Mostert and Others v Nash and Another

• Jurisdiction: South Africa

Mostert and Others v Nash and Another
2018 (5) SA 409 (SCA)

2018 (5) SA p409

Citation	2018 (5) SA 409 (SCA)
Case No	604/2017; [2018] ZASCA 62
Court	Supreme Court of Appeal
Judge	Ponnan JA, Wallis JA, Willis JA, Swain JA and Pillay AJA
Heard	May 21, 2018
Judgment	May 21, 2018
Counsel	CDA Loxton SC (with J Bleazard) for the first and fourth appellants.; JH Dreyer SC (with J Bleazard) for the second and third appellants.; Q Pelser SC (with EL Theron SC) for the fifth and sixth appellants.; A Subel SC (with WJ de Bruyn) for the respondents.

Flynote : Sleutelwoorde

Pension — Pension fund — Appointment of curator by order of High Court — Remuneration of curator — Term of order that remuneration, in terms of agreement to be entered into between curator and Financial Services Board, be 'in accordance with norms of attorneys' profession' — Agreement entitling curator to fees as percentage of amounts recovered on behalf of C fund — Legality of — Whether 'in accordance with norms of attorneys' profession' — Whether infringing Contingency Fees Act 66 of 1997 — Whether contrary to common-law principle prohibiting contingency fee agreements — Financial Institutions (Protection of Funds) Act 28 of 2001, s 5(2).

Administrative law — Administrative action — What constitutes — Conclusion of D remuneration agreement between court-appointed curator of pension fund and Financial Services Board — Curator's appointment and entitlement to remuneration arising from terms of order of court, not from agreement — Conclusion of agreement not amounting to administrative action.

Attorney — Fees — Contingency fees — Contingency fee agreement — In E respect of non-litigious matters — Common law — Court a quo making blanket statement that such agreements unlawful on basis that they were against public policy, thereby extending reach of common-law prohibition against contingency fee agreements, which previously only covering contingency fee agreements in respect of litigious work — SCA finding that court a quo was wrong to do so, and that if the common-law prohibition F was to be extended to other situations, that should be done on case-by-case basis after careful analysis of all interests involved.

Headnote : Kopnota

The Sable Industries Pension Fund (the Sable Fund), after an investigation into G its affairs by the Financial Services Board (FSB) — the allegations were that the assets of the Fund had been 'stripped' as a result of a fraudulent scheme encompassing a number of transactional devices — was placed under curatorship, in terms of a High Court order obtained at the instance of the executive officer of the FSB. The curatorship order appointed the attorney Mr Mostert as provisional curator. He aimed to recover those assets which H he believed rightfully belonged to the Fund. It was a term of the order that Mr Mostert would 'be entitled to periodical remuneration in accordance with the norms of the attorneys' profession, as agreed with [the executive officer of the FSB], such remuneration to be paid from the assets owned, administered or held by or on behalf of the Fund, on a preferential basis, after consultation with [the executive officer of the FSB]'. The agreement ultimately reached between Mr Mostert and the FSB — in effect, a I contingency fee agreement — provided that 'recovery of assets . . . shall be subject to the curators' remuneration of 16,66% (exclusive of VAT) of such assets recovered'. Mr Nash and Midmacor (henceforth collectively referred to as the respondents) — the former a member of the Fund, and the latter a company controlled by him and being the principal employer of the Fund — approached the Pretoria High Court to challenge the lawfulness of this J

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remuneration A agreement and to seek its setting-aside, inter alia, on the grounds that it was not in accordance with the norms of the attorneys' profession. Mr Mostert appealed to the Supreme Court of Appeal (the SCA) against the decision of the High Court to grant the application.

