Louw NO and Others v Coetzee and Others

JurisdictionSouth Africa
JudgeHowie JA, Streicher JA, Mpati JA, Jones AJA and Lewis AJA
Judgment Date29 November 2002
Citation2003 (3) SA 329 (SCA)
Docket Number342/2002
Hearing Date18 November 2002
CounselJ H Dreyer SC (with him A N Oelofse) for the first appellant. No appearance for the second and third appellants. P J J de Jager SC (with him C A C Korf) for the respondents.
CourtSupreme Court of Appeal

Lewis AJA: B

[1] During the past few years a number of banks have run into financial difficulties, and the question has arisen as to the fate of money deposited by attorneys, who have accepted from their clients money in trust, in specially designated bank accounts in terms of s 78 of the Attorneys Act 53 of 1979. This appeal arises from the placing of Saambou Bank Ltd ('the bank') under curatorship in February C 2002. [1] The first appellant (to whom I shall refer as 'the curator') is the curator of the bank. The second and third appellants played no part in this appeal. The first and third respondents are attorneys' firms that deposited clients' trust funds with the bank. The second and fourth respondents are clients who had paid moneys in trust to the respective firms. D

[2] The curator refused to pay to the respondents on demand any deposits made with the bank in terms of s 78(2A) of the Attorneys Act [2] except in sofar as the deposits were linked to guarantees furnished by the bank. The respondents successfully applied to the Pretoria High Court for various forms of E relief. Shongwe J ordered, inter alia, that:

1.

The curator's decision to refuse to pay out deposits made after 23 November 2001 be set aside by virtue of s 5(8)(a) of the Financial Institutions (Protection of Funds) Act 28 of 2001 (to which I shall refer as the '2001 FI Act'). [3] F

2.

All moneys deposited by the attorneys after that date did not form part of the assets of the bank.

3.

All deposits made by the respondent attorneys on behalf of their clients in terms of s 78(2A) of the Attorneys Act were repayable, with interest, on demand. G

[3] It is against these orders that the curator now appeals with the leave of the Court below. It is noteworthy, however, that the respondents did not appear at the appeal hearing, and that the Court did not have the benefit of heads of argument submitted on their behalf.

[4] The basis of the decision of the Court below is an interpretation of certain provisions of the 2001 FI Act, coupled with a H comparative

Lewis AJA

assessment of provisions in the predecessor to that Act, the Financial Institutions (Investment of Funds) Act 39 of 1984 (the A '1984 FI Act'). [4] It is accordingly necessary to examine the relevant provisions in order to determine whether they do apply to moneys placed in an attorney's trust account in terms of s 78(2A) of the Attorneys Act. It was not contended, however, that the 1984 FI Act applied to such trust funds. The change, the respondents successfully argued in the Court below, was wrought B when the 2001 FI Act came into operation, precluding funds deposited by an attorney in terms of s 78(2A) of the Attorneys Act from becoming part of the bank's assets in the event of its insolvency. The redefinition of 'trust property' and the more detailed provision (s 4(5) in both Acts) in the 2001 FI Act dealing with the exclusion of trust property from the assets of a financial institution, the Court C below held, were such as to render the 2001 FI Act applicable to moneys deposited by an attorney who in turn holds it in trust for a client.

[5] Under the 1984 FI Act, the purpose of which was 'to consolidate the laws relating to the investment, safe custody and administration by financial institutions of funds and trust property', D trust property was defined as 'any corporeal or incorporeal, movable or immovable asset kept in trust'. Section 4 of the 1984 FI Act dealt generally with the investment of trust property and the obligations of a financial institution in this regard. The definition of a financial institution under both FI Acts is to be found in s 1 of the Financial E Services Board Act 97 of 1990, and includes a bank 'which deals with trust property as a regular feature of its business'. (The curator argued, in the alternative to the...

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7 cases
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