In the Western Cape High Court, Judge Phillip Zilwa found on 5 August that facts in the long-running matter involving the repayment of R20 million in legal fees, clearly proved that “under the guise of settling BXI’s [Barnabas Xulu Incorporated] liabilities BX [Barnabas Xulu] instead appropriated funds from BXI to himself, his family, his family trust, entities under his control and to his office manager, [Nicole] Pick.”

The R20 million was unlawfully paid to Xulu and his firm by the Department of Environmental Affairs and Forestry (DAFF) in 2017. Xulu was ordered in January 2020 by Judge Owen Rogers to repay the debt.

The amount Xulu gobbled up for personal expenses comes to just under R13-million. The controversial attorney’s use of his firm to further his own affairs, noted the judge, “amounts to an unconscionable abuse of the juristic personality of the entities” that Xulu had controlled including BXI.

Xulu had used the money for house rentals, grocery and clothes shopping, medical expenses, cakes, jewellery and educational fees totalling around R2-million.

Xulu has fought tooth and nail to slither out of the order, claiming he could not be held personally liable for agreements concluded by his firm. 

In November 2020 Judge Ashley Binns-Ward granted a restraining order against Incovision (a Xulu entity), Setlacorp (with Xulu’s wife as director), Xulu and their agents and representatives preventing any from “removing or transferring funds” held in any bank account.

But the funds were soon siphoned off.

Zilwa found in this instance it was vital, however, to “pierce the corporate veil” as both common law and the statute “recognize the abuse of the corporate structure as giving rise to personal liability”, said Zilwa.

The judge added that Xulu’s “clear disregard of the law in following lawful execution proceedings” rendered his conduct as an attorney “wrongful and negligent”.

It would not be unreasonable for the Legal Practice Council aimed at regulating professional conduct and ensuring accountability to be piqued by Zilwa’s scathing findings into Xulu’s conduct or whether the NPA would consider pressing charges.

The court ordered on Thursday that Xulu’s luxury property in Sheffield, Ballito be sold, with movables, and so too his Porsche 911 Carrera.

With reference to Setlacorp, a company registered in Xulu’s wife’s name, Zilwa said bank accounts had reflected that “almost all of the transactions” were for Xulu’s “personal benefit”.

“There is also no evidence of it being a trading company, providing accounting services or otherwise. Neither is there indication of any of its members having some training in the accounting field,” said Zilwa.

Initially BXI had relied on a loan agreement concluded between Xulu and his wife, as Director of Setlacorp, to explain to the court payments from BXI to that company. 

“No explanation was provided as to why the loan was paid in full long before the repayment date or why the repayment exceeded the loan amount by more than R250 000. 

“Even more importantly, the purported Setlacorp loan agreement dated 12 May 2019 shows that the loan is not to BXI but to BX personally. Despite the fact that the purported repayment of the loan is made by BXI not BX.”

Further movement of funds to Setlacorp were facilitated by means of BXI allegedly employing the company at a monthly cost of R70,000 to do accounting work for BXI. 

“However, no tax invoices for these services have been rendered by Setlacorp. Instead, Setlacorp is issued with a payslip as an employee.”

Xulu had admitted that payments totalling R5,628,745.71 of the unlawfully obtained money were paid into his bond and outstanding interest for the family home in KZN, “thereby benefiting Incovision”. 

The controversial lawyer had also admitted to utilising funds from his firm’s bank account to settle an Incovision liability with Investec and to pay rates and electricity for Xulus’ Sheffield home. 

“Some of the payments were later revealed to have been for BX’s personal Porsche motor vehicle, also financed by Investec. No tangible explanation has been proffered for this discrepancy.”

Xulu had stood guarantor for the Investec Bond in favour of Incovision and had conceded that some of the funds had been spent on “myself and the firm”. 

“This is a clear acknowledgement of the conflation of BX’s personal and BXI’ funds,” said Zilwa.

The judge said he was “satisfied on the facts” that BXI, Setlacorp and Incovision could “properly and justifiably” be described as Xulu’s “creatures” and “instruments” through which he had conducted  business and held assets.

Zilwa said there was no merit in Xulu’s argument that his repayment of the DAFF money had been subject to verification of invoices by the department.

“In the first place it is common cause on the papers that the verification process referred to in Rogers’ main judgment was duly performed by the applicants and its outcomes, which indicated that there was to be no set off, was conveyed to BXI through BX.”

“A proper case has been made for BX to be ordered to pay such funds jointly and severally with BXI,” Zilwa found.

Zilwa added that Xulu had “legal duty to avoid or prevent the harm-causing conduct that gave rise to the claim”.

The Rogers judgement was notable in that it evoked the State Liability Act as a warning to ministers, departments and other officials inclined to giving work to friends in the legal profession. It was former Minister of Agriculture, Forestry and Fisheries (DAFF), Senzeni Zokwana, who had funnelled the work to Xulu’s firm.

Back then, Rogers had said that BXI was “was very much the author of its own misfortune. The greater part of the amount the firm would be obliged to refund – R17,657,098 – is money which the BXI parted with after it had been notified that the execution was non-compliant with the State Liability Act.

“With this knowledge, BXI disbursed the proceeds… with almost indecent haste,” said Rogers.

As a firm of attorneys working for the state, BXI, Rogers added in his judgment, could reasonably have been expected “to be familiar with the provisions of the State Liability Act and thus the defect in the execution it had levied.”

An amount of about R11-million (including payments to Setlacorp and Investec) was identified as being for Xulu and not his firm.

Despite communication by DAFF’s attorney to preserve the monies that had been unlawfully attached from the department, Xulu had “immediately transferred the money out on the same day to disburse it with ‘undue haste’ [as Rogers described it].”

Xulu’s “clear disregard of the law in following lawful execution proceedings renders his conduct as an attorney wrongful and negligent.”

Setlacorp had been “used to channel funds” from BXI’s account for Xulu’s personal benefit. Xulu had paid the company loans totaling about R1.5-million between August 2019 and June 2020.

The loan agreement had, however, been concluded in May 2019 and the principal amount of R1-million was lent to Setlacorp by Xulu and not his firm. The terms of repayment were 18 months due in December 2020.

“There is no mention in the loan agreement or that the loan was meant to keep BXI afloat,” said the judge.

Zilwa ordered that Setlacorp be joined to the action “have its veil pierced and be held jointly and severally liable” with Xulu for the “unlawfully removed funds”. Incovision, of which Xulu is the sole director, was also  joined, as was Investec.

With regard to Pick, Zilwa found that she too should be liable for payment as “there is no doubt in my view that there is ample proof that the monies paid to her by BXI were not legitimate payments but an attempt to dissipate funds from the BXI account”. DM