Merits

The High Court had upheld the respondents' claim, setting aside the remuneration B agreement, on the grounds that, at common law, contingency fee agreements in respect of non-litigious work were prohibited, because they were against public policy. In so holding it extended the reach of the common-law prohibition against contingency fee agreements, which had previously only applied in respect of contingency fee agreements between an attorney and client in respect of litigious work. (See [47] – [49].) The SCA, C however, held that the High Court was wrong to do so. It had not been asked by the applicants to extend public policy in such a dramatic manner, and there was no material before the court to justify it. The SCA added that, if the common-law prohibition on financial arrangements between attorney and client that involved the attorney being remunerated with a share of the proceeds of litigation was to be extended to other situations, that should be D done on a case-by-case basis after a careful analysis of all the interests involved, the likelihood of this conducing to conduct on the part of the attorney that was unacceptable and the impact of constitutional values on transactions of the type under consideration. (See [52].)

Counsel for the respondents did not try to support the High Court's approach. It argued rather that the remuneration agreement was illegal because it was E not in accordance with the 'norms of the attorneys' profession', as the curatorship order required it to be. (See [53] and [58].) It was initially argued that the remuneration agreement's illegality stemmed from its non-compliance with the terms of the Contingency Fees Act 66 of 1997, which set out the conditions in which contingency fee agreements were permitted (see [53] – [55]). The SCA rejected such a line of reasoning, F highlighting the fact that the CFA was specific in providing for contingency fees for legal representatives in the performance of their professional obligations; Mr Mostert was not acting as a legal practitioner and was not engaged in proceedings as defined in the CFA. (See [56] – [57].) It was then argued that such a remuneration agreement was prohibited in terms of the broad guidelines provided by the terms of the attorneys' profession (see [58] – [59] G and [64]). On this, the SCA agreed, holding that evidence presented to court demonstrated that the remuneration of an attorney in accordance with the norms of the attorneys' profession was to be understood as a fee calculated on a time basis at an hourly rate, and that was the meaning to be attached to the curatorship order (see [73] and [75]). The arrangement in fact made was not in accordance with such a requirement, and it followed that H Mr Nash was entitled to an order declaring it to be inconsistent with the curatorship order and therefore unlawful, and setting it aside (see [75] and [77]). The SCA added, however, that an agreement in terms of which Mr Mostert received a fee determined as a percentage of the amounts recovered for the benefit of the Sable Fund was not in itself unlawful; it would, however, be a departure from the curatorship order, and would I require the sanction of the court (see [78] and [80]). The SCA, in conclusion, dismissed the appeal on the main point (but see [80]).

Preliminary defences raised by Mr Mostert, and rejected by the SCA

Mr Mostert argued that the conclusion of the fee agreement between himself and the FSB constituted administrative action by an organ of state, and hence any challenge to its lawfulness had to be made in terms of the Promotion of J Administrative Justice Act 3 of 2000 (PAJA). As such, it was submitted, the

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present application had to fail because it was brought considerably outside A of the 180-day period prescribed by PAJA, which delay could not be condoned. In the alternative, it was submitted that, even if the proceedings constituted a review outside of PAJA, under the principle of legality the broad common-law delay rule applied and there was no reason to overlook the delay. (See [27] – [28].) However, the SCA held that the agreement was not administrative action. It reasoned as follows: It could be accepted that the B FSB was an organ of state. It could also be accepted that, in general, the conclusion of a contract for the procurement of goods or services by an organ of state constituted administrative action. However, the agreement under consideration was not such a contract. Mr Mostert's appointment and his entitlement to remuneration for his services arose from the terms of the order of the High Court; the only function of the FSB was to agree with him C the basis for his periodic remuneration in accordance with the 'norms of the attorneys' profession'. The agreement was not one to procure his services on behalf of any organ of state. He was to render services as curator of the Sable Fund because the High Court appointed him to that position, not in terms of a contract with the FSB. (See [30], [33] and [34].) (The SCA added that, even if it could be accepted that these proceedings were properly a D review under PAJA or the principle of legality, it would have, without hesitation, extended the period of 180 days or overlooked the delay, as the case might be. (See [36] – [44].)) [*]

Dissenting judgment

Willis JA, dissenting, held that the remuneration agreement constituted administrative E action to which PAJA applied (see [83]). By way of reasoning, he added that the fact that an act may derive from an order of court did not, without further ado, necessarily deprive it of its administrative character and quality. An administrative act authorised or prohibited by an order of court was not thereby removed from scrutiny according to the law of review. (See [119].)...