Walker and Another v Schabort Potgieter Attorneys Inc and Others

Aurora Empowerment Systems (Pty) Ltd was placed in liquidation in 2011. Its major creditor, Pamodzi Gold East Rand (Pty) Ltd, lodged a substantial claim and funded litigation to recover impeachable dispositions under ss 26–31 of the Insolvency Act after a ss 417–418 enquiry revealed unlawful transactions. A tripartite fee and mandate agreement was concluded between Aurora (through its liquidators), Pamodzi (through its liquidators), and attorney John Walker. Pamodzi undertook to fund and indemnify Aurora for the litigation costs. Walker successfully recovered close to R20 million on behalf of Aurora but refused to account to Aurora and its liquidators, contending that Aurora was not his client and that he owed accounting duties only to Pamodzi. Aurora applied to the High Court to compel Walker to account and debate his fees and to pay over the recovered funds. The High Court granted the relief, and Walker, his firm(s), and the Pamodzi liquidators appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel. All appellants were ordered to pay the costs jointly and severally.

This judgment clarifies the operation of s 32(1)(b) of the Insolvency Act, confirming that a creditor who funds litigation does not acquire entitlement to the proceeds. It affirms the fiduciary, contractual, and statutory duties of attorneys to account to their clients, even where fees are paid by third parties, and reinforces the principles governing accounting and debatement of attorneys’ fees in insolvency-related litigation.