THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable

Case No: 523/2015

In the matter between:

FLUXMANS INCORPORATED                                                                    Appellant

and

LEVENSON STEVEN ZULLA                                                                  Respondent

Neutral citation:  Fluxmans v Levenson (523/2015) [2016] ZASCA 183

(29 November 2016)

Coram:
Mpati AP, Theron, Zondi and Van Der Merwe JJA and Makgoka
AJA

Heard:

16 August 2016

Delivered:

29 November 2016

Summary:
Prescription begins to run as soon as the creditor acquires
knowledge of the minimum facts necessary to institute action: knowledge that the
relevant agreement did not comply with the peremptory provisions of the
Contingency Fees Act 66 of 1997 is not a fact needed to complete cause of action.

___________________________________________________________________

ORDER
___________________________________________________________________
On appeal from: Gauteng Local Division of the High Court, Johannesburg (Windell
J, sitting as a court of first instance):
1. The appeal is upheld with costs.
2. The order of the High Court is set aside and is replaced with the following:
„The respondent‟s special plea of prescription is upheld with costs.‟
___________________________________________________________________

JUDGMENT
___________________________________________________________________
Mpati AP (Makgoka AJA concurring):

[1] Until the introduction of the Contingency Fees Act 66 of 1997 (the Act), which
came into operation on 23 April 1999, legal practitioners could not, in terms of the
common law, conclude contingency fees agreements with their clients. As was said
in Price Waterhouse Coopers Inc & others v National Potato Co-operative Ltd 2004
(6) SA 66 (SCA), the Act was enacted to legitimise contingency fees agreements
between legal practitioners and their clients, which would otherwise be prohibited by
the common law.1 The Act requires a contingency fees agreement to be in writing
and in a prescribed form (s 3(1)) and that it be signed by the client and the attorney
representing him or her (s 3 (2)). This appeal originates from an application brought
by the respondent, Mr Steven Zulla Levenson, against the appellant, Fluxmans
Incorporated, a firm of attorneys, in the Gauteng Local Division, Johannesburg (the
High Court), for an order, amongst others, declaring a contingency fees agreement
(the agreement) concluded between them to be invalid, void and of no force and
effect. The agreement, which, it is common cause, did not comply with the
requirements of the Act, was in relation to fees payable by the respondent to the
appellant in respect of the former‟s claim against the Road Accident Fund (the Fund)

1 Paragraph 41.

following a motor vehicle accident in which he was involved and sustained certain
injuries.

[2] The declaration of invalidity was sought on the basis that the agreement did
not comply with the provisions of the Act. In addition to the order of invalidity, the
respondent sought payment from the appellant of the sum of R844 994.57, being the
amount by which he had allegedly been overreached, having paid costs in the
amount of R1 119 625.62. The appellant denied that it had overreached the
respondent or that the agreement was invalid. It alleged that the respondent‟s claim,
„if legally sustainable, has been extinguished by prescription‟. The High Court came
to the conclusion that the respondent‟s claim „has not become prescribed‟ and
referred the issue of the quantum for trial. It also declared the agreement invalid.
With the leave of the High Court, this appeal is only against the order that the
respondent‟s claim has not become prescribed.

[3] The facts are mainly common cause. On 1 February 2006 the respondent
gave instructions to the appellant to institute action on his behalf for damages
against the Fund in respect of injuries sustained in a motor vehicle collision that
occurred on 8 October 2005. The appellant, represented by an experienced attorney,
Mr Selwyn Perlman, accepted the instructions on a contingency fee basis. In terms
of the agreement, which, according to the answering affidavit, was an „oral
contingency fee agreement‟, the appellant would be paid a contingency fee of 22,5
per cent of the amount that would be recovered as damages on behalf of the
respondent. The agreement was confirmed by Mr Perlman by letter sent to the
respondent by telefax, dated 13 June 2006. The claim was subsequently settled. The
terms of the settlement were made an order of court on 23 May 2008. In terms of the
order, the Fund was to pay to the appellant, on behalf of the respondent, „the capital
sum of R 4 862 561.40 . . . in delictual damages‟, with costs on the scale as between
party and party, including the qualifying fees of four named medical practitioners. In
addition, the Fund undertook to cover the respondent‟s future medical and hospital
expenses.

[4] On 22 June 2008 the respondent wrote a letter to the appellant addressed to
Mr Perlman, the first two paragraphs of which read:
„Regarding our discussion on Friday of my earlier request for a reduction in Fluxman‟s fee, I
left the meeting feeling that I had not communicated clearly and that there was a need to put
something in writing.
You mentioned that I had stated, at the time of my request, that I had not understood the
contract. Whilst I was aware when signing the letter of engagement, that Fluxman‟s would
earn a fee of 22,5% of any settlement, I did not at the time, understand the nature or extent
of my injuries.‟
It was alleged in the founding affidavit that the letter recorded a meeting held
between the respondent and Mr Perlman „to discuss this issue amongst others‟. The
„issue‟ that was discussed clearly related to the contingency fees charged by the
appellant, because the respondent went further to allege that Mr Perlman assured
him „that the fees charged were reasonable‟ and that he „had no reason to doubt [Mr
Perlman‟s] word at that time‟.

