Attorney Barnabas Xulu will have to pay back more than R20m in legal fees unlawfully paid to his firm, following a scathing High Court ruling that found the lawyer for Western Cape Judge President John Hlophe had ‘flouted the law’.

Eastern Cape Judge Phillip Zilwa's ruling now gives the Department of Environment, Forestry & Fisheries the power to sell assets it had seized from Xulu, including his luxury holiday home, to recover more than R20m in legal fees it had unlawfully paid to his firm, writes legal journalist Karyn Maughan in a News24 report. 

Moegamat Abader, the department's then acting DG, successfully argued last year that Xulu's assets should be frozen because of the way in which he had ‘simply dissipated – and appropriated – funds’ from his law firm's bank accounts without regard for its debts and obligations or the multiple court orders made against it.

While the department had attempted to seize Xulu's Porsche 911 Carrera as part of its efforts to recover the legal fees, he has so far refused to hand it over – and was recently found guilty of contempt of court over that refusal.

While Xulu is now attempting to appeal that ruling in the SCA, Zilwa has found that the Porsche, if and when it is eventually recovered, can be sold by the department.

In an embarrassing development for Hlophe, Western Cape Acting Judge Mas-Udah Pangarker's contempt ruling against Xulu has revealed the attorney had sought the Judge President's intervention in the case.

Xulu did so by writing to Hlophe and asking him to refer all the cases linked to his fees battle with the department to the JSC.  Hlophe refused to intervene, but Xulu has already repeatedly used his association with the Judge President to argue that he has been unfairly treated by the multiple judges.

Xulu's fees saga had its genesis in a January 2020 ruling delivered by Western Cape High Court Judge Owen Rogers, who found that the service level agreement and subsequent R20m legal fees settlement agreement between Xulu's BXI law firm and the department were both unlawful.

Rogers ordered Xulu's firm to pay back the R20m and ruled that Xulu must be called upon to explain why he should not be held personally liable for that money.

In a ruling delivered on Thursday, notes News24, Zilwa has now found that the department had ‘succeeded in making a proper case for holding (Xulu) jointly and severally liable’ for the fees. 

Zilwa was also scathing of Xulu's conduct in spending the money that his firm had obtained from the department by seizing its bank accounts, despite being informed that this execution process was unlawful.

The judge pointed out that Xulu was made aware in June 2019 that his firm's legal fees settlement agreement with the department did not appear to be lawful and, further, that his efforts to recover the money he claimed his firm was owed was not in compliance with the State Liability Act.

Despite this, Xulu transferred that money from his firm's trust account and disbursed it with what Rogers would later describe as ‘undue haste’.

Zilwa agreed with the department's argument that Xulu's ‘clear disregard of the law in following lawful execution proceedings renders his conduct as an attorney wrongful and negligent’.

Zilwa also rejected Xulu's argument that the department's application against him and his firm was based on politics and innuendo and not law. He said that claim was ‘devoid of basis’.

Full News24 report

The amount Xulu gobbled up for personal expenses comes to just under R13m.

His 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 R2m.

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, notes Marianne Thamm in a Daily Maverick report.

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 ‘recognise the abuse of the corporate structure as giving rise to personal liability’.

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 payments from BXI to that company. '... 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.’

The DM report notes Xulu had admitted that payments totalling R5,628,746 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’ coastal 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.

Full Daily Maverick report