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[2014] ZACC 2
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Ronald Bobroff & Partners Inc v De La Guerre; South African Association of Personal Injury Lawyers v Minister of Justice and Constitutional Development (CCT 122/13 , CCT 123/13) [2014] ZACC 2; 2014 (3) SA 134 (CC); 2014 (4) BCLR 430 (CC) (20 February 2014)
Links to summary
CONSTITUTIONAL COURT OF SOUTH AFRICA
Cases CCT 122/13 and CCT 123/13
In the matter between:
RONALD BOBROFF & PARTNERS
INC
................................................................
Applicant
and
JUANNE ELIZE DE LA
GUERRE
........................................................................
Respondent
And in the matter between:
SOUTH AFRICAN ASSOCIATION
OF PERSONAL INJURY
LAWYERS
.......................................................................
Applicant
and
MINISTER OF JUSTICE AND
CONSTITUTIONAL
DEVELOPMENT
.........................................................
First
Respondent
ROAD ACCIDENT
FUND
............................................................................
Second
Respondent
Neutral
citation:
Ronald Bobroff &
Partners Inc v De La Guerre; South African Association of Personal
Injury Lawyers v Minister of Justice and
Constitutional Development
[2014] ZACC 2
Coram:
Moseneke ACJ, Skweyiya ADCJ, Cameron J,
Dambuza AJ, Froneman J, Jafta J, Madlanga J, Van
der
Westhuizen J and Zondo J
Decided on:
20
February 2014
Summary:
Contingency fees –
Contingency
Fees Act 66 of 1997
– constitutionality of the Act as a whole –
constitutionality of
sections 2
and
4
of the Act – not
unconstitutional.
ORDER
On appeal from the North Gauteng High Court,
Pretoria:
The applications for
leave to appeal in both matters CCT 122/13 and CCT 123/13 are
dismissed with costs, including, where applicable,
the costs of two
counsel.
JUDGMENT
THE COURT:
Introduction
[1]
These are two applications for leave to
appeal that depend on the same issue, namely the constitutionality of
the Contingency Fees
Act
[1]
(Act). The South African Association of Personal Injury Lawyers
(Personal Injury Lawyers) sought an order in the North Gauteng
High
Court, Pretoria (High Court) declaring the Act unconstitutional as a
whole or, in the alternative, certain sections of it.
[2]
Before us the applicant in a related matter, Ronald Bobroff &
Partners Inc (Bobroff), a law firm, accepted that a declaration
of
constitutional invalidity was a prerequisite for its success in the
proceedings brought against it by a former client (Ms De
La Guerre).
[2]
At issue are contingency fees.
[3]
Under the common law, legal practitioners were not allowed to
charge their clients a fee calculated as a percentage of the
proceeds
the clients might be awarded in litigation.
[4]
The Act changed this. It makes provision for these fees
to be charged in regulated instances and at set percentages.
[5]
Certain Law Societies made rulings allowing their members to
charge in excess of the percentages set in the Act.
[6]
Uncertainty reigned in the attorneys’ profession about
the correct legal position in relation to contingency fees.
Could
these fees be charged only under the Act, or also outside its
provisions?
[3]
Bobroff was one of the firms which charged
more than allowed for in the Act, as the rules of its professional
association allowed.
Ms De La Guerre was charged 30 per
cent as a contingency fee, instead of the maximum of 25 per cent
allowed under the
Act.
[7]
After being awarded damages in litigation she challenged the
excess charge in legal proceedings in the High Court. The
Personal Injury Lawyers also brought proceedings in the High Court,
challenging the constitutionality of the Act. Both cases
were
heard by the same Full Bench of the High Court.
[8]
[4]
The High Court dismissed the application
seeking a declaration of unconstitutionality and found in Ms De La
Guerre’s favour
in her application.
[9]
Leave to appeal was refused by the High Court. Further
leave was also refused by the Supreme Court of Appeal on the
basis
that no reasonable prospects of success on appeal existed and that
there was no other compelling reason why it should be
heard.
