THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

REPORTABLE
CASE NO 61/07

In the matter between

GERHARDUS JOHANNES DU PREEZ

First Appellant
JOHANNES PETRUS JOHST

Second Appellant
VERSATILE CONTRUCTION CC

Third Appellant

and

WILLEM BAREND JOHANNES ZWIEGERS

Respondent

________________________________________________________________________

CORAM:
HOWIE P, NUGENT, CLOETE, HEHER et MAYA JJA
________________________________________________________________________

Date Heard:
11 March 2008

Delivered:
28 March 2008

Summary:
Attorney negligent in paying out money in trust account without
establishing from depositor what latter wanted done with it.

Neutral Citation: This judgment may be referred to as Du Preez v Zwiegers
(61/2007) [2008] ZASCA 42 (28 March 2008).

________________________________________________________________________

HOWIE P

HOWIE P
[1] The respondent, a practising Johannesburg attorney, received the sum
of R385 000 into his trust account.  The depositor was Versatile
Construction CC, a close corporation conducting a construction business.  I
shall refer to it as ‘the corporation’.

[2] The corporation’s sole member, Mr GJ du Preez, in partnership with
Mr TP Johst, had sought to obtain a foreign loan for a project which the
corporation would undertake. The loan was to be procured through an entity
called DLA International Financial Services (DLA). Under a loan
procurement agreement with DLA the borrowers (to whom I refer by their
surnames) were liable to pay the sum in question as a refundable deposit. It
had to be paid into the respondent’s trust account where it would be held
pending onward payment to DLA on implementation of the loan.

[3] However, pursuant to instructions from a client, Mr Michael Louw
(Louw), who himself claimed to be entitled to the amount concerned, the
respondent paid the money, less a fee of R5 000 agreed with Louw, to a
company designated by Louw. Before doing so the respondent did not
contact the corporation or anyone representing it.

[4] When, subsequently, DLA failed to pay out the loan monies, Du Preez
tried to recover the deposit.  All his efforts, including an approach to the
respondent, were in vain.

[5] As co-plaintiffs, Du Preez, Johst and the corporation then sued the
respondent for damages in the sum of R385 000. The claim was based on
contract, alternatively in delict. It was alleged that the respondent’s disposal,
without the corporation’s consent, of the monies deposited constituted (I
paraphrase) the breach either of a mandate to deal with the funds only on the
corporation’s instructions, or of a legal duty to deal with the funds without
negligently causing the plaintiffs harm.

[6] The action was instituted in the High Court at Johannesburg and came
before Marais J. The learned Judge dismissed the action but granted leave to
appeal on the delictual claim.

[7] The relevant evidential material at the trial comprised the testimony of
Du Preez and the respondent, and various items of documentary evidence.
The salient facts, some of which have been referred to above, are not in
dispute.

[8] The sole communications received by the respondent from, or on
behalf of, the plaintiffs consisted in a letter faxed on 11 May 2001 by
attorneys acting for Du Preez and Johst, to which was added a later
handwritten subscript which Du Preez signed, for the corporation, on 16
May. The body of the letter reads:
‘D.L.A. \ GJ DU PREEZ & TP JOHST
The above refers.  We wish to advise that we act on behalf of Messrs du Preez & Johst.
We have been advised that your client granted our clients a loan in the sum of
R3 850 000.00. Your clients however require that our clients must deposit the sum of
R385 000.00 into your company’s  trust account.
1.
Our client wants your written confirmation that the monies will not be paid over
to your clients without our client’s written consent.
2.
The only stage in fact when the money can be paid over to your client is when our
client has received payment of the full R3 850 000.00. Clause 3.3 of the letter of grant
must be amended.
3.
Our clients want an acceptable BANK guarantee for the R3 850 000.00. When
can our client expect to receive the guarantee.
4.
Our clients want your written confirmation that your client is not acting as a
deposit-taking institution, or in the event that your client is a deposit taking institution we
want confirmation that your client is registered as such.
We await your reply at your most earliest [sic] convenience.’

[9] Alongside the writer’s signature appears the subscript. It was written
by one Coetzee, an agent for DLA in the transaction of the loan
procurement. It reads:
‘I, Mr GJ Du Preez confirm that the broker can proceed with the procurement of the
funding and this letter is hereby cancelled.’

[10] Du Preez testified (and he impressed the Judge generally as being an
honest witness) that subsequent to 11 May Coetzee told him that the bank
guarantee requirement in clause 3 of the letter would occasion delay in the
paying out of the loan monies, which payment was imminent. He therefore
proposed that Du Preez sign the handwritten subscript. Du Preez did so
intending, he said, to cancel no more than the guarantee provision. His
evidence on this point is perfectly credible but the matter can be dealt with
on the basis of the respondent’s evidence that he understood the letter to be
cancelled in its entirety.

