What Is a Contingency Fee Agreement?
A contingency fee agreement is an agreement between a client and a legal practitioner under which the practitioner's entitlement to fees depends upon the outcome of the proceedings.
Section 2 of the Contingency Fees Act permits a legal practitioner to enter into such an agreement where, in the practitioner's opinion, there are reasonable prospects that the client may be successful in the proceedings.
The agreement may provide that the practitioner will not be entitled to fees for services rendered unless the client is successful to the extent defined in the agreement.
Fees Depend on Success
The attorney may agree that professional fees will only become payable if the client achieves the success defined in the agreement.
The Claim Must Be Assessed
The Act contemplates a contingency agreement where the legal practitioner considers that there are reasonable prospects of success.
Formal Requirements Apply
A contingency fee agreement must comply with the statutory requirements governing its form, content and signature.
The Success Fee Is Limited
An attorney cannot simply select any percentage of the client's compensation as a success fee.
Are “No Win, No Fee” Agreements Legal in South Africa?
Yes. Contingency fee agreements are expressly permitted by the Contingency Fees Act 66 of 1997, provided that the requirements of the Act are complied with.
The legislation was introduced to regulate contingency arrangements between legal practitioners and clients while providing safeguards concerning fees, disclosure and the client's rights.
The Act's definition of “proceedings” expressly excludes criminal proceedings and proceedings in respect of family law matters. A contingency fee agreement under the Act therefore cannot simply be used as a fee arrangement for every type of legal dispute.
What Types of Claims Commonly Use Contingency Fee Agreements?
Contingency arrangements are particularly relevant where a person has a potentially valuable claim but cannot reasonably fund lengthy litigation and the associated professional fees upfront.
They are therefore frequently associated with damages claims where liability and the value of the claim can be investigated before the attorney agrees to accept the financial risk of acting on contingency.
Public Liability Claims
Claims arising from serious injuries allegedly caused by unsafe premises or negligent conduct may be considered for contingency representation.
RAF Claims
Road Accident Fund claims are a common example of damages litigation in which contingency fee arrangements may be used.
Medical Malpractice Claims
Medical negligence litigation can involve extensive medical records, expert evidence and significant litigation costs.
Dependants' Claims
Qualifying damages claims arising from the death of a breadwinner may also be considered for contingency representation.
The Agreement Must Be in Writing
A valid contingency fee agreement is subject to formal statutory requirements.
Section 3 requires the agreement to be in writing and in the prescribed form. It must be signed by the client and the attorney representing the client. Where applicable, an advocate involved in the matter must also countersign the agreement.
A copy of the signed contingency fee agreement must be delivered to the client on the date it is signed.
The agreement should not leave the client guessing what “success” means, how fees will be calculated or who is responsible for litigation expenses. These issues are specifically addressed by the statutory requirements.
What Must the Agreement Explain?
The Contingency Fees Act requires considerably more than a statement that the attorney will receive payment if the case succeeds.
The Proceedings
The agreement must identify the proceedings to which the contingency arrangement relates.
Alternative Ways of Funding the Case
Before concluding the agreement, the client must be advised of other methods of financing the litigation and their implications.
What Counts as Success
The agreement must define what the parties regard as success or partial success in the proceedings.
How the Fees Are Calculated
The agreement must set out the amount payable or the method that will be used to calculate the amount.
How Disbursements Are Treated
The agreement must explain how expenses incurred on behalf of the client will be dealt with.
What Happens if the Agreement Ends Early
The consequences of premature termination and partial success must also be addressed.
How Much Can an Attorney Charge?
This is one of the most misunderstood aspects of contingency fee agreements.
Where the agreement provides for a fee higher than the attorney's normal fee following success, the Act refers to that increased amount as a success fee.
The success fee is subject to two important statutory limits.
No More Than Double the Normal Fee
The success fee may not exceed the legal practitioner's normal fee by more than 100%. In practical terms, it may not exceed twice the normal fee.
25% Cap on Monetary Claims
In claims sounding in money, the total success fee may not exceed 25% of the amount awarded or obtained by the client, excluding costs for purposes of that calculation.
The legislation does not create a universal rule allowing an attorney automatically to deduct 25% from a client's compensation. The statutory calculation and both applicable limits must be respected.
Why Does the “Lesser Amount” Matter?
The relationship between the normal fee, the permitted uplift and the 25% ceiling is important.
The attorney must calculate the fees in accordance with the agreement and the Act. The 25% provision operates as a statutory ceiling in a monetary claim. It is not a substitute for calculating the attorney's normal fees and the permitted success fee.
A contingency arrangement is regulated legal remuneration, not an unrestricted percentage-sharing arrangement. The amount ultimately charged must comply with the statutory limits.
What Happens if the Case Is Unsuccessful?
A contingency agreement may provide that the legal practitioner is not entitled to professional fees for services rendered if the client is unsuccessful to the extent specified in the agreement.
That does not necessarily mean that an unsuccessful case can never have any financial consequences for the client.
Disbursements and third-party expenses must be dealt with in the contingency fee agreement itself. Depending on the matter, these can include expenses associated with experts, medical records, reports, counsel and other litigation requirements.
“No win, no fee” refers to the attorney's professional fees in accordance with the agreement. It should not automatically be interpreted as meaning that every possible expense or adverse cost consequence disappears if the case is unsuccessful.
Can You Still Be Ordered to Pay the Other Side's Costs?
Potentially, yes.
The Act specifically requires a client to be informed of the ordinary rule that an unsuccessful litigant may be liable for the taxed party-and-party costs of the opposing party.
This is separate from the arrangement between the client and their own attorney.
A contingency fee agreement regulates the fee relationship between you and your legal practitioner. It does not, by itself, eliminate every possible costs order that a court may make in the litigation.
