Fund received 116 claims against Chueu Attorneys valued at R82.7m. SCA says the firm handled 6 000 files with an estimated R6.2bn gross value before its demise.
The Legal Practitioners Fidelity Fund has been ordered by the High Court in Pretoria to pay a 54-year-old widow living in an informal human settlement in Orange Farm, Johannesburg, her Road Accident Fund (RAF) payout that was stolen by her attorneys.
The fidelity guarantee fund, established in terms of the Legal Practice Act, exists to protect the public against losses arising from the theft of trust funds.
Lindiwe Busangani Nkosi claimed compensation from the fund in terms of the Legal Practice Act, because the compensation she received from the RAF for injuries sustained in a motor vehicle accident on 29 July 2015 was stolen by her former attorneys, Chueu Inc Attorneys.
The court was informed that Chueu Inc Attorneys was hopelessly insolvent, and the Legal Practice Council (LPC) confirmed in an email dated 13 February 2024 that the firm is under curatorship and owes the LPC R29 million.
The fund’s Jerome Losper said in an answering affidavit to Nkosi’s claim that it has received 116 claims relating to Chueu Attorneys, to the total value of R82 721 575.48.
Acting Judge HGA Snyman remarked in handing down judgment that it appears from the Supreme Court of Appeal (SCA) judgment in the Chueu Attorneys matter, the firm had handled 6 000 files with an estimated gross value of R6.2 billion before its demise.
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Nkosi applied for an order that the fund be compelled to approve her claim or provide reasons for its repudiation.
The fund opposed Nkosi’s application, with Losper stating that she had not furnished any documentation or evidence of steps taken to recoup the money misappropriated by Chueu Attorneys.
Losper added that as the finalisation of the claim was dependent on this, the fund could not proceed.
Acting Judge Snyman said Chueu Attorneys had instituted action against the RAF in terms of the RAF Act, and the matter was settled on 30 April 2019. Under the agreed court order, the RAF was ordered to pay the settlement amount to Chueu Attorneys.
The Sheriff Centurion East paid R617 115.91 to Chueu Attorneys for Nkosi’s claim [which] never paid the award over to her.
Snyman said this amount less 25% – that is, R462 837, is what he will use for the purposes of this judgment. The 25% is the maximum fee that may be charged by attorneys in terms of the Contingency Fees Act.
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From pillar to post
Nkosi lodged a claim with the fund on 31 October 2022, which acknowledged receipt on 1 December 2022, but requested her to provide it with proof from the sheriff that he had paid the money over to Chueu Attorneys.
She stated in her founding affidavit that she could not get hold of Chueu Attorneys and did know how to obtain the proof of payment from the sheriff’s office.
In 2024, she instructed her current attorneys of record, Setaka Inc, to follow up on the claim with the fund on her behalf. Nkosi said Setaka Inc also assisted her in opening a criminal case against Chueu Attorneys and in retrieving court documents from the RAF; this information was provided to the fund.
Setaka Inc first made contact with the LPC, which referred them to the fund, which it contacted on 25 January 2024. The fund responded by email on 7 February 2024 and requested Setaka Inc to submit the information and documentation outlined in the letter of 1 December 2022 “to finalise the claim.”
The acting judge said nothing was said by the LPC about her first needing to exhaust all legal remedies against Chueu Attorneys before pursuing a claim against the fund.
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The LPC confirmed to Setaka Inc on 13 February 2024 that it took curatorship over the matter in December 2021, with claims of duplicate payments from the RAF to the total of R29 million, plus against the trust account of Chueu Attorneys. It stated that Chueu Attorneys’ trust account had a balance of R5 million and many other trust creditors and confirmed that Nkosi’s money was not in the trust account.
The LPC advised that, in terms of the Legal Practice Act, the fund is only liable for the balance of any loss suffered by any person after deductions of benefits received by that person from any source other than the fund.
It further stated that claimants must sue Chueu Attorneys’ former directors in their personal capacity and recover from that action, with the fund covering any remaining balance.
The LPC also advised that Setaka Inc report the matter to law enforcement agencies.
Setaka Inc on 5 April 2024 provided the fund with the SAP case number, proof of payments, information received from the sheriff, and Nkosi’s bank statements. The fund did not respond to requests from Setaka Inc about when it would receive a response to the claim, and Nkosi launched the present application by 13 August 2024.
The fund filed its notice of intention to oppose on 12 September 2024.
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‘Unreasonable’ expectations
Nkosi said she did not take any steps to recoup the money misappropriated by Chueu Attorneys because the firm has liabilities of R29 million and is literally insolvent. She denied failing to comply with the Legal Practice Act, stating that pursuing the firm’s directors would be a futile exercise and wasteful expenditure, and she did not in any event have funds to embark on such an expensive legal process.
Snyman said that, apart from the side reference by the LPC in an email on 13 January 2024, it never informed Nkosi and her attorneys that she must first try to recover the money from Chueu Attorneys, despite numerous opportunities for the fund to have done so.
He added that the fund only raised this for the first time, two years after Nkosi lodged her claim, when it filed its answering affidavit in November 2024.
Snyman said that to have expected Nkosi, also taking her personal circumstances into account, to have instituted an action against Chueu Attorneys and its former directors “is not reasonable.”
“Under the circumstances, I find that Ms Nkosi could not reasonably recover her loss from any other person liable and her application ought to succeed.”
The fund was ordered to pay Nkosi R462 837, along with the costs of the application.
This article was republished from Moneyweb. Read the original here.
