Attorneys’ profession norms: Fees for acting as curator

Pension fund – curatorship in terms of s 5(2) of Financial Institutions (Protection of Funds) Act 28 of 2001 – trustee’s remuneration – court order that it be agreed with Executive Office of the Financial Services Board in accordance with the norms of attorneys’ profession – whether fee as a percentage of amounts recovered on behalf of fund in accordance with those norms – whether contrary to public policy or an infringement of Contingency Fees Act 66 of 1997.
Whether conclusion of fee agreement administrative action in terms of PAJA – whether application to set aside fee agreement a review in terms of principle of legality – applicability of delay rule – locus standi of applicants – abuse of process and doctrine of unclean hands.

Note: Footnotes omitted and emphasis added

. . . .

[33] The fee agreement was not a contract. A contract is an agreement arising at the conclusion of negotiations between the parties entered into with the intention of creating contractual relations. It is often said to involve an offer and an acceptance with the intention of creating legal obligations. Not every agreement is a contract. Only those concluded with the animus contrahendi, the intention to create a contractual relationship, are contracts.

It is incorrect to assume that when the FSB and Mr Mostert agreed the basis upon which Mr Mostert would charge fees, purporting to act in terms of the court order, their agreement was a contract. The subsequent conclusion of the MOU made this point even more clearly. Not only did it describe itself as an understanding not an agreement, but it recorded in clause A of the preamble that the remuneration of the curators was determined in terms of the relevant curatorship orders.

The failure to appreciate this is the first error underlying the contention that the conclusion of the agreement was administrative action. As the FSB correctly said, in agreeing the basis upon which Mr Mostert could charge fees it was not concluding a contract for his services, but seeking to comply with the court order. This does not involve a conjuring trick or a work of magic, but an application of basic legal principles.

[34] The second error is to treat the court ordained means for determining Mr Mostert’s remuneration as an exercise of public power or the performance of a public function in taking a decision of an administrative nature in terms of any legislation.

The FSB was acting in terms of the court order, not in terms of any legislation. It was not performing any function in the administration of the state. Had no agreement been reached Mr Mostert and the FSB would have needed to go back to the court to ask it to resolve their differences and itself fix the remuneration. Mr Mostert’s position as provisional curator would not have altered. Nor would his entitlement to be remunerated for performing that function have been altered or ceased. If the remuneration so determined was unsatisfactory to Mr Mostert, he could have applied to the court to be released from his role as curator.

That would not have involved any breach of contract for the simple reason that he was not a party to any contract with the FSB.

[35] Properly viewed it is apparent that the court was the arbiter of whether the fee agreement complied with its order. The FSB accepted that the court could vary any agreement if it transpired that its terms were inappropriate or it could fix the remuneration itself. There were examples in the papers of its doing so. If it came to the court’s attention that the agreement concluded between Mr Mostert and the FSB fell outside the parameters it had set, it could intervene to give effect to its own order. That flows from the rule of law and the fact that in terms of s 165(5) of the Constitution court orders must be obeyed until set aside.

It is common cause between the parties that the court order meant that Mr Mostert was only entitled to a reasonable fee. If the court discovered that the remuneration agreed between Mr Mostert and the FSB was grossly exorbitant, it would clearly have been entitled, and in my view obliged, to intervene mero motu. The suggestion that its hands would be tied unless some party were to bring review proceedings does not hold water.

It is important to recognise this because, were it otherwise, there might be no means whereby the court could secure compliance with its order, bearing in mind that the agreement is one between the curator and the FSB and the curator’s subsequent actions are subject to external supervision only by the FSB.

[36] For that reason alone the complaint of delay must be rejected. But even had I accepted that these proceedings are properly a review under PAJA or the principle of legality, I would without hesitation have extended the time period of 180 days or overlooked the delay, as the case might be. I accept that Mr Nash gives little or no explanation for waiting for over two years in order to bring these proceedings, but there are obvious mitigating factors. First and foremost the documents only came to hand as a result of a subpoena addressed to the FSB in the course of the criminal trial in which he and Midmacor are the accused. It is understandable that their relevance would initially be considered in the light of their need to defend themselves there. Indeed the record shows that documents relating to the FSB nominating Mr Mostert for appointment as curator of another fund formed the subject of cross-examination of the Registrar of Pension Funds at the criminal trial and resulted in the disquieting answer that he invoked his privilege against self-incrimination.

