Case Law[2024] ZAGPJHC 683South Africa
Oosthuizen and Another v Rene Fouche Incorporated and Others (022383/2022) [2024] ZAGPJHC 683 (26 July 2024)
Headnotes
Summary
Judgment
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# South Africa: South Gauteng High Court, Johannesburg
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## Oosthuizen and Another v Rene Fouche Incorporated and Others (022383/2022) [2024] ZAGPJHC 683 (26 July 2024)
Oosthuizen and Another v Rene Fouche Incorporated and Others (022383/2022) [2024] ZAGPJHC 683 (26 July 2024)
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sino date 26 July 2024
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REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG DIVISION,
JOHANNESBURG
Case
No: 022383/2022
1.
REPORTABLE: NO
2.
OF INTEREST TO OTHER JUDGES: YES
26
July 2024
In
the matter between:
JOHANNES
LOUIS OOSTHUIZEN N.O.
1
st
Applicant
(In
his capacity as Trustee of the
Mosike
Esther Ratabane Trust IT000277/2018(G))
ELIZABETH
VORSTER N.O.
2
nd
Applicant
(In
her capacity as Trustee of the
Mosike
Esther Ratabane Trust IT000277/2018(G))
and
RENE
FOUCHE INCORPORATED
1
st
Respondent
(Registration
Number: 2015/132057/21)
GIDEON
PETRUS SMITH
2
nd
Respondent
SARAH
ALICE FOUCHE N.O
3
rd
Respondent
(In
her capacity as the Executrix of the
Estate
Late Rene Ian Fouche - Masters Ref 019411/2021)
THE
MASTER OF THE HIGH COURT, JOHANNESBURG
4th
Respondent
NTOMBIFIKILE
QUITENESS RATABANE
(Identity
Number: 7[…])
5th Respondent
This
judgment was handed down electronically by circulation to the
parties’ legal representatives by email. The date and time
for
hand-down is deemed to be 14h00 on 26 July 2024
Summary
Contingency Fee Agreement
– invalidity – substantive and procedural compliance
required.
Contingency Fee Agreement
- Determination of “normal fees” – application of
“success fee” mark-up
to work done before agreement
concluded and work done after success achieved.
Constitution section
28(2) – pure waiver of a child’s rights
ultra vires
the powers of the guardian.-
JUDGMENT
TURNER AJ
[1]
This matter addresses the validity of a
contingency fee agreement, the validity of an agreement in terms of
which a child’s
guardian purported to waive the child’s
rights, the
locus standi
of
the applicants to challenge those agreements and various other issues
related to the fees charged by the attorneys appointed
in a medical
negligence matter involving a minor with cerebral palsy.
[2]
MR (“the minor”) was born in
September 2003 at a state hospital and was later diagnosed with
cerebral palsy. In about
August 2011, the minor’s mother, NR
(“the guardian”) consulted with Joe Hubbart Attorneys and
Conveyancers (“JHA”)
in relation to a possible claim
arising from the circumstances of the minor’s birth at the
hospital. Action proceedings were
then initiated in late 2011 by JHA
against the MEC for Health (“the MEC”) with the guardian
named as the plaintiff,
in her representative capacity.
[3]
Cerebral palsy is the term used for a group
of disorders caused by abnormal brain development or damage to the
developing brain.
It can manifest in different ways and may affect a
person’s ability to move, maintain balance, her posture and the
ability
to control her muscles. It appears that the minor’s
cerebral palsy was the result of birth asphyxia caused by the
negligence
of employees of the state hospital at the time of her
birth. Although no details of the minor’s disabilities are
provided
in the current papers, she is described in the affidavits as
being “severely disabled”.
[4]
In August 2016, a court order granted by
Mojapelo DJP in this Court confirmed the liability of the MEC to the
minor. In September
2017, a further court order granted by Mojapelo
DJP confirmed the quantum of the MEC’s liability to the minor
in amount of
R23,633,780.00, with more than R18 million allocated for
future medical expenses. The September 2017 order included provisions
creating a special trust to receive the funds to be paid out by the
MEC.
[5]
The applicants are the trustees of the
special trust established for the minor pursuant to the September
2017 order.
[6]
The first respondent is René Fouche
Incorporated, the firm of attorneys that acted for the guardian (in
her representative
capacity) in 2016 and 2017 when litigating against
the MEC. The second respondent was a director in that firm at the
time; the
third respondent is the executor of the deceased estate of
the other director in that firm. I refer to the firm and its
directors
collectively as “RFI”. The Master and the
guardian are both cited as respondents for their respective interests
in
the matter but no relief is sought against them and neither
participated in the hearing.
[7]
The answering affidavit records that RFI
was incorporated in 2015 with two directors, namely Gideon Petrus
Smith and the late René
Ian Fouche, both of whom had been
employed as associates at JHA before RFI was formed. At some time in
2015, the guardian moved
from JHA and became a client of RFI and Mr
Smith continued to work on the minor’s claim as a director at
RFI (no longer as
an associate at JHA). The answering affidavit also
records that after the incorporation of RFI, RFI and JHA worked “in
association”
(without explaining the term).
[8]
No
details are provided in the answering affidavit as to the work done
on the minor’s claim against the MEC by JHA prior to
2015 or of
the state of the proceedings when RFI took over from JHA. Limited
details are provided in relation to what was done
after RFI took
over. The following chronology and details are extracted from what is
set out in the affidavits and from what appears
in the narrative on
the “attorney and own client” bill
[1]
and the “Client disbursement sheet” produced by the
respondents to justify the fees they charged the minor.
[9]
The summons and the particulars of claim
against the MEC were prepared and delivered by JHA in around December
2011. The particulars
of claim, settled by counsel, was 10 pages. The
MEC’s plea was delivered in June 2012 (4 pages).
Thereafter, JHA claim
to have prepared a series of expert notices
which appear to have been relatively limited, varying from 2 pages to
9 pages.
[10]
The application for a trial date was
delivered during July 2015, by which time approximately R80,000 in
disbursements had been incurred
by JHA. It appears that a
separation of liability from quantum was agreed shortly before the
trial.
[11]
No details are provided by the respondents
as to precisely when during 2015 RFI took over the matter from JHA.
Further, no written
agreement between JHA and the guardian has been
disclosed recording how the transfer of the matter was managed and
there are no
documents recording any agreement between RFI and JHA as
to how costs (and risk) that may have been incurred prior to the
takeover
would be handled.
[12]
It appears that trial preparation
(including consultations) took place in 2015 and the first half of
2016. The additional disbursements
incurred between July 2015 and
July 2016 (for legal related costs) amounted to approximately
R20,000.
[13]
Four and a half years after summons was
issued and just one month before the trial date, on 20 July 2016, RFI
arranged for the guardian
to sign a “Contingency Fee Agreement”
(the “CFA”). The details of the CFA are discussed further
below.
