In this article, we offer an explanation of lawyers’ contingency fees in South Africa, including how they work and what a “no win, no fee” arrangement typically involves.
A contingency fee agreement means that an attorney receives payment only if a claim is decided in a client’s favour. An attorney represents his or her client for as long as a case takes. The attorney carries the costs of engaging experts, as necessary, without charging an initial fee or the usual hourly rate. In other words, the attorney’s payment is dependent, or “contingent”, on winning the case. When a case is won, the attorney is paid according to the agreement. It’s important to note that other costs, aside from an attorney’s fee, are also involved in trying a personal injury claim in South Africa. This article provides a useful overview of the different types of costs that may be involved.
Contingency fee agreements are regulated by the Contingency Fees Act (CFA) 66 of 1997. Under the Contingency Fees Act, a contingency fee agreement can take one of two forms. The agreement may entitle an attorney to his or her normal fees for services rendered, if the client’s claim is successful. In this case, there’s no statutory cap on the fee amount. Alternatively, the agreement may entitle the attorney to a success fee, in addition to the norml fee. By law, the total fee in this case is limited to 25% (VAT inclusive) of the capital sum (damages) recovered or double the lawyer’s normal fees – whichever is the lesser. South African courts have upheld this cap, declaring contingency fee agreements that don’t comply with the Act invalid. Like any legal fee, a success fee is calculated with reference to work actually done. Expenses/disbursements are excluded from both fee calculations.
A contingency fee agreement is usually in the best interests of the client. There are several obvious advantages:
