IN TWO separate judgments on Wednesday, the North Gauteng High Court limited the contingency fees lawyers can charge their clients.
The judgments make it clear that the Contingency Fees Act — which stipulates that the maximum contingency fee attorneys are entitled to is 25% of the capital received by the client — is the only legislation that regulates such fees, and that all fee agreements that do not comply with the act are invalid.
In the first judgment, the court declared invalid and of no force or effect the contingency fee agreement entered into between beautician Juanne de la Guerre and Ronald Bobroff & Partners.
The law firm had pursued Ms de la Guerre’s claim against the Road Accident Fund after she was involved in an accident in November 2005. Judgment was granted in Ms de la Guerre’s favour and she was awarded R2.5m. But she received only 68.12% of this and the law firm’s charges for fees and disbursements were 31.88% of her award.
Ronald Bobroff & Partners did not file an answering affidavit but filed an application to stay the proceedings pending the determination of a "test case" launched by the South African Association of Personal Injury Lawyers.
Judge Hans Fabricius said in his judgment that it was clear from a Supreme Court of Appeal ruling, PricewaterhouseCoopers vs the National Potato Co-operative, that any contingency fee agreement that did not comply with the act was invalid.
In granting a punitive costs order against Ronald Bobroff & Partners, Judge Fabricius said the law firm must have been aware that the overwhelming view of authorities — including the Supreme Court of Appeal — was that any agreement not complying with the act would be invalid and could, in the proper context, also amount to unprofessional conduct.
"I am of the view that (Ms de la Guerre) is entitled to a punitive cost order which would in turn express the strong disapproval of this court with the (law firm’s) conduct in these proceedings," Judge Fabricius said in his judgment.
The North Gauteng High Court on Wednesday also dismissed a constitutional challenge against the Contingency Fees Act, launched by the South African Association of Personal Injury Lawyers.
The association had been seeking certainty on whether the act exhaustively regulated the powers of legal practitioners to conclude contingency fee agreements with their clients.
Its constitutional challenge was based on the argument that the act was unconstitutional because it set limits on the fees that could be charged under such agreements.
The association also argued that the act capped fees at "too low a level", but gave no indication of what the correct level should be.
In her judgment on Wednesday, Judge Fayeeza Kathree-Setiloane said that, in adopting limits to fees charged under contingency agreements, Parliament sought to give effect to the need for access to justice.
"It recognised — correctly, in my view — that access to justice would not be promoted by unlimited contingency fees," she said in her judgment.
"On the contrary, in order to protect members of the public and ensure that they benefited from litigation conducted on their behalf, it was necessary to impose certain limits on contingency fees," she said.
Judge Kathree-Setiloane said that without such limitations, the right of access to court for many litigants might be rendered meaningless — because even if they were able to get to court and succeed, they would derive little or no financial benefit from such court proceedings.