THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No.:  185/2015

In the matter between:

LAW SOCIETY OF THE NORTHERN PROVINCES   FIRST
APPELLANT
M J S GROBLER

SECOND
APPELLANT

and

LOUW DE WITT LE ROUX

FIRST RESPONDENT
GIDEON FRANCOIS DU PLESSIS

SECOND
RESPONDENT
DE LOUW LE ROUX & DEOFRANN
DU PLESSIS INCORPORATED t/a LE ROUX
DU PLESSIS ATTORNEYS

THIRD
RESPONDENT

Neutral citation:   Law Society of the Northern Provinces v Le Roux (185/2015)
[2015] ZASCA 168 (26 November 2015)

Coram:

Maya DP, Shongwe, Majiedt, Petse and Mathopo JJA

Heard:

6 November 2015

Delivered:

26 November 2015

Summary: Attorneys Act 53 of 1979 – Law Society’s resolution introducing a
requirement to its rules for the submission of an acceptable, unqualified audit
certificate for the issue of fidelity fund certificates under s 42(3)(a) of the Act
constituted administrative action within the meaning of the Promotion of
Administrative Justice Act 3 of 2000 and is binding until set aside on review – wrong
relief sought by insolvent attorneys from whom the Law Society’s secretary withheld
the certificates because their firm’s trust account was in deficit and its audit certificate
accordingly qualified as a result of fraudulent misappropriation of funds from the
account by their associate – should have taken the resolution on review instead of
merely challenging the secretary’s refusal to issue the certificates – appeal thus upheld.
__________________________________________________________________
ORDER
__________________________________________________________________
On appeal from: Gauteng Division of the High Court, Pretoria (Tuchten J sitting as
court of first instance):

1 The appeal is upheld with costs, including the costs of two counsel, on the scale
as between attorney and client.
2 The order of the Gauteng Division of the High Court, Pretoria, is set aside and
replaced with the following order:
‘The application is dismissed with costs on the scale as between attorney and
client.’
_________________________________________________________________

JUDGMENT
__________________________________________________________________
MAYA DP (SHONGWE, MAJIEDT, PETSE and MATHOPO JJA concurring):

[1] This is an appeal against the judgment of the Gauteng Division of the High
Court, Pretoria (Tuchten J) which compelled the secretary of the first appellant (the
Law Society) to issue fidelity fund certificates to the first and second respondents. The
matter serves before us with the leave of the court a quo.

[2] The first and second respondents practise as attorneys in the third respondent,
an incorporated firm (the firm). In October 2014, they unsuccessfully applied to the
secretary of the Law Society (the secretary) for the renewal of their fidelity fund
certificates. The reason given for the refusal, which sparked these proceedings, was
that they had ‘not complied with the lawful requirements of the Law Society in terms
of Section 42(3)(a) of the Attorneys Act, 1979 having regard to the problems …
identified relating to [their] firm’s trust account and the allegations of a trust shortage’.

[3] This decision was made against the backdrop of the stringent regulatory
framework provided by law for the regulation and control of attorneys’ trust accounts.
An important cog in that framework is the Attorneys’ Fidelity Fund,1 which is meant to
protect the public against the misappropriation of their money entrusted to attorneys. It
is chiefly financed by means of contributions made by practising attorneys in terms of s
43 of the Attorneys Act 53 of 1979 (the Act) and the interest the attorneys earn on
their trust bank accounts in terms of s 78(3) of the Act. Its purpose is set out in s 26(a)
of the Act which provides that ‘the fund shall be applied for the purpose of
reimbursing persons who may suffer pecuniary loss as a result of … theft committed
by a practising practitioner, his or her candidate attorney or his or her employee, of any
money or other property entrusted by or on behalf of such persons to him or her or to
his or her candidate attorney or employee in the course of his or her practice or while
acting as executor or administrator in the estate of a deceased person or as a trustee in
an insolvent estate or in any similar capacity’.

