Significant blow to attorneys over contingency fees

Attorneys handling South Africa's Road Accident Fund (RAF) cases and other matters involving contingency fees have been dealt a significant blow by a Gauteng High Court (Pretoria) judgment that clarified how their maximum fees in these cases must be calculated. Moneyweb reports that Judge Anthony Millar, with Judges Nomonde Mngqibisa-Thusi and Jabulani Nyathi concurring, on Friday dismissed an appeal by Fred de Bod to a judgment and order granted on 30 September 2024. In the original judgment, the court declared invalid the contingency fee agreement entered into between the RAF claimant and his attorney because of the attorneys’ failure to comply with the Contingency Fees Act. Attorney Gert Nel, the instructing attorney to De Bod, said the judgment, in his view, is simply wrong and he will be seeking special leave from the full court to appeal the judgment to the SCA. Nel said if they succeed with their special leave to appeal, then this ruling is stayed until the SCA makes its own ruling. On the basis of Millar’s judgment, he added, every attorney who is doing work on a contingency fee basis will have to rethink whether or not it is worth their while to keep on financing their client’s litigation and then also to have to pay their client’s legal fees. ‘That can never be right,’ he said.

Millar said the crisp issue for determination in this appeal is whether, properly construed, the agreement in question falls foul of the Contingency Fees Act or not. He said contingency fees agreements between legal practitioners and their clients are prohibited by the common law and may only be entered into lawfully within the parameters of the act. Moneyweb notes that Millar said some confusion persists regarding what is permitted and what is not permitted in terms of the Act. He said it is apparent from previous judgments that the Act permits two types of contingency fee agreements – one in terms of section 2 (1)(a) and the second in terms of section 2(1)(b) of the Act.

Meanhwile, the RAF board has placed four senior executives of the fund on suspension. The decision, notes The Citizen, comes as Parliament’s Standing Committee on Public Account (Scopa) continues to probe the RAF’s financial management and related affairs. In a statement on Friday, the board confirmed several senior executives are on precautionary suspension with immediate effect. Those suspended include the acting CEO, CFO, chief governance officer, and head of the CEO’s office. ‘The decision was taken to allow for an independent and unhindered investigation into certain administrative and governance matters within the organisation,’ the RAF board said, adding it suspended the officials to protect the integrity of the investigation.

The Sunday Tribune reports that the board stressed that the suspensions did not equate to an admission of guilt or misconduct. Rather, they reflected a commitment to maintaining the integrity of the investigation, which has been ongoing for several weeks. Last week, during the Scopa inquiry, a former executive exposed systemic corruption and fraudulent claims. He also revealed financial mismanagement, including R1.2bn in duplicate payments and payments to deceased claimants. Sefotle Modiba, RAF’s former acting chief investment officer, described the entity as chaotic and corrupt. His explosive affidavit to Parliament painted a picture of dysfunction and incompetence. He testified that the RAF was ‘days away from financial collapse’ when he joined the entity in May 2020. The board said it had implemented interim arrangements to keep RAF operations running during the suspensions. These measures aim to ensure the fund continues to fulfil its mandate. City Press notes that according to submissions before Scopa, more than 100 lawyers, doctors, RAF employees and claimants have provided testimony alleging systemic delays in claim payments (averaging four years), political interference in appointments, reckless financial decision-making and attempts to conceal the RAF’s true liabilities estimated to run as high as R500bn. If confirmed, these liabilities would ultimately fall to taxpayers.