[5] It is not in dispute that in or about August 2008 the respondent received a
statement of account from the appellant which reflected that he had been paid a total
amount of R3 290 138.90, made up as follows: R3 103 449.39 in respect of capital
and R186 689.51, being the costs recovered from the Fund. More than five years
thereafter, on 9 April 2014, the respondent wrote a letter to the appellant in which he
alleged that it had recently been brought to his attention that the contingency fees
agreement entered into between him and the appellant, in February 2006, did not
comply with the provisions of the Act. He referred to the judgment of the Gauteng
Division in De La Guerre v Ronald Bobroff & Partners Inc & others [2013] ZAGPPHC
33 (delivered in February 2013), which was upheld, he said, by the Constitutional
Court in February 2014.2 That decision found, amongst others, he wrote, that „any
agreement outside the Act is invalid, null and void‟. The respondent accordingly

2 In Ronald Bobroff & Partners Inc v De La Guerre [2014] ZACC 2; 2014 (3) SA 134 (CC) the
Constitutional Court dismissed an application for leave to appeal against the decision of the North
Gauteng High Court.

invited the appellant, on the basis that the agreement was unlawful, to advise, by no
later than 30 April 2014, what its proposed revised fee was and of „the process that
will be applied with regard to [his] reimbursement‟.  In all, the respondent sought to
be reimbursed for moneys that had been incorrectly debited against his account with
the appellant.

[6] In coming to the conclusion that the respondent‟s claim has not become
prescribed, the High Court upheld the respondent‟s argument that he only acquired
knowledge of the facts from which the debt arose „when the Constitutional Court‟s
judgment on contingency fees agreements was delivered in 2014‟.3 The High Court
held that the date upon which the respondent acquired the requisite knowledge was
„when the minimum facts necessary to launch the present application came to his
knowledge‟. This meant, in the view of the Court, that the „minimum facts necessary‟
for the debt to have become due was the respondent‟s knowledge that the
agreement was unlawful and thus invalid.

[7] The question to be determined in this appeal is, therefore, whether the High
Court correctly found that the respondent‟s claim had not become prescribed. This,
in turn, requires a consideration of the provisions of s 12 of the Prescription Act 68 of
1969 (the Prescription Act), the relevant parts of which read:
„(1) Subject to the provisions of subsections (2) and (3), prescription shall commence to run
as soon as the debt is due.
(2) If the debtor wilfully prevents the creditor from coming to know of the existence of the
debt, prescription shall not commence to run until the creditor becomes aware of the
existence of the debt.
(3) A debt shall not be deemed to be due until the creditor has knowledge of the identity of
the debtor and of the facts from which the debt arises: provided that a creditor shall be
deemed to have such knowledge if he could have acquired it by exercising reasonable care.‟

3 Paragraph 17 of the judgment.

It has not been suggested that the appellant prevented the respondent from „coming
to know of the existence of the debt‟. Section 12(2) is therefore of no application in
the enquiry.

[8] In its answering affidavit, deposed to by Mr Perlman, the appellant said:
„The alleged debt asserted in this application would have become due on the date on which
payment was made by the applicant to the respondent, upon which date (on the applicant‟s
version) the amount was payable to the applicant. On the applicant‟s version he became
aware (or should reasonably have so become aware) of his alleged cause of action and
claim on 1 September 2008, the date from which interest is claimed. From that date (at the
latest) the applicant had knowledge of the identity of the respondent as (alleged) debtor and
of the facts from which his claim and the debt arises.‟
This court, therefore, has to determine whether the respondent indeed had actual or
deemed knowledge of „the facts from which the debt arises‟ from 1 September 2008
as alleged by the appellant. That must have been the date on which the respondent
became aware of the actual amount of the costs deducted from the money paid by
the Fund in settlement of his claim, since the statement of account sent to him by the
appellant was dated 20 August 2008. The respondent claimed interest on the sum
allegedly due to him, calculated as from 1 September 2008.  It is not in dispute that
the identity of the debtor was known to him all along. The appellant, as a debtor who
invoked the special defence of prescription, bore the onus of establishing „both the
date of the inception and the date of the completion of the period of prescription‟.4

[9] In Truter & another v Deysel [2006] ZASCA 16; 2006 (4) SA 168 (SCA), this
court held that the term „debt due‟ means a debt, including a delictual debt, which is
owing and payable, and that –

4 Gericke v Sacks 1978 (1) SA 821 (A) at 827H-828A; Van Staden v Fourie 1989 (3) SA 200 (A) at
216B; Santam Ltd v Ethwar 1999 (2) SA 244 (SCA) at 256G.

„A debt is due . . . when the creditor acquires a complete cause of action for the recovery of
the debt, that is, when the entire set of facts which the creditor must prove in order to
succeed with his or her claim against the debtor is in place or, in other words, when
everything has happened which would entitle the creditor to institute action and to pursue his
or her claim.‟5 (Footnote omitted.)
And „cause of action‟ for purposes of prescription was held to be-
„every fact which it would be necessary for the plaintiff to prove, if traversed, in order to
support his right to the judgment of the Court. It does not comprise every piece of evidence
which is necessary for the plaintiff to prove each fact, but every fact which is necessary to be
proved.‟6 (Footnote omitted.)

[10] As has been alluded to above, the High Court found that „[t]he invalidity of a
common law contingency fee agreement is a fact and not a legal conclusion‟ and
that the respondent was not aware that an Act prohibiting the agreement existed. It
also found that the respondent had been overcharged. Two things need to be
clarified. The first is that the Act does not prohibit a contingency fees agreement. As
has been mentioned above, it legitimises an agreement otherwise prohibited at
common law. The second is that counsel for the appellant submitted, correctly so,
that the High Court erred in its finding that the invalidity of the agreement is a fact
and not a legal conclusion. In Claasen v Bester [2011] ZASCA 197; 2012 (2) SA 404
(SCA) Lewis JA referred to Truter7 and Minister of Finance & others v Gore NO
[2006] ZASCA 98; 2007 (1) SA 111 (SCA)8 as well as Van Staden,9 where this court
had left open the question whether the nullity of a contract (a legal conclusion) was a
fact for purposes of s 12 of the Act, and said:
„These cases [Truter and Gore] clearly do not leave open the question posed and not
answered in Van Staden. They make it abundantly clear that knowledge of legal conclusions

5 Per Van Heerden JA para 16.
6 Paragraph 19, quoting with approval from McKenzie v Farmers’ Co-operative Ltd 1922 AD 16 at 23.
See also Evins v Shield Insurance Co Ltd 1980 (2) SA 814 (A) at 838D-H.
7 Paragraph 20.
8 Paragraph 17.
9 Footnote 4.

is not required before prescription begins to run. There is no reason to distinguish delictual
claims from others.‟10
Claasen was referred to by the High Court in its judgment, but regrettably, the court
must have missed or misunderstood the authoritative statement just quoted.

