About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: South Gauteng High Court, Johannesburg
SAFLII
>>
Databases
>>
South Africa: South Gauteng High Court, Johannesburg
>>
2015
>>
[2015] ZAGPJHC 68
|
|
Levenson v Fluxmans Incorporated (14/27503) [2015] ZAGPJHC 68 (27 March 2015)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(GAUTENG LOCAL
DIVISION, JOHANNESBURG)
CASE NUMBER: 14/27503
DATE: 27 MARCH 2015
In the matter between:
STEVEN ZULLA
LEVENSON
...............................................................................................
Applicant
And
FLUXMANS
INCORPORATED
.........................................................................................
Respondent
JUDGMENT
WINDELL J:
INTRODUCTION
[1] The applicant seeks an order
against the respondent declaring a contingency fee agreement (the
agreement) concluded between
the parties invalid, void ab initio and
of no force and effect. The agreement was entered into between the
parties in respect of
fees payable by the applicant to the respondent
in respect of the applicant’s claim against the Road Accident
Fund. The applicant
further seeks an order for the repayment of the
fees paid to the respondent, in the sum of R844 994.57, together with
interest
thereon, from 1 September 2008 to date of payment, and costs
on a punitive scale. In the alternative the applicant seeks an order
directing the respondent to deliver a fully itemized and detailed
accounting in the form of a bill of costs.
[2] The respondent conceded during the
hearing of the application that although the substance of the
agreement might be permitted
by the Contingency Fees Act 66 of 1997
(the Act), that it did not comply with the formalities of the Act.
The Constitutional Court
declared common law contingency agreements
invalid in Ronald Bobroff & Partners v De La Guerre and Another
2014 (3) SA 134
(CC). The agreement clearly does not comply with the
formalities of the Act for the reasons set out in the founding
affidavit.
It is accordingly invalid.
[3] The respondent’s opposition
to the application is based on the contention that the applicant’s
claim for the repayment
of the fees is based on the condictio ob
turpem vel iniustam causam, and that motion proceedings are
inappropriate for the relief
claimed. The respondent secondly submits
that even if the applicant’s claim is legally sustainable that
it has become prescribed.
BACKGROUND
[4] The applicant was involved in a
motor vehicle collision on 8 October 2005. He instructed the
respondent on 6 February 2006 to
institute a damages claim on his
behalf against the RAF. The respondent accepted the instruction on
the basis that it would charge
the applicant a fixed fee of 22.5%
plus VAT of the amount recovered from the RAF.
[5] On 13 May 2008 the action was
settled in the sum of R4 862 561.40, together with an undertaking
from the RAF in respect of future
medical and hospital expenses and
party and party costs. The applicant subsequently received a
statement of account from the respondent
advising that the applicant
would be paid the sum of R3 290 138.90, which was made up of R3 103
449.39 in respect of the capital
and R186 689.51 being costs
recovered from the RAF. The respondent’s fees were R1 109
101.02 inclusive of VAT. The applicant
immediately communicated his
unhappiness to the respondent about the fees charged. The respondent
responded that the fees were
reasonable.
[6] On 9 April 2014, following media
reports on the Constitutional Court’s judgment, the applicant
addressed a letter to the
respondent in which he again challenged the
reasonableness of the respondent’s fees. The respondent
responded in a letter
dated 11 April 2014 and questioned, inter alia,
in which respects the contingency fee agreement did not comply with
the Act. On
20 May 2014 the applicant addressed a letter to the
respondent in which he emphasised that the contingency fee agreement
did not
specify the limitation on contingency fees as required by
Act, nor did the respondent at any stage bring those limitations to
his
attention. The applicant requested the respondent to review the
fees they had charged. In a letter dated 10 July 2014 the respondent
impugned the applicant as “being opportunistic and even if you
had such a claim, it has prescribed”. This prompted
the
applicant to launch the present application.