By this stage, all of the plaintiff expert reports were filed
and I have not seen any indication that the MEC had filed an expert
report disputing the plaintiff’s position.
[14]
The bill of costs claims fees for the trial
on the merits for a period of three days on 4, 5 and 8 August 2016.
However, no details
are given of what happened in court on those
days. All that is recorded in the answering affidavit is that “
the
Defendant eventually capitulated, and an Order was granted by the
Honourable Deputy Judge President Mojapelo on the basis that
“the
Defendant was liable for 100% of the ... agreed or proven damages
”
.
It is not clear whether a trial even commenced or whether the days
were spent negotiating with an agreed outcome ultimately being
made
an order in the roll call by Mojapelo DJP.
[15]
After the merits success, the right to
obtain an interim payment of R2,000,000 from the MEC was secured.
RFI’s final
accounting to the trust in 2022 indicates
that the interim payment of R2,000,000 was received on 27 March 2017.
There is an oddity
though as RFI’s bill of costs indicates that
it instructed the Sheriff to attach and remove assets in execution
three times
during June and July 2017 (shortly before the quantum
trial). RFI claims from the guardian in its bill of costs for paying
the
Sheriff R70,000 in June and two amounts of R140,000 in July 2017
- one amount for 10 July 2017 and the second amount for 12 July
2017.
In the context of this matter, it seems strange for the attorneys to
have spent R350,000 of the minor’s funds on the
Sheriff to
attach assets where the quantum trial was set down just a few months
later on 5 September 2017. None of this is explained
by the
respondents.
[16]
After the merits order was handed down, RFI
prepared Rule 36(9)(a) notices and went about consulting and
arranging for medico legal
reports to be prepared to address the
quantum of the claim. After expert reports were exchanged and minutes
of expert meetings
were prepared, the matter proceeded to court on 5
September 2017. The matter was finally resolved when an order was
granted by
Mojapelo DJP confirming that the MEC was liable to pay the
net amount of R21,633,780.00 (being R23,633,780.00 less the interim
payment of R2,000,000.00).
[17]
The order granted by Mojapelo J on 5
September 2017 recorded
inter alia
that
the MEC was required to pay the R21,633,780.00 over nine instalments
from 5 October 2017 to 5 June 2018.
(1)
The damages amount payable to the minor of
R23,633,780.00 was calculated as set out in the “Statement of
Agreed amounts”
presented to the court as follows:
·
General damages :
R 1,600,000;
·
Future loss of earnings
R 1,655,714;
·
Future medical expenses
R 18,729,198;
·
Costs of the trust (at 7.5%)
R 1,648,868.
(2)
Clause 8 of the order provided for RFI to
disburse, on behalf of the minor, out of the funds received “medical
and paramedical
expenses incurred for treatment of the minor as well
as any amounts reasonably required for the minor’s general
wellbeing”.
The amounts paid and fees charged for doing so are
discussed below.
(3)
Clause 9 called for the plaintiff’s
attorneys to cause a trust to be established within six months of the
order and for those
attorneys to pay all monies held by them for the
benefit of the minor to the trust after deduction of their fees,
costs and disbursements.
(4)
Clause 10 set out the basic requirements of
the trust instrument.
(5)
Clause 13 required the defendant to pay the
plaintiff’s taxed or agreed costs on the party and party scale,
including the
costs of all of the plaintiff’s experts and the
costs of preparing the eight sets of trial bundles.
[18]
Notably, when the matter was called and the
order sought before Mojapelo DJP in September 2017, no affidavit by
the attorneys or
the guardian was presented to the Court, so neither
the terms (nor existence) of the CFA was disclosed . The respondents
provided
a very sketchy account in the answering affidavit of what
occurred on 5 September 2017 and, during argument before me, counsel
was compelled to accept that the available evidence indicates that
these documents were not handed up.
[19]
The respondent has argued, in the answering
affidavit and before me, that it was not necessary for the
respondents to hand up these
documents because the matter was not
settled as contemplated by section 4 of the Contingency Fees Act
(“the Act”).
They argue that the parties’
representatives made submissions to the Court which led to the order
that was granted by Mojapelo
DJP, that there was no signed settlement
agreement nor an offer of settlement made by the MEC to be accepted.
On this basis, the
respondents contend that they were not required to
meet the requirements of section 4 of the Act.
[20]
To complete the chronology, I also deal
with events which occurred after the September 2017 order before
dealing with the issues
in dispute.
[21]
Additional entries in the bill of costs
which deal with “medical expenses, financial support and
aftercare” reveal additional
amounts were paid by RFI before
and after the court orders:
(1)
From August 2015 until July 2016, an amount
of approximately R850 per month was paid to Nkanyezi Stimulation
Centre and RFI also
made
ad hoc
payments to the guardian of approximately R2,850 per month. Prior to
July 2016, it appears that an aggregate amount of approximately
R15,000 was disbursed for medical expenses and R40,000 for financial
assistance.
(2)
From August 2016, after the order
confirming the MEC’s liability, the monthly amounts increased
and additional
ad hoc
payments were made to service providers.
(3)
After the quantum order in September 2017,
more frequent and larger amounts were paid to the guardian and to
other service providers
as well as to retail stores Game and
Bradlows, an “Auto Mechanical Service” and in November
2018, an amount of R123,000
was paid for the purchase of a motor
vehicle. Between August 2016 and the end of 2018 the additional
payments made by RFI for the
minor/guardian amounted to approximately
R700,000.
[22]
In December 2017, three months after the
September 2017 order, RFI prepared a document headed “Interim
deed of settlement
and mandate of instruction (subject to
confirmation of costs)” which was signed by the guardian on 6
December 2017. (the
“December 2017 agreement”). In the
document, the guardian purports to confirm, retrospectively, that she
authorised
RFI and conferred the necessary authority on RFI “
to
settle my action, in my representative capacity on behalf of ... the
minor
”
. It also purports to
record her agreement and confirmation that the attorneys were
entitled to deduct from the capital amount paid
by the MEC:
R311,667.40 in respect of advances made to the guardian;
R1,300,000.00 in respect of the recommended house for the
minor and
the guardian; an interim contribution pending taxation of R895,546.00
in respect of counsel’s fees; and a provision
in the amount of
R6,879,573.70 in respect of RFI’s costs, fees and
disbursements. I deal with the December 2017 agreement
in detail
below as its validity is challenged by the applicants.
[23]
RFI paid funds over to the applicants to
hold in special trust for the minor over the period 2018 to 2022.
[24]
In July 2022, RFI provided its final
accounting to the applicants in which it confirmed the following
funds were received by RFI
on behalf of the minor:
Total
capital
R
23,633,780,18
Interim
(27.03.17)
R2
000 000
Final
(05.09.17}
R
21,633,780.00
Taxed
PP
R
1,863,087.06
Interest
(trust investment)
R
163,567.06
R
25,660,434.18
[25]
Despite an enquiry directed by the
applicants, no evidence of a taxed party and party bill of costs was
presented in the evidence
before me. For current purposes, I shall
treat the amount of R1,863,087.12 as being the payment for costs made
by the MEC following
a taxation on a party and party basis. However,
I do so without making any finding in this regard as the existence of
such a taxed
bill may be an issue in future. I point out that this
amount would have been the taxed amount recovered from the MEC, to
include
the costs of the advocates, attorneys and experts involved.