[11] The respondent‟s claim is based on enrichment. He claims repayment of
money paid by him in terms of an illegal and invalid contract (condictio ob turpem vel
iniustam causam). As has now been authoritatively decided, lack of knowledge of the
invalidity of a contract does not postpone the running of prescription,11  which begins
to run immediately after the payment was made.12

[12] But the respondent‟s case was not simply that he did not know that the
agreement was invalid (which is a legal conclusion). It is set out as follows in his
founding affidavit:
„I have since ascertained and been advised by my present legal representatives that the
percentage fee agreement for 22.5% plus VAT in the circumstances of my case and my
dealings with Fluxmans, as set out more fully hereunder, is known as a “common law
contingency fee agreement” and is illegal and unenforceable as it does not comply with the
Contingency Fees Act 66 of 1997.’ (My emphasis.)
And:
„In the letter „SZL4‟ I informed Fluxmans that I had become aware of the Judgments of the
Constitutional Court and that on consideration of my Statement of Account annexure “SZL2”,
I was of the view that the agreement entered into between myself and Fluxmans was invalid
as it did not comply with the Provisions of the Contingence Fees Act 66 of 1995.‟ (My
emphasis.)
The letter and statement of account referred to were annexed to the founding
affidavit. The second paragraph of „SZL4‟ reads:

10 Paragraph 15.
11 Claasen para 15 and Yellow Star Properties 1020 (Pty) Ltd v MEC, Department of Development
Planning and Local Government, Gauteng [2009] ZASCA 25; 2009 (3) SA 577 (SCA) para 37.
12 Van Staden, at 215B, where Grosskopf JA quotes with approval (see 215F) De Wet & Yeats
Kontraktereg en Handelsreg 4de uitgawe 263.

„It has recently been brought to my attention that the contingency fee agreement entered into
between Fluxmans and myself in February 2006 did not comply with the Contingency Fees
Act 66 of 1997 (the Act).‟ (My emphasis.)
Further down in the letter, „SZL4‟, he states that the court (Constitutional Court)
found that „at common law a contingency agreement between an attorney and client
is unlawful‟. It therefore becomes necessary to consider the question: when did the
debt arise (s 12(3) of the Act)?

[13] In its answering affidavit the appellant alleged that the respondent‟s claim „is
premised on an oral contingency fee agreement‟ concluded between the parties in
February 2006. The deponent also alleged that at the time of the conclusion of the
agreement he „did not understand the terms of the contingency fee agreement to be
in contravention of the [Act]‟ and said that the agreement was concluded in good
faith. It was conceded during argument before us that the agreement did not comply
with s 3 of the Act, the terms of which are peremptory. The agreement was therefore
invalid, hence the order declaring it as such.

[14] In Van Staden the appellant (defendant) had, in terms of what was referred to
as an „Offer to Purchase‟, sold to the respondent (plaintiff) a share block in a share
block scheme for R28 000. The share block entitled the owner thereof to the right of
use of a flat and parking area (the premises) in a certain building. The plaintiff took
occupation of the premises on 1 November 1981. He paid the deposit and thereafter
the monthly instalments and levies in terms of the agreement. Disputes arose as a
result of the plaintiff‟s failure to sign „a proper deed of sale‟ which the parties had
agreed would be drawn upon the fulfilment of a particular condition. That condition
was fulfilled on 19 September 1982. The plaintiff vacated the premises more than
three years after he had taken occupation. He thereafter issued summons in April
1985 claiming repayment, in terms of s 1813 of Share Block Control Act 59 of 1980
(Share Block Act), of the amounts he had paid to the defendant. The defendant, in

13 The relevant part of the section provides that „any purchaser or seller who has performed partially
or fully under a contract for the acquisition of a share which does not comply with the provisions of
section 16 or 17, shall be entitled to reclaim from the other party what he has performed under the
contract . . . .‟

turn, counterclaimed, also in terms of s 18 of the same Act, for payment of
reasonable compensation for the use of the premises which the plaintiff had enjoyed,
as well as for damages he had caused to the premises. The parties were each
partially successful in their claims. One of the defences raised by the defendant was
prescription. It was alleged that the plaintiff‟s claim for repayment of moneys paid in
respect of the months of December 1981 and January to March 1982, inclusive, had
prescribed. This special defence of prescription was unsuccessful.
[15] Section 17 of the Share Block Act provides that a contract for the acquisition
of a share „shall state the matters required by Schedule 2 [to that Act] and be
accompanied by the documents referred to in that Schedule‟. On appeal to this court
it was argued on behalf of the defendant that because of non-compliance with the
provisions of s 17 the agreement („Offer to Purchase‟) was void ab initio and that the
plaintiff‟s claim for repayment of each instalment, that is the debt, arose immediately
after payment of each such instalment. This court considered the provisions of s
12(3) of the Act and reasoned as follows (at 216B-E):
„Die probleem in die onderhawige geval draai om die toepassing van die woorde “die feite
waaruit die skuld ontstaan” in art 12(3) van die Verjaringswet. Die respondent was
klaarblyklik bewus van die basiese feite. Hy het geweet wat die aard en inhoud van die
kontrak was. Uiteraard was hy bewus daarvan dat feitlik geen van die besonderhede vereis
deur art 17 van die Wet daarin opgeneem was nie. Ook het hy geweet dat die stukke waarna
in die artikel verwys word, nie die kontrak vergesel het nie. Hy was dus bewus van die feite
wat aangetoon het dat art 17 van die Wet nie nagekom is nie. Hy het geweet dat hy
betalings kragtens die kontrak gemaak het. Myns insiens was hy dus van meet af aan ten
volle bewus van al die feite wat aanleiding gegee het tot die spesiale remedies voorgeskryf
deur art 18 van die Wet. „n Mens kan aanvaar dat hy eers later bewus geword het van watter
vereistes deur art 17 van die Wet gesel word, en van watter regte hy verkry het toe die
appellant nie hierdie vereistes nagekom het nie.‟14

