A personal injury law firm has been found guilty of heavily overcharging a minor client, and has been ordered to refund almost R4m to her trust. The firm has also been slapped with a punitive costs order and the case has been referred to the Legal Practice Council to investigate whether disciplinary action should be taken against the business.
René Fouché Incorporated (RFI), a specialist boutique law firm based in Rosebank, Johannesburg, and its directors now have to compensate a trust established for a child identified as MR, who won a claim of almost R24m from the Gauteng health MEC for medical negligence.
This comes after the court found in favour of MR’s trust, agreeing that RFI's Contingency Fee Agreement (CFA) was invalid, that the R10,000 per hour they charged was unjustified and ordered them to immediately return the overcharge.
“This matter addresses 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 in a medical negligence matter involving a minor with cerebral palsy,” explained Johannesburg High Court acting judge Duncan Turner.
MR was born in September 2003 at a state hospital and was later diagnosed with cerebral palsy. In August 2011 her mother, NR, consulted with Joe Hubbart Attorneys (JHA) in relation to a possible medical negligence claim.
In late 2011, JHA initiated an action against the MEC for Health, naming MR as the plaintiff.
The court was told that cerebral palsy is a group of disorders caused by abnormal brain development or damage to the developing brain. It affected MR’s ability to move, maintain balance, her posture and control of her muscles.
MR’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, leaving her “severely disabled”.
In August 2016, the Johannesburg High Court confirmed the liability and in September 2017, deputy judge president Phineas Mojapelo confirmed the quantum to be R23,633,780. The order included provisions for a special trust to be created to receive the funds to be paid out by the MEC.
RFI was the firm of attorneys that acted for MR (in her representative capacity) in 2016 and 2017 when litigating against the MEC.
RFI was incorporated in 2015 with two directors, Gideon Petrus Smith and the late René Ian Fouche. Both were associates at JHA before RFI was formed. In 2015, MR’s mother moved from JHA and became a client of RFI, where Smith continued to work on MR’s claim as a director at RFI and no longer associated with JHA.
RFI provided no details of the work done on MR’s claim by JHA before 2015, or of the state of the proceedings when RFI took on the case.
However, according to the summons, the particulars of claim against the MEC were prepared and delivered by JHA in December 2011 and the MEC’s plea was delivered in June 2012.
The application for a trial date was delivered in July 2015.
RFI gave no details on precisely when they took over the case in 2015, and no written agreement between JHA and MR’s mother was disclosed. There was no record of the transfer and no agreement between RFI and JHA as to how costs and risk incurred before the takeover would be handled.
Four-and-a-half years after a summons was issued and one month before the trial date, on July 20 2016, RFI arranged for MR’s mother to sign the CFA.
The trial was set down for three days on August 4, 5 and 8 2016, but no details were provided by RFI as to what happened in court.
“All that is recorded in the answering affidavit is that 'the defendant eventually capitulated', and an order was granted on the basis that ‘the defendant was liable for 100% of the ... agreed or proven damages’. It is not clear whether a trial even commenced or whether the days were spent negotiating with an agreed outcome ultimately being made an order by Mojapelo DJP,” said Turner.
On March 27 2017, an interim payment of R2m was made to MR’s trust.
RFI then went about consulting and arranging for medico-legal reports to address the quantum. It was finally resolved in September 2017 with the MEC ordered to pay the trust a net amount of R21,633,780, the interim payment having been deducted.
The payout was for general damages, future loss of earnings, future medical expenses and the costs of the trust. The order provided for RFI to disburse, on behalf of MR, out of the funds received “medical and paramedical expenses incurred for treatment of the minor as well as any amounts reasonably required for her general wellbeing”.
At the time the order was made, no affidavit by the attorneys or MR’s mother was presented to the court, so neither the terms (nor existence) of the CFA was disclosed.
RFI argued that it had not been necessary to hand over the CFA in terms of the CFA Act. They presented only a bill of costs detailing medical expenses and “additional ad hoc payments to service providers”.