[26]
Of the R25,660,434.18 received by RFI, the
amount ultimately paid over by RFI to the trust was R14,763,029.96.
After taking into
account the disbursements paid as “financial
assistance” and for “medical expenses, financial support
and aftercare”
(approximately R100,000 before July 2016 and
approximately R700,000 after July 2016), a rough calculation
indicates that the total
amount retained by RFI as legal fees and
disbursements exceeds R9,000,000 - in circumstances where the taxed
party and party bill
(including all fees, all expert costs and
disbursements) is alleged to have been just R1,863,087.12.
#
# The relief claimed and
issues in dispute
The relief claimed and
issues in dispute
[27]
The applicants contend that RFI has
withheld far more than it ought to have and that a far greater
proportion of the R25,660,434.18
quantum awarded ought to have been
paid to the trust for the benefit of the minor. In support of the
claim for payment, the applicants
contend that the CFA concluded in
July 2016 is invalid and that RFI overreached on the fees charged
even before applying the claimed
100% mark-up “success fee”
in terms of the CFA. The applicants contend that RFI had a fiduciary
duty towards the minor
and that it breached that duty.
[28]
In summary, the relief sought by the
applicants, confirmed by Mr Arnoldi SC in argument, is the following:
1. That the
Contingency Fee Agreement be declared invalid and unenforceable.
2. That the
December 2017 agreement be declared invalid and unenforceable.
3.
That the first, second and third respondents, jointly and severally,
refund and pay back fees debited and taken by the
first respondent to
the applicants in the amount of R3,896,250.43
[2]
alternatively
in
such an amount as the Honourable Court deems reasonable.
5. Costs of this
application.
[29]
While the respondents acknowledge their
fiduciary duty, they deny the invalidity of the CFA and the
allegations of overreaching.
They also challenge the application on
two grounds
in limine
:
first they contend that the applicants do not have
locus
standi
to bring this application and
seek the relief they do; second, they contend that the terms of the
December 2017 agreement constitute
a bar to any subsequent challenge
to the fee arrangement.
[30]
In the respondents’ heads of
argument, they also launched an
in
limine
attack on the attorney of record
for the applicant, contending that the attorney had previously acted
for the first respondent or
its deceased director, Mr René
Fouche and that his involvement constituted prejudicial a conflict of
interest. No affidavits
were filed to support these allegations and
so there was no evidence to support or contradict these allegations.
At the outside
of the hearing, the respondents abandoned this
objection.
[31]
The principle underpinning both of the
respondent’s arguments
in limine
is that neither the Trustees nor the court should
be entitled to interfere with the arrangement they concluded with the
guardian,
who they refer to as their client. In my view, these
in limine
defences
can be given short shrift. Further, the fact that these arguments
were raised and pursued by RFI indicate to me that RFI
has not
acknowledged or paid heed to the interests of the disabled minor at
the centre of the dispute and so has not understood
its
constitutional or fiduciary duty at all in circumstances where a
conflict of interest arose. I now deal with the merits of
each of
these objections.
[32]
An evaluation of
locus
standi
in
judicio
considers two elements: first,
a party’s capacity to litigate and second, the interest that
the party has in the relief claimed
or in the right to claim the
relief. There is no dispute that the Trustees have the capacity to
litigate in discharging their duties.
The respondents challenge the
locus standi
of the Trustees on the second element. They argue that paragraphs 7
and 8 of the September 2017 court order contemplated the quantum
being paid by the MEC into their trust account, authorised them to
make deductions from those funds for
inter
alia
fees, costs and disbursements and
then required them to:
“
9.2
Pay all monies held in trust by them for the benefit of the
minor to the trust after deduction of their fees, costs and
disbursements.”
[33]
The respondents argue that the trustees’
interest and involvement only commenced once they received payment
into trust of
the balance after the attorneys had made their
deductions. They contend that because the trust only has an interest
in the funds
that were paid over to the trust
after
deduction of their fees, costs and disbursements, the trustees
therefore have no right to interrogate the fees, costs and
disbursements
deducted before the monies were paid over. They say
that up to that point, the only relationship that existed was the one
between
RFI and the guardian and consequently only the guardian had
the right to challenge the validity of the CFA and the basis on which
fees, costs and disbursements were deducted.
[34]
They then contend that, in the December
2017 agreement, the guardian confirmed that they had deducted funds
correctly. As a result
of her signing the December 2017 agreement, so
the argument goes, the guardian was precluded from challenging their
fee deductions.
[35]
The
main problem with these arguments is that they have ignored the
rights and interests of the party with the primary interest
in
determining the validity of the CFA, being the minor herself. That
interest does not lie with her guardian. The role of the
guardian is
to assist the minor in exercising the minor’s rights, the
minor’s rights do not become the rights of the
guardian.
[3]
**-
[36]
In all applications of the common law and
statutory law, our courts (and legal practitioners) are obliged to
ensure that the law
is interpreted and applied in accordance with the
Constitution. Section 28 of the Constitution deals with “Children”
and confirms
inter alia
, that:
“
28(1)
Every child has the right
(h) to have a legal
practitioner assigned to the child by the state, and at state’s
expense, in civil proceedings affecting
the child, if substantial
injustice would otherwise result;
(2) A child’s
best interests are of paramount importance in every matter concerning
the child.”
[37]
The September 2017 Court order granted by
Mojapelo DJP recognised that the interests of the minor needed to be
protected and the
trust was established to safeguard the funds and
interests of the minor after the quantum was awarded. The Trustees
were required
to receive into trust, for the benefit of the minor,
the proceeds of the court order and then to manage those funds in the
interests
of the minor.
[38]
Counsel for the respondent did not
challenge the proposition that the trustees would have
locus
standi
to pursue recovery proceedings,
if the full capital amount due to the minor was not paid into the
trust. Once one recognises that
the challenge by the Trustees to the
validity of the CFA has, as its central goal, the recovery by the
Trustees of the full capital
amount due to the minor – to be
held in trust – then there is no doubt that the Trustees have
the necessary interest
and therefore
locus
standi
to pursue the relief claimed. If
fees and disbursements were deducted incorrectly or unlawfully by
RFI, then the full capital amount
has not been paid to the Trust.
[39]
In
support of the argument relying on the terms of the December 2017
agreement to avoid a challenge to their fees, the respondents
rely on
a confirmatory affidavit which was prepared for the guardian during
October 2022 which, although not expressly stated to
be the case,
seems from the context to have been prepared for the guardian by RFI.
