Mofokeng v Road Accident Fund (unreported case no 22649/09);
Makhuvele v Road Accident Fund (unreported case no 19509/11);
Mokatse v Road Accident Fund (unreported case no 24932/10);
Komme v Road Accident Fund (unreported case no 20268/11) (GSJ) (22-8-2012) (Mojapelo DJP)
By Kim Hawkey
Since their early origins, contingency fees agreements have been a matter of controversy and, in recent years, there has been much confusion over the exact bounds of such agreements in light of the Contingency Fees Act 66 of 1997 (the Act), which came into force in 1999.
A recent decision by Mojapelo DJP in the South Gauteng High Court in Johannesburg has, however, provided much-needed clarity on what is required when these agreements are concluded between litigants and their legal representatives in this particular court.
Mojapelo DJP used the opportunity afforded by the four matters referred to above to issue the following practice directive (in para 63 of the judgment), which he said was necessary for the court to exercise its monitoring function in respect of contingency fees agreements effectively:
Practice directive
1.1. the affidavits referred to in s 4 of the Contingency Fees Act must be filed if a contingency fees agreement, as defined in the Act, was entered into;
1.2. if no such contingency fees agreement was entered into, the attorney and his client must file affidavits confirming that fact;
1.3. where a contingency fees agreement was entered into, in addition –
1.3.1. counsel shall confirm to the court that counsel has read such agreement and advise the court whether same complies with the Act or not;
1.3.2. the court may in its discretion call for the submission to it of the contingency fees agreement for examination by the court.
1.4. In addition to the matters contemplated in s 4(1) and (2) of the Act –
Matters before the court
In all four cases before the court, the plaintiff and the defendant (the Road Accident Fund (RAF) in all of the matters) reached agreement on the quantum of the claim and costs. Further, all of the plaintiffs had entered into a contingency fees agreement with their legal representatives. In an offer of settlement to the plaintiff in each of the matters, the RAF included the following term:
‘In the event of plaintiff having concluded a contingency fees agreement with his/her attorney, such settlement shall be deemed to denote that the plaintiff and his/her attorney had complied with section 4 of the Contingency Fees Act, 66 of 1997 through having filed required affidavits with either the court, if the matter is before court, or with the relevant professional controlling body, if the matter is not before court.’
An outstanding issue in all of the matters was the conditionality of the offer. There was confusion as to whether a term was to be included in the court order recording that a contingency fees agreement was applicable and that the requisite affidavits had been filed or whether this was part of the offer and would not appear in the order.
As the parties could not agree on how the matters were to proceed, the court decided to hear them together. The court noted that the need for compliance with s 4 of the Act had the potential to affect a large number of matters and that ‘[a]n alleged non-compliance with the law could not be allowed to continue’.
After hearing argument by counsel in the various matters, the court noted that there were divergent views on –
The Act
The court considered the intention of the legislature in enacting the Act and highlighted the importance of the court’s role in monitoring contingency fees agreements.
Section 2 of the Act provides for two forms of contingency fees agreements, which the court noted often appear in the same agreement, namely –
In respect of the calculation of these fees, Mojapelo DJP agreed in part with the judgment in Thulo v Road Accident Fund 2011 (5) SA 446 (GSJ), however he did not agree with the court’s view that an attorney may legally enter into an agreement with his client to charge the maximum possible under the Act plus taxed costs to be paid by the other side.
In respect of settlement and affidavits, s 4(1) of the Act provides: ‘Any offer of settlement made to any party who has entered into a contingency fees agreement may be accepted after the legal practitioner has filed an affidavit with the court, if the matter is before court, or has filed an affidavit with the professional controlling body if the matter is not before court.’ According to the court, this provision is peremptory and a court cannot make a settlement order until such affidavits are filed.
Section 4(3) provides: ‘Any settlement made where a contingency fees agreement has been entered into shall be made an order of court, if the matter was before court.’
In this respect, the court stated that there could not be an out-of-court settlement where one of the parties has entered into a contingency fees agreement, which reinforced the importance of the court’s monitoring role in respect of such agreements.
Role of the court
In addition to the practice directive set out above, the court elaborated on its supervisory functions in respect of contingency fees agreements.
In respect of the prescribed affidavits, the court held that these must be signed and filed: It is not sufficient for the court to be advised that the affidavits have been filed; it must have sight of the affidavits and ensure they comply with the Act.
In terms of s 4(1), the attorney’s affidavit must state:
In terms of s 4(2) of the Act, the client’s affidavit must confirm that the attorney has complied with his obligations in terms of the Act, including that he informed the client in writing of the terms of settlement, which were explained to him and, further, that he understands and agrees to them. The client must also disclose to the court what his attitude is to the settlement.
Section 5 of the Act creates a mechanism for a client aggrieved by the fees agreement or the fees charged to approach the relevant law society or society of advocates/Bar council, which has the power to review and set aside the provision or fees if unreasonable or unjust. The attorney must inform his client of this right and specifically state in his affidavit that he has done so. The court said that it should be clear from the client’s affidavit that the attorney furnished the client with the full contact details of the controlling body and added that it would be good practice to specify these details in the contingency fees agreement itself.
Must the contingency fees agreement be handed in?
Although the Act does not expressly provide for the agreement to be handed in to court, Mojapelo DJP held that there was no reason why the court should not call for and examine the agreement if it was necessary for the court to perform its monitoring function. The court added that attorney and client privilege does not operate against disclosure of the agreement and that, even if it did, public policy deemed such disclosure necessary.
Outcome in each of the four matters
The court made three orders in respect of the four matters.
In one of them the agreement was found to be invalid for non-compliance with the Act. The other three matters stood down for counsel to confirm that the contingency fees agreement was read and that it complied with the Act, as well as to rectify certain defects in the agreement in one of the matters.
Kim Hawkey, kim.hawkey@derebus.org.za
This article was first published in De Rebus in 2012 (Oct) DR 48.