The issue at the centre of this appeal concerned the question as to whether the Board, which owes its existence to s 25 read with s 27 of the Attorneys’ Act 53 of 1979 (the Act), holds liability for the loss of monies deposited by Prevance, into the trust account of Mr Robert Victor Weide, an attorney and conveyancer (Mr Weide).
Prevance is in the business of advancing finance to prospective sellers of immovable property for purposes of assisting them to cover fees associated with the transfer of immovable property to prospective buyers. Once the transfer process is concluded and the purchasers of the immovable property have paid the purchase price to the seller, the sellers repay Prevance back for the monies it has advanced to them. Such repayment is inclusive of an added fee as remuneration for Prevance. Mr Weide, falsely presented himself to Prevance, falsely claiming that he was legally acting on behalf of what later transpired to be non-existent prospective sellers of immovable property. Prevance advanced monies to the non-existent sellers by depositing such advanced monies into the trust account of Mr Weide. Mr Weide misappropriated the money and Prevance suffered pecuniary loss.
While the Board would typically reimburse a client who may suffer pecuniary loss as result of theft committed by a practising attorney of any money entrusted to such practicing attorney on behalf of the client in terms of s 26(a) of the Act. A number of exceptions to the general liability of the Board to reimburse a client who has suffered pecuniary loss are set out in the Act. Section 47(1)(g) of the Act in particular, excludes the Boards general liability in instances where a client’s money was not merely entrusted to a practicing attorney, but where there was also an instruction from the client for such monies to be invested on their behalf.
As such, the question that arose in this matter was whether the monies advanced and then deposited by Prevance to the trust account to Mr Weide were indeed entrusted to Mr Weide or whether such monies constituted investments. The Board argued that since the monies advanced by Prevance were deposited with Mr Weide in terms of a finance scheme conducted by Prevance, the monies had been invested and the liability of the Board was excluded in terms of s 47(1)(g). The Board contended that the monies deposited were not ‘entrusted’ to Mr Weide as envisaged in s 26(a) of the Act.
The High Court rejected the Board’s argument entirely and found that that the monies were indeed entrusted to Mr Weide and were not invested with him. The Board then contended that the High Court erred in finding that it was liable – hence the appeal to the Supreme Court of Appeal.
On an analysis of the facts and the law, the Supreme Court of Appeal found that when objectively observed, there was never any question of an investment being made by Prevance.
Accordingly, the Court held that Mr Weide, in soliciting the funds from Prevance and receiving them into his trust account had only the objective of theft, and as such the funds were not received as an investment or for any other legitimate purpose.
The Court further held that the provisions of the subsection are inapplicable as it was not simply a case of Mr Weide being instructed to make an investment and Mr. Weide was not merely a bystander or conduit.
It was the view of the Supreme Court of Appeal that the exception provided for in s 47(1)(g) the Act on which the Board relied on was not applicable in this matter. The court accordingly dismissed the appeal with cost (upholding the appeal against a judgment of the Gauteng Division of the High Court, Pretoria).
The matter further defines the meaning of “entrustment” to an attorney and the liability of the Fidelity Fund.
Written by Dewald Claassen and supervised by Charlotte Clarke , 8 October 2018