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[2013] ZAGPPHC 33
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De La Guerre v Ronald Bobroff & Partners Inc and Others (22645/2011) [2013] ZAGPPHC 33 (13 February 2013)
REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA
(NORTH GAUTENG HIGH COURT)
Case
Number: 22645/2011
DATE:13/02/2013
In
the matter between:
DE
LA GUERRE, JUANNE
ELIZE
.........................................................
APPLICANT
and
RONALD
BOBROFF & PARTNERS
INC.
...........................................
1st
RESPONDENT
LAW
SOCIETY OF THE NORTHERN PROVINCES
..........................
2nd
RESPONDENT
ROAD
ACCIDENT
FUND
........................................................................
3RD
RESPONDENT
JUDGMENT
Fabricius
J,
1.
In
this application the Applicant sought the following relief:
1.
“That the '‘Percentage Contingency Fee Agreement (“Common
Law Contingency Fee Agreement”) entered into
between the
Applicant and the First 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 27 November
2005, a copy of which
is attached to the Founding Affidavit marked “J2”, be
declared invalid, void and of no force
or effect;
2.
That the First Respondent deliver to the Applicant, within a time to
be fixed by the above Honourable Court, a fully itemized
and detailed
account in the form of a “Bill of Costs”, supported where
necessary by vouchers, reflecting the reasonable
fees and
disbursements incurred by the First Respondent in case number
2007/013898 in the South Gauteng High Court between the
Applicant and
the Third Respondent and that the Applicant is entitled to demand
taxation thereof;
3.
That the First Respondent pay to the Applicant the difference between
the sum of R1 063 707,69 and the total of the taxed bill
of costs
within 7 days of the taxation.
4.
That the First Respondent pay the costs of this Application on the
scale as between attorney and own-client which, costs are
to include
the costs consequent upon the employment of two Counsel.”
2.
The
notice motion was dated 6 October 2011
It
is convenient to briefly set out the facts that the Applicant relied
on:
The
motor vehicle collision which caused Applicant substantial injuries
occurred on 27 November 2005. She thereafter consulted the
First
Respondent and was advised that it would accept instructions from her
on a contingency basis that she pay a fixed 30% plus
VAT of the
damages recovered, for it instituting, prosecuting and finalising her
case against the Third Respondent. She was then
handed a written
agreement headed "Percentage contingency fee agreement”,
and she filled in her name and signed it.
She was thereafter advised
by her present attorney that this agreement was illegal, invalid and
unenforceable as it did not comply
with the Contingency Fees Act 66
of 1997 ("the Act”). He also stated that the provisions of
section 3(3) of the Act
had not been complied with, inasmuch as none
of those requirements had been explained to her at all, and in any
event she was not
even advised of the existence of the Act or any of
its provisions, let alone any detail contained therein.
First
Respondent did institute the relevant claim, and on 30 April 2009
judgment was granted in her favour in the total amount of
R
2,538,811, 02. Thereafter she received payment from First Respondent
as follows:
2.1
On 22nd June 2009 the sum of R1360000.00;
2.2
On 13 October 2009 the sum of R166000,00;
2.3
On 15 February 2011 the sum of R19126.00 ; and
2.4
On 22 March 2011the sum of R184325, 11.
3.
On
the same day she was also given a statement of account from which it
appeared that:
3.1
the total moneys paid by the RAF in respect of capital and costs was
R2793158, 80;
3.2
the total amount received by her was R1729451.11;
3.3
the total fees and disbursements deducted by First Respondent
amounted to R1063707, 69 of which:
3.3.1
the sum of R868 273, 37 was in respect of the firms fees including
VAT;
3.3.2
the sum of R195 434, 32 was in respect of so called disbursements.
4.