NATURE OF THE CLAIM
[7] The respondent contends that the
basis of the applicant’s claim, properly constructed, is
enrichment. In order to succeed
in such claim, the argument
continued, the applicant will be required to satisfy the requirements
of an enrichment action and,
more specifically, the condictio ob
turpem vel iniustam causam. Respondent submits that the applicant has
failed to satisfy those
requirements and, as the claim is for an
unliquidated amount, the applicant should have instituted an action.
The respondent contends
that motion proceedings for the recovery of
an unliquidated amount of enrichment are inappropriate.
8] The nature of the applicant’s
claim is primarily for a declaratory order. The facts are common
cause and the illegality
of the agreement has been shown. It is trite
that motion proceedings are primarily intended for the resolution of
legal issues.
Factual disputes should be addressed in action
procedure. Such factual dispute exists, but only in regard to the
quantum of the
applicant’s claim. There is however no reason
for this court not to separate the issues. That would ensure
determination
of the merits and a postponement of the quantum of the
amount of the claim for later adjudication by way of a referral to
trial.
In Cadac (Pty) Ltd v Weber Stephen Products Company and Others
2011 1 All SA 343
(SCA), Harms DP held (par [13] and [14]):
‘[13] I cannot see any objection
why, as a matter of principle and in a particular case, a plaintiff
who wishes to have the
issue of liability decided before embarking on
quantification, may not claim a declaratory order to the effect that
the defendant
is liable, and pray for an order that the
quantification stand over for later adjudication. It works in
intellectual property cases
albeit because of specific legislation
but in the light of a court’s inherent jurisdiction to regulate
its own process in
the interests of justice – a power derived
from common law and now entrenched in the Constitution (s 173) –
I can see
no justification for refusing to extend the practice to
other cases. The plaintiff may run a risk if it decides to follow
this
route because of the court’s discretion in relation to
interest orders. It might find that interest is only to run from the
date when the debtor was able to assess the quantum of the claim.
Another risk is that a court may conclude that the issues of
liability and quantum are so interlinked that it is unable to decide
the one without the other.
[14] Once the principle is accepted for
trial actions there is no reason why it cannot apply to application
proceeding....’
[9] I accordingly propose to order a
separation of the issues as will appear at the end of this judgment
and I will now turn to
consider the merits of the applicant’s
claim.
[10] The right to seek a declaratory
order is a debt for purposes of the Prescription Act, Act 68 of 1969
(‘the Prescription
Act’). The only real issue between the
parties concerns prescription.
PRESCRIPTION
[11] The respondent contends that the
applicant’s claim has been extinguished by prescription since
the applicant failed to
take action before 30 August 2011, which is
three years after the applicant received his statement of account and
payment from
the respondent. The prescriptive period in this
instance is three years. It is trite that a debt, whether
contractual, delictual
or arising otherwise, is not deemed to be due
until the creditor has knowledge of the identity of the debtor and of
the facts giving
rise to the debt (s 12(3) of the Act). It is
well-established that the respondent bears the onus of proving when
the plaintiff
acquired, or should reasonably be deemed to have
acquired the knowledge in question.
[12] The question thus is whether the
plaintiff had ‘knowledge’ of the facts from which ‘the
debt’ arose
at the time he received the account from the
respondent. In Truter and Another v Deysel
[2006] ZASCA 16
;
2006 (4) SA 168
(SCA), Van
Heerden JA, held (para [16]):
‘[16] ... For the purposes of the
Act, the term 'debt due' means a debt, including a delictual debt,
which is owing and payable.
A debt is due in this sense when the
creditor acquires a complete cause of action for the recovery of the
debt, that is, when the
entire set of facts which the creditor must
prove in order to succeed with his or her claim against the debtor is
in place or,
in other words, when everything has happened which would
entitle the creditor to institute action and to pursue his or her
claim.’
