By Dr Michele van Eck

Vallaro obo BR v Road Accident Fund 2021 (4) SA 302 (GJ) and Bouwer obo MG v Road Accident Fund 2021 (5) SA 233 (GP)

It is trite law that a party must have the requisite contractual capacity to participate in juristic acts. A contract that is concluded with a party that has limited contractual capacity may still be saved by means of a guardian or curator ratifying the transaction. However, when a party has no contractual capacity then the contract is void and cannot be resurrected. Two recent cases illustrate the fatality to contingency fee agreements (CFA) concluded with parties that lacked contractual capacity and raised the question whether such CFAs could be ratified after the fact. The first case, Vallaro, is where the court questioned the ability of the curator to ratify a CFA signed by a person with a severe mental disability. Similarly, in the case of Bouwer the court questioned the ability of a de facto guardian entering a CFA on behalf of a minor and whether CFAs would, at any time, be considered in the best interest of the minor. The principles of both cases are briefly discussed below to illustrate how this may impact the conclusion and the validity of CFAs with clients in a legal practice.

The Vallaro case

In the Vallaro case an adult male (the claimant) suffered a head injury in a collision, which resulted in severe impairment of his mental faculties (para 1). Subsequently, a curator was appointed to act on behalf of the claimant that had the power to ratify actions already undertaken for the claim against the Road Accident Fund (RAF) (para 2 – 3).

The claim was eventually settled but the court questioned the validity of the CFA that formed part of the papers, particularly that the CFA was signed by the claimant and not the curator (para 4). The issue centred on the claimant’s lack of contractual capacity to enter the CFA (para 4), which effectively rendered the agreement void. The rationale for this was that the claimant could neither reach consensus nor participate in a juristic act due to the impairment of his mental faculties (para 8). According to Thompson AJ, ‘[c]urators cannot ratify agreements which were entered into by severely mentally disabled persons if the agreement was entered into whilst the severely mentally disabled person laboured under such severe mental disability, as the agreement would be void ab initio in such circumstances’ (para 12). The CFA was accordingly found to be invalid.

The Bouwer case

In the Bouwer case a minor (who was driving in a vehicle with her great grandmother) was in a collision and sustained injuries and a claim was brought against the RAF (para 1). Although liability for the collision was admitted and the papers were filed, the court took exception to the two CFAs that were entered into on behalf of the minor by her great grandmother (paras 9 and 12). The first CFA was signed with a legal practitioner that had subsequently died and the second CFA was entered into with new legal practitioners that had eventually taken over the matter (para 12).

The court again questioned the validity of the CFAs based on the issue of contractual capacity. An argument was made that the minor’s great grandmother was a de facto guardian of the minor at the time of signing the CFAs (para 13 – 14), and therefore, had the necessary capacity to enter into the CFAs on behalf of the minor. However, the court noted that the Children’s Act 38 of 2005 (the Act) provides specific categories of guardians that may act on behalf of a minor (para 33), and a de facto guardian did not constitute a new category of guardians under the Act (para 35). Furthermore, nothing in the Act granted the great grandmother guardianship over the minor, and the parental responsibilities and rights under the Act still remained with the minor’s biological mother (para 38 – 39).

In addition to this, van der Westhuizen J noted that ‘[t]he clear and unambiguous intention of the Children’s Act has at its core the best interest of the child. The concluding of an onerous agreement to the estate of a child can never be in the best interest of a child. A contingency fee agreement can never be in the best interest of a child’ (para 41). The court concluded that there was no possibility that the curator could ratify the CFAs, as there was not a valid CFA in the first place, and that CFAs would not be in the best interest of the minor in that it would negatively impact a large portion of the minor’s estate (para 45).

Conclusion

Contingency fee agreements are important to the functioning of litigation practices. Although these agreements must comply with the requirements under the Contingency Fees Act 66 of 1997, they must still embody the common law requirements for valid and enforceable contracts. The Vallaro and Bouwer cases illustrate the importance of ensuring that the signatory to a CFA has the necessary contractual capacity to enter into such an arrangement and that not all juristic acts are capable of ratification. In the words of Thompson AJ in the Vallaro case, one cannot attempt to ‘[blow] life into the void agreement’ by means of ratification (para 6). It is up to the legal practitioner to confirm that their clients have the necessary contractual capacity not only to sign such a CFA but also to be able to provide a mandate to act in litigation matters. The Bouwer case, however, raises an additional practical question, and that is whether CFAs can be entered into with minors (whether represented or not). Van der Westhuizen J’s comments in the Bouwer case is indicative that CFAs would never be in the best interest of a child which logically follows that CFAs with children (whether represented or not) cannot be concluded. If this is the case, then the Bouwer case may have significant impact on how legal practitioners manage their litigation matters with minors in their legal practices.

Dr Michele van Eck BCom (Law) LLB LLM (UJ) LLD (UP) is a senior lecturer and head of the Department of Private Law at the University of Johannesburg.

This article was first published in De Rebus in 2022 (May) DR 31.