[4] The attorneys’ trust accounts are regulated by ss 78 and 79 of the Act which,
inter alia, require attorneys to hold all money entrusted to them in separate trust

1 Established by s 8 of the Attorneys’ Admission Amendment and Legal Practitioners’ Fidelity Fund Act 19 of 1941.

banking accounts2 which do not form part of the attorney’s assets;3 and to keep proper
accounting records containing particulars and information of the money held in trust4
which shall be inspected by the council of the society of the province in which the
attorney practises to satisfy itself that they are kept properly.5 These provisions are
supported by rules 68 to 70 of the Rules of the Law Society6 which impose similar
requirements and enjoin attorneys, inter alia, to ensure prompt deposit of trust money
received;7 that the money in a trust account is not less than the total amount of the
credit balances of its trust creditors;8 that no account of any trust creditor is in debit;9
and that withdrawals from the trust account are only in respect of payments to or for or
on behalf of a trust creditor.10 Rule 70(1) obliges a firm,11 at its expense once in each
calendar year, or at such time as the council may require, to appoint an accountant
approved by the council to act on behalf of and as the representative of the fund to
discharge the duties assigned to him or her in terms of rule 70.4.12 These duties are
essentially the preparation of an audit report in the form prescribed by the Third

2 Section 78(1).
3 Section 78(7) and s 79.
4 Section 78(4).
5 Section 78(5).
6 In this instance the rules of the Law Society of the Northern Provisions (Incorporated as the Law Society of the Transvaal)
made under the authority of s 74 of the Act and promulgated in GG 7164 of 1August 1980, as amended.
7 Rule 69.1.
8 Rule 69.3.1.
9 Rule 69.3.2.
10 Rule 69.5.
11  Defined in Rule 1.9 as a partnership of practitioners, a sole practitioner for his own account, a professional company who
or which in each case conducts the practice of a practitioner.
12 Section 70.4 provides:
‘Duties of accountant
Every accountant who has accepted an appointment in terms of rule 70.1 shall –
70.4.1
within six months of the annual closing of the accounting records of the firm concerned, or at such other times as
the Council may require, furnish the council with a report which shall be in the form of the Third Schedule to these rules;
70.4.2
without delay report in writing directly to the council if, at any time during the discharge of his function and duties
under this rule–
70.4.2.1 it comes to his/her notice that at any date the total of the balances shown on trust accounts in the accounting
records of the firm exceeded the total amount of the funds in its trust banking account, its trust investment account and its
trust cash;
70.4.2.2 any material queries regarding its accounting records which he/she has raised with the firm have not been dealt
with to his/her satisfaction;
70.4.2.3 any reasonable request made by him/her for access to its accounting records and supporting documents or for any
authority referred to in rule 70.2 has not been met to his/her satisfaction.’

Schedule to the rules, once a year, and to report to the council on the firm’s
compliance with the requirements of the Act and the rules regarding its accounting.

[5] Section 41 of the Act bars an attorney from practising for his or her own account
without a fidelity fund certificate.13 Section 83(10) of the Act criminalises breach of
these provisions by providing that ‘[a]ny person who directly or indirectly purports to
act as a practitioner or to practise on his or her own account or in partnership without
being in possession of a fidelity fund certificate, shall be guilty of an offence and on
conviction liable to a fine not exceeding R2 000 or to imprisonment for a period not
exceeding six months or to both such fine and such imprisonment’. Section 42(1) of
the Act obliges the attorney to apply in the prescribed form to the secretary of the
society concerned for the certificate. Subsection (2) requires such application to be
accompanied by the contribution (if any) payable in terms of s 43.14

[6] In addition to rule 70, the Law Society resolved, on 30 September 2013, to
amend the ‘lawful requirements’ for the issue of a fidelity fund certificate, in terms of s
42(3)(a) of the Act. The resolution required timeous submission of the original
completed and signed application form for the certificate and the lodgement with the
Law Society of an acceptable, unqualified audit certificate for the relevant period. The
Law Society duly notified its members (which included the respondents) of the

13 Section 1 of the Act makes reference to ‘a practitioner’ which is defined as an ‘attorney, notary or conveyancer’. A fidelity
fund certificate is defined as ‘a certificate issued in terms of section 42’. Section 41 provides that:
‘(1) a practitioner shall not practise or act as a practitioner on his or her own account or in partnership unless he or she is in
possession of a fidelity fund certificate.
(2) Any practitioner who practises or acts in contravention of subsection (1) shall not be entitled to any fee, reward or
disbursement in respect of anything done by him or her while so practising or acting’.
14 Section 43 determines the contributions which practitioners practising for their own account are required to make to the
Attorneys Fidelity Fund annually. In terms of s 42(3)(b) the certificate shall be valid until 31 December of the year in
respect of which it was issued

resolution.15 Failure to comply would also deprive the members of the Attorneys
Indemnity Insurance cover.

