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[2013] ZAGPPHC 34
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South African Association of Personal Injury Lawyers v Minister of Justice and Constitutional Development (32894/12) [2013] ZAGPPHC 34; 2013 (2) SA 583 (GNP); [2013] 2 All SA 96 (GNP) (13 February 2013)

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REPORTABLE
NORTH GAUTENG HIGH COURT, PRETORIA
CASE NO: 32894/12
DATE:13/02/2013
In
the matter between:
THE SOUTH AFRICAN ASSOCIATION OF PERSONAL
INJURY
LAWYERS
........................................................................................
Applicant
and
THE MINISTER OF JUSTICE AND CONSTITUTIONAL
DEVELOPMENT
…........................................................................................
Respondent
and
THE ROAD ACCIDENT
FUND
....................................................................
Intervening
Party
J U D G M E N T
KATHREE-SETILOANE, J
:
Introduction
[1] This matter concerns the legality and enforceability of
contingency fee agreements which are concluded without complying with

the Contingency Fees Act 66 of 1997 (“the Act”) and the
constitutionality of the Act itself.
[2] A contingency fee agreement is an agreement between a legal
practitioner and his or her client where the legal practitioner

agrees to charge no fee if the client’s court case is
unsuccessful. Prior to the coming into operation of the Act, on 23

April 1999, which provides for contingency fee agreements between
legal practitioners and their clients, contingency fee agreements

between legal practitioners and their clients were prohibited under
the common law.
[3] The meaning, effect and constitutionality of the Act have
generated much controversy and debate in the legal profession since

its enactment. In an attempt to put this controversy to rest, the
various law societies across the country had considered the

contending positions, sought legal advice and two branches –
the Law Society of the Northern Provinces
1
and of the Free State made rulings permitting its members to conclude
contingency fee agreements outside the prescripts of the
Act,
provided that certain criteria were met.
2
Until recently legal practitioners, following the rulings of the Law
Society of the Northern Provinces and the Free State, have
been
concluding such agreements without compunction. A spate of recent
court decisions on the subject of the legality of these
contingency
agreements has, however, generated uncertainty as to whether the
“so-called” common law contingency fee
agreement can
co-exist with the Act. The South African Association of Person Injury
Lawyers (“SAAPIL”), a voluntary
association representing
personal injury lawyers who frequently litigate on contingency has,
therefore, launched this application
in an effort to obtain certainty
on the question whether the Act exhaustively regulates the power of
legal practitioners to conclude
agreements with their clients for
recompense by way of contingency fees.
[4] SAAPIL’s case is three-fold:
(a) First, it contends that the Act does not override the common
law. Its primary argument is that the Legislature could never
have
intended the Act to be exhaustive and that the common law right of
practitioners to conclude contingency fee agreements is
untrammelled.
It therefore contends that legal practitioners can conclude
enforceable contingency fee agreements with their clients
without
complying with the requirements of the Act, provided they observe
their ethical duties.
(b) Second, and in the alternative, SAAPIL contends that in the event
that the Court concludes that the Act is exhaustive, then
the entire
Act is unconstitutional on the grounds that it discriminates against
lawyers and their clients in breach of section
9 of the Constitution.
(c) Third, and in the further alternative, SAAPIL contends that
sections 2 and 4 of the Act are unconstitutional because they breach

various rights contained in the Bill of Rights.
[5] SAAPIL’s application is opposed by the respondent, the
Minister of Justice and Constitutional Development (“the

Minister”), who is charged with the function of administering
the Act. The Road Accident Fund (“the Fund”) also
opposes
the application. The Fund was granted leave to intervene in these
proceedings at the hearing of the matter as it has a
clear and
substantial interest in the outcome of this application. If SAAPIL’s
contentions are upheld, then a significant
portion of the funds
earmarked for road accident victims would be claimed by their legal
representatives instead − even beyond
the very generous
compensation already permitted by the Act. The primary concern of the
Legislature in enacting the Road Accident
Fund Act 56 of 1996 (“the
RAF Act”) has been
“to give the greatest possible
protection … to persons who have suffered loss through a
negligent or unlawful act on
the part of the driver or owner of a
motor vehicle”.
3
The object of the RAF Act is the payment of compensation for loss or
damage wrongfully caused by the driving of motor vehicles.
4
The Fund accordingly has a clear interest in ensuring that road
accident victims receive payment of fair and reasonable compensation

as contemplated by the RAF Act.
Status of Contingency Fee Agreements under the Common Law
[6] SAAPIL’s primary contention is that the Act does not
override the common law as developed under the Constitution or,
at
the very least, should now be construed as not doing so. It
accordingly seeks a declaratory order to the effect that legal
practitioners are under no obligation to comply with the Act, but can
also invoke their common law right to conclude contingency
fee
agreements.
[7] Our courts have under the
common law, consistently recognised that contingency fee agreements
between legal representatives
and clients were contrary to public
policy, unenforceable and unlawful
5
.
Thus in
De La Guerre v
Ronald Bobroff and Partners Inc and Others
6
,
which was heard by this Court on the same day as the current matter,
this Court observed:
“
[C]ontingency
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,
Law of Contract, 4
th
edition at 408-409
.
It is also clear that the First Respondent and the Second Respondent
were aware of this view as long ago as November 1992, when
the Former
Chief Justice Corbett
wrote
a letter to the Natal Law Society,
7
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 have been at all exhaustive):
Voet 2.14.18; Kersteman
Woorden-Boek; sv Conditie van Triumphe; Grotius 3.1.41 and Schorer’s
note CCLXXV; Van der Keessel,
Praelectiones, 3.1.41; Van Leeuwen R D
Law 5.4.2; Incorporated Law Society v Reid
(1908) 25 SC 612
; Goolam
Mahomed 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 Ltd
1930 TPD 287
,
where a number of the cases are [reviewed].(See also Christie, The
Law of Contract 2
nd
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.””
[8] Accordingly, in
De
la Guerre
this Court
found that:
“
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
Price
Waterhouse Coopers Inc supra
,
that any contingency fee agreement which does not comply with the
Act, is invalid.”
[9] In surveying the common law,
it is important to distinguish between contingency fee agreements
between lawyers and their clients
on the one hand, and other species
of
pacta de quota litis
such as champerty
agreements between litigants and third parties, on the other. There
are some decisions which suggest that not
all of the latter class of
agreements are contrary to public policy.
8
Whatever the correctness of these decisions, however, they relate
only to champertous agreements between litigants and third parties
–
not to contingency fee agreements between legal practitioners and
their clients − which have always been regarded
as against
public policy and thus prohibited under the common law.
[10] There appears, however, to
be only one case suggesting that a contingency fee agreement between
a lawyer and his client might
not be contrary to public policy. This
is the
Headleigh
Private Hospital
decision
9
of Cameron J in the Witwatersrand Local Division of the High Court
(as it then was).
Headleigh
was out of step with the rest of our jurisprudence on the common law
status of contingency fee agreements between legal practitioners
and
their clients. Three years later Cameron JA (as he then was)
seemingly acknowledged that
Headleigh
was wrongly decided when he concurred in the
Price
Waterhouse
decision of
the Supreme Court of Appeal, which held that the Act was “
enacted
to legitimise contingency fee agreements between legal practitioners
and their clients which would otherwise be prohibited
by the common
law
”.
10
[11] Since
Headleigh
was overruled by
Price
Waterhouse
there is no
common law basis for the contention that a contingency fee agreement
between a lawyer and a client is permissible.
SAAPIL, however, argues
that the uncompromising approach adopted in
Price
Waterhouse
holding
contingency fee agreements between attorney and client to be invalid
at common law, does not reflect current policy which
has evolved in
respect of such agreements in line with the constitutional objective
of access to justice. SAAPIL contends that
the exception recognised
at common law in respect of champertous agreements between a litigant
and a third party applies in respect
of contingency fee arrangements
between attorney and client as well, and that the Act is not the only
development in public policy,
but that the public policy
consideration of increased access to justice underpins a further
development in the common law.
[12] SAAPIL submits, in this regard, that public policy now
recognises instances at common law where a contingency arrangement