[13] It is not disputed that the
applicant only became aware of the legal position with regards to
contingency fee agreements in
April 2014. The respondent submits that
the applicant has confused knowledge of the facts, on the one hand,
with knowledge of legal
position, on the other. With reference to
Claasen v Bester
2012 (2) SA 404
(SCA), it is submitted that the
applicant cannot rely upon his ignorance of the legal invalidity of
the agreement, as it was held
in par [15] that ‘... knowledge
of legal conclusions is not required before prescription begins to
run.’ The respondent
further contends that the applicant, on
his own version, was aware of the respondent’s identity and of
the facts from which
the alleged debt arose already in 2008, and the
claim has therefore become prescribed.
[14] The facts in Claasen were the
following: The parties were farmers and erstwhile friends. When the
respondent ran into financial
difficulty, the appellant offered to
prevent foreclosure of the respondent’s farm and bought the
farm from him at a price
that approximated the debt to the Land Bank.
In the deed of sale the respondent was afforded the rights of
lifelong use and occupation.
He also agreed that the respondent could
buy the farm back, but no price for this 'right' was reflected in the
deed of sale. When
the respondent obtained a copy of the deed of sale
two years later he realised that such a provision had been omitted.
The buy-back
was unenforceable because of the requirement of
s 2(1)
of the
Alienation of Land Act 68 of 1981
in that the provision in the
deed did not determine the price, or set out a means for determining
the price. The respondent issued
summons four years later claiming a
declaration that the sale was void. The court of appeal found that
the invalidity of the provision
was a conclusion of law, and not a
fact and that prescription began to run when the respondent came to
know that no price had been
determined in the provision.
[15] The invalidity of a common law
contingency fee agreement is a fact and not a legal conclusion. The
applicant in casu was not
aware that an Act, prohibiting the
agreement existed and that he was overcharged. The applicant was
initially unhappy when he received
the account and noticed that the
respondent charged an amount of R1 109 101.02 in respect of legal
fees. He wrote a letter wherein
he expressed his unhappiness and also
had a meeting with the attorney’s firm. He was advised by his
attorney that the fees
were reasonable. The applicant merely
suspected that the fees were not correct. Suspicion cannot be equated
to knowledge. Suspicion
is insufficient for the running of
prescription to commence. For there to be knowledge, the belief must
be justified (see Minister
of Finance v Gore
2007 (1) SA 111
(SCA)).
In Claasen the respondent was aware that no provision was made in the
deed of sale for a price at which he could buy back
the farm. The
facts in Claasen are therefore distinguishable from the facts in
casu.
[16] In Macleod v Kweyiya
2013 (6) SA 1
(SCA) the plaintiff instituted action against the attorney who had
settled an insurance claim on her behalf when she was still
a minor.
She alleged that she first became aware that the defendant had
possibly acted negligently, when she consulted with her
current
attorneys on a different matter eleven years later. In para [12] and
[13] of the judgment, Tshiqi JA summarized the facts
and legal
position as follows:
‘[12] Her contention amounts to
this. She needed more than just the knowledge that her claim had been
settled to be able to
appreciate the alleged negligence. She at least
needed to appreciate that there was a substantial under-recovery.
That appreciation
entailed not only knowledge of the minimal facts of
the claim but also an appreciation that those facts afforded her a
claim against
the appellant.
[13] It is the negligent and not an
innocent inaction that s 12(3) of the Prescription Act seeks to
prevent and courts must consider
what is reasonable with reference to
the particular circumstances in which the plaintiff found himself or
herself. In MEC for Education,
KwaZulu-Natal v Shange
2012 (5) SA 313
(SCA) para 11 this court had to consider whether a 15-year-old
learner who had been hit with a belt on the side of his eye by his
teacher acted reasonably in waiting more than five years to institute
action against the teacher's employer. As in the present
matter, the
plaintiff became aware of the possibility of a claim by chance. He
had initially accepted the teacher's explanation
that it was an
accident. A family friend noticed that he was wearing an eye patch
and suggested that he should approach the Public
Protector. An
advocate in that office advised him of the possibility of a claim
against the teacher. Snyders JA held that the delay
was innocent, not
negligent. She stated: 'He was a rural learner of whom it could not
be expected to reasonably have had the knowledge
that not only the
teacher was his debtor, but more importantly, that the appellant was
a joint debtor. Only when he was informed
of this fact did he know
the identity of the appellant as his debtor for the purposes of the
provisions of s 12(3) of the Prescription
Act.'