15 Law Society Notice 4 September 2013.

[7] It is the respondents’ failure to comply with the requirements for an unqualified
audit requirement which led to the secretary’s refusal of their applications for renewal
of their fidelity fund certificates. The respondents’ audit certificate was heavily
qualified because their trust account had been plundered and was accordingly in
disarray. Three of the firm’s trust creditors had debit balances amounting to R545 758
and a sum of R5 024 041 appeared to have been misappropriated from the firm’s trust
account, in breach of rules 68.1, 69.3 and 69.5.

[8] The culprit was the second respondent’s brother, Mr Andries Christiaan
Dormehl du Plessis (Du Plessis), who worked at the firm until his expulsion for his
misdeeds on 16 July 2014. From 2007 until his admission as an attorney on 24 March
2014 he was a candidate attorney at the firm. Thereafter, he practised as a sole
proprietor under the name of Dormehl Du Plessis Incorporated but ran his practice in
association with the firm from its premises under a lease. He also used its personnel,
office facilities and trust account for all deposits in respect of his matters. He referred
all his conveyancing work to the firm as he was not a qualified conveyancer.

[9] The association ended abruptly when Du Plessis confessed to the second
respondent that he had misappropriated several millions of rands from the firm’s trust
account over several months. Pursuant to this disclosure he was immediately removed
from the premises. The respondents took various steps to rectify the situation,
including reporting him to the Law Society, laying fraud charges against him,
launching sequestration proceedings against his estate, mandating a forensic audit and
placing their own immovable property on the open market for sale to raise funds to
rectify the trust deficit.

[10] In August 2014, the Law Society appointed an independent auditor, Mr Ashwin
Reddy, to conduct a forensic audit on the firm. He made the following findings:
‘[Du Plessis] was able to defraud the firm’s trust bank account by taking advantage of certain
weaknesses in the firm’s system of internal controls. In particular, the firm did not obtain suitable
confirmation of the client’s bank account details as well as confirming the client’s bank accounts
details prior to payment. [Du Plessis] recognised the weakness and took advantage of the weakness
by falsifying correspondence from clients wherein they confirm their bank account details. Suitable
proof of banking details would be a cancelled cheque, a letter from the bank or a bank stamped bank
statement.
Due to the significant trust shortage … as well as the claims lodged with the Attorney’s Fidelity
Fund, I am of the opinion that the firm poses a high risk to the Attorney’s Fidelity Fund and trust
creditors.
In my opinion [the first and second respondents] were not party to the fraudulent activities of [Du
Plessis] however as the directors of the firm they are ultimately reliable for establishing, maintaining
and monitoring the firm’s system of internal controls with the objective of preventing and detecting
fraud as well as safe-guarding trust assets. Furthermore the Directors of the firm are responsible for
the supervision and oversight of all staff members. I thus recommend that my report be referred to
the Disciplinary Department to consider further appropriate steps against [the first and second
respondents].
In light of [Du Plessis’s] fraudulent and dishonest actions which has resulted in financial loss to the
firm, trust creditors and ultimately the Attorney’s Fidelity Fund, I recommend my report be referred
to the Council to consider further appropriate steps.’