between an attorney and client is not invalid, and that a contingency
fee arrangement maybe entered into between attorneys and
clients as
the common law would permit a contingency fee arrangement as a matter
of judicial discretion provided that: (a) it relates
to a case of
assisting an impecunious litigant (not meaning totally indigent) to
assert his or her rights; (b) that the attorney’s
remuneration
is fair; and (c) the agreement does not amount to gambling,
speculation or trafficking in litigation.
[13] SAAPIL finds support for these
contentions in the following authorities:
Headleigh
Private Hospital
,
Mort
NO v Henry Shields-Chiat,
11
and
Thusi v Minister of Home Affairs.
12
I am of the view that SAAPIL’s reliance on these cases is
misplaced. As alluded to above,
Headleigh
has been overruled by the Supreme Court of Appeal in
Price
Waterhouse
. In
Mort
NO v Henry Shields Chiat,
the
court considered whether an agreement between an attorney and his
client to deduct fees from the proceeds of a settlement in
a claim
for damages complied with the requirements of
bona
fides
. The agreement
preceded the Act. The Court remarked that:
13
“
A
contingency fee arrangement has subsequently been recognised in
s 2
of the
Contingency Fees Act 66 of 1997
, which provides that the
‘success’ fee may be twice the practitioner’s
normal fee, with a maximum threshold of
25% of the client’s
award. While
s 3
sets a range of requirements designed to protect the
client, there is no evidence before this court which suggests a
contravention
of these kinds of safeguards which even in
circumstances which pertained prior to the introduction of the Act
represents a useful
checklist when investigating questions of good
faith… the case made out by the applicant does not justify
judicial interference
with the contract concluded between Hermanus
Ellis and respondent.”
As indicated, SAAPIL’s
reliance on this case is misplaced, firstly because the Court was not
called upon to make a determination
regarding the validity of the
agreement in terms of the Act or the common law and, in fact,
deliberately desisted from doing so,
14
The mandate at issue was also entered into before the Act came into
operation.
15
Thus,
Mort
does
not purport to alter the common law prohibition against contingency
fee agreements between legal practitioners and their clients.
[14] In
Thusi
v Minister of Home Affairs
16
,
the Court held, with
reference to a claim where an attorney took cession of his client’s
claim for costs as compensation for
legal fees and disbursements,
that an order for costs
may be granted in favour of a successful applicant where the litigant
is indigent and is seeking to enforce
constitutional rights against
an organ of state; the legal representative acts on the litigant’s
behalf for no fee and accepts
liability for all disbursements; and
the litigant agrees that the legal representative will be entitled to
the benefit of any costs
order made by the Court on his or her
behalf. Wallis J (as he then was) found:
17
“
The
constitutional right of access to Court favours the recognition of an
exception. Allowing an exception does not appear to give
rise to any
greater scope for abuse than exists in other instances where
attorneys are permitted to act on a speculative or contingency
basis,
and the Courts and professional bodies will be able to prevent abuse.
I have pondered whether such an exception should rather
be formulated
in legislation and accept that a revision of the
Contingency Fees
Act, long
called for by the organised legal profession, would be
desirable. However the exception I contemplate is narrow and
consistent
with other exceptions in allowing an order for costs even
though there is underlying liability by the litigant to the legal
representative.
It is subject to constraint both by the Court and
possibly through the mechanism of taxation, although as I will show,
that poses
difficulties.”
[15] Mindful of the
dictum
of Southwood AJA in
Price
Waterhouse
that
“the
Act was enacted to legitimise contingency fee agreement 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”,
18
Wallis J found that the cost arrangement between attorney and client
is not one that would be prohibited by the common law. He
found that
an arrangement which involved the cession of costs to the attorney as
a fee is simply one that, in the absence of an
exception to the
indemnity principle, would result in the client being unable to
obtain an order for costs and the attorney not
recovering any
payment. I am of the view that SAAPIL’s reliance on
Thusi
is, for this reason, mis-directed.
[16] Clearly
Thusi
concerns a narrow exception to the indemnity principle
19
that a costs order is intended to indemnify the winner (subject to
limitation of the party and party costs scale) to the extent
that it
is out of pocket as a result of pursuing the litigation to a
successful conclusion,
20
and not an exception to the common law prohibition against
contingency fee arrangements between legal practitioners and their

clients. Wallis J expressly pointed out that this was not a matter
envisaged in the Act, when he stated:
“
Whilst
the
Contingency Fees Act contemplates
non-monetary litigation, its
provisions are directed at the arrangements between the legal
practitioner and the litigant, rather
than recovery from the other
party. They deal with ‘no win, no fee’ arrangements and
the recovery of success fees.
The underlying assumption is that when
success is achieved a liability to pay fees attaches to the
successful litigant. That is
not the case here.”
21
[17] With reference to the other
(three) exceptions to the indemnity principle, Wallis J stated that
what is notable about them
is that they recognise that in the area of
assisting the indigent to obtain access to justice, there is no
public policy reason
precluding the attorney from recovering costs on
an order in favour of the client, and that the
Contingency Fees Act
and
Price Waterhouse
reflect that public policy and the right of access to justice
requires a relaxation of other restrictions that previously limited

the range of fee arrangements that could be concluded between clients
and legal practitioners
22
.
[18] Accordingly, neither
Headleigh, Mort, nor
Thusi
support the view
that the common law has developed to a point where it recognises the
validity of a contingency fee agreement between
a legal practitioner
and his client outside the prescripts of the Act. As pointed out by
the Constitutional Court in
Carmichele,
23
the major engine for law
reform is the Legislature and not the Judiciary, and that:
“
In
exercising their powers to develop the common law, Judges should be
mindful of the fact that the major engine for law reform
should be
the Legislature and the not the Judiciary. In this regard, it is
worth repeating the dictum of Iacobucci J in R v Salituro
[(1992) 8
CRR (2d) 173 ([1991]
3 SCR 654)
, which was cited by Kentridge AJ in
Du Plessis v De Klerk:
‘
Judges can and should adapt the common law to
reflect the changing social, moral and economic fabric of the
country. Judges should
not be quick to perpetuate rules whose social
foundation has long since disappeared. Nonetheless there are
significant constraints
on the power of the Judiciary to change the
law….In a constitutional democracy such as ours it is the
Legislature and not
the Courts which has the major responsibility for
law reform….The Judiciary should confine itself to these
incremental changes
which are necessary to keep the common law in
step with the dynamic and evolving fabric of our society’.
”
[19] What
Carmichele
,
in my view, makes clear is that law reform is primarily the
responsibility of the Legislature, and not the Judiciary. Where the

Legislature has introduced such reform, by enacting legislation such
as the
Contingency Fees Act in
issue, which provides for contingency
fee agreements between legal practitioners and their clients to
reflect the public policy
consideration of access to justice, now
guaranteed in s 34 of the Constitution, there is no scope for the
development of the common
law by the Judiciary in relation to such
agreements
–
more particularly where such arrangements between legal
practitioners and their clients are prohibited under the common law.
There, therefore, cannot be two systems of law regulating the same
subject matter.
24
Were it, perhaps, permissible for legislation and the common law on
the status of contingency fee arrangements between legal
practitioners and their clients to develop in tandem
−
how then would these two systems co-exist?
The
Contingency Fees Act, 66 of 1997
[20] The Act seeks to strike a balance between the vices of
contingency fee agreements on the one hand and their virtue on the

other, and of making justice accessible to poor people who might
otherwise not have access to justice. This is the consideration

which prompted the South African Law Commission and ultimately
Parliament to make limited provision for contingency fee agreements

in terms of the Act.
[21] The compromise recommended by the Law Commission and adopted by
Parliament, was to make an exception to the common law prohibition
by
permitting contingency fee agreements in terms of s 2(1) of the
Act, but to make the exception subject to and dependent
on the
limitations and controls imposed by s 2(2) to s(5). The Law
Commission made this clear in its report:
“
Notwithstanding
the danger of over-regulation, the Commission is not convinced that
safeguards and requirements for valid contingency
fee agreements
should be excluded from its proposed draft Bill. As is evident from
the comments received and discussed in this
report, there is grave
concern that contingency fee agreements may lead to abuse and may
disturb the high ethical standards maintained
by the legal profession
up to the present. The Commission concedes that there are dangers
attached to the implementation of a
contingency fee system and
expressed the view, in Working Paper 63, that if such a system should
prove to be desirable, contingency
fee agreements should be fortified
in legislation, firstly, to remove common law prohibitions thereupon
and, secondly, to prescribe
clearly the limitations and controls to
which they should be subjected so as not to breach the relationship
between lawyer and
client and to impact adversely upon public policy.
The safeguards contemplated by the Commission which were also
embodied in the
proposed draft Bill in Annexure A to Working Paper
63, amounted to the following:
* The
exclusion of criminal law and family law cases from contingency fee
agreements…
* the
imposition of statutory limitations on the size of the proposed
uplift and caps on the fees payable to legal practitioners…
* requirements
to the effect that contingency fee agreements should only be entered
into upon reasonable prospects of success and
that legal
practitioners should advise their clients of other options of funding
litigation;
* requirements
as to the form and content of contingency fee agreements…
* review
of contingency fee agreements and fees by the controlling bodies
governing the legal profession and the courts.
The
Commission regards these safeguards as so important that they ought
to have statutory force and should not be dealt with simply
as
recommendations of the Commission which do not have the force of law
and may or may not be complied with by the professional
bodies. …
The
Commission therefore concludes that any system of contingency fees
should be regulated statutorily and that, although practical

