I have been asked to write on a few illegal fee arrangements and setups which seem to be proliferating as of late.
The first is the creation of a retainer agreement. An attorney, in such an unethical scenario, is either paid a monthly retainer or a retainer at the beginning of the matter. The retainer is generally non-refundable and not based on services rendered. This is illegal. Blaikie-Johnstone v D Nell Developments (Pty) Ltd 1978 (4) SA 883 (N) is a key case as regards what an attorney can and cannot charge a client. It set out that an attorney may not charge by an arbitrary manner, such as on commission, but instead must charge based upon the basis of services rendered. The Contingency Fee Act has altered the common law slightly, allowing an attorney to charge either 25% of the total awarded or 100% in excess of their normal fee, whichever is the lesser, exclusive of costs. Note, that in contingency fee matters, a full record of work done is required, as it is either 25% or 100% more than the usual fee, whichever is the lesser, which may be charged.
It is improper to advertise your fees openly, such as on your website, as this borders on, or is an attempt to compare yourself with other practitioners. The norm is for a client to request what fees may be and to be informed of these.
There are two types of consideration, other than for costs incurred, that an attorney generally incurs.
Those where a tariff may apply, such as for civil litigation in the magistrates', regional and higher courts. In this case, an attorney may agree with their client to charge in addition to tariff. Mostly attorneys and clients do.
The second is where no tariff applies. Examples include appearances in the criminal justice system, general legal work, drafting of wills and contracts, appearances and preparation for appearances before other bodies and tribunals. This is usually done at a fee which is agreed.
Per Amlers on Attorneys, and Mort NO v Chiat [2000] 2 All SA 515 (C), the relationship between an attorney and client is one, the basis for which is mandate. This makes sense, as the very word attorney comes from the Norman French word for one who is appointed. In fact, while, in South Africa, locally, the word 'attorney' is defined to mean a legal practitioner in terms of the Attorneys Act, outside of our borders, an agent may be referred to as an 'attorney at fact', while a legal practitioner would be called an 'attorney at law'.
Per Amlers, yet again, and per Incorporated Law Society, Transvaal v Meyer [1981] 4 All SA 350 (T) an attorney has a fiduciary duty towards their client. Barlow Rand Ltd t/a Barlow Noordelike Masjinerie Maatskappy v Lebos 1985 (4) SA 341 (T) (also noted by Amlers), notes that an attorney further has a duty of care towards their client, their opponent, the court, and third parties. In fact, an attorney is expected to act honestly and with high integrity and trustworthiness in all their dealings.
For the purposes of this discussion, what is called a retainer in relation to advocates, a sum paid to one to not oppose one in any matters during the period covered, is not looked into. The new Legal Practice Act also seemingly allows for this.
Now, I have a consideration for you. If you are charging fees you are not allowed to charge, such as in terms of a monthly or initial non-refundable retainer agreement, and you state to your client that these fees are due, are you not perhaps doing further things, such as possibly committing an act of fraud? In fact, there have been many criminal law cases against attorneys for various infractions which are also covered by legal ethics. What is more, retainer agreements might also constitute touting, as it incentivises a client to only use that attorney's services.
Where an attorney has not been paid, they have a common law right of lien over documents in matters they have dealt with for a client. Any document an attorney may charge a fee as regards, not merely those they themselves have prepared, may be held under lien. This is according to Botha v EM Mchunu.
A conveyancer should only charge significantly above or below tariff with permission of the law society.
Trust money is money an attorney takes purely for the mandate the client has given, and may be spent only for that.
'When trust money is handed to a firm it is the duty of the firm to keep it in its possession and to use it for no other purpose than that of the trusted. It is inherent in such a trust that the firm should at all times have available liquid funds in an equivalent amount. The very essence of a trust is the absence of risk. It is imperative that trust money in the possession of an attorney should be available to his or her client the instant it becomes payable. Trust money is generally payable before and not after demand.8
The Attorneys Act places an unqualified obligation on every practising attorney to keep a separate trust account and to keep all trust moneys in it until payment out of it to persons entitled to it, so that there are at all times sufficient funds in that account to fully cover all trust obligations.9 In a partnership (or professional company) all the partners are responsible for keeping proper books of account.10 An attorney's alleged ignorance of the provisions of the Attorneys Act indicates that he or she is unfit to practise as an attorney.11
[ ... ]
8 Law Society, Tvl v Matthews 1989 4 SA 389 (T); Incorporated Law Society, Tvl v Visse (1)
1958 4 SA 115 (T).
9 Attorneys Act 53 of 1979s 78(1).
10 Rheeder v Ingelyfde Wetsgenootskap van die OVS 1972 3 SA 502 (A); Incorporated Law Society, Tvl v W 1962 4 SA 559 (T). See also Incorporated Law Society, Tvl v K 1959 2 SA 386 (T); and Smith v Price 1988 1 SA 53 (W) in which it was held that an attorney with whom money had been deposited by a client pending the registration of immovable property into such client's name and who had undertaken to invest the same in an interestbearing account for the benefit of the purchaser, could not excuse his failure to invest such moneys by justifying this omission on the grounds of the provisions of r 77 published under the Attorneys Act 53 of 1979s 74.
11 Natal Law Society v Vawda 1998 1 All SA 356 (N).'
(LAWSA Volume 14(2) 2nd edition, para 205)
There are in fact many criminal law cases involving incorrect handling of trust money, and the courts find it rather serious. You will be given a harsher sentence than a layman if you commit trust account fraud, for the same amount as they defrauded someone.
The law society sent out a recent warning to practitioners:
On 18 October 2017, in a notice to members signed by M J S Grobler, the director of the said law society, the Law Society of the Northern Provinces stated:
'2. PAYING ESTATES AGENTS’ COMMISSION IN ADVANCE
It has come to the attention of the Council that in some instances, members who act in conveyancing transactions, whether as the conveyancer or as a referring attorney, are advancing commission to Estate Agents in circumstances where all suspensive conditions have not been fulfilled and the transfer process has not yet been finalised.
Members are reminded that it is unprofessional conduct for them to advance commission to Estate Agents prior to the finalisation of the transfer process and members who do this will be subject to disciplinary action.'
Note that there are two instances, and not merely one, noted, where it is inappropriate to pay out the conveyancing funds, per the notice: 1) when all suspensive conditions have not been fulfilled and 2) when the transfer process has not yet been finalised.
Monday, 23 October 2017
Inappropriate and illegal payments and fees
(SAST/CAT: GMT+2), this article was posted by:
Marc Evan Aupiais
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Monday, October 23, 2017
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