[10]
As a final resort, this Court has now been approached by the
Personal Injury Lawyers and Bobroff for leave to appeal. Written
submissions were sought from the interested parties.
[11]
Ms De La Guerre, the Minister of Justice and Constitutional
Development and the Road Accident Fund all opposed the applications
for leave.
Should leave be granted?
[5]
We
accept that the matter is of great public interest, but leave should
nevertheless not be granted because there are no reasonable
prospects
of success. The judgment of the Full Bench is, in our view,
correct. It is not necessary to repeat its reasoning
in any
great detail in this judgment. We will only deal briefly with
the two main arguments put forward in the written argument.
For
convenience we will refer to them as the rationality review argument
and the reasonableness review argument.
The distinction between rationality and
reasonableness review
[6]
The
Constitution allows judicial review of legislation, but in a
circumscribed manner. Underlying the caution is the recognition
that
courts should not unduly interfere with the formulation and
implementation of policy. Courts do not prescribe to the
legislative arm of government the subject-matter on which it may make
laws. But the principle of legality that underlies
the
Constitution requires that, in general, the laws made by the
Legislature must pass a legally defined test of ‘rationality’:
“
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.”
[12]
[7]
A rationality enquiry is not grounded or
based on the infringement of fundamental rights under the
Constitution. It is a basic
threshold enquiry, roughly to
ensure that the means chosen in legislation are rationally connected
to the ends sought to be achieved.
[13]
It is a less stringent test than
reasonableness, a standard that comes into play when the fundamental
rights under the Bill of Rights
are limited by legislation.
[8]
In those cases the courts have a more
active role in safeguarding rights. Once a litigant has shown
that legislation limits
her fundamental rights, the limitation may
only be justified under section 36 of the Constitution.
[14]
Section 36 expressly allows only limitations that are
“reasonable and justifiable in an open and democratic society
based on human dignity, equality and freedom”.
[15]
[9]
The challenge to the constitutionality of
the Act is not clearly demarcated along the lines set out above.
However, closer consideration
shows that the attack on the
constitutionality of the Act as a whole is founded on rationality
review, and the attack on sections
2
[16]
and 4
[17]
specifically on reasonableness review.
Rationality
[10]
The Full Bench accepted that a rational
distinction may be made between the regulation of contingency fees
for attorneys and that
of champertous agreements
[18]
amongst lay persons:
[19]
“
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.
Second, legal
practitioners have specialised 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. 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.
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.”
[20]
[11]
That
there is a distinction is now accepted by the Personal Injury
Lawyers. But they question the wisdom of this distinction
made
by the Legislature, regulating only legal practitioners and not lay
persons. In doing so they ask us to venture beyond
rationality
into reasonableness, which courts cannot do under the guise of
rationality review. In addition, the fact that
regulation for
lay persons may also be wise does not mean that regulation of legal
practitioners is unwise. Thus, the rationality
review bears no
merit and should fail.
Limitation and reasonableness
[12]
The Personal Injury Lawyers’ other
attack is against sections 2 and 4 of the Act, based on the
limitation of fundamental rights.
But whose rights? It
appears as if there is an underlying reliance on access to justice
under section 34.
[21]
However, in the matter before us the right of access to justice
is that of the legal practitioners’ clients, not the
rights of
the legal practitioners themselves. The application was not
brought as a representative one under section 38 of
the
Constitution,
[22]
but as one where the Personal Injury Lawyers acted on their own
behalf. And even if the practitioners sought to bring it
on
behalf of others there is no evidence that their clients’
rights have been limited.
[13]
It
is for these reasons that there are no reasonable prospects of
success on appeal.
Order
[14]
The
applications for leave to appeal in matters CCT 122/13 and CCT 123/13
are dismissed with costs, including, where applicable,
the costs of
two counsel.
In CCT 122/13:
For the Applicant:
Advocate M Brassey SC and Advocate K Hopkins
instructed by Rontgen & Rontgen Inc.
