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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

 

CASE NO.: 35371/2016

10/11/2017

 

(1)           NOT REPORTABLE

(2)           NOT INTEREST TO OTHER JUDGES

(3)           REVISED

 

In the matter between:

 

COMMERCIAL INDUSTRIAL DOMESTIC

ELECTRICAL CONTRACTORS (PTY) LTD                                               APPLICANT

 

and

 

ARNOUX VAN DER MERWE                                                                        1^ST RESPONDENT

MACHOBANE KRIEL INCORPORATED                                                   2^ND RESPONDENT

 

Heard:            16 October 2017

Delivered       10 November 2017

 
JUDGMENT

Coram; VAN DER SCHYFF AJ

[1]           It is common cause that the first respondent, who is a shareholder and former director of the applicant, instructed one of the applicant's debtors to pay money owed to the applicant into the trust account of the second respondent.

[2]           The amount of R656 085.28 has subsequently been paid into the trust account of second respondent.

[3]           This is an application to have the misappropriated sum paid to the applicant, and to elicit information pertaining to any other occurrences where payment of debts owed to the applicant were possibly re-routed in a similar manner.

[4]           The nature of the relief sought against the first respondent is interdictory. During oral argument, counsel for applicant contended that the order that applicant seeks against the second respondent pertaining to the payment of the money, is founded in the condictio furtiva. The facta probanda of a claim based on the condictio furtiva are set out by Harms LTC Amler's Precedents of Pleadings 8^th ed LexisNexis on 90-91. It is explained here that the actio furtiva may be used to vindicate money. To succeed, a claimant must at all relevant times have had a sufficient interest in the thing and the defendant must have stolen the thing or have received it ma/a fide, knowing that it has been stolen. In Chetty v Italtile Ceramics 2013 (4) SA 374 (SCA) at 378C-E it was held that that 'theft', at common law, had a wider meaning than the meaning today attributed to the crime theft as set out inter alia in R v Sibiya 1955 (4) SA 247 (A) at 257B-D and S v Van Coller 1970 (1) SA 417 (A) at 424G-F. Malan JA explained that at common law theft 'includes furtum usus, or the appropriation of the use of another's thing. Theft of the use of another's thing is no longer a crime. The condictio furtiva lies in all cases of theft. "Whether the theft wreaked was one of proprietorship or of use or possession .. . makes no difference to the possibility of the action being available."'

[5]           On 20 May 2016, applicant filed an application against first and second respondent seeking an order that the application be dealt with as an urgent application. (The aspect of urgency has since become moot). The remainder of the prayers sought by applicant were:

(2)        That first and second respondent, jointly and severally, be ordered to make payment to the applicant of the amount of R656 085.32;

(3)        In the alternative to prayer 2, that the second respondent be ordered to make payment of the applicant's funds held in trust by the second respondent;

(4)        In the alternative to prayers 2 and 3, and in the event that the court finds that the funds of the applicant held in trust by the second respondent should not be paid over to the applicant, that the amount be paid over into an independent attorney's trust account until the matter is finalised;

(5)         Compelling the first and second respondents to provide the applicant with a statement confirming:

5.1       The total amounts received from creditors of the applicant;

5.2       The names associated with each creditor on whose behalf amounts were received; and

5.3        The exact amounts, if any, utilised from the amounts received.

(6)          Interdicting the second respondent from utilising any of the applicant's funds held in trust;

(7)          Cost of suit on the scale as between attorney and client:

(8)          Further and/or alternative relief.

[6]           First respondent filed an answering affidavit but no answering affidavit was filed on behalf of second respondent. Applicant filed a replying affidavit to first respondent's answering affidavit. Despite second respondent not having filed an answering affidavit, heads of arguments were filed (late) on their behalf.

[7]           The parties came to an agreement that the money held in second respondent's trust account would be paid over to the trust account of Rooth & Wessels, and the matter was removed from the urgent court role on 31 May 2016.

[8]           The matter was set down again for hearing by the applicant.

