KwaZulu-Natal Law Society v Davey and Others

• Jurisdiction: South Africa
• Judge: Levinsohn DJP and Skinner AJ
• Judgment Date: 05 September 2008
• Citation: 2009 (2) SA 27 (N)
• Docket Number: 3406/2006
• Counsel: YN Moodley SC (with HS Gani) for the applicant. GJ Shaw QC (with AM Annandale) for the first, second, third, fourth and sixth respondents. JA Ploos van Amstel SC for the fifth respondent.
• Court: Natal Provincial Division

Levinsohn DJP:

[1] On 4 May 2006 the applicant law society commenced proceedings in this court seeking the removal of the five respondents from the roll of attorneys. Subsequently the sixth respondent was joined. F

[2] Essentially it is alleged that the respondents' directors and in one case a consultant in the firm Meumann White (MW), have been guilty of improper and unprofessional conduct in their conveyancing practice. In the applicant's view that conduct renders them unfit to practise as attorneys, notaries and conveyancers. G

[3] The respondents have opposed the application and have delivered answering affidavits and the applicant in turn has delivered a reply. The evidentiary material before the court is voluminous.

[4] The matter was argued on 18 and 19 June 2008. The court is H indebted to counsel for the applicant and counsel for the respective respondents for their detailed written argument which was of great assistance to us.

[5] Before getting to grips with the various issues that arise, it is convenient to set forth a brief summary of the salient facts that emerge I from the respective affidavits.

[6] The applicant's principal deponent is Mr Alfred Collen Rees who describes himself as the applicant's 'head of regulatory affairs'. At the outset Rees states that the applicant's main complaint against the respondents is what the applicant perceives to be the respondents' J

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A improper relationship with non-practitioner third parties. This particularly relates to the respondents' conveyancing practice.

[7] The two so-called non-practitioner third parties are Wakefields who carry on business as estate agents and MortgageSA.com (MSA.com). The applicant charges that the respondents obtain conveyancing instructions B in an improper and unprofessional manner, thus breaching all of the applicant's rules and rulings, as well as the international code of ethics. It is said that these breaches are of such a serious nature that they require this court to impose the ultimate sanction of a strike-off from the roll of attorneys.

C [8] MSA.com carries on business as 'mortgage originators'. According to Rees its principal function is the securing of mortgage bonds from the various financial institutions on behalf of purchasers. In the normal course mortgage originators would receive applications from members of the public and estate agents. They in turn would negotiate with the financial institution with a view to obtaining a loan on favourable terms. The D financial institution concerned pays it a commission.

[9] Rees put forward a hypothesis as follows:

On securing the approval of a bond from a financial institution, mortgage originators would have the ability to influence the financial E institution concerned to engage the services of a specific firm of attorneys to attend to the transfer of the property. In this way, mortgage originators have the ability to influence the allocation of bond instructions to particular attorneys of their choice.

[10] Rees goes on to aver that the arrival on the scene of these mortgage originators has in his words 'significantly impinged' on the ability of F financial institutions to appoint conveyancers of their choice to register their mortgage bonds.

[11] Rees points out that mortgage originators have established their own panel of eligible attorneys and they insist that instructions to register G mortgage bonds be given to those attorneys only.

[12] According to Rees the applicant has over a period of time received complaints about certain attorneys who employ improper methods to tout work from estate agents, mortgage originators and other non-practitioner entities. Those that complain allege that the result of this is H that their practices have all but dried up.

[13] According to Rees this state of affairs has resulted in disharmony among conveyancing practitioners. The applicant in consequence of this convened a symposium of conveyancers chaired by The Honourable Mr Justice Thirion. Mr Justice Thirion's report is put up as an annexure I to Rees's affidavit.

[14] Following upon this and having regard to certain disclosures which were made by the third respondent at the said symposium the applicant decided to investigate MW's relationship with both MSA.com and the estate agents, especially Wakefields. On 24 June 2005 the applicant's council resolved to appoint an inspection committee to inspect the books J and records of MW. The committee was mandated to determine the

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nature of the relationship between MW and the entities referred to A above. In due course the committee submitted its report to the applicant's council. This forms part of the founding affidavit as well.

