Masango and Another v Road Accident Fund and Others (2012/21359) [2016] ZAGPJHC 227; 2016 (6) SA 508 (GJ); 79 SATC 295 (31 August 2016)

Masango and Another v Road Accident Fund and Others (2012/21359) [2016] ZAGPJHC 227; 2016 (6) SA 508 (GJ); 79 SATC 295 (31 August 2016)

The court held that the Contingency Fees Act does not permit an attorney to charge a percentage of the capital award as fees. The Act only allows a success fee that is an increase over the normal fee, capped at 100% of the normal fee and not exceeding 25% of the capital amount awarded. VAT is not recoverable above this cap; it is included in the fee unless the agreement specifies the components separately as required by the VAT Act. The agreement in question failed to comply with the Act both in its fee structure and in its form, lacking necessary details and definitions. The court declared the contingency fee agreement invalid and limited the attorney's fees to party and party High Court...

Citation
[2016] ZAGPJHC 227
Parties
Plaintiff: Masango Mlungisi Nelson; Defendant: Road Accident Fund; Intervening Party: Renier van Rensburg Incorporated; Amicus Curiae: Johannesburg Society of Advocates; Amicus Curiae: Law Society of the Northern Provinces
Court
South Gauteng High Court, Johannesburg
Jurisdiction
South Africa
Judgment Date
31 August 2016
Case Number
2012/21359
Procedural Posture
Civil Judgment / Judgment Delivered After Argument on Validity of Contingency Fee Agreement
Outcome
The contingency fee agreement is declared invalid and of no force and effect. Attorney's fees are limited to party and party High Court scale as agreed or taxed, not exceeding 25% of the capital amount settled.
Judges
P M Mojapelo
Legal Topics
Contingency Fees Act, Attorney Client Fees, Value Added Tax, Invalid Agreement, Professional Ethics
Civil Procedure Commercial and Corporate Tax Law Contingency Fees Act Attorney Client Fees Value Added Tax Invalid Agreement Professional Ethics

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Parties

Masango Mlungisi Nelson

Plaintiff

Road Accident Fund

Defendant

Renier van Rensburg Incorporated

Intervening Party

Johannesburg Society of Advocates

Amicus Curiae

Law Society of the Northern Provinces

Amicus Curiae

Procedural Posture

Civil Judgment / Judgment Delivered After Argument on Validity of Contingency Fee Agreement

Legal Issues

  1. 1 Is a legal practitioner entitled to charge 25% of the capital amount recovered for a client plus 14% VAT under a contingency fee agreement governed by the Contingency Fees Act?
  2. 2 Does the agreement in question comply with the strict requirements of the Contingency Fees Act 66 of 1997?
  3. 3 Is VAT recoverable above the statutory 25% cap imposed by section 2(2) of the Contingency Fees Act?

Ratio Decidendi

The court held that the Contingency Fees Act does not permit an attorney to charge a percentage of the capital award as fees. The Act only allows a success fee that is an increase over the normal fee, capped at 100% of the normal fee and not exceeding 25% of the capital amount awarded. VAT is not recoverable above this cap; it is included in the fee unless the agreement specifies the components separately as required by the VAT Act. The agreement in question failed to comply with the Act both in its fee structure and in its form, lacking necessary details and definitions. The court declared the contingency fee agreement invalid and limited the attorney's fees to party and party High Court...

Court Disposition

The contingency fee agreement is declared invalid and of no force and effect. Attorney's fees are limited to party and party High Court scale as agreed or taxed, not exceeding 25% of the capital amount settled.

Orders

  • The defendant shall pay R664,000.00 to the plaintiff's attorney in settlement of the plaintiff's claim.
  • The amount is to be paid into the plaintiff's attorney's trust account as specified.