[9]           It was argued by counsel for the respondents that the application, when it was first put forward by applicant on 20 May 2016 on an urgent basis, was settled by the parties agreeing to the alternative prayer 4 contained in the notice of motion. Counsel argued that in light of the settlement, applicant cannot now be permitted to resort to pre-settlement issues, seeking an order thereon. The argument was that applicant will only be entitled to an order in terms of the original notice of motion once the settlement agreement was rescinded. It was in essence advanced on behalf of the respondents that the bringing of this application was inappropriate in that the parties had settled the matter by agreeing that the funds in question be paid over to the trust account of an independent attorney firm, Rooth & Wessels pending the finalisation of the liquidation application under case number 38751/16.

[10]      In replying to this argument, applicant's counsel stated that the settlement agreement only settled the issue of urgency, since the remainder of the prayers, in particular prayer [5] contained in the notice of motion, were not dealt with. In addition counsel argued that the matter between the parties has in the meantime become finalised as the winding-up application brought by the second respondent has been dismissed on 30 June 2017. (A request for reasons for judgment in terms of rule 49(1)(c) was only served on the applicant in this matter on 25 July 2017 and there is no indication that it was delivered timeously to the court as required by rule 49(1)).

[11]        The status quo is that there is currently no appeal pending in the liquidation application. In addition, counsel for the respondents has indicated during oral argument that the court can disregard the issue of the appeal. If the issue of a pending appeal is disregarded any possible reason for postponing the (re)payment of the money to applicant falls away. I accordingly find that there is no obstacle to considering the application.

 

Re- Prayer (2)- 'That fil'§t and second respondent, jointly and severally, be ordered to make payment to the Applicant of the amount of R656 085.32'

[12]        Neither first nor second respondent indicated the existence of any legal ground that would legally justify the facilitation of payment of money owed to the applicant, into the second respondent's trust account.

[13]        First respondent explains that he was only protecting the applicant's interests. However, it is evident from his answering affidavit that he was also protecting his own interest. He effectively resorted to self-help when he ordered the debtor to pay the debt into the trust account of the second respondent. Appropriate remedies are provided in the Companies Act 71 of 2008 that could have been utilised by the first respondent.

[14]        It is very difficult to think of any reason why the applicant cannot not be granted an order that money that was owed to it, but wrongfully (without legal cause) re-routed into a third party's bank account, should not be paid over to him forthwith if there are currently no legal proceedings between the affected parties that might directly or indirectly have a bearing on the payment of the money. (Although, even if there was a pending legal dispute between the applicant and first respondent, it would still need much convincing for a court to hold that the unlawful re-routing of payment owned by a debtor to the applicant should be condoned.)

[15]        Applicant's right to the money is not only substantial and clear, but uncontested. The injury suffered by a legal persona who is unlawfully deprived of payment due to it, goes without saying. In light of these circumstances it is obvious that there is no adequate alternative remedy that could be utilised to compel the first respondent to take the necessary steps to ensure that money to which he has no right that was paid into second respondent's trust account due to first respondent's active interference, be paid over to the applicant immediately.

[16]        The only twist that elevates this otherwise straightforward application to a more complicated matter, is second respondent's involvement. Second respondent's role in this matter needs to be elucidated.

[17]        The need to refer to second respondent is caused by the fact that although an amount of R656 085.32 was paid into their trust account, only R557 393.60 was paid over to Rooth & Wessels following the agreement between the parties.

[18]        Second respondent is a firm of attorneys who incidentally represented the first respondent in several legal disputes involving the applicant as the opposing party. In considering this application, the court will afford second respondent the benefit of the doubt and assume that at the time that the amount of R656 085.32 (the misappropriated sum) was paid into its trust account, the second respondent considered it as a bona fide payment made to the benefit of its client, first respondent. This assumption is on face value confirmed by the content of a letter dated 24 May 2016 sent by second respondent to applicant's attorneys of record. In this letter second respondent state:

'1. This firm received an amount of R656 085.32 on Trust on behalf of our client, A van der Merwe;

2.     Our bank statement indicates that the money was received from A van der Merwe;

3.     Upon instructions from our client, the money was invested in an interest bearing Trust account in terms of Section 78(2A) of the attorneys Act 1979;

4.     In light of the above, our client instructed us to agree that the funds in our Trust account may be transferred to an independent attorney's Trust account and to be invested in an interest bearing account pending finalisation of our client's Liquidation Application. We suggest that the money should be paid over into the Trust account of Rooth & Wessels Incorporated, the Law Society's attorneys.