As
I have said, she was advised later that the agreement did not comply
with the requirements of the Act, and further that she had
probably
been overcharged. On consideration of the mentioned account it
appeared that the sum of money received by her expressed
as a
percentage of the total moneys received (capital and costs) was 61.9%
of the total. The sum of money charged by First Respondent
expressed
as a percentage of the total moneys received was 31.08%, and the
total disbursements of the case expressed as a percentage
of total
moneys received was 7.02%. If the Third Respondent’s
contribution towards costs was excluded, then having regard
to the
amount paid and actually received by her, the actual amount received
expressed as a percentage of the total capital was
68,12% of the
total, and the sum charged by First Respondent in respect of fees and
disbursements and expressed as a percentage
of the total capital
received was 31.88%. In summary therefore it appeared that having
regard to all of the mentioned figures,
the First Respondent in fact
charged her 30% of the capita! and costs received together with 14%
VAT thereon. She stated that she
had been advised that in terms of
the Act the maximum contingency fee to which an attorney was entitled
to was 25% of the capital,
or double their normal fee, whichever was
the lesser. She further stated that in order to arrive at a
reasonable attorney and client
fee, and if she were to multiply the
party and party fees by 3, it would appear that a reasonable attorney
and client charge would
be R58913.46 (that was the amount recovered
from the RAF in respect of costs) multiplied by 3 would be R176740,
38, Even if this
were doubled, as provided for in the Act, this would
mean that First Respondent was notionally only entitled to charge her
R353480.76,
whereas in fact she had been charged R868273.37 equalling
R514772.61 more than the notional fee. She accordingly submitted that
having regard to the legality of the contingency agreement she was
entitled to have this agreement declared null and void, and
that
First Respondent be ordered to submit a formal attorney and client
bill of costs for taxation. Whatever difference there may
be between
what she was charged in terms of the illegal agreement, and what
First Respondent was entitled to charge her, should
be refunded to
her together with interest.
5.
In
respect of costs, she said the following in the founding affidavit:
First Respondent claims specialist expertise in major personal
injury
claims. She was never informed by the firm that the fee agreement did
not comply with the provisions of the law. She was
also not advised
that there were alternative lawful agreements, such as an agreement
in terms of the Act, or a time based charge
for work actually done.
She felt compelled to have launched these proceedings because First
Respondent had failed to act in her
best interest, but chose rather
to act in its own interest, in circumstances where it knew or
alternatively ought to have known
better, in that its directors were
senior attorneys of many decades standing, and because the senior
partner was a past president
of the Law Society of the Northern
Province, and was currently a member of its council. Accordingly we
were asked to show our displeasure
at the conduct of First Respondent
due to its fragrant violation of the Act, and its failure to properly
apply the law, despite
its professed expertise, by making a punitive
cost order against it on the scale as between attorney and own
client.
6.
To
put the further events into proper context it is necessary to refer
to a letter which the Second Respondent wrote to Applicant’s
attorney on 27 September 2011, and I quote part of this letter:
“council noted your comments and fully agrees with the view
expressed by you that attorneys, who enter into invalid or illegal
attorney and client agreements, should be sanctioned by the
law
society and also attorneys who charge excessive fixed percentage fees
in terms of attorney and client fee agreements.
I
also wish to confirm that council is prepared to participate in the
referral of a test case, on the basis as was suggested by
the
Honourable Deputy Judge President, as it would be in the public
interest and also the interest of the attorneys profession
to obtain
certainty and clarification on the question of whether fixed
percentage fee agreements entered into, will constitute
a valid and
regular fee agreement.” This letter was annexed to the founding
affidavit.
7.
The
Second Respondent filed an affidavit and after setting out so-called
problematic situations arising from the Act concluded as
follows: In
the light of the impracticality arising from the
Contingency Fees Act
and
the need for a workable alternative, common law contingency fee
agreements may validly be concluded within the stated recognised
perimeters.” It referred to a ruling that it had made on 21
June 2002 which permitted members to enter into certain common
law
contingency fee agreements as they call it, if such agreements met
the following criteria:
7.1
it should relate to a genuine case of assisting an impecunious client
to assert his or her rights;
7.2
the attorney’s remuneration had to be fair;
7.3
the agreement should not amount to gambling, speculation or
trafficking in litigation.
This
was the only topic of interest to the Second Respondent in the
present context, and it did not express any view to other statements
made by the Applicant herein against the First Respondent.
8.
First
Respondent did not file an answering affidavit, but on 11 November
2011 filed an application to stay proceedings in the following
terms:
(that) "these proceedings are stayed pending the final
determination of a test case to be convened to a Full Bench
of this
division, by arrangement with the Deputy Judge President and the Law
Society of the Northern Provinces/’ In the meantime
there had
been certain correspondence between the Law Society and the
Honourable Deputy Judge President regarding so called "test
case", but it is not necessary to deal in any great detail
therewith. What transpired was that on 28 May 2012 the South African
Association of Personal Injury Lawyers launched an application
against the Minister of Justice and Constitutional Development being
the Respondent, in terms of which it sought an order declaring
amongst others that nothing in the
Contingency Fees Act restricts
the
rights of a legal practitioner to conclude an agreement with a client
that makes payment of legal fees depend, in whole or
in part, on the
outcome of the client’s proposed or pending litigation, and
that subject to the rules governing their ethical
conduct, legal
practitioners have the same right to conclude contingency fee
agreements as any other person. The alternative claim
was that an
order was sought declaring that the Act, by restricting the rights of
practitioners and the client to conclude contingency
fee agreements,
was an infringement of section 1 of the Constitution of South Africa
and/ or section 10 (the right to human dignity),
14 (the right to
privacy), 34 (the right to a fair public hearing), and parts of
section 35 of the Constitution. That application
was opposed by the
Minister of Justice and Constitutional Development, and ultimately a
Full Bench was constituted by the Honourable
Judge President of this
Court, and both the application of De La Guerre and the South African
Association of Personal Injury Lawyers
were heard on 29 November 2012
by the same panel of judges. A judgment in the South African
Association of Personal Injury Lawyers
application will be delivered
in due course, and for present purposes I will not comment any
further thereon.