The affidavit records that the guardian concluded
the CFA and the
December 2017 agreement on behalf of her child, that the Trustees
seek to interfere with and override the “free
consensus”
between her and RFI and that she did not want the consequences of the
agreements interfered with. In their
heads of argument, the
respondents argue strenuously that if the court rejects reliance on
the December 2017 agreement, it would
be undermining fundamental
concepts of consensus and reliance, a party’s rights to
“dignity and autonomy” and
“cornerstones of the law
of contract ... freedom ... sanctity ... and privity of contract”.
[4]
[40]
In argument before me, Counsel for the
respondents also argued that permitting interference by the Trustees
with the December 2017
agreement would impermissibly allow the
Trustees to supplant the decision-making authority of the guardian,
as the child’s
mother. Counsel emphasised that the Trustee’s
role was restricted to managing the funds in trust and did not extend
to making
decisions in the interests of the child, which remained
within the sole remit of the guardian.
[41]
While it may be correct that the Trustees
do not have the power to override the guardian’s day-to-day
decisions on the welfare
and treatment of the minor, the current
matter does not impinge on those matters. Instead, it invokes the
Court’s role as
upper guardian of the minor and addresses the
litigation and the costs of the litigation which are regulated by
inter alia
the
Act and the need to provide for a person with a severe disability. At
its heart are the fraught circumstances which arise in
many matters
where contingency fee agreements are used and where our courts have
repeatedly recognised the potential for abuse.
[42]
One need only consider the chronology of
events, the conflict of interests and the relative power dynamic
between RFI and the indigent
guardian to recognise the cynical nature
of this second
in limine
defence. By the time the December 2017 agreement
was prepared by RFI for the guardian to sign, court orders on the
merits and on
the quantum of the claim had been obtained; RFI had not
presented the CFA and affidavits to the court as required by the Act;
approximately
R10 million of the R23 million had already been
paid by the MEC into the RFI trust account; RFI had arranged for the
guardian
to be paid approximately R1,3 million in respect of a
“recommended house” and RFI was paying the guardian
monthly –
approximately R5,000 per month up to October 2017 and
then an additional R48,000 during November and December 2017.
[43]
All of the evidence indicates that the
guardian was completely dependent on RFI during this period and, no
doubt, was extremely
grateful for the result that had been obtained
for her daughter. It is completely improbable that the guardian would
have challenged
anything done by RFI at the time. The guardian was
not resourced or qualified to evaluate the need for the December 2017
agreement,
she was not resourced or qualified to assess the
reasonableness or lawfulness of the fees charged and as a
consequence, she was
obliged to trust that everything done by RFI
remained to be in the best interests of the minor.
[44]
However, viewed objectively, there was no
need for the guardian to sign the December 2017 agreement at all. The
document does not
generate any benefit for her or for the minor. All
of the necessary Court orders had been granted by this stage, the
payments from
the MEC were being received and the trust was being
established. The only reason that RFI would have prepared the
December 2017
agreement would have been to try to secure
its
interest against the interests of the minor
and the guardian.
[45]
RFI’s conduct thus created a direct
conflict of interest. To discharge their fiduciary and professional
duty, if the respondents
believed there was a justification for the
guardian signing the December 2017, they were obliged to recommend
that the guardian
obtained independent advice, to explain their
conflict of interest and why such advice was required. Where the
attorneys failed
to do so, this would constitute a breach of the
attorney’s duties.
[46]
Further,
the nature of the December 2017 agreement and particularly the
construction placed upon it by the respondents, amounts
to little
more than an attempt to waive the minor’s rights. The operative
elements of that agreement (which are now relied
upon by RFI) do not
regulate prospective arrangements for the benefit of the minor but
merely purport to waive existing rights.
Such an agreement is not in
the interests of the minor and consequently, is
ultra
vires
the
powers of the guardian
[5]
and falls to be set aside by the court as upper guardian of minor
children, applying the common law and section 28(2) of the
Constitution.
[47]
For these reasons, I dismiss the arguments
in limine
and
find that the December 2017 agreement is invalid and unenforceable.
[48]
In any event, it is also worth emphasising
that, having regard to the authorities set out below and my findings
on the validity
of the CFA, the agreement concluded in December 2017
could never validate a CFA that was already invalid.
[49]
Given the apparent conduct of RFI during
December 2017 in the face of a clear conflict of interest, I direct
that the matter should
be referred to the Legal Practice Council for
that professional body to consider whether action should be taken
against RFI and
its directors.
[50]
I now deal with the main issue in dispute –
the validity and enforceability of the CFA.
# Legal principles on
Contingency Fee Agreements
Legal principles on
Contingency Fee Agreements
[51]
The
recent judgments in
MKM
[6]
,
Mkuyana
[7]
and
Letsoale
[8]
record
and confirm the principles applicable when dealing with contingency
fee agreements and they deal extensively with the earlier
judgements
establishing these principles.
[9]
For current purposes, it is sufficient for me to summarise the
principles that are relevant to the current matter:
(1)
Non-compliance
with the Contingency Fees Act
[10]
renders
a contingency fee agreement invalid.
[11]
Compliance
with both substantive and procedural requirements is required.
(2)
Substantive
compliance includes ensuring that the “normal fees”
recorded in the CFA can be justified according to principles
of
reasonableness.
[12]
(3)
Before
the CFA is concluded, a full and proper assessment of the client’s
prospects of being successful should be undertaken.
[13]
(4)
The
CFA must be concluded at a sufficiently early stage of the
proceedings so that the requirements of the Act are complied with.
In
particular, at the time that the agreement is concluded, there must
be a risk of failure shared between client and attorney
which
justifies the “success fee” recorded in the CFA.
[14]
(5)
The
“success fee” allowed by the Contingency Fees Act is not
intended as compensation for funding the disbursements
of the case or
having to wait until a matter is concluded to receive payment. The
purpose of the success fee is to compensate the
attorney for the
prospective risk of undertaking the litigation.
[15]
(6)
The
entitlement under the Contingency Fees Act to “double”
the normal fee (or increase by 100%) is not an automatic
entitlement.
The percentage allowed for the success fee should also be subjected
to a principle of reasonableness, having regard
to the risk and the
assessment of the prospects of success.
[16]
This
assessment of risk and prospects is undertaken at the time the
contingency agreement is concluded.
(7)
Judicial
oversight is required in all cases where the matter to which the
contingency fee agreement applies is before the court
and is settled.
Such judicial oversight is a necessary procedural step given the
inherent risk of abuse and incentive to profit
that contingency fee
agreements carry with them.
[17]
(8)
The
Act is not intended to be a mechanism for a legal practitioner to
charge fees that are unreasonable or to unjustifiably increase
his
fee simply to place him in a position to recover the maximum of the
success fee which the Act allows.
[18]
(9)
An
invalid agreement cannot be replaced by a subsequent agreement which
seeks to improve or replace aspects of the invalid prior
agreement.
