How does no-win-no-fee work in South Africa?

No win no fee means your attorney only charges a fee if your claim succeeds. In South Africa these arrangements are regulated by the Contingency Fees Act 66 of 1997, and the rules are strict. The success fee cannot be more than double the attorney's normal fee, and it cannot be more than 25% of the amount awarded to you, whichever of those two figures is lower. The agreement must be in writing.

The word that trips people up is "fee". The cap applies to the attorney's professional fee. It does not cover disbursements, which are the out of pocket costs paid to third parties on your behalf. Those are usually still yours, win or lose, unless your agreement says otherwise in writing.

What the cap actually means

Two calculations happen, and you pay the lower one.

• Double the normal fee. The attorney works out what the file would have cost at their ordinary rates, then doubles it. That uplift is the reward for carrying the risk of getting nothing.
• 25% of the award. A quarter of the compensation you are actually awarded, excluding any costs recovered from the other side.

Whichever number is smaller is the maximum. In a large claim the doubled normal fee is often the lower figure, so 25% is a ceiling and not a default. Ask for both calculations in writing when the claim settles.

The 25% is worked out on the compensation, not on the party and party costs your opponent pays. In an RAF matter, where the Fund also pays a contribution to your legal costs if you succeed, that costs recovery is a separate stream and should not be swept into the calculation.

A worked example

Bongani's Road Accident Fund claim settles. The figures are illustrative only and are chosen to show the arithmetic, not to suggest what any claim is worth.

• The settlement is R600 000 in compensation. The Fund also agrees to pay a contribution towards his legal costs.
• His attorney's normal fee for the work done, at the firm's ordinary hourly rates, comes to R90 000. Doubled, that is R180 000.
• 25% of R600 000 is R150 000.
• The lower of the two is R150 000. That is the most the attorney may charge as a success fee.
• Disbursements on the file, for four medico-legal reports and an actuarial calculation, come to R70 000. These sit outside the cap and are deducted as well.
• Bongani receives R600 000 less R150 000 less R70 000, which is R380 000, plus whatever part of the costs contribution is not absorbed by the disbursements, depending on what the agreement says about that.

Now change one number. If the settlement had been R1 200 000, 25% would be R300 000, but double the normal fee would still be R180 000 if the same work was done. The cap would then be R180 000, not R300 000. This is why you must ask for both calculations. A firm that simply deducts 25% every time is not applying the Act.

Partial success and reduced awards

Claims do not only win or lose. The Fund may concede liability but only in part, because you were found partly at fault, or your injury may not be accepted as serious, which removes general damages from the claim. The agreement should say what happens to the fee in those situations. A well drafted agreement ties the fee to the amount actually recovered, so a reduced award produces a reduced fee. A poorly drafted one defines success so widely that any payment at all triggers the full uplift on the normal fee. Read that clause before you sign, and ask the attorney to explain it in a sentence you can repeat back.

Disbursements are the part people miss

Disbursements in an injury or negligence claim are real money and they add up:

• medico-legal reports from orthopaedic surgeons, neurosurgeons, psychologists, occupational therapists and industrial psychologists
• an actuarial calculation of future loss of earnings
• an independent merits opinion in a medical negligence matter
• sheriff's fees, court filing fees, counsel's fees, travel and record retrieval costs

Some firms carry these and recover them out of the award. Some ask you to fund them as you go. Some carry them only until the claim fails and then invoice you. These are completely different deals. Ask which one you are being offered, and get the answer in the written agreement, not in a conversation.

Our cost page sets out typical ranges for these items.

What a valid agreement must contain

The Act requires the agreement to be in writing and signed by you. It must set out, in language you can follow:

1. The work the attorney will do.
2. What counts as success, and what counts as partial success. This matters. If "success" is defined loosely, a poor settlement can still trigger the full fee.
3. The normal fee that would have been charged, so the doubling calculation can be checked.
4. The percentage or uplift being charged, and confirmation that it is within the cap.
5. What happens to disbursements, and who carries them if the claim fails.
6. Your right to withdraw from the agreement, and what you would owe if you do.
7. Confirmation that you were told about other ways of funding the matter.

You must be given a copy. If you were not given one, ask for it in writing today.

Where a matter is settled, the Act also requires the attorney to record the settlement and to file an affidavit dealing with the fee. That is a protection for you. It means someone other than your attorney can see what was charged.

Where contingency agreements are not allowed

The Act does not permit contingency fee arrangements in criminal proceedings or in family law matters. A divorce or a maintenance dispute cannot be run on a percentage of what you receive. Contingency work in practice is concentrated in personal injury, RAF claims, medical negligence and some claims against the state.

Questions to ask before you sign

• What is your normal hourly rate, and what would this file cost at that rate?
• Is the fee capped at 25% or at double the normal fee, and which do you expect to apply here?
• Who pays for the medico-legal reports if we lose?
• What exactly counts as "success" under this agreement?
• If I terminate, what will I owe?
• Is VAT included in the figures you have quoted me?
• What happens to the costs the other side pays if I win?

Take the agreement home. Read it when you are not sitting across a desk. There is no rush that justifies signing something you do not understand, and no attorney worth using will object.

What to do this week

1. If you already have a signed agreement, find your copy. If you do not have one, ask for it in writing.
2. Read the definition of success and the clause on disbursements. Those two clauses decide what you actually receive.
3. Write down the normal hourly rate stated in the agreement. If none is stated, ask for it.
4. If you have been offered a settlement, ask for the fee calculation both ways, and for the disbursement schedule, before you sign any acceptance.
5. If anything does not add up, get a second opinion before the settlement is finalised, not after.

Common mistakes and what they cost

• Treating 25% as the fee. It is the ceiling. If double the normal fee is lower, you have overpaid the difference.
• Not asking about disbursements. A lost claim can leave you owing tens of thousands of rand for reports, which is exactly the outcome "no win no fee" seemed to rule out.
• Signing a loose definition of success. A settlement far below what the claim was worth can still trigger the full fee.
• Accepting a verbal arrangement. Without a written, signed agreement the arrangement does not comply with the Act, and you have no document to hold the firm to.
• Not checking the VAT position. VAT on the fee comes out of the same award.

Your rights and the attorney's rights

You have the right to: a written, signed agreement and a copy of it; both fee calculations at settlement; an itemised list of disbursements; to withdraw from the agreement on the terms it states; and to have the bill taxed or reviewed by the Legal Practice Council.

The attorney has the right to: the agreed success fee within the cap if the claim succeeds; recovery of disbursements as the agreement provides; a fee for work done if you withdraw, as the agreement states; and to hold your file under a lien until a legitimate account is settled.

The alternatives

You do not have to use an attorney at all for an RAF claim. You can lodge directly with the Fund yourself at no cost. See How to claim from the Road Accident Fund. For a rejected insurance claim, the National Financial Ombud Scheme is free. For a complaint about a medical practitioner's conduct, the Health Professions Council of South Africa costs nothing. For a consumer dispute, the National Consumer Commission is free.

If you qualify, Legal Aid South Africa on 0800 110 110 provides assistance based on a means test.

If you think you have been overcharged

Ask for a detailed statement of account showing the normal fee calculation, the contingency calculation and every disbursement. If the fee exceeds the cap, or there is no written agreement at all, raise it with the firm first and then complain to the Legal Practice Council. Fee disputes can also be taxed, which means an independent taxing master reviews the bill.