[37] Second, it is apparent that Mr Mostert has received very substantial amounts pursuant to the arrangement both in respect of the Sable Fund and in respect of ten other funds, similarly situated. This emerges from the answer by the Minister of Finance to another parliamentary question on 18 February 2011. That revealed that Mr Mostert had earned some R23.6 million as curator of the Sable Fund in addition to there having been legal fees and disbursements of over R7 million of which a reasonable proportion must represent fees paid to his law firm. Taking all 10 funds together he had recovered nearly R946 million and fees as curator or liquidator amounted to R118.5 million. Legal fees and disbursements were over R45.5 million. These are very substantial sums of money and substantially reduced the amounts recovered for the benefit of pensioners and members of these funds. If the fee agreements concluded by Mr Mostert and the FSB were not in accordance with the court orders under which he was appointed, it seems to me a matter of public importance that a court determine this, so that the interests of past members of funds and pensioners are protected. That is so notwithstanding the fact that according to the FSB they have already been the beneficiaries of the recoveries by the curators to the tune of some R750 million.

[38] Third, that view is reinforced by the approach that the FSB has taken of addressing only the challenge to the fee agreement and doing so on its merits. It is consistent with the view of the Executive Officer of the FSB, Mr Tshidi that curators are officers of the court by which they are appointed. As an organ of state that is likely to be confronted with similar situations in the future, the FSB is naturally anxious that it should know once and for all whether a fee arrangement of the type it concluded with Mr Mostert and has apparently concluded in other cases is legitimate and, if so, within what parameters.

[39] Fourth, I am unconvinced that the setting aside of the fee agreement would have the cataclysmic effects on the funds suggested by Mr Mostert when wearing his curator’s hat. He painted a gloomy picture where all financial statements and reports would have to be retracted and re-audited to determine the surplus assets for distribution. The determination of a reasonable fee for the work to date would have to be recalculated on an hourly basis for a senior attorney which would be impossible because time-billing was not generated for the curatorship. A delay of several years was foreshadowed with some 13 000 former members of funds being prejudiced and having their benefits suspended. Mr Mostert even went so far as to suggest that there might be claims for refunds of overpaid surplus.

[40] My scepticism over the weight to be attached to these allegations is considerable. Mr Mostert said that the court must exercise its remedial powers in order to prevent prejudice to the Sable Fund and its beneficiaries. Quite so, but then in the next breath he said that the court must ensure ‘that the benefits of the fee agreement to the Fund are maintained’. It is quite unclear what he meant by this. He is himself the beneficiary of the fee agreement not the Sable Fund. These are amounts forming part of the recoveries made by him as curator that have been paid to him as curator.

If they were not properly paid, because the agreement was unlawful, so that he has to repay amounts to the fund that will be a benefit enuring to the former members of the fund, not a disadvantage.

[41] Nor can I see that the logistical nightmare scenario that Mr Mostert tries to paint will arise in the event that the fee agreement is held to be unlawful. That will not disentitle him to a reasonable fee for his services as curator determined in accordance with the norms of the attorneys’ profession. Such a fee would need to be determined as between him and the FSB in an open and transparent way and approved by the court that appointed him. If he was overpaid under the current fee agreement there would be an obligation to refund some amount to the Sable Fund and potentially to other funds similarly situated. Any amount so repaid would then be available to be distributed to former members of the fund by way of a supplementary apportionment exercise.

[42] None of this should involve the logistical problems that someone with his claimed experience and knowledge of the field would not be able to cope with. Insofar as he says that it would be impossible for another curator to be appointed at this stage of the curatorship, that hardly seems relevant as the decision over the lawfulness of the fee agreement would not impinge on his appointment as curator or require the appointment of a new curator. In any event the same problem would arise were he to die, or become unable to pursue his duties as curator, or decide to retire. It is a possibility ever present in this situation where the curator is not a partner in a large organisation or firm, but an attorney in a small firm with only one other partner and one professional assistant.

[43] Lastly under this head it is significant that the FSB does not raise similar concerns if the agreement is set aside. Neither in the affidavit deposed to by the Executive Officer of the FSB, nor in the heads of argument on behalf of the FSB, is there any suggestion that the effect of setting aside the fee agreement would lead to any seriously detrimental consequences for the Sable Fund and its former members. The general information circulars to the members of affected funds issued by the FSB in November 2011 and October 2012 make it clear that monies already distributed in terms of surplus apportionment exercises have been lawfully distributed and the beneficiaries would not be under any obligation to refund them.

