SVV Construction (Pty) Ltd v Attorneys, Notaries and Conveyancers Fidelity Guarantee Fund

• Jurisdiction: South Africa
• Citation: 1993 (2) SA 577 (C)

SVV Construction (Pty) Ltd v Attorneys, Notaries and Conveyancers Fidelity Guarantee Fund
1993 (2) SA 577 (C)

1993 (2) SA p577

Citation	1993 (2) SA 577 (C)
Court	Cape Provincial Division
Judge	King J
Heard	June 12, 1990; June 13, 1990
Judgment	July 17, 1990

Flynote : Sleutelwoorde B

Attorney — Theft of money by — Claim by owner for reimbursement by Fidelity Guarantee Fund in terms of s 26(a) of Attorneys Act 53 of 1979 — C Requirement of notice in terms of s 48(1)(a) — Requirement in s 48(1)(a) that written notice be given to Fund's board of control within three months after claimant 'became aware of the theft or by the exercise of reasonable care should have become aware of the theft' — Becoming aware of theft meaning that claimant must have had actual personal knowledge thereof — 'Knowledge' connoting awareness of material facts which would D create in mind of reasonable man belief or conviction (not merely suspicion) that theft, in sense of wrongful dealing by attorney with moneys entrusted to him, committed — 'Reasonable care' meaning that claimant required to act as reasonably prudent person would have in E particular circumstances of matter.

Attorney — Theft of money by — Claim by owner for reimbursement by Fidelity Guarantee Fund in terms of s 26(a) of Attorneys Act 53 of 1979 — Requirement that loss result of theft of money 'entrusted by or on behalf' of claimant — Substance and not form of transaction conclusive in deciding whether provision complied with — Entrustment meaning that F claimant must impress payment of money with trust — 'On behalf of' presumably encompassing concepts 'as agent for' and 'for benefit of', provided that person on whose behalf money placed acquiring legal right vis-à-vis attorney.

Headnote : Kopnota

G The plaintiff brought the instant action in a Provincial Division in terms of the provisions of s 26(a) of the Attorneys Act 53 of 1979 ('the Act'), contending that one L, an attorney to whom it had entrusted R38 000, had stolen the money. It appeared that one B, the plaintiff's financial director, had paid the R38 000 into L's trust account pursuant to a contract between the plaintiff and a third person in terms whereof the money was to be made available to the third person on the occurrence of a certain event, but returned to the plaintiff if the event did not occur. B, at all times acting on behalf of the plaintiff, paid the money to L on H the understanding that it could not be released to the third person without the plaintiff's written consent. When the envisaged event did not occur, the plaintiff gave instructions for the money to be refunded, after which it received a post-dated trust account cheque from L. On the due date, 14 December 1984, the cheque was dishonoured, marked 'return to drawer'. B immediately instructed plaintiff's attorneys to report the matter to the law society and to take steps to recover the money. Six days later the plaintiff's attorneys advised the law society that instructions I had been received from plaintiff to issue a provisional sentence summons against L based on the dishonoured cheque. On 4 January the law society advised that the matter was receiving attention. The plaintiff's attorneys then wrote to the defendant informing the defendant that the plaintiff was claiming the R38 000 from it, which claim was received by the defendant on 1 May 1985. Thereafter, over the following four-year period, plaintiff's attorneys wrote to defendant on 21 occasions concerning progress with the J claim. Defendant's

1993 (2) SA p578

A response over this period indicated that the matter had been investigated, considered on its merits and ultimately rejected on the ground that the plaintiff had failed to prove that any stolen money had been entrusted on behalf of the plaintiff to the attorney in the course of his practice. It appeared however that the defendant was not prepared to finalise its investigation of the matter until it was placed in possession of the record of the criminal proceedings against L. The defendant also indicated that, if legal proceedings were instituted by the plaintiff, defendant B would, firstly, take the point that the requirement in s 48(1)(a) of the Act that written notice of a claim against the fund had to be given within three months 'after the claimant became aware of the theft or by the exercise of reasonable care should have become aware of the theft' had not been complied with: the three-month period had commenced to run on the date of dishonour of the cheque (14 December 1984) and expired on 13 March C 1985, that is before defendant received plaintiff's claim on 1 May 1985. The defendant, secondly, contended that the plaintiff had not shown that the money had been entrusted to L 'by or on behalf of' the plaintiff, as required by s 26 of the Act, which section provides inter alia for the reimbursement of persons who suffer loss as a result of the theft of money entrusted to a practising attorney. The defendant argued that the money had actually been held in trust on behalf of the abovementioned third person, not the plaintiff, and that this appeared from the terminology used by the parties, such as that the money was to be held 'for' such D third party, on his 'behalf', or 'for his account'.