5.     We as previously indicated and upon instructions from our client confirm that the balance of the money received is held in an interest bearing account pending finalisation of the Liquidation Application.'

 

[19]        However, it is trite, that as early as 4 May 2016, second respondent received an e­ mail from applicant's attorney of record claiming that there is no legal basis upon which second respondent was entitled to receive or hold the money under consideration. In addition, second respondent, acting in his capacity as first respondent's attorney of record, filed first respondent's answering affidavit, dated 25 May 2016, in these proceedings. In the affidavit first respondent acknowledges that he 'indeed instructed the creditor, Checkers, to make payment of the retention funds into the account of second respondent.' He purports to convey his bona tides by stating later: 'I have no intention to act to the detriment of either Mr Robbertze [the remaining shareholder] or the Applicant. The fact that the retention monies were paid out by Checkers into my attorney's trust account was revealed by me. Due to the fact that I ran the business of Applicant Mr Robbertze was not aware of the fact that these were due and/or paid out.'

In an even earlier affidavit, dated 13 May 2016 and filed on behalf of first respondent as a founding affidavit in case number 38751/16 (the liquidation-appcliation) first respondent declared: 'In addition Checkers retained an amount of R 1 300 000.00 following a contract awarded to and performed by CID at their Cresta and Edenvale branches. In respect of these an amount of R656 085.32 was paid out. I caused, whilst I was still a director and employer by CID, for this amount to be paid into the trust account of my attorney of record. The way in which second respondent [one Robbertze who is the other shareholder of the first applicant] disregarded the interests of CID caused me to be concerned about CID's wellbeing as a result of which I ordered for the funds to paid into the trust account as I had no other means to secure its interests. Second Respondent has now made enquiries insisting on the amount to be paid to CID. I respectfully submit that the balance of the funds will be secure if kept in their trust account pending the finalisation of this application. No harm should come off this'.

[20]        The fact of the matter is that second respondent was undeniably aware that first respondent effected the payment of money owed to the applicant into its trust account since, at least, the date of first respondent's founding affidavit in the liquidation application. In addition, it is noteworthy that second respondent did not file an answering affidavit to applicant's founding affidavit. This effectively means that applicant's claims toward second respondent stand unchallenged. These include, but are not limited to: '(72) Second respondent's opinion that there is a dispute as to who the amount belongs to is unfounded and cannot be correct.'; (80) 'The First and Second Respondent have never denied that the amounts are not due and payable to the Applicant'; (84) 'The Second Respondent is infringing on the Applicant's right in that it: (84.1) is utilising funds to which their client has no legal right.'

[21]        Despite this knowledge, second respondent only paid over an amount of R557 393.60 to Rooth & Wessels Attorneys on or before 27 May 2016. The question immediately comes to mind as on what basis an attorney firm who holds money in its trust account and who is (made aware) aware that the money was paid over into their trust account in the absence of any legal basis for the money being paid into their trust account in the first place, can justify not paying over the total amount into the independent attorney's trust account as agreed between the parties. In light of second respondent's letter to applicant's attorney of record dated 10 May 2016 where it has been stated 'Die gelde is ontvang namens ans klient [Van der Merwe] en as sekuriteit vir ans regskoste en reflekteer oak so op ons bankstaat', and applicant's uncontested claim contained in its founding affidavit that second respondent is utilising funds to which their client has no legal right, the only tenable conclusion that the court can come to, is that second applicant deducted the legal costs owed to them by first respondent, before paying the balance of the money over to Rooth and Wessels. This view is confirmed when the heads of argument filed on behalf of second respondent are considered. It is trite that these heads of argument cannot be regarded as evidence before the court since it is not supported by statements contained in an affidavit. The content of the heads of argument can therefore not be considered when the merits of applicant's application are determined on the basis of the Plascon Evans-rule . I t does however confirm the reason why only R557 393.60 of the amount paid into their trust account was paid over to Rooth & Wessels since the argument is made in paragraph 3 of the second respondent's heads of argument at 3.3 that 'It is common cause between the parties that an amount was utilised for the legal costs of the First Respondent'.