For the Respondent:
Advocate B Ancer SC and Advocate A Berkowitz
instructed by Norman Berger & Partners Inc.
In CCT 123/13:
For the Applicant:
Advocate M Brassey SC and Advocate K Hopkins
instructed by Rontgen & Rontgen Inc.
For the First Respondent:
Advocate Q Pelser SC and Advocate L Maite instructed
by the State Attorney.
For the Second Respondent:
Advocate G Marcus SC, Advocate S Budlender and
Advocate N Mayosi instructed by Lindsay Keller.
[1]
66 of 1997.
[2]
Sections 2 and 4.
[3]
The Act defines a contingency fee agreement in
section 2(1) as—
“
an agreement with such client in which
it is agreed—
(a) 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;
(b) 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, for any such services rendered, if such client is
successful in such proceedings to the
extent set out in such
agreement.”
[4]
In Re William Emil Hollard v Paul H Zietsman
(1885) 6 NLR 93
at 96-7. See also
Price
Waterhouse Coopers Inc and Others v National Potato Co-operative Ltd
and Another
[2004] ZASCA 64
;
2004 (6)
SA 66
(SCA) (
National Potato
Co-operative
) at para 41;
Lekeur
v Santam Insurance Co Ltd
1969 (3) SA
(CPD) at 9; and
Incorporated Law
Society v Reid
(1908) 25 SC 612
at 615
and 618-9.
[5]
The Act stipulates that the fee charged may not
exceed the legal practitioners’ fees by more than 100 per
cent, and for
claims sounding in money it may not be more than 25
per cent of the total amount awarded.
[6]
Both the Law Society of the Free State and the
Law Society of the Northern Provinces made provision for contingency
fees under
the common law outside of the prescripts of the Act.
See
South African Association of
Personal Injury Lawyers v Minister of Justice and Constitutional
Development
[2013] ZAGPPHC 34;
2013
(2) SA 583
(GSJ) at para 3.
[7]
De La Guerre v Ronald Bobroff & Partners
Inc and Others
[2013] ZAGPPHC 33 (High
Court judgment) at para 4.
[8]
So constituted under
section 14(1)(a)
of the
Superior Courts Act 10 of 2013
.
[9]
High Court judgment above n 7 at paras 15-7.
[10]
Order of the Supreme Court of Appeal dated 9
September 2013.
[11]
The Directions of the Constitutional Court dated
8 November 2013 stated that:
“
1. The Chief
Justice and other Justices of this Court have considered the
application for leave to appeal and decided, in terms
of
rules 11(4)
and
19
(6)(b) of the Rules of this Court, to dispose of this matter
without hearing oral argument.
2. The parties must file
written submissions on behalf of the—
(a) applicant by Friday,
22 November 2013; and
(b) respondents by
Friday, 29 November 2013.
3. Further directions may
be issued.”
[12]
Merafong Demarcation Forum and Others v
President of the Republic of South Africa and Others
[2008]
ZACC 10
;
2008 (5) SA 171
(CC);
2008 (10) BCLR 969
(CC) at para 63.
[13]
In
Albutt v Centre
for the Study of Violence and Reconciliation and Others
[2010]
ZACC 4
;
2010 (3) SA 293
(CC);
2010 (5) BCLR 391
(CC) at para 51,
this Court held:
“
The Executive has a wide discretion in
selecting the means to achieve its constitutionally permissible
objectives. Courts
may not interfere with the means selected
simply because they do not like them, or because there are other
more appropriate means
that could have been selected. But,
where the decision is challenged on the grounds of rationality,
courts are obliged
to examine the means selected to determine
whether they are rationally related to the objective sought to be
achieved. What
must be stressed is that the purpose of the
enquiry is to determine not whether there are other means that could
have been used,
but whether the means selected are rationally
related to the objective sought to be achieved. And if,
objectively speaking,
they are not, they fall short of the standard
demanded by the Constitution.”
