Is it justifiable for legal practitioners to charge contingency fees outside of the Contingency Fees Act?

Contingency fee agreements are generally used in MVA matters, where an attorney and client agree that upon success of the claim the attorney shall be entitled to fees equal to or, higher than his or her normal fees, set out in such agreement, for any such services rendered, according to section 2(1) of the Contingency Fee Act 66 of 1997.

Section 2(2) of the Act further states that any fees referred to in subsection(1)(b) which are higher than the normal fees of the legal practitioner concerned, shall not exceed such normal fees by more than 100%, provided that, the total of any such success fee payable by the client to the legal practitioner, shall not exceed 25% of the total amount awarded or any amount obtained by the client in consequence of the proceedings concerned, which amount shall not, for purposes of calculating such excess, include any costs.

According to research, there are quite a number of law firms that charge clients a higher contingency fee than the percentage prescribed. The question is, is this justifiable?

In the case of Bobroff and Partners Inc v JE De La Gurre; South African Association of Personal Injury Lawyers v Minister of Justice and Constitutional Development [2014] ZACC 2, Bobroff and Partners was one of the firms that charged its clients more than what the Contingency Fee Agreement Act 66 of 1997 prescribed. In this case, Bobroff and Partners charged their client Juanne Elize De La Guerre a 30% contingency fee. JE De La Guerre challenged the excess by way of an application in the High Court. Simultaneously, the South African Association of Personal Injury Lawyers, on Bobroff and Partners’ behalf, also brought an application in the High Court challenging the constitutionality of the Contingency Fee Act as a whole, alternatively section 2 and 4 of the said Act.

The High Court dismissed the South African Association of Personal Injury Lawyers’ application and found in Ms JE De La Guerre’s favour. The South African Association of Personal Injury Lawyers further applied for leave to Appeal, which was refused by the High Court and the Supreme Court of Appeal.

The South African Association of Personal Injury Lawyers approached the Constitutional Court seeking leave to appeal. The Constitutional Court agreed with the High Court and refused to grant leave because there was no reasonable prospect of success.

The Court went further to say why it refused to grant leave by drawing up a distinction between the principle of rationality and reasonableness review.

Before the distinction could be drawn, the Court made an important statement that courts should not unduly interfere with the formulation and implementation of policy and they are not in power to prescribe to the legislative arm of government on which it may make laws.

Rationality

It is an important requirement for the exercise of power in a constitutional state. But this principle does not mean that courts may take over the function of government to formulate and implement policy.

It is not grounded or based on the infringement of fundamental rights under the Constitution.

It is used to ensure that the means chosen in legislation are rationally connected to the ends sought to be achieved.

It is less stringent than the test of reasonableness.

Reasonableness

The reasonableness principle is based on the aspects of the law and its applicability in a particular matter, incorporating the constitutional rights.

The courts always to reason with the facts brought before them.

The Constitutional Court in the mentioned cased above concluded to say that the Applicant’s attack against section 2 and 4 of the Contingency Fee Act is merely based on the limitation of fundamental rights. But who’s rights? The right in question was section 34 of the Constitution which deals with the right to access to justice. The Court pointed out that section 34 is applicable to the legal practitioners’ clients, and not to the legal practitioners themselves.

The Court further pointed out that the application was not brought as a representative one under section 38 of the Constitution, but one where the Applicants acted on their own behalf. There is no evidence that the Applicants’ clients’ rights have been limited.

In this case the principle of reasonableness could not succeed on appeal. The application for leave to appeal was dismissed.

To this effect it is unjustifiable and unconstitutional for legal practitioners to charge contingency fees outside the scope of the Contingency Fee Act. In other words, legal practitioners are not allowed to charge more than 25% or their normal fees plus 100%, which is the lesser.

By Avela Makunga
avela@dyason.co.za