South African Legal Practice Council v Melato (1863/2020) [2021] ZAFSHC 305 (2 December 2021)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

FREE STATE DIVISION, BLOEMFONTEIN

(1) REPORTABLE: NO

(2) OF INTEREST TO OTHER JUDGES: NO

(3) REVISED.

Case Number: 1863/2020

In the matter between:

THE SOUTH AFRICAN LEGAL PRACTICE COUNCIL

Applicant

and

TSWANTSO PHILLEMON MELATO Respondent

Delivered. This judgment was handed down electronically by circulation to the parties’ representatives by email. The date and time for hand down is deemed to be 10h00 on 02 December 2021.

JUDGMENT

CORAM: WILLIAMS J et RANCHOD J

Introduction

[1] The applicant seeks, in summary, the following relief as against the respondent who is a practicing attorney:

1.1 That the respondent’s name be struck from the roll of legal practitioners of the Free State Division of the High Court, alternatively, that the respondent be suspended from practice for such period and on such conditions as this court may deem appropriate;

1.2 That a curator bonis be appointed with the powers as fully set out in the notice of motion; and

1.3 That the respondent pays the costs of the application on the scale as between attorney and client.

[2] The respondent opposes the application.

Factual background

[3] The respondent was admitted to practise as an attorney on 29 August 2002 and has practised as such since then in this Division of the High Court.

[4] The deponent to the affidavit filed in support of the application on behalf of the applicant (the LPC) says the LPC received two complaints against the respondent from two persons who were his clients. Both complainants alleged that the respondent misappropriated monies entrusted to him by each of them respectively.

[5] The LPC further states that the respondent also committed transgressions of the then extant Attorneys Act 53 of 1979 as well as the Legal Practice Act 28 of 2014. It says that he, inter alia, failed to submit his audit reports timeously. The result was that he did not obtain the annual Fidelity Fund Certificate for certain periods, which was a contravention of both the Acts. It is also alleged that the respondent failed to keep proper accounting records, which was also a contravention of the relevant provisions of the then extant Attorneys Act and thereafter that of the LPA. The effect of this was that he failed to administer his practice properly to the detriment and prejudice of his clients. A further allegation is that the respondent's clients did not have access to their files. He also did not reply to inquiries from clients and failed to properly account to them.

The legislative matrix

[6] The provisions of the LPA, which came into operation on 1 November 2018, are applicable to this application. Prior to that date, the provisions of the Attorneys Act 53 of 1979 were applicable.

[7] The LPC is the successor-in-title to the erstwhile Free State Law Society, which served as the regulatory body for legal practitioners in the Free State. The LPC is statutorily enjoined, in terms of s5 of the LPA, to regulate all legal practitioners and to enhance and maintain the integrity and status of the legal profession. It exercises jurisdiction over all legal practitioners practicing for their own account or otherwise in the Republic of South Africa. The former provincial law societies and now the LPC are the custos morum of the legal profession, and the guardians of its values and traditions. They are seized with the duty to uphold the requisite professional and ethical norms and standards of the profession. Amongst the stated objectives of the LPA the LPC is to ‘ensure’ that the profession is held accountable and the ‘public interest’ is protected and promoted.

[8] In terms of section 119(3) of the LPA, anything done in terms of a law repealed or amended by the LPA remains valid if it is consistent with the LPA until repealed or overridden and is deemed to have been done in terms of the corresponding provisions of the LPA.

[9] On 1 March 2016 the uniform rules of the attorneys profession came into operation and replaced the then existing rules of the different law societies, in casu, the rules of the Free State Law Society. The uniform rules were later replaced by the Code of Conduct for legal practitioners, candidate legal practitioners and juristic entities, which were published during 2017 but which were suspended on 14 November 2018. They were replaced by the Code of Conduct for legal practitioners, candidate legal practitioners and juristic entities published in GN168 in the Government Gazette 2337 of 29 March 2019 as corrected by GN198 in Government Gazette 42364 of 29 March 2019.

The Court’s approach to applications of this kind

[10] When the court considers an application of this kind, it follows a three-stage inquiry: see, inter alia, Jasat v Natal Law Society 2000 (3) SA 44 (SCA); Malan & Another v Law Society of the Northern Provinces [2008] ZASCA 90; 2009 (1) SA 216 (SCA).

