The Right of an Attorney to claim Payment of Costs from a Third Party

• Jurisdiction: South Africa
• Author: Jacques du Plessis
• Citation: (2016) 27 Stell LR 292
• Pages: 292-308
• Date: 27 May 2019
• Published date: 27 May 2019

THE RIGHT OF AN ATTORNEY TO CLAIM

PAYMENT OF COSTS FROM A THIRD PARTY

Jacques du Plessis

BCom LLB LLM (Stell) PhD (Aberdeen)

Distinguished Professor of Private Law, Stellenbosch University*

1 Introduction

Parties to a contract sometimes agree that one party will pay certain costs

to the other part y’s attorney. A typical clause to this effect, which featured in

Barnett v Abe Swersk y & Associates (“Barnett”),1 reads as follows:

“The purchaser undertakes and agrees to effect payment to Abe Swersky & Associates of all their

costs as between attorney and client relating to the drafting and drawing of these presents and the

implementation of the terms and conditions thereof … .”2

It is especially common for agreements of sale of land, where the seller is

obliged to ef fect tr ansfer,3 to determine that the pu rchaser undertakes to pay

to the seller’s attorney the costs of transfer. These costs usually include the

attorney’s fee for his services, as well as transfer dut y (or VAT) and deeds

ofce fees payable to the state.4

If all goes well in the examples above, effect is given to the clause. The

party who is not the attorney’s client, i.e. the third party, pays the attor ney

his own fee or other fur ther costs. But, what are the consequences if t he third

party does not honour this undertaking? Moreover, to wh at extent may the

attorney play a more active role in collecti ng payment of his fees and the

other cost s from the third part y? Even if t he attorney m ay play such a role,

is it desirable to do so? Furthermore, whom does t he attorney r eally act for

when paying over costs to other par ties, such as tran sfer duty received from

the purchaser for payment to t he state?5

This art icle explores various answers to these and related questions. It sta rts

with the normal conse quence, whereby there is a distinct and clear separat ion

of the contractual r elationships between the attorney and the client on the one

hand, and between t he client and the thi rd party on the other hand.

* I am gratef ul to Prof Max Loubser, di rector of Cluver Markot ter Attorneys and E xtraordinar y Professor

in Private La w at the University of Stellenb osch, as well as Dr Har tmut Wicke LLM, notary i n Munich,

Germany, for thei r valuable comments. I f urther would li ke to acknowledge the fi nancial support of t he

National Resea rch Foundation.

1 1986 4 SA 407 (C).

2 409B.

3 See Sweet v Rager guhara 1978 1 SA 131 (D) 134.

4 See eg Blundell v Mc Cawley 1948 4 SA 473 (W); W haley (Law So ciety of Zimb abwe Interven ing) v

Cone Textiles (P vt) Ltd 1989 3 SA 574 (ZSC) 578-582; Joel Melamed and Hur witz v Cleveland Estate s

(Pty) Ltd; Joel Mela med and Hurwitz v Vorn er Investments ( Pty) Ltd 1984 3 SA 155 (A) 172G (where the

relevant clause pr ovided that “[t]he purchaser s hall pay the costs of thi s deed of sale and all costs of a nd

incidental t o transfer of the prop erty includi ng stamp and tra nsfer duty”).

5 See Stopforth Swa nepoel & Brewi s Incorporat ed v Royal Anthem Inve stments 129 (Pty) Lt d 2015 2 SA 539

(CC) para [26], overr uling Royal Anthe m Investments 129 (Pty) Lt d v Lau 2014 3 SA 626 (SCA).

292

(2016) 27 Stell LR 292

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2 The normal consequence: failure of the third p arty to pay the

attorney amounts to breach of the cont ract with the client,

which entitles the client , and not the attorney, to proceed

against the third party

2 1 The legal relationships: two contracts, one transfer, two

performances

South African law gener ally adheres to a principle rooted in Roma n law and

in common sense. It is the pri nciple of privity of contract, which essentially

means that a contract can only bind those who are par ty to it.6 When applied

to the examples discussed above, the pr inciple requires that a distinction has

to be drawn bet ween two contrac ts.

The rs t is the contr act between the attorney and t he client. Its content is

that the attor ney will perform certain se rvices for the client and that the client

will pay the costs of these ser vices. These will be called the “attor ney’s costs”,

for which the attorney is entitled to keep payment, to disting uish them from

costs, such as transfer duty and deeds ofce fees, which the attorney must pay

over to the state.

The second contract is between the client and the third party. Its content,

inter alia, is that the third party is obligated towards the client to pay certain

costs. This obligation is met when the th ird party “ factually” or physically

transfers money directly to the attorney. However, “legally” the third party

has performed an obligation he undertook towards the client. This position

is illustrated by the recent judgment of the Constitutional Court in Stopforth

Swanepoel & Brewis Incorporated v Royal Anthem Investme nts 129 (Pty)

Ltd.7 Here the purchaser of property was contractually obliged to pay a

deposit, as well as costs such as tr ansfer duty. It was held that the transfer of

funds which the purchaser (i.e. the third part y) made to the seller’s attorney

constituted a payme nt to the seller (i.e. to the client), and not to the attor ney.8

Where the parties agree that mak ing such a transfer to the at torney

constitutes per formance to the client, the attor ney is in effect only a “collection

bowl” for the third part y’s transfer;9 in tech nical terms, he is a person adje ctus

solutionis causa. This is an additional person, ot her than the creditor (i.e.

other th an the client) to whom the debtor by agreement between the pa rties

6 See Aussenkehr Farm s (Pty) Ltd v Trio Transpor t CC 20 02 4 SA 483 (SCA); Manousakis v R enpal

Entertainment CC 1997 4 SA 552 (C ); RH Ch risti e & GB Brad field Christie’s Law of Contract 6 ed (2011)

269-270.

7 2015 2 SA 539 (CC).

8 2015 2 SA 539 (CC). T he implication , when the contract fai led, was t hat the selle r had to b e ordered to

repay these f unds; the attor ney merely held the fu nds as fiduciar y.

9 See Barnett v Abe Swe rsky & Asso ciates 198 6 4 SA 40 7 (C) 411J- 412A ; Whaley (L aw Society o f Zimbabwe

Intervenin g) v Cone Textiles (Pv t) Ltd 1989 3 SA 574 (ZSC) 580.

RIGHT OF AN ATTORNEY TO CLAIM PAYMENT OF COSTS 293

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