Du Preez v Zwiegers

The respondent, a Johannesburg attorney, received R385,000 into his trust account from Versatile Construction CC (the corporation). The deposit was made as part of a loan procurement agreement with DLA International Financial Services. The corporation's sole member (Du Preez) and his partner (Johst) were seeking a foreign loan for a project. The deposit was to be held pending implementation of the loan. On 11 May 2001, attorneys acting for Du Preez and Johst sent a letter requiring written confirmation that the money would not be paid over without their written consent. A handwritten subscript was later added cancelling the letter. The respondent, acting on instructions from his client Michael Louw, who claimed entitlement to the funds, paid the money (less R5,000 fee) to a company designated by Louw without contacting the corporation or anyone representing it. When DLA failed to pay out the loan monies, Du Preez tried unsuccessfully to recover the deposit. The respondent never responded to the 11 May letter from the plaintiffs' attorneys despite its request for an urgent reply.

• Whether an attorney owes a legal duty to a depositor who is not their client when money is deposited into their trust account
• Whether the respondent was negligent in paying out trust account money without establishing from the depositor what they wanted done with it
• Whether unlawfulness was established for delictual liability
• Whether the cancellation of the 11 May letter relieved the respondent of any duty to the depositor

The appeal was allowed with costs, including costs of two counsel insofar as two were employed. The order of the High Court was set aside and substituted with judgment in favour of the third plaintiff (Versatile Construction CC) for: (1) Damages of R385,000; (2) Interest at 15.5% per year a tempore morae; (3) Costs of suit.

An attorney into whose trust account money is paid owes a legal duty to the depositor, even if the depositor is not an existing client of the practice, to deal with the money in such a way that harm is not negligently caused to the depositor. An attorney acts negligently when they pay out trust account funds based solely on instructions from their own client without taking the reasonable step of contacting the depositor to ascertain what the depositor wanted done with the money. The element of unlawfulness is established where an attorney breaches this duty to deal with trust account money without negligently causing loss to the depositor. A depositor's silence as to what is to be done with money deposited does not relieve the attorney of the duty to make enquiries of the depositor before disbursing the funds, and does not entitle the attorney to rely exclusively on instructions from their own client regarding those funds.

The Court observed that the trial judge's finding that the plaintiffs had been victims of a fraudulent conspiracy may have been correct, with DLA and Louw possibly being parties to it, though there was no suggestion the respondent was party to any fraud. The Court noted that the respondent's evidence about receiving telephone calls from someone claiming to be Du Preez was bizarre and inherently improbable, and these alleged calls played no part in the trial judge's conclusions or the respondent's case on appeal. The Court rejected the proposition that it is up to the depositor to look after its own interests, noting that an attorney is not just another member of the public entitled to expect fellow citizens to take reasonable care to protect their own interests - the attorney owes a specific duty to the depositor. The Court also noted that the trial court erred in holding that as long as a depositor is silent, an attorney can negligently but lawfully ignore what the depositor might want done with the money based solely on instructions from the attorney's own client.

This case is significant in South African law as it clarifies and extends the principles established in Hirschowitz Flionis v Bartlett regarding an attorney's duties in relation to trust account funds. It establishes that an attorney owes a legal duty to a depositor of trust account funds even where that depositor is not the attorney's client. The case emphasizes that attorneys cannot simply rely on instructions from their own clients regarding trust account funds deposited by third parties without taking reasonable steps to ascertain the depositor's intentions. It reinforces professional standards for attorneys in managing trust accounts and protecting third-party interests. The judgment makes clear that attorneys must exercise the same level of care toward depositors as they would toward their own clients when dealing with trust account funds, and that failure to make basic enquiries of a depositor constitutes negligence.