The legal profession has been regarded as an honourable profession from time immemorial and legal practitioners are generally held in high esteem by members of the public. In Vassen v Law Society of the Cape of Good Hope 1998 (4) SA 532 (SCA) at 538G, the court emphasised that the profession of an attorney is an honourable one and, as such, demands complete honesty, reliability, and integrity from its members. Practitioners are, therefore, obliged to be honest to their clients, the court, colleagues, and members of the public in general.
Despite the honour bestowed on the profession, there are a few instances in which the conduct of some practitioners is at variance with the high standard of honesty and truthfulness expected of them. The conduct of these errant practitioners has led to some members of the public believing that lawyers are generally liars and/or thieves. This is a misrepresentation of the truth, as it cannot be said that all lawyers are liars or thieves. There are, however, very serious consequences for legal practitioners whose conduct is found to have fallen short of the high standard of honesty required by members of the profession. The rules of the Legal Practice Council (the LPC) and the ethics of the profession create a myriad of infractions for which legal practitioners may be disciplined. This article will, however, only focus on the misconduct relating to the theft of trust money by legal practitioners.
The LPC regulates all practitioners (attorneys and advocates) and all candidate legal practitioners. It is empowered in terms of s 6 of the Legal Practice Act 28 of 2014 (the Act) to develop norms and standards to guide the conduct of practitioners. Pursuant to its powers under the Act, the LPC has developed a Code of Conduct for all Legal Practitioners, Candidate Legal Practitioners and Juristic Entities and the Rules made under the authority of ss 95(1), 95(3) and 109(2) of the Act, which must be adhered to by all practitioners. Failure by a practitioner to comply with any provision of the Act or the rules may result in the legal practitioner concerned being hauled before the LPC’s disciplinary committee.
Section 40 of the Act provides that if the disciplinary committee finds a practitioner guilty of misconduct it may, among others, advise the LPC to apply to the High Court for an order striking the practitioner’s name from the roll, suspending them from practice or interdicting them from dealing with trust money. If the LPC is convinced that the legal practitioner concerned is no longer fit and proper to continue practice, it will apply to the High Court for an order as aforesaid. This is so because the High Court has the power to strike the name of a defaulting legal practitioner from the roll (s 31(1)(a) read with s 44(1) and (2) of the Act).
In terms of r 54.14.9 of the LPC, a firm must ensure that no account of any trust creditor is in debit. Furthermore, r 54.14.14 provides that withdrawals from a firm’s trust banking account shall be made only to or for a trust creditor or as transfers to the firm’s business banking account in respect of money due to the firm. It follows, therefore, that where a practitioner withdraws money from the trust banking account in contravention of these provisions, this will inexorably lead to a trust deficiency and the practitioner’s conduct may constitute theft of trust funds.
Theft of trust funds by legal practitioners is a very serious offence and has far-reaching consequences for practitioners. South African courts have held that an attorney who dishonestly misappropriates trust funds is not a fit and proper person to continue practising as an attorney and deserves the ultimate sanction of strike-off (Law Society of the Free State v Le Roux and Others (FB) (unreported case no 3039/2014, 30-11-2015) (Molemela JP, Daffue J and Mia AJ)). In South African Legal Practice Council v Bobotyana [2020] 4 All SA 827 (ECG), the respondent stole trust funds amounting to more than R 2 million. The court held that the respondent’s conduct was calculated, persistent and repugnant to the due and faithful discharge of his mandate as an attorney. The court further remarked that where an attorney has been found to have acted dishonestly a court will not lightly conclude that striking off is not a fitting sanction. The respondent’s name was accordingly struck from the roll of attorneys.