experience with contingency fees may eventually require amendments to
the proposed Act, which may be cumbersome, the safeguards,

limitations and controls of contingency fee agreements are of such
importance that it is deemed to be in the public interest that
they
cannot be altered easily.”
25
[22] It is clear from this extract that the Law Commission’s
recommendation, ultimately adopted by Parliament, was to create
a
limited exception to the common law prohibition but strictly subject
to the limitations and controls imposed by the Act. This
has been
recognised by the Supreme Court of Appeal in
Price Waterhouse
:
“
[O]ur
Legislature followed the English example of permitting contingency
fee arrangements - 'no win, no fees' and increased fees
in case of
success - but subject to strict controls.”
26
The
clear intention [of the Act] is that contingency fees be carefully
controlled.”
27
“
The
Legislature … has made [contingency fee] agreements legal
within carefully circumscribed limits and subject to regulation
by
the professions' controlling bodies and the Minister of Justice.”
28
The effect of the Act
[23] The Act gives effect to its
purpose in the following ways. Section 1 defines a “
contingency
fee agreement
”
as any agreement of the kind described in section 2(1) of the Act
which provides:
“
Notwithstanding
anything to the contrary in any law or the common law, a legal
practitioner
29
may, if in his or 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;
that the legal practitioner
shall be entitled to fees equal to or, subject to subsection (2),
higher than his or her normal fees,
set out in such agreement.
[24] Section 2(1) makes an
exception to the common law by permitting contingency fee agreements
“
[n]otwithstanding
anything to the contrary in any law or the common law
”.
The Act governs all agreements of the kind described in s 2(1) of the
Act. These are a
“no
win, no fees agreement”
,
30
and an agreement in terms of which a legal practitioner is entitled
to fees equal to or higher than his or her normal fee if the
client
is successful.
31
The latter agreement is subject to the limitations provided for in s
2(2) of the Act which provides that:
“
Any
fees referred to in subsection 1(b) which are higher than the normal
fees of the legal practitioner concerned (hereinafter referred
to as
the ‘success fee’), shall not exceed such normal fees by
more than 100 percent: Provided that, in the case of
claims sounding
in money, the total of any such success fee payable by the client to
the legal practitioner, shall not exceed 25
percent of the total
amount awarded or any amount obtained by the client in consequence of
the proceedings concerned, which amount
shall not, for purposes of
calculation such fees, include any costs.”
[25] Section 2(2) of the Act
accordingly limits the “success fee” by providing that it
must not exceed the normal fees
by more than 100% or, in the case of
claims sounding in money, 25% of the total amount awarded. The
“success fee” must
not include costs. Sections 3
32
,
4
33
and 5
34
then impose a range of further limitations on, and requirements for,
all contingency fee agreements. Professional controlling bodies,
or
in the absence of such bodies, the Rules Board for Courts of Law may
make such rules as they may deem necessary, in terms of
s 6 of the
Act, in order to give effect to the Act. Finally, the Minister of
Justice may, in terms of s 7 of the Act, make regulations
prescribing
further steps to be taken for purposes of implementing and monitoring
the provisions of the Act.
[26] The effect of the Act is
two-fold. First, it permits contingency fee agreements in terms of s
2(1) of the Act. Second,
it makes all contingency fee agreements
subject to the limitations and requirements of s 2(2) to s 5. By so
doing, the Act leaves
no room for lawful contingency fee agreements
which do not comply with the limitations and requirements in s 2(2)
to s 5. Sections
2(2) to 5 apply to all contingency fee agreements.
Any contingency fee agreement which does not comply with these
provisions of
the Act is unlawful and invalid.
“
So called common law contingency fee agreements”
[27] So-called common law
contingency agreements are thus unlawful for two reasons. First, they
are unlawful under the Act. The
Act covers the field and applies to
all contingency fee agreements. It requires all contingency fee
agreements to comply with the
limitations and requirements laid down
by sections 2(2) to 5 of the Act. Therefore, as held by this Court
in
De La Guerre
35
any contingency fee agreement not in compliance with the Act is
invalid. Second, a contingency fee agreement which does not comply

with the Act also falls outside the scope of the exception in s 2(1)
of the Act. Hence, any contingency fee agreement which is
not
permitted by s 2(1) of the Act, will fall to be dealt with under
the common law, which expressly prohibits such agreements
and renders
them invalid.
[28] The decision of the Supreme
Court of Appeal in
Price
Waterhouse Coopers
makes this clear.
36
Although the case did not concern a contingency fee agreement
between a client and an attorney, but rather a champertous agreement

between a litigant and a third party, the Court discussed in some
detail the legal status of contingency fee agreements, and concluded

as follows:
“
The
Contingency Fees Act 66 of 1997
… provides for two forms of
contingency fee agreements which attorneys and advocates may enter
into with their clients.
… 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.””
37
[29] The judgment was delivered
by Southwood AJA (as he then was) and was concurred in by Harms,
Cameron, Conradie and Lewis JJA.
Although it may be arguable that the
view expressed in
Price
Waterhouse
on the
legal status of common law contingency fee agreements
is
obiter
,
the thrust of the judgment was that the Act did not render lawful
that which was up to the time of the enactment unlawful under
the
common law − the Act introduced an exception and not an
amendment to the common law. Hence, in
De
La Guerre
38
this Court made it clear that it was not persuaded to depart from the
view expressed in
Price
Waterhouse
when
Fabricius J, writing for the Court, stated:
“
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 (SCA) at par 17.
I
do not agree 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 para 12
.
I
may also 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.”
[30] In
Mnisi
39
a more recent decision of Southwood J, in the North Gauteng High
Court, he reiterated the view expressed by the Supreme Court
of
Appeal in
Price
Waterhouse
40
relating to the illegality of contingency fee agreements between
legal practitioners and their client that are not covered by the
Act.
After discovering, during the course of considering a draft
settlement in the matter, that the plaintiff and the attorney
had
entered into a contingency fee agreement, Southwood J found that the
fees that the plaintiff agreed to pay to the attorney
for the conduct
of the case were
“clearly not covered by the Act and the agreement appeared to
be illegal
”
41
.
He stated:
“
Although
I hold a (strong) prima facie view that the contingency fee agreement
offends against the Act and is not invalid I shall
not make an order
declaring that it is invalid”
.
42
Southwood J, nonetheless made an
order directing the Registrar to send a copy of the judgment together
with the exhibits and affidavits
filed to the President of the Law
Society for the Northern Provinces to investigate the conduct of the
attorney.
43
[31] As discussed in
De
La Guerre
44
,
the South Gauteng High Court has also recently, on four occasions,
reached the identical conclusion to the Supreme Court of Appeal
in
Price Waterhouse.
In
Tecmed
,
45
Van Rooyen AJ held that for a contingency fee agreement to be valid,
it had to comply with the Act.
46
In
Thulo,
47
Morison AJ concluded
that once the Act was enacted it set the limits and methods whereby
practitioners could raise contingency fees,
and a contingency fee
must thus be raised in accordance with the Act or it is unlawful. He
added “[t]
here is
accordingly no such thing as a common-law contingency fee.
”
48
[32] In
Mofokeng
,
49
decided in August
2012, Mojapelo DJP again concluded that a contingency fee agreement
which did not comply with the Act was unlawful.
He stated that:
“
The
clear intention of the legislature is that the contingency fees be
carefully controlled. The Act was enacted to legitimise contingency

fees agreements between legal practitioners and their clients which
would otherwise be prohibited by the common law. Any contingency
fees
agreement between such parties which is not covered by the Act is
therefore illegal and unenforceable.”
50
[33] In
Tjatji,
51
the most recent of the
four decisions of the South Gauteng High Court, Boruchowitz J again
concluded that a contingency fee agreement
that did not comply with
the Act was unlawful and unenforceable. He held that:
“
The
phrase: “Notwithstanding anything to the contrary in any law or
the common law …” which appears in s 2(1),
and the
long title of the Act, make it plain that the Act was intended to be
exhaustive of the rights of legal practitioners to
conclude
contingency fee agreements with their clients. There is no room
whatever for a legal practitioner to enter into a contingency
fee
agreement with a client outside the parameters of the Act or under
the common law… A contingency fee agreement which
does not
comply with the provisions of the Act is illegal.”
52
…
“
Although
the Act does not 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 encourage legal
practitioners to undertake speculative actions for their clients in
order to promote access to the courts but
subject to strict control
so as to minimise the disadvantages inherent in the contingency fee
system and to guard against its abuse
(see the report of the South
African Law Commission, Chapters 2, 3 and 4; KG Druker op cit,
Chapters 6 and 7). The safeguards
introduced to prevent such abuses
include ss 2 and 3 of the Act. As these sections are not enabling but
prescriptive in nature,
it would undoubtedly have been the intention
of the legislature to visit nullity on any agreement that did not
comply with these
provisions.”
53
[34] SAAPIL concedes that textually the Act appears to be exhaustive,
since the constraints would have no valid sphere of operation

