- The High Court dismissed an appeal involving an invalid contingency fee agreement.
- Judges warned that attorneys cannot deduct more than 25 percent of a client’s capital award.
- VAT may not be used to increase success fee deductions beyond statutory limits.
When the High Court recently examined how contingency fee agreements can strip accident victims of their hard-won compensation, the numbers spoke volumes.
Judge A Millar pointed to a stark example, saying, “The agreement showed a fee of R228 000 from a R500 000 payout, leaving the client with only R388 000 instead of R471 000. The court found that the agreement’s implementation served the attorney’s interests, not the client’s.”
This ruling, delivered on 7 November 2025 in the North Gauteng High Court in Pretoria, makes clear that legal practitioners may not inflate success fees or tack on VAT to sidestep the statutory 25 percent cap set by the Contingency Fees Act. The court’s decision not only dismissed the appeal of accident survivor Fred Christian Steven De Bod, but it also sounded a warning to attorneys that manipulating fee agreements to erode victims’ compensation will not stand.
Turning compensation into profit risk
Delivering the judgment, Judge A Millar, with Judge N Mngqibisa-Thusi and Judge S Nyathi concurring, made clear that the appeal “is against a judgment and order… in terms of which the contingency fee agreement entered into… was declared to be invalid for want of compliance with the Contingency Fees Act 66 of 1997.”
The court emphasised that “contingency fees agreements between legal practitioners and their clients are prohibited by the common law and may only be entered into lawfully within the parameters of the Act.”
On the ongoing confusion around the statute, Judge Millar stated: “Even though the Act is written in clear language and ought to be readily understandable to legal practitioners… there persists some confusion regarding what is permitted and what is not permitted in terms of the Act.”
A surcharge that bears no relation to value
The judgment was explicit on success fees and VAT. “‘Success fee’ does not attract Value Added Tax (VAT) in the same way as ‘normal fees’… The surcharge, which is added to normal fees to make up the success fee, bears no relation to the value of services rendered but is a function of risk,” Judge Millar noted.
The judge stated that applying VAT on top of a capped fee “would raise the client’s liability to 28.75%, which offends the Act.”
Invalid agreements cannot be salvaged
Judge Millar stressed that compliance is mandatory: “Since the only way to enter into a valid contingency fee agreement is in terms of the Act, any agreement that does not comply is unlawful.” The court summarised the principle succinctly: “Any contingency fee agreement not in compliance with it is invalid.”
The appeal was dismissed, with no order for costs. The judgment reinforces that contingency fees are strictly controlled, ensuring that clients retain the bulk of their compensation and preventing attorneys from converting risk-based arrangements into disproportionate earnings.
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