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[2022] ZAMPMBHC 40
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Sibiya v Road Accident Fund: In the matter of Chiau v Road Accident Fund (557/2016 1150/20) [2022] ZAMPMBHC 40 (2 June 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
MPUMALANGA
DIVISION (MAIN SEAT)
CASE
NUMBER 557/2016
REPORTABLE:
YES
OF
INTEREST TO OTHER JUDGES: YES
REVISED
2
June 2022
DANNY
J SIBIYA
PLAINTIFF
And
ROAD
ACCIDENT FUND
DEFENDANT
AND
Case
Number:1150/20
In
the matter of:
ANITA
ERNESTO
CHIAU
PLAINTIFF
And
ROAD
ACCIDENT
FUND
DEFENDANT
JUDGMENT
LEGODI
JP
[1]
The Act, (referring to the Contingency Fee Act) does not authorise a
legal practitioner
to recover a contingency fee that is exploitative.
Whilst the Act provides an incentive for legal practitioner concerned
by allowing
him or her to charge an increased fee, it is not, in the
words of Plasket J in Erasmus v Williams
[1]
“intended to be a licence to plunder up to 25 percent of any
award paid to a client who had entered into a contingency fee
agreement ad who is usually indigent. The Act is therefore not
intended to be a mechanism for a legal practitioner to charge fees
that are unreasonable, and to unjustifiably increase his fees simply
to place him or her in a position to recover the maximum of
the
success fee which the Act allows. To hold otherwise, would be
inconsistent with the purpose of the Act, namely to enhance access
to
justice by enabling litigants who would otherwise not have been able
to afford it, to engage the services of a legal practitioner
[2]
.
[2]
Contingency fee agreements facilitate access to justice as they
enable litigants to obtain legal representation to prosecute
their
claims where the litigant may otherwise have been unable to do by
reason of the prohibitive costs of litigation. However,
such
agreements carry with them the inherent risk of abuse and the
incentive to profit. The undesirable features of contingency
fee
agreements were highlighted as follows in South African Association
of Personal Injury Lawyers v Minister of Justice and Constitutional
Development, (Road Accident Fund, Intervening Party)
[3]
:
“
The first is
that they compromise the lawyer’s relationship with his client
by introducing conflicts of interest, and have
a high risk of abuse.
Contingency fee agreements vest the legal practitioner with financial
interest in the outcome of the case,
which may adversely affect a
legal practitioner’s ability to give dispassionate and unbiased
advice to clients at the different
stages during the proceedings. The
second feature is that a contingency fee agreement gives a legal
practitioner a material financial
interest in the outcome of the
litigation; and on overriding desire to secure a successful outcome
may tempt him or her into practices
which may compromise his or her
clients to the court, such as coaching witnesses, misleading the
court, falsifying evidence, etc
[4]
.
[3]
Unregulated contingency fee agreements have the potential for
earnings by legal practitioners
which are excessive and
disproportionate to the labour and risk invested. This will
negatively impact on the public confidence
in the legal system. The
legislature was clearly conscious of the risk of exploitation when it
legitimised contingency fee agreements.
What the Act therefore sets
out to do is to carefully regulate the extent to which a legal
practitioner may agree with his client
for the payment of an
increased fee
[5]
.
[4]
What section 2 does is to place a limitation on the contingency fee
that an attorney
may recover from his client. In the scheme of the
Act, this is achieved in three ways: The agreed increased fee, or as
it is referred
to in section 2 the success fee or uplift fee as it
also known, is firstly limited to confining it to an amount that
represents
an increase in the attorney’s normal fees. The
principle is that the legal practitioner charges his normal fee, and
as an
added incentive to compensate him for the risk of undertaking
the litigation, he be rewarded by being permitted to agree with his
client to charge an extra fee over and above his normal fee, either
equal or a percentage increase on the normal fee. The normal
fee of
the practitioner is therefore taken as the base fee from which a
percentage increase is by agreement with the client permissible
to
arrive at the amount of the success fee. What is important is that
there is a base (the normal fee) from which a percentage
increase is
permissible. This is the ordinary and only basis which the
practitioner may increase fees. The legal practitioner first
determines his normal fee, which he would have been entitled to
charge without a contingency fee, and then increase it in terms
of
the contingency fee agreement. The success fee is a fee which has
been increased from normal fee
[6]
”.
Otherwise than the success fee, the amount of the practitioner’s
normal fee is therefore not limited by way mutual
consent in the
contingency fee agreement, but rather by the provisions of the Act
itself
[7]
.
[5]
Contingency fee agreements are accordingly subject to judicial
oversight and intervention. This is
consistent
with the right vested in the courts at common law to determine the
propriety of any agreement entered into between an
attorney and his
client with regard to fees. The authority of the court to set aside a
fee agreement is founded upon considerations
of public policy and in
the context of the supervisory function of the court over the conduct
of its own officers, and the protection
of the court’s dignity
and reputation
[8]
.
A contingency fee
agreement that is not covered by the Act or which does not comply
with the requirements of the Act, is invalid
[9]
.
(My emphasis).
[6]
Although the Act does state in express terms that a failure to
fulfil the statutory requirements will render the contingency
fee
agreement null and void, there are clear indications that this was
indeed the legislature’s intention. The primary object
of the
Act was to legitimise contingency fee agreements which were otherwise
prohibited by the common law. The purpose was also
to promote access
to courts subject to the strict control so as to minimise the
disadvantages inherent in the contingency fee system
and to guard
against abuse. The safeguards introduced to prevent such abuse
include sections 2 and 3 of the Act.
As
these sections are not enabling but prescriptive in nature, it would
understandably have been the intention of the legislature
to visit
nullity on any agreement
that
did not comply with these provisions
[10]
.
[7]
In
Mostert
and Others v Nash and Another
[11]
,
Wallis JA once again confirmed that the intention of the legislature
is that the provisions of the Act must be complied with strictly.
He
stated: “Any non-compliance with or departure from the
requirements of CFA,
either
as to substance or to form renders the contingency fee agreement
invalid and unenforceable”.
[8]
The reason for demanding strict compliance with the Act is that a
contingency fee agreement is otherwise unlawful as it
is prohibited
at common law
[12]
. Another
reasoning by
Plasket
J in Mfengwana
is
that it is “…
necessary
to prevent an abuse on the part of the unscrupulous legal
practitioners willing to take advantage of their clients –
a
phenomenon that is, in my experience, unfortunately all too
common
”
[13]
.
It is
the responsibility of the courts to exercise strict control by
ensuring that any contingency fee agreement that do not comply
with
the Act, for whatever reason, should be declared invalid
[14]
.
(My emphasis).
[9]
In this Division, what is stated in
Mfengwana
has sadly
become a phenomenon and this is my experience. The practitioners
would abuse and evade an oversight role of the court
as contemplated
in paragraph [5] above. By stating in the matters they are seized
with on behalf of their clients that ‘
no contingency fee
agreement has been concluded’,
has become fashionable This
is seen as an attempt to avert the courts’ authority in the
exercise of their strict control
or oversight role regarding fee
agreements concluded between attorney despite the form and substance
of such agreements amounting
to contingency fee agreements.
[10]
The two cases before me, namely
Chiau
v Road Accident Fund: case no 1150/2020 and Sibiya v Road Accident
Fund: case no 557/2016,
in
my view, involve contingency fee agreements which in their form and
substance, are both null and void for non-compliance with
the
provisions of the Act. Before I deal with the background to
each of the cases, it is important to deal first with the
principle
governing attorney and client costs. Attorney and client costs are
the costs that an attorney is entitled to recover
from his client for
the disbursement made by him on behalf of his client, and for the
professional services rendered. These costs
are payable by the client
whatever
the outcome of the matter in which he or she engaged the attorney
services;
and
are not dependent upon any award of costs by the court
.
In the wide sense, it includes all costs that attorney is entitled to
recover against the taxation of his bill of costs, but in
the narrow
and more technical sense, the term is applied to those costs, charges
and expenses as between attorney and client that
ordinary the client
cannot recover from the other party
[15]
.
[11]
The relationship between a client and his attorney is that of
principal and agent based on a
contract of mandate
[16]
.
