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[2014] ZAWCHC 87
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Darries v Fielies (14788/2013) [2014] ZAWCHC 87 (9 June 2014)
THE REPUBLIC OF
SOUTH AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
CASE
NO: 14788/2013
DATE:
09 JUNE 2014
In the matter
between:
CLIVE AMOS
DARRIES
..........................................................................
Applicant
Versus
JAMES EDWARD
FIELIES
.................................................................
Respondent
JUDGMENT:
9 JUNE 2014
BOZALEK, J
[1] In these
proceedings Applicant seeks an order against Respondent, his former
attorney, setting aside a contingency fee agreement
as being invalid
and of no force and effect together with other ancillary relief.
[2] Applicant
instructed Respondent to recover damages on his behalf for personal
injuries he suffered in a motor-vehicle accident
which took place in
September 2003.
[3] On 27 December
2004 the parties entered into the disputed written contingency fees
agreement (‘the agreement’) in
terms of the
Contingency
Fees Act, 66 of 1997
.
[4] The relief
sought herein by Applicant was opposed by Respondent who filed an
opposing affidavit. However, when the matter was
argued on 27 May
2014 there was no appearance for Respondent. From the bar Mr Van
Heerden, counsel for Applicant, advised that
Respondent was aware of
the hearing date and in unsuccessful settlement negotiations had
asked that the matter be removed from
the roll but this request had
been refused.
[5] Applicant’s
claim against the Road Accident Fund (‘the Fund’) was
eventually settled on 16 August 2010 upon
acceptance of the Fund
paying the amount of R1 433 736.00 in respect of general damages and
damages for loss of earnings and an
amount of R11 912.02 in respect
of past medical expenses. The Fund also tendered an undertaking in
terms of
section 17(4)(a)
of the relevant Act relating to the
provision of future medical expenses. Prior to settlement an amount
of R110 550.85 had been
paid by the Fund directly to the hospital
which treated Applicant after the Department of Health had instituted
a supplier’s
claim for past medical and hospital expenses.
[6] A few days after
the settlement was reached Respondent requested the actuary whose
services had been used in the matter to value
the
section 17(4)(a)
undertaking by the Fund. The actuary placed a value of R476 714.00 on
the undertaking but made no provision for contingencies.
Instead,
under a note headed ‘Contingencies’ he recorded
‘omitted/to be negotiated’.
[7] In September
2010 Respondent provided a statement of account to Applicant in which
he charged a contingency fee of 25% on an
amount of R2 032 913.80
made up as follows:
i. the capital
payment of R1 433 736.00;
ii. the value of the
undertaking in the amount of R476 714.00;
iii. past hospital
expenses in the amount of R110 551.85; and
iv. past hospital
expenses paid in terms of the settlement in the amount of R11 912.02.
[8] Respondent’s
contingency fee amounted to the handsome sum of R508 222.45. After
certain further disbursements were paid,
including counsel’s
fees, hospital, medical and doctor’s fees. Applicant received
the amount of R581 930.65. Respondent
then instructed a consultant to
tax a party and party bill of costs and, during April 2011 Applicant
received a further, and apparently
as far as Respondent was
concerned, a final payment R335 546.24 after the party and party
costs had been taxed and recovered.
[9] Applicant was
unhappy with the fees charged and, in October 2010, a complaint was
laid on his behalf with the Cape Law Society
against Respondent. In
September 2013, evidently so as to interrupt the running of
prescription and with a view to obtaining the
repayment of amounts
alleged to have been wrongfully deducted by Respondent, these
proceedings were instituted. To date the Law
Society has still not
finalised its hearing of the complaint against Respondent. Earlier
this month it advised Applicant’s
attorney that its council had
directed that the matter stand over pending finalisation of these
proceedings.
[10] Respondent
maintains that he is entitled to the 25% contingency fee which he
charged and in his opposing affidavit explains
in more detail how he
arrived at this figure as follows:
‘…
Fielies (referring to himself) (was) forced to use what he had in his
possession, namely, a fees statement of Adv
Moses, which amounted to
R278 271.25. Fielies then proceeded to calculate his fees based on
that.
The amount of R278
271.25 x 2 = R556 542.50.
Fielies then
proceeded to quantify his fees of 25% of R2 032 913.80 – R508
228.55. And he took the lesser of the two amounts
(R508 228.55) as
his fees’.
THE
CONTINGENCY
FEES ACT AND
THE AGREEMENT
[11] In Price
Waterhouse Coopers Incorporated & Others v National Potato
Co-Operative Ltd & Others
2004 (6) SA 66
SCA at 78C, the court,
per Southwood AJA, stated as follows:
‘The
Contingency Fees Act 66 of 1997 (which came into operation on 23
April 1999) provides for two forms of contingency fee
agreements
which attorneys and advocates may enter into with their clients. The
first, is a “no win, no fees” agreement
(section 2(1)(a))
and the second is an agreement in terms of which the legal
practitioner is entitled to fees higher than the normal
fee if the
client is successful (section 2(1)(b)). The second type of agreement
is subject to limitations. Higher fees may not
exceed the normal fees
of the legal practitioner by more than 100% and in the case of claims
sounding in money this fee may not
exceed 25% of the total amount
awarded or any amount obtained by the client in consequence of the
proceedings, excluding costs
(section 2(2)). The Act has detailed
requirements for the agreement (section 3), the procedure to be
followed when a matter is
settled (section 4) and gives the client a
right of review (section 5). … The clear intention is that
contingency fees be
carefully controlled. The Act was enacted to
legitimise contingency fee agreements between legal practitioners and
their clients
which would otherwise be prohibited by the common law.