[44] Cumulatively, even if the delay rule were applicable, either under PAJA or under the common law, those factors outweigh the impact of the delay and justify an extension of time under s 9 of PAJA or that the delay be overlooked. There is no suggestion, beyond the prospect of Mr Mostert being required to repay to the Sable Fund some amounts received by him as fees, of anyone being prejudiced by the delay between January 2011 and July 2013, when these proceedings were commenced. Finally, Mr Mostert has not approached the matter with any urgency. An application launched in July 2013 was met with two answering affidavits deposed to on 4 May 2016, nearly three years later. In the meantime he pursued a range of other litigation against Mr Nash and Midmacor. The preliminary objections based on delay must be dismissed.

The merits

[45] Turning to the merits all parties (and my colleague) are agreed that the source of the fee agreement is the requirement in para 9 of the order appointing Mr Mostert as curator that he would be entitled to ‘periodic remuneration in accordance with the norms of the attorneys’ profession’ as agreed between him and the FSB.

When the provisional curatorship order was made final and the curator’s powers expanded, further provision was made empowering him to bring about a voluntary dissolution of the fund. In that event his remuneration was to be subject to the provisions of s 28A of the PFA dealing with the remuneration of a liquidator. That section provides for a very different fee regime to that in the fee agreement. It reads:

‘(1) The registrar shall prescribe the services for which remuneration shall be payable to the liquidator of a fund which is terminated or dissolved voluntarily, whether wholly or in part, and prescribe the tariff of remuneration in respect of those services.
(2) Notwithstanding subsection (1) the registrar may reduce or increase the liquidator’s remuneration if satisfied on reasonable grounds that there is good reason for doing so, and the registrar may disallow the liquidator’s remuneration because of any failure or delay to carry out the liquidator’s duties or to carry them out properly and effectively.’

[46] Mr Nash expressed the objection to the fee agreement in the following way in his founding affidavit:

‘This is an application for the setting aside of certain unlawful agreements … purportedly concluded, inter alia, between the curator of the Sable Fund (Mostert) and the FSB, and ancillary relief to enforce the provisions of prayer 9 of the order by Poswa J … dated 20 April 2006 (“SJN1”). The unlawfulness of the agreements arises, amongst others, from non-compliance with paragraph 9 of “SJN 1” [the court order] read with section 5(5) of the Financial Institutions (Investment of Funds) Act … and the Contingency Fees Act, [66 of] 1997 [CFA].’

The complaint was thus that the fee agreement did not comply with the requirements of the court order when read in the light of the two mentioned statutes. There is an ambiguity about this. It is not clear whether he was saying that the unlawfulness lay in non-compliance with the court order, read in the light of the FI Act, with non-compliance with the CFA providing a separate ground of unlawfulness, or whether he was saying that the court order needed to be read in the light of both these statutes. That will need to be addressed in due course.

Public policy

[47] The high court upheld Mr Nash’s attack on the fee agreement, but on the grounds of an extension of public policy and not on the basis advanced by him. The judge held that the curator’s remuneration had to be agreed in accordance with the norms of the attorneys’ profession. He recognised that the main activity of the curator, at least at the outset, would be to frame demands upon persons believed to be liable to the fund and to prosecute legal proceedings if his demands were not met. To that end he was empowered to employ counsel and attorneys.

[48] Tuchten J then considered the cases that are authority for the proposition that at common law agreements between a legal practitioner and the client that the legal practitioner would be remunerated out of the proceeds of the litigation were contrary to public policy, unenforceable and unlawful.

He rejected a submission that these cases applied when an attorney undertook non-litigious work as opposed to litigation on behalf of a client and said:

‘I do not read the cases to say this. To my mind the position is rather that the question whether contingency fee agreements between legal practitioner and client in non-litigious matters were permitted at common law has not yet been expressly decided.’

[49] Tuchten J analysed the reasons underpinning this prohibition at common law and concluded that:

‘With all this in mind, there can be no justification for allowing legal practitioners to conclude contingency fee agreements in relation to non-litigious work. … I find that contingency fee agreements in relation to non-litigious work are against public policy for broadly the same reasons that such agreements are contrary to public policy in relation to litigious work.’

Having reached this conclusion he engaged in a brief consideration of the provisions of the CFA and, while accepting that on its terms it did not apply to the work of a curator, held that there was no reason why it did not create a norm of the attorneys’ profession and that the parties could have concluded a remuneration agreement that complied in substance with the CFA and thus brought themselves within that norm.