The attorney is entitled to be remunerated for his services. His
charges may be agreed in advance or they are the usual or normal
fees
due for the work actually performed. Irrespective of whether the
attorney’s fees are agreed, the fee charged must be
reasonable
[17]
.
[12]
Based on considerations of public policy, the court receiving the
right to decide what a fair
and reasonable remuneration would be. A
fee that is unreasonable cannot validly be recovered, and a fee
agreement that authorises
an attorney to charge an unreasonable fee
that amounts to overreaching will be unreasonable and consequently
unenforceable
[18]
. An enquiry
in terms of the Act into the legality of the attorney’s normal
fee is an objective assessment that will be conducted
on the basis of
certain specified considerations or factors which facts are aimed at
achieving proportionately and consisting of
amount that constitutes
the basis for the agreed success fee.
[13]
The purpose of incorporating into the enquiry the norms and principle
applicable to the taxation
or assessment of costs on an attorney and
own client scale, is to achieve some measure of consistency and
certainty of the amount
of the normal fee. In that context, the role
played by the principle that the court’s tariff provides a
guide for the determination
of the reasonableness of fees an attorney
charges his client, can simply be stated as that it provides a
yardstick against which
the attorney’s normal fee in the
contingency fee agreement is to be measured in an overall assessment
of the reasonableness
of that fee
[19]
.
[14]
The point of departure of any enquiry into the enforceability of an
agreed contingency fee is
therefore the base fee, which the Act
requires to be the attorney’s normal fee that must be set out
in the agreement. What
the normal fee is, is clearly defined in
section 1 of the Act. Consistent with the common law position it
establishes “reasonableness”
as the standard by which the
base fee must be judged. The question is, how is reasonableness of
the fee to be assessed? A reasonable
fee is a fee that is fair. A fee
is fair if it is appropriate for the work performed by the
practitioner and falls within a range
of fees that is usually charged
for the same work
[20]
.
[15]
What is contemplated in the definition in section 1 is an objective
assessment of the reasonableness
of the fee essentially based on
three factors. That is, the nature of the work to be performed by the
legal practitioner in question,
and the norms and principles that
find application in the taxation or assessment of costs on an
attorney and client scale in the
absence of a fee agreement
[21]
.
It is not necessary for the normal fees in the contingency fee
agreement to reach a degree of unreasonableness to the extent that
it
would amount to overreaching and unprofessional conduct on the part
of the legal practitioner concerned before it will constitute
an
unreasonable fee for the purpose of the Act. A determination of the
reasonableness of the base fee is separate from the ethical
basis of
the right of judicial intervention in the fee agreements between an
attorney and client where the enquiry is focused on
the extent of the
unreasonableness of the fee so as to constitute abuse, impropriety or
overreaching and therefore unprofessional
conduct.
[16]
A determination of these reasonableness of the attorney’s
normal fees for purposes of the
Act therefore requires an objective
assessment of what is appropriate in the incentives of a particular
case. Factors to be considered
with regard to the nature and subject
matter of the case, are its complexity and the time and effort likely
to be spent on it.
Factors relevant to the practitioner who will
perform the work may in turn include among others his experience, the
skills level
and expertise that is required to perform the work in
question and the fee charged in the jurisdictional area by
practitioners
with comparatively the same level of skill and
expertise
[22]
.
[17]
In Mkuyana
, the question was whether the plaintiff’s
attorney’s hourly fee, which the attorney disclosed in the fee
agreement
with the plaintiff, was a reasonable fee, as envisaged in
the definition in section 1 of the Act. Counsel for the attorney in
question
asked the court to refer the issue to the Legal Practice
Council for determination as envisaged in section 5 of the Act. The
section
provides that a client of a legal practitioner who has
entered into a contingency fee agreement and who feels aggrieved by
any
provision or fees chargeable in terms thereof may refer such
agreement or fees to the professional controlling body or, in the
case of a legal practitioner who is not a member of a professional
controlling, to such body or person as the Minister of Justice
may
designate. In terms of subsection (2), such controlling body or
designated body or person may review any such agreement and
set aside
any provision thereof or any fees claimable in terms thereof or any
fees claimable in terms thereof if in his, her or
its opinion the
provision or fees are unreasonable or unjust. On the other hand, the
amicus in
Mkuyana
suggested a different course.
[18]
In paragraph [38]
Van Zyl DJP
in
Mkuyana
held:
“
The issue
is before us and we have been placed in position to deal therewith to
finality. The issues have been fully ventilated
on the evidence and
the court should not lightly and without good reason refuse to
exercise its supervising duties and functions
alluded to earlier when
it is placed in a position to do so. Further, as will appear more
fully hereafter, the premise on which
the attorney proceeded to
determine his normal fee, was fundamentally flawed. Another reason
for us to decide the matter is that
the contingency fee agreement is
also invalid for other reasons which falls outside the mandate and
authority of the professional
controlling body”
[23]
.
IN
the matter of Sibiya v Raf, Case No. 557/2016
[19]
This is enquiry on the lawfulness or otherwise of the fee agreement
concluded between the attorney
of record Mr Eastes of Bremmer &
Hough and his client, Ms A E Chiau an adult female person born on 4
July 1969, currently staying
at the rural area called Sebokeng Naas
Township, district Mpumalanga. She instituted an action against the
Road Accident Fund arising
from a motor-vehicle collision that
happened on 20 July 2015 when she was injured as a passenger.
[20]
The fee agreement was concluded on 11 September 2015. On 3 March 2022
this matter was laid before
me on the close of the roll for
allocation to any judge scheduled for trial during the trial week
starting from 14 March 2022.
On top of the court papers and as per
the Consolidated Covid-19 Directive of this division, a practice note
was filed. In paragraph
9 thereof is stated: “
The parties
agree
that the plaintiff did not enter into a contingency
fee agreement as contemplated in the Contingency Fees Act, with the
plaintiff’s
attorney”
.
[21]
Worried whether indeed no contingency fee agreement was concluded,
the matter was not allocated
to proceed on trial on 14 March 2022.
Instead, the matter was removed from the roll and a directive was
issued and of relevance
worded as follows:
1.
“
In
Merriam-Webster
Dictionary
the meaning of
contingency fee is ‘a fee for services paid upon successful
completion of services and usually calculated as
a percentage’.
Contingency fee is also described as ‘any fee for services
provided where the fee is payable if there
is a favourable result’.
2.
The suggestion that no contingency fee
agreement has been concluded pre-supposes that the plaintiff and his
or her attorney agreed
on a specific amount of a fee for the
litigation when the instructions were taken and that the agreed fee
was so paid by the plaintiff.
For this, the plaintiff’s
attorney is hereby directed as follows:
2.1.
When was such a fee agreed upon?
2.2.
When was such a fee paid in total?
2.3.
What is the amount of the fee agreed upon?
2.4.
If no fee was paid or was paid in part, when
was such a fee or remaining part thereof supposed to be paid?
2.5.
If no fee was paid, what is the basis upon
which is alleged no contingency fee agreement was concluded?
3.
If it is correct that the plaintiff and his
attorney agreed on a fee as so required, the following information
should be provided
in an affidavit by the plaintiff and his attorney
by not later than 12h00 on
Thursday 10 March 2022.
4.
Lastly, it is noted in paragraph 9 of supplementary practice note,
is stated that
the parties
agree that the
plaintiff did not enter into contingency fee agreement. This
pre-supposes,
that the plaintiff and defendant agree that
there will be no fee agreement
.
4.1.
On what basis the parties (plaintiff and defendant) could so have
agreed?
4.2.
If it is alleged that the plaintiff and defendant did not agree to
no contingency fee agreement, on what basis reference is made
to “the
parties” in paragraph 9 of the practice note?”
