THE
HIGH COURT OF SWAZILAND
IN
THE EXPARTE APPLICATION OF
KOBLA
QUASHIE
1st
Applicant
SABELO
GUMEDZE
2nd
Applicant
And
THE
LAW SOCIETY OF SWAZILAND
Respondent
Civil
Case No. 3087/2002
Coram
J. P. ANNANDALE - J
For
the Applicants MR. MADAU & MR MOTSA
For
the Respondent
JUDGMENT
1st
NOVEMBER 2002
2
Much
unfinished business was left behind the closed doors of the law firm,
Bhekie G. Simelane & Company, when one of the erstwhile partners
disappeared from Swaziland under a cloud of suspicion. Inter alia it
resulted in the Law Society of Swaziland stepping into the quagmire
to try and salvage from the then dormant firm what it could. From the
papers filed in support of the order then obtained, it appeared that
the partners of the firm of attorneys had abandoned their practice,
leaving behind not only a number of clients but also a trust account
which reflected much less monies than what would have been expected.
Suspicions and rumours abounded. Former clients were disgruntled with
the situation. By all accounts the firm operated without having had
its trust account audited as is required by law and no fidelity fund
contributions were kept up to date with the Law Society. Whether it
is the Law Society or the Attorney General's office which was to
blame for allowing attorneys to practice as such without meeting
minimum requirements is not the issue now to decide.
As
said, in an attempt to rescue the situation, the Law Society (not the
Attorney General) applied for and obtained an order on the 7th June
2002, in Case No. 1795/2002, whereby Kobla Quashie (an accountant)
and Sabelo Gumedze (an attorney) were appointed by the High Court of
Swaziland as curators bonis of the trust Account held by the law firm
of Bheki G. Simelane and Company.
These
two joint curators, duly appointed by the Court, took trouble to
attend to the affairs of the troubled Trust Account and eventually
filed their report. Therein, they report on the operation of the
Trust Account, the difficulties they encountered as curators on
issues of non-compliance with the law, as well as various matters
incidental thereto. Serious anomalies are reported like flagrant
disregard of the law and practise, like unaccounted transfers to the
business account, partner's drawings, cash payments and business
expenses made from the Trust Account.
As
their rights, duties and powers were not detailed as terms of
reference in the empowering court order, they lit their candle with
the Law Society to obtain guidance and assistance. The curators could
not establish and confirm that the firm complied with Section 43 of
the Legal Practitioners Act of 1964 (Act 15 of 1964 and hereafter
referred to as "the Act"). This part of the Act regulates
establishes and regulates the
3
Law
Society Fidelity Fund ("the Fund"). Essentially, the fund
is to provide for disbursements and expenses and to pay for ..."loss
sustained by any person in consequence of an Act of dishonesty by a
legal practitioner..." (Section 43 (2) of the Act). The Law
Society is to have the Fund underwritten by a suitable insurer and
require of its members to pay their contributions to the Fund, in
order to practise as legal practitioners and attorneys may not
practise as such or be entitled to fees etcetera, if they are not in
possession of a Fidelity Fund certificate.
Prima
facie it thus flows from the report by the curators that the law firm
concerned was not entitled to practise as such as they did not have
the required certificate, nor could the Law Society confirm (to the
curators) the contrary.
The
curators not only come to the above stated conclusion but go further
than that in their report, very critically so in their comments on
the role of the Law Society of Swaziland, the professional body who
initiated their appointments as curators bonis of the Trust Account.
I quote verbatim from page 4 of their report:
"Furthermore
if it were confirmed that they (Bheki G. Simelane and Company) had no
Fidelity Fund Certificates then the Law Society of Swaziland would
have been deemed to have failed in its duties to administer the
Fidelity Fund in that it allowed both Simelane partners to practice
without a Fidelity Fund Certificate and as such prejudiced the claims
of Trust creditors. On the basis of the curators investigations it
would appear that the existing Law Society Fidelity Fund did not
cover trust creditors of Bheki G. Simelane and Company. It is
therefore their considered view that the Law Society be liable for
allowing the Simelane partners to practice without the Fidelity Fund
Certificate to the detriment of the public".
These
are the words contained in the report if the curators bonis whose
fees are now sought to be recovered.
Most
disturbingly are the following words in the report at page 9:
4
"As
already pointed out, the Trust bank balance is E107 095-60 (vis-a-vis
the trust creditors of E4 835 649-75) given (sic) a shortfall of E4
728 554-15".