[15] The inspection was conducted on 3 November 2005 in the presence of all five respondent partners. The respondents furnished extracts of the firm's financial statements for the financial year ended B 2005. In addition the committee was provided with extracts from the ledger reflecting its advertising expenditure.

[16] The said committee focused principally on the relationship between MSA.com and Wakefields. It concluded that MW had contravened applicant's rules of conduct as follows: C

(a)

Rules 14(b)(vi) and (xv) in that they are touting for work and are thereby engaging in conduct which is likely to attract business unfairly.

(b)

Rule 14(b)(xix) in that they are securing work by conferring benefits upon estate agents in order to induce them to channel D work to Meumann White.

(c)

Rule 14(b)(xvii) in that they are guilty of conduct which impairs their independence by creating conflicts of interest.

(d)

Rule 14(b)(xxiii) and (xxiv) and ss 2 and 4 of the Prevention and Combating of Corrupt Activities Act in that they are offering inducements to estate agents and a mortgage originator to E influence their appointment as conveyancers.

[17] Rees goes on to aver that the committee's findings in regard to the amounts expended on advertising -

confirm the operation of an elaborate and orchestrated scheme on the part of Meumann White to remunerate estate agents and other F non-practitioners in various indirect respects for the referral of work.

[18] The committee also observed that the 'partners of Meumann White entertained on a lavish scale'. The inference sought to be drawn from this according to Rees was that this scale of entertainment was simply recompense for the referral of instructions. Rees makes the point that as G early as 2002, after the symposium presided over by Mr Justice Thirion, the respondents, notwithstanding warnings from the learned judge, persisted in their conduct which is characterised by the deponent as follows:

However, notwithstanding such caution and the concerns of the H profession as expressed at this meeting, Meumann White have continued to engage itself in disguised schemes to buy and/or tout for instructions.

[19] Rees goes on to emphasise that MW's extensive expenditure is in his view directed at securing instructions for the firm. He characterises I this as 'intentionally remunerating and benefiting non-practitioner third parties in exchange for the referral of work'.

[20] Again, in para 59 of his affidavit, he states:

In the circumstances, the Applicant contends that the Respondents have embarked on a premeditated and disguised scheme to 'buy work', I

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A and that it is indisputable that the Respondents have in fact derived significant direct financial benefit as a result thereof.

[21] At para 64.4 the theme is repeated:

The same reasoning applies to the Applicant's prohibition against touting. The manifest objective of Meumann White advertising with B estate agents and expending on these non-practitioners is to secure referrals of work. This has the effect, or is likely to have the effect, of compromising or impairing a number of core values of the profession, including the following:

64.4.1

The Respondents' independence and integrity. It is indisputable that the close relationship which Meumann White has C fostered between itself and MortgageSA.com and the estate agents has rendered (or is likely to render) Meumann White in a special position to those non-practitioners which influences and incentivises them to refer work to Meumann and White.

64.4.2

The lay client's freedom of choice of attorney is compromised or is likely to be compromised. The 'scheme of arrangement' D between Meumann White and MSA.com and the estate agents places (or is likely to place) an 'unwritten obligation' on the latter entities to persuade their clients to refer their conveyancing and bond instructions to Meumann White. This is clearly what is happening in the case of Meumann White.

64.4.3

The good repute of the firm and that of the attorney's profession. E Within the context of the attorney's profession, 'buying work' has historically been regarded as an undesirable evil, which endangers the reputation of both the practitioner concerned and that of the profession. It also compromises the interests of the public. This is confirmed by formation of a concerned citizen's grouping.

64.4.4

F The duty to act in the best interests of the client. It is notorious, within the context of touting, that, due to the fact that the attorney is required to pay (in whatever respect) for the instruction, there is a likelihood of the lay client being overcharged, which serves to the serious detriment of the client. Due to the added 'cost' in paying for the instruction, G the likelihood of the standard of work being compromised also arises.

[22] Rees goes on to specify the various rules of professional conduct and rulings of the applicant which in his view have been contravened. It is unnecessary at this stage to summarise these. I shall presently turn to H consider the applicant's rules...