Mr
Eastes affidavit of 3 March 2022
[22]
In an affidavit deposed to on 8 March 2022, Mr Eastes alluded
to the fact that the matter has since been settled with
the State
Attorney one Mr Sibiya and that notices of acceptance of offer,
removal and settlement agreement will subsequently be
served and
filed. In seeking to deal with the issues as quoted in paragraph [21]
above, he stated that a fee agreement was concluded
on 11 September
2015, that on15 February 2022 and during consultation the plaintiff
as a client confirmed that “she did not
enter into a
contingency fee agreement as defined in the Act”. Then in
paragraph 3.13 of the affidavit in question
Mr Eastes reiterated that
the fee agreement concluded between the plaintiff and her attorneys
of record represented “normal
fee”, taking cognisance of
years and expertise as he, Mr Eastes dealt with the matter from the
onset. Having said this and
emphasised by underlining he stated in
paragraph 3.14 of his affidavit as follows:
“
I respectfully
submit that the payment of the professional fees is not subject to
the successful completion of a claim against the
defendant and I
respectfully refer the above Honourable Court to paragraph 2 of the
agreement of fees as between attorney and own
client dated 11
September 2015 annexure B hereto and therefore is not a contingency
fee agreement as contemplated in the Contingency
Fee Act, Act 66 of
1997”.
[23]
Then in paragraph 4 of his affidavit Mr Eastes stated that “…
It
was agreed with the plaintiff, pertaining to capital, party and party
costs and attorney and own client costs at the conclusion
of this
matter”
. Mr Eastes in seeking to deal with paragraph 4 of
the questions quoted in paragraph [21] quotation of this judgment
proceeded to
state that he considers it to be his fiduciary
obligation in the legal field to acquaint himself whether the
plaintiff entered
into a contingency fee agreement as contemplated in
the Contingency Fee Act. And if so, whether the requirements of the
Act are
being met. One must commend Mr Eastes for this, but what
follows gives the impression that he too was not sure whether the
agreement
he concluded with the plaintiff was a simple fee agreement
or a contingency fee agreement to which the Act applies.
[24]
I say so because according to Mr Eastes it is his practice to
disclose the fee agreement entered
with the plaintiff to the
defendant’s attorney, normally at the pre-trial conference held
between the parties. Then in paragraph
5.3 of his affidavit he
continued:
“
If can remember
correctly, I did present a copy of the fee agreement entered with the
plaintiff to the State Attorney
and
normally enquire from the defendant’s attorney if they agree
that the fee agreement entered with the plaintiff is not
a
contingency fee agreement as contemplated in the Contingency Fee
Act…”.
[25]
True, the Road Accident Fund in matters that are settled should
satisfy itself before payment
is made that a contingency fee
agreement does not apply. The Road Accident Fund is there through the
public purse and most importantly
it is there to serve the public in
particular, the poor, uneducated and the vulnerable who could easily
be taken for a ride by
the unscrupulous legal practitioners. It
therefore needs to ensure that the right award of damages goes to the
right people. For
this, before payment is made on settlement, the
Road Accident Fund has to ensure that any settlement to which
contingency fee agreement
applies, meets the requirement for a valid
agreement before payment is made. In other words, where contingency
fee agreement applies
and the matter is settled, payment should only
be made on the basis of a court order to ensure that the court’s
oversight
role is not subverted or side-stepped. The allegation of
“no contingency fee agreement” when it comes to damages
claim,
in particular against the Road Accident Fund and in medical
negligence matters where touts are mostly used, has to be
investigated
at all its corners, otherwise the Act will not worth the
paper is written on.
[26]
The fact that such an allegation is made, does not on its face-value
make it a fee agreement
to which the Act does not apply. The form,
content and substance of the alleged simple fee agreement has to be
looked at to ensure
that no abuse takes place and that courts are not
used to facilitate such an abuse. The enquiry herein was therefore
necessary.
Mr
Eastes affidavit of 17 March 2022
[27]
This affidavit was prompted by the response contained in Mr Eastes
affidavit of 8 March 2022.
The response was meant to deal with the
issues raised as quoted in paragraph [21] of this judgment. Worried
by lack of sufficient
particulars given, further directives were
issued as follows:
1.
“
The terms and conditions of the fee
agreement with the plaintiff in this matter is noted and you are
hereby directed to file further
affidavits dealing with the
followings:
1.1
Were the accounts in respect of disbursements
and interim accounts in respect of attorney’s fees ever
delivered to the plaintiff
as contemplated in clause 3 of the fee
agreement?
1.2
If the answer in paragraph 2.1 above is in the
affirmative, the following questions must be dealt with in the
affidavit:
1.2.1
When were such accounts delivered?
1.2.2
What were the terms of payment for such
accounts?
1.2.3
Was the plaintiff financially capable to pay
the amounts as per such accounts and if so, when did she pay for such
accounts?
1.2.4
If the accounts as per clause 3 were delivered
and it is alleged that the
plaintiff was financially capable of paying for such account
s,
when did she pay for such accounts so submitted to the plaintiff in
terms of clause 3?
1.2.5
If it is contended that the plaintiff was and
is not financially capable of
paying the amounts as per the accounts so submitted
,
on what basis is it contended that the fee agreement concluded did
not amount to a contingency fee agreement? In dealing with
this
question, the plaintiff’s attorney is hereby directed to
indicate what is his definition or understanding of contingency
fee
agreement.
1.2.6
Did the plaintiff’s attorneys
before accepting the instruction to litigate on behalf of client
consider whether client (the
plaintiff) has reasonable prospects of
success in the anticipated litigation? And if so, can it be assumed
that if the prospects
were not good, the plaintiff’s attorney
would not have proceeded with the litigation unless client was able
to finance the
litigation out of his or own pocket?
2.
It is also noted in clause 4 that the plaintiff
was to pay a deposit in respect of attorney’s fees and or
disbursements only
when so demanded. In the light hereof the
following questions should be answered:
2.1
Was any demand for such payment of the deposit
ever made? And if so when was such a demand made?
2.2
If a demand was never made, why was it not
made? In dealing with these questions it must also be explained why
a deposit was
not demanded upfront if indeed the contingency fee
agreement is not involved here.
3.
It is further noted that in clause 5 of the fee
agreement in question, all accounts shall be payable upon
receipt thereof.
The plaintiff’s attorney is hereby required to
deal in his affidavit with the following questions:
3.1
Were such accounts ever sent to and received by
the plaintiff?
3.2
If the answer in 4.1 above is “yes”,
then the following questions must be dealt with:
3.2.1
When were they sent and received by the
plaintiff?
3.2.2
Did the plaintiff pay as per clause 5? If so,
when was payment/s made? Proof of such payment/s must be provided.
3.3
If no accounts were ever submitted as per
clause 5, when are such accounts intended to be submitted to the
plaintiff for payment
and why they have not been submitted if the fee
agreement in not based on contingency fee?
3.4
It is further noted that in terms of clause 7.1
the client is obliged to pay attorneys fee and disbursements
depending on the amount
of quantum as may from time to time be
applicable in respect of all services rendered, plus 100% surcharge,
that is, double the
tariff and any fixed surge on such tariff
including inter alia, so many items in respect of which an attorney
is entitled
to charge client.
3.4.1
In the affidavit, you are hereby directed
to indicate how does clauses 7.1 and 7.2 differ from what is
envisaged in section 2 of
the Contingency Fee Act. “
3.4.2
…
[28]
In dealing with the specific questions quoted in paragraph 21 of this
judgment the followings
were stated: That on 11 September 2015 the
plaintiff agreed to pay her attorneys of record “attorney and
own client fees
and disbursements”. As to when was a fee agree
upon paid the answer is that “the fee has not been paid in
total. Regarding
the amount of the fee agreed upon a somewhat long
answer is given,
inter alia
, as follows:
“
The plaintiff
agreed to pay – attorney and own client fees and disbursements
as per tariff (which includes surcharge) as provided
for in Rule 70
of the High Court as may from time to time be applicable in respect
of all professional services rendered, plus
100% surcharge
”.
[29]
I pause for a moment to deal with the meaning of “surcharge”.
According to Collins English Dictionary, ‘
a surcharge is an
extra payment of money in addition to the usual payment for
something. It is added for a specific reason’
. Therefore,
for the purpose of determining whether the fee agreement concluded by
Mr Eastes, regard been had to the form, content
and substance of the
agreement in question, “surcharge mentioned in the agreement
should be understood as meaning ‘
additional fees to the
hourly normal fee charged by Mr Eastes’
as so stated in the
fee agreement between Mr Eastes and his client.
