WORKING PAPER 63 - SPECULATIVE AND CONTINGENCY FEES

Issued by: The South African Law Commission

The South African Law Commission has published a working paper in which the desirability of speculative and contingency fee agreements is investigated.

A contingency fee agreement is an agreement between a legal practitioner, such as an attorney, and his or her client to the effect that the legal practitioner will charge no fees if the client's court case is conducted unsuccessfully. The system therefore implies that a litigant may, in certain instances, instruct a legal practitioner on a "no success, no pay" basis. Up to the present such a system has not been recognised in South African law due to common law restraints. It has, however, been introduced in certain legal systems abroad, mainly because of its enormous potential to promote access to justice.

Should the client win the case, the fee payable to the legal practitioner - in terms of a contingency fee agreement - is recovered from the proceeds of the litigation and is usually higher than the practitioner's normal fee. This is so because the legal practitioner bears the risk of not being compensated in a number of cases.

The Commission provisionally concluded that a system of contingency fees in terms of which a prospective litigant is only liable to remunerate his or her legal representative in the event of successful litigation, can contribute significantly to promote access to the courts and that such a system is desirable. The working paper expounds various methods of determining the extent of the fee payable upon success, the disadvantages of contingency fee agreements as well as safeguards to ensure that the client is not prejudiced.

The Commission's proposals inter alia entail that -

• it should be possible for both attorneys and advocates to enter into contingency fee agreements with their clients;
• the remuneration payable to the legal representative in the event of success may be double the normal fee, but should be limited to a determined percentage of the proceeds of the litigation;
• contingency fee agreements should not be permissible in family law and criminal law cases;
• contingency fee agreements should only be entered into if the intending litigant has a reasonable prospect of success, and that the agreement should be modelled on a standard agreement containing certain safeguards prescribed by law; and
• the existing rule in terms of which the loser in litigation is responsible for payment of the winner's costs, should be retained.

The working paper is being published to provide persons and bodies wishing to comment or make suggestions for the development, improvement, modernisation or reform of this particular branch of the law with sufficient background information to enable them to place substantiated submissions before the Commission.

The working paper is available at the Commission's offices, situated on the 8th floor, 228 Visagie Street, Pretoria. The telephone number is (012) 322-6440 (requests for the working paper: Mrs P Kotze); the fax number is (012) 320-0936; and the postal address is Private Bag x668, Pretoria 0001. It would be appreciated if written comments or representations could reach the Commission by 15 April 1996.

ISSUED BY THE SECRETARY: SA LAW COMMISSION

DATE: 14 MARCH 1996

CONTACT FOR ENQUIRIES IN RESPECT OF MEDIA RELEASE: MR J H POTGIETER (TEL: (012) 322-6440