Legal Practitioners Fidelity Fund v Marshall
| Jurisdiction | http://justis.com/jurisdiction/166,South Africa |
| Judge | Dambuza ADP, Saldulker JA, Mothle JA, Matojane JA and Daffue AJA |
| Judgment Date | 13 June 2023 |
| Citation | 2023 JDR 2052 (SCA) |
| Hearing Date | 18 May 2023 |
| Docket Number | 702/2022 |
| Court | Supreme Court of Appeal |
Daffue AJA (Dambuza ADP and Saldulker, Mothle and Matojane JJA concurring):
Introduction:
At the heart of this appeal is the nature of a payment into the trust account of an attorney who has been struck from the roll since then, but failed to account fully for the funds deposited into his trust account. It is common cause that the attorney misappropriated the money. Ms Carla Marshall Guilherme (Ms Guilherme), the respondent in the appeal before us, suffered a loss. She unsuccessfully lodged a claim with the Legal Practitioners' Fidelity Fund (the Fund), the appellant in this appeal, for payment of the misappropriated amount whereupon litigation ensued.
Undisputed factual background:
It is apposite to deal with the relevant factual background before considering the parties' submissions. The following facts are common cause:
Ms Guilherme was previously married to Mr Bradley Clem Bartie (the deceased) who committed suicide on 10 May 2012; his attorney, Mr Spencer was appointed executor of the insolvent deceased estate.
Upon the death of the deceased Ms Guilherme became the sole beneficiary of the proceeds of a life policy in the amount of R5 000 000, of which she received an immediate cash payment of R50 000.
The balance of the death benefit in the amount of R4 950 000 was initially paid into Ms Guilherme's Nedbank account. Mr Spencer advised her to pay the money into
2023 JDR 2052 p3
Daffue AJA (Dambuza ADP and Saldulker, Mothle and Matojane JJA concurring)
his trust account as these funds were at risk as a result of the deceased's liabilities towards his creditors. Consequently, this amount was returned to the insurer and thereafter paid into a Capitec bank account which she had opened for that purpose, where after the full amount was transferred into Mr Spencer's trust account on/or about 1 June 2012.
Ms Guilherme withdrew a total amount of R1.4 million over a period of time from Mr Spencer's trust account. On 1 December 2016 Mr Spencer transferred R2 750 032.76 into her Nedbank account which she believed at that stage to be the full amount owing to her.
Ms Guilherme became concerned with the ineffective manner in which Mr Spencer was dealing with her matter and his advice in respect of the litigation by the bank against her. She terminated his mandate and appointed a new attorney who investigated the matter and made a reconciliation of the money held by Mr Spencer and paid back to her. He discovered that an amount of R799 967.24 was still due to her.
The new attorney further discovered that Mr Spencer had already been suspended from practice in April 2017 and eventually struck from the roll in November 2017.
On receipt of a letter of demand addressed to him, Mr Spencer denied that any amount was still outstanding, but Ms Guilherme believed that he had stolen her money, an aspect which is not in dispute.
A claim was submitted with the Fund on 13 September 2018 on behalf of Ms Guilherme, but eventually rejected on 15 July 2019 on the ground that there was no entrustment as contemplated in s 26 of the Attorneys Act.
Ms Guilherme stated in her founding affidavit:
'I would never, under any circumstances, have paid the monies to [Mr] Spencer for any other reason than that he as an attorney advised me to do so. I also felt comfortable because [Mr] Spencer was the executor of my late husband's estate and the money was paid into [Mr] Spencer's trust account. At no stage had I any reason, as a traumatised and grieving widow, not to trust [Mr] Spencer'.
This aspect was not disputed by the Fund. The Fund also did not dispute that Ms Guilherme believed that Mr Spencer was acting in her best interest.
2023 JDR 2052 p4
Daffue AJA (Dambuza ADP and Saldulker, Mothle and Matojane JJA concurring)
Litigation history:
On 17 November 2020 the Western Cape Division of the high court found in favour of Ms Guilherme, ordering the Fund to pay to her the amount of R 799 967.24 plus interest a tempore morae and the costs of the application. It made a further order directing Ms Guilherme's attorneys to notify Standard Bank (the bank) upon receipt of payment from the Fund into their trust account. The bank was a creditor of Ms Guilherme's deceased husband and she allegedly stood surety for the debt. At the stage when the order was made, the litigation between the bank and Ms Guilherme was pending. An application for leave to appeal was dismissed by the court of first instance, but this Court granted leave to the appellant to appeal to the full court of the Western Cape Division. The full court in a majority judgment dismissed the appeal. Thereupon the Fund requested and obtained special leave to appeal to this Court.
Grounds of appeal:
Several grounds of appeal have been raised. The Fund submitted that payment by the respondent of her money to an attorney for safekeeping to hide it from the creditors of her late husband's estate did not constitute an entrustment for purposes of s 26 of the Attorneys Act 53 of 1979 (the Attorneys Act), but rather a deposit for safekeeping. Also, Parliament could never have intended that payment of money into the trust account of an attorney for such purpose would constitute an entrustment as provided for in s 26. Furthermore, entrustment entails that the attorney entrusted with the money is bound to hold it and pay it over (a) to a third person (b) upon fulfilment of a particular condition, or the occurrence of a particular event, or (c) on the instruction of the depositor upon conclusion of a particular matter or transaction which is already in place or about to come into existence. Finally, the appellant alleged that it did not seek to import a further 'element' into the concept of entrustment and the court a quo erred in this regard.
Section 26 of the Attorneys Act
Ms Guilherme's claim, she being the successful plaintiff in the court of first instance, was premised on subsec 26(a) of the Attorneys Act. It needs to be recorded that at the stage when the action was instituted on 13 September 2018, the Legal Practice Act 28 of 2014 which repealed the Attorneys Act was not yet applicable.
2023 JDR 2052 p5
Daffue AJA (Dambuza ADP and Saldulker, Mothle and Matojane JJA concurring)
The heading of s 26 is significant, it being 'Purpose of the fund.' The relevant portion of the section, before its repeal stipulated as follows:
'Subject to the provisions of this Act, the fund shall be applied for the purpose of reimbursing persons who may suffer pecuniary loss as a result of
theft committed by a practising practitioner, his clerk or employee, of any money or other property entrusted by or on behalf of such persons to him or to his clerk or employee in the course of his practice or while acting as executor or administrator in the estate of a deceased person or as a trustee in an insolvent estate or in any other similar capacity.'
Evaluation of the parties' submissions
The Fund's main submission is that the legal concepts of 'deposit' (depositum) on the one hand and 'entrustment' as contemplated in subsec 26(a) of the Attorneys Act on the other are clearly separate and distinct from one another. A deposit (depositum), as alleged, is an agreement in terms whereof a thing is delivered for gratuitous safekeeping returnable on demand. [1] (I point out in the next paragraph that this submission is...
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