No funds does not mean no risk

August 1st, 2022
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There are many instances in legal practice where legal practitioners are not timeously placed in funds to pursue the matters in which they are instructed to finality. The clients concerned may have made undertakings to place the legal practitioner in funds but may not have complied with such undertakings. The legal practitioner is put in the difficult position where they either must, for example, apply for a postponement of a pending trial or appeal as they are unable to proceed with the matter due to the lack of funds, which is commonly articulated as ‘a lack of instructions’. In some instances, the legal practitioner may have to consider withdrawing from the matter for the same reason. The point made in this article is that an election must be made by the legal practitioner as early as possible, failing which they will have to face the risks that flow from remaining on record and running the matter until the date of the hearing while knowing that they have not been placed in funds. When placed in that invidious position, a legal practitioner should consider their professional duties and the likely risks. Whatever your ultimate decision is in the circumstances, report to the client and your opponent timeously and file the appropriate notice to withdraw with the court. If the decision is to apply for a postponement of the matter, that should also be communicated as soon as possible.

The professional duties of legal practitioners

It is trite that legal practitioners owe professional duties to their clients, the courts and to third parties (see Sayed NO v Road Accident Fund 2021 (3) SA 538 (GP) at para 9).

The Code of Conduct for all Legal Practitioners, Candidate Legal Practitioners and Juristic Entities (the Code) published in terms of s 97(1)(b) of the Legal Practice Act 28 of 2014 (the Act) provides that:

‘3. Legal practitioners, candidate legal practitioners and juristic entities [established to conduct a legal practice as an attorney, as contemplated in s 34(7) of the Act and a limited liability legal practice as contemplated in s 34(9) of the Act] shall –

3.1 maintain the highest standards of honesty and integrity;

3.3 treat the interests of their clients as paramount, provided that their conduct shall be subject always to –

3.3.1 their duty to the court;

3.3.2 the interests of justice;

3.3.3 observance of the law; and

3.3.4 the maintenance of the ethical standards prescribed by this code, and any ethical standards generally recognised by the profession;

3.11 use their best efforts to carry out work in a competent and timely manner and not take on work which they do not reasonably believe they will be able to carry out in that manner;

3.12 be entitled to a reasonable fee for their work, provided that 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 or advance cover thereof) if demand for such payment or provision is made at an unreasonable time or in an unreasonable manner, having regard to the particular circumstances;

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Part III

Conduct of Attorneys

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20.3 If, after an attorney has accepted an instruction to appear in court on behalf of a client, any circumstances arise that imperil the proper discharge of his or her duties of diligence, he or she shall, once such eventuality is apparent, especially in relating to trials, report such circumstances to the client to facilitate timeous steps to inhibit prejudice to the client and facilitate a successor to be instructed in time to take over the instructions.’

Late applications for postponements or withdrawals

There are several cases chronicling the consequences of a failure to timeously make an election to withdraw from a matter or to apply for a postponement due to a lack of funds.

In Ngcobo v Union & South West African Insurance Co Ltd 1964 (1) SA 42 (D) the plaintiff had failed to place her attorneys in funds. The attorneys had intended to apply for leave to withdraw but the plaintiff had not been notified. The plaintiff’s attorneys had notified the defendant’s attorneys the day before the trial of their intention to withdraw as the attorneys of record. A postponement was applied for as the plaintiff had not been notified of the trial date. The attorneys had not, at any time, been in direct communication with the plaintiff, but communicated with her through her agents who were a firm of third-party insurance consultants (p 43). The agents indicated to the court that they had spoken to the plaintiff – almost two months before the trial date – and notified her that the attorneys would withdraw if they were not placed in funds before the date of the trial. Even on the assumption that the plaintiff was not aware of the trial date, her ignorance, in the court’s judgment, was ‘largely due to the lack of interest which she herself displayed in the proceedings’ (p 44A). The court noted (p 44C) that the plaintiff’s attorneys had ample time to withdraw in accordance with the procedure set out in the rules but did not do so. They had informed the defendant’s attorneys on the date before the trial of their intention to withdraw as attorneys of record. However, the attorneys did not persist with the application to withdraw as notice had not been given to the plaintiff herself (p 44E). The court directed that a copy of the judgment be sent to the Secretary of the then Natal Law Society (p 44H).