The
curators are not yet done. They say that it is still necessary, inter
alia to confirm trust creditors and wind up the practise, secure
outstanding fees etcetera. It would require a creditor to move an
appropriate application. They foresee the need to attach personal
assets of the partners due to the shortfall of the Trust Account. It
also may require action against both the Law Society and the Attorney
General for not enforcing the Legal Practitioner's Act. The curators
say they will still need to approach the courts for determination of
their rights, duties and powers relating to the above.
Presently
however, they want to be paid for the work already done, before all
is said and done.
This
exparte application is brought by way of a Notice of Motion, which
was served on the respondent, the Law Society of Swaziland. Quite
understandably, no notice has been filed wherein the Law Society
opposes the relief sought, possibly for precisely the reason that
they are "trying to pass the buck". The failure by the Law
Society, and one might also add the office of the Attorney General,
to ensure that its members, or any other person for that matter who
practises as attorney, comply with the requirements of the Legal
Practitioner's Act, especially so with the Fidelity Trust Fund, has
lead to the events that result in this application. The application
wants the court to authorise a helping from the desert, so to speak,
of the trust account of Bheki G. Simelane and Company. It is the two
curators bonis who now want their own remuneration for the work they
did, to be paid for from the Trust Account they were appointed to
protect and administer, and not by the Law Society who belatedly
asked for their appointment in an effort to limit the losses, an
exercise of damage control, after the Attorney General's office did
not call for an inspection of the books. Their claim is also not
against the firm or the partners, nor a surplus of the Trust Account.
The
relief sought reads:
5
"1) Authorising
the applicants to withdraw the sum of E86 500 (eighty six thousand
five hundred emalangeni) from the trust account of Bheki G. Simelane
and Company as payment of their reasonable fees incurred in executing
their duties as curator bonis to the said account.
2) Costs
of Suit"
The
usual prayer for further/alternative relief is included, as well as a
founding affidavit by the first applicant. For some reason, no
affidavit, confirmatory or otherwise, by the second applicant is
attached, although the notice reads that affidavits of both
applicants would be used to support their application. Possibly it
may be merely misfiled, but for some or other reason the applicants
attached a confirmatory affidavit by one Zanele Khumalo pertaining to
a rescission application in the matter wherein the curators bonis
were appointed (Case No. 1795/02) and also a letter by Bheki G.
Simelane and Company dated 7th June 2002, addressed to "To Whom
It May Concern", advising the reader that the firm has closed
down on the 7th June 2002. The aforementioned report by the curators
is also attached, as is their statement of account.
When
this matter was first brought before me on the uncontested roll of
Friday the 18th October 2002, I queried the relief sought from
applicant's attorney, Mr. Madau of Robinson Bertram. Even though the
relief was not contested or opposed and the papers had been served on
the so-called respondent, the Law Society of Swaziland, I expressed
reservations about the propriety of such an order. The obvious issue
I held out for a reply was whether if would be proper to direct that
the Trust Account of the closed down law firm should be made liable
to settle the account rendered by the curators bonis for their
services and disbursements. As my qualms were not dispersed, the
matter was postponed to attend to the query and at the same time, to
properly set out how the amount sought to be paid was made up.
Annexure C3, the statement of account by the curators as at 31st
August 2002 is as threadbare as can be. The whole of its contents
reads:
"Curators
fees: Sabelo Gumedze 25 000
Kobla
Quashie 50 000
6
Security
Bond SRIC 5 000
Investigators
fees SA
Private
Investigator 3 500
Advertising
Telephone
Calls 3
000
TOTAL 86
500"
Concerning
the second and less important aspect of the matter, the quantum, Mr.
Motsa of Robinson Bertram attended in chambers on Wednesday the 23rd
October, and filed what I have marked as "exhibit A" - a
bundle of documents marked "Amplified Curator's Statement of
Account". It sets out the details of how the abovementioned
heads of account have been calculated and encloses copies of relevant
invoices etcetera and the hours of work claimed for. For the reasons
hereunder, it is not necessary to determine whether the amount sought
is reasonable or not. Incidentally but not of consequence, is that
the amount reflected on the latter set of papers exceeds the
originally claimed amount by some E3 500, and is a healthy E10 999
less than the original statement of account, rendered to the Law
Society for payment, of which I informally received a copy (together
with exhibit "A").
