Debt could cripple black legal firms

Although Justice Minister Jeff Radebe wants black lawyers to get a bigger slice of the government’s multibillion-rand spending on litigation, many top black-owned law firms are battling to survive as a result of the nonpayment of legal fees by clients, which includes the government and state-owned enterprises.

Radebe’s spokesperson, Tlali Tlali, told the Mail & Guardian the minister was concerned about the plight of previously disadvantaged members of the legal profession, because the “skewed patterns of briefs in the past” had the effect of benefiting certain sectors in the legal profession to the exclusion of others.

Yet a top attorney, who asked not to be named, said many black-owned law firms were facing another threat: they frequently had to write off debts because of nonpayment.

This was confirmed by the national president of the Black Lawyers’ Association, Busani Mabunda, who said there was a “serious strain” on attorneys and some black-owned law firms were now under threat of closure. “Government and all stated-owned enterprises have, to some extent, tried to procure black legal professionals, but when it comes to paying, they are not playing ball.”

He said President Jacob Zuma was aware of the increasing issue for some black-owned law firms, which faced financial ruin if they were not paid.

Culture of nonpayment
One high-profile attorney who claimed to be at the receiving end of the “culture of nonpayment” is attorney Barnabas Xulu.

Xulu is a well-known figure in political circles. He devoted himself to administering the trust of the Friends of Jacob Zuma, which was set up to assist and raise funds for Zuma’s long-running legal battles against corruption and rape charges.

However, the established law firm he co-owns, Xulu Liversage Inc, has been blacklisted by the Bar Council after he was unable to pay in full senior legal counsel he had hired.

Xulu’s Cape Town-based law firm has some prominent clients and is currently representing the department of defence in its legal battle over a R826-million VIP jet contract. Thankfully, the defence department paid its legal bills “timeously and in full”, which helped to keep the firm afloat, he said.

But his concerns over other unpaid bills have given him headaches and he is currently being sued by a Johannesburg legal firm for work it did for his firm in the marathon legal battles affecting Western Cape Judge President John Hlophe.

A hollow ring
Xulu is Hlophe’s lawyer and has been fighting a battle with the justice department and the master’s office for more than a year to get his legal fees paid.

When Radebe announced last week that he would introduce a policy this year that would ensure that black-owned law firms benefit from the state’s burgeoning litigation bill, it had a hollow ring for Xulu, who claimed he was still owed more than R1-million by the state attorney’s office.

“If I did not have this problem with nonpayment of my legal fees by clients who are able to pay, maybe my firm might have grown even bigger. This obviously has a crippling effect on the growth of the firm,” said Xulu. “They say there are a small number of lawyers coming into the system. Here I am – I have the exposure, but you cannot grow without resources.”

Hlophe’s litigation is still ongoing. The Constitutional Court has said  the Judicial Service Commission should resume its inquiry, ordered by the Supreme Court of Appeal, into allegation of gross misconduct. As a judge president Hlophe is entitled to legal representation. He stands accused of trying to influence the deliberations of the Constitutional Court in a criminal case against President Jacob Zuma.

In correspondence Hlophe wrote to Radebe in June last year, he revealed his concern about the nonpayment of his mounting legal fees.

Frivolous litigation
The requirement that he sign an undertaking that he would repay all fees incurred by the government if he loses his Constitutional Court appeals was based on an erroneous misreading of the relevant provisions of the Public Finance Management Act, Hlophe wrote.

He asked that Radebe reconsider his decision in this matter after the minister made a public announcement that the judge president would have to repay the money if he lost his case.

“In the eyes of the public, there may well have been an impression that I was involved in frivolous litigation and that my lawyers were milking the state of large sums of money,” he wrote.

Hlophe reminded the minister that the most important purpose of judicial immunity was to protect judicial independence.

“Judicial immunity is needed because judges, who often are called on to decide controversial, difficult and challenging disputes, should not have to fear that disgruntled litigants will hound them with litigation, charging improper judicial behaviour. To impose this burden on judges would constitute a real threat to judicial independence.”