This was reiterated in
Democratic Alliance v
President of the Republic of South Africa and Others
[2012] ZACC
24
;
2013 (1) SA 248
(CC);
2012 (12) BCLR 1297
(CC) at para 32 where
this Court held that—
“
rationality review is really concerned
with the evaluation of a relationship between means and ends: the
relationship, connection
or link (as it is variously referred to)
between the means employed to achieve a particular purpose on the
one hand and the purpose
or end itself. The aim of the
evaluation of the relationship is not to determine whether some
means will achieve the purpose
better than others but only whether
the means employed are rationally related to the purpose for which
the power was conferred.
Once there is a rational
relationship, an executive decision of the kind with which we are
here concerned is constitutional.”
[14]
This Court has carried out such a limitations
analysis in numerous cases, the most recent of which being
Gaertner
and Others v Minister of Finance and Others
[2013] ZACC 38
and
Teddy Bear Clinic
for Abused Children and Another v Minister of Justice and
Constitutional Development and Another
[2013]
ZACC 35; 2013 (12) BCLR 1429 (CC).
[15]
Section 36 states:
“
(1) The rights
in the Bill of Rights may be limited only in terms of law of general
application to the extent that the limitation
is reasonable and
justifiable in an open and democratic society based on human
dignity, equality and freedom, taking into account
all relevant
factors, including—
(a) the nature of the
right;
(b) the importance of the
purpose of the limitation;
(c) the nature and extent
of the limitation;
(d) the relation between
the limitation and its purpose; and
(e) less restrictive
means to achieve the purpose.
(2) Except as provided in
subsection (1) or in any other provision of the Constitution, no law
may limit any right entrenched
in the Bill of Rights.”
[16]
Section 2 of the Act provides:
“
Contingency fees agreements
(1) Notwithstanding
anything to the contrary in any law or the common law, a legal
practitioner 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—
(a) 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;
(b) 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, for any such services rendered, if such client is
successful in such proceedings to the extent
set out in such
agreement.
(2) 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 per
cent: 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 per cent 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
calculating such excess, include any costs.”
[17]
Section 4 of the Act provides:
“
Settlement
(1) Any offer of settlement
made to any party who has entered into a contingency fees agreement,
may be accepted after the legal
practitioner has 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—
(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
contemplated in paragraphs (a) to (e) were explained to the client,
and the steps taken to ensure that the
client understands the
explanation; and
(g) that the legal
practitioner was informed by the client that he or she understands
and accepts the terms of the settlement.
(2) The affidavit referred
to in subsection (1) must be accompanied by an affidavit by the
client, stating—
(a) that he or she was
notified in writing of the terms of the settlement;
(b) that the terms of the
settlement were explained to him or her, and that he or she
understands and agrees to them; and
(c) 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.”
[18]
Champerty is an agreement to finance litigation
in exchange for part of proceeds. In this regard, see
National
Potato Co-operative
above n 4.
[19]
Id at para 46 where the Court held that
agreements in terms of which a person provides a litigant with funds
to prosecute an action
in return for a share of the proceeds of the
action were not contrary to public policy or void.
[20]
High Court judgment above n 7
at
paras 43-4. (Footnotes omitted.)
[21]
Section 34 of the Constitution reads:
“
Access to courts
Everyone has the right to have any dispute that can
be resolved by the application of law decided in a fair public
hearing before
a court or, where appropriate, another independent
and impartial tribunal or forum.”
[22]
Section 38 of the Constitution:
“
Enforcement of rights
Anyone listed in this section has the right to
approach a competent court, alleging that a right in the Bill of
Rights has been
infringed or threatened, and the court may grant
appropriate relief, including a declaration of rights. The
persons who
may approach a court are—
(a) anyone acting in their
own interest;
(b) anyone acting on behalf
of another person who cannot act in their own name;
(c) anyone acting as a
member of, or in the interest of, a group or class of persons;
(d) anyone acting in the
public interest; and
(e) an association acting
in the interest of its members.”