[30]
Of necessity this consideration will also become relevant to the
meaning of “normal fee”
and ‘contingency fee’
as defined in the Act read together with section 2(1) of the Act. I
expand on this later in this
judgment, in particular with reference
to the fact that the agreement of fees entered into with the
plaintiff in present case whilst
is contingency in form and
substance, it does not comply with the strict requirements of section
2 and 3 of the Contingency Fees
Act.
[31]
The answer to the question ‘when was such a fee or remaining
part thereof supposed to be
paid?’, is revealing. ‘
I
decided to deliver a comprehensive account at the completion of the
matter’, as stated
in Mr Eastes’s affidavit
deposed
to on 17 March 2022,
can only flow from the fact that the
plaintiff’s case was taken up by Mr Eastes knowing that the
plaintiff was in no financial
position to pay for any of the
attorney’s fees or disbursements and that he proceeded to
litigate on behalf of client on
risk basis. Failure to deal with the
plaintiff’s financial ability to pay for the litigation would
appear clearly later in
this judgment. Therefore, one can comfortably
assume that payment was to come from the capital amount on a
successful finalisation
of the litigation. No legal practitioner
would be willing to incur disbursements of advocates and experts in a
matter that has
no prospects of success and without a full cover.
[32]
In paragraph 2.2.1 of the directive issued on 9 March 2022 the
attorney for the plaintiff was
requested to indicate when the
accounts in respect of disbursements and interim accounts in respect
of attorney’s fees, were
delivered. The answer is that they
were presented to the plaintiff. Having said this and without
specifying the dates on which
such accounts were “presented to
the plaintiff”, Mr Eastes in his affidavit alluded to the fact
that he negotiated
with the experts for extended payment periods on
behalf of and to the benefit of the plaintiff. This is not for the
benefit of
the plaintiff but is for the attorney’s benefit who
is litigating on behalf of client on contingency basis. I say so
because
payment of such disbursement is a matter between the attorney
and the experts and not the client.
[33]
Without stating when were the accounts delivered to the plaintiff
regarding the accounts he had
received from four of the experts
mentioned in paragraph 4.2.1(c) of his affidavit deposed to on 17
March 2022, Mr Eastes alluded
to the fact that his experts agreed to
give him a grace of six months from a date unknown. I say so because
no particulars were
given regarding such accounts so allegedly
presented to the plaintiff.
[34]
What is however startling is the only invoice or account Mr Eastes
referred to in paragraph 4.2.1
(g) of his affidavit. This is the only
invoice in respect of which the particulars were given except to say
no proof was provided
that same was presented to the plaintiff. Why
only this invoice was attached to the affidavit is not explained. I
assume that no
other invoices were issued despite the experts having
apparently incurred costs in the compilation of the reports.
Otherwise, if
the experts submitted such accounts, Mr Eastes would
gladly have submitted such accounts to this court as he did regarding
the
one account I refer to hereunder.
[35]
Of note is the fact that the only invoice submitted to this court in
terms of the directive is dated
1 October 2021. This is an invoice
from an actuary in the amount of R14 260.00 payable
on
1 October 2024
.
This seems to facilitate finalisation of the matter. Almost like
waiting for the matter to be finalised before the amount becomes
due
and payable. The statement written in bold and capital letters: “
The
amount DUE AND PAYABLE ON 01/10/2024 even if not settled by then
”,
is a strange kind of an arrangement. Firstly, why the statement “even
of not settled by then”? Why an outsider
as between attorney
and client will attribute payment to a settlement as if he or she was
told that the matter was being litigated
on the basis of contingency
fee agreement. In any event why an expert like Dr Robert J Koch, an
actuary with vast experience of
many years will find the need to
issue such an invoice due and payable three years after it was
issued? The irresistible conclusion
is that he was told that the
matter was dealt on contingency basis and that payment will only be
possible after the matter shall
have been settled. This brings me to
consider another issue.
What
is the object of the Act?
[36]
Contingency fee agreements facilitate access to justice as they
enable litigants to obtain legal representation to prosecute
their
claims where the litigant may otherwise have been unable to do by
reason of the prohibitive costs of litigation. The Act
was intended
to facilitate this access by doing away with the prohibition at
common law. The Legislature was clearly conscious
of the risk of
exploitation when it legitimised contingency fee agreements. What the
Act sets out to do is to carefully regulate
the extent to which a
legal practitioner may agree with his or her client for the payment
of an increased fee.
[37]
As previously indicated in this judgment, unregulated contingency
fees agreements have the potential
for earning by the legal
practitioners which are excessive and disproportionate to the labour
and risk invested. Subsection (1)(a)
of section 2 of the Act makes it
plainly clear that notwithstanding anything to the contrary in any
law or common law, a legal
practitioner may, if in his her opinion
there are reasonable prospects that his or her client may be
successful in any proceedings,
enter into an agreement with such
client in which it is agreed that the legal practitioner shall not be
entitled to any fees for
services rendered in respect of such
proceedings, unless such client is successful in such proceedings to
the extent set out in
such agreement.
[38]
Section 2(1)(a) should therefore be interpreted to mean that if
client is indigent or poor and unable
to fund the costs of litigation
and the attorney after having formed an opinion that there are
reasonable prospects that his or
her client may be successful in any
proceedings, decides then to enter into an agreement, that will
constitute a contingency fee
agreement. That is so because the
litigation is proceeded with in the context of inherent risk the
attorney is prepared to take.
And that is the risk the attorney in
the present case was prepared to take as it would appear clearer
later in this judgment
Was
the plaintiff able to fund the costs of litigation?
[39]
In paragraph 2.2.3 of the directive dated 9 March 2022 the
plaintiff’s attorney was required
to indicate whether the
plaintiff was financially capable to pay the amounts as per the
amounts so submitted and if so, the plaintiff’s
attorney was
required to indicate when the plaintiff so paid. In paragraph 4.2 of
his affidavit, Mr Eastes devoted his attention
to paragraph 2 of the
directive issued on 9 March 2022. In so doing, he neglected to
specifically respond to the question raised
in paragraph 2.2.3 of the
directive. Failure to respond to this question is not in my view
inadvertent. It was deliberate because
clearly regards been had to
the facts of the case as disclosed in the two affidavits deposed to
by Mr Eastes, the form, content
and substance of the agreement upon
which the attorney relies on for his assertion that the fee agreement
concluded did not amount
to contingency agreement, clearly do not
support such an assertion.
[40]
Seeking to deal with a follow-up question to question 2.2.3 of the
directive, Mr Eastes, in my
view, also found himself being confronted
with a difficulty to justify his assertion of no contingency fee
agreement. The assertion
in paragraph 4.4.2 of his affidavit to the
effect that ‘
the fee does not depend on the outcome of the
case, and because we advise our clients properly, there is no need to
enter into a
contingency fee agreement’,
is wrong in law
and is not supported by the facts of the case. Unfortunately, this
appears to be wide-spread practice which tends
to undermine the
imperative in the Act. His unilateral suggestion to deliver a
comprehensive account at the conclusion of the matter
as alluded to
in paragraph 4.4.1 of his affidavit, serves to show the extent of the
abuse. Almost abandoning a fee agreement by
going contrary to the
alleged agreed terms and conditions of the agreement which are not
realisable because client is not and has
never been in any position
to afford any such fees and disbursements. This was clearly common
cause when the fee agreement relied
upon was concluded.
[41]
The abuse is obvious. That is, to avoid the strict requirements for
compliance in sections 2
and 3 of the Act coupled with the court
oversight in terms of section 4. In terms of clause 4 of the fee
agreement, the plaintiff
as a client was to pay a deposit on demand.
In question 3.1 Mr Eastes was directed to indicate if such a demand
was made. Having
made such a demand on 11 September 2015 when the
agreement was concluded, question 3.2 as quoted in paragraph [21] of
this judgment
was probing. To this, Mr Eastes resorted to stating
that he unilaterally decided to deliver a comprehensive account at
the conclusion
of the matter. This would only mean that payment was
to come from the capital amount after the matter shall have been
successfully
concluded. This in my view, arises from the fact that
‘
before accepting the instructions, taking cognisance of how
the collision occurred giving rise to the plaintiff’s claim and
nature, extent and sequence of the injuries the plaintiff sustained’
as so stated in paragraph 4.2.8 of his affidavit, Mr Eastes advised
the plaintiff of her chances of success. To suggest that the
fee
agreement was not based on “success” has no merits. It is
actually at odds with the facts of the case to conclude
or contend
that the fee agreement concluded was not based on a success agreement
or “no win, no fee” agreement.