[19]
[52]
In the paragraphs below, I consider whether
there has been compliance with the Act. I also assess how RFI has
determined it “normal
fee” and applied the “success
fee” in charging the guardian, on behalf of the minor.
# Settlement contemplated
by section 4 of the Contingency Fees Act
Settlement contemplated
by section 4 of the Contingency Fees Act
[53]
The primary defence raised by RFI to resist
the arguments of invalidity of the CFA is that the content of section
4 of the Act is
not applicable on a proper interpretation and
application of section 4. RFI argues that the provisions of section
4, requiring
production of the CFA and affidavits, would only have
been triggered if there was a formal offer of settlement made by the
defendant
and accepted by the plaintiff. They say that in the current
matter, the MEC’s legal representatives could not get a formal
instruction to settle and so, in accordance with a practice developed
in the Johannesburg High Court, a Statement of Agreed Facts
and a
Statement of Agreed Amounts (determined by the experts for both
parties) was handed up in Court, and these statements were
relied on
by Counsel addressing the Court in support of the order being
granted. They say that by following this procedure where
Counsel had
to address these statements rather than merely hand up a settlement
agreement, there was no “offer of settlement”
as
contemplated by the Act and so there was no obligation on RFI to
comply with the requirements of section 4.
[54]
There was some uncertainty during argument
as to the onus or evidential burden carried by each party in a matter
such as this, where
the validity and enforceability of a CFA is
challenged. The default common law position is that contingency fee
agreements that
do not comply with the Act are unlawful and so, in my
view it follows that, an agreement purporting to be a contingency fee
agreement
must be regarded as invalid in the absence of evidence to
establish compliance and validity. An attorney who wishes to rely on
and enforce a contingency fee agreement must therefore produce the
evidence necessary to show substantive and procedural compliance
with
the Act.
[55]
Further, given the conflict of interest
inherent in these matters and the opportunity for abuse, as well as
the fact that the attorney
would have been at the centre of all
litigation and settlement activities, the attorney should always have
the necessary evidence.
If the attorney does not produce evidence to
show compliance with the Act, then the attorney suffers the
consequence of invalidity.
[56]
In the answering affidavit, the deponent
(an attorney) states the following when dealing with what occurred on
5 September 2017:
“
36.
The parties’ legal representatives, accordingly, prepared and
presented the Statement of Agreed Facts to the Honourable
Justice
Mojapelo whereafter the Honourable Justice gave judgment as per a
draft order, which draft order the Honourable Justice
Mojapelo made
an order of court. In view of the aforesaid, section 4 of the
Contingency Fees Act No. 66 of 1997 (‘the CFA’)
was not
applicable to the latter. This aspect will be addressed [sic] in full
hereafter.
37. The matter was
not settled between the parties. The Court Order was granted
subsequent to the parties presenting their
respective cases, with
reference also to the Statement of Agreed Facts.”
[57]
First, RFI did not produce the “Statement
of Agreed Facts” that was allegedly handed up in these
proceedings, notwithstanding
direct requests for its production from
the applicants and from me, during argument. What was produced was
the “Statement
of Agreed Amounts” which, in terms,
confirms that the quantum was agreed before the trial.
[58]
The
amounts that were recorded in the “Statement of Agreed Amounts”
were amounts reached through deliberations and agreement
by the
experts appointed by RFI and the MEC. It reflected the amounts which
both parties’ representatives accepted as resolving
the
dispute. To suggest that this procedure permits avoidance of section
4 of the Act flies in the face of all the established
authority which
requires judicial oversight of contingency fee agreements The SCA in
MKM
has
made it clear that even where there is no formal offer of settlement,
the attorney must still comply with section 4 of the Act
where an
order is granted without contestation. When interpreting the
Contingency Fees Act, like
any other document, one must have regard
to the text, context and the purpose of the legislation
[20]
and if the respondents’ approach were to be adopted, this would
undermine the purpose of the Act requiring judicial oversight
to
protect indigent persons.
[59]
Second, along with other documents prepared
contemporaneously, RFI’s own bill of costs (item 967) records
the attendance on
5 September 2017 as follows: “
Attend
court – matter stood down pending settlement negotiations –
matter settled – settlement made an Order of
Court
.”
[60]
Third, the December 2017 agreement prepared
by RFI for the guardian to sign, records that the guardian conferred
the necessary authority
on RFI “
to
settle my action, in my representative capacity on behalf of ... the
minor
”
. This also shows that, in
December 2017, RFI considered that they had been involved in the
settlement of the action.
[61]
Last and in any event, no consideration has
been given to how the merits were resolved in August 2016. The
language used in the
answering affidavit is vague and no details are
given as to whether a trial actually proceeded and witnesses were led
and cross-examined.
In my view, the description given by the
respondent of what happened at the merits stage in 2016 –
namely that the MEC “eventually
capitulated” –
reflects a likely settlement of the merits in that the MEC agreed to
settle the merits on the basis
that the Department would be liable
for 100% of the minor’s agreed or proved damages. Such a
settlement would also have required
production of the CFA and the
affidavits required by section 4.
[62]
In my view, whether the order granted was
expressly agreed with the authority of the MEC or granted based on
submissions that the
lawyers and experts involved had jointly
motivated the pre-determined outcome, the attorneys were required to
comply with the provisions
of section 4 of the Act. In this
case, where the affidavits and CFA were not handed up, RFI failed to
comply with the requirements
of section 4 of the Act. For this reason
alone, I find that the CFA is invalid and unenforceable.
[63]
Given the arguments made before me and
potential future disputes that may be raised by the respondents, it
is necessary to set out
additional reasons why RFI could not rely on
the CFA or claim the full fees they do in terms of the draft Attorney
Client bill
of costs.
[64]
At the time that the merits were resolved
in August 2016, the ink on the CFA had hardly dried since the CFA was
concluded less than
a month beforehand. Counsel for the respondent
argued before me that an attorney was only entitled to conclude a
contingency fee
agreement when there is a reasonable prospect of
success and so I should accept in this case, that RFI was only in a
position to
make this determination in July 2016. This argument has
no merit at all. First, the attorney has not produced any evidence to
support
such an argument. Second, the bill of costs indicates that
the pleadings were exchanged and experts were appointed years
earlier.
The fact that both JHA and RFI pursued the matter indicates
(at least
prima facie)
that
they considered the matter had reasonable prospects of success from
an early stage.
[65]
Taking account of the authorities referred
to above, it appears clear to me that if the CFA had been presented
at Court in 2016
(or in 2017), it would
not
have been accepted as a valid and enforceable agreement. It was
concluded far too late in the proceedings and at a time when the
risk
in the litigation was likely significantly reduced. There
particularly was no justification for RFI to conclude an agreement
extracting a 100% mark-up from their indigent client at such a late
stage where there appears to have been little or no substantive
opposition to the merits of the minor’s claim.
