In Kahn v Stetter, Brian Kahn Inc., a firm of attorneys, instituted an application in the High Court for an order directing its' client to pay for outstanding fees in respect of legal services that were rendered to him.
Background
The parties entered into a fee and mandate agreement (also known as an engagement letter), in terms of which Mr Stetter gave the law firm a mandate to provide him with legal services. According to the law firm, it provided legal services to Mr Stetter and bills were rendered over a period of time. Some bills were settled by Mr Stetter without objection. However, in respect of the outstanding bills, these were never disputed and the fees were deemed to have been accepted by Mr Stetter by virtue of a provision in the fee and mandate agreement. Mr Stetter, however, failed to settle the outstanding balance.
The crux of the matter
The mandate agreement included specific clauses such as the tariff would apply to the specific instructions given and shall also apply to any other instructions given by Mr Stetter at a later stage; the bills should be settled at the end of the month following that on which the bill was provided; the bills/statements may be disputed by Mr Stetter before the expiry of the due date for the payment failing which it would be assumed that the bill/statement has been accepted and therefore payable; and even if the bill is disputed and referred for taxation/assessment, Mr Stetter would still be expected to pay the bill in full but he would be refunded after taxation if the amount paid exceeded the amount allowed after taxation.
Issues for determination by the court and the court's findings:
- Should the application be stayed pending the
adjudication of the dispute lodged by Mr Stetter with the Legal
Practice Council (“LPC”)?
This argument by Mr Stetter lacked supporting authority and failed to make a case for this relief. The court stated that a payment order does not prevent the LPC from considering whether the law firm has breached any ethical codes.
- Must the bill first be subjected to taxation?
The court approved the reasoning in the judgment of Werksmans Incorporated v Praxley Corporate Solutions (Pty) Ltd, which considered whether the right to demand taxation, can without more, apply to instances where the bill has been settled. In this case, the Full Court held that where payment has been effected, the client would ordinarily not be entitled to demand the taxation of the bill unless it can be demonstrated that there has been fraud, misrepresentation or an error. Consequently, the court found that the review and/or assessment of the bill by the taxing master may not include bills which have already been settled.
- Are the fees due and payable?
The court found that the mandate agreement clearly gives Mr Stetter an opportunity to challenge the bill within a specified time and further stated that: “Such a clause in a fee agreement is not unusual or unconscionable. The contrary would mean that resolution of disputes would be delayed unreasonably if the period within which to dispute the bill is for a longer period. In any event the respondent has already settled some of the statements and by requesting an extension to pay would not be a conduct consistent with a party refusing or objecting to be liable for the bills”. No challenge was raised to suggest that Mr Stetter was deemed to have accepted the amount as payable and was therefore liable to pay.
- Did the law firm breach the mandate agreement?
Mr Stetter argued that the law firm's change of approach/tactics or strategy in the matter should have been preceded by a new mandate. The court found that the law firm correctly argued that the directions of cases do change especially after obtaining the version from the opponent, which may have not been conveyed clearly or correctly at the initial consultation with a client.
Conclusion
The court concluded that the law firm made out a proper case, and was therefore entitled to the relief sought. Mr Stetter was ordered to pay the law firm R1 607 048.10; interest at the rate of 24% per annum; and the law firm's legal costs.
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