Hough & Bremner Inc and Another v The Road Accident Fund

H&B (the first appellant) was a firm of attorneys that represented Ms Chiau (the second appellant) in a delictual claim against the Road Accident Fund (RAF) for damages suffered in a motor vehicle collision on 20 July 2015 in Mpumalanga. H&B and Ms Chiau entered into a fee agreement on 11 September 2015, prior to the institution of the action. The fee agreement provided that fees would be paid at the conclusion of the matter, and expressly stated it was not a contingency fee agreement as defined in the Contingency Fees Act 66 of 1997. The action was settled on 7 March 2022, with the RAF accepting 100% liability and agreeing to pay R1,034,470.20 plus costs and an undertaking for future medical expenses. Both Ms Chiau and H&B filed affidavits confirming no contingency fee agreement had been concluded. The trial judge (Legodi JP), concerned about whether the fee agreement was a contingency fee agreement, refused to allocate the matter and issued directives requesting information about the fee agreement. Despite responses from H&B and Ms Chiau stating the fee agreement was not a contingency fee agreement, Legodi JP determined the matter mero motu, found the fee agreement to be a contingency fee agreement that did not comply with the Act, reviewed and set it aside, refused to make the settlement agreement an order of court, and made various orders against H&B (which was not a party to the proceedings) without affording it an opportunity to be heard.

• Whether the fee agreement between H&B and Ms Chiau constituted a contingency fee agreement within the meaning of the Contingency Fees Act 66 of 1997
• Whether a fee agreement that provides for payment of fees at the conclusion of a matter is necessarily a contingency fee agreement
• Whether the high court was empowered to make orders against H&B when it was not a party to the proceedings and without affording it an opportunity to be heard
• Whether the high court erred in refusing to make the settlement agreement an order of court
• Whether the high court could mero motu review and set aside the fee agreement
• Whether an invalid or unlawful contingency fee agreement would necessarily invalidate the underlying settlement agreement

The appeal was upheld. The order of the high court was set aside and replaced with the following: 'The settlement agreement concluded between the parties on 7 March 2022 is made an order of court.'

1. A fee agreement that provides for fees and disbursements to be paid on the finalization of a matter is not necessarily a contingency fee agreement that must comply with the Contingency Fees Act 66 of 1997. 2. A court may not make orders against a party who is not before the court and has not been afforded an opportunity to be heard, in accordance with the audi alteram partem principle. 3. Courts are bound by the issues and relief sought by the parties before them and may not mero motu make orders that were not sought, except in limited circumstances where a question of law arises from the evidence and is required for a decision in the case. 4. An invalid or unlawful contingency fee agreement would not necessarily invalidate the underlying settlement agreement between a litigant and the opposing party. 5. While a court may exercise judicial oversight under section 4 of the Contingency Fees Act and enquire whether there is a contingency fee agreement, it may not ignore evidence from the parties stating there is no such agreement and make adverse findings without affording them an opportunity to be heard. 6. A contingency fee agreement is a bilateral agreement between the legal practitioner and the client and has nothing to do with a party against whom the client has a claim.

The Court noted that this was the fourth appeal from the same high court (Legodi JP) on more or less the same facts, indicating a pattern of error requiring clear guidance. The Court stated it was 'opportune' to clarify the law on this issue given the repeated appeals. The Court expressed concern that the high court's orders deprived H&B not only of its right to claim fees from its client but also of its right to recover costs from the RAF. The Court noted that the high court's approach appeared to be that any agreement not providing for payment of fees by the litigant prior to finalization of litigation constitutes a contingency fee agreement within the ambit of the Act, which the Court indicated was clearly wrong based on previous authority. The Court referred to its recent decisions in Mucavele, Majope, and Sibiya SCA as establishing the correct principles. The Court emphasized that even if the high court was entitled to enquire about contingency fee agreements as part of judicial oversight under the Act, it exceeded its jurisdiction in the manner it proceeded.

This case is significant in South African law for several reasons. First, it clarifies that fee agreements providing for payment at the conclusion of a matter are not necessarily contingency fee agreements under the Contingency Fees Act 66 of 1997. Second, it reaffirms fundamental principles of natural justice, specifically that courts cannot make orders against parties who are not before the court and have not been afforded an opportunity to be heard (audi alteram partem). Third, it emphasizes that courts are bound by the issues and relief sought by the parties and cannot mero motu make orders that were not sought. Fourth, it establishes that even if a contingency fee agreement is invalid or unlawful, this does not necessarily invalidate the underlying settlement agreement between the litigant and the opposing party. Fifth, it emphasizes the proper scope of judicial oversight in terms of section 4 of the Contingency Fees Act - judges may enquire into whether there is a contingency fee agreement but cannot ignore evidence and make adverse findings without affording parties an opportunity to be heard. This is the fourth appeal dealing with similar issues from the same high court, demonstrating the importance of these principles and providing clear guidance to lower courts.