[66]
A further argument raised before me by the
respondents was directed at trying to distinguish between a practice
that had apparently
developed in this court which differs from the
practice in the Gauteng Division, Pretoria. The way in which the
point was addressed
in the answering affidavit is as follows:
“
72.2
At the time in question, the practice in the above Honourable Court,
was that a Court Order will only note when no valid
contingency
agreement was entered into or where the Presiding Judge declared the
same to be invalid, where draft orders in settled
matters were
presented to the court. I understand this was the opposite of the
practice in the Gauteng Division of the High Court,
Pretoria.
72.3 In
other words, in matters where the Presiding Judge was of the view
that there were valid contingency agreements,
in settled matters no
inscriptions were made on the court orders. In such matters the
contingency fee agreement and the affidavits
had to be handed up to
the Presiding Judge who would then consider same.”
[67]
In argument, counsel suggested that the
practice relieved RFI from the obligation to hand up the affidavits
required by section
4.
[68]
The
fundamental problem with this line of argument is that a practice
cannot excuse non-compliance with the Act. The views expressed
by
Mojapelo DJP himself in
Masango
[21]
and
the consistent views expressed in this and other Courts over the
requirement to disclose the CFA and affidavits in any settled
matter,
means that there would be no lawful basis for a practice that permits
attorneys to rely on a CFA but withhold disclosure
of the CFA and
affidavits when a matter is settled.
#
# The fees and
disbursements charged
The fees and
disbursements charged
[69]
I now consider the details of how RFI
charged the minor (represented by the guardian) relying on the
provisions of the CFA. I do
so first, to express my displeasure as to
what appears to have been a flagrant abuse of the Act and second, to
avoid doubt over
my views on the remaining disputes. This additional
part of the judgment is also included following submissions made by
counsel
for the respondent to the effect that it was not in the
interests of the minor for me to find in favour of the trustees
because
(and I summarise): RFI would appeal and challenge all
attempts by the trustees to enforce the judgment; that RFI would drag
out
procedural matters such as taxations etc. with the result that
the trustees would spend more of the minor’s funds on
litigation
and not on the minor. This thinly veiled threat,
suggesting that it was in the minor’s interest for the
applicants to abandon
funds unlawfully retained by RFI, is no doubt
the product of counsel’s instructions and shows the wholly
inappropriate approach
that has been and is adopted by RFI.
[70]
My first concern in relation to the CFA and
the manner in which it was applied by RFI arises in respect of the
period during which
the “success fee” mark-up was applied
to attorney’s fees. RFI applied the success fee to all
fees charged
on the matter from 2011(before their involvement
commenced) to the end of their involvement (long after the September
2017 order
was granted).
[71]
I agree with the applicant that the
starting point for charging a “success fee” mark-up
should be the date on which
the CFA was concluded. In the absence of
very exceptional circumstances that are explained and motivated,
there would ordinarily
be no justification for an attorney applying a
success fee mark-up to fees incurred prior to the date on which the
contingency
fee agreement was concluded. The fees incurred during an
earlier period would have been incurred in terms of a different
regime
and not in terms of the CFA.
[72]
This also applies to the alleged “normal
fee” for time-based charges The Bill of Costs relied on by RFI
reflects that
RFI has charged R5,000 per hour for all attendances,
including the attendances at JHA, with a total fee on a time basis of
R1 280
683.
[73]
Even if a valid CFA had been concluded in
July 2016, there was no basis for RFI to charge what it contended was
its agreed “normal
fee” in 2016 of R5000 per hour for
time related matters, to attendances prior to July 2016. Even if
R5000 per hour was an
acceptable “normal fee” when the
agreement was signed in 2016, there is no evidence to support any
agreement to charge
a R5000 fee for the period prior to 2016.
[74]
Inexplicably, RFI even applied its alleged
2016 “normal fee” of R5000 and the success fee mark up of
100% (making it
R10,000 per hour) to fees incurred from 2011 to 2015,
while the matter was being run by a different firm, JHA. These fees
are charged
for work done by JHA, before RFI was even incorporated.
RFI has provided no basis to justify charging for work done by JHA
and
no justification for charging elevated fees and a mark-up on
these charges. Again, this is something that should be considered by
the Legal Practice Council’s disciplinary committee.
[75]
There also appears to me to be no
justification for an attorney applying a success fee mark-up to fees
incurred after the quantum
of the claim has been awarded. After that
date, the attorney does not carry any litigation risk. The work done
in collecting a
debt or paying out disbursements to the minor and
guardian is very different from work done in preparing a case for
trial. During
the period after the quantum award, there is no risk to
the attorney in not being paid for undertaking the residual work. The
attorneys
can recover their normal fees for debt recovery or for work
done in finalising the matter.
[76]
The anomalies that arise if this principle
is not applied are apparent from the facts of this case, discussed
below.
[77]
My second concern relates to how RFI set
its “normal fee”. In describing RFI’s “normal
fee” for attendances
charged on a time/hourly basis, the CFA
records that the “normal” hourly fee can change,
depending on the “full
enforceable value” of the claim.
The CFA records that RFI can charge R1,000 per hour for claims below
R100,000; R2,500 per
hour for claims exceeding R100,000 but less than
R2,000,000; R3,500 per hour for claims exceeding R2,000,000 but less
than R10,000,000
and R5,000 per hour for claims exceeding
R10,000,000. Apparently, the scale of charges would only be
determined at the end of the
case as this would be the point at which
the “full enforceable value” of the claim is apparent. In
other words, the
same work carried out by the same person within the
firm will ultimately be charged to the client at either R1,000 per
hour or
R5,000 per hour, depending on the eventual result.
[78]
This formulation reflects that not only the
success fee mark-up but also the amount charged as a “normal
fee” is triggered
by the success of the litigation as the
attorney receives a greater benefit (higher hourly fee) if a higher
quantum is achieved.
In my view, this undermines the intended
function of the “normal fee” in the Act, which is to
reflect the fee that
is normally charged to paying clients whether
the case is won or lost.
[79]
In this case, there is no evidence of an
agreed “normal” hourly rate for work done on a time basis
at the outset of
the case. As a consequence, this form of agreement
does not provide any certainty in relation to a “normal fee”
for
work carried out. In my view, an attorney cannot rely on a
template formulation such as this. It must, in each case, at the
beginning
of a case and before work is done, provide the specific
fees that are normally be charged for work done by each professional
(or
rank of professional) in the firm.
[80]
Further, on the principles set out in the
above authorities and in the absence of exceptional circumstances, it
seems to me that
there would seldom be a justification for charging a
100% success fee mark-up on fees incurred after the point that
success has
been achieved on the merits, particularly where an
interim payment is secured. In most of those cases, like the current
one, the
risk of litigation and the risk of recovery will have
dissipated.
[81]
My
third concern relates to the “normal fee” charges for
attendances that are not calculated on a time basis. For these
attendances, RFI records its “normal” charge as being a
multiple of the party and party tariff prescribed by the Uniform
Rules of Court, again on a sliding scale : 1,5 times the tariff on
claims that do not exceed R100,000; 2 times the tariff for claims
between R100,000 and R2,000,000; 2,5 times the tariff on claims
between R2,000,000 and R10,000,000; and 3,5 x the tariff on
claims
exceeding R10,000,000.