otherwise. It, however, then goes on to argue that the Act exhibits
no intention to oust the legitimacy of common law agreements
if they
can be recognised by law or should, by dint of the development of the
common law, be recognized in the future. I am of
the view that this
argument is manifestly unfounded and completely irreconcilable with
the seven judicial decisions, including
the decision of the Supreme
Court of Appeal in
Price Waterhouse,
to which I have referred.
As is demonstrated by these decisions, the language, history and
purpose of the Act all indicate that
Parliament’s intention was
to cover the field and to provide that a contingency fee agreement
would only be lawful where
it complied with the Act. There is thus
simply no basis for the contention that a contingency fee agreement
can be valid even though
it does not comply with the Act.
Accordingly, as held by this Court in
De La Guerre
:
54
“
[T]he
Contingency Fees Act is
exhaustive
on its stated object, and a
ny
contingency fee agreement not in
compliance with it is invalid.”
The Constitutional Challenge to the Act as a Whole
[35] SAAPIL’s alternative approach is to contend that the
entire Act is unconstitutional. The thrust of SAAPIL’s
constitutional challenge is that the Act “
irrationally,
disproportionately, unreasonably and unfairly discriminates against
[legal practitioners] and their clients
”. SAAPIL’s
argument is that legal practitioners and their clients are treated
unfavourably relative to ordinary people
who enter into champertous
or speculative litigation agreements. It accordingly contends that
the Act violates section 9 of the
Constitution as well as the
principle of legality under s 1(c) of the Constitution.
Test under s 9 of the Constitution
[36] In
Harksen
v Lane
55
,
the Constitutional
Court set out the test to be followed in determining whether section
9 of the Bill of Rights is violated.
Harksen
makes clear that there
are two different tests to be applied – one in relation to s
9(1) and one in relation to s 9(3). Section
9(1) of the Constitution
guarantees
equal
protection and benefit of the law to everyone”
and
s 9(3) prohibits unfair discrimination.
[37] The enquiry, under the
Harksen
analysis, commences with
the guarantee of equality under s 9(1) of the Constitution. The first
question is whether the Act differentiates
between people or
categories of people? If so, does the differentiation bear a rational
connection to a legitimate governmental
purpose? If it does, then
there is no violation of s 9(1), and that is the end of the enquiry.
If it does not, there is a violation
of s 9(1) and the enquiry moves
onto the prohibition of discrimination under s 9(3) of the
Constitution.
[38] The Act no doubt “
differentiates
” between
legal practitioners and ordinary persons. As indicated, section 9(1)
of the Constitution requires that this differentiation
be “
rational
”.
The same requirement is imposed by the principle of legality in s 1
(c) of the Constitution which provides that South Africa
is founded
on the value of
“the supremacy of the Constitution and the
rule of law”
.
The rationality requirement
[39] Both sections 9(1) and 1(c)
of the Constitution require that the differentiation occasioned by
the Act be “
rational
”.
In
Law Society
56
the Constitutional Court observed as follows in respect of the
constitutional requirement of rationality:
“
The
constitutional requirement of rationality is an incident of the rule
of law, which in turn is a founding value of our Constitution.
The
rule of law requires that all public power must be sourced in law.
This means that State actors exercise public power within
the formal
bounds of the law. Thus, when making laws, the legislature is
constrained to act rationally. It may not act capriciously
or
arbitrarily. It must only act to achieve a legitimate government
purpose. Thus, there must be a rational nexus between the legislative

scheme and the pursuit of a legitimate government purpose. The
requirement is meant ‘to promote the need for government action

to relate to a defensible vision of the public good’ and ‘to
enhance the coherence and integrity of legislative measures.”
The test for rationality in
relation to s 9(1) of the Constitution, in particular, was reiterated
by the Constitutional Court in
Weare
:
“
The
test for determining whether s 9(1) is violated was set out by the
court in Prinsloo v Van der Linde and Harksen v Lane. A
law may
differentiate between classes of persons if the differentiation is
rationally linked to the achievement of a legitimate
government
purpose. The question is not whether the government could have
achieved its purpose in a manner the court feels is
better or more
effective or more closely connected to that purpose. The question is
whether the means the government chose are
rationally connected to
the purpose, as opposed to being arbitrary or capricious.”
57
[40] For SAAPIL's constitutional challenge to succeed, it is required
to demonstrate that there is no rational basis for differentiating

between legal practitioners who enter into contingency fee agreements
with their clients, on the one hand, and lay persons who
enter into
champerty agreements with other lay persons, on the other. It is
important to bear in mind, in this regard, that the
requirement of
“rationality” is not the same as the requirement of
“reasonableness”. Rationality is a
lower standard than
reasonableness. The Constitutional Court has made this clear on
numerous occasions:
“
Decisions
as to the reasonableness of statutory provisions are ordinarily
matters within the exclusive competence of Parliament.
This is
fundamental to the doctrine of separation of powers and to the role
of Courts in a democratic society. Courts do not review
provisions of
Acts of Parliament on the grounds that they are unreasonable. They
will do so only if they are satisfied that the
legislation is not
rationally connected to a legitimate government purpose. In such
circumstances, review is competent because
the legislation is
arbitrary. . . . If the legislation defining the scheme is rational,
the Act of Parliament cannot be challenged
on the grounds of
''unreasonableness''. Reasonableness will only become relevant if it
is established that the scheme, though rational,
has the effect of
infringing the right of citizens to vote. The question would then
arise whether the limitation is justifiable
under the provisions of s
36 of the Constitution and it is only as part of this s 36 enquiry
that reasonableness becomes relevant.
It follows that it is only at
that stage of enquiry that the question of reasonableness has to be
considered.”
58
[41] SAAPIL, however, repeatedly conflates and confuses the question
of rationality with issues of disproportionality, unfairness
and
unreasonableness. Rationality is, however, not the same as or even
linked to disproportionality, unfairness or unreasonableness.
The
Constitutional Court has made this expressly clear in the
Law
Society
case:
“
It
remains to be said that the requirement of rationality is not
directed at testing whether legislation is fair or reasonable or

appropriate. Nor is it aimed at deciding whether there are other or
even better means that could have been used. Its use is restricted
to
the threshold question whether the measure the lawgiver has chosen is
properly related to the public good it seeks to realise.”
59
[42] The Constitutional Court adopted the same approach in
Merafong:
“
The
fact that rationality is an important requirement for the exercise of
power in a constitutional state does not mean that a court
may take
over the function of government to formulate and implement policy. If
more ways than one are available to deal with a
problem or achieve an
objective through legislation, any preference which a court has is
immaterial. There must merely be a rationally
objective basis
justifying the conduct of the legislature.”
60
[43] SAAPIL’s fundamental complaint is that it is irrational
for Parliament to have enacted a different regime for contingency

fees for legal practitioners in comparison to agreements of champerty
and maintenance, which may be entered into by ordinary members
of
the public. This argument, however, overlooks the obvious and
fundamental differences between legal practitioners who enter

contingency fee agreements, on the one hand, and lay persons who
enter into champerty and maintenance agreements, on the other.
As
pointed out by the Fund, there are four fundamental and overlapping
differences. First, legal practitioners are responsible
for
conducting the litigation concerned. They run the case and are
responsible for advising on and taking the litigation decisions.
Lay
persons who enter into champerty and maintenance agreements do not
engage in any of these activities.
[44] Second, legal practitioners
have specialized knowledge and training which equip them to conduct
litigation. They are perceived
by their clients as being experts on
the decisions to be taken. This puts lawyers in a powerful position
to influence the actual
conduct of litigation. Lay persons who enter
into champerty and maintenance agreements do not possess any of these
skills or characteristics.
Third, legal practitioners are bound by a
range of ethical duties to their clients.
61
These duties may well come into conflict with their own pecuniary
interest in the litigation when contingency fee agreements are

concluded. Lay persons who enter champerty and maintenance
agreements have no such ethical or other duties. There is, therefore,

no possibility of a conflict of interest in this regard. Lastly,
legal practitioners are bound by a range of ethical duties to
the
court.
62
Again, these duties may well come into conflict with their own
pecuniary interest in the litigation when contingency fee agreements

are concluded. Lay persons who enter into champerty and maintenance
agreements owe no such ethical duties to the court or to litigants.