[50] Wisely in my view, counsel for Mr Nash did not seek to support this line of reasoning. Whether described as champerty, maintenance or a pacta de quota litis, the arrangements between legal representatives and their clients that have over the years been condemned as contrary to public policy have been those where the legal representative or a third party was remunerated out of, or took a share of, the proceeds of litigation.

The public policy reasons that have informed this condemnation relate to the undesirability of stirring up litigation and, in regard to legal representatives, the undesirability of the lawyer having a personal financial interest in the outcome of the litigation. In that case the fear is that the lawyer will cease to be an impartial adviser to the client and may be tempted to depart in various ways from the strict path of rectitude in the conduct of the litigation.

[51] None of this has any direct bearing on the situation with which we are concerned, much less on situations where attorneys

• negotiate an agreement on behalf of a client;
• advise on the structure of a commercial transaction;
• obtain a valuable licence on behalf of a client; or
• act and provide advice in relation to the many and varied areas of life on which people may seek their assistance.

How public policy should play out in those areas is not immediately apparent, especially when it is recognised that public policy is now informed by the norms and values in the Constitution and particularly the Bill of Rights.

[52] The judge was not asked by Mr Nash to engage in such a dramatic extension of public policy and there was no material before him that justified the extension. If the common law prohibition on financial arrangements between attorney and client that involve the attorney being remunerated with a share of the proceeds of litigation is to be extended to other situations, that should be done on a case by case basis after a careful analysis of all the interests involved, the likelihood of this conducing to conduct on the part of the attorney that is unacceptable and the impact of constitutional values on transactions of the type under consideration. For those reasons the approach of the judge in the high court cannot be supported.

The CFA

[53] The argument on behalf of Mr Nash was more nuanced. It took as its starting point the proposition that the fee agreement concluded between Mr Mostert and the FSB needed to be in accordance with the norms of the attorneys’ profession. It contended that on a proper analysis of the role Mr Mostert was to play as curator, bearing in mind that he would use his own firm to perform legal work, he was in substance an attorney pursuing the recovery of amounts for the Sable Fund by way of demands and, if necessary, litigation.

In any litigation he would be both the de facto claimant as curator of the fund and the lawyer acting for the fund. He would personally provide the means to litigate and take the risk of the litigation not succeeding. The glittering prize at the end of the day was the prospect of a substantial share in the proceeds of that litigation. Any distinction between his situation and that of an attorney conducting litigation in terms of a champertous agreement or a pactum de quotis litis, to the extent that those may encompass slightly different arrangements, was illusory. His situation as curator should be treated as being identical with that of an attorney acting for a client in the position of the Sable Fund. Such an arrangement was not only unlawful, but also incompatible with the norms of the attorneys’ profession.

[54] Recognising that the CFA introduced an exception to this situation in permitting attorneys to conduct litigation on behalf of clients under a contingency fee agreement, it was submitted that the exception was limited.

In terms of s 2 of the CFA attorneys are now permitted to conduct litigation on a contingency basis in the sense of only having a claim for payment of professional fees if the action or proceeding succeeds. If the claim succeeds they may then recover their fees from their client.

They may also agree with their client to conduct the litigation on the basis that they will not charge their ordinary fees, but will, if the claim succeeds to an agreed extent, charge an enhanced fee.

Such an enhanced fee is subject to two restrictions. It may not be greater than double their ordinary fee and overall it may not exceed 25 per cent of the amount recovered by the client.

Furthermore the contingency fee agreement must be in writing and conform to specific formal requirements set out in s 3 of the CFA. Any non-compliance with, or departure from, the requirements of the CFA, either as to substance or as to form, renders the contingency fee agreement invalid and unenforceable.

[55] Building upon this, it was contended that the norms of the attorneys’ profession had been altered by the CFA, but only to a limited degree, and if Mr Mostert wished to conclude a fee agreement entitling him to a share in the amounts recovered on behalf of the Sable Fund he needed to do so in a way that in substance complied with the provisions of the CFA.

Counsel summarised the argument in the heads in the following terms:

‘The respondents contend that

(i) the Poswa Order incorporates the CFA as part of the norms of the attorneys’ profession,

(ii) any contingency agreement that does not comply with the CFA is illegal,

(iii) the contingency fee agreement does not comply with the provisions of the CFA, and consequently the contingency fee agreements is illegal.’