14 Loosely translated the court said: „The problem in the instant matter is the application of the words
“the facts from which the debt arises" in s 12(3) of the Prescription Act. The respondent was plainly
aware of the basic facts. He was aware of the nature and content of the contract. Naturally, he was
aware that virtually none of the particulars required by s 17 of the Act were contained therein. He also
knew that the documents referred to in the section did not accompany (or were not attached to) the
contract. He was therefore aware of the facts that indicated that the provisions of s 17 of the Act were
not complied with. In my view he was therefore fully aware from the outset of all the facts which lead
(or give rise) to the special remedies prescribed by s 18 of the Act. One can accept that he became
aware of the requirements prescribed by s 17 only later and of what rights he acquired when the
appellant failed to comply with these requirements.‟

This court accordingly held that the plaintiff had knowledge of the facts from which
the debt arose when he made the first payment. The court therefore upheld the
defendant‟s special plea of prescription.

[16] In Claasen the respondent (Bester) issued summons on 14 December 2007
seeking a declarator that a deed of sale, in terms of which he had sold a farm to the
appellant (Claasen), was void or voidable and that he was entitled to the return of the
farm. He tendered a refund of the purchase price of R175 000. The contract of sale
was concluded in or about September 2001. The parties had agreed - and this was
reflected in the deed of sale – that Bester could buy the farm back. Bester had been
in financial distress and the farm was about to be sold at a sale in execution. The
price at which he could buy back the farm was, however, not reflected in the deed of
sale. The relevant clause in the deed of sale provided that the purchase price and
the terms and conditions of such sale would be determined by the parties when the
right to repurchase was exercised. Bester claimed not to have read the provision and
that he had relied on the attorney who drew up the deed of sale to include a
provision that the price would be market-related. He testified at the trial that when the
sale was discussed at a meeting in the attorney‟s office on 25 September 2001 he
had insisted that the price at which he would buy back the farm „must be market-
related‟. He only realised when he obtained a copy of the deed of sale on 3 March
2004 that such a provision had been omitted. Attempts to have the „right‟ to purchase
back the farm registered against the title deed failed. Bester was informed on 11
January 2006 that the provision purporting to record the right to buy back the farm
was a nullity.

[17] Claasen‟s special plea of prescription failed before the trial court. His appeal
to this court was upheld on the basis that prescription began to run as from 3 March
2004, when Bester knew that no provision had been made in the deed of sale in
relation to the price at which he could buy back the farm from Claasen. Thus, when
Bester issued summons on 14 December 2007 his claim had become prescribed.

[18] It has been held, in the context of s 12(3) of the Act, that the appellant (in this
case) must show what the facts are that the respondent was required to know before
prescription could commence running and that it must also show that the respondent
had knowledge of those facts on the date prescription is alleged to have commenced
running.15  The respondent made the allegation, in his founding affidavit, that he „did
sign a written fee agreement‟ confirming that the appellant would accept instructions
from him „on a contingency on the basis that [he] would pay a fixed 22.5% plus VAT
of the damages recovered‟ on his behalf. He also stated that he signed various
documents on the day that he consulted at the appellant‟s offices – it appears this
was on 1 February 2006. He was, however, unable to recall whether a copy of what
he had signed was given to him, but said that despite a diligent search he was
„unable to locate a copy of such written fee agreement‟. Although the appellant
asserted in its answering affidavit that the respondent did not sign various
documents on 1 February 2006, it was not suggested that he never signed any
document. It is true, according to the answering affidavit, that Mr Perlman did furnish
the respondent with a motor vehicle claim form which the latter had to complete. But,
as early as 22 June 2008, the respondent, in a letter to the appellant to which he
never received a response, mentioned that „when signing the letter of engagement‟
he was aware of the percentage fee that the appellant would earn. In my view, this
clearly supports his version that he signed „a written fee agreement‟ confirming that
the appellant would accept his instructions „on a contingency on the basis that [he
would] pay a fixed 22.5% plus VAT of the damages recovered‟.

[19] It was not argued or suggested in this court, nor could it be so argued, in my
view, that the respondent knew, or must have known, at any stage before he
stumbled across the Bobroff decision, that what he said he signed in the appellant‟s
offices was some other document and not a written contingency fees agreement
contained in a prescribed form as required by s 3(1)(a) of the Act, and that he
therefore knew that the agreement was not in writing. It was also not suggested that
the respondent knew, or must have known, that the document which he believed
was the contingency fees agreement did not contain other information as required in

15 Links v Member of the Executive Council, Department of Health, Northern Cape Province [2016]
ZACC 10; 2016 (4) SA 414 (CC) para 24.

terms of any other provision of s 3 of the Act. Nor was it suggested that the
respondent could not reasonably have believed that the document he signed
contained a contingency fees agreement that complied with the provisions of the Act.
A finding that a copy of the document which the respondent believed to be the
written contingency fees agreement was made available to him cannot be made on
the papers. And if the document he signed was not one confirming the terms of the
contingency fees agreement as he said it was, it could, in any event, not be argued
that he knew that the agreement was not in writing as required by s 3(1)(a) of the
Act. It could not be suggested, therefore, that the respondent had knowledge from
the inception, or at any time before February 2014, of the basic facts from which the
debt arose.