[11] Mr Reddy described the disorder he found in the firm’s trust account as follows:
‘During my inspections of the accounting records I quantified the trust shortage to be an amount of
R4,690,070, based solely on the information I was provided. The directors of the firm are not in the
financial position to reimburse the trust creditors, the funds which have been misappropriated.
Furthermore the accounting records are not accurate in that the fraudulent payments to Mr Du
Plessis have been accounted for as legitimate payments towards trust creditors. This places the firm

in a predicament as they are unable to properly account to the trust creditors, nor are they able to
identify the actual liability towards each trust creditor. The effect of this is that the directors are
unable to provide satisfactory responses to the queries of the affected trust creditors.’
In essence, the gravamen of the report was that the respondents are factually and
commercially insolvent.

[12] Pursuant to Mr Reddy’s report, the Law Society launched an application, which
was subsequently struck off the roll for lack of urgency, for the suspension of the first
and second respondents from practice pending the finalisation of an application for the
removal of their names from the roll of Attorneys.16 In the meantime, the respondents
had lodged their applications for fidelity fund certificates for 2015. When the
applications were refused, they successfully brought an urgent application in the
Gauteng Division, Pretoria (Tuchten J), to compel the secretary to issue the
certificates.

[13] The court a quo found that the first and second respondents had ‘shown
themselves to be fit and proper people to practise … caught up in a situation which
was not of their own making’. In the court’s view, s 42(3)(a) of the Act enjoined the
secretary to assess the risk attendant on the issue of the certificate which it believed
was ‘very low’ in this case. The court then found the requirement of an unqualified
audit certificate unlawful because it did not ‘address the situation of an entirely
unblameworthy applicant who is unable through circumstances beyond his control to
comply with it’ and required the respondents to do what they were objectively
incapable of in circumstances where they were blameless and the risk to the Law
Society and the Fidelity Fund, if the certificates were issued, were negligible.
Interestingly, the court recognised that deposits into the firm’s trust account in deficit

16 The application was subsequently struck off the roll for lack of urgency and it does not appear that it was pursued
thereafter.

by the respondents’ future trust creditors would likely be exposed to risk. But it held
that such risk could be ‘mitigated to some extent by a direction that the [respondents]
open a fresh banking account into which trust deposits must be deposited and … that
such deposits will not carry the risk that the depositors in relation to amounts
previously deposited will suffer as a result of the misbehaviour of [Du Plessis]’.

[14] On appeal before us, it was argued for the respondents that the requirement of
an acceptable, unqualified audit certificate is invalid because it ‘is overbroad, vague
and leaves no room for discretion’ as it does not cater for exceptions or instances such
as where the qualification may be trivial, or the applicant practitioners are not
blameworthy and cannot comply with the requirement through circumstances beyond
their control. It was further argued that the respondents were entitled to mount a
collateral challenge against the validity of the Law Society’s resolution and that the
court a quo was correct to set aside the secretary’s decision and substitute its own
decision.

[15] I agree with the Law Society’s contention that the chief hurdle for the
respondents is that their application targeted the wrong party. The respondents’ main
complaint in their papers and in argument before us, as set out above, concerned the
scope and validity of the resolution.  But the only relief sought in their notice of motion
was an order compelling the secretary to renew their fidelity fund certificates. The
difficulty with this approach is that it neither reckons with the statutory provisions in
terms of which the secretary acts when considering applications for fidelity fund
certificates nor the nature of the resolution and the effect thereof.

[16] The empowering provisions are couched in s 42(3)(a) of the Act which provides
that ‘[u]pon receipt of the application [for a fidelity fund certificate], the secretary of

the society concerned shall, if he or she is satisfied that the applicant has discharged all
his or her liabilities to the society in respect of his or her contribution and that he or
she has complied with any other lawful requirement of the society, forthwith issue to
the applicant a fidelity fund certificate in the prescribed form’. These provisions clearly
circumscribe the secretary’s role to merely satisfying herself that the application
complies with the relevant, lawful requirements. Whilst that exercise involves some
judgment on her part, she nevertheless enjoys no discretion to go beyond simply
granting the application if it meets the requirements or declining it if it does not. As the
respondents’ applications did not meet the requirement of an unqualified audit
certificate the secretary had no option but to decline them.