What Are Disbursements?
Disbursements are expenses incurred in progressing the matter that are separate from the attorney's own professional fee.
In personal injury and medical negligence litigation, these expenses can become substantial because expert evidence is often required to establish liability, causation and the value of the damages.
Expert Reports
Specialists may be required to assess injuries, prognosis, causation and future treatment requirements.
Actuarial Calculations
Actuaries may be required where future loss of earnings or loss of support must be calculated.
Counsel & Court Expenses
Depending on the case, litigation may involve counsel and other expenses necessary to progress the proceedings.
Records & Documentation
Obtaining medical, employment and other supporting records may also involve third-party expenses.
Do Clients Have a Cooling-Off Period?
Yes. This is an important protection that clients sometimes do not know about.
The contingency fee agreement must record that the client has a period of 14 days from the date of the agreement during which the client may withdraw by giving written notice to the legal practitioner.
If the client withdraws during that period, the practitioner may still be entitled to fees and disbursements for necessary or essential work performed to protect the client's interests during the period, as provided for by the Act.
Clients should receive a copy of the agreement, understand its terms and know how success, fees, expenses and termination will be dealt with before litigation progresses.
What Happens When a Contingency Matter Settles?
The Act also contains specific safeguards governing settlement.
Where a settlement offer is made in a matter subject to a contingency fee agreement, section 4 requires prescribed information to be placed before the court if the matter is before court, or before the relevant professional controlling body where it is not.
This includes information about the terms of the settlement, the estimated outcome if the matter proceeds to trial, the prospects of success or failure, the legal practitioner's fees and the reasons why settlement is recommended.
The client must also confirm in an affidavit that the settlement terms were provided in writing, explained and understood, and must state their attitude to the settlement.
Where the matter is already before court, a settlement concluded under a contingency fee agreement must be made an order of court. The statutory process is intended to promote transparency between practitioner and client when the claim is resolved.
What if a Client Disputes the Agreement or Fees?
The Act provides a mechanism for a client who feels aggrieved by a provision of a contingency fee agreement or by fees charged under it.
Section 5 allows the client to refer the agreement or fees to the relevant professional controlling body for review in accordance with the legislation.
This reinforces an important feature of contingency litigation: although the practitioner accepts financial risk by acting without ordinary upfront professional fees, the fee arrangement remains subject to statutory regulation and professional oversight.
Why Are Contingency Fee Agreements Important?
Serious litigation can be expensive. A claimant may need attorneys, counsel, medical specialists, occupational therapists, actuaries and other experts before the matter is finally resolved.
Without a contingency arrangement, some people with legitimate claims may simply be unable to fund the legal process required to pursue them.
Litigation Without Ordinary Upfront Fees
A qualifying claimant may obtain representation despite not having the resources to pay ordinary professional fees as the litigation progresses.
The Attorney Assumes Financial Risk
The practitioner accepts the risk that professional fees may not become payable if the matter does not achieve the success defined in the agreement.
Claims Are Screened
Because the attorney assumes financial risk, the merits, evidence, causation and potential damages generally require careful assessment before a matter is accepted.
Fees Are Regulated
The Contingency Fees Act establishes formal requirements and limits designed to regulate the arrangement between practitioner and client.
What Should You Check Before Signing?
A client should understand the financial arrangement before committing to contingency litigation.
Understand What Counts as Success
The agreement should make it clear what outcome will trigger the attorney's entitlement to fees.
Understand the Fee Calculation
Ask how the normal fee and any success fee will be calculated and how the statutory limits apply.
Understand the Disbursements
Know which litigation expenses may arise, how they will be funded and who ultimately bears responsibility for them.
Understand What Happens if You Lose
The agreement should be read together with advice about possible disbursements and any potential adverse costs order.
Keep Your Copy
You should receive and retain a copy of the signed contingency fee agreement for your records.
Does Danel Campbell Attorneys Act on a Contingency Basis?
Danel Campbell Attorneys acts on a contingency fee basis in qualifying personal injury claims, subject to an assessment of the merits and prospects of the individual matter.
This may include qualifying Road Accident Fund, medical negligence and other personal injury matters where the claim is suitable for contingency representation.
Before a matter is accepted on this basis, the circumstances of the incident, available evidence, liability, causation, damages and prospects of successful recovery must be considered.
A contingency arrangement shifts significant financial risk to the attorney. For that reason, each claim must first be assessed on its own merits before the firm can confirm that it will accept the matter on a contingency basis.
The Key Takeaway
A “no win, no fee” agreement can provide an important route to legal representation for people who have valid claims but cannot afford to fund substantial litigation upfront.
But the phrase can also make the arrangement sound much simpler than it really is.
In South Africa, contingency fee agreements are regulated contracts. The agreement must comply with the Contingency Fees Act, the client must understand how fees and expenses will operate, and success fees are subject to statutory limits.
Do not focus only on the phrase “no win, no fee”. Understand what constitutes success, how the success fee will be calculated, how disbursements are treated, what happens if the agreement ends early and what financial risks may remain.
Do You Have a Personal Injury Claim?
Danel Campbell Attorneys acts on a contingency fee basis in qualifying personal injury matters. We can assess the circumstances of your claim, the available evidence and whether the matter is suitable for contingency representation.
Explore Personal Injury Services →This article provides general legal information about contingency fee agreements under the Contingency Fees Act 66 of 1997 and does not constitute legal advice. The validity, operation and financial consequences of a contingency fee agreement depend on the terms of the agreement, the nature of the proceedings and the applicable law. Acceptance of a matter by Danel Campbell Attorneys on a contingency basis remains subject to an assessment of the merits and prospects of the particular claim.