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No-win, no-fee agreements, where lawyers’ fees do not comply withthe Contingency Fees Act, are unlawful and invalid, the RoadAccident Fund (RAF) argued before three judges this week in a case that may soon settle the issue ofhow much lawyers who assist road accident victims to claim from the fund can deduct as fees from anypayout made.
The RAF was allowed to intervene in an application brought by the South African Association of Personal Injury Lawyers (Saapil) against the Minister of Justice and Constitutional Development tohave contingency fee agreements that do not comply with the Act declared lawful.
The RAF argued that if Saapil’s application were upheld, a significant proportion of the funds meant to compensate road accident victims could be claimed by their lawyers instead.
Pretoria High Court Judge President Dunstan Mlambo and judges Fayeeza Kathree-Setloane and Hans Fabricius heard that many personal injury lawyers have, for many years, been charging more in contingency fees than the Contingency Fees Act allows. The Act became effective 13 years ago.
Saapil’s application was heard this week, together with an application by Juanne de la Guerre, aformer client of the law firm of Saapil’s president, Ronald Bobroff, for the return of the fees she argues his firm illegally charged her (see “Two cases against Saapil head”).
Judgment was reserved in the two related applications. The two cases were heard together this week after Bobroff failed to secure a stay of the proceedings in the De la Guerre case pending the outcome of Saapil’s application.
The Act states that in a case taken on a contingency basis, the lawyer can charge double his or her normal hourly rate or 25 percent of the damages awarded, whichever amount is lower.
In its application, Saapil argues that the Contingency Fees Act does not explicitly prohibit contingency fee agreements other than those provided for in the Act. It says lawyers are not obliged to observe the Act and have a common law right to enter into other contingency fee agreements.
Saapil says the Law Societies of the Northern Provinces and the Free State have adopted resolutions favouring lawyers’ rights to conclude contingency fee agreements outside of the Act as long as they do not overcharge.
Its alternative argument is that if lawyers are allowed to enter into contingency fee agreements only as provided for in the Act, then the Act is unconstitutional. This, it says, is because preventing lawyers from entering into any contingency fee agreement discriminates against lawyers, infringes their rights to earn a livelihood and their potential clients’ right to access legal services.
Saapil says the Act’s requirements infringe on clients’ rights to human dignity, privacy and a fair public hearing, and the right to remain silent and not to incriminateyourself. It says the Act requires that certain details about settlements made in contingency fee cases be disclosed to a court, and these details may include clients’ medical conditions or failures to comply with tax laws.
In reply to Saapil’s application, Kalayvani Pillay, chief director of legal services in the Department of Justice, says on behalf of the Minister of Justice that although the Contingency Fees Act does not explicitly prohibit other contingency fee agreements, these are prohibited “by necessary implication”.
He also argues that a profession can be regulated by the law and that the Contingency Fees Act in fact enhances the right of lay people to access lawyers’ services.
Pillay says Saapil members are not applying their normal fees when determining fees for so-called common law contingency agreements and they do not draw up detailed bills of account, while agreements regulated by the Act must be based on a lawyer’s normal fees and a detailed bill.
The minister’s application says, in response to Saapil’s contention that the Act is inflexible, that the organisation should have sought an amendment to the Act.
In its court papers, the RAF says, Saapil’s argument about common-law contingency fee agreements is irreconcilable with five previous judicial decisions, including a Supreme Court of Appeal case, and is inconsistent with the plain wording and the purpose of the Act.
It says Saapil’s argument that the Act is unconstitutional rests on “a novel and remarkable proposition that Parliament has no right to put in place special statutory protections to prevent abuses by lawyers acting on contingency”.
The RAF’s lawyers, GilbertMarcus, Steven Budlender and Ncumisa Mayosi, argue that the common law recognises that contingency fee agreements are unenforceable and unlawful because theycompromise a lawyer’s relationship with his or her client by introducingconflicts of interest and a high risk of abuse.
The RAF says the Contingency Fees Act seeks to strike a balance between the vices of contingency fee agreements and the virtue of making justice accessible to poor people.
The Act is therefore intended to create a limited exception to the common law prohibition, but with strict limitations and controls, the RAF says, and therefore agreements that do not comply with the Act are unlawful and invalid.
The RAF says the limit the Contingency Fees Act places on contingency fees prevents you from finding that all the proceeds of a claim, such as one against the RAF, are swallowed up in legal fees.
The RAF says it appears that members of Saapil have simply ignored the provisions of the Act and have been entering into common law contingency fee agreements without complying with the Act for years.
The RAF says this approach is “patently impermissible and amounts to a form of self-help that neither the interests of justice nor our constitution countenances”.
TWO CASES AGAINST SAAPIL HEAD
The case of a former client against the law firm of the president of the South African Association of Personal Injury Lawyers (Saapil), Ronald Bobroff, is one of two cases Bobroff is facing.
Juanne de la Guerre wants the court to declare invalid her fee agreement with Bobroff & Partners because it did not comply with the Contingency Fees Act.
The Road Accident Fund (RAF) paid R2.7 million in compensation and costs in De la Guerre's case, and she was paid R1.7 million after fees and costs were settled.
De la Guerre wants her costs itemised and the legal fees amended to comply with the Act.
In a separate application to the Pretoria High Court in October, Jennifer Graham asked the court to have Bobroff and his son, Darren, struck off the roll.
Graham says the Bobroffs kept R1.1 million for legal fees and costs out of the R2.2 million the RAF paid in her husband’s case.
She complained to the Law Society of the Northern Provinces in June last year that Bobroff & Partners had massively overcharged her husband, but a disciplinary hearing has yet to be held.