[20] I disagree, therefore, with the finding (in paragraph 41 of the judgment of the
majority, which I have had the privilege to read) that the respondent knew that the
fees which he paid to the appellant were calculated on the basis of „the oral
contingency fees agreement which he concluded with the appellant (Perlman)‟. (My
emphasis.) Stripped of all excesses, the appellant‟s case was that from 1 September
2008, at the latest, the respondent „had knowledge of the identity of the [appellant]
as (alleged) debtor and of the facts from which his claim and the debt arises‟. No
attempt was made in the answering affidavit to show what the facts are that the
respondent was required to know, and in fact knew on or before 1 September 2008,
before prescription could commence running.16 The general statement that the
respondent‟s claim „is premised on an oral contingency fee agreement‟ does not
assist the appellant in this regard. The respondent‟s claim was premised on an
invalid written contingency fees agreement.

[21] Counsel for the appellant only dealt, in their heads of argument and before us,
with the issue relating to the invalidity of the agreement and ignored the second part
of the respondent‟s case, namely, that the agreement did not comply with the
provisions of the Act, that is, that the respondent was aware of facts that indicated

16 Ibid.

that there was no compliance with the provisions of s 3 of the Act. This was probably
because of the finding of the High Court that the invalidity of a common law
contingency fees agreement is a fact and not a legal conclusion. The issue of non-
compliance was, however, squarely raised in the founding affidavit.

[22] There was some suggestion in the appellant‟s heads of argument that even if
the law required knowledge of the invalidity or voidness of an agreement in order for
prescription to commence running, the respondent would still not be able to rely on s
12(3) of the Prescription Act. It was submitted that on his own version the
respondent would be „deemed to have such knowledge‟ as by the exercise of
reasonable care he could have acquired it. The matter of Price Waterhouse Coopers
Inc & others v National Potato Co-Operative Ltd 2004 (6) SA 66 (SCA) para 41, in
which it was held that any contingency fees agreement that is not covered by the Act
is illegal, was decided in 2004 and, so it was contended, the respondent could, by
the exercise of reasonable care, have acquired knowledge of the fact of the invalidity
of the agreement. Although a different finding has been made, I suspect that these
submissions would still have been advanced.

[23] In his founding affidavit the respondent averred that he is a lay person and
that he relied on the appellant to represent his interests and to advise him properly
and fairly. It is clear that he placed his trust in the appellant, who, he would have
thought, were the experts on matters legal and would handle his claim
professionally. He referred to Mr Perlman, who handled his claim, as „a very
experienced attorney‟, and felt confident that he „would be properly advised and
represented in all respects‟.  There is nothing in the papers to suggest that he should
at any stage have realised that there had been non-compliance with the provisions of
the Act and which should have led him to believe that he should seek legal advice
elsewhere. It is true that he was not happy with the amount of the fees that he paid in
terms of the agreement, but that was no reason for him to even suspect that there
had not been compliance with the provisions of the Act. He merely felt that, because
of the nature and extent of his injuries, the percentage fees he was required to pay
should be less than 22.5 per cent. There can be no basis, therefore, for a submission

that the respondent could, by the exercise of reasonable care, have acquired
knowledge, at an earlier stage, of facts that would indicate non-compliance with the
Act. It follows that prescription did not begin to run until the respondent acquired
knowledge, during February 2014, that the appellant had not complied with the
provisions of the Act. I would accordingly dismiss the appeal.

________________________
L Mpati

Acting President

Zondi JA (Theron and Van der Merwe JJA concurring):
[24] I have read the well reasoned judgment prepared by Mpati AP. However, I
regret that I cannot agree with my learned colleague that the appeal should be
dismissed. In the judgment (paras 18 and 19) Mpati AP concludes that the
respondent‟s claim had not become prescribed because the respondent did not have
knowledge from the inception, or at any time before February 2014, of the basic facts
from which the debt arose. I disagree with his conclusion. It is based on the finding
that the respondent‟s version that he concluded a written fees agreement, is correct.
In my view, the appeal should succeed and the appellant‟s special plea of
prescription should have been upheld by the High Court.

[25] The background facts have been set out in detail in the judgment by Mpati
AP, for which I am grateful and support his narration. It is common cause that on 2
February 2006 the appellant, a firm of attorneys, concluded a percentage-based
contingency fees agreement with the respondent in terms of which the appellant
agreed to represent the respondent in the institution and prosecution of an action
against the Road Accident Fund (the RAF) for damages for personal injuries suffered
by the respondent in a motor vehicle collision on 8 October 2005. The parties agreed
that the appellant would charge the respondent a contingency fee of 22.5 per cent
plus VAT of the damages that the respondent recovered from the RAF. This

agreement did not comply with the requirements of the Act17 and neither were its
provisions discussed prior to, and at the time that it was concluded.

[26] The RAF subsequently settled the respondent‟s claim and the terms of the
settlement were made an order of court on 23 May 2008. In terms of the order, the
RAF, among others, was to pay to the appellant, on behalf of the respondent, the
capital amount of R4 862 561.40. Upon receipt of the capital amount and legal costs
from the RAF the appellant deducted from that amount a sum of R1 109 101.02
representing a contingency fee of 22.5 per cent plus 14 per cent VAT and paid the
balance to the respondent on 20 August 2008.