Any contingency fee agreement between such parties which is not
covered
by the Act is therefore illegal.’
[12] In Tjatji v
Road Accident Fund and Two Similar Cases
2013 (2) SA 632
the Court
was required to consider the validity of contingency fee agreements
concluded when the proceedings to which they were
related were at an
advanced stage and after it was found that the pre-existing
contingency fee agreements did not comply with the
requirements of
the
Contingency Fees Act. The
Court held that although on the face of
it the new agreements appeared to be valid, as the prescribed form of
agreement had been
used, in substance, however, they were invalid as
a result of the failure by the parties to observe the requirements of
the Act.
It held further that, despite not stating so expressly, the
Act undoubtedly visited non-compliance with invalidity. In this
regard
the Court relied on the findings by the Court in Price
Waterhouse [supra] and went on to state as follows: ‘As both
the
initial and new contingency fee agreements are invalid, the
common law will apply. Under the common law the plaintiff’s
attorneys
are only entitled to a reasonable fee in relation to the
work performed. Taxation of a bill of costs is the method whereby the
reasonableness of a fee is assessed. The plaintiff’s attorneys
are therefore only entitled to such fees as are taxed or assessed
on
an attorney and own client basis’.
[13] In the present
matter although the contingency fee agreement was concluded at an
early stage, it is the content of that agreement
which arguably
renders it invalid and of no force and effect.
[14] The agreement
appears to follow in part the prescribed format but falls short of
the Act’s requirements in many respects.
To mention but some of
these: in the clause dealing with the issue of the client/applicant
being advised of other ways of financing
the litigation it is
recorded that this is not applicable: provision is made for the
appointment of an advocate and the agreement
is in fact signed by the
counsel who acted in the matter. However, all of the substantive
provisions relating to the terms of the
agreement between the client
and the advocate are left blank. The most important defect, however,
is the contradictory provisions
relating to the fee which Respondent
would earn in the event of a successful result. Clause 6, although
obscurely worded, appears
to state that if the claim met with success
Respondent would be entitled to double his normal fees or 25% of the
total amount awarded,
whichever is the lower, excluding costs. In the
succeeding clause, clause 7, the agreement appears to provide that in
the event
of Applicant being partially successful the attorney would
be entitled to 25% of the amount settled upon. Neither success nor
partial
success is defined in the agreement. These two clauses,
either taken together or separately, make no sense and do not comply
with
the requirements of the Act. They are contradictory or obscure
and, most importantly, do not provide that upon a successful result
Respondent would be entitled to double his normal fees or 25% of the
award, whichever was the lower.
[15] As will be seen
Respondent’s position throughout is that he was entitled to a
flat 25% contingency fee without properly
measuring this against his
normal fee as is required by the Act. To compound matters it is clear
that Respondent, despite that
elapse of many years, has taken no
steps to draw a bill of costs which sets out the fees to which he
claims to be entitled. Given
the description of the work performed in
the matter and the limited extent of the litigation I regard it as
highly improbable that
Respondent will ever be able to justify a fee
approaching R500 000.00 in a matter which was resolved before the
trial commenced.
[16] Be that as it
may, and in accordance with the findings in Price Waterhouse and
Tjatji, in the light of the obscure and/or contradictory
provisions
of the agreement and, provisions are on any interpretation
non-compliant with the Act, it follows that the agreement
is invalid
and of no force and effect. It must therefore be set aside with the
result that Respondent is only entitled to such
fees as are taxed or
assessed on an attorney and own client basis.
[17] Since the
exercise of taxing such a bill of costs has regrettably not
commenced, notwithstanding that Applicant has been disputing
the fees
and disbursements which he has been charged for more than three
years, it follows that Respondent will have to be directed
to tax
such a bill of costs and must be put to terms in this regard. Given
the time that has elapsed since the initial complaint
was made I
regard a period 45 days as more than adequate within which Respondent
must file his bill of costs with the taxing master.
I should add in
this regard that in his opposing affidavit Respondent repeatedly
complains that the original file in this matter
was improperly
removed from his control by Applicant’s present legal
representative. I am satisfied, however, that a full
copy of such
file has long since been delivered to Respondent.
[18] The ancillary
relief which Applicant seeks is that Respondent pays to him the
difference between the bill of costs as duly
taxed (or agreed) and
the amount deducted by Respondent in respect of fees and
disbursements. There can be no difficulty with
such relief which
flows naturally from the declaratory order sought in the main prayer.
