Smith v The Legal Practitioners’ Fidelity Fund Board

Mr Ian Julian Smith suffered substantial financial losses after Mr Andruw Stephens, an employee of Dadic Attorneys, stole money paid into the firm’s trust account. Mr Smith lodged four separate claims with the Legal Practitioners’ Fidelity Fund, alleging that amounts of R1 million (October 2015), R900 000 (March 2015), R4 million (June 2016) and R2.7 million (July 2017) were entrusted to the firm and stolen by Mr Stephens. The Fund rejected the claims. The High Court dismissed all four claims, finding that none of the monies were ‘entrusted’ as contemplated in s 26(a) of the Attorneys Act 53 of 1979. Mr Smith appealed to the Supreme Court of Appeal.

The appeal was allowed in part. The High Court’s order was set aside and substituted. Claims 1, 3 and 4 were dismissed. Claim 2 was upheld. The Legal Practitioners’ Fidelity Fund Board was ordered to pay Mr Smith R900 000 plus interest at 10.25% per annum a tempore morae from the date of service of summons. Each party was ordered to pay its own costs.

The judgment provides authoritative clarification on the concept of ‘entrustment’ under s 26(a) of the Attorneys Act and confirms that payment into an attorney’s trust account does not automatically constitute entrustment. The case underscores the importance of the client’s intention at the time of payment and draws a clear distinction between trust monies and funds paid as part of investment or loan schemes. It also reaffirms the scope of the Fidelity Fund’s liability for theft by attorneys or their employees.