[27] More than 6 years later on 9 April 2014, the respondent wrote a letter to the
appellant in which he claimed that he had recently became aware that the appellant
had overcharged him because the contingency fees agreement, on the basis of
which the fees were calculated, failed to comply with the Act and was therefore null
and void. For this proposition the respondent referred to the judgment of the
Gauteng Division in De La Guerre v Ronald Bobroff & Partners Inc & others
unreported case no 22645/2011 delivered on 13 February 2013, which he said, was
upheld by the Constitutional Court in February 2014.18 In that case the Gauteng
Division found, on the authority of a decision of this Court in Price Waterhouse
Coopers,19 that the contingency fees agreement which is not covered by the Act, is
illegal. The respondent accordingly demanded that the statement of account
rendered by the appellant to him on 20 August 2008 be debated or that the
reasonable fees be agreed upon.

17 Section 3(2) of which provides as follows:
„A contingency fees agreement shall be signed by the client concerned or, if the client is a juristic
person, by its duly authorized representative, and the attorney representing such client and, where
applicable, shall be countersigned by the advocate concerned, who shall thereby become a party to
the agreement.‟
18 Ronald Bobroff & Partners Inc v De La Guerre [2014] ZACC 2; 2014 (3) SA 134 (CC) para 14, in
which the two applications for leave to were dismissed for having no prospect of success on appeal.
19 Price Waterhouse Coopers Inc and others v National Potato Co-Operative Ltd [2004] ZASCA 64;
2004 (6) SA 66 (SCA) para 41.

[28] The appellant rejected the respondent‟s demand and contended that it had
acted according to „both the spirit and requirements of the Contingency Act‟.

[29] The appellant‟s refusal prompted the respondent to launch an application in
the High Court seeking, among others, an order declaring that the common law
contingency fees agreement concerned be declared invalid, void and of no force and
effect and that the appellant be ordered to pay to him the sum of R844 994.57. The
appellant opposed the application and contended among others that the
respondent‟s claim had become prescribed.

[30] The High Court dismissed the appellant‟s special plea of prescription holding
that the respondent only acquired knowledge of the facts (that common law
contingency fees agreements are unlawful) from which the debt arose when the
Constitution Court‟s judgment20 on contingency fees agreements was delivered in
February 2014 and that before that date the respondent was not aware that an Act,
prohibiting such agreements existed and that he was overcharged. It held that the
invalidity of a common law contingency fees agreement is a fact and not a legal
conclusion. The appeal is with the leave of the High Court.

[31] Before setting out my reasons for reaching a different conclusion, I must
agree with Mpati AP that the issue before us is whether the High Court correctly
found, when it did, that the respondent‟s claim had not become prescribed. That
issue, in turn, requires a consideration of the provisions of s 12 of the Prescription
Act 68 of 1969 (the Prescription Act).

[32] I also agree with Mpati AP‟s conclusion that the High Court erred in finding
first, that „the invalidity of a common law contingency fees agreement is a fact and

20 Ronald Bobroff & Partners Inc v De La Guerre (above). There the Constitutional Court was merely
required to determine whether the Contingency Fees Act was unconstitutional and the questions of
whether the common law contingency fees agreements were invalid, did not arise.

not a legal conclusion‟ and secondly, that the Act prohibits contingency fees
agreements. I am in full agreement with the reasons that Mpati AP advances in
support of that conclusion. I wish to emphasise in relation to the High Court‟s second
finding, that it is incorrect that the Act prohibits the conclusion of a „common law‟
contingency fees agreement.  The Act permits the parties to conclude such
agreement. It in fact allows them to do something that would otherwise be unlawful
under the common law. In other words, the Act was enacted to overcome the
prohibition which existed under the common law (Price Waterhouse Coopers Inc
para 41), which is quite the opposite of the High Court‟s second finding.

[33] The relevant parts of s 12 of the Prescription Act are set out fully in para 7 of
Mpati AP‟s judgment and I consider it unnecessary to repeat them. But to the extent
that it is necessary, s 12(1) provides that subject to the provisions of subsecs (2), (3)
and (4) of s 12, extinctive prescription commences to run as soon as the debt is due.
The term „debt‟ is not defined in the Prescription Act and the courts have held that it
must be given a wide and general meaning.21 The courts have also held that the
words „debt is due‟ must be given their ordinary meaning and that it is due when it is
immediately claimable by the creditor and it is immediately payable by the debtor.22

[34] This court in Truter & another v Deysel [2006] ZASCA 16; 2006 (4) SA 168
(SCA) para 16 said that:
„For the purposes of the [Prescription] Act, the term “debt due” means a debt, including a
delictual debt, which is owing and payable. A debt is due in this sense when the creditor
acquires a complete cause of action for the recovery of the debt, that is, when the entire set
of facts which the creditor must prove in order to succeed with his or her claim against the
debtor is in place or, in other words, when everything has happened which would entitle the
creditor to institute action and to pursue his or her claim.‟ (See, for example, Evins v Shield
Insurance Co Ltd 1980 (2) SA 814 (A) at 838D-H; and Deloitte Haskins & Sells Consultants
(Pty) Ltd v Bowthorpe Hellerman Deutsch (Pty) Ltd 1991 (1) SA 525 (A) at 532H-I. See

21 African Products (Pty) Ltd v Venter [2007] 3 All SA 605 (C) 612d.
22 Benson & another v Walters & others 1984 (1) 73 SA (A) at 82C, where Van Heerden JA quotes
with approval the dicta in The Master v I L Back and Co Ltd & others 1983 (1) SA 986 (A) at 1004.

further M M Loubser Extinctive Prescription (1996) para 4.6.2 at pp 80-81 and the other
authorities there cited.)