[42]
The statement, “
clause 7.1 and 7.2 of the agreement of fees
entered into with the plaintiff differs from section 2 of the Act in
that payment of
fees as per agreement was not subject to successful
finalisation of the claim”
in paragraph 4.4.3 of Mr Eastes’
affidavit, cannot be correct. The assertion that Mr Eastes or his
firm of attorneys ‘will
be entitled to its normal fee, and that
the agreement of fees entered into with the plaintiff does not comply
with sections 2 and
3 of the Act’, cannot be considered without
having regard to the facts of the case, the form, content and
substance of the
fee agreement concluded. It is a fee agreement based
on a risk taken by the attorney and that constitutes “contingency”
which means “
an event that may or may not occur in the
future. In other words, it depends on fulfilment of a condition which
is uncertain’’
. Whist Mr Eastes seeks to distance
himself from this definition, the facts of the case do not support
his assertions.
[43]
As indicated earlier, the facts of the present case fits into
the provisions of I have section 2(1)(a). Similarly, section
2(1)(b)
of the Act also fits into the facts of the case and content of the
fee agreement Mr Eastes relies on. An undertaking by
the plaintiff in
clause 7.1 of the fee agreement to pay attorney and own client fees
and disbursements as per tariff (which includes
any surcharge) as
provided in Rule 70 - as may from time to time be applicable in
respect of all professional services rendered
plus 100% (One
Hundred Percent)
(i.e double the tariff and any fixed surcharge
on such tariff, including,
inter alia
consultation,
attendance, telephone calls, including
inter alia
preparation,
settlement claims, settlement as taxation of costs, accounting in
respect of capital and or costs; advice on and arrangements
made in
respect of investments, travelling costs, making copies (irrespective
of the number of copies made of each and every document);
sending out
or receiving of fares, should in my view, dispose of and burry any
suggestion that no contingency fee agreement has
been concluded.
[44]
For reasons best known to Mr Eastes he put emphasis by bolding and
using also capital letters
to the words “PLUS 100% (ONE HUNDRED
PER CENT) surcharge”. In paragraph [29] of this judgment the
meaning of “surcharge”
was given. Clearly in the context
of the present case “surcharge” means that not only the
“normal fees”
as defined in section 1 of the Act will be
charged, but also 100% additional charges. This in my view, falls
squarely within section
2(1)(b) of the Act.
[45]
Section 2(1)(b) allows a legal practitioner to charge in a
contingency fee agreement fees equal
to or subject to subsection (2),
higher than his or her normal fee set out in such agreement, for any
such services rendered, if
such client is successful in such
proceedings to the extent set out in such agreement. “Surcharge”
referred to in paragraph
7.1 of Mr Eastes’s affidavit of 17
March 2022, is an added higher fee than his or her normal fees. So,
whatever way you look
at the facts of the case and the agreement
concluded on 11 September 2015, you are led to one conclusion. The
fee agreement concluded
is a contingency fee agreement which is
invalid and unenforceable for non-compliance with the provisions of
the Act.
[46]
There is another issue to deal with. This statement in paragraph 4 of
Mr Eastes’s affidavit
deposed to on 16 March 2022, is telling:
“
I confirm that it was agreed with the plaintiff that we
will account to the plaintiff pertaining to capital, party and party
costs
and attorney own costs, at the conclusion of this matter
”,
in paragraph 4 of Mr Eastes’ affidavit deposed to on 16 March
2022, is telling. First, this term and condition of
the fee agreement
if it had actually arisen, must have arisen after the written
agreement was concluded on 11 September 2015. I
say so because in
terms of clause 3 of the written fee agreement, the attorney was
obliged to deliver to the plaintiff particulars
of the disbursements
as soon as they are incurred and interim accounts in respect of
attorney’s fees from time to time. The
plaintiff was expected
to make payment in regard thereto. In terms of the fee agreement in
question, all accounts shall be payable
upon receipt thereof by the
plaintiff.
[47]
Mr Eastes in his affidavit alluded to the fact that all expert
accounts were submitted to the
client. He did not specify when and
for how much. But all what is known is that client paid nothing
despite what is stated in clause
5. So, if the agreement relied upon
is now that client will pay after the capital amount is paid and that
a comprehensive account
in relation thereto including party and party
costs paid and that an attorney and own client costs will be
deductible from the
capital amount awarded, that should dispose of
any suggestion that contingency fee agreement was not concluded. This
way of litigating
on behalf of a client amounts to an abuse intended
to side-step the prohibition at common law and also to side-step the
imperative
in the Contingency Fees Act.
Lack
of information regarding reasonableness of the agreed fees
[48]
Mr Eastes’s attention was drawn to the decision in
Mkuyana
.
In this case, the full court also had to deal with the unlawfulness
of the fee agreement based on the unreasonable nature of the
fees to
be charged to the client. There is a long standing practice in the
attorneys’ profession which is repeated in section
35 of Legal
Practice Act, although the provisions of the section are still to be
proclaimed.
[49]
Just to paraphrase what is provided for in section 35 which deals
with fees in respect of legal
services: When an attorney first
receives instructions, he or she is obliged to specify in writing all
the particulars relating
to the envisaged costs of the legal services
including the attorney or advocate’s hourly rate. An
explanation to client’s
right to negotiate the fees payable to
the attorney or advocate, should be provided to client. Similarly,
the likelihood of engaging
an advocate as well as explanation to
client of the different fees that can be charged by different
advocates depending on aspects
such as seniority or expertise, should
also be provided to client. Non-compliance with section 35 entitles
the client to refuse
to pay the attorney any legal costs until the
Legal Practice Council has reviewed the matter and made a
determination regarding
the amounts to be paid. Whilst subsections 7
to 12 of section 35 of the Legal Practice Act have not been
proclaimed yet, they cannot
be ignored as this has always been the
practice which every attorney in my view, ought to emulate and
practise.
[50]
Mr Eastes in his affidavit elected not to be open to the court and
explain what his hourly rate
is. Instead, in clause 7.2 of the fee
agreement concluded on 11 September 2015 it is stated that court
appearance by Messrs Bremmer
and Eastes shall be equivalent to that
of senior/junior counsel. It cannot be expected that a client like
the plaintiff in the
present case coming from a rural area of
Sebokeng at Nkomazi, will know what appearance fee rate for
senior/junior counsel is.
Secondly, Mr Eastes’s hourly rate for
other legal services is not specified. This generalisation of legal
costs is susceptible
to an abuse and that is what the Contingency
Fees Act and the long standing practice in the attorneys’
profession due to
be converted into law in terms of section 35, are
intended to curb the abuse.
[51]
Van Zyl DJP in
Mkuyana
dealt at length with what should be
considered in dealing with the reasonableness or otherwise of the
fees charged by a legal representative.
Whilst the reasonableness
thereof has to be determined by the Taxing Master in terms of rule
70, when everything is placed before
the court, there is nothing
preventing the court from dealing with the issue.
[52]
Van Zyl DJP in
Mkuyana
held that the attorney is entitled to
be remunerated for his services. His charges may be agreed in advance
or they are the usual
or normal fees due for the work actually
performed. Irrespective of whether the attorney’s fees are
agreed, the fee charged
must be reasonable. Reasonableness is the
standard aspect when the attorney’s fee ultimately be measured.
Based on consideration
of public policy, the court retains the right
to decide what a fair and reasonable remuneration would be. A fee
that is unreasonable
cannot validly be recovered, and a fee agreement
that authorises an attorney to charge an unreasonable fee that
amounts to overreaching
will be unreasonable and consequently
unenforceable.
[53]
In paragraphs [48] to [50] of this judgment I referred to section 35
and the long standing practice
in the attorney’s profession.