Applicant also seeks interest on such balance
with effect from 1 May
2011 until the date of payment. Applicant’s counsel motivated
for this date on the basis that it was
some six months after
Respondent initially accounted to Applicant and by which time
Respondent had taxed a party and party bill
of costs. It was thus
reasonable to have expected Respondent to have taxed an attorney and
own client bill by this date in order
that he could justify claiming
his fee be it double his fees or 25% of the award, whichever was the
lesser. I accept both the logic
and the fairness of this reasoning,
namely, that if Respondent is unable to tax a fee in the amount which
he has already charged,
deducted and enjoyed he has, in effect,
enjoyed the fruits of money to which he was not entitled and should
therefore be required
to pay interest thereon.
[19] Finally,
Applicant seeks an order that Respondent pay the costs of the present
application on the scale as between attorney
and own client. In
support of this prayer counsel submitted that Respondent had
improperly attempted to exploit the contingency
fee agreement by not
limiting it as section 2(2) of the Act required and, furthermore, by
purporting to take a percentage fee on
‘amounts’ or
‘awards’ that did not fall under the provisions of the
Act. This was a reference to Respondent
claiming a 25% success fee on
the value of the Fund’s undertaking in terms of section
17(4)(a) of the Act (without even applying
a contingency factor),
past hospital expenses paid directly to the Department of Health and
past hospital expenses paid in terms
of the settlement.
[20] Without
expressing an opinion on two of these components, I am certainly of
the opinion that charging a 25% success fee on
the purported
actuarial value of the section 17(4) undertaking, without applying a
contingency factor and without seeking any input
from Applicant, was
completely inappropriate conduct on the part of Respondent. To these
complaints can be added several more but
I will mention only two. It
is clear that Respondent has dragged his heels in responding to
Applicant’s long-standing complaint
concerning his fee and has
stubbornly asserted a right to a 25% success fee where the agreement
upon which that is based was clearly
non-compliant with the Act.
Secondly, and without touching upon the reasonableness of counsel’s
fee in this matter, I note
that to that fee counsel added a 15%
‘contingency’ in the amount of R36 295.25. I can see no
basis for counsel charging
such a ‘contingency fee’ as a
surcharge and certainly it finds no basis in agreement into which he
entered. Respondent,
however, paid this fee without demur.
[21] In these
circumstances I consider that there is ample justification for a
costs order against Respondent on the attorney and
own client basis.
In the result the follow order is made:
1. The “CONTINGENCY
FEE AGREEMENT” entered into between Applicant and Respondent in
respect of fees payable by Applicant
to Respondent in pursuance of
Applicant’s claim against the Road Accident Fund in respect of
an accident in which Applicant
was involved on 23 September 2003, a
copy whereof is attached to the Founding Affidavit marked “CD1”
is declared invalid,
void and of no force or effect;
2. Respondent is
directed to deliver to Applicant within 45 (FORTY-FIVE) days of this
Court Order a fully itemised and detailed
accounting in the form of
an attorney and own client Bill of Costs drawn on the High Court
scale as promulgated from time to time
in terms of the Rules Board
for Courts of Law Act 107 of 1985, supported where necessary by
vouchers, as well as disbursements
incurred in case number 2773/2007
in the matter between Applicant and the Road Accident Fund; and
3. Respondent shall
tax such Bill of Costs, if Applicant so requires, and on 30 (THIRTY)
day notice to Respondent failing which
Applicant may set the Bill
down for taxation on notice to Respondent;
4. Respondent shall
pay to Applicant any difference between the Bill of Costs as duly
taxed and the amount deducted by Respondent
in respect of fees and
disbursements within 7 (SEVEN) days of such taxation;
5. Respondent shall
pay interest on any balance to be repaid at the rate of 15,5% per
annum from 1 May 2011 to date of payment;
6. Respondent shall
pay the costs of this application on the scale as between attorney
and own client.
[22] Finally, I must
record some observations concerning the complaints which were lodged
on behalf of Applicant relating to the
fees which he was charged with
two professional bodies, namely, the Cape Law Society in relation to
Respondent’s fee and
the Cape Bar Council in relation to the
fees charged by the counsel who was engaged to represent Applicant.
As previously mentioned,
even though a complaint was lodged with the
Law Society on behalf of Applicant in October 2010, after the elapse
of more than three
years no substantial progress appears to have been
achieved. Had any disciplinary proceedings which the Law Society
initiated been
pursued by it with more vigour then the present
litigation may have proved unnecessary. As it was Applicant was
forced to institute
these proceedings in order to avoid prescription.
[23] As regards the
Bar Council it would appear that a complaint was laid in December
2010 but on the papers before me again there
is no indication that
the complaint was followed up or any action was taken by the Bar
Council in the matter. In the result I will
be forwarding a copy of
this judgment to both professional bodies for their consideration
and, if they deem it necessary, for further
action.
L J BOZALEK
JUDGE OF THE HIGH
COURT