The
more important aspect and the real difficulty with the application
concerns the principle of trust accounts of lawyers - is it proper
for courts to sanction the use of trust account monies for other
purposes than what the account exists for? In casu, is it in order
for curators bonis to be remunerated for their services and
incidental disbursements and expenses from such a trust account, one
which they were appointed for to try to protect and salvage it?
To
answer this question one firstly has to look at what an attorneys
trust account is and why it exists at all. Section 24 (1) of the Act
states that:
"Every
practising attorney having an office in Swaziland shall open and keep
a separate trust account, at a bank lawfully established in
Swaziland, in which he shall deposit all moneys held or received by
him in connection with his or her practice within Swaziland, on
account of any person, and he shall further
7
keep
proper books of account containing particulars and information as to
moneys received, held or paid by him for or on account of any person
" (my emphasis).
The
underlined words clearly indicate that the moneys held or received on
account of clients of attorneys' practices are what is paid into
trust accounts. It is not monies that belong to the attorney himself,
or his/her partners or the firm that goes into the account but monies
that belong to the firm's clients, monies received on their behalf
and kept in a trust account on their behalf. This is also the
fundamental reason why such strict control has to be exercised over
trust accounts.
Subsection
24 (2) of the Act provides for the inspection of trust accounts by
the Attorney-General or his nominee with the attorney himself being
liable for such costs where it is found that the account was not
properly kept.
Subsection
24 (3) of the Act gives further confirmation of the separation of
assets held by the attorney vis-a-vis the Trust Account. It also
exempts Trust Account monies from being attached at the instance of
any creditor of the attorney. Only an excess of the account forms
part of the assets of the attorney.
It
is thus clear from the provisions of the Legal Practitioners Act
alone that the Trust Account held by an attorney in Swaziland is a
separate entity altogether from the partners of the law firm, the
practice itself. Monies kept in such Trust Accounts are not there for
the benefit of the firm, nor can it be attached by its creditors - it
is monies received and kept on behalf of clients of the firm. The
Attorney General has wide ranging powers to have Trust Accounts
inspected, the account is separate from assets of the firm, the
attorney cannot practice without having a Trust Account and abuses or
neglect of the account or failure to deposit all monies received or
held by an attorney in connection with his practice on account of any
person is a punishable offence (up to eighteen months imprisonment)
and also is unprofessional conduct, making him liable to be struck
off the roll if not suspended from practice.
The
Attorney-General is empowered in Section 24 (4) (a) of the Act to
move the High Court to inter alia appoint a curator bonis. In the
present matter, the order to appoint
8
the
two curators bonis was brought by the Law Society of Swaziland and
not by the Attorney-General. Where a curator bonis is appointed under
Section 24 (4) (b) of the Act, where, upon death, insolvency,
suspension/debarment or abandoning of a practice, amongst other
reasons, a curator is appointed by the Master to control and
administer the trust account, it is "...with such of the rights,
duties and powers prescribed by Regulations made under Section 33 (2)
(g) (sic) as the Master may deem fit". This particular provision
(33 (2) (g)) fell away in the 1988 amendment of the Act. In its
former form, I am not aware of any legal notice or regulation so
promulgated. In any event, as things presently stand, there is not an
authoritative empowering order or legislation under which the two
curators bonis may "dip" into the trust account they were
appointed to take care of, for their own fees and disbursements.
The
basic essence of a trust account is that it consists of monies held
or received by an attorney on account of any person. Proper account
keeping would obviously include not only the money held and received
but also any monies paid from the trust account to, for, or on
account of any person. Even charges levied against the trust bank
account, i.e. charges and costs incurred from the operation and
keeping of such account, must be charged against the business account
of the attorney. This must be done because the money lodged in the
trust bank account is held in trust for clients and cannot be
appropriated for the purpose of paying bank charges, which should
correctly be borne by the attorney himself, (see: "The Keeping
of Attorneys Books" by Bobrov and Faul, 3rd ed. Butterworths,
1981 page 15, paragraph 2.3).