[11] The respondent received the letter on or about 11 May. Despite its
concluding request for a very early reply he did not answer it. This was
despite the fact that he had heard from Louw both before and after its
receipt. Before the letter’s arrival, so the respondent testified, Louw
telephoned him and said he was due some commission which would soon be

paid into the respondent’s trust account. The amount, Louw said, would be
‘in the vicinity of R380 000’. Louw said he would instruct the respondent
‘where to pay the money to’ (the respondent’s words). Because the letter
conflicted with this intimation from Louw, the respondent telephoned Louw
and told him what the letter said. Louw said it was nonsense and undertook
to ‘sort it out’ (again the respondent’s words). That was some time before 16
May.

[12] A number of significant events occurred on 16 May. First, as
mentioned already, there was the handwritten cancellation of the letter of 11
May. The respondent said he inferred that the cancellation was the result of
Louw’s intervention. Second, the corporation’s loan deposit was paid into
the respondent’s trust account. Third, Louw telephoned the respondent and
instructed him to pay the money (less fee) to Asset Allocation Consultants
(Pty) Ltd, a Pretoria company. Fourth, the respondent prepared the necessary
documentation but told Louw, so he testified, that he required written
instructions from Louw before he would pay what he regarded as Louw’s
money to anyone else.

[13] On 17 May Louw faxed the requested instructions to the respondent.
Also on that date DLA, per a director named RC Koekemoer, faxed the
respondent as follows:
‘With reference to our phone conversation at 16h30 on 16 May 01, DLA hereby appoints
Mr Michael Louw as our agent/representative and authorises Zwiegers Attorneys to
release all funds held on our behalf to Mr Louw who will invest the funds as per
agreement between ourselves and Mr Louw.’
Questioned by the trial court about this letter, and particularly the reference
to the funds allegedly held on DLA’s behalf, the respondent, who had earlier
testified that he all along regarded the money as being Louw’s the moment it
was paid into the trust account, said he did not apply his mind to this point.
He said (unconvincingly) he hoped there was some commission sharing
agreement and because the letter did not direct him not to pay Louw, he paid
out the funds when he got Louw’s letter of the same day. It may be
observed, in any event, that DLA was not the respondent’s client. The
respondent’s case is based squarely on the fact that Louw was the client and
it was on his instructions that the respondent placed total reliance.

[14] The trial Judge considered that the plaintiffs had been the victims of a
fraudulent conspiracy. It may be that DLA and Louw were parties to it,
hence the DLA letter to the respondent of 17 May. However that may be,

there is no suggestion that the respondent was a party to it and the
fundamental question is whether the reasonable person in the respondent’s
position would have relied exclusively on Louw’s statements and
instructions or taken the simple step of contacting the depositor to ascertain
what the latter wanted done with the money.

[15] I should mention for the sake of completeness that the respondent
testified that, at some stage which he said was before 17 May, he received a
number of telephone calls from somebody who said he was Du Preez, the
consistent tenor of which was that the money should be got to Louw as
quickly as possible. The trial Judge accepted without hesitation that Du
Preez did not make these calls. Although he considered that there was
nothing to contradict the core factual allegations in the respondent’s
evidence, the Judge’s summary of those allegations does not include the
bogus telephone instructions. The latter were not part of the respondent’s
reasons for paying out the money, they played no part in the Judge’s
conclusions and counsel for the respondent did not rely on them. It is
therefore unnecessary to elaborate on why this feature of the defence case
impresses as bizarre and inherently improbable.

[16] Reverting to the fundamental question posed earlier, the long and
short of the respondent’s case is that he saw no need to make contact with
the plaintiffs or their attorney in view of the cancellation of the letter of 11
May and the fact that his client, Louw, had given him unambiguous
instructions as to the disposal of the money.

[17] The trial Judge’s conclusions on the delictual claim may be
summarised as follows. The respondent was acting for Louw throughout.
Louw told the respondent that the contents of the 11 May letter were
nonsense and the letter was later cancelled. Although it was ‘strange’ that
the respondent failed to respond to the 11 May letter and although it might
have been expected that he would query the handwritten cancellation of an
attorney’s letter, and although confronting the plaintiffs with Louw’s version
would immediately have exposed the fraud, the respondent was entitled to
assume that the plaintiffs had no further instructions for him and did not
wish to impose any duties on him in his dealing with the money. They had,
in effect, in disregard for their own interests, parted with their money
‘without strings’ and by inference had no further concern as to how the
respondent disposed of it. Having no mandate from them, he was not obliged
to look after their interests. In all the circumstances the legal duty necessary
for delictual liability had not been established in this case.

