Sibiya v Road Accident Fund

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Legodi JP
• Judgment Date: 02 June 2022
• Court: Mpumalanga Division (Main Seat)
• Hearing Date: 02 June 2022
• Docket Number: 557/2016; 1150/20

Legodi JP:

[1]

The Act, (referring to the Contingency Fee Act) does not authorise a legal practitioner to recover a contingency fee that is exploitative. Whilst the Act provides an incentive for legal practitioner concerned by allowing him or her to charge an increased fee, it is not, in the words of Plasket J in Erasmus v Williams [1] "intended to be a licence to plunder up to 25 percent of any award paid to a client who had entered into a contingency fee agreement ad who is usually indigent. The Act is therefore not intended to be a mechanism for a legal practitioner to charge fees that are unreasonable, and to unjustifiably increase his fees simply to place him or her in a position to recover the maximum of the success fee which the Act allows. To hold otherwise, would be inconsistent with the purpose of the Act, namely to enhance access to justice by enabling litigants who would otherwise not have been able to afford it, to engage the services of a legal practitioner [2] .

[2]

Contingency fee agreements facilitate access to justice as they enable litigants to obtain legal representation to prosecute their claims where the litigant may otherwise have been unable to do by reason of the prohibitive costs of litigation. However, such agreements carry with them the inherent risk of abuse and the incentive to profit. The undesirable features of contingency fee agreements were highlighted as follows in South African Association of Personal Injury Lawyers v Minister of Justice and Constitutional Development, (Road Accident Fund, Intervening Party) [3] :

"The first is that they compromise the lawyer's relationship with his client by introducing conflicts of interest, and have a high risk of abuse. Contingency fee agreements vest the legal practitioner with financial interest in the outcome of the case, which may

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adversely affect a legal practitioner's ability to give dispassionate and unbiased advice to clients at the different stages during the proceedings. The second feature is that a contingency fee agreement gives a legal practitioner a material financial interest in the outcome of the litigation; and on overriding desire to secure a successful outcome may tempt him or her into practices which may compromise his or her clients to the court, such as coaching witnesses, misleading the court, falsifying evidence, etc [4] .

[3]

Unregulated contingency fee agreements have the potential for earnings by legal practitioners which are excessive and disproportionate to the labour and risk invested. This will negatively impact on the public confidence in the legal system. The legislature was clearly conscious of the risk of exploitation when it legitimised contingency fee agreements. What the Act therefore sets out to do is to carefully regulate the extent to which a legal practitioner may agree with his client for the payment of an increased fee [5] .

[4]

What section 2 does is to place a limitation on the contingency fee that an attorney may recover from his client. In the scheme of the Act, this is achieved in three ways: The agreed increased fee, or as it is referred to in section 2 the success fee or uplift fee as it also known, is firstly limited to confining it to an amount that represents an increase in the attorney's normal fees. The principle is that the legal practitioner charges his normal fee, and as an added incentive to compensate him for the risk of undertaking the litigation, he be rewarded by being permitted to agree with his client to charge an extra fee over and above his normal fee, either equal or a percentage increase on the normal fee. The normal fee of the practitioner is therefore taken as the base fee from which a percentage increase is by agreement with the client permissible to arrive at the amount of the success fee. What is important is that there is a base (the normal fee) from which a percentage increase is permissible. This is the ordinary and only basis which the practitioner may increase fees. The legal practitioner first determines his normal fee, which he would have been entitled to charge without a contingency fee, and then increase it in terms of the contingency fee agreement. The success fee is a fee which has been increased from normal fee [6] ".

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Otherwise than the success fee, the amount of the practitioner's normal fee is therefore not limited by way mutual consent in the contingency fee agreement, but rather by the provisions of the Act itself [7] .

