KwaZulu-Natal Law Society v Moodley and Another (3072/2012) [2014] ZAKZPHC 37 (9 May 2014)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE HIGH COURT OF SOUTH AFRICA

KWAZULU-NATAL DIVISION, PIETERMARITZBURG

Case No:- 3072/2012

In the matter between:

KWAZULU-NATAL LAW SOCIETY..................................................................................Applicant

and

DHENASAGREN NADARAJ MOODLEY...............................................................First Respondent

ABSA BANK LIMITED..........................................................................................Second Respondent

JUDGMENT

Delivered on 09 May 2014

Vahed J:

[1] In an article titled Are Lawyers Truly Greedy? An Analysis Of Relevant Empirical Evidence published in New England Law | Boston Legal Studies Research Paper [Research Paper 13-15] on 9 October 2013 Paul F Teich wrote:

‘Since the early 1990s, the majority of Americans have repeatedly expressed the belief that lawyers charge too much for their services. The public is concerned not only about fee size but also about billing misconduct. It is claimed, for example, that lawyers routinely hide the reasons that fees are imposed, refuse to account for their hours, and charge for services that have never been provided-that they routinely fee gouge. Understandably then, the majority also believe that lawyers earn excessive incomes and that the average practicing lawyer is quite literally "greedy."

Every lawyer should take the public's concern about greed seriously, and bar leaders should worry about the factors that provoke that concern. When deciding whether to secure a lawyer’s help, Americans consider the likely cost of help to be critically important. Americans pay for personal legal services primarily from current income, and cost is the principal reason Americans avoid bringing otherwise insoluble law-related problems to lawyers. Further, if lawyers are routinely cheating clients, as is often charged, their dishonesty should be considered a shameful professionalism problem that disciplinary authorities need to aggressively confront and eliminate. Finally, public beliefs about lawyer greed are influential determinants of the profession's occupational prestige, and the reputation of lawyers affects public confidence in the justice system generally. Greed, in all its purported manifestations, is worth studying and addressing, and mistaken beliefs about lawyer behaviour and motivation are worth correcting.’

[2] Teich could just have easily been describing the situation in South Africa because far too many cases involving lawyer greed are featuring on the court rolls these days and the present matter is yet another.

[3] The applicant Law Society seeks an Order, inter alia, striking the first respondent’s name from the roll of attorneys. The first respondent resists the relief sought. But first,

a recount of the facts.

[4] The first respondent was admitted and enrolled as an attorney of this Court on 8 November 1993. He practises for his own account under the name and style Deena Moodley and Associates in central Durban.

[5] Mrs N M Mkhize was a client of the first respondent. Her husband had been shot and killed on 22 October 2005 and she retained the services of the first respondent to report and wind-up her late husband’s estate and to assist in lodging and pursuing two claims (worth in total R600 000,00) against the Old Mutual Insurance Company in terms of two life insurance policies taken on the deceased’s life and in respect of which she was the sole nominated beneficiary.

[6] The estate consisted of a single asset, certain immovable property situated at I[…], Durban.

[7] At the respondent’s offices she was seen and attended to by a Mr M P Gumede, apparently a clerk in the first respondent’s employ. Although not a professional person, it appears that Mr Gumede was in a fairly advanced stage towards completing his legal studies. In fact, during the period 2001 to 2006, Gumede was the first respondent’s articled clerk but remained in his employ after that five year period of articles expired. It was common cause that Gumede at all times acted under the direct control and supervision of the first respondent. Everything Gumede did was done in consultation with the first respondent.

[8] It appears that after an enquiry made by her as to the progress of her matters Mrs Mkhize received a letter dated 14 March 2007 from the first respondent’s firm, signed by Gumede, in the following terms:

‘RE: STATEMENT OF ACCOUNT DUE BY YOU TO DEENA MOODLEY AND ASSOCIATES

As per fee agreement of 25% entered into by yourself and Deena Moodley and Associates

Instructions being to persue (sic) 2 claims against Old Mutual viz:

1. Policy No 1[….]

:R100 000 00 successfully claimed

2. Policy No 1[…]

:R500 000 00 successfully claimed

3. Save immovable property (debt)

:R417 059 53 settled on 15/03/07

Fees charged 25% of R600 000 00 = :R150 000 00

Cancellation costs and transfer fees are not included.’

[9] Not being satisfied Mrs Mkhize sought assistance and ultimately, on 20 April 2009, a complaint was lodged with the applicant.