[18] The respondent’s argument on appeal conformed very much to the
trial Judge’s conclusions. In essence the submission was that on the unique
facts of the matter unlawfulness had not been established and any negligence
on the respondent’s part that there might have been before cancellation of
the 11 May letter ceased to have any effect after that.

[19] I find it difficult to see what possible scope there is for the contention
that there was no legal duty in this situation. An attorney is under a legal
duty to deal with trust account money in such a way that loss is not
negligently caused, inter alia, to the depositor. That was decided in
Hirschowitz Flionis v Bartlett and Another.1 No acceptable reasons have
been advanced which take this case outside the scope of what was there
found in regard to unlawfulness.

[20] The court below did not make any express finding that the respondent
had been negligent but there are indications in the judgment that the court
considered his failure to make certain enquiries to have been remiss. What
the court went on to say, however, would mean the same even if the
respondent had been found negligent. What the court in effect held was that
as long as a depositor is silent as to what is to be done with the money

1  2006 (3) SA 575 (SCA).

deposited in an attorney’s trust account the latter can, as long as there are
specific instructions from the attorney’s client as to that money, negligently,
but still lawfully, ignore what the depositor might want done with the
money. The proposition’s mere articulation warrants its rejection.

[21] It was also wrong, in my view, to hold, as a corollary, that it was up to
the depositor to look after its own interests. Vis-à-vis the depositor the
attorney is not just another member of the public who is entitled to expect
fellow citizens to take reasonable care to protect their own interests. An
attorney into whose trust account money is paid owes a duty to the depositor
even if the depositor is not an existing client of the practice. That duty, at the
risk of repetition, is to deal with the money in such a way that harm is not
negligently caused, to the depositor among others.

[22] Moving on to the element of fault, the test is that laid down in Kruger
v Coetzee.2 Upon receipt of the letter from the plaintiffs’ attorneys of 11
May the respondent knew that at that juncture the impending deposit was to
be held for the benefit of DLA, his supposed client. He did not respond that
DLA was not his client. Had he made contact with the letter-writer the true
picture would have emerged.  Then he heard from Louw that the deposit he

2  1966 (2) SA 428 (A) at 430 E-F.

was expecting was owed on a completely different basis. The respondent
made no effort to ascertain the plaintiffs’ attitude to Louw’s version. Later
still the plaintiffs’ letter was cancelled but the money was nevertheless
deposited. The respondent chose to ignore – he could not simply have been
inadvertent about this – what the depositor wanted done with the money. He
closed his mind to the depositor’s intention and confined his attention to
what Louw instructed. Significantly, the respondent dealt with the money in
relation to Louw as he should have dealt with it in relation to the plaintiffs.
Louw said clearly enough that he wanted the money paid to Asset Allocation
Consultants but the respondent refused to pay out, even though Louw was
the beneficiary – or perhaps one should say because Louw was the
beneficiary – without Louw putting that instruction in writing so that no later
dispute would arise. Had this expedient been followed in relation to the
plaintiffs no loss would have resulted. Indeed, the required care was more
simply taken. It needed only a telephone call to the plaintiffs’ attorney to
establish exactly the purpose of the deposit and that in no circumstances was
the money to go to Louw or his designated payee.

[23] Correct though the finding of the court below may have been that the
respondent was given no mandate by the depositor, the respondent’s
essential error lay in failing to find out whether it intended to give him a

mandate and, if so, what it was. A reasonable attorney would have done so
and in having omitted to do so the respondent was negligent.

[24] It is clear that the damages sustained were suffered by the corporation.
It follows that its delictual claim ought to have been upheld. As to costs, the
plaintiffs’ heads of argument on appeal were prepared by two counsel but
only junior counsel appeared at the hearing. The employment of two counsel
in that regard was a precaution reasonable in the circumstances.

[25] The order of this court is as follows:
A.
The appeal is allowed with costs, such costs to include the costs of
two counsel in so far as two were employed.
B.
The order of the court below is set aside. Substituted for it is the
following:
‘Judgment is granted in the third plaintiff’s favour and the defendant
is ordered to pay it -

(1)
Damages in the sum of R385 000.

(2)
Interest on that sum at 15,5% per year a tempore morae.

(3)
Costs of suit.’

__________________________
CT HOWIE
PRESIDENT
SUPREME COURT OF APPEAL

CONCUR:
NUGENT JA
CLOETE  JA
HEHER  JA
MAYA  JA