In Legal Practice Council (KwaZulu-Natal Provincial Office) v Naicker and Another (KZP) (unreported case number 2788/2019P, 6-11-2020) (Bezuidenhout AJ), the respondent stole the sum of R 1 million, which was deposited into his trust account in respect of the purchase of an immovable property. Shortly after the money was paid into his trust account the respondent made several unauthorised payments from the trust account contrary to the rules as discussed above. He passed the transfer and registered the property without having the funds in his trust account. Although the respondent subsequently paid the money back, the court held that such a payment does not mean that a wrong has been corrected. The court further held that when a person takes trust money, knowing that it is trust money, and then uses it for his own benefit, this constitutes theft. The court found that although the respondent’s conduct had fallen short of the high standard expected of a practitioner, his character has not been shown to be inherently flawed. He was therefore suspended from practice for a period of two years instead of being struck off.
A complainant or erstwhile client whose money was stolen by a legal practitioner has the right, not only to lodge a complaint with the LPC, but also to lay criminal charges with the South African Police Service (the police) against the practitioner concerned. It is not necessary for the victim of theft to await the outcome of any disciplinary inquiry by the LPC against the practitioner concerned before they can open a criminal case. The LPC – as the regulator – is also entitled to open a criminal case against a practitioner if it has reason to believe that a crime has been committed.
In terms of s 55 of the Act, the Legal Practitioners Fidelity Fund (the LPFF) is liable to reimburse persons (the claimants) who suffer financial loss as a result of theft of trust money or property by practitioners or their employees. Section 80 of the Act provides that once the LPFF has settled any claim in terms of s 55, the LPFF is subrogated, to the extent of the payment, to all the rights and legal remedies of the claimant against any practitioner or person in relation to whom the claim arose, or in the event of their death or insolvency or other disability, against any person having authority to administer their estate. The LPFF, therefore, steps into the shoes of the claimant and exercises all such rights and legal remedies as would normally be available to the claimant. The claimant has the right, among others, to lay criminal charges against the legal practitioner concerned and to institute civil proceedings to recover the stolen trust funds. The LPFF is also empowered in terms of s 63(1)(i) of the Act to institute private prosecutions for the misappropriation or theft of property or trust money in the event of the National Prosecuting Authority declining to prosecute defaulting legal practitioners. It is clear from the aforementioned that the LPFF does not only reimburse victims of theft of trust money by legal practitioners but is also actively involved in the criminal prosecutions of errant practitioners.
Some of the cases involving theft of trust money by practitioners are discussed below to demonstrate the attitude of South African courts towards thieving practitioners. In Jayshree Baijnath v State (KZP) (unreported case no AR320/18, 11-12-2020) (Chetty J (Mnguni J)) the appellant was convicted in the Durban Regional Court on one count of theft of an amount of R 644 989,72, which was entrusted to her in her capacity as an attorney. The salient facts of this case are briefly as follows: The appellant’s client required assistance with a conveyancing instruction in which the client intended to purchase a house belonging to his mother. The appellant accepted the instruction but indicated to her client that the conveyancing aspect would be handled by another attorney, Ms Ramnarain. Transfer and registration of the property was affected, and Ms Ramnarain transferred the purchase price to the appellant using the banking details provided by the appellant, which happened to be that of the appellant’s business bank account. The appellant failed to pay the money over to the seller, her client’s mother. She gave numerous excuses and repeated promises of payment without any of these materialising. Eventually she signed an acknowledgment of debt in which she undertook to repay the money in instalments but had also failed to make any payment in terms of the said acknowledgment of debt. The court a quo sentenced her to six years’ imprisonment, wholly suspended for a period of five years on condition, among others, that she paid the LPFF an amount of R 644 989,72, which the LPFF had paid to the seller. She was granted leave to appeal against her conviction. The state was also granted leave to appeal on the ground that the sentence imposed by the Regional Court was shockingly inappropriate and lenient. The appellant’s appeal was dismissed and the state’s cross-appeal against the sentence imposed by the Regional Court was upheld. The sentence imposed by the Regional Court was substituted with the sentence of five years direct imprisonment. The court was of the view that the court a quo had misdirected itself when it imposed a suspended sentence. The court stated as follows: ‘In my view, the sentence imposed by the trial court pays lip service to the seriousness of the offence for which the legislature has seen fit to determine a mandatory minimum sentence, and the impact that misappropriation by attorneys of funds entrusted to them has on members of the public. It is settled law that a court of appeal will only interfere with the exercise of the discretion by a trial court if the exercise of such a discretion is vitiated by misdirection.’ The court emphasised its disapproval of the lenient sentence imposed by the court a quo by referring to S v Brown [2015] 1 All SA 452 (SCA) at 121, where the court said the following: ‘In my view, the sentence imposed by the court … tends toward bringing the administration of justice into disrepute. Less privileged people who were convicted of theft of items of minimal value have had custodial sentences imposed. We must guard against creating the impression that there are two streams of justice; one for the rich and one for the poor.’
