Road Accident Fund v MKM obo KM and Another; Road Accident Fund v NM obo CM and Another

Two matters involving claims for loss of support by minor children who lost parents in motor vehicle collisions. In the first matter (case 1677/2019), MKM acted on behalf of minor children KM and TM after their mother's death. A curator ad litem was appointed with instructions not to settle without judicial approval. In the second matter (case 1928/2019), NM acted as natural guardian for her minor children CM and LM after their father's death. In both matters, the children were represented by Sonya Meistre Attorneys who concluded contingency fees agreements with the respondents. The RAF made settlement offers which the attorneys accepted without obtaining judicial approval as required by section 4 of the Contingency Fees Act. The RAF was not informed about the existence of contingency fees agreements. Settlement payments were made, and the attorneys deducted their fees (25% in the first matter, R66,625.75 in the second). The attorneys then applied to have draft settlement orders made orders of court. The high court raised concerns mero motu about the lack of judicial oversight and made wide-ranging orders setting aside the settlements and appointing a new curator ad litem in the first matter.

• Whether section 4 of the Contingency Fees Act imposes an obligation on the Road Accident Fund to ensure that a legal practitioner obtains judicial approval before entering into a settlement agreement
• Whether a settlement agreement concluded without judicial approval in terms of section 4 of the Contingency Fees Act is unlawful and invalid
• The effect of non-compliance with section 4 of the Contingency Fees Act on the validity of contingency fees agreements and underlying settlement agreements
• The consequences for legal practitioners who fail to comply with section 4 of the Contingency Fees Act
• Whether courts should raise issues mero motu that do not arise from the papers before them

Appeal upheld with no order as to costs. In case 1677/2019: Contingency fees agreement declared invalid; attorneys directed to submit bill of costs for taxation within 15 days; any excess fees paid to be refunded to Trust; Registrar to contact first plaintiff to explain judgment and deliver copy to Legal Practice Council; curator ad litem's fees to be taxed; attorneys to establish Trust within 3 months in accordance with Trust Property Control Act; Trust to be established per clauses 5.1-5.13 and 6-9 of Draft Consent Order; once Trust established, all monies to be paid into Trust; attorneys to report to Registrar within 3 months; conduct of Attorney Sonya Meistre, Adv Jonatan Johanan Bouwer, and Adv Liezle Swart to be brought to attention of Legal Practice Council. In case 1928/2019: Contingency fees agreement declared invalid; attorneys to submit bill of costs for taxation within 15 days; any excess over R66,625.75 to be refunded to first plaintiff within 7 days of taxation; conduct of Attorney Sonya Meistre and Adv Liezle Swart to be brought to attention of Legal Practice Council.

Section 4 of the Contingency Fees Act does not impose any obligation on third parties such as the Road Accident Fund to ensure that legal practitioners obtain judicial approval before concluding settlement agreements. The obligation to obtain judicial approval rests solely on the legal practitioner who has entered into a contingency fees agreement with a client. Non-compliance with section 4 of the Contingency Fees Act renders the contingency fees agreement invalid and unenforceable as between the legal practitioner and the client, but does not invalidate the underlying settlement agreement concluded between the client and a third party. Where a contingency fees agreement is invalid due to non-compliance, the legal practitioner is only entitled to reasonable attorney-and-client fees subject to taxation, not the higher fees stipulated in the contingency fees agreement. A contingency fees agreement is a bilateral agreement between legal practitioner and client that is confidential and privileged; third parties have no right or obligation to enquire into its existence or terms.

The Court made several non-binding observations: (1) While the RAF generally has no special duty regarding claims involving minor children, there may be instances where it should play a more proactive role, such as where claimants are unrepresented. (2) It may be salutary (though not legally required) for the RAF to enquire whether section 4 compliance has occurred before settling where it knows a contingency fees agreement exists. (3) The Court endorsed the practical approach adopted in Mfengwana v RAF of enforcing settlements despite non-compliance with section 4 where this serves the client's interests, with appropriate safeguards. (4) The Court criticized the high court's extensive discussion of vehicles for protecting minor children's funds (particularly the Guardian's Fund) as unnecessary on the facts. (5) The Court expressed concern about the high court's attempt to prescribe additional factors beyond those in section 4(1) for cases involving minors, noting this improperly trenches on legislative function. (6) The Court emphasized the importance of courts confining themselves to issues properly raised by parties, citing Fischer v Ramahlele and Advertising Regulatory Board v Bliss Brands. (7) The Court noted that during COVID-19 lockdown, the curator ad litem could and should have arranged for remote judicial approval rather than proceeding without it.

This judgment provides important clarification on the scope and operation of the Contingency Fees Act in the context of RAF claims. It establishes that: (1) Third-party litigants like the RAF have no obligation to police compliance with the Contingency Fees Act by opposing legal practitioners. (2) Non-compliance with section 4 affects only the enforceability of the contingency fees agreement itself, not the validity of the underlying settlement between the parties. (3) Courts should adopt a practical approach that protects clients' interests through taxation of costs rather than invalidating settlements that may be in clients' best interests. (4) Courts must confine themselves to issues actually raised by the parties and not embark on wide-ranging inquiries mero motu into matters not properly before them. (5) The separation of powers requires courts not to prescribe additional legislative requirements beyond those enacted by Parliament. The judgment balances the protective purposes of the Contingency Fees Act with the need for finality in settlements and protection of clients' substantive rights. It is particularly significant for RAF litigation where contingency fees agreements are common.