9.
I
accordingly return to the De La Guerre application. As I have said,
the First Respondent filed no answering affidavit and preferred
the
route of applying for a stay of the proceedings. Mr. Brassey SC very
properly conceded, when I put the point to him, that it
was the
practice in the courts that a litigant could not follow this route,
unless it is in very exceptional circumstances, without
pleading over
i.e. without filing an answering affidavit. He admitted that the
decision not to file such an affidavit had been
a considered one, and
he was also aware of the relevant authorities in this context.
Because the two matters were heard on the
same day there was
obviously no point in pursuing the application for a stay, but he did
ask for leave to file an answering affidavit.
For
present purposes it is necessary to refer briefly to the relevant
authorities in this context. In Bader and Another v Weston
and
Another
1967 (1) SA 134
(C) at par 136, Corbett J (as he then was)
said the following: “it seems to me that, generally speaking,
our application
procedure requires a Respondent, who wishes to oppose
an application on the merits, to place his case on the merits before
the
court by way of affidavit within the normal time limits and in
accordance with the normal procedures prescribed by the court. Having
done so, it is also open to him to take the preliminary point that
(in this case) the petition fails to disclose a cause of action...on
the other hand, I do not think that normally it is proper for such a
Respondent not to file opposing affidavits but merely to take
the
preliminary point”
In
Randfontein Extension Limited v South Randfontein Mines Limited and
Others
1936 WLD 1
at 5, Greenburg J emphasised that one could not ask
a Respondent to assume that his preliminary point would be
successful; he had
to be prepared for the possibility of his point
failing. A similar approach was adopted by Coetzee J in Lipschitz and
Schwartz
NNO v Markowitz
1976 (3) SA 772
(W) at 776. As a result of
these dicta the court in Standard Bank of SA Limited v RTS Techniques
and Planning (Pty) Ltd 1992 (1)
SA
432 (T) at 442, held that it was established practice that a
Respondent should file affidavits on the merits, irrespective of
whether a preliminary point was to be argued. It should not rely upon
his preliminary point only. As I have said, this rule is
not
inflexible, and the court may in appropriate circumstances allow of
the late filing of affidavits. I am of the view that no
such
appropriate circumstances or exceptional circumstances exists herein.
In Applicant’s answering affidavit to First Respondent’s
application for a stay of the proceedings, Applicant’s attorney
said that the present matter was in fact the intended “test
case”. Apart from that, the Applicant was entitled to pursue
her case to conclusion. Stay of proceedings is normally only
granted
in exceptional cases and the power is exercised sparingly.
See:
Cilliers A.C etal. 2009. The Civil Practice of the High Courts of
South Africa (1), 5th ed. at 306, Herbstefn and Van Winsen.
Apart
from that he referred to certain correspondence, and suggested that
the First Respondent herein was attempting to delay the
outcome of
this case as long as possible, and was moreover on a "forum-shopping”
exercise. The fact of the matter however
is that First Respondent,
knowing the requirements of practice that I have referred to, and the
relevant authorities quite well,
intentionally chose not to file an
answering affidavit. It cannot do so now.
10.
On
behalf of the Applicant it was submitted that it was clear from the
relevant contingency fee agreement that it did not comply
with the
Act and that - accordingly it was invalid. The Second Respondent was
of the view that a so called “common law fee
agreement”
could lawfully co-exist with an agreement in terms of the Act, Third
Respondent supported the Applicant’s
view that a contingency
fees agreement between a lawyer and his client was unlawful at common
law.
11.
The
Act was introduced after a report in November 1996 by the South
African Law Commission on Speculative and Contingency Fees,
mainly to
provide access to justice for those persons who most likely were
unable to prosecute their claims and pay for their own
legal fees. It
allowed such claims under specified circumstances and subject to
certain conditions.
