A law firm which took about R9-million in contingency fees from the payout a mother received (held in a trust) from the health authorities after her child was born with cerebral palsy, was ordered to pay a portion of the legal fees back to the trust.
The Gauteng High Court, Johannesburg, overturned the contingency fee agreement and ordered the law firm to pay nearly R3.9m back into the trust.
The court earlier ordered a payment of about R25.6 by the Gauteng MEC for Health towards the child, which was to be held in a trust account. It was stipulated that R18m of the amount was for the child’s future medical expenses.
But, following the fee agreement, the trust only received about R14.7m after law firm, René Fouche Incorporated, deducted their fees. The law firm appeared in the damages claim against the MEC on behalf of the mother.
Not only did the court order the firm to pay millions back to the trust, but it also ordered that a copy of the judgment be forwarded to the Legal Practice Council’s disciplinary committee (legal watchdog organisation) to investigate, and to decide on whether steps should be taken against the law firm and its directors.
This matter, launched by the trustees, addressed the validity of a contingency fee agreement, the validity of an agreement in terms of which a child’s guardian purported to waive the child’s rights, and the legal standing of the trustees to challenge those agreements.
The child was born at a state hospital and was later diagnosed with cerebral palsy. The mother, as the guardian of the child, instituted proceedings against the MEC. Prior to 2015, she had another attorney acting on her behalf but then changed to René Fouche Incorporated.
It appeared that the child’s cerebral palsy was the result of birth asphyxia caused by the negligence of employees of the state hospital at the time of her birth. The child is described in the affidavits as being “severely disabled”.
The court confirmed the MEC’s liability and ordered a payment of R25.6m to be held in a trust account.
The summons and the particulars of claim against the MEC were prepared and delivered by the mother’s former legal team, who also prepared a series of expert notices.
Acting Judge DA Turner noted that four and a half years after summons was issued (prepared by the former attorney) and just one month before the trial date, René Fouche Incorporated arranged for the guardian to sign a “contingency fee agreement” (CFA).
By this stage, all of the plaintiff expert reports were filed. But when the legal bill came, millions were charged for work done on the case.
The applicants contended that the law firm had withheld far more than it ought to have, and that a far greater proportion of the R25,6 quantum awarded ought to have been paid to the trust for the benefit of the child.
They argued that firm overreached on the fees charged even before applying the claimed 100% mark-up “success fee”. According to the trustees, the firm had a fiduciary duty towards the child, which it had breached.
The law firm denied that it had overbilled and raised several preliminary points, including the argument that the trustees did not have the legal standing to challenge their fees.
The judge raised several concerns regarding the fees charged by René Fouche Incorporated, which included how the firm had set its “normal fee”. It was found that this was much higher than that prescribed by the Contingency Fees Act (CFA).
He said there was no justification for the law firm concluding an agreement, extracting a 100% mark-up from their indigent client, especially at such a late stage of the trial when most of the work had been done by the previous lawyer.
“The evidence indicates overreaching,” the judge said in overturning the agreement and ordering the firm to pay back what was not due to it.
Pretoria News