Tag Archive | Price Waterhouse Coopers

Contingency fee agreements and their application

Dear Reader,

Welcome to the eleventh edition of Independent Actuarial Consultant’s (IAC) monthly newsletter. Via this newsletter we will keep you updated of all the latest case law relating to motor vehicle accidents and the quantification of damages relating to personal injury claims.

We will also keep you updated of IAC developments, events and training seminars and lighten up your day with a joke or inspirational quote.


I am excited to announce that IAC will again be presenting training on the calculation of simple loss of income and loss of support calculations. The training is aimed at attorneys in order to equip them to give better instructions, have a better understanding of the actuarial calculation process and to aid in settlement of matters.

Same will be taking place on the following dates:

Durban 13 July 2010
Johannesburg 15 July 2010
Pretoria 15 July 2010
Cape Town 28 July 2010
Port Elizabeth 29 July 2010




This is a dependants’ action in which the plaintiff claimed damages in her personal capacity (R726 792) and on behalf of her minor children, B M (born 1997) (R158 120) and C L M (born 2005) (R265 001)

This judgment is not concerned with any issues raised in the trial but with the manner in which the plaintiff’s attorney purported to charge fees for his services.

On Wednesday 28 April 2010 counsel for the parties attended the chambers of the Honorable Southwood J to inform that they were attempting to settle the matter and requested that the matter stand down.

The matter was adjourned and counsel later that day again approached Southwood J in chambers with a handwritten draft order. The draft recorded that the defendant would pay the plaintiff the sum of R844 686 and costs.

At that stage Southwood J was unaware that the plaintiff and her attorney had entered into a contingency fees agreement as the prescribed affidavits i.t.o. s 4 of the Contingency Fees Act 66 of 1997 (‘the Act’) had not been filed.

After perusing the draft Southwood J informed counsel that in the absence of a breakdown of the amounts to be paid to the plaintiff and her children and proper arrangements for the administration of the funds to be paid to the children he was not prepared to make the draft order an order of court.

The parties were informed to consider these matters overnight. The next day counsel, but no attorneys, presented themselves in chambers with a typed draft order. It read as follows:

“By agreement between the parties: It is hereby ordered that:
1. …
2. …
3. The Defendant shall pay 25 % plus VAT of the total amount to the plaintiff’s attorneys in terms of the Contingency Fee Agreement Act.”

This was the first time that Southwood J became aware of a contingency fees agreement. Southwood J was not prepared to make the draft an order of court as he was not satisfied that he could order that the defendant pay 25 % plus VAT on the total amount to the plaintiff’s attorney pursuant to the terms of a contingency fee agreement and the prescribed affidavits had not been filed.

Southwood J demanded to see the contingency fees agreement as well as the plaintiff’s attorney together with counsel and the defendant’s attorney at 14h00 on 29 April 2010.

At 14h00 the counsel and the attorneys arrived at chambers. The plaintiff’s attorney’s colleague handed the contingency fees agreement apparently signed by the plaintiff to Southwood J. The plaintiff’s attorneys had arranged for his colleague to ‘stand in for him’.

The colleague was clearly unaware of the necessity for filing affidavits in accordance with s 4 of the Act. The colleague knew about the contingency fees agreement and informed as claimed he was present when it was explained to the plaintiff and when it was signed by her.

When requested by Southwood J to estimate the firm’s usual or ordinary fees for handling the case the colleague refused to do so and simply replied that ‘he stuck with’ the 25 % of the amount awarded as stated in the agreement
Southwood J was not satisfied with the contingency fees agreement and directed that the matter be adjourned to Monday 3 May 2010 so that the plaintiff’s attorney could file the affidavits required by s 4 of the Act and deal with the other problems referred to.