The
Supreme Court of Appeal in Pricewaterhouse Coopers Inc v National
Potato Co-op Limited
2004 (6) SA 66
(SCA) at par 41, said the
following per Southwood AJA; "The Contingency Fees Act 66 of
1997 (which came Into operation on
23 April 1999) provides for two
forms of contingency fee agreements which attorneys and advocates may
enter into with their clients,
The first, is a “no win, no
fees” agreement (s2(1).(a)), and the second is an agreement in
terms of which the legal
practitioner is entitled to fees higher
than
the normal fee if the client is successful (s2(1)(b)). The second
type of agreement is subject to limitations. Higher fees
may not
exceed the normal fees of the legal practitioner by more than 100%
and in the case of a claim sounding in money this fee
may not exceed
25% of the total amount awarded or any amount obtained by the client
in consequence of the proceedings, excluding
costs (s2(2)). The Act
has detailed requirements for the agreement (s3), the procedure to be
followed when a matter is settled
(s4) and gives the client a right
of review (s5). The professional controlling bodies may make rules
which they deem necessary
to give effect to the Act (s6), and the
Minister of Justice may make regulations for implementing and
monitoring the provisions
of the Act (s7). The clear intention is
that contingency fees be carefully controlled. The Act was enacted to
legitimise contingency
fee agreements between legal practitioners and
their clients which would otherwise be prohibited by the common law.
Any contingency
fee agreement between such parties which is not
covered by the Act is therefore illegal.”
12.
During
argument it was contended that the latter dictum was obiter. A "real”
obiter is a judicial observation made in
passing: one not necessary
for the decision of the case. It is a stated thought that does not
advance the reasoning by which the
outcome is reached.
See:
De Kock and Others v Van Rooyen
2005 (1) SA 1
(SCA) at par 17.
I
do not agree that the said dictum is obiter, as it is clear from the
judgment as a whole that the Supreme Court of Appeal was
dealing with
a mosaic (if I can call it that) of contingency fee agreement
validity in general, be it between a third party and
a litigant, or
be it between a litigant and a legal practitioner.
Its
so-called obiter dictum certainly did advance the reasoning by which
it reached the particular outcome in that decision. In
any event,
even if I am wrong in this view, it is of no consequence. The
,Supreme Court of Appeal itself has said that it will
not lightly
depart from a previous decision made by it, even if relevant
dicta
were
obiter
.
See:
Steenkamp v SABC
2002 (1) SA 625
(SCA) at par 12.
I
may also just add that I am of the view that if five Judges of the
Supreme Court of Appeal say that an act is illegal under certain
circumstances, the High Court will not easily, if at all, come to a
different view.
13.
It
is clear in my view, that contingency fee agreements between a
litigant and his attorney were unlawful at common law. At common
law
a legal practitioner was only entitled to a reasonable fee for work
actually done. See: Christie, R.H. 2011. Law of Contracts
in South
Africa, 4th ed at 408- 409, Lexis Nexis. It is also clear that the
First Respondent and the Second Respondent were aware
of this view as
long ago as November 1992, when former Chief Justice Corbett wrote a
letter to the Natal Law Society regarding
this issue, which was also
considered with approval by the South African Law Commission in its
report at par 3.9. For present purposes
I deem it necessary to quote
the relevant paragraph dealing with the common law authorities:”
I am prima facie of the view
that any [contingency fee agreement]
between an attorney and his client... would be unlawful at common
law. I list some common
law authorities which I have consulted in
this regard and also some case law (I do not claim that my somewhat
hurried research
has been at all exhaustive): Voet 2.14.18; Kersteman
Woorden-Boek; sv Conditie van Triumphe; Grotius 3.1.41 and Schoreas
Note CCIXXV;
van dec Keessel Praeiectiones, 3,1.41; van Leeuwen RD
Law 5.4.2; Incorporated Law Society v Reid (1908) 25 (SC) 612; Goolam
Mohamed
v Janion (1908) 29 (NLR) 304; Hollard v Zietsman (1885) 6
(NLR) 93, a judgment of Connor CJ containing a full review of the
common
law authorities; Campbell v Welverdiend Diamonds Limited 1930
(TPD) 287, where a number of the cases are [reviewed]. See also
Christie,
The Law of Contract 2nd edition, 423. It is true that the
decision in Patz v Salzburg 1907 (TS) 526 appears to run counter to
the
general trend, but this did not concern an arrangement between
attorney and client”.
