Contingency fee cap calculator

"No win, no fee" is how most personal injury and Road Accident Fund claims in South Africa are funded, and most clients believe the attorney takes 25 per cent. That is half the rule. The Contingency Fees Act caps the success fee at the lower of two figures: 25 per cent of the amount awarded, and double the fee the attorney would normally have charged for the work. On a large award the second limit is usually the lower one and the client is entitled to the difference. This calculator applies both limits, shows the VAT and the disbursements that sit outside the cap, and compares the attorney's proposed fee with what the Act allows.

It is for claimants about to sign a contingency fee agreement, for claimants whose matter has settled and who want to check the attorney's account, and for anyone who has been told that 25 per cent is simply the fee.

What this calculator works out and who it is for

You enter the amount awarded or settled excluding costs, the attorney's normal fee for the work done if you know it, the disbursements, the party-and-party costs recovered from the other side, the fee the attorney proposes, and whether the attorney is a VAT vendor. The calculator returns 25 per cent of the award, double the normal fee, the maximum success fee as the lower of the two, the VAT on it, the disbursements and costs recovered, what is left for you, and whether the proposed fee is within the cap. It warns where the normal fee has not been entered, because without it only one of the two limits can be tested.

How the calculation works

The calculator multiplies the award by 25 per cent for the first limit. If you enter the normal fee, it doubles it for the second limit. The cap is the lower of the two; where only the first is available it uses that and says so. It adds VAT at 15 per cent on the fee where the attorney is a vendor, because the Act's cap is on the fee and VAT is charged on top. It shows the disbursements, the attorney's outlays on counsel, experts, medico-legal reports and the sheriff, which are recoverable from you in addition to the fee, and the party-and-party costs recovered from the other side, which go towards the fee and disbursements first. It subtracts the capped fee, the VAT and the unrecovered disbursements from the award to show what is left for you. If you enter the proposed fee, it compares it with the cap and flags an excess.

The law behind the numbers

Before 1997 contingency fees were unlawful in South Africa under the common law, as champerty. The Contingency Fees Act 66 of 1997 made them lawful on strict conditions. Section 2(1) allows a legal practitioner to agree with a client that, if the client is unsuccessful, the practitioner is not entitled to a fee, and that if the client is successful the practitioner is entitled to a fee higher than the normal fee. Section 2(2) sets the two limits on that higher fee: it may not exceed the normal fee by more than 100 per cent, that is double the normal fee; and in the case of claims sounding in money, the total of the success fee may not exceed 25 per cent of the total amount awarded or any amount obtained by the client in consequence of the proceedings, excluding any costs. Both limits apply, so the fee is whichever is lower.

The normal fee is the fee the attorney would have charged on an ordinary basis for the work actually done, at the attorney's usual hourly rate or on the tariff, and it is the anchor of the whole scheme. An attorney who does R80 000 of work on a matter that settles for R2 million may charge R160 000, not R500 000. The 25 per cent is a ceiling for small awards and heavy work, not a flat entitlement, and the Supreme Court of Appeal and the High Courts have repeatedly set aside agreements and accounts that treated it as one.

Section 3 requires the agreement to be in writing in the form prescribed by the Minister, signed by the client and the attorney, and to state among other things the proceedings to which it relates, that the client was advised of alternatives, the circumstances in which the fee is payable, the amount or method of calculation, what happens on partial success and on early termination, and the client's right to a review by the Legal Practice Council. Section 4 requires an affidavit by the attorney and the client to be filed with the court when a matter settles, confirming the agreement and the fee. An agreement that does not comply is invalid, and the courts have held that an attorney under an invalid agreement is entitled only to a reasonable fee on an ordinary basis. The guide to no-win-no-fee agreements covers the form and the questions to ask before signing.

Costs and disbursements are outside the cap. Party-and-party costs recovered from the losing side belong to the client and go towards the fee and disbursements. Disbursements, the amounts the attorney paid out to third parties, are recoverable from the client in addition to the capped fee unless the agreement says otherwise, which is why a claimant can receive less than 75 per cent of the award even where the fee is within the cap. Counsel's fees under a separate contingency agreement with the advocate are subject to the same Act.

