Hirschowitz Flionis v Bartlett and Another

• Jurisdiction: South Africa
• Judge: Howie P, Zulman JA, Navsa JA, Brand JA and Van Heerden JA
• Judgment Date: 22 March 2006
• Citation: 2006 (3) SA 575 (SCA)
• Docket Number: 546/04
• Hearing Date: 03 March 2006
• Counsel: C J H Badenhorst SC and P Pauw SC for the appellant. Z F Joubert SC (with G W Amm) for the respondents.
• Court: Supreme Court of Appeal

Howie P:

[1] The primary question in this appeal is whether the appellant firm of attorneys, in whose trust account the first respondent caused to be deposited the sum of R3,1 million, owed the latter a legal duty to deal with the money without negligence. The appeal is against B an order made on trial in the Johannesburg High Court by Schwartzman J who answered that question in the affirmative. The learned Judge went on to find that the appellant had dealt with the money negligently and was therefore liable to pay the first respondent damages in the sum concerned plus interest from the date of judgment. It was ordered C accordingly. With the necessary leave, the appellant appeals. There is a cross-appeal, also with leave, against the interest order, the contention being that interest should have been ordered to run from a much earlier date. The judgment of the High Court is reported. [1] I shall call it 'the reported judgment'. D

[2] The litigating parties are practising Johannesburg attorneys. The first respondent, Mr J R N Bartlett, cited his professional company, of which he is sole director and shareholder, as co-plaintiff. The appellant is a two- person partnership. Only one of the partners, Mr A Flionis, was involved in the events with which the E case is concerned. The second respondent had no significant role in those events and the damages were awarded to Mr Bartlett only. Therefore, I shall, for convenience, refer to the protagonists as 'Bartlett' and 'Flionis', respectively.

[3] Bartlett testified at the trial. Flionis did not. The facts pertaining to the material events are established, directly or F inferentially, by Bartlett's evidence and the contents of various items of documentary evidence. The truth or authenticity of some of the documents or their contents was proved or admitted. However, certain documents discovered by Flionis were admitted in evidence on the restricted basis that they were no more than what they purported to be. In relation to the documents last mentioned, Bartlett called the G evidence of a handwriting expert to question their authenticity and, as regards Flionis' obligation as attorney with regard to money in his trust account, Bartlett led the evidence of a forensic accountant, Mr V Faris. A full summary of the facts is contained in the reported judgment in paras [12] - [39]. I shall refer only to such evidence as is pertinent to the issues on appeal. H

[4] Bartlett met a woman named Karen Hardaker in 1998. She lived then in Durban. Early in 1999 Hardaker mentioned to him a pending offshore gold-bullion transaction involving the sale of 10 tonnes of gold from an unnamed seller to a European company that would on-sell to the Swiss Government. Implementation involved a spectrum of agents and intermediaries. She claimed to be an intermediary between the seller's I agent and the buyer's agent and entitled as such to a commission

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on the eventual sale price. She went on to say that, if Bartlett put up what was referred to in evidence as a 'goodwill' deposit of A US$500 000, an even greater commission - between US$5 million and US$8 million - would be payable to him offshore, which the two of them could share. The 'goodwill' deposit, she explained, was required to demonstrate the seriousness and capability of the buyer, and enable it to initiate the transaction. The B necessary amount or its Rand equivalent had to be paid into a South African attorney's trust account. As Bartlett understood it, the deposit would remain in the trust account until the gold was paid for, after which it would be disbursed on his instructions; if the transaction failed the deposit would be returned to him. C

[5] Bartlett, a commercial attorney with about 19 years' experience, had limited financial means and could not put up US$500 000 himself. He therefore borrowed it from a client, one Loewen, and undertook repayment within 60 days of receipt into his own trust account. Loewen was due shortly to emigrate and Bartlett said he would arrange that repayment was effected offshore, which was attractive to Loewen. D

[6] In further discussion, Hardaker told Bartlett she had a business connection with a man whose broking company in Helsinki, Allied Global Securities (AGS), represented a Liechtenstein company, Amaxa. The latter would take delivery of the bullion and, in turn, deliver it to the Swiss entity. E

