Blakes Maphanga Incorporated v Outsurance Insurance Company Limited

The appellant, a firm of attorneys, represented the respondent insurance company in approximately 400 litigious matters. The parties' relationship was governed by an oral agreement providing for remuneration according to a fee structure and tariff. According to the respondent, all monies collected by the appellant had to be paid over without deduction, with separate monthly accounts rendered and payment due within 30 days. On 4 March 2005, the respondent terminated the appellant's mandate and demanded payment of monies collected on its behalf. By January 2005, the respondent's accounts were allegedly in arrears for 180 days. The appellant sought to set off fees owing against monies collected, claiming entitlement to do so when payment was not made within 30 days. The appellant rendered final accounts on 18 April 2005 totalling R300,471.34. The respondent disputed the amounts, alleging the agreed tariff had not been followed and that only R66,794.78 was owing. The respondent paid this amount to the appellant and placed the disputed balance of R233,676.56 in trust pending establishment of the appellant's entitlement. The respondent disputed the appellant's closing fees of R150 per file and questioned whether the agreed tariff had been followed. None of the appellant's bills were taxed. The respondent instituted proceedings for payment of the monies held in trust.

• Whether an attorney may set off untaxed and disputed fees against monies collected on behalf of a client
• Whether untaxed attorney's fees constitute a liquidated debt capable of being set off
• Whether taxation is a prerequisite for attorney's fees to become liquidated
• Whether the terms of the mandate regarding set-off survived termination of the relationship

The appeal was dismissed with costs, including the costs of two counsel.

An untaxed bill of costs that is disputed by a client is not a liquidated debt capable of being set off against amounts owed to the client. Set-off requires two liquidated debts that are capable of speedy and easy proof. A disputed attorney's bill of costs only becomes liquidated upon taxation by the taxing master. Until taxation occurs, the exact amount of fees owing depends on the determination of the taxing master and cannot be regarded as capable of speedy and prompt ascertainment. A client has the right to insist on taxation of attorney's fees, and the determination of the reasonableness of such fees in litigious matters is the function of the taxing master, not the court. Therefore, an attorney cannot unilaterally set off disputed, untaxed fees against monies collected and held on behalf of a client.

The court noted that the mere fact that fees may be owing in terms of an agreed tariff does not necessarily result in the claim being liquidated where the client disputes the fees. The court also observed that there are sound policy reasons for a client's right to insist on taxation, given the specialized role of the taxing master in determining whether costs have been properly incurred, whether services were actually performed, and whether fees are reasonable. The court remarked that even where an agreement exists between attorney and client, a taxing master is empowered to satisfy themselves that fees related to work done and authorized were reasonable. The court indicated that the question whether a debt may be capable of speedy ascertainment is a matter left to the individual discretion of the judge, but in the case of disputed attorney's fees in litigious matters, this is properly a matter for the taxing master rather than the court.

This case is significant in South African law as it definitively establishes that untaxed attorney's fees that are disputed by a client do not constitute liquidated debts capable of being set off against amounts owed to the client. It reinforces the client's right to insist on taxation of disputed bills and clarifies that only after taxation do attorney's fees become liquidated amounts. The judgment protects clients from unilateral deductions by attorneys from trust monies where fees are in dispute, and emphasizes the role of the taxing master (rather than the court) in determining the reasonableness of attorney's fees in litigious matters. The case provides important guidance on the relationship between attorneys and clients, particularly regarding trust accounting and the requirement for taxation before disputed fees can be treated as liquidated debts.