There is, therefore, no possibility of a conflict of interest in this
regard.
[45] The Law Commission was mindful of precisely these sorts of
considerations and concerns when it adopted its report on contingency

fees, which ultimately led to the enactment of the Act. The
Commission articulated these concerns as follows:
“
As
far as the relationship between lawyer and client is concerned, it is
the Commission’s opinion that contingency fee arrangements

involve the question of a lawyer’s professional ethics. These
ethical concerns may be taken back to our common law and case
law.
In litigation a professional lawyer’s role is to advise his or
her client with a clear eye and unbiased judgment.
Furthermore, a
lawyer retained to conduct litigation is not merely the agent and
adviser to the client, but also an officer of
the court with a duty
to the court to ensure that the client’s case is presented and
conducted with scrupulous fairness and
integrity. A lawyer who
acquires a personal financial interest in the outcome of litigation
may obviously find himself or herself
in a situation in which that
interest conflicts with those obligations.
63
The Commission showed particular concern for conflict of interests,
when it stated thus:
“
Another
argument against contingency fees is that the financial interest of
lawyers in the outcome of litigation may adversely affect
their
ability to give dispassionate, objective and disinterested advice at
all stages of the proceedings. For example, lawyers
might advise
their clients to accept settlement offers, even though a settlement
offer is lower than the judgment likely to be
gained at the trial, in
order to secure their fees and avoid the additional expense of the
trial – which the lawyer might,
depending on the nature of the
agreement entered into, have to meet if unsuccessful. It is also
argued that the personal involvement
with the client in the outcome
of the litigation is likely to place the lawyer in direct conflict
with his duty to the court.
…
In
addition it is said that a lawyer who has a financial interest in the
recovery may take charge of the litigation and disregard
the desires
of the client. The lawyer can use his or her position of superior
knowledge to persuade the client to pursue a course
of action that is
more in line with the lawyer’s interests and desires than those
of the client. Although this conflict
may be present in every
professional relationship, it is submitted that it is especially
dangerous under a contingency fee arrangement
because under such an
arrangement the client surrenders the principal means of controlling
how much the lawyer works, or does not
work, on the client’s
behalf.”
64
[46] The Law Commission concluded as follows regarding the danger
inherent in the system of contingency fees:
“
The
dangers inherent in a system of contingency fees are that it may
create a conflict of interests in terms of a lawyer’s

responsibility to his or her client and the lawyer’s duty to
the court, may result in fees out of proportion to the work
actually
done by lawyers on behalf of their clients, may give rise to an
increased load of frivolous, spurious and unmeritorious
litigation
and may encourage “ambulance chasing”.”
65
The Commission considered these to be serious concerns. It
considered, however, that they should be dealt with by way of
statutory
regulation, rather than a ban on contingency fees:
“
In
the Commission’s view the potential of contingency fees
creating a conflict of interests between lawyers’ duty towards

their clients and to the courts would raise a serious concern.
However, this inherent danger of contingency fees would appear
to be
insufficient, per se, to warrant the rejection of contingency fee
arrangements. In order to maintain the balance between
a lawyer’s
duty to the court and to his or her client, which balance has been
referred to by the Chief Justice, care should
be taken not to disturb
the prevailing ethical standards maintained by the legal profession.
Sufficient safeguards should essentially
be built into any system of
contingency fees to minimize the disadvantages of the system and to
guard against its abuse.”
66
[47] The vast majority of the Commission’s concerns,
understandably, apply to legal practitioners. The Commission
displayed
no such concerns in relation to lay persons who enter into
champerty and maintenance agreements. In the circumstances, I am of
the view that the Act manifestly satisfies the rationality
requirement. There is a clear rational connection in the
differentiation
between legal practitioners and their clients and
other laypersons who may enter into champertous agreements, and a
legitimate
governmental purpose. The purpose is to cater for the
particular risks inherent in contingency fee agreements between legal
practitioners
and their clients.
The Act
does not, therefore, impermissibly infringe upon the guarantee of
equality under s 9(1) of the Constitution.
[48] SAAPIL, no doubt, seeks to
buttress its “irrationality” argument by relying on the
fact that legal representatives
are subject to the rules and
disciplinary decisions of their professional bodies. Whatever the
effectiveness or ineffectiveness
of these self-regulatory regimes, it
cannot be that Parliament’s decision to legislate safeguards
rather than leaving them
to the professional bodies is irrational.
Parliament’s objective in enacting the Act was not merely to
put the right of a
practitioner to charge contingency fees beyond
doubt. Had that been the case, then there would have been no need for
the Act to
be as detailed as it is. As is apparent from the answering
affidavit of the Minister, the intention of Parliament, for good
reason
and in compliance with the recommendations of the Law
Commission, was to properly regulate such agreements –
something that
is starkly absent from the ruling of the Law Society
of the Northern Provinces permitting its members to enter into “so
called
contingency fee agreements” outside the prescripts of
the Act. I agree.
[49] The Law Society of the
Northern Provinces has to date not put in place rules aimed at
addressing the pertinent risks of overreaching
by its members which
may result from contingency fee arrangements. It has also not
promulgated a cap to the percentage of the capital
that may be
recovered by attorneys. Nor has it promulgated a cap on the uplift of
the normal fees. The only guideline of any note
promulgated by the
Law Society of the Northern Provinces is that the attorney’s
remuneration must be fair. However, in my
view, what is to be
regarded as fair, in the context of contingency fee arrangements
between attorney and client, is not easily
determinable in the
absence of proper guidelines relating to the nature and form of
contingency fee agreements.
[50] It important to bear in
mind that by the time a case goes to court, the attorney has paid out
on average tens of thousands
of rands
67
and has worked for years without debiting any fees from the client.
Naturally, by the time the trial is conducted, the attorney
is eager
to recover his fees and close the book in order to maximise his or
her cash-flow. If the matter is unable to settle there
will be no
recovery of fees for yet another year or so. Therefore,
unsurprisingly, matters of this nature invariably settle.
The
possibility of a conflict of interest, in this context, is thus very
real. There is, moreover, no detailed accounting by attorneys
under
the “so-called common law contingency fee” arrangement
system. There is apparently also no attempt to establish
whether the
attorney’s fee calculated as a percentage exceeds a 100%
increase of the normal fees of the attorney or not.
Lastly, the
percentage at which attorneys undertake to work on contingency
invariably exceeds 25%. In my view, the imposition of
limitations and
safeguards by means of statutory measures, in so tenuous a context
that is arguably open to abuse, can only be
for the public good.
[51] The issue of self-regulation by professional bodies versus
statutory regulation was fully considered and addressed by the
Law
Commission in its Report:
“…
[T]hose
not in favour of the introduction of a contingency fee system
providing for the payment of an uplift fee, hold the view
that the
legislation governing speculative fees … are unnecessary and
contend that the regulation of such fees should be
left in the hands
of the profession….
Notwithstanding
the danger of over-regulation, the Commission is not convinced that
safeguards and requirements for valid contingency
fee agreements
should be excluded from its proposed draft Bill. As is evident from
the comments received and discussed in this
report, there is a grave
concern that contingency fee agreements may lead to abuse and may
disturb the high ethical standards maintained
by the legal profession
up to the present. The Commission concedes that there are dangers
attached to the implementation of a
contingency fee system and
expressed the view, in Working Paper 63, that if such a system should
prove to be desirable, contingency
fee agreements should be fortified
in legislation, firstly, to remove common law prohibitions thereupon
and, secondly, to prescribe
clearly the limitations and controls to
which they should be subjected so as not to breach the relationship
between lawyer and
client and to impact adversely on public policy.
…
The
Commission regards these safeguards as so important that they ought
to have statutory force and should not be dealt with simply
as
recommendations of the Commission which do not have the force of law
and may or may not be complied with by the professional
bodies. The
Commission’s view was reiterated by Advocate AJ Louw of the
Pretoria Bar who stated that a system of contingency
fees must be
regulated strictly, in the form of legislation, in view of the
possibility that different sets of rules might be agreed
upon by
different Bars and different Law Societies who may not even agree
among themselves as to what precisely the acceptable
arrangements
should be. Moreover, persons who are not members of, for instance,
the Bar, might take the view that they are not
bound by any rules
laid down by the various Bars in this respect. … The
Commission is also of the opinion that statutory
measures will
contribute to establishing uniformity of the law in all parts of the
country…
The
Commission therefore concludes that any system of contingency fees
should be regulated statutorily and that, although practical

experience with contingency fees may eventually require amendments to
the proposed Act, which may be cumbersome, the safeguards,

limitations and control of contingency fee agreements are of such
importance that it is deemed to be in the public interest that
they
cannot be altered easily.”
68
[52] I am of the view that far from being irrational, this approach
is both laudable and sensible. As maintained by the Fund, SAAPIL’s