The matter of S v Ndima 1977 (3) SA 1095 (N) concerned an appeal from the magistrate’s court. The appellant was not represented on the date of the appeal. On the date of the hearing, counsel appearing for the state contacted the appellant’s attorneys of record telephonically. A clerk in the attorney’s office gleaned from the file that counsel had not been briefed for the appeal and that the attorneys were not doing anything about it as they had not been placed in funds. This was conveyed to counsel appearing for the state during the phone call. The attorneys had not, however, withdrawn from the case, or informed the appellant that his appeal would not proceed on the date. It was not clear whether the appellant was aware that his appeal was due to be heard on that day or that no counsel was in court to represent him. Didcott J (then sitting in the Natal Provincial Division) explained the impact on the workload of judges and the then Attorney-General’s staff (now the National Prosecuting Authority) if they were not informed timeously that an appeal would not be proceeding. The court also pointed out that it was not only inconvenient, but also highly discourteous to the court and the team appearing for the state, to read records where the case would not be proceeding (p 1096F-G). The court stated that:

‘It is quite plain that an attorney must, if he is going to withdraw from a case, withdraw from it timeously and inform his client that he is withdrawing so that the client can make other arrangements or, if there are none which he can make and if he wishes to do so, so that he may appear in person to argue his appeal. If an attorney wishes to carry on hoping that at the last minute he will be given funds and does not wish to withdraw at an earlier stage of the case because he will jeopardise his chance of being paid, then he must be willing to take the risk that he will find himself financing the appeal and go on with it’ (p 1097).

In Kara NO and Others v Department of Land Affairs 2005 (6) SA 563 (LCC) the claimants’ legal representatives sought a postponement due to their non-preparedness for the resumption of the trial and difficulties in funding their legal costs (para 4). The court detailed how postponements not sought timeously affected its operations. Citing the Ngcobo and Ndima judgments, respectively, the court stated at para 6 that a ‘lack of funding is not a sufficient reason for a last-minute postponement application. A practitioner who has insufficient funding must withdraw or apply for a postponement in good time. If he does not, he must continue representing his clients at his own risk’ (emphasis in the original). Meer J also sounded a warning to practitioners litigating in the Land Claims Court that they ‘would do well to take cognisance hereof and to apply well in advance for postponements’ (para 7). That warning, in my view, should be heeded by practitioners litigating in all courts.

Suggested measures to mitigate this risk

Explain to the client as early as when you accept the instruction that you may need to either withdraw or apply for a postponement if you are not placed in funds. Document this in file notes and in correspondence sent to client to confirm this. A prominent note in this regard in your letter of engagement will also go a long way to protect your interests and those of the client.

Where the client may face a possible order to pay costs, this must also be explained to the client and documented. Though s 35 of the Act has not come into effect yet, legal practitioners will be well advised to have regard to the provisions of that section, which prescribe what must be explained to the client in respect of the estimate of costs.

Trial dates and dates for the hearing of appeals are allocated months in advance and communication in this regard is sent to the parties. You thus have sufficient time to discuss the funding issues with your client well before the date of the hearing.

If the client has made undertakings to place you in funds by a specified date, also record that and communicate with your client when that date arrives if your client has not complied with the undertakings.

Do not compromise your professional duties to your client, the other parties, the court, and the administration of justice. Remember to comply with your obligations in terms of paras 3.12 and 20.3 of the Code in particular.

If you decide to withdraw from the matter, give timeous notice to your client, the other parties, and the court. If there are any further steps that must be taken to pursue the matter or a court date looming, record this in the correspondence that you send to the client. Explain to the client that your withdrawal from the matter is not to be construed as a termination of the underlying litigation.

The fact that you have not been placed in funds does not extinguish your potential liability to the client while you still act for that client. Ensure that you have taken steps to mitigate the potential risks.

Thomas Harban BA LLB (Wits) is the General Manager of the Legal Practitioners’ Indemnity Insurance Fund NPC in Centurion.

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

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