[56] Two flaws in this argument emerged in the course of argument and were, as I understood it, accepted by counsel.

The first related to the endeavour to equate Mr Mostert with an attorney conducting litigation for a party. That was not his role and there was no attorney client relationship between him and the FSB. An attorney conducts litigation for a client in terms of the mandate given by the client. Mr Mostert had no such mandate from the Sable Fund or the FSB. He was a court appointed curator charged with taking control of the fund and administering it. Others would conduct litigation and he was authorised to employ others for that purpose. His role was

• to investigate what had happened, with the advantage of the report on the investigation already undertaken by the FSB; to take decisions on how to proceed;
• to make demand on parties he identified as being responsible to reimburse or compensate the fund for any amounts;
• to negotiate if possible with those parties to make a recovery for the benefit of the fund;
• to institute proceedings if he thought it appropriate;
• to invest and care for funds recovered and
• to prepare and implement schemes for the appropriation of any surplus arising in the fund in consequence of his endeavours.

The endeavour to equate his role with that of a legal representative acting for a share in the proceeds of litigation was misplaced.

[57] The second flaw lay with the CFA itself and the suggestion that it established a new norm for the legal profession permitting the charging of contingency fees, but defining and restricting the parameters within which that could be done. Here the difficulty lies in the fact that the CFA is specific in providing for contingency fees for legal representatives in the performance of their professional obligations.

Mr Mostert was not acting as a legal practitioner and was not engaged in proceedings as defined in the CFA.

His responsibilities as curator involved the management and administration of the Sable Fund including the apportionment and distribution of any surplus arising from his endeavours to recover amounts from third parties. The CFA does not deal with that situation and the strait jacket that the argument sought to put around the fee arrangements for the curator did not fit and cannot be made to fit. One may not take a statute that expressly deals with one set of circumstances and apply it in a wholly different context to which it is inapplicable.

Non-compliance with para 9 of the court order

[58] Accepting these difficulties with the argument as articulated in the heads of argument, counsel narrowed its scope in the following way. Paragraph 9 of the provisional curatorship order remained the starting point. It provided that the curator would be entitled to periodic remuneration in accordance with the norms of the attorneys’ profession. This expression fell to be construed in the same way as any other court order. It meant in the first instance that the fees charged by the curator should be subject to the ordinary professional constraints of the profession. In practice this meant that fees had to be reasonable, or as counsel for Mr Mostert put it ‘reasonable, appropriate and not excessive’.

In the second place it meant that the fees agreed upon should be determined in the ordinary and conventional way in which attorneys charge for their services and any departure from this was not permitted by the terms of the order.

[59] Counsel contended that the fee agreement did not comply with the second requirement, in that to charge a fee on the basis of a percentage of the amount recovered on behalf of a client is not the ordinary and conventional way in which attorneys’ fees are determined.

Conventionally attorneys charge for their professional services on a time basis calculated at an hourly rate, the amount of which will depend upon the skill, experience and seniority of the attorney, the nature and complexity of the work and its importance to the client and factors of that nature.

While the work of the curator was different from the conventional role of an attorney in litigation, there were substantial similarities insofar as the recovery of amounts on behalf of the Sable Fund was concerned.

The norm in regard to litigation was clear, namely that charging on the basis of being paid a percentage of the amount recovered was not permissible save within the narrow constraints provided by the CFA. For those reasons the fee agreement was not one contemplated or permitted by the court order. Had the judge who granted it (Poswa J) been asked whether his order contemplated that the curator’s fees would be determined as a percentage of the total amount recovered, it was submitted that he would have answered in the negative.

[60] Before the merits of this argument can be addressed it is necessary to decide whether it was open to counsel to advance the argument in this way. What this boils down to is whether the argument that the fee agreement did not comply with the court order was so inextricably linked to the contention that it had to conform to the requirements of the CFA that it cannot be advanced in a way that divorces it from the CFA. It had been advanced in the heads of argument in the passage quoted in para 55 on the footing that the CFA was one of the norms of the attorneys’ profession and any contingency agreement not complying with the CFA was illegal. Was it open to Mr Nash now to contend that the agreement did not comply with the norms of the attorneys’ profession, without tying the argument so directly to the CFA? I should make it clear that this argument was not that the fees charged were unreasonable. Compliance with the court order was the issue.

[61] This raised two questions.

Was the argument one that was open on the papers before the court and, if so, would the appellants be prejudiced in any way by permitting it to be argued.