rather remarkable proposition that Parliament has no right to put in
place special statutory protections to prevent abuse by lawyers

acting on contingency − and that Parliament was
constitutionally obligated to leave the regulation of contingency
fees to
the professional bodies concerned − is therefore
unsustainable as a matter of constitutional law. SAAPIL’s
primary
rationality challenge to the Act as a whole, under s 9(1) and
s 1(c) of the Constitution is, accordingly, without merit.
Enquiry under s 9(3) of the Constitution
[53] What remains then is the argument based on
unfair discrimination. However, as indicated earlier, having
established that there
is a rational connection between the
distinction (between legal practitioners and their clients and other
laypersons) and a legitimate
governmental purpose, there is no
violation of s 9(1) and that is the end of the s 9 enquiry. There
would, therefore, be no need
for the Court to consider whether there
has been a violation of s 9(3) of the Constitution. However, in
view of SAAPIL’s
repeated assertion that the Act discriminates
between legal practitioners and their clients and other laypersons,
it is important
to examine SAAPIL’s challenge to the Act on
this ground.
[54] Turning then to the application of the
prohibition of unfair discrimination under s 9(3) of the
Constitution, the first question
for consideration is whether the Act
unfairly discriminates. If it differentiates on a ground specified in
s 9(3), then it is presumed
to be unfair discrimination. However, in
a case such as this one, where the differentiation is not on a ground
specified in s 9(3),
the question for consideration is whether the
differentiation is made on the basis of
“attributes
and characteristics which have the potential to impair the
fundamental human dignity of persons as human beings
or to affect
them adversely in a comparably serious manner”
.
If it does, then this constitutes discrimination. The
court
must then consider whether the discrimination is “
fair
”
or “
unfair
”. The right to dignity is central to
this enquiry. The Constitutional Court reiterated this in
Weare:
“
Whereas
the core of s 9(1) is the idea that no one is above or beneath the
law and that all persons are subject to law impartially
applied and
administered, the core of the right against discrimination in s 9(3)
is dignity. Differentiation becomes unfair discrimination
when it is
based on grounds that have the potential to impact upon the
fundamental dignity of human beings. As the court has held,
these are
grounds that … have the potential, when manipulated, to demean
persons in their inherent humanity and dignity
. . . . In some cases
they relate to immutable biological attributes or characteristics, in
some to the associational life of humans,
in some to the
intellectual, expressive and religious dimensions of humanity and in
some cases to a combination of one or more
of these features.”
69
[55] SAAPIL contends that the Act
discriminates between legal practitioners and lay persons. To
demonstrate this, SAAPIL is required
to show that the differentiation
is on a ground specified in section 9(3) of the Constitution or that
objectively the ground of
differentiation was “
based
on attributes and characteristics which have the potential to impair
the fundamental human dignity of persons as human beings
or to affect
them adversely in a comparably serious manner.
”
70
[56] SAAPIL concedes that the differentiation does not occur on any
of the listed grounds set out in section 9(3). It must, therefore,
in
order to succeed with its challenge to the Act under s 9(3) of the
Constitution, demonstrate that the Act as a whole discriminates

unfairly because it differentiates in a manner that impairs the
fundamental human dignity of legal practitioners and their clients
or
affects them adversely in a comparably serious manner. SAAPIL,
however, barely suggests that this is the case. It makes only
a
peripheral reference to the right to human dignity in a single
paragraph in its heads of argument, and then only in relation
to
section 4 of the Act, not the Act as a whole. The right to human
dignity was also barely touched upon in argument, despite the
fact
that SAAPIL’s main constitutional attack to the Act is based on
an assertion of “
discrimination
”. The
differentiation in the Act between legal practitioners and their
clients, on the one hand, and lay persons who may
enter into
champertous agreements, on the other, does not, in my view,
constitute unfair discrimination. It does not have the potential
to
impair the fundamental human dignity of legal practitioners and their
clients as human beings or to affect them adversely in
a comparably
serious manner. The Act consequently does not violate the prohibition
of unfair discrimination in s 9(3) of the Constitution.
The Challenge to s 2 of the Act
[57] SAAPIL contends that s 2 of
the Act is unconstitutional. Section 2 of the Act sets out the limits
regarding what fees may be
charged under a contingency fee agreement.
SAAPIL contends that sections 2(1) and 2(2) of the Act violate the
right to a fair hearing
in section 34 of the Constitution. It claims
that s 2(2) caps fees at
'too
low a level',
but
gives no indication of what the correct level of the cap should be.
Its second complaint
is that the prevailing cap is far too inflexible because it sets a
single threshold for the maximum contingency
fee, which applies to
all types of cases. SAAPIL, therefore, contends that currently the
Act leaves the practitioner with little
choice but to turn the
prospective client away or to enter into a common law contingency fee
agreement.
[58] There is, in my view, no
evidence on SAAPIL's papers to support these contentions. It does
not claim that its members have
turned away clients because of the
restrictions in s 2(2) of the Act or, for that matter, that they
would do so if the present
application was dismissed. Without such
positive factual averments, the suggestion that sections 2(1) and
2(2) of the Act violate
s 34 of the Constitution is entirely
speculative and unfounded. Moreover, in the analogous context of
time-bar provisions, the
Constitutional Court has emphasised that s
34 of the Constitution does not allow litigants an unbounded and
indefinite right to
institute legal proceedings. It merely requires
that they be afforded a “
real
and fair”
opportunity to do so.
71
There is simply no evidence before the Court to suggest that sections
2(1) and 2(2) of the Act prevent litigants from having a
“
real
and fair
”
opportunity of instituting legal proceedings. SAAPIL has accordingly
not demonstrated any limitation to s 34 of the Constitution.
[59] Moreover, it is notable that
s 2 of the Act was adopted by Parliament and the Law Commission only
after the Commission paid
close attention to comparative experience.
In adopting the proposal that the maximum surcharge should not exceed
100% of ordinary
fees, the Commission noted that such a surcharge had
been introduced in England and Wales and advocated in Australia. It
adopted
the reasoning of the Australian access to Justice Advisory
Committee:
“
[W]e
think that a maximum 100% uplift bears a sufficient relationship to
the chances of success and failure over a range of cases
to encourage
lawyers to offer contingency fee arrangements to their clients, while
protecting clients from excessive fees.”
72
The Law Commission also viewed
the 25% maximum limit on fees as being an important safeguard
in order to
“prevent
that all proceeds are swallowed up in legal fees”
73
.
In this respect too, the Commission relied on the fact that England
and Wales had imposed a maximum limit on fees of 25% of the
proceeds
of an action.
74
[60] In adopting the limits in s 2(2) of the Act, Parliament sought
to give effect to the need for access to justice. It recognised

correctly, in my view, that access to justice would not be promoted
by unlimited contingency fees. On the contrary, in order to
protect
members of the public and ensure that they benefited from litigation
conducted on their behalf, it was necessary to impose
certain limits
on contingency fees. Without such limitations, the right of access to
court for many litigants might be rendered
meaningless because even
if they were able to get to court and succeed, they would derive
little or no financial benefit from such
court proceedings.
[61] SAAPIL contends for a situation where the level of contingency
fees, permitted by the Act, would depend on arrangements
which may be
struck between a legal practitioner and his or her client
“under
a flexible system that is impossible under the rigid system of
maximum fees
” created by the Act. Quite how the
legislature could ever hope to achieve this without abolishing the
limits on contingency
fees altogether is not clear. It thus appears
that for SAAPIL's argument to succeed, it must demonstrate that the
Constitution
requires that the limits on contingency fees be
abolished altogether. This argument, in my view, is unsustainable.
Apart from
the United States where contingency fees are largely
unregulated, I am unaware of any comparable jurisdiction which allows
contingency
fee arrangements without any limitations on the amount
that may be charged. As Druker in his book “
The Law of
Contingency Fees in South Africa”
explains, after having
conducted a survey of the comparative international position:
“
In
order to combat the abuse of such agreements and to conserve the
lawyer/client relationship, a substantial number of safeguards
have
either been introduced or are being considered by other
jurisdictions. These include provisions as to the limit to be placed

on increased fees (ranging from about 15% to 100%), the particulars
that the contingency fee agreements should contain, provision
for
cooling-off periods and review of such agreements by the watchdog
bodies concerned and the courts. The limits on increased
fees are,
in some instances, statutorily prescribed and in others merely
regulated by the rules of the appropriate law societies.”
75
[62] In the circumstances, I am of the view that there is no
limitation of any right occasioned by s 2 of the Act. Even if there

was, this would amount to a permissible and justifiable limitation in
terms of s 36 of the Constitution as contingency fees arrangements,

as envisaged in the Act, serve to facilitate access to justice as
opposed to denying litigants such access, where they may otherwise