[17] But the more fundamental problem arises from the fact that the resolution, which
remains extant, was a decision of an administrative nature made by an organ of state or
a juristic person exercising a public power and performing a public function under an
empowering statutory provision, which had a direct external legal effect on
practitioners and adversely affected their rights. Thus, it constituted administrative
action within the meaning of s 1(a) and (b) of the Promotion of Administrative Justice
Act 3 of 2000. It is trite in our law that invalid administrative action may not simply be
ignored, but may be valid and effectual, and may continue to have legal consequences
until set aside on judicial review.17 The resolution was therefore binding on the
secretary and the respondents. Furthermore, the principles of fairness embedded in our
law militate against invalidating the requirement without affording the Law Society an
opportunity to explain the requirement. And this could be done only in review
proceedings. The respondents should, therefore, have challenged the resolution in such
proceedings and followed a wrong procedure.

17 Oudekraal Estates (Pty) Ltd v City of Cape Town & others2004 (6) SA 222 (SCA) paras 26 and 40 (41/2003) [2004]
ZASCA 48 (28 May 2004); MEC for Health, Eastern Cape & another v Kirland Investments (Pty) Ltd t/a Eye and Lazer
Institute  2014 (3) SA 481 (CC) paras 87-106; Incorporated Law Society, Transvaal v Visse & others (1); Incorporated

[18] Having thus found, it is not necessary or even prudent to determine the validity
of the resolution and the appeal should succeed on that basis alone. But a few material
misdirections committed by the court a quo bear mention. For its finding that the
requirement was unlawful the court relied on this court’s statement in Law Society of
the Northern Provinces & another v Viljoen; Law Society of the Northern Provinces
and another v Dykes & others.18 There, the court determined that a lawful requirement
under s 42(3)(a) of the Act ‘means one that: (i) relates to the purpose served by the
issue of a fidelity fund certificate; (ii) unequivocally informs the practitioner what it is
that the society requires of him or her; (iii) the practitioner is capable of complying
with, since the section is designed to enable the practitioner to carry on practice
subject to satisfying the requirement’.19 In the court a quo’s view, (iii) invalidated the
requirement because it required practitioners ‘to do things which they are objectively
not capable of doing in situations where they are not blameworthy and where the risk
to the law society and to the fund is as small as it is in the present case’.

[19] The first problem with this finding, ie that any risk that might arise from the
issue of the certificates was ‘very low’ or ‘small’, is belied by Mr Reddy’s undisputed
findings to the contrary. The second problem is that the court a quo’s interpretation of
(iii) above overlooks the context in which the statement was made and accordingly
misconceives its meaning. The court in Viljoen also remarked that the enquiry
conducted by a secretary dealing with an application for a fidelity fund certificate is
‘intended solely to assess any risk attendant on the secretary … so as to ensure that the
Fidelity Fund is not overexposed’. In the circumstances, the court’s statement in (iii)
could only have meant that the requirement must be capable of objective fulfilment.

Law Society, Transvaal v Viljoen (2)
18 Law Society of the Northern Provinces & another v Viljoen; Law Society of the Northern Provinces & another v
Dykes & others 2011 (2) SA 327 (SCA); [2010] ZASCA 176 (2 December 2010).

The court simply could not have meant that the secretary was obliged to issue a

19 Ibid, para 15.

fidelity fund certificate to an insolvent practitioner with a trust account in deficit, such
as the respondents, which would patently place the Fidelity Fund at risk.20

[20] This finding finds support in the court a quo’s own order for the opening of a
new trust account and the attempt to immunise deposits of new trust creditors’ funds
made into that account, which was a key condition to the issue of the certificates. This
unprecedented order clearly attests to the court a quo’s recognition of the real risk that
any fresh trust funds would be swallowed up by the trust account in deficit to the
prejudice of the new trust creditors. Needless to say, neither the Law Society nor the
secretary could grant such a remedy. And it remains highly doubtful that the court a
quo itself could, as the order impermissibly sought to alter the ranking of claims in
insolvency in the absence of the relevant creditors.

[21] The following order is accordingly made.
1 The appeal is upheld with costs, including the costs of two counsel, on the scale
as between attorney and client.
2 The order of the Gauteng Division of the High Court, Pretoria, is set aside and
replaced with the following order:
‘The application is dismissed with costs on the scale as between attorney and
client.’