Subject to the first of those receiving an affirmative answer and the second a negative answer it was open to counsel to advance the argument. This court has repeatedly held that it is open to parties to argue fresh points on appeal, provided that involves no unfairness to the party against whom the point is directed.

[62] The passage from the founding affidavit already quoted in para 46 was ambiguous in saying that:

‘The unlawfulness of the agreements arises, amongst others, from non-compliance with paragraph 9 of “SJN 1” [the court order] read with section 5(5) of the Financial Institutions (Investment of Funds) Act … and the Contingency Fees Act, 1997.’

The important question is whether Mr Nash complained of the fee agreement’s unlawfulness on the simple ground of non-compliance with para 9 of the court order, or was the argument restricted to unlawfulness flowing from non-compliance with the CFA. In developing it in his founding affidavit he drew attention to the fact that in relation to another pension fund a court order was obtained that specifically provided for the curators to receive a fee calculated as a percentage of the amounts recovered. Mr Nash commented that this demonstrated that Mr Mostert and the FSB knew that such a fee was not one permitted by the norms of the attorneys’ profession.

[63] Mr Nash said specifically that the court order, based on s 5(5) of the FI Act ‘did not (and does not) authorise payment of any contingency fee’. He repeated this at a later stage of the founding affidavit when summarising his contentions regarding the lawfulness of the fee agreement, saying:

‘Fifthly, any purported agreement in [the letter quoted in para 14] between the FSB and Mostert as curator does not comply with paragraph 9 of the Poswa order. The yardstick is the attorneys’ profession.’

He went on to say that ‘in any event’ the CFA capped a success fee.

[64] There is no doubt that Mr Nash launched a general assault on the validity of the fee agreement. To that end he prayed in aid the Constitution, the principle of legality, the CFA, the common law and the terms of the curatorship order.

But in the face of the statements that ‘all contingency fees agreements contravene paragraph 9 of the Poswa order’ and the transaction itself ‘contravenes the law – the CFA, the common law and the Poswa order’, it seems to me impossible for Mr Mostert and the FSB to contend that they were taken by surprise by the contention that the fee agreement was not in conformity with the provisions of para 9 of the order because it was not in accordance with the norms of the attorneys’ profession. Nor did they do so. Mr Tshidi, who deposed to the answering affidavit on behalf of the FSB, specifically argued that the fee agreement was a permissible one within the broad guideline provided by the norms of the attorneys’ profession.

[65] As to the content of the norms of the attorneys’ profession these were canvassed in some detail in the affidavit of Mr Mostert and that of Mr Tshidi. Both had every opportunity to show where those norms operated to permit a fee agreement based on payment of a percentage of the amounts recovered.

Finally, it was not suggested by any of the three teams of counsel who appeared before us representing Mr Mostert and the FSB that they were prejudiced by this argument or that it was impermissible for it to be advanced on the papers as they stood. It was therefore permissible for counsel to advance his argument on behalf of Mr Nash and Midmacor on this revised basis.

I turn then to consider the argument on its merits.

[66] The Executive Officer of the FSB, Mr Tshidi, explained that at the provisional stage of a curatorship the court will state a basis for the curator’s remuneration and the details will then be agreed between the curator and the FSB ‘within the ambit of the Order’. Over the years courts have approved different bases for remuneration. The usual basis is the norms of the curator’s profession.

Where the curatorship is no more than a run-off of the entity’s business and a sale of its assets, the same basis as a liquidator, that is, an ad valorem or commission basis, is appropriate. Sometimes a monthly salary or hourly fee is stipulated and at others the tariff of the Auditor-General for outsourced auditing work by private auditors.

[67] In one instance (the Datakor case), in relation to three pension funds, the court approved the charging of a contingency fee as a percentage of amounts recovered for the funds. Originally the curators had been appointed on the usual basis of receiving fees in accordance with the norms of the attorneys’ profession. The order providing for them to be paid on a contingency basis altered this. The interesting feature of this arrangement, which also involved Mr Mostert, is that it was not simply an agreement concluded under the rubric of ‘the norms of the attorneys’ profession’, but was concluded and then endorsed by the court in an application brought by the FSB to alter the original basis for remuneration.

[68] The order in the Datakor case provided that the curators were to be remunerated at the hourly rates agreed between them and the FSB, subject to a cap, for work done prior to its being granted. This suggests that the arrangement for the curators to be paid fees based on a percentage of the recoveries on behalf of the three funds was regarded as a special arrangement requiring the consent of the court, rather than an arrangement in accordance with the norms of the attorneys’ profession.

