Know Your Rights - Contingency Fee Act

CONTINGENCY FEE AGREEMENTS

The Contingency Fee Act, 1997 (“the Act”), came into effect on 23 April 1999 and supersedes any other law or the common law.

What is a contingency fee agreement?

The Act defines a contingency fee agreement as an agreement between an attorney and his client in which the parties agree that:

(a) unless the client is successful to the extent described in the agreement, the attorney will not be entitled to any fees for services rendered; and

(b) if the client is successful to the extent described in the agreement, the attorney will be entitled to fees for services rendered equal to, or higher than his normal fees, as specified in the agreement. Provided that the higher fee (the fee above the attorney’s normal fee) may not exceed the attorney’s normal fees by more than 100 per cent, and further providing that in the case of claims for money, the total of the higher fee, may not exceed 25 per cent of the total amount of money awarded to the client. Any costs awarded to the client are excluded from calculation the aforementioned 100 per cent and 25 per cent limits.

Are there any formalities which must be complied with pertaining to the formation of the contract?

The Act provides for the following formalities in respect of contingency fee agreements:

 the agreement must be in writing in the prescribed format;

 the agreement must be signed by the client and the attorney, and where applicable must be countersigned by the advocate concerned;

 the agreement must state the following –

o the proceedings to which the agreement relates; o that, before the agreement was entered into, the client—

(i) was advised of any other ways of financing the litigation and of their respective implications;

(ii) was informed of the normal rule that in the event of his, her or it being unsuccessful in the proceedings, he, she or it may be liable to pay the taxed party and party costs of his, her or its opponent in the proceedings;

(iii) was informed that he, she or it will also be liable to pay the success fee in the event of success; and

(iv) understood the meaning of the agreement;

 what will be regarded by the parties to the agreement as constituting success or partial success;

 the circumstances in which the attorney’s fees and disbursements relating to the matter are payable;

 the amount which will be due, and the consequences which will follow, in the event of the partial success in the proceedings, and in the event of the premature termination for any reason of the agreement;

 either the amounts payable or the method to be used in calculating the amounts payable;

 the manner in which disbursements made or incurred by the attorney on behalf of the client shall be dealt with;

 that the client will have a period of 14 days, calculated from the date of the agreement, during which he, she or it will have the right to withdraw from the agreement by giving notice to the attorney in writing: Provided that in the event of withdrawal the attorney will be entitled to fees and disbursements in respect of any necessary or essential work done to protect the interests of the client during such period, calculated on an attorney and client basis;

 the manner in which any amendment or other agreements ancillary to that contingency fees agreement will be dealt with; and

 a copy of the agreement shall be delivered to the client on the date on which the agreement is signed.

Are there any other formalities prescribed by the Act?

The Act provides that when an offer of settlement is made to the client who has entered into a contingency fees agreement, the offer of settlement may be accepted only after the attorney has filed an affidavit with the court, if the matter is before court, or has filed an affidavit with the relevant law society, if the matter is not before court.

The affidavit by the attorney must state the following:

 the full terms of the settlement;

 an estimate of the amount or other relief that may be obtained by taking the matter to trial;

 an estimate of the chances of success or failure at trial;

 an outline of the attorney’s fees if the matter is settled as compared to taking the matter to trial;

 the reasons why the settlement is recommended;

 that the matters referred to in the above bullet points were explained to the client, and the steps taken to ensure that the client understands the explanation; and  that the attorney was informed by the client that he or she understands and accepts the terms of the settlement.

The affidavit by the attorney must be accompanied by an affidavit by the client in which the client must state the following:

 that he or she was notified in writing of the terms of the settlement;

 that the terms of the settlement were explained to him or her, and that he or she understands and agrees to them; and

 his or her attitude to the settlement.

Lastly, any settlement made where a contingency fees agreement has been entered into, must be made an order of court, if the matter was before court.

What can a client do if he or she does not agree with the fees charged by the attorney in respect of their agreement set out in the contingency fee agreement?

If the client is unhappy with the fees charged by his attorney the client may refer the matter to the relevant law society for the contingency fee agreement to be reviewed. The law society may set aside any provision of the contingency fee agreement or any fees claimable in terms thereof if in its opinion the provision or fees are unreasonable or unjust.

Does the law allow for another type (“common law”) contingency fee agreement to be concluded between a client and his, her or its attorney?

No. Any contingency fee agreement that does not comply with the Act is unlawful.