not be able to afford to litigate. As recognised by Fourie and
Sarkin:
“
[C]lose
regulation of contingency fee agreements is clearly essential both to
safeguard individual clients and to ensure that the
public interest
is served by allowing contingency agreements into our law”.
76
Challenge to s 4 of the Act
[63] Section 4 of the Act deals with the issue of settlement when a
contingency fee agreement has been entered into. It provides,
in
essence, that such a matter may only be settled after affidavits from
the legal practitioner and client have been filed, with
court or if
the matter is not before court, with the relevant professional body.
The affidavit of the legal practitioner must set
out: (a) the full
terms of the settlement; (b) an estimate of the amount or other
relief that may be obtained by taking 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 reasons why the
settlement is recommended; (f) that the matters
set out above 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. The
affidavit of the client
must state that: (a) he or she was notified in writing of the terms
of the settlement; (b) the terms of
the settlement were explained to
him or her; (c) he or she understands and agrees to them; and (d) his
or her attitude to the settlement.
[64] SAAPIL contends that s 4 constitutes an infringement of sections
10 (the right to human dignity); 14 (the right to privacy);
34 (the
right to a fair public hearing); 35 (1)(a), (b), and (c) and 35(3)(h)
and (j) (the right to remain silent and the privilege
against
self-incrimination) of the Constitution. SAAPIL contends that s
4(1)(e) of the Act is especially drastic and far-reaching
because in
personal injury cases, the explanation of the reasons why the
settlement is recommended may entail the disclosure of
private
medical details, such as an individual's HIV status. It contends
further that in a conventional commercial case, the litigant
may
prefer to settle than have his or her finances subject to scrutiny in
open court, particularly if he or she has been less than
scrupulous
in filing tax returns. Lastly it contends that an opposing party,
armed with the information contained in the settlement
affidavit
required to be filed in terms of s 4 of the Act, is in a position to
retract the offer if he or she so chooses, once
it is recognised that
there has yet to be acceptance of the offer of settlement that is
being presented to the court. These difficulties,
it argues, render s
4 of the Act “
unworkable in practice”.
[65] SAAPIL’s contention
that s 4 of the Act constitutes an infringement of the rights to
remain silent and the privilege
against self-incrimination under s
35(1)(a), (b), and (c) and s 35(3)(h) and (j) of the Constitution
respectively, is completely
unsustainable as s 1(v)
77
of the Act makes it abundantly clear that the Act has no application
to criminal proceedings. Furthermore, in relation to the challenge
to
the Act, on the grounds that it infringes upon the rights to dignity,
privacy and to a fair trial, SAAPIL has once again failed
dismally to
put up evidence, on its papers, to support these challenges. Nor has
it provided a single actual example to demonstrate
any such
infringements. SAAPIL’s claims are, therefore, entirely
speculative and unfounded. Moreover, even if these facts
had been
established, they would not demonstrate any limitation of the rights
concerned. As submitted by the Fund, section 4 does
not preclude
courts and parties resolving these concerns if they were ever truly
to arise. Thus, for example, if a given client
was truly concerned
about the disclosure of private medical information, the attorney
could ask the Court to direct that the affidavit
containing such
information be sealed and not be made available to the public.
Similarly, if the real concern of the plaintiff
is that a particular
defendant might retract a settlement offer upon sight of the
affidavit, the plaintiff could insist that the
offer be kept open
until after the Court has considered the affidavits. Accordingly, I
am of the view that there is nothing in
section 4 of the Act that
impermissibly limits any constitutional right under s 36 of the
Constitution.
[66] Finally, even if SAAPIL were
to establish a limitation of constitutional rights, this Court is
required to have regard to the
critical importance of protecting
clients subject to contingency fee agreements in the context of
settlements. The Law Commission
drew specific attention to this
danger in its Report:
“
Another
argument against contingency fees is that the financial interest of
lawyers in the outcome of litigation may adversely affect
their
ability to give dispassionate, objective and disinterested advice at
all stages of the proceedings. For example, lawyers
might advise
their clients to accept settlement offers, even though a settlement
offer is lower than the judgment likely to be
gained at the trial, in
order to secure their fees and avoid the additional expense of the
trial – which the lawyer might,
depending on the nature of the
agreement entered into, have to meet if unsuccessful”.
78
Similarly, in proposing its version of s 4 of the Act (which is
different to the final version adopted by Parliament), the Commission

recorded that:
“
The
judges of the Appellate Division expressed concern that, as in the
USA, it may often be financially more advantageous to a lawyer
to
settle a case quickly without spending too much time on it.”
79
[67] It was these risks, in the
context of settlement, that led to s 4 of the Act being introduced.
As Mojapelo DJP observed in
Mofokeng
,
the purpose is to ensure that the supervisory or monitoring process
of the court was present when contingency matters settled.
80
It also does everything possible to ensure that the client is made
aware of the prospects of success, fee options and so on. These
are
plainly laudable and important measures which outweigh the marginal
limitation of rights contended for by SAAPIL. Accordingly,
the
challenge to s 4 of the Constitution is patently lacking in merit and
falls to be dismissed.
[68] For the reasons stated, SAAPIL’s constitutional challenge
to the Act as a whole is without merit and falls to be dismissed
in
its entirety.
[69] In the result, I make the following order:
The application is dismissed with costs which costs shall include
the costs consequent upon the employment of two counsel.
F. KATHREE-SETILOANE
JUDGE OF THE NORTH AND SOUTH GAUTENG HIGH COURT
I
Agree:
D. MLAMBO
JUDGE PRESIDENT OF THE NORTH AND SOUTH GAUTENG HIGH COURT
I Agree:
H. FABRICIUS JUDGE OF THE NORTH
AND SOUTH GAUTENG
HIGH COURT
Counsel for the Applicant:
M Brassy SC with K Hopkins
Attorneys for the Applicant:
Rontgen and Rontgen Inc
Counsel for the First Respondent:
Q Pelser SC
Attorneys for the First Respondent:
The State Attorney
Counsel for the Intervening Party:
Marcus SC with S Budlender
& N Mayosi
Attorney for the Intervening Party:
Lindsay Keller
Date of Hearing:
29 November 2012
Date of Judgment:
13 February 2013
1
The Council of the Law Society of the Northern Provinces made this
ruling on 21 June 2012. The Law Society of the Free State
followed
soon thereafter.
2
The ‘so called common law contingency fee agreement’ had
to meet the following criteria: (a) it should relate to
a genuine
case of assisting an impecunious client assert his or her rights;
(b) the attorney’s remuneration must be fair;
and (c) the
agreement must not amount to gambling, speculation or trafficking in
litigation
3
Engelbrecht v Road Accident Fund and Another
2007 (6) SA 96
(CC)
para 23
4
s 3 of the RAF Act
5
Contingency fee agreements are a species of
pacta de quota litis,
which were looked upon with disfavour at common law because they
were considered to encourage speculative litigation and consequently

amounted to an abuse of the legal process. Contingency fee
agreements were singled out for particular censure because they are

