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Pretoria - The Pretoria High Court has put a stop to lawyers taking more than their 25 percent share of a payout when acting on a contingency basis, a decision that personal injury lawyers say they will appeal against.
On Wednesday, a full bench of three judges confirmed that any contingency fee agreements that did not comply with the Contingency Fees Act would be invalid.
In terms of the act, where there is a “no win, no fees” agreement and where the claim is successful, the lawyer is entitled to legal fees equal to only 25 percent of the amount awarded.
This was the outcome of two related judgments by Pretoria Judge President Dunstan Mlambo and Judges Hans Fabricius and Fayeeza Kathree-Setiloane.
In the first judgment, they ordered that top Joburg personal injury lawyer Ronald Bobroff had to return some of the fees charged to a Road Accident Fund (RAF) after finding his agreement was invalid and the fees far exceeded the regulations of the act.
The RAF paid out R2 793 158 in respect of accident victim Juanne De La Guerre’s claim, but De La Guerre received only R1 729 451.
Bobroff, a former chairman of the Law Society of the Northern Provinces, deducted R1 063 707.
Bobroff was ordered to give De La Guerre a fully itemised bill, supported by the necessary vouchers, of the fees incurred while he was handling her case.
De La Guerre is also entitled to demand that this bill be subject to taxation by the tax master at the high court, who would scrutinise the bill to see whether it was fair. Bobroff has to pay De La Guerre the difference between the amount he charged and the total of the taxed bill.
The court also awarded a punitive costs order against him for the legal costs incurred by De La Guerre.
Judge Fabricius said it was “blatantly obvious” that the agreement did not comply with the act and that Bobroff, as an experienced practitioner, must have been aware that the Supreme Court of Appeal and other authorities had made it clear that any agreement that did not comply with the act would be invalid and could amount to unprofessional conduct.
An advocate, who may not be named for professional reasons, said this judgment could open the floodgates for other people who felt they had been overcharged by lawyers. They could approach the court on the same basis as De La Guerre as hers had been a test case
The advocate said he had four cases waiting to go to court following this judgment.
The South African Association of Personal Injury Lawyers (Saapil), of which Bobroff is a founder member, was blasted in a second judgment.
In this case, Saapil asked that the act be declared unconstitutional. This was refused.
Bobroff indicated that both judgments would be appealed in the Constitutional Court.
It was argued in the second case that legal practitioners should be able to conclude contingency fee agreements with clients without complying with the requirements of the act which, it was submitted, discriminated against lawyers and their clients.
However, Judge Kathree-Setiloane said: “If Saapil’s contentions are upheld, then a significant portion of funds earmarked for RAF victims would be claimed by their legal representatives.”
The act sought to strike a balance between the vices of contingency fee agreements on the one hand, and making justice available to the poor who otherwise would not have access to it, Judge Kathree-Setiloane said.
She added that invariably the percentage at which attorneys undertook to work on contingency exceeded 25 percent. The safeguards in place under the act were for the good of members of the public, to protect them from being abused, she said.
The judge commented that the Law Society of the Northern Provinces and its Free State counterpart, in 2002, made a ruling permitting members to conclude contingency fee agreements outside the prescripts of the act, provided certain criteria were met.
Lashing out at the Northern Provinces society, Judge Kathree-Setiloane said no rules had been put in place to address the risks of overreaching (overcharging) by its members in contingency fee agreements.
It also had not promulgated a cap on the percentage of the capital that might be recovered by attorneys, she said.
The only guideline was that the attorneys’ remuneration had to be fair. In the absence of proper guidelines, this was not determinable.
The president of the Law Society of the Northern Provinces, Busani Mabunda, said the judgment was being studied. The purpose of the court application had been to obtain certainty regarding contingency fees.
Mabunda added that it was unfair to say the law society had not put rules in place to address the risks of overreaching, as there were clear rules that were being enforced by the law society.
Regarding Bobroff, Mabunda said if the circumstances warranted sanction for unprofessional conduct, the society would deal with him like any other member.
Bobroff, meanwhile, said the Constitutional Court should have the final word on the contingency fee issue as it affected about 15 000 lawyers and many people who wanted to approach the court, but did not have the financial means to do so.
“The reality is that many South Africans cannot afford litigation and they are happy if their lawyer represents them on a contingency fee basis.”
The world had moved away from lawyers charging an hourly rate, Bobroff said.
He said lawyers working for a percentage would push a case to obtain the best results for a client.
“This judgment deprives the public from negotiating with a lawyer… the act locks every attorney and client into a box.”