[35] In terms of s 12(3), a debt is not deemed to be due until the creditor has or
ought to have had knowledge of the identity of the debtor and the facts from which
the debt arises. In the founding affidavit, the respondent, in setting out the facts from
which the debt (his claim) arises, alleges as follows:
„9. I have since ascertained and been advised by my present legal representative that the
percentage fee agreement for 22.5% plus VAT in the circumstances of my case and my
dealing with Fluxmans, as set out more fully hereunder, is known as a “common law
contingency fee agreement” and is illegal, invalid and unenforceable as it does not comply
with the Contingency Fees Act 66 of 1997 (“the Act”).
. . .
20. I am a layman and it was only after I read of the Constitutional Court Judgment of 20
February 2014 that I decided thereafter to write to Fluxmans to obtain clarity in regard to the
basis upon which I had been charged in my case.
. . .
24. After the handing down of the Judgments in the De La Guerre and SAAPIL [2013 (2) SA
583 (GSJ)] cases on 20 February 2014 I addressed a letter to Selwyn Perlman at Fluxmans
dated 9 April 2014, a copy of which is annexed hereto marked “SZL4” . . .
25. In the letter “SZL4” I informed Fluxmans that I had become aware of the Judgments of
the Constitutional Court and that on consideration of my Statement of Account annexure
“SZL2” I was of the view that the agreement entered into between myself and Fluxmans was
invalid as it did not comply with the Provisions of the Contingency Fees Act 66 of 1997”.

[36] The respondent says the agreement he concluded with the appellant was in
writing and that he was given a copy to sign, which he did. He alleges, however, that
he is unable to produce a copy of the agreement as he cannot locate it after a
diligent search. On the evidence, such agreement does not exist. The deponent to
the appellant‟s answering affidavit denies that the agreement he concluded with the

respondent was in writing and in substantiation of that denial refers to a letter he
addressed to the respondent on 13 June 2006 embodying the terms upon which the
appellant accepted the respondent‟s instruction. The letter reads:
„This serves to confirm the arrangement that we have in regard to our fees is as follows:-
We shall charge you 22½% plus VAT thereon on whatever amounts we recover from the
Road Accident Fund alternatively R1 500.00 plus VAT for the time spent per hour by the
writer on the matter, whichever of the two is the greater.
. . .
Obviously the above is on the contingency that we recover the moneys from the Fund.‟

The appellant‟s version that the agreement between the parties was a verbal one is
not denied by the respondent in the replying affidavit. To the extent that there is a
dispute on whether or not the agreement was in writing that dispute in accordance
with the Plascon Evans principle23 must be resolved in the appellant‟s favour.

[37] It is clear from the aforegoing that the agreement the parties concluded, did
not comply with the peremptory requirements of s 3 of the Act which, among others,
require a contingency fees agreement to be in writing and signed by the client and
an attorney representing such client. The agreement, the parties concluded, is
therefore invalid.

[38] In respect of its defence of prescription the appellant avers that the debt
asserted by the respondent became due on 20 August 2008, the date on which the
respondent paid fees to the appellant. It contends that from that date the respondent
had knowledge of the identity of the appellant and the facts from which his claim
arose.

23 Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634E-635C.

[39] In its opposing affidavit the appellant did not rely upon the proviso to s 12(3)
of the Prescription Act. But in the heads of argument the appellant submitted in the
alternative that, to the extent that knowledge of the invalidity of a common law
contingency fees agreement was a „fact‟ for the purposes of s 12(3), the respondent
could, by the exercise of „reasonable care‟, have acquired knowledge of such „fact‟.
In the light of the conclusion I have reached it is not necessary to decide on the
appellant‟s alternative defence.

[40] The respondent‟s case therefore is that prescription did not commence to run
against its claim before 20 February 2014 because he did not by that date have
knowledge of the facts from which the debt arose. He says he did not know that the
percentage fee agreement he concluded with the appellant is a „common law
contingency fees agreement‟ and is illegal and unenforceable as it does not comply
with the Contingency Fees Act. . .‟ (My emphasis).

[41] The question, therefore, is whether before February 2014 the respondent had
knowledge of the facts from which his claim arose. In my view, the respondent did
have knowledge of such facts. Immediately after he paid the fees to the appellant on
20 August 2008 the respondent knew all the facts even though he did not know the
legal conclusion flowing from those facts. The respondent knew that fees which he
paid to the appellant on 20 August 2008 were calculated on the basis of the oral
contingency fees agreement which he concluded with the appellant (Perlman). On
his own evidence, the respondent then also knew all the other facts that he relied
upon in his founding affidavit for the conclusion that the contingency fees agreement
was invalid. He knew that the appellant‟s fees were not limited to double their normal
fee or 25 per cent of the amount awarded, whichever was the lower. He also knew
that before the agreement was entered into; he was not advised of any other ways of
financing the litigation and of their respective implications; he was not informed of the
normal rule that in the event of him being unsuccessful in the proceedings he may be
liable to pay the taxed party and party costs of the RAF in the proceedings; he was
not advised that he would have a period of 14 days, calculated from the date of the
agreement, during which he would have the right to withdraw from the agreement by

giving notice to the appellant in writing. He knew that none of this formed part of the
contingency fees agreement. Therefore, even if the contingency fees agreement
should be regarded as a written agreement, by 20 August 2008 the respondent knew
all the facts that he relied upon for his claim in his founding affidavit. According to
him, what he did not know, however, was the legal conclusion flowing from these
facts, namely that it was invalid because of its failure to comply with the Act. In para
20 of the judgment Mpati AP states that counsel for the appellant only dealt in their
heads of argument and before us with the issue relating to the invalidity of the
agreement and ignored the second part of the respondent‟s case, namely, that the
agreement did not comply with the provisions of the Act. I disagree.

