Ruling clears way for contingency fee claims

By Laura du Preez Time of article published Feb 23, 2014

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A Constitutional Court ruling this week clears the way for former clients of personal injury lawyers to claim back what is estimated to be many millions of rands of fees charged on a no-win, no-fee basis that exceed those set by law.

Personal injury lawyers typically help road accident victims to claim from the Road Accident Fund (RAF).

The RAF paid out R12.5 billion in compensation last year, and Deon Francis, a director of Hogan Lovells, which has been acting for the RAF, says it is conceivable that five percent of this compensation, or R600 million, represents fees above the legal limits.

The Constitutional Court this week unanimously found that it is not irrational for the law to regulate how much a lawyer can charge you when acting on a no-win, no-fee basis.

It dismissed an application by personal injury attorney Ronald Bobroff to appeal a full-bench High Court decision setting aside fees his firm charged in excess of the legal limits.

Bobroff is also facing an action in the North Gauteng High Court to have him and his son, Darren, suspended from the roll of attorneys because he charged a client, Matthew Graham, fees that exceeded those set by law. That matter was heard at the end of January and judgment in that case has been reserved.

The Constitutional Court this week also dismissed an application by the South African Association of Personal Injury Lawyers (Saapil) for leave to appeal against the High Court’s dismissal of its application. It confirmed the High Court’s view that the only contingency agreements that lawyers may enter into with their clients are those that comply with the Contingency Fees Act.

The Act says lawyers acting on a no-win, no-fee basis can charge up to double their normal time-based fees or 25 percent of the settlement, whichever amount is lower. Francis says the Constitutional Court ruling means anyone who has been charged more than this will have a very good chance of claiming against their attorney for fees exceeding the limits.

Regarding the general rule that claims prescribe after three years, he said the three years would begin only from this week’s ruling, when accident victims could have become aware that the fees they were charged were illegal.

The Constitutional Court ruling upholds last year’s High Court finding that the fee agreement that Bobroff’s firm, Ronald Bobroff & Partners, signed with a former client, Jeanne de la Guerre, is void. The High Court ordered the firm to submit reasonable itemised fees. Bobroff & Partners charged De la Guerre a contingency fee of 30 percent, about R1 million, of the R2.7 million the RAF paid in compensation and costs after her accident.

Francis says other lawyers’ agreements above the legal limits will also be void.

The Constitutional Court this week found no merit in Bobroff and Saapil’s challenge as a whole, dismissing the argument that the Contingency Fees Act was irrational because it applied only to lawyers. It also said there was no evidence that the Act was unreasonable and would result in clients being denied access to justice and such a claim should be made by those denied access rather than their lawyers.

The court therefore dismissed the applications for leave to appeal with costs.

Commenting on the court ruling, Bobroff & Partners and Saapil said the court had noted that the Law Societies, which regulate some 70 percent of all practising attorneys had made rulings allowing their members to enter into fee agreements that exceeded the limits in the Contingency Fees Act since 2002.

Bobroff says attorneys did not act improperly or unethically, as the Constitutional Court judges note that uncertainty reigned in the legal profession regarding the correct position on contingency fees.

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