The attorney for the plaintiff on more than one occasion missed an
opportunity to deal with
the legality of his fee charges based on the
fee agreement concluded. In other words, he missed an opportunity to
deal with the
reasonableness of his fees. He had an opportunity to
specify his fee charge in the agreement concluded on 11 September
2015. Second,
the opportunity was also missed when he was asked to
deal with the directive dated 3 March 2022. Instead, he attached a
fee agreement
which was couched in general terms without specifying
his hourly rate and that of counsel where applicable.
[54]
Failure to disclose in detail costs of litigation in circumstances
where client pays nothing
until the matter is finalised is one of the
things the Act sought to avoid when the Legislature did away with the
prohibition of
contingency fee agreement at common law. To allow and
sees no illegality in the present facts of the case, would only
promote the
abuse and this will make the Act not to be worth the
paper is written on. It is expected that at the first consultation
with client,
client will be placed in a position to understand the
costs implications of the contemplated litigation. It is at this
stage that
client’s assessment of the means and ability to feed
the bill costs should be ascertained and not just resort to “no
contingency fee agreement is concluded”. When in actual fact
fees are payable upon and deductible from the capital amount.
The
tendency and practice of concluding fee agreements as we have lately
discovered, is worrisome especially if officers of the
courts are
behind it. I find that the agreement concluded, is illegal and
unenforceable. This then leaves the issue of remedy to
be dealt with
later in this judgment
In
the matter of D.J Sibiya v RAF. Case Number 557/2016 – Mbombela
[55]
On 24 January 2022 the plaintiff’s attorneys Du Toit-Smuts
filed notice of set down for
taxation by the Taxing Master scheduled
for 2 February 2022. Upon receipt of the bill of costs in the amount
of R66 949.50 for
fees and R24 595 for disbursements, the Taxing
Master directed the following questions to the plaintiff’s
attorney:
“
5.
However, as a follow-up on our conversation, I have the following
question
to ask, as a follow-up to the issue of “no
contingency”
(a)
My question was whether the client paid cash or not?
(b)
When was the fee agree upon?
(c)
When was such a fee paid in total?
(d)
What is the amount of the fee agreed upon?
(e)
If no fee was paid or was paid in part, when was such a fee or
remaining part thereof supposed to be paid?
(f)
If no fee was paid, what is the basis upon which is alleged no
contingency fee agreement was concluded?
6.
I asked the above questions, so that I can approach one of the
Judges
in Chamber in terms of Rule 70(5A)(d)(ii), for the purposes of
getting direction in order to tax the bill of costs to finality.”
[56]
In a letter dated 8 February 2022 to the Taxing Master, Mr Krige on
behalf of the plaintiff sought
to respond to the questions raised as
in paragraph [54]. In paragraph (iii) of his letter he stated: “Only
after the quantum
is finalised and the matter is finalised in
toto
are we able to compile an attorney and client bill of costs”
[57]
Mr Krige then proceeded and made this statement:
“
In this
matter, the merits have become settled and we are now entitled to tax
the plaintiff’s party and party costs against
the Road Accident
Fund
:
Any proceeds
from the party and party bill of costs will be utilised to appoint
the necessary medical experts
.
The party and party bill of costs will be taken when compiling the
attorney and client bill of costs, of which the latter is payable
by
the client. We are however, at this stage, in no position to compile
an attorney and client bill of costs as the matter is not
yet
finalised.
Our firm did not enter
into a contingency fee agreement in terms of the Contingency Fee Act
No. 66 of 1997. The Legal Practice Act,
Act 28 of 2014 stipulates the
requirements regarding attorney and client fee agreements which is
governed by the Legal Practice
Council. We respectfully submit that
our attorney and client fee agreement is in accordance thereof”.
[58]
Starting with the latter statement, reference to requirements
regarding attorney and client fee
in terms of the Legal Practice Act,
can only be with regard to section 35. “Our attorney and client
fee agreement in accordance
thereof”, can only be in accordance
with section 35. The section does not only set out the requirements
for a valid fee agreement,
but it also outlaw any fee agreement which
is not compliant therewith. In addition, non-compliance therewith
constitutes a misconduct
and renders the agreement unlawful and
unenforceable.
[59]
In terms of subsection (7) of section 35 of the Legal Practice Act,
an attorney when he or she
first receives instructions from a client,
the costs estimate notice must be provided to client in writing. In
such a notice all
particulars relating to the envisaged costs of the
legal services must be specified including (a) the likely financial
implications
including fees charges, disbursements, and other costs,
(b) attorney’s or advocate’s hourly fee rate and an
explanation
of the client of his or her right to negotiate the fees
payable to the attorney or advocate, (c) an outline of the work to be
done
in respect of each stage of litigation process, where
applicable, (d) the likelihood of engaging an advocate, as well as an
explanation
of the different fees that can be charged by different
advocate, depending on aspects such as seniority or expertise, and if
the
matter involves litigation, the legal and financial consequence
of the client’s withdrawal from the litigation as well as
the
costs recovery regime.
[60]
Mr Krige does not in his letter explain how he allegedly complied
with the requirements stipulated
in the Legal Practice Act. Probably
he did. If he did, he would have seized the opportunity to provide
the written agreement as
required in terms of the intended
legislative imperative in subsection (7). I say “intended”
because the section has
not been proclaimed yet. The statement “We
are however at this stage in no position to compile an attorney and
client bill
of costs as the matter is not yet finalised” is in
direct conflict with the provision of subsection (7) which requires a
costs estimate in writing specifically the particular relating inter
alia, the attorney’s or advocates’ hourly fee rate
as
contemplated in paragraph (b) of subsection (7).
[61]
Furthermore, the statement: “…the merits have become
settled and we are now entitled
to tax the plaintiff’s party
and party costs against the Road Accident Fund.
Any proceeds from
the party and party bill of costs will be utilised to appoint the
necessary medical experts”,
is a clear concession that
client in the present case is in no position to fund the costs of the
litigation against the Road Accident
Fund. At common law to litigate
on behalf of client on this basis is prohibited unless the attorney
and client enter into contingency
fee agreement in terms of the
Contingency Fee Act, something which did not happen in the present
case and thus making the agreement
illegal and unenforceable.
[62]
Speaking about the legality and enforceability of the agreement,
subsection (11) of section 35
of the Legal Practice Act provides that
if any attorney or advocate referred to in section 34(2)(b), does not
comply with the provisions
of the section, the client is not required
to pay any legal costs to that attorney or advocate until the council
has reviewed the
matter and made a determination regarding amounts to
be paid. This is an aspect to consider when dealing with the remedy
later
herein.
[63]
I may however mention that whilst subsections 7 to 12 of section 35
of the Legal Practice Act
are not proclaimed yet, what is stated in
these subsections has always been a good practice in the legal
profession. It is for
this reason, I want to believe, that Mr Krige
is talking about the requirements in the Legal Practice Act despite
that the subsections
have not been proclaimed yet.
[64]
The Taxing Master having been provided with the explanation by Mr
Krige, invoked the provisions
of rule 70(5A)(d)(iii) and referred the
matter for direction. Upon receipt of the request from the Taxing
Master, the plaintiff’s
attorneys were on 8 March 2022 directed
to file an affidavit and to give specific response to each of the
questions raised by the
Taxing Master as quoted in paragraph [55] of
this judgment. An affidavit deposed to on 16 March 2022 has since
been filed.
[65]
In dealing with the question whether client paid any fee for the
litigation, the respondent was
given as follows:
“
No the client
did not pay cash. The matter has not been finalised. Only merits have
been settled and the client only has to pay
when the matter is
finalised in toto.”
[66]
The answer is revealing. This is not a pro-bono matter. A clear
concession is made that client
is not able to fund the litigation.
Obviously the matter is litigated on the basis of contingency. In
dealing with the question
when was the fee agree upon, the response
on affidavit is articulated as follow:
“
No fee has been
agreed upon. That is the reason for taxation. The amount taxed and
paid by the defendant will be taken into account
once the matter has
been finalised.”