[42] Knowledge that the relevant agreement did not comply with the provisions of
the Act is not a fact which the respondent needed to acquire to complete a cause of
action and was therefore not relevant to the running of prescription. This Court stated
in Gore NO para 1724 that the period of prescription begins to run against the creditor
when it has minimum facts that are necessary to institute action. The running of
prescription is not postponed until it becomes aware of the full extent of its rights nor
until it has evidence that would prove a case „comfortably‟. The „fact‟ on which the
respondent relies for the contention that the period of prescription began to run in
February 2014, is knowledge about the legal status of the agreement, which is
irrelevant to the commencement of prescription. It may be that before February 2014
the respondent did not appreciate the legal consequences which flowed from the
facts, but his failure to do so did not delay the date on which the prescription began
to run. Knowledge of invalidity of the contingency fee agreement or knowledge of its
non-compliance with the provision of the Act is one and the same thing otherwise
stated or expressed differently. That the contingency fees agreements such as the
present one, which do not comply with the Act, are invalid is a legal position that
obtained since the decision of this court in Price Waterhouse Coopers Inc and is
therefore not a fact which the respondent had to establish in order to complete his
cause of action. Section 12(3) of the Prescription Act requires knowledge only of the
material facts from which the prescriptive period begins to run – it does not require

24 Minister of Finance & others v Gore NO [2006] ZASCA 98; 2007 (1) SA 111 (SCA).

knowledge of the legal conclusion (that the known facts constitute invalidity)
(Claasen v Bester [2011] ZASCA 197; 2012 (2) SA 404 (SCA).

[43] If the respondent‟s claim had become prescribed in the interim because of the
lapse of the prescriptive period of three years, knowledge of invalidity of the common
law contingency fees agreement allegedly acquired thereafter following the
Constitutional Court judgment in Bobroff cannot revive such a prescribed claim.

[44] In my view, the respondent‟s cause of action arose on 20 August 2008 when
he paid fees to the appellant which he now contends were incorrectly calculated. The
action should have been instituted in August 2011 which is three years from the date
on which the cause of action arose. When the respondent therefore instituted these
proceedings in July 2014 his claim had become prescribed. The High Court erred
therefore by dismissing the appellant‟s special plea of prescription. The appeal must
accordingly succeed.

[45] With regards to costs, the appellant‟s counsel sought costs of two counsel to
be awarded as the matter, according to him, involves a consideration of legal issues
of utmost importance. Counsel for the respondent submitted that the matter does not
warrant the employment of two counsel and that costs to be awarded should be
limited to the costs of one counsel. The issue for determination, both in the High
Court and in this Court, was a narrow one, namely whether the respondent‟s claim
had become prescribed which in my view, despite its importance, was not complex.
The matter did not therefore deserve the services of two counsel and in the
circumstance costs of only one counsel should be awarded.

[46] In the result, I make the following order:
1. The appeal is upheld with costs.
2. The order of the High Court is set aside and is replaced with the following:

„The respondent‟s special plea of prescription is upheld with costs.‟

________________
D H Zondi
Judge of Appeal

APPEARANCES

For the Appellant:

A Subel SC (with him S Stein SC)

Instructed by:

Fluxmans Inc, Johannesburg

Lovius Block, Bloemfontein

For the Respondent
J J Bitter

Instructed by:

Norman Berger & Partners Inc, Johannesburg
McIntyre & van der Post, Bloemfontein
SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

FROM
The Registrar, Supreme Court of Appeal
DATE
29 November 2016
STATUS
Immediate

Fluxmans v Levenson (523/15) [2016] ZASCA 183 (29 November 2016)

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal.

Today the SCA upheld an appeal by Fluxmans Incorporated against the judgment of
the Gauteng Local Division of the High Court dismissing with costs the special plea
of prescription.

The appeal originates from an application brought by the respondent against the
appellant, his erstwhile attorneys for an order declaring a contingency fees
agreement concluded on 1 February 2006 between them to be invalid,void and of no
force and effect. The agreement was in relation to fees payable by the respondent to
the appellant in respect of the respondent’s claim against the Road Accident Fund
following a motor vehicle accident in which he was injured. The respondent’s claim
was finalised in May 2008 and on 20 August 2008 the respondent issued him with a
statement of account recording the fees it had charged him pursuant to the
contingency fees agreement and the amount that was due to him. The contingency
fees agreement did not comply with the provisions of the Contingency Fees Act (the
Act).

More than five years later the respondent brought the application seeking the setting
aside an order of the contingency fees agreement and that he be reimbursed for
moneys that had been debited against his account with the appellant. The appellant
opposed the application, contended that the claim had become prescribed and
asked for the dismissal of the claim. In response the respondent alleged that he did
not know that the contingency fees agreement he concluded with the appellant did
not comply with the provisions of the Act and was invalid. He maintained that he only
became aware of that fact in 2014 following a Constitutional Court judgment in the
Bobroff matter.

The high court dismissed the special plea of prescription. It upheld the respondent’s
argument that he only acquired knowledge of the facts from which the debt arose
when the Constitutional Court’s judgment on contingency fees agreement was
delivered in 2014.

On appeal the SCA held that the high court erred in finding that invalidity of the
agreement is a fact and not a legal conclusion. It also held that the prescription
period began to run on 20 August 2008 when the respondent acquired facts
necessary to institute a claim and that the claim had become prescribed by the time
that the respondent brought the application in July 2014.

---ends---