[22]
Again, the applicable scale is determined only at the end of the
litigation and based on the quantum ultimately ordered. As noted
above, this impermissibly elides the determination of the “normal
fee” with the success of the litigation.
[82]
These attendances involve work such as
making copies of documents for experts or counsel; perusing invoices
or statements of account
received from experts or the Sheriff;
attending to service and filing of documents, etc. On a review of the
bill of costs presented
by RFI, it appears that this is the area
where the most significant abuse has taken place. It is not clear to
me at all, and remains
unexplained, why the time spent copying a
document in a R10,000,000 matter is worth more than double the time
spent copying a similar
document in a R100,000 matter.
[83]
The manner in which the surcharge to
produce the “normal fee” has been applied in the bill of
costs is as follows.
(1)
The bill of costs was prepared in
accordance with the party and party tariff. At the end of the bill,
all of the attendance-based
fees (charged at the tariff rate) from
2011 to 2018 are aggregated.
(2)
Then a premium is added as a “Surcharge
Fee (4x)”, multiplying the tariff total by four, to determine
the total of the
alleged “normal fee”. In this
application, RFI acknowledge that the surcharge was not applied in
accordance with its
own interpretation of the CFA – a multiple
of 4x was applied instead of the agreed 3,5x.
(3)
After that the time-based fee is added to
the(overstated) “normal” attendance-based fee and the
“success fee”
mark-up is applied by doubling the total.
[84]
I set out a few attendances based items
from the bill of costs below to highlight how these calculations are
implemented and the
anomalous results that arise:
(1)
Item 322 – Drawing application for a
trial date. This is a standard notice, irrespective of the size of
the matter. The party
and party tariff for preparing the notice is
R105.50. RFI contends that its “normal fee” for such an
attendance if
the matter has a low value is R211. However, in the
current matter, it charged R844 (R105.50 x 4 x 2).
(2)
Item 350 – attendance to service and
filing (21km), time taken 1 hour. This is a simple delivery of papers
which will not
be any different in a big or small matter. The party
and party tariff is R243. RFI contends that its “normal fee”
for
such an attendance if the matter has a low value is R486.
However, in the current matter, it charged R1 944 (R243 x 4 x 2).
[85]
The prejudicial and ultimately abusive
consequence of RFI’s approach is also exposed through the
disbursement payments made
to Nkanyezi Stimulation Centre. (Bill
Items 1029 to 1097).
(1)
R850 was paid to the Centre on
approximately 35 occasions for treatment to the minor. Making a
payment is an administrative task
and does not involve any legal
complexity. Further, most of the payments were made after the merits
order was granted and when
there was no risk at all to the attorneys.
(2)
The bill of costs reflects that the party
and party tariff for an attendance to pay a bill is R158.50. Applying
the stated multiple
of 3.5 times, this value becomes R554.75 (on the
4 times multiple actually applied, it was R634). In effect, RFI says
its “normal”
fee for making each such administrative
payment of R850 is R554.75 (or R634).
(3)
Applying the “doubling”
mechanism, this fee then increases to R1,109.50 or R1,268.
(4)
Effectively, without making an alternative
arrangement that might be beneficial to the minor once the merits
were resolved and an
interim payment was received, RFI charged the
minor R1,268 on each occasion merely to make a payment of R850
with
the minor’s own money
.
[86]
On the evidence before me, RFI has not
provided any justification for charging the “normal” fee
it has sought to charge
for non-time attendances. In circumstances
where the contingency fee agreement has been declared invalid, there
is no contractual
basis to have charged those fees. RFI has not put
up any other basis on which it should be entitled to the surcharge of
3,5x (or4x).
# Taxation of the Attorney
and Own Client bill of costs
Taxation of the Attorney
and Own Client bill of costs
[87]
There is a section in the respondents’
heads of argument dealing with the “authority of the Taxing
Master” and
the inability of the court to interrogate a bill of
costs without setting aside the taxation on review. However, all of
these arguments
are misplaced as there is no evidence in this matter
that the attorney/ client bill value deducted from the capital amount
was
subjected to taxation. In argument, counsel for the respondent
confirmed that the attorney/client bill has not been taxed and so
there is no decision of the taxing master to be reviewed.
[88]
Having
recognised the fragility of its CFA, the respondents contend that if
the CFA is rendered invalid and that they are only entitled
to
recover normal fees, they should be entitled to re-draw the
attorney-client bill of costs that was prepared previously. This
is
resisted by the applicants, who contend that this is an opportunistic
tactic to extract additional amounts. The applicants rely
on a series
of judgments to resist this attempt.
[23]
[89]
I agree with the applicants that no
contractual or legal basis has been set out to justify redrawing of
the bill. The respondents
have not identified which items they
contend would be amended, which items have been omitted from the
original bill but would now
be included, or why one this Court should
consider that the original bill was not correct or not reasonable.
[90]
If, after receiving this judgment, the
parties are unable to settle the remaining disputes (through
mediation or otherwise), then
the question of residual liability will
be determined by taxation of the existing bill of costs. In
performing that taxation, the
taxing master should have regard to the
party and party bill taxed with the MEC as paragraph 13 of the
September 2017 order records
the costs payable by the MEC to the
guardian (obo the minor) should have included the attorney tariff
costs and the costs of the
expert reports delivered, the qualifying
fees of the relevant experts, costs of senior and junior counsel and
the reasonable travelling
expenses to and from medico legal
appointments. The party and party bill should therefore deal
comprehensively with the disbursements
incurred by the attorneys.
# Amount repayable
Amount repayable
[91]
RFI has argued that no payment can be
ordered in these proceedings because any amount recoverable would not
be a liquidated amount
and would have to be determined on evidence in
different proceedings. As I understand the substance of the argument,
RFI contends
that it would only be liable to pay funds to the
applicants if the applicants could prove the precise extent to which
the minor
had been overcharged and until then, they would not be
liable to pay over any amount.
[92]
This argument also does not withstand
scrutiny. In circumstances where the agreement relied on to charge
and withhold the funds
is invalid, there is no basis on which to have
charged those fees in the first place. The amount of R3,896,250.43
claimed by the
applicants is the difference between the amount
charged as fees by RFI after charging the success fee - being
R5
715 245,16 -and the amount of R1 818 994.73 which is calculated with
reference to the RFI attorney- client bill of costs: allowing
R5 000
per hour for time related work and the standard tariff for non-time
related attendances.
[93]
The applicants contend that payment of this amount of
R3 896
250.43 can be ordered in these proceedings because it is calculated
using RFI’s own bill of costs. They have reserved
their rights
to pursue recovery of additional amounts in the future, by
challenging individual line items on the bill, if the bill
of costs
is subjected to taxation.