Held, as to the defendant's first contention, that to 'become aware' of a theft meant that the claimant must have had actual, personal knowledge thereof, knowledge connoting an awareness of material facts which would create in the mind of the reasonable man the belief or conviction (not merely the suspicion) that a theft, in the sense of a wrongful dealing by the attorney with the moneys entrusted to him, had been committed. E

Held, further, that the plaintiff (in the person of B) did not actually become aware of the fact that L had committed a theft until he was shown the bank statement from which this could be inferred with sufficient certainty to engender the necessary belief or conviction, by which time defendant had received the letter of 1 May 1985, which defendant accepted as constituting notice for the purposes of s 48.

Held, further, as to the next stage of the enquiry, viz whether the F plaintiff should by the 'exercise of reasonable care have become aware of the theft', that the 'exercise of reasonable care' meant that a claimant was required to act as a reasonably prudent person would have done in the circumstances: he must in other words not have been negligent in failing to take whatever steps were reasonably open to him.

Held, further, that there was nothing B could have done which would have made him aware that L had stolen the money: when the cheque was dishonoured he had acted promptly in referring the matter to plaintiff's G attorney with instructions to recover the money and to refer the matter to the law society; he thereafter corresponded regularly with the law society, which felt itself unable, despite its own investigation and the legal expertise of its members, to determine whether or not L had committed theft - the defendant was in fact not willing to finalise said investigation until the facts became known by way of criminal trial.

Held, further, that, if the law society could not achieve the required H awareness over a period of four years, it could not be expected of B to have been able to do so during the three-month period between 14 December 1984 and 13 March 1985: despite what he might have suspected, there were no steps reasonably open to him which could have confirmed this suspicion - the fact of the theft was only known much later, however much suspicions may have been aroused.

Held, further, that the plaintiff had accordingly complied with the requirements of s 48(1)(a).

I Held, further, as to the defendant's second contention (that the money had not been entrusted to L 'by or on behalf of' the plaintiff, as required by s 26 of the Act), that the act of entrustment involved placing in possession subject to a trust, the impressing of the payment with a trust, and that B could not have done more than he did in this regard: he took advice from the plaintiff's attorneys, then contacted L, to whom he made it clear that the money was to be paid into L's trust account, and that it was the plaintiff's money represented by the plaintiff's cheque, which money was not to be released without the plaintiff's consent; and the J cheque was given only

1993 (2) SA p579

A when written confirmation of the instructions with regard to the holding of the money in trust and the conditions relating to its release was received.

Held, further, that the phrase 'on behalf of' could presumably encompass the concepts 'as agent for' and 'for the benefit of', provided that the person on whose behalf the money was placed acquired a legal right vis-à-vis the attorney: thus, if A placed the money on his own behalf in trust with an attorney, then he is the person who has entrusted it and is entitled to reimbursement; if he places it on behalf of, say, his wife, B then she is the person on whose behalf the money was entrusted and she is entitled to reimbursement.

Held, further, that it was perfectly clear in the instant case that the money was held in trust for the plaintiff and that this was not altered by the fact that the plaintiff would have been obligated on the happening of a certain event to authorise or direct the release of the money to a third person - the money had been entrusted by the plaintiff on its own behalf, C not someone else's.

Held, further, that the fact that the parties had originally used terminology such as that the money was being held 'for' a third person, on his 'behalf', or for his 'account' was immaterial: what was decisive was not what the parties in their ignorance chose to call the transaction, but what actually took place.

Held, accordingly, that...