[7] On 29 January 1999, Bartlett received a draft agreement faxed from a Helsinki number. It purported to be a commission agreement between AGS and Bartlett relating to what was referred to as 'Transaction No 90129'. The draft stated that it involved 'commodities to be delivered to Amaxa . . . for import and F reverification of delivered quantity and quality with subsequent payments to Supplier and the parties herein involved'. Those 'parties' included Bartlett, Hardaker, AGS and Amaxa. It was Bartlett's obligation to 'obtain the funds of USD1 million, or equivalent in another currency, to be placed in a Trust Account of a South African law firm'. For their respective acts of participation, 2,5% of the total value of the goods would be due to G 'Karen's, Mrs Karen D Fairbairn-Hardaker and Mr H Cotter'; 2,5% to AGS; 5% to Amaxa in respect of the first 10 tonnes and 10% for subsequent quantities; and to Bartlett 15% for the first 10 tonnes and 10% thereafter. The supplier was not identified. The draft was signed on behalf of AGS. H

[8] The draft was silent as to the purpose of the money that would be put up by Bartlett. It would seem to have been unnecessary for the efficacy of any bullion sale that money be paid into a South African attorney's trust account, particularly by someone not a party to the sale. Moreover, it is unfathomable why Bartlett, a complete stranger to the trade, should have been earmarked for more commission I than AGS or Amaxa which were, supposedly, regular participants in the trade.

[9] Bartlett did not sign the draft. Instead, in a letter to AGS, dated 3 March 1999, he drew his own version of what he thought an appropriate agreement should contain. In his draft, although there was J

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reference to an 'actual supplier' (again unidentified), he described himself as 'seller' and Hardaker as 'seller's mandate'. A Why he referred to himself as seller he could not satisfactorily explain in evidence. Patently, it was nonsense. He also made provision for signature by Hardaker and Amaxa. He stipulated an offshore banking account into which his and Hardaker's commissions had to be paid, as also another offshore account to receive repayment of Loewen's loan. B Hardaker's commission was made payable not to her and H Cotter, as before, but simply to her. Having received faxed copies for signature and refaxing to Bartlett, Hardaker signed (as K D Hardaker) on 3 March and signatures purportedly on behalf of Amaxa and AGS were appended on 4 March, all without comment on any of Bartlett's C changes. From Bartlett's own trust account, the required 'goodwill' deposit, in the Rand equivalent (R3,1 million), was paid at Hardaker's direction into Flionis' trust account, on 3 March 1999.

[10] Bartlett did not tell Flionis of the deposit or its purpose. That was because Hardaker told him not to communicate with Flionis. She said that she had herself conveyed to Flionis what the D purpose of the deposit was. She urged Bartlett to trust her. He said he did. However, he went on to testify that he had nevertheless written and handed to Hardaker a letter stating the purpose for which Flionis was to hold the money. She was supposed to send the letter to Flionis and told Bartlett she had done so. However, at the time he gave evidence, he accepted she had not done so. Significantly, he was able E to produce copies of all his other important letters relative to the case, but not this one. He was unable to explain why.

[11] On 4 March 1999 Bartlett received an anxious telephone call from Hardaker, from Durban, to say that the money was not in F Flionis' account. He faxed her a sheet of paper on which was pasted a copy of the relevant bank deposit slip. She faxed a copy of his document back to him. On it she had written 'Urgent Attention: Alex Flionis' and, underneath, Flionis' fax number and a message stating that the funds referred to in the deposit slip had been cleared. This document was discovered by Bartlett, not Flionis. Whether Hardaker sent G Flionis an identical fax, the latter did not establish. As already mentioned, he did not give evidence. Nor did anyone else on his firm's behalf. Transmission details printed on this document show that Bartlett transmitted at 12:48 and that the return fax - from 'Hardaker's residence' - was at '13:04'. H

[12] Also bearing the printed transmission date 4 March 1999, is a document purporting to be a fax sent from Zurich by one Charlie F Gambino to Flionis' firm. The transmission printout gives no indication where it was sent from but the transmission time was 12:47. (Assuming it was sent from Zurich at 12:47, the time in South Africa would have been 13:47.) It contains a handwritten message in broken English, with sundry grammatical and spelling errors. The writer clearly was at pains to guide the flow of the manuscript with an object such as a ruler. The writing appears thus: J

Howie P

A

F

Howie P

[13] A typed transcript is as follows: A

'Zurich 4 - 3-1999	To: Hirschowitz; A Flionif; Attorney's; Johannesburg; South Africa
Mr Flionif, B

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