Where the award is from the Road Accident Fund, the Fund's own rules require the attorney's fee to be disclosed and the Act's affidavit to be filed, and the RAF guides on this site deal with the interaction; the RAF claim range calculator estimates the award itself.

Worked example

Thabo's RAF claim settles for R1 000 000 in capital, plus party-and-party costs of R120 000 recovered from the Fund. His attorney's time on the matter at the usual hourly rate comes to R150 000. Disbursements for medico-legal experts and counsel are R180 000. The attorney proposes a fee of R250 000 plus VAT.

The calculator shows 25 per cent of the award as R250 000 and double the normal fee as R300 000. The lower is R250 000, so the proposed fee is at the cap and within the Act. VAT at 15 per cent adds R37 500. The disbursements of R180 000 are reduced by the R120 000 recovered from the Fund, leaving R60 000 unrecovered. Thabo receives R1 000 000 less R250 000 less R37 500 less R60 000, which is R652 500.

Change one figure: the attorney's normal fee was R100 000. Double that is R200 000, which is lower than R250 000, so the cap is R200 000 and the proposed R250 000 exceeds it by R50 000. The calculator says so and tells Thabo that a fee above the cap is unlawful, that the agreement is then void and the attorney entitled only to a reasonable ordinary fee, and that the Legal Practice Council hears complaints. Change another: Thabo's claim settles for R200 000 after R150 000 of work. The 25 per cent limit is R50 000 and double the normal fee is R300 000; the fee is capped at R50 000 and the attorney carries the rest, which is the risk the Act asks the attorney to take in exchange for the uplift on the matters that pay.

What the calculator does not include

It does not know the attorney's normal fee. Ask for it, with the hours and the rate; the Act's second limit cannot be tested without it, and the attorney is obliged to account for the work.

It does not deal with the fee on partial success, which the agreement must address and which is usually a proportionate reduction.

It does not deal with counsel's separate contingency agreement, which is capped by the same Act on counsel's own normal fee.

It does not calculate the award. The RAF claim range and other calculators on this site estimate that.

It does not apply to matters where contingency fees are not permitted, such as criminal and family matters, or to the costs of a matter the client loses, where disbursements may still be payable under the agreement.

When to get advice

Before signing, read the agreement against section 3: the prescribed form, the fee and how it is calculated, partial success, termination, and the right to review. Ask what the normal hourly rate is and for an estimate of the hours. When the matter settles, ask for the attorney's account with the time records and the disbursement vouchers, and run the figures through this calculator. If the fee exceeds the cap, write to the attorney first; most firms correct it. If it stands, complain to the Legal Practice Council, which can tax the account and discipline the practitioner, and ask for the account to be taxed. Get independent advice if the agreement is not in the prescribed form, if the attorney wants a share of the costs as well as the fee, or if the disbursements are a large part of the award and were never explained.

Frequently asked questions

How much can a no-win-no-fee attorney charge? The lower of 25 per cent of the amount awarded excluding costs and double the attorney's normal fee for the work done, under section 2(2) of the Contingency Fees Act. VAT and disbursements are added on top.

Is 25 per cent the standard fee? No. It is the ceiling for claims sounding in money. The success fee is also capped at double the normal fee, and on a large award that is usually the lower figure. An attorney who charges 25 per cent regardless of the work done is overcharging.

What is the normal fee? What the attorney would have charged on an ordinary hourly or tariff basis for the work actually done. The attorney must be able to show the hours and the rate. Double it is the second cap.

Do I pay the disbursements as well? Yes, unless the agreement says otherwise. Experts, counsel, medico-legal reports and the sheriff are paid out by the attorney and recovered from you in addition to the fee, less whatever the other side pays in costs.

What if the agreement is not on the prescribed form? It is invalid. The attorney is then entitled only to a reasonable fee on an ordinary basis, which is usually less than the contingency fee, and the Legal Practice Council can intervene.

Is VAT included in the 25 per cent? No. The cap is on the fee; VAT at 15 per cent is charged on top where the attorney is a VAT vendor.

Who checks that the fee is lawful? You, first. The Act requires affidavits from the attorney and the client to be filed with the court on settlement, and the Legal Practice Council hears complaints and can tax the account.