In Peffer v State (ECP) (unreported case no CA&R206/07, 24-10-2007) (Froneman J), the appellant was convicted of the theft of trust money amounting to R 215 776 and was sentenced by the Specialised Commercial Crimes Court to six years’ imprisonment (of which two years were conditionally suspended). The appellant appealed against the sentence on the ground that the regional magistrate misdirected herself in her judgment on sentence by finding that the appellant had a ‘propensity in being involved in offences involving dishonesty’. In dismissing the appellant’s contention and confirming the lower court’s sentence Froneman J, as he then was, stated as follows: ‘Even accepting Mr Wessel’s submission that the previous convictions as recorded on the SAP 69 do not in themselves justify an inference of dishonesty in their commission, the appellant’s own admission does. And what else does the fact that the appellant, very soon after the commission of the tax offences, embarked on a prolonged endeavour of stealing trust money from clients show other than sustained dishonesty? He did not stop until the matter was reported to the police and at no stage voluntarily attempted to recompense the persons who suffered as a result of his actions. His property was seized by the asset forfeiture unit, not offered by him for sale for the benefit of those who suffered from his theft’.
Any person who has suffered financial loss because of the theft of trust money by a practitioner is entitled to take whatever legal steps are necessary to recover the money, including the institution of civil proceedings against the legal practitioner concerned. As discussed above the LPFF is also entitled, in terms of its right of subrogation, to recover the amounts of claims it has paid in terms of s 55 of the Act. The legal practitioner will remain liable to repay the stolen trust funds irrespective of whether the funds were stolen by them, a co-director or any person in the employ of his firm. Section 19(3) of the Companies Act 71 of 2008 provides that the ‘directors are jointly and severally liable, together with the company, for any debts and liabilities of the company as are or were contracted during their respective periods of office’. The directors of an incorporated law practice will, therefore, be liable, jointly and severally with the practice, to repay the stolen trust money if the theft occurred during their term of office as directors of the firm.
The recovery of the stolen trust funds can also occur in the context of criminal proceedings where the court makes an award of compensation to the victim of crime in terms of ss 300 or 297 of the Criminal Procedure Act 51 of 1977. An award of compensation in terms of s 300 has the effect of a civil judgment of the magistrates’ court while an award in terms of s 297 is made as part of the condition of suspension of sentence.
Lastly, where a legal practitioner is convicted of theft of trust funds, the Asset Forfeiture Unit may apply to court for a confiscation order in terms of s 18 of the Prevention of Organised Crime Act 121 of 1998. A confiscation order under this section has the effect of a civil judgment of the court that made it. The proceeds of the sale of any property confiscated under this section may be used to recompense the victim of theft of trust funds (see Peffer).
Theft of trust funds by legal practitioners does not only result in untold hardships for the victims but also brings the legal profession into disrepute. Those legal practitioners who violate the rules and ethics of the profession by failing to uphold the highest standard of honesty, reliability and integrity should suffer the consequences of their nefarious actions. The requirements for re-admission of struck off practitioners should also be made more stringent to ensure that practitioners who have a propensity for stealing trust money do not find it easy to re-enter the legal profession.
John Ndlovu BIur (UNIZULU) LLB (UP) Masters Cert (Labour Relations Management) (UJ) is a Senior Legal Adviser at the Prosecutions Unit of the Legal Practitioners’ Fidelity Fund in Centurion.
This article was first published in De Rebus in 2022 (Oct) DR 4.