[5]

Contingency fee agreements are accordingly subject to judicial oversight and intervention. This is consistent with the right vested in the courts at common law to determine the propriety of any agreement entered into between an attorney and his client with regard to fees. The authority of the court to set aside a fee agreement is founded upon considerations of public policy and in the context of the supervisory function of the court over the conduct of its own officers, and the protection of the court's dignity and reputation [8] . A contingency fee agreement that is not covered by the Act or which does not comply with the requirements of the Act, is invalid [9] . (My emphasis).

[6]

Although the Act does state in express terms that a failure to fulfil the statutory requirements will render the contingency fee agreement null and void, there are clear indications that this was indeed the legislature's intention. The primary object of the Act was to legitimise contingency fee agreements which were otherwise prohibited by the common law. The purpose was also to promote access to courts subject to the strict control so as to minimise the disadvantages inherent in the contingency fee system and to guard against abuse. The safeguards introduced to prevent such abuse include sections 2 and 3 of the Act. As these sections are not enabling but prescriptive in nature, it would understandably have been the intention of the legislature to visit nullity on any agreement that did not comply with these provisions [10] .

[7]

In Mostert and Others v Nash and Another [11] , Wallis JA once again confirmed that the intention of the legislature is that the provisions of the Act must be complied

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with strictly. He stated: "Any non-compliance with or departure from the requirements of CFA, either as to substance or to form renders the contingency fee agreement invalid and unenforceable".

[8]

The reason for demanding strict compliance with the Act is that a contingency fee agreement is otherwise unlawful as it is prohibited at common law [12] . Another reasoning by Plasket J in Mfengwana is that it is "...necessary to prevent an abuse on the part of the unscrupulous legal practitioners willing to take advantage of their clients - a phenomenon that is, in my experience, unfortunately all too common" [13] . It is the responsibility of the courts to exercise strict control by ensuring that any contingency fee agreement that do not comply with the Act, for whatever reason, should be declared invalid [14] . (My emphasis).

[9]

In this Division, what is stated in Mfengwana has sadly become a phenomenon and this is my experience. The practitioners would abuse and evade an oversight role of the court as contemplated in paragraph [5] above. By stating in the matters they are seized with on behalf of their clients that 'no contingency fee agreement has been concluded', has become fashionable This is seen as an attempt to avert the courts' authority in the exercise of their strict control or oversight role regarding fee agreements concluded between attorney despite the form and substance of such agreements amounting to contingency fee agreements.

[10]

The two cases before me, namely Chiau v Road Accident Fund: case no 1150/2020 and Sibiya v Road Accident Fund: case no 557/2016, in my view, involve contingency fee agreements which in their form and substance, are both null and void for non-compliance with the provisions of the Act. Before I deal with the background to each of the cases, it is important to deal first with the principle governing attorney and client costs. Attorney and client costs are the costs that an attorney is entitled to recover from his client for the disbursement made by him on behalf of his client, and for the professional services rendered. These costs are payable by the client whatever the outcome of the matter in which he or she engaged the attorney

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services; and are not dependent upon anv award of costs by the court. In the wide sense, it includes all costs that attorney is entitled to recover against the taxation of his bill of costs, but in the narrow and more technical sense, the term is applied to those costs, charges and expenses as between attorney and client that ordinary the client cannot recover from the other party [15] .

[11]

The relationship between a client and his attorney is that of principal and agent based on a contract of mandate [16] . The attorney is entitled to be remunerated for his services. His charges may be agreed in advance or they are the usual or normal fees due for the work actually performed. Irrespective of whether the attorney's fees are agreed, the fee charged must be reasonable [17] .

[12]

Based on considerations of public policy, the court receiving the right to decide what a fair and reasonable remuneration would be. A fee that is unreasonable cannot validly be recovered, and a fee agreement that authorises an attorney to charge an unreasonable fee that amounts to overreaching will be unreasonable and consequently unenforceable [18] . An enquiry in terms of the Act into the legality of the attorney's normal fee is an objective assessment that will be conducted on the basis of certain specified considerations or factors which facts are aimed at achieving proportionately and consisting of amount that...