[67]
If this explanation does not amount to a contingency fee agreement to
which the Act applies,
then the Act will not be worth the paper is
written on. Subversion of the imperative in the Act will continue to
be nation wide-spread
and our courts would be used as a facilitator
for the abuse or subversion of the Act. The oversight power of the
court as contemplated
in section 4 of the Act was meant to ensure
that there was a strict compliance with the provisions of section 2
and 3 of the Act.
[68]
Section 4(1) of the Act provides that any offer of settlement made to
any party who has entered
into a contingency fee agreement, may be
accepted after he has filed an affidavit with the court, if the
matter is before, or has
filed an affidavit with the professional
controlling body, if the matter is not before court, stating (a) full
terms of the settlement;
(b) an estimate of the amount or other
relief that may be obtained by taken the matter to trial; (c) an
estimate of the chances
of success or failure at trial; (d) an
outline of the legal practitioner’s fees if the matter is
settled as compared to taking
the matter to trial; (e) the reason why
settlement is recommended; (f) that the matter contemplated in
paragraphs (a) to (e) were
explained to the client, and the steps
taken to ensure that the client understands the explanation; and (g)
that the legal practitioner
was informed by the client that he or she
understands and accepts the terms of the settlement.
[69]
The effect of section 4 (1) is that if a fee agreement is found to be
a contingency fee agreement
based on its form, content or substance
and there is an offer of settlement, that offer cannot legally be
accepted unless an affidavit
is filed with the court or controlling
body in which the requirements as indicated in paragraph 68 above are
found to have been
met. In terms of subsection (2) of section 4 of
the Act, the affidavit referred to in subsection (1) must be
accompanied by an
affidavit by the client, stating (a) that he or she
was notified in writing of the terms of the settlement; (b) that the
terms
of the settlement were explained to him or her and that she
understands and agrees to them; (c) and his or her attitude to the
settlement.
[70]
Therefore, an offer of settlement must be preceded by the filing of
an affidavit deposed to by
the legal practitioner in a matter where a
contingency fees agreement has been concluded. As indicated elsewhere
in this judgment,
the assertion by some of the legal practitioners
that “
no contingency fee agreement was concluded
”,
contrary to their assumptions, does not mean that a fee agreement in
question is not subject to the provisions of the Act.
[71]
The content, substance, form of the fee agreement and the surrounding
facts in each case is what
determines whether a particular fee
agreement amounts to a contingency fee agreement or not. The facts of
the present case under
discussion does not support the assertion that
no contingency fee agreement was concluded. The statement: “
there
was no fee agreed upon. The plaintiff will be debited for
professional services rendered as per the attorney and client fee
agreement once the matter is finalised in toto”
points to
the conclusion of contingency fee agreement that is illegal and
unenforceable in law for failure to comply with the imperative
in
sections 2, 3 and 4 of the Contingency Fee Act.
[72]
On 17 March 2022 and in the matter of
Mucavele v MEC for Health
(3352/2016) Mbombela Main Seat (17 March 2022)
another fee
agreement was found to be illegal and unenforceable. The matter was
referred to the Legal Practice Council for investigation.
Mr Krige
was provided with a copy of the judgment and directed to indicate
whether he was still insisting that the fee agreement
he concluded
with the client was legal. He did not heed to the directive. Perhaps
he has no answer to the enquiry. The plaintiff
in Mucavele was
represented by another firm of attorneys not involved in the present
two cases. This is the extent of the wide-spread
practice that turns
to undermine the imperative in sections 2, 3 and 4 of the Contingency
Fee Act.
Remedy
[73]
An agreement that is illegal, null and void cannot be relied upon or
become enforceable. The
fee agreements concluded in the two cases
cannot be enforceable in law as they are illegal in their form,
content and substance
coupled with the explanation given on
affidavits, constitute contingency fee agreements concluded without
complying with the provisions
of the Contingency Fee Act. In
addition, they offended against the legal profession rules of game or
conduct in that they did not
enter into a proper and acceptable fee
agreement as set out in this judgment. Therefore, the two agreements
in the two cases ought
to be set aside.
[74]
This then raises the question what kind of remedy is in the offering.
In Sibiya case
, the matter has been settled on merits only. In
the circumstances, the appropriate order or remedy would be to refer
the conduct
of Mr Krige to the professional body for investigation
and where appropriate take whatever it might find befitting to the
facts
of the case. The fee agreement having been found unlawful, the
Taxing Master is under no obligation to tax the bill of costs
presented
to him. In fact, it would be improper to do so as that will
facilitate and put into effect the illegal fee agreement between an
attorney and client.
[75]
Paragraph 15.11.4 of the division’s Practice Directive
dated 9 January 2020 as amended provides that in selected
damages
claim matters like the RAF and medical negligence matters, if a bill
of costs is submitted where a settlement agreement
has been reached
and is suggested that no contingency fee agreement has been concluded
with client in whose favour a settlement
has been reached, the party
or party’s attorney filing such a bill of costs, shall also
file an affidavit confirming that
no contingency fee agreement has
been concluded with client, failing which the taxing master shall
return the bill. The fee agreement
in
Sibiya matter
has been
found to constitute a contingency fee agreement which did not comply
with the provisions of the Act and thus illegal and
unenforceable.
[76]
As regard the matter of
Mr Chiau,
a settlement agreement was
concluded some few days before the date of hearing on 14 March 2022.
On 3 March 2022, the defendant
delivered an offer of settlement. On 7
March 2022 the plaintiff duly accepted the offer. On the same day,
and at the close of the
roll this matter was not allocated because of
the statement which appeared in paragraph 3 of the plaintiff’s
Practice Directive.
The statement reads as follows: ‘…
the
parties agree that the plaintiff did not enter into a contingency fee
agreement as contemplated in the Contingency Fee Act with
the
plaintiff’s attorney’.
It was this statement which
prompted the launch of the present enquiry on the legality or
otherwise of the fee agreement in question.
[77]
As things are now, the matter between the plaintiff and defendant has
been settled in the amount
of R1 034 470.00 being for general damages
and loss of earnings. In the settlement agreement reduced to writing
by the plaintiff’s
attorney and state attorney on 7 March 2022,
it is recorded that the plaintiff did not enter into a contingency
fee agreement as
defined. The intention is obvious. For now, it
suffices to mention that the fee agreement is unlawful and
unenforceable. The plaintiff’s
attorneys cannot through the
court benefit from unlawful fee agreement.
[78]
In dealing with the remedy, one should take queue from what is
envisaged in section 35 although
not proclaimed yet. First,
subsection (12) provides that the provisions of the section do not
preclude the use of contingency fee
agreements as provided for in the
Contingency Fees Act. Second, and I do this at the risk of
repetition, subsection (11) provides
that if any attorney or advocate
referred to in section 34(2)(b) does not comply with the provisions
of this section, the client
is not required to pay any legal costs to
that attorney or advocate until the Council has reviewed the matter
and made determination
regarding amounts to be paid. I take it before
any such a determination is made in accordance herewith, the Council
will accordingly
advise client that he or she is entitled to object
to his or her attorney benefitting from an illegal and unenforceable
agreement.
In other words, that he or she should be advised that
there is no obligation in law to pay any fee or disbursements arising
from
the illegality and unenforceability of the fee agreement in
question.
[79]
Section 35(11) of the Legal Practice Act should also be read in the
context of section 5 of the
Contingency Fee Act which allows the
professional controlling body to review any fees chargeable in terms
of a contingency fee
agreement concluded between a legal practitioner
and client and in terms of subsection (2) of section 5 of the Act,
the professional
body or a designated body or person may review any
such agreement and set aside any provision thereof.
[80]
However, I do not find it necessary to refer the review or setting
aside of the fee agreement
in the present case to the professional
body as this court has all the facts before it to deal with the
review and setting aside
of the fee agreement concluded. However, the
agreement between the defendant and plaintiff remains intact and the
payment agreed
on should be paid direct to the plaintiff. The Legal
Practice Council insofar as practically possible to duly advise the
plaintiff
in the recovery of the capital amount including costs of
litigation that the plaintiff might be entitled to. But the Road
Accident
Fund should take the lead in ensuring that the plaintiff is
directly paid what is due to him or her in terms of the agreement so
reached between the plaintiff and the RAF.