It
is abundantly clear from all authorities that the common law
prohibited contingency fee agreements between lawyers and their
clients. Certain authorities some of which are unreported, are clear
on this point as well, being of the view, as was the Supreme
Court of
Appeal in Pricewaterhouse Coopers Inc supra, that any contingency fee
agreement which does not comply with the Act, is
invalid. I mention a
number of these decisions:
13.1
in Teemed (Pty) Ltd v Hunter and Another
[2008] ZAGPHC 41
;
2008 (6) SA 210
(W) it was
held that a so called “merit bonus” or a "performance
bonus” agreement between an attorney and
his client could only
be valid if it complied with the Act;
13.2
in Thulo v Road Accident Fund
2011 (5) SA 446
(GSJ) Morrison AJ held
that there was no such “thing” as a common law
contingency fee agreement which could in any
possible
manner
somehow co-exist with an agreement required by the Act.
13.3
I agree with that view, as did Boruchowitz J in Tjatji v Road
Accident Fund (case no: 2010/22475 of 19 October' 2012) at par
12,
and Mojapelo DJP in NK Bridget v Road Accident Fund (Case no;
2010/24932 of 22 August 2012) at par 32.
14.
it
is my view that the above mentioned decisions were correct in finding
the following:
14.1
at common law a contingency agreement between an attorney and his
client was unlawful;
14.2
the
Contingency Fees Act is
exhaustive on its stated object, and any
contingency fee agreement not in compliance with it is invalid.
15.
There
is no doubt that the agreement entered into between the Applicant and
the First Respondent does not comply with the Act for
the reasons set
out in the founding affidavit. The agreement is accordingly invalid.
The Third Respondent, in its answering affidavit,
was of the same
view. In my view therefore the Applicant is entitled to the relief
sought.
16.
As
far as an order for costs is concerned, I have mentioned why the
Applicant is of the view that she is entitled to an attorney
and own
client costs order with reference to the allegations made in the
founding affidavit. Her contentions in this context were
not put in
issue by the First Respondent due to its intentional decision not to
file an answering affidavit. It is blatantly obvious
that the
relevant agreement does not comply with the Act. There is no
explanation before court why payments of the amounts due
to her were
made over a period of 2 years. First Respondent must have been aware
as an experienced practitioner that the overwhelming
view of
distinguished authorities, including the Supreme Court of Appeal, was
that any agreement not complying with the Act would
be invalid, and
could, in the proper context, amount to unprofessional conduct as
well This becomes clear from the unreported judgment
of Southwood J
in Mnisi v RAF[2010] JOL 258 at 257 (GNP) of 18 Mei 2010. For the
stated reasons, I am of the view that applicant
is entitled to a
punitive cost order which would in turn express the strong
disapproval of this court with the First Respondent’s
conduct
in these proceedings. There is also no reason at all why the
Applicant should be out of pocket in seeking the relief that
she did.
17.
Accordingly
prayers 1, 2 and 3 of the notice of motion are granted. In the
context of prayer 2 the relevant “bill of costs”
is to be
delivered to the Applicant within 30 days from date of this judgment.
The First Respondent is ordered to pay the costs
of the application
on the scale as between attorney and own-client which costs are to
include the costs consequent upon the employment
of two counsel.
ordered
to pay the costs of the application on the scale as between attorney
and own-client which costs are to include the costs
consequent upon
the employment of two counsel.
JUDGE
FABRICIUS
JUDGE
OF THE NORTH & SOUTH GAUTENG HIGH COURT
I
Agree :
JUDGE MLAMBO
JUDE
PRESIDENT OFTHE NORTH & SOUTH GAUTENG HIGH COURT
I
Agree :
JUDGE
KATHREE - SETILOANE
JUDGE
OF THE NORTH & SOUTH GAUTENG HIGH COURT
Date
of hearing:
Date
of Judgment:
Applicants
Counsel:
Instructed
by:
First
Respondent’s Counsel: Instructed by:
Second
Respondent’s Counsel: Instructed by:
Third
Respondent’s Counsel; Instructed by:
29
November 2012 13 February 2012
Adv.
Ancer SC Adv, Berkowitz
Norman
Berger & Partners Inc. Johannesburg
Adv,
Brassey SC Adv. Hopkins RCntgen & ROntgen Inc. Pretoria
Adv.
Labuschagne SC Rooth & Wessels Inc.
Pretoria
Adv.
Marcus SC Adv. Budlender Adv, Mayosi Lindsay Keller Attorneys
Johannesburg