[10] In dealing with the complaint the first respondent submitted an affidavit deposed to by Gumede and himself delivered an affidavit confirming the contents of Gumede’s affidavit. From that response it can be gleaned that when initially taking instructions from Mrs Mkhize, Gumede, inter alia, caused her to conclude a contingency fee agreement with the first respondent’s firm.

[11] That response also alluded to the fact that the first respondent regarded the fee charged of R150 000,00 as being fair and reasonable. He justified the fee on the basis that he assumed risk in processing the claims.

[12] I pause to mention that as at the date of the complaint and the response thereto the estate remained unresolved.

[13] There is no need to repeat the contents of the contingency fee agreement here. It suffices to state that it was one concluded in terms of the Contingency Fees Act, 66 of 1997 (“the Act”) and contained repeated references to litigation contemplated by the client (Mrs Mkhize) and provided for a fee of 25% of the amount recovered, whether by judgment or upon settlement of the intended claim. A worrying feature of the document is that is also makes repeated reference to Gumede as being the attorney.

[14] After receiving the first respondent’s response to the complaint the applicant decided to appoint an inspection team to visit the first respondent and inspect his files. That was done and during that inspection it was pointed out to the first respondent that the Act did not apply to the two claims against Old Mutual as nothing was in dispute and that the processing of the claims involved nothing more than a “form filling exercise”. It was also pointed out to him that the fees applicable to the

winding-up of the estate were separately regulated.

[15] Subsequent to the inspection the first respondent, on 21 April 2011, lodged with the applicant a statement the import of which was summarised in the founding affidavit as follows:

a. he undertook to “come clean”;

b. he submitted that the manner in which the issue of the fees was handled was “flawed and ill-conceived”;

c. he admitted that his understanding of the contingency fee agreement was “skewed”;

d. he agreed that the matter should not have been dealt with on a contingency fee basis;

e. he conceded that Mrs Mkhize’s matter ought to have been first investigated before any agreement with her was concluded;

f. he admitted that he made a mistake and wished to take responsibility therefor;

g. he admitted that the fees charged were excessive;

h. he admitted that he impermissibly shared fees with Gumede;

i. he agreed that he had contravened the applicant’s rules;

j. he undertook to repay to the applicant the sum of R150 000,00 together with interest.

[16] The inspection team reported their findings to the applicant’s council. That report, put up with the application papers, discloses that:-

a. Gumede had advised Mrs Mkhize that because the insurance claims exceeded the sum of R100 000,00 the proceeds had to be paid into the first respondent’s trust account. This was not correct because the insurance company’s only requirement was that the proceeds be paid into a nominated bank account and Mrs Mhkize’s bank account would have adequately served that purpose. This distortion on the part of Gumede points to the conclusion that the only reason for that conduct was to enable access by him and the first respondent to the contemplated fee. The first respondent’s reliability and honesty was thus called into serious question.

b. The estate of the deceased was incompetently handled. No immediate advertising was undertaken as contemplated in section 29 of the Administration of Estates Act, 1965, this aspect only being attended to during February and April 2008. The unnecessary delay resulted in additional interest being incurred on the mortgage bond over the property.

c. In the conveyancing transaction concerning the transfer of the property from the estate to Mrs Mkhize Gumede signed and submitted documents to the revenue authorities describing himself as the appointed conveyancer.

[17] The remarks made by me in the first two paragraphs of this judgment were not lightly made. On the same day that we received argument in the present matter we also heard argument in another application (Case No AR 3611/2012) to strike the name of an attorney from the roll. That matter too involved financial dishonesty on the part of an attorney. There we delivered a judgment, penned by Ploos van Amstel J, the following extract from which bears repetition here:

[13] … A high degree of honesty and integrity is expected from attorneys. The interests of the public are paramount because they are vulnerable to exploitation when they entrust their affairs to an attorney. Attorneys are officers of the court and a vital cog in the judicial machinery. If dishonest attorneys are allowed to practice the administration of justice will be brought into disrepute. It does not follow however that every attorney who has stumbled and did something dishonest should be removed from the roll. The aim is to prevent people who are not fit to practise from doing so. But when an attorney who has suffered a moral lapse can recover from it and become a fit and proper person again we must allow him that opportunity and make it possible for him to return to practice as a productive member of society.

[14] Section 22(1) (d) of the Attorneys Act 53 of 1979 provides that any person who has been admitted and enrolled as an attorney may on application by the society concerned be struck off the roll or suspended from practice if he, in the discretion of the court, is not a fit and proper person to continue to practice as an attorney. In Summerley v Law Society, Northern Provinces 2006 (5) SA 613 (SCA) Brand JA said in paragraph 2 that it has now become settled law that the application of section 22(1) (d) involves a threefold inquiry.