[11] Firstly, the court has to decide whether the alleged offending conduct has been established on a preponderance of probabilities. It is a factual enquiry.

[12] Secondly, the enquiry is whether the person concerned is, in the discretion of the court, not a fit and proper person to continue to practice or should be suspended from practice. This requires the court to exercise a discretion that involves a weighing up of the conduct complained of against the conduct expected of a legal practitioner, and in this regard it is partly value judgment and partly objective fact.

[13] Thirdly, the court enquires whether in all the circumstances of the matter the person in question ought to be removed from the roll of practitioners or whether an order of suspension from practice for a specified period might suffice. Again, this involves the exercise of a discretion as to whether the ultimate penalty is warranted in the circumstances.

[14] At this stage of the inquiry, the function of the court is primarily to protect the public, rather than punish the attorney. (See Malan and Another v Law Society of the Northern Provinces [2008] ZASCA 90; 2009 (1) SA 216 (SCA) para 7.) That said, the Supreme Court of Appeal endorses a conservative approach to standing and erosion of professional ethics rather than "a kid gloves approach." [See Malan, supra, para 11, and Hewetson v Law Society of the Free State [2020] 3 All SA 15 (SCA) para 51.]

[15] Each case depends on its own circumstances. The entire inquiry is of a disciplinary nature, and how the court conducts the inquiry depends on the circumstances of the case. (See Solomon v Law Society of the Cape of Good Hope, 1934 A.D. 401 at 412.)

[16] Dishonesty is not a sine qua non for striking off. Although it is not an inviolable rule the transgressions involving dishonesty attract striking off where the transgressions not involving dishonesty attract a suspension from practice and the court generally follows this distinction. [See Summerley, supra para 21.] Each case must be evaluated on its own facts and merits, to determine what order is justified in the specific case. Considerations such as whether the conduct complained of were likely to recur in future and the objective of protection of the public are material in considering a suitable error. The absence of dishonesty does not mean that striking off is not an appropriate order. [See Malan, supra, at para 11.] Leach JA in Hewetson (supra, at para 47) referred to striking off as the default position, the onus resting on the errant attorney to place evidence before the court to justify another order, namely suspension. The body of case law establishes that where dishonesty is established, exceptional circumstances would have to be shown by the errant attorney to justify a suspension rather than striking off (See Hewetson, supra, at para 48).

[17] A lack of insight by an attorney (the respondent in casu) into what he or she did wrong would in itself be an important factor which reflects adversely on his character and is a weighty consideration in militating against any lesser stricture than his removal from the roll. (See Vassen v Law Society of the Cape of Good Hope, [1998] ZASCA 47; 1998 (4) SA 532 (SCA) at 539B-C.) These factors may manifest character defects, a lack of integrity, a lack of judgment and the lack of insight. (See Malan, supra, para 28.)

[18] Applications of this kind are sui generis proceedings. An attorney is therefore not entitled to approach the matter as if it were a criminal case and rely on denial upon denial and, instead of dealing with the allegations, to deflect them and, as part of the culture of blame, blame others. (See Malan, supra, para 12.) This principle was discussed in Cirota and Another v Law Society, Transvaal, 1979 (1) SA 172 at 173A. If allegations are made by the LPC and underlying documents are provided which form the basis of the allegations, they cannot simply be brushed aside; the attorneys are expected to respond meaningfully to them and to furnish a proper explanation of the financial discrepancies as their failure to do so may count against them. (See Hepple v Law Society of the Northern Provinces [2014] 3 All SA 408 (SCA) para 9.)

[19] Leach JA, in the minority judgment in Hewetson, supra, para 49, explains the evidentiary burden in these matters, as follows-

"Moreover, in order for the court to properly exercise its discretion, there is an evidential burden at least (for the present purposes I put it no higher than that) for an attorney shown to be not fit and proper to practice, to place evidence before court to demonstrate why it would be appropriate that he or she be suspended rather than struck off. By reason of the sui generis nature of the proceedings, this would require a full and frank disclosure of all material information so as to allow the court to make a proper and informed decision. There is no room for an attorney who wishes to remain on the roll to be coy about material facts in a matter of this nature. As officers of the court, attorneys are at all times expected to be scrupulously honest and observe the utmost good faith in their dealings with the court, even if it means disclosing information which may be adverse to their own interests, and this rule applies equally in the applications to strike them off.” (Footnotes omitted.)