__________________________

M M L MAYA

Deputy President of the Supreme
Court of Appeal

20 According to the first and second respondents, the trust deficit amounts were initially in the region of R7 million which
they reduced by a sum of R1,5 million which was all they were able to raise to rectify the situation. The respondents are
therefore actually and commercially insolvent.

APPEARANCES

For the Appellants:
W Trengrove SC (with H Vorster)

Instructed by: Rooth & Wessels Attorneys, Pretoria

Phatshoane Henney, Bloemfontein

For the Respondents:
JGW Basson

Instructed by: Clarke & Van Eck Attorneys, Pretoria

Martins Attorneys, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

26 November 2015

STATUS

Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal.

Law Society of the Northern Provinces v Le Roux (185/2015) [2015] ZASCA 168
(26 November 2015)

The Supreme Court of Appeal (SCA) today handed down judgment in a matter relating to the lawful
requirements of the Law Society of the Northern Provinces for the submission of an unqualified audit
certificate for the issue of fidelity fund certificates to a practitioner, and whether the secretary of the
Law Society could be compelled to grant a fidelity fund certificate where the practitioner had a
qualified audit certificate.

The appeal to the SCA by the Law Society of the Northern Provinces (the Law Society) was against
the judgment of the Gauteng Division of the High Court, Pretoria that held that the secretary of the
Law Society was required to issue fidelity fund certificates to the first and second respondents.

Proceedings began in the Gauteng Division of the High Court, Pretoria when the first and second
respondents, two practising attorneys practising as such in the third respondent, an incorporated firm
launched an urgent application seeking an order compelling the secretary of the Law Society (the
secretary) to issue fidelity fund certificates after they unsuccessfully applied to the secretary for the
renewal of their fidelity fund certificate. The secretary had refused to issue the fidelity fund certificates
because the respondents did not comply with a requirement of the Law Society in that they lodged a
qualified audit certificate with their applications to renew their fidelity fund certificates. The Law
Society had issued a resolution on 30 September 2013 amending the lawful requirements for the
issue of a fidelity fund certificate in terms of s 42(3)(a) of the Attorneys Act 53 of 1979 (the Act) to
provide that an application for a fidelity fund certificate must be accompanied by an acceptable,
unqualified audit certificate of the practitioner. The respondents’ audit certificate was heavily qualified
because one of the associates who worked with them had misappropriated a large sum of money
from the third respondent’s trust account. The court a quo held that the requirement by the Law
Society for an unqualified audit report before it could issue a fidelity fund certificate was unlawful
because it required practitioners ‘to do things that they are objectively not capable of doing in
situations where they are not blameworthy and where the risk to the law society and to the fund is as
small as it is in this case’.

The SCA held that the resolution by the Law Society constituted administrative action within the
meaning of s1(a) and 1(b) of the Promotion of Administrative Justice Act 3 of 2000 (PAJA) in that it
was a decision of an administrative nature made by an organ of state or a juristic person exercising a
public power and performing a public function under an empowering statutory provision, which has
direct external legal effect on practitioners and adversely affects their rights. The SCA reiterated that
an-invalid administrative action may continue to have legal consequences until set aside on judicial
review and that the resolution was binding on the secretary and the respondents until set aside only
by judicial review.

The SCA also found that the provisions of s 42(3)(a) of the Act circumscribed the role of the secretary
to merely satisfying herself that the application by the practitioner complies with the lawful
requirements, and that she did not have the discretion to grant the application where a practitioner did
not meet the lawful requirements.

The SCA also held that the court committed an irregularity when it found that the resolution was
unlawful in that it required practitioners ‘to do things that they were not objectively capable of doing in
situations where they were not blameworthy’. The correct position is that the requirement must be
capable of objective fulfilment, and not that the secretary was obliged to issue a fidelity fund
certificate to an insolvent practitioner with a trust deficit.

The SCA accordingly upheld the appeal with costs and the judgment of the Gauteng Division of the
High Court, Pretoria was set aside and replaced with an order dismissing the application with costs
on the scale as between attorney and client.

--- ends ---