’In Price Waterhouse Coopers Inc v National Potato Co-op Ltd 2004 (6) SA 66 (SCA) in para 41 the court considered the Act in the following terms –

‘The Contingency Fees Act 66 of 1997 … provides for two forms of contingency fee agreements which attorneys and advocates may enter into with their clients. The first, is a “no win, no fees” agreement (s 2(1)(a)) and the second is an agreement in terms of which the legal practitioner is entitled to fees higher than the normal fee if the client is successful (s 2(1)(b)). The second type of agreement is subject to limitations. Higher fees may not exceed the normal fees of the legal practitioner by more than a 100 % and in the case of claim sounding in money this fee may not exceed 25 % of the total amount awarded or any amount obtained by the client in consequence of the proceedings, excluding costs (s 2(2)).

The contingency agreement in question provides that the plaintiff will pay the following to the attorney for the conduct of the case:

(1) 25 % (excluding VAT or other tax) of the capital amount awarded to the plaintiff and her dependants as a success fee; and
(2) for all work done before receipt of the capital proceeds, R1 000 per hour (excluding VAT or other tax); and
(3) any party and party cost contribution made to the plaintiff’s attorney (in respect of which the attorney need not account to the plaintiff).

This is clearly not covered by the Act and the agreement appears to be illegal. A contingency fees agreement may make provision for only double the attorney’s usual fee at the most.

On 3 May 2010 the plaintiff’s attorney appeared at court and provided the court with his affidavit and an affidavit by the plaintiff i.t.o. the Contingency Fees Act.

He informed the court that he did not and does not use the form prescribed by s 3(1)(a) of the Act for contingency fees agreements. He did not offer an explanation for not doing so.

He further informed that he enters into contingency fees agreements with his clients and, depending on the risk, he stipulates for between 15 % and 25 % of the award as his fee.

In this case he did not provide the Law Society with a copy of the contingency fees agreement. He did not offer an explanation for this.

He contended that he did not file the affidavits required by s 4 of the Act because the settlement happened so quickly.

Regarding the contingency fees agreement the plaintiff’s attorneys counsel submitted that it is covered by the provisions of the Act and is therefore valid and binding. With reference to Brisley v Drotsky 2002 (4) SA 1 (SCA) he submits that the plaintiff and Mr. Mhlanga should be allowed to contract as they see fit and that unless there is a complaint by the plaintiff that she entered into the contingency fees agreement without having fully comprehended its financial implications the agreement should not be impugned.

Despite Southwood J’s prima facie view that the contingency fees agreement offends against the Act and is not valid he declined to make an order declaring that it is invalid.

The court held:
“ I The defendant is ordered to pay to the plaintiff …
II …
IV …
V The plaintiff’s attorney, Mr. P.T. Mhlanga, is to bear the further costs relating to the hearings on 3 May 2010 and 18 May 2010;
VI The registrar is requested and directed to send a copy of this judgment together with exhibits ‘A’, ‘B’, ‘C’ and ‘D’ and the affidavits filed to the President of the Law Society of the Northern Provinces to investigate the conduct of the attorney, Mr. P.T. Mhlanga, as set out in paragraph [11] at para 3(a)-(d) of this judgment; whether the contingency fees agreement between the plaintiff and Mr. Mhlanga does not comply with Act 66 of 1997 and is therefore invalid and whether the contingency fees agreements which Mr. Mhlanga has entered into with his clients generally do not comply with Act 66 of 1997.”

Sending us an Instruction

Our dedicated full time professional team receive instructions by any of the following means:

• Email : damagesclaims@iac.co.za, or
• Post : PO Box 1172, Cape Town, 8000
• Fax : 086 616 8308

Now for some fun –
A physician, an engineer, and an attorney were discussing who among them belonged to the oldest of the three professions represented. The physician said, “Remember, on the sixth day God took a rib from Adam and fashioned Eve, making him the first surgeon. Therefore, medicine is the oldest profession.”

The engineer replied, “But, before that, God created the heavens and earth from chaos and confusion, and thus he was the first engineer. Therefore, engineering is an older profession than medicine.”

Then, the lawyer spoke up. “Yes,” he said, “But who do you think created all of the chaos and confusion?”