A
useful guideline as to exactly which monies may properly be drawn
from a Trust Account may be found in a practise directive, following
Queens Counsel's opinion, which is contained in the so called "Red
Booklet", or more formally, "Attorney's Trust Accounts",
which is issued by the Cape Law Society. Although it is a ruling as
old as the 3rd February 1947 and it is really only binding on members
of the Cape Law Society, the principles adumbrated therein are
concise, to the point and precisely correct. Rule 4 on page 11 of the
"Red Booklet" reads (as is quoted by Van Blommenstein in
"Professional Practise for Attorneys", Juta, 1965 at page
56):
"4.
No money should be drawn from a trust account other than:
9
a) Money
properly required for payment to or on behalf of a client for or
towards payment of a debt due to the attorney from a client or money
drawn on the clients authority or money in respect of which there is
a liability of the client to the attorney; provided that the money so
drawn should not in any case exceed the total of the money so held
for the time being for such client.
b) Such
money belonging to the attorney as may have been paid into the trust
account under Rule 3 (c) of these Rules (which rule refers to "a
cheque or draft received by the attorney representing in part money
belonging to a client and in part money due to the attorney) (my
insertion).
c) Money
which may by mistake or accident have been paid into such account in
contravention of Rule 3 of these Rules (which rule refers to the only
monies that should be paid into trust accounts, i.e. money held or
received on account of any person, money for replacement of other
monies mistakenly or accidentally withdrawn, money belonging to the
attorney himself ((b) supra) and deposits on account of fees and
disbursements) (my insertion).
d) Deposits
on account of fees and disbursements when the services in respect of
which the fees have been paid, have been rendered and/or the
disbursements made; provided, however, that no such withdrawals shall
exceed the amount of such deposit".
The
salutary practice of adhering to the above principles is more than
just that which meets the eye - a flouting thereof will go against
the very grain and essence of a trust account. I fail to see how the
two applicants could justifiably extract their claim, however
legitimate and well earned it may be, from the trust account of Bheki
G. Simelane and Company. They knock on the wrong door for their
money.
During
the period that this unopposed matter was postponed for the two
reasons mentioned above and during which their attorney filed the
detailed statement of
10
account,
I had my court interpreter/clerk contact him to open the door for a
formal hearing during which argument in support of the application
could be presented. This opportunity was not utilised, the invitation
to argue the case for the applicants was (wisely) not accepted.
A
principle of law that cannot be overlooked is that a court is not
enjoined to grant (all) relief sought if it is not opposed. There is
more than ample authority for that. Here it is only the Law Society
of Swaziland which was cited as respondent in the ex parte
application, presumably as it was the applicant when the appointment
of the curators bonis was sought and granted. I neither purport nor
propose to advise litigants of what proper course their matters
should take to meet with judicial approval. I thus refrain from
stating an opinion, which is all it could be at most, as to who the
correct respondent(s) in the application should be.
I
am disinclined and adverse to grant the authorisation that the
applicants seek, to plunder the trust account.
I
was unable to find a precedent which is on all fours with the present
matter, but Ex parte Law Society, Transvaal: In re Hoppe and Visser
1987 (2) SA 773 TPD, a full bench decision, is not too remote to be
of useful guidance. Therein, orders were sought and granted (pages
778 E - F; 781 H - 782 - F) whereby the practitioners whose trust
account had to be inspected were ordered to bear the costs thereof,
despite the absence of a contractual obligation to do so. It would be
practically the same where the curator is paid from any excess funds
in the trust account, which would in any event have been due to the
attorney or practice who operated the trust account.
In
the Hoppe and Visser matter supra at 782 B reference was made to Cape
Law Society v Katz 1958 (4) SA 444 (C) at 446 H (point 5) where,
contrary to the outcome of this matter, an order was made as is
sought here, namely that the fees and charges of a curator bonis
(together with costs of the application) be paid out of the trust
assets. The judgement in that matter was based on the need to appoint
a curator by the court, as two different empowering Acts of
parliament lacked a transitional period from one to the other, under
which the curator ordinarily could have been appointed and
remunerated. No ratio was given for the source of payments that was
11
ordered
at all. It is not known for what reasons such an order was made,
which otherwise would have been for the costs to come from an excess
of the trust account, if there was one, if not from the attorney
himself. The particular order features as a footnote at the end of
the judgment, not from the reported reasons for the judgment itself.
I do not consider it as binding authority on this court to come to
any other conclusion than the inevitable, as is set out above.
In
the event, it is ordered that the ex parte application be dismissed,
with costs for account of the applicants.
J.
P. ANNANDALE
JUDGE
