the best of my abilities set
out the circumstances leading up to the problem.
Mr Molefe: Yes, but
explain the steps in detail, from the point where you had this
affidavit taken down, tell this Committee how
it happened.
Mr Minnie: When I
discussed the problem with Probest’s director, I indicated to
them that they in all probability will have
to seek the services of
another attorney to assist them with a claim against the Fund …”
It is common cause
therefore that appellant had a new set of attorneys by 23 July 2009.
Judging from Minnie’s testimony,
respondent knew about the
shortfall in the trust account before the services of other attorneys
were sought. The new attorneys
did not lodge the claim with
respondent, but rather prepared agreements referred to above. The
reasons for doing so could be gleaned
at page 149 of the record where
Minnie testified that:-
“Mr Minnie: I
think so, because in the beginning as the pressure mounted and we
flight through various means and procedures
to alleviate it, we tried
to sort out the problems and hoped that by putting up from my
investment properties for sale, we could
sort out the funds problem,
the problem was trust funds, that is and it became clear towards late
last year, 2009, I would say
about October or thereabout, that there
is no way around …”
This testimony again
confirms that the directors knew all along that there was a trust
shortfall in Izak Minnie Inc trust account,
but rather tried other
means in sorting out the problem. It was only in October 2009, when
they could not wiggle their way through,
that they sought refuge from
respondent.
[17] Further
Minnie’s testimony was confirmed by his affidavit dated 13
January 2010 that could be found at page 74 of the
record that:-
“13. I
appraised PROBEST of the situation and advised that a claim be lodged
on their behalf with the attorneys’ fidelity
fund.”
[18] The legislation
is clear that a written notice of a claim has to be 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.
Seemingly the 3 months period was not met by the respondent due to
the fact that Minnie and the appellants
explored other ways to solve
the shortfall issue in the trust account. Blame could not be shifted
to the respondent after the
appellants were tardy in resolving the
issue.
[19] Taking into
account all the evidence, I come to the conclusion that appellant
personally knew of this theft at least by 23
July 2009. In this
regard, see SVV Construction v Attorneys, Notaries and Conveyancers
Fidelity 1993 (2) SA 577 at 585 par D –
E, (supra) where King,
J held that:-
“I accordingly
hold that becoming aware in the section imports the actual, personal
knowledge of the claimant.
What then is this
‘knowledge’?
It is not confined
to ‘that mental state of awareness produced by personal
participation in the theft or by information derived
from the actual
thieves, but includes also a conviction or belief engendered by the
attendant circumstances’…”
6.
FINDINGS
[20] In my view,
appellant knew about the theft of funds by 23 July 2009. It was only
after they discovered that certain caveats
were registered against
those properties that Minnie put as security that they immediately
lodged the claim with the respondent.
[21] In my judgment,
I cannot find fault with the decision of the court a quo. Having
considered the facts above, it is highly
unlikely, improbable and
far-fetched that appellant did not know about the theft of funds by
23 July 2009.
[22] In the
circumstances, I propose the following order.
The appeal is
dismissed with costs including costs of 20 September 2013.
MANTAME, J
I agree, and it
is so ordered.
HLOPHE, JP
I agree.
WEINKOVE, AJ