Because Xulu’s legal bills had not been paid by the state, Hlophe was not asked to repay any money when he lost his Constitutional Court appeal.

Tlali Tlali said the department remained “hopeful” that the issues would be resolved.

“Parties have yet to resolve a dispute, which emanated from an agreement that had to be entered into between Judge President Hlophe and the department of justice through the state attorney’s office,” he said. “The agreement forms a basis for, and is a precondition to, any commitments we could make in the settlement of legal costs that arose out of litigation involving Judge President Hlope, where Mr Xulu may have rendered legal services.”

Xulu’s financial woes do not end there. His firm is taking the KwaZulu-Natal provincial department of economic development and tourism to court next week to try to recover about R195 000 it claims is owed for extensive legal work it did.
The department’s chief financial officer, Bongani Shezi, said he would pass on the M&G’s queries to its communications department, but no response was received.

Xulu’s firm was blacklisted by the Bar Council after Xulu Liversage Inc was unable to pay what it owed to senior counsel who had been briefed to assist in liquidating the Canyon Springs Investment 12.

Xulu Liversage claimed it was owed R1.8-million by the South African Clothing and Textile Workers’ Union for appearing at the Canyon Springs Investments 12 insolvency inquiry, which has been unravelling what happened to more than R100-million of misappropriated pension funds.

The union’s general secretary, Andre Kriel, said the union “has sympathy for the position which Mr Xulu finds himself in”.

“We do clarify, however, that we do not owe Mr Xulu any fees. He has never represented [the union] at the Canyon Springs inquiry,” said Kriel. “The attorneys who represented us were from Eversheds.”

At the public interest inquiry, Xulu represented Trilinear Empowerment Trust, the investment vehicle used for the pension fund money. Its trustees resigned after Xulu assisted them in laying fraud charges against former unionist Richard Kawie and Trilinear group owner Sam Buthelezi.  

Xulu said if he was not paid by the union, he might be forced to sue and sequestrate the trust.

Financial stress blamed for suicide
The highly respected Mvuseni Ngubane always gave the other lawyers in his Durban-based law firm the strength to keep going when their legal bills were not paid, so they were “baffled” by his apparent suicide.

“Each and every business has its up and downs and we were no different,” said his distraught business partner, Madoda Nxumalo. “If one of us got despondent around the finances, he would always act positive.”

Ngubane’s body was found in his Mercedes-Benz in his garage with a gun and a blood-stained note. A devastated Mxolisi Nxasane, sitting president of the KwaZulu-Natal Law Society, said his best friend had apologised to his wife, his loved ones and the ANC and had written that a slump in his practice had caused him stress.

His brother, Bhekadantu Wilfred Ngubane, said it was hard to accept that he had taken his life, but there was “not the slightest suspicion” anyone else had been involved in his death.

Ngubane handled many high-profile cases, including that of convicted drug dealer Cheryl Cwele, the wife of State Security Minister Siyabonga Cwele.

Commission matters
He had recently taken up the position of secretary to the arms deal commission and had met with President Jacob Zuma two weeks ago to discuss commission matters on the day he is believed to have shot himself.

“He called me and asked me what I was doing and I said I was with a friend. If it was something urgent, I would have dumped everything and gone to see him,” said Nxumalo.

“But he said: Don’t worry, I will report back to you Tuesday. Now I am cursing myself.”

When he was called to the house, Nxumalo said his much-loved colleague was still in the vehicle and he “did not have the courage” to go closer, or to look at the CCTV footage that is believed to have captured his suicide.

It was just so uncharacteristic of Ngubane to be despondent and their law firm, Ngubane and Partners, was a busy practice, Nxumalo said.

“When there were delays in payment he would cheer us up. One of our main clients is the Road Accident Fund, and if payments were delayed we would become despondent,” he said. “It can happen with private clients too, and he would just say ‘we must carry on and do our work’. Payments had been delayed because of problems, he would tell us.” – Glynnis Underhill

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Glynnis Underhill
Glynnis Underhill has been in journalism for more years than she cares to remember. She loves a good story as much now as she did when she first started. The only difference is today she hopes she is giving something back to the country.

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