a form of
pacta de quota litis
between a lawyer and his
client, which has additional undesirable features. 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 a
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 an overriding desire to secure a
successful outcome, may tempt him or her into practices which may
compromise his or her
duties to the court, such as coaching
witnesses, misleading the court, falsifying evidence etc.
6
Case No 22645/2011, 11 February 2013
7
Letter from former Chief Justice Corbett to the Natal Law Society,
dated 9
November 1992, at p 2.
8
For example,
Patz v Salzburg
1907 TS 526
9
Headleigh
Private Hospital (Pty) Ltd t/a Rand Clinic v Soller & Manning
Attorneys and Others
2001 (4) SA 360
(W) 369 E – 371 J
10
Price
Waterhouse Coopers Inc and Others v National Potato Co-Operative Ltd
2004 (6) SA 66
(SCA) para 41
11
2001(1) SA 464 (C)
12
2011(2) SA 561 KZP
13
At 476G-J
14
Mort
at 476I-J
15
Mort
at 467H-I, 476I-J and 476G-H
16
2011 (2) SA 561
(KZNP)
17
Thusi
at para
110-111
18
Price Waterhouse
at para 41
19
Thusi
at para
109
20
Price Waterhouse Meyernel v Thoroughbred Breeders’
Association of South Africa
2003 (3) SA 54
SCA at para 18;
Taylor v Mackay Bros and McMahon Ltd
1947 (4) SA 423
(N) at
431
21
Thusi
at para
106
22
Thusi
at para
108
23
Carmichele v Minister of Safety and Security
2001(4) SA 938 (CC) at para 36
24
Pharmaceutical
Manufacturers of South Africa: In Re Ex Parte President of the
Republic of South Africa
[2000] ZACC 1
;
2000 (2) SA 674
(CC) at para 44;
Bato
Star Fishing (Pty) Ltd v Minister of Enviromental Affairs
[2004] ZACC 15
;
2004
(4) SA 490
(CC) at para 22
25
South African Law Commission (Project 93), Report on
“Speculative
and Contingency Fees”
(November 1996) at paras 4.95 –
4.97. See also paras 1.19, 2.19, 3.23 and 4.101
26
Price Waterhouse
at para 40
27
Price Waterhouse
at para 41
28
Price Waterhouse
at para 45
29
“legal
practitioner”
is defined in s 1 of the Act to mean an
attorney or advocate
30
s 2(1)(a) of the Act
31
s 2(1)(b) of the Act
32
s
3 of the Act provides:
(1)(a)A contingency fees
agreement shall be in writing and in the form prescribed by
the Minister of Justice,
which shall be published in the Gazette, after consultation
with the advocates’
and attorneys' profession.
(b) The Minister of Justice
shall cause a copy of the form referred to in
Paragraph (a) to be tabled in
Parliament before such form is put into operation.
(2)
A contingency fees agreement shall be signed by the client
concerned
or, if the client is a juristic person, by its duly authorised
representative, and the
advocate concerned, who shall thereby become a party to
the agreement
(3) A contingency fees
agreement shall state-
(a) the proceedings to which
the agreement relates:
(b) that before the agreement
was entered into, the client-
(i) was advised of any other
ways of financing the litigation and of their
respective implications:
(ii) was informed of the
normal rule that in the event of his, her or it
being unsuccessful in the
proceedings, he, she or it may be liable to
pay the taxed party and
party costs of his, her or its opponent in the
proceedings;
(iii) was informed that he,
she or it will also be liable to pay the success
fees in the event of
success; and
(iv) understood the meaning
of the purport of the agreement;
(c) what will be regarded by
the parties to the agreement as constituting success or partial
success;
(d) the circumstances in
which the legal practitioner’s fees and disbursements relating
to the matter are payable;
(e) the amount which will be
due, and the consequences which will follow, in the event of partial
success in the proceedings,
and in the event of the premature
termination for any reason of the agreement;
(f) either the amounts
payable or the method to be used in calculating the amounts payable;
(g) the manner in which the
disbursements made or incurred by the legal practitioner on behalf
of the client shall be dealt with;
(h) that the client will have
a period of 14 days, calculated from the date of the agreement,
during which he, she or it will
have the right to withdraw from the
agreement by giving notice to the practitioner in writing: Provided
that in the event of
withdrawal the legal practitioner shall be
entitled to fees and disbursements in respect of any necessary or
essential work
done to protect the interests of the client during
such period, calculated on an attorney and client basis; and
(i)the manner in which any
amendments or other agreements ancillary to that contingency fees
agreement will be dealt with.
(4) A copy of any contingency
fees agreement shall be delivered to the
client concerned upon the
date on which agreement is signed.”
33
s
4 of the Act provides:
“
(1) Any offer of
settlement made to any party who has entered into a contingency fees
agreement may be accepted after the legal
practitioner had filed an
affidavit with the court, if the matter is before court, or has
filed an affidavit with the professional
controlling body, if the
matter is not before court, stating-
the full terms of the
settlement;
an estimate of the amount or
other relief that maybe obtained by taking the matter to trial;
an estimate of the chances
of success or failure at trial;
an outline of the legal
practitioner’s fees if the matter is settled as compared to
taking the matter to trial;
the reasons why settlement
is recommended;
(f) that the matters
contemplated in paragraph (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.
(2) The affidavit referred
to in subsection (1) must be accompanied by an
affidavit by the client
stating -
that he or she was
notified in writing of the terms of the settlement;
that the terms of the
settlement were explained to him or her, and that
he or she understands and
agrees to them; and
His or her attitude to the
settlement.
(3) Any settlement made
where a contingency fees agreement has been
entered into, shall be made
an order of court, if the matter was before
court.”
34
s
5 of the Act provides:
“
(1) A client of a
legal practitioner who has entered into a contingency fees
agreement and who feels
aggrieved by any provision thereof or any 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 body, to such body or person as the
Minister of Justice may
designate by notice in the Gazette for the purpose of
this section.
(2) Such professional
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 if
in his, her or its opinion the provision of fees are
unreasonable or unjust.”
35
De La Guerre
at para 13
36
Price Waterhouse Coopers Inc and Others v National Potato
Co-Operative Ltd
2004 (6) SA 66
(SCA)
37
Price Waterhouse
at para 41
38
De la Guerre
at para 11
39
Mnisi v RAF
[2010] JOL 25857
(GNP)
40
Mnisi
at para 12
41
Mnisi
at para 13
42
Mnisi
at para 26
43
Mnisi
at para 27
44
De la Guerre
at para 12
45
Tecmed (Pty) Ltd v Hunter and Another
[2008] ZAGPHC 41
;
2008 (6) SA 210
(W)
46
Tecmed
at para 29
47
Thulo
v Road Accident
Fund 2011 (5) SA 446 (GSJ)
48
Thulo
at para 49 – 50
49
Mofokeng
v Road Accident Fund, Makhuvele v Road Accident Fund, Mokatse v Road
Accident Fund, Komme v Road Accident Fund
[2012] ZAGPJHC 150 (22
August 2012)
50
Mofokeng
at para 41
51
Tjatji and Others v Road Accident Fund
[2012]
ZAGPJHC 198 (19 October 2012)
52
Tjatji
at para 12 - 13
53
Tjatji
at para 21
54
De La Guerre
at para 13
55
Harksen v Lane NO and Others
[1997] ZACC 12
;
1998 (1) SA 300
(CC)
56
Law Society of South Africa v Minister of Transport
2011 (1)
SA 400
(CC) at para 32
57
Weare and Another v Ndebele NO and Others
[2008] ZACC 20
;
2009 (1) SA 600
(CC) at para 46
58
New
National Party of South Africa v Government of the Republic of South
Africa and Others
[1999] ZACC 5
;
1999 (3) SA 191
(CC) at para 24, quoted with
approval in
Affordable Medicines Trust v Minister of Health
[2005] ZACC 3
;
2006 (3) SA 247
(CC) at para 82. See also:
Bel Porto School
Governing Body and Others v Premier, Western Cape, and Another
[2002] ZACC 2
;
2002 (3) SA 265
(CC) para 45 – 46
59
Law
Society
at para 32-35
60
Merafong
Demarcation Forum and Others v President of the Republic of South
Africa and Others
[2008] ZACC 10
;
2008 (5) SA 171
(CC) para 63
61
Eg:
S v Hollenbach
1971 (4) SA 636
(NC)
62
Eg:
Ex parte Swain
1973 (2) SA 427
(N)
63
Law Commission Report at para 1.19
64
Law Commission Report at para 3.8 – 3.10.
65
Law Commission Report at para 3.19
66
Law
Commission Report at para 3.23
67
In
De la Guerre
it amounted to an amount of R120 000, which
the attorney of record had carried for a period of two years
68
Commission Report at para 4.94 – 4.97
69
Weare
[2008] ZACC 20
;
2009 (1) SA 600
(CC) at para 72
70
Harksen
at para 54
71
Mohlomi
v Minister of Defence
[1996] ZACC 20
;
1997 (1) SA 124
(CC) para 12;
Potgieter
v Lid van die Uitvoerende Raad: Gesondheid, Provinsiale Regering,
Gauteng
2001 (11) BCLR 1175
(CC) para 6;
Moise v Greater
Germiston Transitional Local Council: Minister of Justice and
Constitutional Development Intervening (Woman's
Legal Centre as
Amicus Curiae)
[2001] ZACC 21
;
2001 (4) SA 491
(CC) para 14;
Engelbrecht v
Road Accident Fund and Another
2007 (6) SA 96
(CC) para 31
72
Law Commission Report at para 4.40 and 4.41.
73
Law
Commission Report
at p (x)
74
Law Commission Report
at 4.15 and 4.111
75
Druker,
The Law of Contingency Fees in South Africa
(2007)
at 91
76
J Sarkin and N Fourie,
“The Contingency Fees Bill: opening
the doors of justice or Pandora’s Box?”
SA Public
Law (1997) volume 12, 214 at 219
77
s 1(v) of the Act provides:
“ “
proceedings”
means any proceedings in or before any court of law or any tribunal
or functionary having the powers of a court
of law, or having the
power to issue, grant or recommend the issuing of any licence,
permit or other authorisation for the performance
of any act or the
carrying on of any business or other activity, and includes any
professional services rendered by the legal
practitioner concerned
and any arbitration proceedings, but excludes any criminal
proceedings or any proceedings in respect of
any family law matter.”
78
Law Commission Report at para 3.8.
79
Law Commission Report at p 91
80
Mofokeng
at para 54 – 61