Ronald Bobroff silenced by the Constitutional Court

Jonathan Faurie, FAnews Journalist

In a landmark ruling by the highest court in South Africa, the Constitutional Court has finally laid the issue of contingency fees to rest when they ruled against Ronald Bobroff & Partners and the South African Association of Personal Injury Lawyers (Saapil) on 20 February 2014.

The case was heard by the Constitutional Court after Ronald Bobroff and Saapil appealed two decisions which were handed down in 2012 by the North Gauteng High Court and the Supreme Court of Appeal.

The issue

Contingency fees are regulated by the Contingency Fees Act of 1999 (The Act). The Act lays down the fees that an attorney can charge when entering into an agreement with a client to represent them in claiming money back from the Road Accident Fund (RAF). This is done on a no win, no fee basis.

The Act points out that if a client is successful in claiming money back from the RAF, the attorney representing the client will be entitled to a fee that is either equal to, or higher than his/her nominal fee. This entitlement comes with the provision that it will be awarded as long as the fee is not more than double the attorney’s nominal fee or 25% of the amount claimed from the RAF, depending on which is the smaller amount of the two.

Certain attorneys, of whom Bobroff was one of the guilty parties, have been entering into what they label as common law contingency fee agreements where the fees agreed to exceed the parameters governed by The Act. These attorneys claim that they are entering into these agreements under the premise that the Law Society of Northern Provinces has given them permission to do so, provided that the fees agreed upon were fair and reasonable.

It must be pointed out that Bobroff is a past President of the Law Society of Northern Provincesand is the current President of Saapil.

Opening a can of worms

Bobroff and Saapil were taken to the North Gauteng High Court over two cases of charging excessive contingency fees.

In the first case, Juanne de la Guerre was involved in a motor vehicle accident in 1995. She then approached Ronald Bobroff & Partners to reclaim money back from the RAF. The company entered into a contingency fee agreement with De La Guerre saying that she would be charged a fixed fee of 30% plus value added tax (VAT) of any damages recovered. She was handed this in a document which she signed, but was later told by another attorney that this agreement was invalid as it went against the principles of The Act, which she did not even know existed.

Matthew and Jennifer Graham were also clients of Ronald Bobroff & Partners and complained to the Law Society of the Northern Provinces about the firm’s fees. After not having the complaint heard, the Graham’s took to the North Gauteng High Court to have Bobroff and his son Darren Bobroff struck off the roll of attorneys.

The North Gauteng High Court ruled in favour of both parties saying that the common law contingency agreements were unlawful and that any agreements contrary to those outlined by The Act are unlawful.

Bobroff then appealed this decision with the Supreme Court of Appeal saying that these common law contingency agreements were being entered into with the knowledge and permission of the Law Society of Northern Provinces.

Bobroff lost this appeal, after which he went to the Constitutional Court where he lost again.

Effects on the medical schemes industry

When a person is successful in claiming money back from the RAF, their medical scheme is entitled to a certain percentage of that payment in order to cover the medical expenses incurred by it during any hospitalisation or subsequent treatment.

By charging clients excessive contingency fees, attorneys are decreasing the pay outs that clients would receive from the RAF. This in essence would decrease the payment that medical schemes can recover from policyholders.

Discovery Health tried to recover such money from a policyholder after the policyholder did not reimburse the money that was owed. The policyholder was a client of Ronald Bobroff & Partners and Discovery was alerted to the fact that Bobroff may be charging his clients excessive contingency fees.

Discovery investigated the allegations surrounding Bobroff and found that he was charging excessive fees. It then paid for the legal fees of the Graham case in order that they can recover the excessive fees from Bobroff.

Discovery Health CEO Dr Jonathan Broomberg says that the Constitutional Court ruling has significant ramifications for the industry. "Discovery Health will endeavour to identify and contact all Discovery Health members who may be affected by this ruling. We would also encourage all brokers to contact any of their clients who may have claimed from the RAF following a motor vehicle accident and who may potentially be affected by the Constitutional Court rulings."

Effects on the industry

The ruling is important for a number of other reasons.

Firstly, the ruling means that Ronald Bobroff & Partners may be liable to pay back all monies illegally misappropriated by the company through common law contingency agreements. The statement of intent by Discovery Health, if followed through, will result in Bobroff being liable to pay back what Broomberg describes as hundreds of millions of rands.

Secondly, it casts a bad light on certain areas of the legal fraternity. Ronald Bobroff & Partners was a leading firm when it came to claiming from the RAF. In his professional capacity, Bobroff is the President of Saapil and is a past President of the Law Society of Northern Provinces. So he is a prominent figure within the legal fraternity. One wonders how his reputation will be affected following this judgement.

Thirdly, there will now be clarity on the associated fees when claiming from the RAF.

Editor’s Thoughts:
The house of cards that Ronald Bobroff built on shifting sands now has the potential to collapse in on him. Following Discovery’s statement of intent that its policyholders should recover fees from Bobroff; will other medical schemes adopt a similar standpoint? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.