[20] In the present matter, the respondent was obliged to observe the highest degree of good faith in his conduct as attorney, both in answering to the complaint and dealing with the applicant's allegations in the striking off application. The facts show that the respondent did not observe this obligation, not in the disciplinary proceedings and certainly not in these proceedings.

[21] Due to the nature of disciplinary proceedings of this ilk, the court may have regard to evidence which would normally be inadmissible in civil proceedings, or which would ordinarily have been liable to be struck out, subject to the qualification that the court hearing the matter will determine, with due regard to considerations of fairness and justice to the ‘respondent party’ (attorney), what weight to accord to such material. (See Hassim v Law Society of Natal 1977 (2) SA 757 (A).)

[22] An order striking an attorney from the roll envisages that the attorney will not be readmitted to practice unless the Court can be satisfied by the clearest proof that the attorney is genuinely reformed, that a considerable period has elapsed since he was struck off and that the probability is that, if reinstated, he will conduct himself honestly and honourably in the future. (See Law Society of the Cape of Good Hope v C 1986 (1) SA 616 (A) at 640D-E.)

[23] Although the court is not bound by the views of the LPC, the LPC is no ordinary litigant. It seeks to safeguard the status and dignity of the profession, while protecting interests of the public in its dealings with attorneys. The court must therefore afford due and proper weight to the view of the LPC while at the same time bearing in mind that the court itself is ultimately the repository of disciplinary jurisdiction over attorneys. (See Law Society, Cape of Good Hope v Berrangè 2005 (5) SA 160 (C); Hewetson, supra.)

The offending conduct

[24] Before turning to the details of the offending conduct complained of by the two complainants Ms B M Toolo and Ms D S Makhethe, it would be apposite to state briefly the circumstances under which the two complainants became clients of the respondent.

[25] The respondent was well known to Mathebula J as he had served the Judge as a candidate attorney some 20 years before. Both the complainants were previously clients of the attorneys firm Uys Mathebula Inc., of which attorney (as he was then) M A Mathebula was the sole director. Attorney Mathebula was later appointed as a Judge of this division. He therefore arranged for some of his clients’ matters - including those of the two complainants - to be taken over by the respondent. He handed over certain files to the respondent as well as, in the case of the two complainants, the monies held by the firm in its trust account at the time.

Complainant Ms BM Toolo

[26] Ms Toolo complained of misappropriation of money entrusted by her to the respondent. The gist of the complaint was that an amount of R260 000.00 was entrusted by her to the respondent. These funds were initially held by Ms Toolo’s erstwhile attorneys, Uys Mathebula Inc. As I said, the respondent took over Ms.Toolo's matter and R260 000 was transferred to the respondent’s trust account in February 2017. The respondent admits having received the trust funds.

[27] Ms Toolo deposed to an affidavit on 9 April 2018 at Sasolburg for purposes of submission of a claim against the Attorneys Fidelity Fund and also to register a criminal case for investigation by the South African Police Service (SAPS). A copy of the affidavit was delivered to and a complaint lodged with the erstwhile Free State Law Society in May 2018 as well. Mathebula J had also provided an affidavit to the SAPS.

[28] The respondent deposed to an affidavit on 26 June 2018 in response to Ms Toolo’s and, it appears, Mathebula J’s allegations as part of the investigation.

[29] Both Ms Toolo and Mathebula J filed affidavits in reply to the allegations by the respondent in his affidavit.

[30] The respondent deposed to a further affidavit on 10 December 2018 in response to the allegations of Ms Toolo and Mathebula J in their respective ‘replying affidavits’.

[31] The respondent admits having received the funds in trust and says he paid over various amounts totalling R80 000.00 to Ms Toolo at her request. There was therefore to be a balance of R180 000 in his trust account to the credit of Ms Toolo. However, Ms Toolo appended bank statements to her complaint evidencing what she says is the misappropriation of the trust funds. The bank statements show that various amounts were withdrawn from the respondent’s trust account for the credit of Ms Toolo over a period of time, but which, she says, she did not receive.

[32] The respondent admits having withdrawn these funds or the bulk of the funds that were still to the credit of Ms Toolo but, his version is that he was given permission, or authorized to do so, by Mathebula J. He says Mathebula J had told him that he should have the funds available when required by Ms Toolo. Mathebula J denies these allegations.