The learned Judge continues in par [14]
and held as follows:
‘[14] Similarly, in this matter
the respondent visited the offices of the appellant merely because
she had a dispute with
her mother pertaining to the occupancy of the
house which had been bought with some of the money that had been
received as the
settlement amount. The visit did not concern the
details of the settlement amount. There is no suggestion that at that
stage she
was concerned about the quantum at all. The version of the
appellant confirms that there was no discussion pertaining to the
quantum
of the claim, the cost of the house and the amount given to
her mother. There is no basis to conclude that she should have
appreciated
that there was something wrong with the quantum of the
claim nor with any other aspect of the claim at that stage. More
importantly,
there is no basis to conclude that she must have
realised that there was an under-recovery nor that there was a
possible claim
for negligence against the appellant. She probably
believed, innocently, that the settlement amount was the best under
the circumstances.
It was not unreasonable of her to trust her mother
and the appellant's judgment. In all probability she thought that
they had acted
in her best interests.’
[17] The applicant only acquired
knowledge of the facts from which the debt arose when the
Constitutional court’s judgment
on contingency fee agreements
was delivered in 2014. Section 12(3) of the Prescription Act provides
that a debt is not deemed to
be due until the creditor has knowledge
of the identity of the debtor and of the facts giving rise to such
debt, provided that
a creditor who could have acquired the knowledge
by exercising reasonable care is deemed to have such knowledge.
[18] In Drennan Maud and Partners vs
Pennington Town Board
[1998] ZASCA 29
;
1998 (3) SA 200
(SCA) Olivier JA stated (209
F-G):
‘In my view, the requirement
“exercising reasonable care” requires diligence not only
in the ascertainment of
the facts underline the debt, but also in
relation to the evaluation and significance of those facts. This
means that the creditor
is deemed to have the requisite knowledge if
a reasonable person in his position would have deduced the identity
of the debtor
and the facts from which the debt arises.’
[19] The respondent acted as the
applicant’s attorneys. They were duty bound to properly
represent and advise the applicant.
They failed to advise the
applicant that the contingency fee agreement was illegal, invalid and
unenforceable. The fact that the
applicant may have believed that the
fees charged by the respondent were excessive and immediately raised
his concerns after receiving
the statement of account is irrelevant.
The date of acquiring the requisite knowledge, as I have alluded to,
is 2014 when the minimum
facts necessary to launch the present
application came to his knowledge.
[20] For all these reasons I have come
to the conclusion that the applicant’s claim has not become
prescribed.
[21] In the result the following order
is made:
1. The quantum of the applicant’s
claim is referred for trial, in respect of which:
1.1 The notice of motion is to stand as
the simple summons and the respondent’s notice of opposition as
notice of intention
to defend.
1.2 The applicant as plaintiff is to
file a declaration within 30 days of the date of this order.
1.3 Thereafter the normal rules
relating to the filing of pleadings and preparation for trial will
apply.
2. The Percentage Contingency Fee
Agreement entered into between the applicant and the respondent, in
respect of fees payable by
the applicant to the respondent in
pursuance of the applicant’s claim against the Road Accident
Fund in respect of the accident
in which the applicant was involved
on 8 October 2005 is declared invalid, void and of no force or
effect.
3. The respondent is ordered to deliver
to the applicant, within 20 days of the date of this order a fully
itemized and detailed
statement of account in the form of a bill of
costs, duly supported where necessary by vouchers, reflecting the
fees of the respondent
(disbursements excluded) in the action
instituted on behalf of the applicant in the South Gauteng High Court
between the applicant
and the Road Accident Fund.
4. Respondent is ordered to pay the
costs of this application.
LWINDELL
JUDGE OF THE HIGH COURT
Counsel for applicant: Adv JJ
Bitter
Counsel for respondent: Adv A Subel
SC
Date of hearing: 29 January 2015
Date of judgment : 27 March 2015