Payment
upon offer of settlement where contingency fee agreement applies.
[80]
Earlier in paragraph [24] of this judgment I dealt with the practice
adopted by Mr Eastes in
dealing with the Road Accident Fund. As I
said, that is not a bad practice. The difficulty however is when is
stated that no contingency
fee agreement was concluded when in actual
fact the form, content and substance of the fee agreement in question
amounts to a contingency
fee agreement.
[81]
The assertion of “no contingency agreement has been concluded”,
has an abuse inherent
in it. The RAF officials or attorneys for the
RAF with whom settlement discussions are undertaken, may not have the
legal understanding
of what constitute a contingency fee agreement.
That however, should not be an excuse to let contingency fee
agreements slip through
their fingers. If this was to happen, that
would defeat the essence of the Act which is aimed at protecting not
only the profession,
but also the vulnerable through an oversight
authority of the courts.
[82]
If the RAF in the present case came to the conclusion that the fee
agreement that was presented
to it during the settlement
negotiations, was a contingency fee agreement, it would, in my view,
have been entitled to refuse to
make an offer of settlement or
payment thereof unless review process as envisaged in section 5 of
the Act or as envisaged in section
35 of the Legal Practice Act has
taken place. In any case, referral for the review of fees chargeable
or agreement thereof by the
professional body, is a long standing
standards generally recognised by the profession. This will also be
as contemplated in paragraph
3.3.4 of the code of conduct which
provides that ….
[83]
The point I am making is that a defendant who settles and pays
on the basis that a contingency fee agreement is not applicable,
should be wary of accepting such an assertion by the plaintiff’s
attorney and his or her client. Acceptance of such assertion
without
due consideration and interrogation might result in a wide-spread
abuse that tends to undermine the Act. The RAF as a defendant
including other defendants in general damages claims like in medical
negligence cases where it is expected that many indigent and
uneducated litigants would be involved, should be proactive to ensure
that it is not used as facilitators of a potential abuse.
The present
case is an example of such an abuse. What was said not to be
contingency fee agreements, on the facts of the two cases,
have
turned to be such agreements which did not comply with the provisions
of the Act. This was despite the fact that in
Chiau matter
and
according to Mr Eastes, the RAF was asked to confirm if it was happy
that the fee agreement in question was not a contingency
fee
agreement.
[84]
Consequently, an order is hereby made as follows:
In Chiau Case
84.1
The fee agreement concluded between Chiau and his attorneys
is hereby
reviewed and set aside for the reasons set out in this judgment.
84.2
The defendant to pay the costs of litigation to the defendant
on a
party and party scale as agreed between the parties.
84.3
An amount of R1 034 470.00 awarded to the plaintiff
by the
defendant to shall be paid directly to the plaintiff within 90 days
from date of this order and the Road Accident Fund to
take reasonable
steps to ensure that the capital amount is directly paid to the
plaintiff.
84.4
The Legal Practice Council to consider the appropriateness
or
otherwise of the conduct of the plaintiff’s attorneys of
record.
84.5 The plaintiff’s
attorneys of record to bring this judgment to the attention of the
plaintiff by explaining the contents
thereof to the plaintiff and to
provide an affidavit by not later than Friday 10 June 2022 confirming
that the order in this paragraph
has been complied with.
In Sibiya’s case
84.6
The fee agreement concluded between the plaintiff and his
attorneys
of record is hereby reviewed and set aside due to its illegality as
set out in this judgment and the plaintiff is not
obliged to pay any
fee or costs to his or her attorneys of record.
84.7
Settlement of the matter on merits between the plaintiff and
defendant is hereby noted and taxation thereof to be stayed over
until finalisation of the case in its entirety.
84.8
The Legal Practice Council to consider whether the conduct
of
attorney Krige in concluding the fee agreement as he did which has
now been found to be illegal, constituted unprofessional
conduct and
if so to take such steps as it might deem appropriate.
84.9
The Legal Practice Council is hereby directed to advise the
plaintiff
to consider instructing another attorney to proceed with her matter
to its finality and the plaintiff should also be
advised that she is
not obliged to pay anything to the attorneys of record due to the
illegality of the fee agreement.
8.10 The
plaintiff’s attorneys are hereby directed to bring this
judgment to the attention of the plaintiff and explain
the contents
therefore to the plaintiff and confirm in an affidavit to be filed by
not later than Friday 10 June 2022 that the
order in this paragraph
has been complied with.
LEGODI
JP
JUDGMENT
DATE: 2 June 2022
In
Chiau Matter:
FOR
THE PLAINTIFF
: HOUGH & BREMNER
H & B LAW
CHAMBERS, 30 VAN RENSBURG STREET
MBOMBELA
TEL: 013 752
3177
REF:
C20/2015(C1323) Mnr Eastes /mp
FOR
THE DEFENDANT
: STATE ATTORNEY NELSPRUIT
3
RD
FLOOR, ADMIN BLOCK, WEST WING
R104 SAMORA
MACHEL DRIVE
NELSPRUIT
TEL: 013 101
3722
REF: CHIAU AE
/ 12/21/Z03 MP/ SIBIYA SS
Email.
shaunsi@raf.co.za
In
Sibiya Matter:
FOR
THE PLAINTIFF : DU
TOIT – SMUTS ATTORNEYS
LAW CHAMBERS
VAN NIEKERK
STREET
MBOMBELA
C/O KS LEGAL
COSTS CONSULTING
TEL: 013 745
3200
REF:
C20/2015(C1323) Mnr Eastes /mp
Email:
dschutte@dtsa.co.za
[1]
2016
JDR 2007 (ECG 3364/2016, 8 December 2016 at para [13]. See
also Mathimba v Nomxuba
2019 (1) SA 550
(ECG) at para [101]
[2]
Nowetu
Mkuyana v RAF CASE NO4000/2017 at para 14, ZAECGHC/2020/73
[3]
2013 (2) SA 583 (GNP)
[4]
Idem
at (587-H-I) ----, see also Mkuyana
supra
at
para 15
[5]
Mkuyana
Supra
at
para 16
[6]
Masango
v Road Accident Fund 2016(6) SA 508 (GJ) at para [12]
[7]
See
Mkuyana
supra
at
para 17
[8]
Cambridge
Plan AG v Cambridge Diet Pty Ltd
1990 (2) SA 574
600 A-G and Muller
v The Master and Others
1992 (4) SA 277
T at 284 B-C; see also
Mkuyana
supra
at
para 22
[9]
Ronald
Bobroff & Partners Inc v De La Guerre
2014 (3) SA 134
(CC);
Masango v RAF 2016 (6) (GT) at para [1]; Fluxmans Inc v Levenson
217
(2) SA 520
(SCA); Mostert and Others v Nash & Another
2018 (5)
SA 409
(SCA) at para [54]; Mfengwana v RAF
2017 (5) SA 445
(ECG) at
para [12] and Mathimba and others v Nontwaba & Others
2019 (1)
SA 591
C (ECG) at para [118.1]
[10]
Tjatji
v RAF
2013 (2) SA 623
(GSJ) at para [21], see also para [22] in
Mkuyana.
[11]
2018
950 SA 409
(SCA) at para [54]
[12]
See
Mkuyana at para 23
[13]
See
para 12 in Mfengwana
[14]
See
Masango (…) at para 54
[15]
Hawkins
v Bels & Another
1959 (1) SA 702
(WLD) at 705, see also Cilliers
Loots and Nel, Herbstein and Van Winsen Civil Practice of the High
Courts of South Africa vol
2 5
th
ed
(2009) at page 1000g
[16]
Blakes
Maphanga Inc v OutSurance Co Ltd
2010 (4) SA 232
(SCA) at para [16]
[17]
Ben
McDonald Inc & Another v Rudolph and Another
1997 (4) SA 252
(T)
at 256 – C - D
[18]
Melamed
& Hurwitz Inc v Goldberg (686/2007)
[2009] ZASCA 15
(19 March
2009)
[19]
See
para 29 in Mkuyana
supra
[20]
See
para 31 in Mkuyana
supra
[21]
See
Mkuyana at para 32
[22]
See
further Mkuyana at para 35
[23]
See
Mkuyana at para 38