Claims in terms of s 55 of the Legal Practice Act: What legal practitioners must consider, guard against, or look out for

December 1st, 2022
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By William Rampela Mokoena

The Legal Practitioners’ Fidelity Fund (the LPFF) is liable to repay claimants who show that they have suffered pecuniary loss due to theft of money or property ‘given in trust’ (s 55 of the Legal Practice Act 28 of 2014 (LPA), read with s 57(1)(a)) to a trust account practice. The theft must have been committed by the legal practitioner themselves, or an employee or person supervised by that legal practitioner – in the course and scope of the practice of the legal practitioner concerned.

The claim qualifies as well if the perpetrator is –

‘(b) … an attorney or person acting as executor or administrator in the estate of a deceased person; or (c) … an attorney or person employed by that attorney who is a trustee in an insolvent estate or in any other similar capacity, excluding a curator to a financial institution in terms of the Banks Act, 1990 (Act no 94 of 1990) or a liquidator of a mutual bank in terms of the Mutual Banks Act, 1993 (Act no 124 of 1993)’ (s 55(1)).

Recently, in Leysath v Legal Practitioners’ Fidelity Fund Board of Control (SCA) (case no 770/2021, 28-7-2022) (Smith AJA (Petse DP, Zondi and Mabindla-Boqwana JJA and Savage AJA concurring)), the court (at para 24) reiterated that for the claim to be considered as valid, what needs to be established by the claimant is that:

‘(a) [the claimant] had suffered pecuniary loss;

(b) by reason of theft committed by [the legal practitioner or any other person mentioned in the section];

(c) of money entrusted [the LPA uses the phrase ‘given in trust’] by or on the [claimant’s] behalf;

(d) in the course of [the legal practitioner’s] practice’ (my italics).

The court further emphasised that ‘not all monies paid into an attorney’s trust account constitute an entrustment’ and that ‘the term is … not limited to cases where the money or property was subject to a “trust” in the legal technical sense of the word.’

Discussion

It is known that claimants mention – as the reason for their failure to lodge claims within the prescribed period of three months as required by s 78 of the LPA – the reluctance or unwillingness of certain legal practitioners to be involved in litigation against colleagues.

But one is also aware of instances where legal practitioners have accepted instructions to represent claimants and proceeded to lodge claims against the LPFF on behalf of such clients, only to abandon such claimants, halfway towards finalising the claim when the LPFF asks questions or requires certain information or documents and the legal practitioners concerned seem to have no clue how to comply with the request.

Legal practitioners are implored to consider that the Code of Conduct for all Legal Practitioners, Candidate Legal Practitioners and Juristic Entities (the Code), which applies to and must be observed by all those mentioned therein clause 3.9 requires inter alia, that legal practitioners ‘retain the independence necessary to enable them to give their clients … unbiased advice’. They must, therefore, guard against putting themselves in positions where the collegiality professed to be shared between legal professionals might lend itself to an interpretation of unethical allegiance, which in turn and on later analysis, might be seen as misconduct.

May a legal practitioner fail or refuse to act for a claimant who pursues against a professional colleague a potentially meritorious claim, and thereby deny the claimant access to justice – on the mere and patently flimsy basis that they feel uncomfortable to litigate against a colleague?

The Code further expects legal practitioners to ‘remain reasonably abreast of legal developments, applicable laws and regulations, legal theory and the common law, and legal practice in the fields in which they practise’ (clause 3.13). Might they be regarded as meeting this expectation if in some instances they are reported by claimants/clients to have advised claimants to proceed on their own because the legal practitioner in question does not understand what the LPFF requires, or they do not know anymore how to take the client’s claim further?

Legal practitioners must remember that they must ‘advise their clients at the earliest possible opportunity on the likely success of such clients’ cases and not generate unnecessary work, nor involve their clients in unnecessary expense’ (clause 3.10). And they must ‘use their best efforts to carry out work in a competent and timely manner’ (clause 3.11).

There are legal practices that are regarded as newly established or yet-to-develop. These law firms must look out for opportunities to earn a fee. In this regard, s 92(1) of the LPA may be useful, in that it provides that:

‘Whenever in any legal proceedings or any dispute in respect of which legal services are rendered for free to a litigant or other person by a legal practitioner …, and costs become payable to that litigant or other person in terms of a judgment of the court or a settlement, or otherwise, that litigant or other person must be deemed to have ceded his or her rights to the costs to that legal practitioner, … or practice.’

Section 57(1)(e) obliges the LPFF to refund ‘the costs or any portion thereof incurred by a claimant in establishing a claim or attempting to recover the whole or a portion of the claim from the person whose wrongful conduct gave rise to the claim’.

Legal practitioners must only recognise that they shall ‘be entitled to a reasonable fee for their work, … [and] no legal practitioner shall fail or refuse to carry out, or continue, a mandate on the ground of non-payment of fees and disbursements (or the provision of advance cover therefor) if demand for such payment or provision is made at an unreasonable time or in an unreasonable manner, having regard to the particular circumstances’ (clause 3.12).

For this, they might want to resort to contingency fee agreements as the basis for accepting the mandate. But they must heed this warning from courts: ‘… the [Contingency Fees Act 66 of 1997) does not authorise a legal practitioner to recover a contingency fee that is exploitative’. And ‘a contingency fee agreement that is not covered by the Act, or which does not comply with the requirements of the Act, is invalid’ (Mkuyana v Road Accident Fund [2020] 3 All SA 834 (ECG) at paras 14 and 22).

Conclusion

To accept instructions from potential claimants in respect of s 55 matters makes business sense. Legal practitioners must be open to, and willing, to accept such instructions. They should not worry about the perceived negative impact it might have on their relationship with colleagues. Their focus must be only to help clients to access justice. All they must consider is their ethical and professional duty to the clients. They must look out for any opportunity to earn a fee, but in a proper manner.

And when they do accept such mandates, they must be prepared and be ready to run with the matter to its finality. They must ensure that they have read and understood all relevant case law on these claims.

The courts do recognise that ‘it is a sad day when one member of the legal profession is asked to protect a member of the public from the conduct of a colleague’. But they do also commend them for doing so (South African Legal Practice Council v Bobotyana [2020] 4 All SA 827 (ECG) at paras 31 and 60).

William Rampela Mokoena BProc (University of Zululand) is a Curatorship Officer at the Legal Practitioners’ Fidelity Fund in Centurion.

This article was first published in De Rebus in 2022 (Dec) DR 7.

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