[69] In the answering affidavit the FSB described it as a special arrangement outside the norms of the attorneys’ profession. Dealing with the present case Mr Tshidi said:

‘In fact this type of arrangement has its origins in an order of court which was compelled by a specific situation which did not allow the curators in that matter [both attorneys] to be remunerated on the usual basis according to the norms of their profession.’ (Emphasis added.)

Mr Tshidi added that the order in the Datakor case had been the subject of much controversy and criticism, but that it had not been challenged. He recorded that the order had subsequently been amended to cap the remuneration at 25 per cent of the recoveries up to R140 million and thereafter at a rate of 16,66 per cent in anticipation of the funds’ liquidation. Even the latter more limited fee is greater than that conventionally earned by liquidators.

[70] I have no difficulty with the notion that in circumstances such as those that arose in both the Datakor case and the present case there might be good reasons for a curator to be remunerated on a basis other than the norm, including a fee calculated as a percentage of the amount recovered on behalf of the fund.

For the reasons advanced by both the FSB and Mr Mostert that may be the only feasible way in which to undertake the curatorship with an appropriately skilled curator. Nor would I regard it as per se unlawful. Thus far my colleague and I arrive at the same conclusion.

But that is not the sole issue in this case, and by the end of argument counsel for Mr Nash had accepted that the law did not rule out contingency fee arrangements in all circumstances.

What remained outstanding was whether an arrangement of that sort, which is the arrangement with which we are confronted, was one providing for periodical remuneration in accordance with the norms of the attorneys’ profession. In other words, did it comply with the terms of para 9 of the provisional curatorship order?

According to the evidence of the FSB the answer is ‘No’. It is an arrangement that can be authorised by a court in the exercise of its powers under s 5(5)(c) of the FI Act, as was done in the Datakor case, but that is an entirely different matter.

[71] Mr Mostert’s evidence supported the view of the FSB. In his answering affidavit in his personal capacity and on behalf of his firm he dealt in some detail with the remuneration agreements. He referred particularly to an affidavit Mr Tshidi had deposed to in the application to authorise the fees in the Datakor case and said that this disclosed, (as did his affidavit in this case), that:

‘… the general rules and practices concerning the remuneration of curators and funding of curatorship expenses could not be followed.’

Such an arrangement was legally permissible and the court had the power – presumably in terms of s 5(5)(c) of the FI Act – ‘to endorse such an arrangement’.

[72] Dealing with the conventional arrangement, when an attorney was appointed as curator subject to receiving periodical remuneration in accordance with the norms of the attorneys’ profession, Mr Mostert explained that:

‘… in the ordinary course, in implementing the court order, I as curator would have received an hourly fee at the rate of a senior attorney with more than 40 years experience …’

He then dealt with the difficulties confronting the Sable Fund leading up to the conclusion of the fee agreement and explained that this was concluded:

‘… given the peculiar circumstances applicable to the Sable Fund whereby the mechanism provided for in the original court order could not be implemented as there were no monies to do so in the Fund.’ (Emphasis added.)

[73] The picture that emerges from these affidavits is that an arrangement in terms of which a curator is to be remunerated on a periodical basis in accordance with the norms of the attorneys’ profession is one under which the attorney is paid a fee calculated at an hourly rate, plus an amount to cover any disbursements. This accords with the experience of members of this court. The practice among attorneys for many years, both in South Africa and internationally, has been that the ordinary (normative) basis for them to charge their clients is by way of an hourly rate for services rendered, the rate being determined by the attorney’s standing, expertise, experience and the like.

[74] Mr Nash said that charging at an hourly rate was precisely the way in which it should have been done under para 9 of the court order. In the case of the curatorship of the related Cadac fund the order appointing Mr Mostert as curator provided that he be remunerated in accordance with the norms of the attorneys’ profession.

Documents placed before the court by Mr Nash recorded that on this basis Mr Mostert was being paid R2 000 per hour subject to a monthly cap of R320 000. Mr Cowan, a senior commercial attorney, deposed to an affidavit in which he said that commercial attorneys in Johannesburg would have been happy to take on the work of a curator at their ordinary hourly rates had it been open to them to do so.

[75] This review of the evidence demonstrates that remuneration of an attorney in accordance with the norms of the attorneys’ profession is to be understood as a fee calculated on a time basis at an hourly rate. That is the meaning to be attached to para 9 of Poswa J’s order.