Complainant Ms DS Makhethe

[33] Like the first complainant, Ms Makhete too deposed to an affidavit at Sasolburg, but on 14 May 2018, for submission of a claim against the Attorneys Fidelity Fund and to register a criminal case for investigation by the SAPS. A copy of the affidavit was also filed with her complaint to the Free State Law Society. She, too, complains of misappropriation of funds entrusted by her to the respondent.

[34] The circumstances leading to Ms Makhethe becoming the client of the respondent are similar to that of Ms Toolo save that the money transferred to the respondent’s trust account was R1 252 871.58 on 14 February 2017. The respondent paid over R80 500 to Ms Makhethe, at her request. The balance of R1 172 371.58 should have reflected to her credit in the respondent’s trust account. However, the respondent admits utilising the funds for his own benefit. However, he says, upon his request Judge Mathebula authorised him to utilise the funds.

[35] Mathebula J had also filed an affidavit in the criminal complaint lodged by Ms Makhethe. He denies having authorised the respondent to utilise the trust funds.

[36] The respondent filed the same affidavit as in the case of Ms Toolo as a response to the allegations of Ms Makhethe and Mathebula J in their respective ‘replying affidavits’.

[37] The respondent denies that the two complainants were his clients and says that he at all times dealt with Mathebula J regarding these two matters, after the latter’s appointment to the Bench. He further states that as far as he was concerned Mathebula J was the trust creditor with regard to the funds held in trust by him for the two complainants. Ms Toolo states that she had direct interactions with the respondent regarding her matter but the respondent flatly denies that and says he has never met her and has had no interactions with her at all.

[38] The respondent says Mathebula J retained the files of the two complainants. However, by his own admission, he issued receipts in the name of the two complainants for the amounts received by him in trust from Mathebula J. It is incomprehensible that he would, in the circumstances, not have files for the complainants and not regard the two complainants as his clients.

[39] It seems to me highly improbable that the respondent asked Mathebula J for permission to utilise the trust funds. It beggars belief that he would do so knowing full well as a senior attorney in practise in excess of 15 years that it would be wrong. Furthermore, his stance that Mathebula J was the trust creditor and not the two complainants falls to be rejected as the receipts issued for the trust funds were not in the name of Mathebula J but of the respective complainants. In the circumstances the respondent’s explanation is disingenuous, to say the least. Even assuming for a moment that Mathebula J authorised him to utilise the trust funds of the complainants (I do not say that the Judge did) as an experienced attorney he should know that he cannot act on the instructions of a third party to utilise a client’s trust funds in the absence of a written authority from the client.

[40] The SMS messages that the respondent relies on to show that he had met Mathebula J at his chambers do not take the matter any further. The Judge admits having met the respondent (although he does not expressly state where) but that at the meeting the respondent admitted to having misappropriated the trust funds. The respondent also says the SMS conversation shows that Mathebula J was the trust creditor. I do not think so. Insofar as two SMS messages from the Judge on 12 February and 27 March 2018 instructing him to pay Ms Toolo R20 000.00 (‘R20g’) and R5000.00 respectively are concerned, they do not show that he was the trust creditor for the reasons mentioned earlier. What the respondent should have done, in my view, is to contact Ms Toolo and obtain instructions from her.

[41] I should mention that rather than take the court into his confidence and see the error of his ways, the respondent resorted to delaying tactics. He alleged that the striking off application could not proceed as he had launched a review application challenging the LPC’s decision to launch this application when the disciplinary enquiry it had instituted against him had not been finalised. The review application was launched the day before this application was to be heard and the respondent then moved for a postponement and also sought condonation for the late filing of his answering affidavit. Condonation was granted. This in circumstances where he had admitted the misappropriation of trust funds at the disciplinary inquiry. This application was postponed on certain conditions relating to time-frames within which the review application was to be finalised. The review application was ultimately dismissed.

[42] The respondent also sought postponement of the matter on the basis that he had changed attorneys. He also briefed a different counsel at the last minute, which led to counsel requesting a postponement in order to take proper instructions.