[94]
In my view, this approach is consistent
with the interests of justice. There is no reason to delay ordering
payment of the amount
of R3,896,250.43 to the applicants, for the
benefit of the minor. Having declared the contingency fee agreement
invalid and made
my findings on the fees charged above, there is no
contractual or other basis on which the applicants would be entitled
to retain
this amount.
[95]
If either party sought to subject the RFI
attorney-client bill to taxation, the taxing master would determine
inter alia
:whether
the fee of R5 000 per hour was justified and if not, the amount
due to RFI would decrease; whether all of the items
(including
disbursements and fees for prior to 2015) on the bill were justified
and if not, the amount due to RFI would decrease;
whether a premium
should be allowed on the tariff for non-time related attendances, in
which case the amount due to RFI would increase
. Consequently, that
process may deliver slightly more or less for RFI, but until that
taxation is finalised, there is no justification
for RFI retaining
these funds. If the matter is not settled and after taxation takes
place it is found that RFI is owed an additional
amount, the trustees
at the time would be in a position to pay that difference on behalf
of the minor.
# Conclusion
Conclusion
[96]
In the circumstances, I find that the
applicants have
locus standi
to bring the current application in their capacities as Trustees of
the special trust established for the benefit of the minor.
[97]
The applicants have established that the
relevant affidavits were not presented to the court when they ought
to have been. Consequently,
the CFA is invalid and unenforceable. The
CFA is also invalid and unenforceable due to its late conclusion
(just one month before
the trial) where RFI claimed a full 100%
success fee and because the fees charged as a “normal”
fee by RFI are not
justified on the evidence.
[98]
The evidence also indicates overreaching by
RFI. There is no evidence to justify RFI charging the minor for work
done by JHA. Further,
the imposition of a success fee mark-up of 100%
on fees during periods before the conclusion of the CFA and also
during the period
after the Court orders were granted, when there was
no longer a litigation risk, is also unreasonable and unenforceable.
[99]
Having regard to all of these findings, the
applicants have established that they are entitled to the relief they
seek, including
payment of R3,896,250.43. No claim was made for
interest and so no order for interest is made.
[100]
The
bill of costs prepared by RFI as an “attorney and own client”
bill for purposes of charging the guardian (obo the
minor) was not
subjected to taxation. It remains open to either party to submit this
bill to taxation. When assessing the bill,
the Taxing Master is
required to consider the authorities referred to herein and in
particular, Mkuyana
[24]
and the cases referred to in paras 26 – 36 of that judgment. To
avoid doubt, I confirm that RFI is required to make payment
of the
R3,896,250.43 immediately and is not entitled to withhold payment
pending the taxation of the bill.
[101]
As to costs, if the respondents had engaged
in this litigation
bona fide
and in accordance with their fiduciary duties to the minor, they
would not have raised the defences that have been raised. In my
view,
the defences raised by the respondent cannot be justified and all
were directed at attempting to prevent transparency into
the manner
in which the minor’s affairs were managed by RFI. This
justifies a punitive costs order.
[102]
In the circumstances, I make the following
order:
2
(1) The Contingency
Fee Agreement dated 20
th
July 2017 (Annexure JL4 to the
Founding Affidavit) is declared invalid and unenforceable.
(2) The Interim
Settlement Agreement and Mandate Instruction dated 6
th
December 2017 (Annexure JL 5 to the Founding .Affidavit) is declared
invalid and unenforceable.
(3) The 1
st
,
2
nd
and 3
rd
Respondents, jointly and severally
the one paying the other to be absolved, are ordered to pay to the
applicants, for the benefit
of the minor, the amount of R3 896 250,43
(4) Costs of this
application are to be paid by 1
st
, 2
nd
3
rd
Respondents on an attorney and client scale, jointly and severally
the one paying the other to be absolved;
(5) A copy of this
judgment is to be sent to the disciplinary committee of the Legal
Practice Council to investigate and determine
whether disciplinary
action should be taken against RFI and its directors.
DA TURNER AJ
Gauteng Division,
Johannesburg
Counsel for the
applicants: Adv F Arnoldi SC; Adv L Keijser
Instructed by: Vorsters
Inc
Counsel for the 1
st
,
2
nd
& 3
rd
respondents: Adv M Letzler
Instructed by: Rene
Fouche Inc
Date of hearing: 24
January 2024
Date of Judgment: 26 July
2024
[1]
The bill of costs identifies the defendant as the Road
Accident Fund, but I have assumed this to be a typo and an
oversight.
[2]
The calculation of this amount is addressed below
[3]
Christie's
Law of Contract in South Africa 8
th
Ed 2022 p 290 -291 and the cases cited there
[4]
To
this end, reliance is placed on Barkhuizen v Napier 2007 (7) BCLR
691 (CC).
[5]
The guardian is only empowered to make an agreement for
the minor that is in the interests of the minor.
[6]
Road
Accident Fund v MKM obo KM & Another
2023 (4) SA 516
(SCA)
(“MKM”).
[7]
Mkuyana
v Road Accident Fund
2020 (6) SA 405
(ECG) (“Mkuyana”).
[8]
Letsoale
v Road Accident Fund
2023 (6) SA 533
(GP) (“Letsoale”).
[9]
E.g.
PriceWaterhouseCoopers Inc and others v National Potato Cooperative
Ltd
2004 (6) SA 66
(SCA); Ronald Bobroff and Partners Inc v De La
Guerre
2014 (3) SA 134
(CC); Masango v RAF
2016 (6) SA 508
(GJ);
Fluxmans Inc v Levenson 2017 (2) SA 520 (SCA).
[10]
Contingency
Fees Act 66 of 1997
.
[11]
MKM
para 36.
[12]
Letsoale
paras 7 – 10.
[13]
Tjati
v RAF
2013 (2) SA 632
(GSJ) para 23; Letsoale para 19.
[14]
Letsoale
para 13; Mkuyana para 17.
[15]
Mkuyana
para 17; Letsoale para 15.
[16]
Letsoale
paras 37 – 39; Mkuyana paras 17 and 18. Mkuyana para 20;
PriceWaterhouseCoopers para 41. Mkuyana paras 29 –
36.
[17]
Mkuyana paras 15 and 16; MKM paras 8 and 36; Letsoale para 12 - 13.
[18]
Letsoale
para 18; Mkuyana para 14.
[19]
Letsoale
para 9; Tjati paras 24 – 25.
[20]
University Of Johannesburg v Auckland Park Theological Seminary and
Another 2021 (6) SA 1 (CC)
[21]
Masango v
Road Accident Fund
2016 (6) SA 508
(GJ
)
[22]
In fact, RFI claimed after multiplying the tariff rate by 4
[23]
Hershen
Sohnn v Martins
1915 NPD 310
;
Ramsay
Webber Inc v Anastassopoulos 2022 JDR 2127 (GJ).
[24]
Mkuyana
v Road Accident Fund
2020 (6) SA 405
(ECG).
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