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Contingency Fee Agreements: Red Light Warning for Legal Billings

Our clients continue to pose interesting questions to the Pick our Brain section of our website. This week, someone raised a concern that lack of compliance with section 4 of the Contingency Fee act can have a significant impact on legal billings. We explore the issue in more detail below.

Since the introduction of the Contingency Fees Act 66 of 1997, we have found more and more Attorneys employing the Act as a viable alternative to generate remuneration for services rendered. It is clear that result-orientated agreements with the litigant have appeal for both parties and can be a fair arrangement for certain results achieved.

The Act however requires monitoring and our Court’s role in this regard is vital. The Act provides for two forms of Contingency fee agreements which Attorneys and Advocates may enter into with their clients.

The first being the “no win – no fee” agreement is as per s2(1)(a). The second type is subject to limitations. “Higher fees” as per s2(1)(b) means fees may not exceed more than 100% the prescribed fees due to the attorney. In the case of a claim sounding in money, the fee may not exceed more than 25% of the total amount of the award (plus costs and Vat) – s2(2).

S4 of the Act provides for such an Agreement to be filed supported by affidavits from the Attorney and the client in this regard. The fact is that very few attorneys actually comply with s4 and may even have concluded such agreements orally. This may render them CONTRA BONES MORES.

Such a situation has recently arisen with a client where the Attorney’s ex-client queried the legality of the Agreement as s4 had not been complied with. Although the initial Agreement is not denied, the non-compliance with the requirements of the Act has caused a big stir as to the Agreement’s legality and enforcement. Even though an oversight (which it is in most cases) may occur, an Attorney may find himself in a situation where he will have to approach a Court to rectify and condone such oversight before the Agreement can be deemed enforceable.

When considering an arrangement with a client which relies on the Contingency Fee Agreement Act, please ensure full compliance with the Act as it can come back to bite you !

Your views will be appreciated! Please email us your thoughts, or better still, Pick our Brain. And if there are other points of issue or debates you’d like us to explore in more detail in future issues of this newsletter, let us know. We’ll do our best to shine a bright light on some of the more complex areas of the law as it relates to costs.

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