[43] At the last hearing a further postponement was sought for two reasons. One was that the respondent had (rather belatedly) launched a complaint with the Judicial Service Commission (the JSC) against Mathebula J and this court should therefore await the outcome of that complaint. We were of the view that this matter is to be decided on the facts before us and there was no need to postpone it any further. The outcome of the complaint with the JSC could not have a bearing on this application in circumstances where, as I said, the respondent admits to misappropriating trust funds.

[44] Secondly, we were informed that the respondent wants to repay the misappropriated amounts and to this end had paid a certain amount into his attorney’s trust account. Certain questions arise. Why has he not repaid the complainants? Why is the money being held in his attorney’s trust account? All that was said was that it was pending ‘negotiations’ with the complainants. We were not told what these negotiations were about. In any event we fail to understand what there is to negotiate about.

[45] The respondent also contravened the provisions of the Attorneys Act as it was applicable at the relevant time and subsequently that of the LPA as well as the applicable Rules governing the conduct of the respondent as attorney, by failing on several occasions to ensure that the audit reports relating to his trust account were submitted timeously. The consequence of these failures was that he failed to timeously lodge his annual applications for a fidelity fund certificate thus putting the Fidelity Fund at risk. He practised without a fidelity fund certificate in direct contravention of the relevant statutes. The respondent’s attitude in this regard is that the LPC did not discipline him for practising without a fidelity fund certificate.

[46] A worrying feature regarding the belated filing of the audit report is that it appears that it was provided by the auditor without qualification in circumstances where there was a trust deficit during the period covered by it, i.e. 1 March 2016 to 28 February 2017. The LPC should investigate this further and if it is indeed found to be so, to report the auditor’s conduct to the relevant professional body. (See paginated pages 208 – 211 of the bundle.)

[47] It is clear from the respondent’s attitude to the complaints that he is shifting the blame on anyone else but himself. His failure to take responsibility for his actions and to own up to them demonstrates that he has no remorse or contrition for what he has done. He has no insight into the character flaws revealed by his conduct. In our view this is consequently a matter where the only appropriate remedy and fit sanction to impose is an order striking the respondent from the roll of attorneys. We also do not find any exceptional circumstances for imposing a lesser sanction than that of striking off.

Costs

[48] The matter first came before us on 19 and 20 November 2020 when it was postponed for the respondent to pursue the review application which he had launched just before the matter was to be heard. Costs were reserved for later determination. He did not succeed in the review application. It is therefore appropriate that he pay the wasted costs of 19 and 20 November 2020 on the attorney and client scale.

[49] On 18 June 2021 the respondent sought a further postponement – this time to settle the matter with the complainants as, he said, he had already paid some amount into his attorney’s trust account for this purpose. His counsel indicated that the settlement should be finalised by the following week. Respondent also tendered the wasted costs on the attorney and client scale. The matter was duly postponed to 21 July 2021.

[50] On 21 July 2021 the respondent again sought a postponement for several reasons. His counsel informed us that respondent had filed a complaint with the JSC and wished to await its outcome. I have already stated earlier why we were of the view that this was not a persuasive ground for a postponement. Another reason why he sought a postponement was that he had terminated his attorney’s mandate two days before (on 19 July 2021). No convincing reasons were given as to why he terminated the mandate shortly before the hearing on 21 July 2021. As I said earlier, the request (by counsel from the bar) for a postponement was refused and the matter proceeded. In view of the outcome of the application for a striking off it is appropriate that the respondent pay the costs of the LPC on the attorney and client scale which is the usual order given in matters of this nature.

Order

[51] The following order shall ensue:

1. Condonation is granted for the late filing of the respondent’s answering affidavit.

2. Condonation is granted for the filing of a supplementary affidavit by the respondent.

3. The respondent’s name is to be struck from the roll of legal practitioners of the Free State Division of the High Court.

4. A curator bonis is to be appointed with the powers as fully set out in the notice of motion.

5. The respondent shall pay the costs of the application including the wasted costs occasioned by the postponement of the matter after the hearing on 19 and 20 November 2020 and 18 June 2021 on the scale as between attorney and client.

RANCHOD J

Judge of the High Court

I agree

WILLIAMS J

Appearances:

For applicant: Adv Snellenburg SC

Instructed by Symington & De Kock

169B Nelson Mandela Drive

Bloemfontein

For respondent:

Adv Litabe

Instructed by Hanlie Fourie Attorneys

119 Waverley Road