Greedy lawyers beware
Chief Registrar of the Eastern Cape Division of the High Court Denim Kroqwana has been involved in assessing legal fees for many years and says the media, the law societies and even the judiciary need to do more to alert the public to growing abuses and advise on how to ensure they are not ripped off.
In a recent matter that came to the attention of the Grahamstown High Court, an attorney drew up a contingency fee agreement with a client entitling him to charge 25% or R226000 of his R900000 Road Accident Fund (RAF) settlement.
The matter had been quickly settled out of court with the RAF with very little legal legwork having to be done by the attorney. The attorney had sought to make the settlement an order of court – which is how the matter came to the attention of the judge.
So exorbitant would the attorney’s reward have been for doing very little work that Judge Clive Plasket was moved to comment: “This is yet another case in which an attorney – an officer of the court who is supposed to act with integrity and comply with the highest ethical standards – is guilty of an attempt to grossly overreach his client, of rapacious and unconscionable conduct. Unfortunately, in this jurisdiction, this is a problem that is all too common.”
Contingency fee agreements and
When attorneys take a matter on contingency, the Contingency Fees Act allows them to charge more than usual as they are taking a financial risk.
As Plasket puts it: “The basic idea behind a contingency fee agreement is that the attorney takes on the risk of financing his or her client’s litigation in the hope – or anticipation – of succeeding. If the litigation is not successful, the attorney will not be paid. If the litigation is successful, the attorney will be entitled to a success fee that is higher than his or her normal fee.”
But the Act specifies two very important limitations.
First, the fee charged may never exceed twice the attorney’s usual fee (which is controlled by scale or tariff set by legislation); and secondly, the fee may not exceed 25% of the damages awarded to the client, no matter how much work the attorney has done.
Both Plasket and Kroqwana emphasise that the second limitation did not give an attorney the licence to simply plunder up to 25% of any award paid to a client, many of whom are indigent and who have likely been injured or disabled in some way.
“All those who have been charged in this manner have a reason to complain,” says Kroqwana.
The limitations have implications. If the attorney does an hour of work on an RAF claim and makes one phone call before the RAF settles an award on their client, they may not charge more than double what they would usually charge for an hour of work and that single phone call.
Similarly, even if it takes the attorney years of dedicated work, hours of court time and the assistance of experts, they may never charge more than 25% of the award. This protects the client from, for instance, having to hand over so much of their award that they are unable to cover vital medical and other expenses to survive the injury suffered.
Too often, people do not know they have a right to complain. They often feel that they have, after all, signed the agreement and the attorney is entitled to collect in line with it. But, Kroqwana says, the agreement is simply invalid if the attorney stipulated a charge that is not in line with the Act.
Plasket says problematic contingency fee agreements that come to the attention of the courts are in all likelihood, the “tip of the ice-berg”.
The reason for this, says Kroqwana, is that most contingency fee agreements are never assessed by an independent entity or don’t ever come before the courts.
Generally, he says, agreements can be assessed in a process referred to as “taxation”, if the client requests it.
The assessment is done by an independent court official known as a taxing master.
It is the taxing master’s job to ensure that costs are kept within a proper limit. They will assess the “reasonable amount of costs payable under the costs order or agreement”, says Kroqwana.
But, too many contingency fee agreements slip under the radar.
“Keep in mind that the only matters brought against the RAF that are are those involving clients who have received legal advice about the possibility of overreaching. The majority of clients do not have the knowledge to know when, or if, they have been overcharged or to demand that their bills be assessed before payment.”
Kroqwana explains that there are three main types of bills of costs from attorneys.
The first is the “attorney and own client” costs payable by clients to their attorneys.
The second is the attorney and client bills payable by the other party.
The third bill type is the so-called “Party and Party” costs.
Party and Party costs refer only to those fees and disbursements reasonably incurred during litigation and the litigant who loses the case usually pays these costs. The scale of these costs is governed by a tariff set by legislation and the scale for a Magistrate Court matter is different to a High Court matter.
Party and Party costs are only the essential costs incurred in the litigation. So, if an attorney sends a letter to the client explaining how the case is going, that attorney has incurred a cost – but not one essential to the case. In that case, it would fall under an attorney and client cost and not a Party and Party cost.
In practice, says Kroqwana, the Party and Party costs should be offset against the Attorney and Client costs and the victorious litigant should only have to pay the difference.
“I have come across numerous instances where an attorney pockets the money recovered from the Party and Party bill (from the losing party) and still charges the client 25% of their damages award. The nett effect of this is the attorney is paid twice for the same work. The proportions of the abuses are alarming.”
Kroqwana says the answer lies in educating the public as well as better oversight over attorney fee agreements.
He says all contingency fee agreements should be subjected to judicial scrutiny.
“Judicial officers must insist that Contingency Fee Agreements be filed with the prescribed affidavit and that the attorney and own client bills be taxed before payment. The taxing officers must ensure that Party and Party bills are set off against the Attorney and Own Client bills.”
He said law societies should also make it compulsory for their members to have all Contingency Fee Agreement-based bills taxed before payment if the matter was settled before a summons was issued.
If in doubt, he says, clients should demand that the bill be assessed by a taxing master.
So determined is Kroqwana to ensure the abuses are halted that he says people who are uncertain about whether or not they are being overcharged can contact him direct.
“I will never turn anyone away.”
He can be reached via fax on 0866447802 or on email at DKroqwana@judiciary.org.za
People may also complain to the Law Society of the Cape Of Good Hope: email firstname.lastname@example.org or call (021) 424-8060 or (021) 443-6700, fax
(021) 422-1355 or (021) 443-6751/2
He says people can also approach another attorney for advice or consult a Legal Cost Consultant.