[22]        If the money that was paid into second respondent's trust account was indeed money to which first applicant had a legitimate claim, the appropriation of a portion thereof by second respondent in respect of legal services rendered by second respondent to first respondent would not have posed any problem. However, in view of the fact that second respondent knew that first respondent had no claim to this money, the situation changes. Unlike in the case of Roestoff v Cliffe Dekker Honneyer Inc 2013 (1) SA 12 (GNP), second respondent was not dealing with money without knowledge that there was no legal basis for the payment of the money into its trust account. Second respondent knew that the applicant had a legitimate claim to the money and that there was no legal basis on which first respondent could claim money owed to a separate legal entity, for his own legal expenses. Despite this knowledge, second respondent appropriated an amount of R98691.72 by not including it in the amount paid over to Rooth & Wessels and using it to settle the first respondent's bill.

Re- prayer 5 - Compelling the first and second respondents to provide the applicant with certain information

[23]        It is common cause, that first respondent caused payment owed to applicant to be paid into his attorney's trust account. Applicant only gained knowledge of this transaction after first respondent revealed the information. Despite being requested to provide information pertaining to the occurrence of similar incidences, no information has been provided by either first or second respondent.

[24]        It goes without saying that applicant has a clear right in obtaining the information it is seeking. The injury associated with not obtaining said information is obvious and relates, amongst others, to being deprived of payment legally owed to it. No other adequate alternative remedy exist that can be utilised to ensure that applicant obtains this information.

[25]        The only question is whether this court may direct an order of this nature to second respondent. Although counsel acting on behalf of second respondent did not address this issue in argument, it is trite that second respondent stands in a privileged relationship towards first respondent. It is equally trite that '[l]egal professional privilege is a right necessary for the proper functioning of the adversarial system and is not a mere evidentiary principle. It is a fundamental right and can be claimed not only in actual litigation but also to prevent seizure by warrant.'- Mahomed v National Director of Public Prosecutions and Others [2005] ZAGPHC 90; 2006 (1) SACR 495 (W) para [7]. I accordingly hold that I cannot compel second respondent to divulge information obtained while acting as first respondent's attorney.

 

Rooth & Wessels Inc. is not a party to this proceedings

[26]      During hearing the application, I enquired from counsel whether Rooth & Wessels Inc. can be compelled to make payment of the money held in their trust account to applicant since it has not been joined as a party to the proceedings.

[27]      Counsel for the applicant indicated that Rooth & Wessels Inc does not have any interest in the legal dispute between the applicant and respondents. It is merely holding the money paid over to them as an independent firm of attorneys. Accordingly, I need merely to authorise them to make the payment. Such authorisation does not need their presence as a party before the court.

[28]      Counsel for respondents argued without reference to authority that Rooth & Wessels Inc. indeed need to be a party before the court before it can be authorised to make the payment.

[29]        Since Rooth & Wessels Inc. only hold the money paid over to them by second applicant as a result of an agreement concluded between the applicant and respondents, it does not have any interest in this matter. I accordingly find that its not being a party before the court does not constitute any bar to the order that I am granting.

 

IT IS ACCORDINGLY ORDERED THAT:

[1]     Rooth & Wessels Inc. is authorised to make payment to the applicant of the amount of R557 393.60, an amount that was paid into their trust account by Machobane Kriel Inc on or before 27 May 2016;

[2]      In the event of Rooth & Wessels Inc. not making payment within 15 days from the date of this order, first respondent is ordered to make payment of the amount of R557 393.60 to applicant;

[3]      First respondent and second respondent are ordered jointly and severally, to make payment to the applicant of the amount of R98 691.72, the one paying the other to be resolved.

[4]      First respondent is ordered to provide the applicant with a statement confirming:

4.1       Whether any other debtors were induced to re-route payment owed to the applicant in a similar manner:

4.2       The total amounts concerned, if any;

4.2       The details of debtors associated with each payment;

4.3       The exact amounts, if any, utilised from the amounts received.

 

[5]      First respondent and second respondent are ordered, jointly and severally, to pay the costs of the application, the one paying the other to be absolved.

 

 

 

EVAN DER SCHYFF

Acting Judge of the High Court

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