‘The first enquiry is aimed at determining whether the law society had established the offending conduct upon which it relies, on a balance of probabilities. The second question is whether, in the light of the misconduct thus established, the attorney concerned is not a “fit and proper person to continue to practise as an attorney” … the determination of the second issue requires an exercise of its discretion by the court [which] involves, in reality, a weighing up of the conduct complained of against the conduct expected of an attorney and, to this extent, is a value judgment … The third inquiry again requires the court to exercise a discretion. At this stage a court must decide, in the exercise of its discretion, whether the person who has been found not to be a fit and proper person to practise as an attorney deserves the ultimate penalty of being struck from the roll or whether an order of suspension from practice will suffice’.

In paragraphs 18 and 19 he said that in deciding whether an attorney should be removed from the roll or whether an order suspending him from practice would be an appropriate sanction,

‘sight should not be lost of the reality that, in its effect, the imposition of the former stricture constitutes a severe penalty. Apart from the ignominy of being struck off the roll, the attorney will be precluded from practising his profession for a substantial period of time … Before imposing this severe penalty, the Court should therefore be satisfied that the lesser stricture of suspension from practice will not achieve the objectives of the Court’s supervisory powers over the conduct of attorneys. These objectives have been described as twofold: first, to discipline and punish errant attorneys and, secondly, to protect the public, particularly where trust funds are involved.’

[18] The conduct of the first respondent is admittedly manifestly unprofessional and worthy of censure. He disgracefully overreached in the fee he charged, he mismanaged the winding-up of the deceased’s estate, and in the face of challenge, initially had the temerity to justify his wrongdoings. The question remains whether such conduct warrants the ultimate professional penalty.

[19] When the matter was called before us, and notwithstanding the stance adopted in the first respondent’s answering affidavits and in his counsel’s heads of argument, the first respondent’s approach focussed on an acceptance of his wrongdoing. The argument concentrated on the submission that this was a momentary lapse in judgment on the part of the first respondent and that an Order striking his name from the roll was too severe in the circumstances. We were advised, and this was common cause, that

Mrs Mhkize had already been repaid the sum of R100 000,00 and we were advised of the arrangements being put in place to repay her the balance and interest, calculated by counsel to be in the sum of a further R100 000,00.

[20] The first respondent has demonstrated that he was not fit and proper to practise as an attorney. However, I think too that the facts demonstrate that he has learnt a hard lesson and that there is no reasonable danger of the events recurring. The ultimate professional penalty would, in my view, be too harsh in all the circumstances of the case. A suspension from practice, itself suspended for a period upon appropriate conditions and coupled with an Order for the repayment tendered, would, in my view constitute sufficient punishment. It is also proper that the first respondent bear all the costs of the application.

[21] Although the Order I intend making provides for repayment of an amount calculated by the first respondent’s counsel as reasonably representing the balance due to Mrs Mkhize, I make no specific finding with regard to the first respondent’s indebtedness to her. She may well contend that, properly calculated, more is due to her, and this judgment is not intended or to be employed as a bar to such efforts she might wish to make in recovering what she may contend is additionally due.

[22] The following order is made:

(a) The first respondent is suspended from practice as an attorney for a period of one year.

(b) The Order made in paragraph (a) above is suspended for a period of three years upon the condition:

i. that the first respondent is not found guilty of professional misconduct involving dishonesty (including a breach of the applicant’s rules of practice) committed during the period of suspension ;

ii. that the first respondent pay to the complainant (Mrs Ntombifikile Mendy Mkhize) the sum of R100 000,00 by immediate payment of the sum of R50 000,00 and thereafter by payment of the sum of R10 000,00 per month on the 1st day of each month commencing 1 June 2014, with proof of such payments to be submitted to the KwaZulu-Natal Law Society immediately upon each payment being made;

(c) The first respondent is ordered to pay the costs of the application on the attorney and client scale, such costs to include those reserved on previous occasions.

____________

Vahed J

I agree

________________

Ploos van Amstel J

CASE INFORMATION

Date of Hearing: 21 February 2014

Date of Judgment: 09 May 2014

Applicant’s Attorney: Mr S N Chetty

Applicant’s Attorneys: Siva Chetty & Company

378 Langalibalele Street

Pietermaritzburg

(Ref: Mr S N Chetty/Sumaya/KZN33)

Tel: 033 342 9636

1st Respondent’s Counsel: L Pillay SC

1st Respondent’s Attorneys: Justice Reichlin Ramsamy Attorneys

Durban

Locally represented by:

Messenger King

21 Timber Street

(Ref: Ms K Sewpal/M2289/KS)

Tel: 031 305 3844