In strict law it may be that the attorney is only entitled to remuneration once the work is completed, but the more conventional practice is for regular, usually monthly, accounts to be rendered while the work is being undertaken, as reflected in the provision for payment of ‘periodic remuneration’.

The evidence demonstrates that this was the arrangement contemplated when the order was taken for Mr Mostert’s appointment on the basis that he would be periodically remunerated in accordance with the norms of the attorneys’ profession. The arrangement in fact made was not in accordance with that requirement. It follows that Mr Nash was entitled to an order declaring it to be inconsistent with para 9 of the order appointing Mr Mostert as curator.

Relief

[76] The high court granted an order declaring the fee agreement to have been null and void ab initio and setting it aside. The court added that this did not affect the rights of Mr Mostert and any co-curator or liquidator under the MOU in relation to any other fund. It then ordered Mr Mostert to render an account supported by vouchers in respect of all curators’ fees charged by him in relation to the Sable Fund and authorising any party thereafter to apply to court on notice for an order that Mr Mostert should repay any money received by him as his fee under the remuneration agreement.

[77] That order went far further than is appropriate in the light of the narrow basis upon which I decide this case. A declaration that the fee agreement was not in accordance with the provisions of para 9 of the court order appointing Mr Mostert and should be set aside, does not alter the position that he was properly appointed as curator of the Sable Fund and was entitled to be remunerated for his services in discharging that function. All it does is hold that by virtue of the terms of the court order he was not entitled to be remunerated on the basis set out in the fee agreement. The precise basis upon which he should be remunerated remains to be determined.

So long as the present order stands it is open to him and the FSB to agree upon a basis for remuneration that is in accordance with the norms of the attorneys’ profession. That could, by way of example, be an hourly rate, enhanced to take account of the risks that he has run as curator in financing the activities of the curatorship in effecting at least the original recoveries. Such an agreement could be concluded without the need to obtain further approval from the court, although given the circumstances of this litigation it would be wise to do so to forestall any challenge to the reasonableness of the fees due under such an agreement.

[78] If an hourly rate is not thought to be appropriate or is, at this late stage, not able to be determined or calculated because records have not been kept of the hours spent on this curatorship, a different basis for remuneration needs to be determined between Mr Mostert and the FSB.

I wish to make it clear that this does not exclude a fee determined as a percentage of the amounts recovered for the benefit of the Sable Fund, provided that the fee so determined is reasonable, having regard to the risks undertaken, the work involved, the uncompensated costs to Mr Mostert and his firm in performing the work and the like. A percentage fee subject to an appropriate cap or a sliding scale would be a possibility in this regard. Such a fee arrangement would involve a departure from the terms of the order granted by Poswa J and would require the sanction of the court. If Mr Mostert and the FSB are unable to arrive at an agreement it will be necessary for them to approach the court for a determination of the basis upon which Mr Mostert must be remunerated for his services.

[79] An order that Mr Mostert either account for the amounts he has received thus far as fees for the Sable Fund curatorship, or repay any amount to the fund, is premature at this stage. These questions will only be capable of being explored once a new and permissible basis for his remuneration has been determined. Once that has been done the FSB will need to examine what Mr Mostert has already received and assess it against what will be due in terms of a fresh agreement. Only then will it be possible to determine whether there has been an overpayment. In accordance with the need for transparency and accountability in public affairs that process will need to be open to input from interested parties and especially the former members of the Sable Fund.

[80] The appeal is therefore unsuccessful on the main point, but the order of the high court must be substantially altered. Mr Nash and Midmacor have succeeded in preserving the order that the fee agreement was inconsistent with para 9 of the curatorship order and therefore unlawful. However, they do so on a far narrower basis than in the high court and the consequential relief that they were granted in that court must be set aside. Mr Mostert has therefore obtained some substantial success in this appeal. As far as the FSB is concerned the finding by the high court that the fee agreement was unlawful in principle has been set aside. But this court has said that in principle, subject to obtaining the approval of the court in terms of s 5(5)(c) of the FI Act, there is no objection to a fee agreement for a curator involving the payment of a percentage of the amounts recovered in the course of the curatorship. This is also significant success. In the circumstances I think the appropriate order is that each party pay his or its own costs of the appeal. While the order of the high court went further than in my view it should, Mr Nash and Midmacor were compelled to bring the proceedings in order to establish their primary point. The costs order in the high court should not be disturbed.