What is an Attorney’s liability for the misconduct of a partner in his/her law firm?
An Article by Advocate Ivor Heyman (Protea Group), 12 July 2019
A recent judgment by Rabie J and Moultrie AJ in the North Gauteng High Court has emphasized the responsibility of an attorney to detect a partner’s misconduct and prevent occurrence of harm.
In Law Society, Northern Provinces v Stuart and others 2019 (3) SA 523 (GP), the first respondent and second respondent were partners in, and co-directors of, the third respondent law firm. Despite being a director, the second respondent did not attend to the management of the administration and financial affairs of the firm except in relation to his own clients and files. That task was left to the first respondent.
The first respondent took advantage of this state of affairs by improperly drawing from the firm’s trust account, leading to a deficit. This occurred without the knowledge or involvement of the second respondent. The court held an attorney could not be found guilty of professional misconduct solely because a fellow partner had engaged in professional misconduct.
However, it said that an attorney may be found guilty of misconduct in his own right in the form of dereliction of duty if he fails to take measures that a reasonable attorney would have taken to detect the misconduct and prevent the occurrence of harm. When it comes to trust moneys, the court held that the question was whether the attorney had sufficiently interested himself in the books of account of the firm.
While the court did not expressly define the steps that an attorney should take to interest himself in the books of account of the firm, it appears from the evidence led by the parties that the minimum steps a partner ought to take are the following:
- Ensure that you have access to the login details of the firm’s trust accounts;
- View the trust account statements regularly to see if there are any suspicious transactions or a trust account deficit;
- If you see any suspicious transactions or a trust account deficit, immediately raise this issue with the firm’s bookkeeper and/or your partners requesting an explanation;
- If you do not receive a satisfactory explanation from the bookkeeper or your partners, immediately bring the issue to the attention of the Law Society (or Legal Practice Council as it is now called).
An irony emerging from the judgment is that the second respondent, while practising as a co-director of the firm, only held a 1% shareholding in the firm. One wonders whether the oversight duties that his shareholding attracted were worth his minor profit share.
That said, our law has consistently required that an attorney keep a separate trust account for clients. In Incorporated Law Society v Sime 1913 T.P.D. 165 at p168, the court stated:
“If an attorney undertakes to act for a client, and obtains money on behalf of his client, it is his duty to communicate to his client as soon as possible what he has done and what moneys he has received on behalf of the client. It is not a question of courtesy, due from one individual to another, or as between an attorney and his client. It is a question of professional duty.”
The court in Sime went on to quote a 1662 passage from van Leeuwen which can be found in Censura Forensis Bk IV, Ch 36, s20 to the effect that an attorney is bound to keep the accounts of his clients entirely separate from his own.
A redeeming feature of the judgment in Stuart is that, after finding the second respondent guilty of unprofessional conduct, the court ordered that his one-year suspension of practice would be suspended for three years on condition that he had not contravened any other rules of the Law Society. This was a very different order than the one meted out to the first respondent who was struck off the roll of attorneys.