Wypkema v Lubbe

The appellant loaned R1,850,000 to Rooihak Eiendomme (Edms) Bpk as bridging finance for an immovable property acquisition, at a fee of R350,000. The respondent, a practising attorney acting on behalf of Rooihak, furnished the appellant with a cheque dated 14 September 2004 drawn on his firm's trust account for the total amount of R2,200,000. The cheque was accompanied by a letter dated 13 September 2004 stating that registration of a mortgage bond would occur no later than 28 September 2004 and requesting that the cheque only be presented for payment on 29 September 2004. When the appellant presented the cheque on 30 September 2004, it was dishonoured and returned marked 'effects not cleared'. The appellant claimed provisional sentence against the respondent personally. The Pretoria High Court refused provisional sentence, finding that the attorney acted in a representative capacity when issuing the trust cheque and was therefore not personally liable.

• Whether an attorney who draws a cheque on his trust account acts as principal or in a representative capacity
• Whether an attorney is personally liable on a cheque drawn on his trust account when the signature is unqualified
• Whether the agreement underlying the cheque was subject to a suspensive condition of registration of the mortgage bond
• Whether an agreement to issue a trust cheque as security for a loan when funds were not yet in the trust account was contra bonos mores and therefore unenforceable

The appeal was upheld with costs. The order of the High Court was set aside and replaced with an order for provisional sentence requiring: (i) payment of R2,200,000; (ii) interest at 15.5% per annum from 1 October 2004 until final payment; and (iii) costs of suit. The Registrar was requested to refer the judgment to the Law Society of the Northern Provinces for investigation of the respondent's conduct.

When an attorney draws a cheque on his trust account, he exercises his right to dispose of the amount standing to the credit of that account and does so as principal and not in a representative capacity. An attorney's signature on a trust cheque is unqualified when it appears below printed words that merely identify the bank account on which the cheque is drawn. Such printed words do not qualify the signature of the drawer within the meaning of s 24(1) of the Bills of Exchange Act 34 of 1964. Where there is no qualifying language indicating that the attorney signs on behalf of a principal or in a representative capacity, the attorney is personally liable on the cheque. The attorney's right to operate and make withdrawals from the trust account, as recognized in De Villiers NO v Kaplan and Fuhri v Geyser NO, means that when exercising that right by drawing a cheque, the attorney acts in his personal capacity.

The Court made observations about the presumption that parties intend to perform agreements lawfully and that a contract which may be performed in two ways (one lawful, one unlawful) will not be void except on proof of intention to perform it illegally. The Court also commented that as a general proposition, one is entitled to accept that when an attorney issues a trust cheque, he acts lawfully and in accordance with the rules of his profession, and being given a trust cheque by an attorney provides added assurance that the cheque is likely to be met. The Court expressed concern about the propriety of the respondent's conduct in issuing what was effectively a post-dated cheque on a trust account when funds were not available, making promises about imminent availability of funds, and the registration of a mortgage bond that never took place. This led the Court to direct the Registrar to refer the matter to the Law Society for investigation, though this was not necessary for the decision itself.

This case established important principles regarding the personal liability of attorneys who draw cheques on their trust accounts. It clarified that while trust account funds are protected from attachment by creditors of the attorney, the attorney exercises control over the account as principal when issuing cheques. The judgment reinforces the application of the Bills of Exchange Act to attorney trust cheques and confirms that an unqualified signature by an attorney on a trust cheque renders the attorney personally liable. The case serves as an important warning to attorneys about the proper use of trust accounts and the serious consequences of issuing trust cheques without adequate funds. It also reinforces public confidence in the reliability of trust cheques issued by attorneys, which are intended to provide added assurance that the cheque will be honoured.