After the quantum order in September 2017, more frequent and larger amounts were paid to MR’s mother, other service providers and in November 2018 a vehicle was bought for R123,000. Additional payments made between August 2016 and the end of 2018 amounted to about R700,000.
Three months after the settlement order, RFI prepared a document headed “Interim deed of settlement and mandate of instruction (subject to confirmation of costs)” which was signed by MR’s mother on December 6 2017.
In the document, the mother purports to confirm, retrospectively, that she authorised RFI and conferred the necessary authority on RFI “to settle my action, in my representative capacity on behalf of ... the minor”.
The document stated that RFI was entitled to deduct R311,667.40 for advances she was given; R1.3m for a house for MR and her mother; an interim contribution pending taxation of R895,546 in respect of legal fees; and a provision of R6,879,573.70 for RFI’s costs, fees and disbursements.
It is the validity of this claim that was challenged by MR’s trust. Of the R23,660,434.18 paid over to RFI, only R14,763,029.96 was paid over to the trust after RFI’s deductions.
“A rough calculation indicates that the total amount retained by RFI as legal fees and disbursements exceeds R9m — in circumstances where the taxed party and party bill is alleged to have been just R1,863,087.12,” said Turner.
The trust argued that RFI withheld far more than it ought to have, that the CFA was invalid and that RFI overreached on fees even before applying a claimed 100% mark-up “success fee” in terms of the CFA. They argued that RFI had breached its fiduciary duty towards a minor.
RFI argued that neither the trustees nor the court were entitled to interfere with the arrangement they concluded with MR’s mother, who they referred to as their client.
“In my view, these defences can be given short shrift ... and indicate to me that RFI has not acknowledged or paid heed to the interests of the disabled minor at the centre of this dispute,” Turner said.
He said while the trustees may not have the power to override the mother’s day-to-day decisions on the welfare and treatment of her child, the current matter did not impinge on this.
“Instead, it invokes the court’s role as upper guardian of the minor and addresses the litigation costs and the need to provide for a person with a severe disability. At its heart are the fraught circumstances which arise in many matters where contingency fee agreements are used and where our courts have repeatedly recognised the potential for abuse,” said Turner.
Turner said RFI’s conduct was “in the face of a clear conflict of interest” and ordered that the matter be referred to the Legal Practice Council to decide if action should be taken against RFI and its directors.
He also criticised RFI for stating that, if the court found in favour of the trust, they would appeal and challenge all attempts to enforce the judgment and drag the matter out so that the trustees would end up spending more money on legal costs rather than the child.
“This thinly veiled threat, suggesting that it was in the minor’s interest for the applicants to abandon funds unlawfully retained by RFI, is no doubt the product of counsel’s instructions and shows the wholly inappropriate approach adopted by RFI,” Turner said.
He pointed out that RFI had applied its alleged 2016 “normal fee” of R5,000 an hour and topped it with a success fee mark-up of 100% — charging R10,000 per hour. These fees were backdated to 2011 to 2015 at a time when the work was done by another firm and the rate would have been much lower.
“RHI has given no justification for charging marked-up elevated fees. Again, this is something that should be considered by the Legal Practice Council’s disciplinary committee,” Turner said.
RFI argued it would only be liable to refund the trust if the trustees could prove the precise extent to which the minor had been overcharged and until then, they would not pay over anything.
The trustees argued that RFI should repay at least R3,896,250, as this was just the overcharge calculated on their own bill of costs.
“In my view, this approach is consistent with the interests of justice. There is no reason to delay ordering payment of the amount of R3,896,250.43 to the applicants, for the benefit of the minor ... there is no contractual or other basis on which the applicants would be entitled to retain this amount,” Turner ordered, finding that RFI’s conduct justified a punitive costs order.
“A copy of this judgment is to be sent to the disciplinary committee of the Legal Practice Council to investigate and determine whether disciplinary action should be taken against RFI and its directors.”
Roelof Vorster, acting on behalf of the trustees, told TimesLIVE Premium: “We received the judgment on Friday and we are still considering it. We will advise the client on the next steps in the process as soon as all aspects are considered. Our client has no further comment at this stage.”
RFI did not respond to a request for comment.
