Costs seminar, 17 February 2015

ProBono.Org, hosted by Fasken Martineau, held a breakfast discussion to discuss the issue of costs in pro bono matters. The seminar was aimed at discussing cases where costs have been granted to pro bono litigants, what averments to put in court papers to substantiate acting in the public interest, costs orders against pro bono litigants, cession agreements with the Law Society and dealing with the issue of security for costs in pro bono matters.

Advocates Richard Moultrie and Janice Bleazard both made excellent presentations, which are summarised below. Adv. Moultrie discussed the principles followed in the Biowatch matter and Adv. Bleazard touched on the Thusi case. Relevant comments by a cost consultant, Monica Voigt are also included. All references, including cases, will be listed at the end of this document, including some further reading material.

Introduction

The three most obvious obstacles to accessing the courts by the public are

  • the costs of the courts; and
  • the costs of the lawyers and the risk of having to pay your opponent’s costs.

The uncertainty of how large these costs will be at the onset of litigation also does not assist hopeful litigants.

The general principles of costs in public interest cases

According to Lord Justice Brooke, the problem is that “there’s little point in opening the doors to the courts if litigants cannot afford to come it”.

The general rule in litigation is that costs follow the event. This is potentially problematic as litigants could potentially end up with adverse costs awards, inhibiting them from approaching the courts in the first place.

However, this should not be the only consideration for litigants to undertake or refrain from litigation. There are broader principles to consider (which will be highlighted below when looking at constitutional litigation).

Litigants should not necessarily be discouraged from approaching the court as the opposite is also true; a favourable costs order could also be awarded. This, of course, does not mean that litigants are completely protected from risk (Ex parte Gauteng Provincial Legislature).

So where does that leave us? The guiding principles for Richard in undertaking the costs issue in the Biowatch matter are set out below.

[A question to keep in mind is when do you argue costs? Do you argue the ancillary issue of costs at the time of the judgment?  No not necessarily, the issue of costs can be argued at a later stage but it is important to mention when this will be argued at the time of the judgment (Richard)].

The Biowatch principles:

  • Particularly powerful reasons had to exist for a court not to award costs against the State in favour of a private litigant who achieved substantial success in proceedings against it;
  • Private parties that lost in constitutional litigation against the State should not, as a rule, be mulcted in costs, i.e. when a private party sought to assert a constitutional right against the government and failed, each party should normally bear its own costs;
  • The principle that people should not be discouraged from pursuing constitutional claims should be applied in the award of costs, where private entities sued the State for its failure to fulfil its obligation to regulate competing claims between parties, irrespective of the number of private parties seeking to support or oppose the State’s posture in such litigation;
  • The mere labelling of litigation as constitutional and the dragging in of specious references to sections of the Constitution, would of course not be enough … The issues must be genuine and substantive, and truly raise constitutional considerations relevant to the adjudication;
  • The starting point had to be the nature of the issues, not the parties. Equal protection under the law requires that costs awards not be dependent on whether the parties were acting in their own interests or in the public interest, or whether they were indigent or well endowed. The primary consideration in constitutional litigation had to be the way in which a costs order would hinder or promote the advancement of constitutional justice.
  • What matters was not the nature of the parties or the causes they advanced, but the character of the litigation and their conduct in pursuit of it, i.e. whether it had been undertaken to assert constitutional rights and whether there had been impropriety in the matter in which the litigation had been undertaken.

It is important to have regard to the character of the litigation itself. In this regard, one has to look at what is undertaken, why and how.

a) Financial gain: In the Weare case (pre Biowatch) the ordinary rule is that where litigants (unsuccessfully) raise important constitutional issues against the State, costs will not be awarded against them. There is an exception to this rule and that is where litigation is pursued for private commercial gain.

b) Political gain: The respondents (in Democratic Alliance v President) submitted that the DA instituted this application to boost its political profile in the run-up to the national election and therefore attacked national legislation. It was therefore done to gain popular support. But the principles in Biowatch indicate that this type of criticism is unfounded and not in itself a basis for not applying the general rule.

A litigant may attack constitutionality of legislation for its own benefit or in the public interest and that is why the character of the litigation is so important.

c) Private v Private: The general principle as far as private litigation is concerned is that costs will ordinarily follow the result. This means that where parties initiate proceedings they take the risk that, if unsuccessful, they will have to pay the costs of their opponents (Bothma v Els, Loureiro v Imvula ).

d) Exceptions to the above: Most of these cases involve constitutional principles (examples like freedom of speech, dignity, etc.). A factor in justifying a departure from the general rule (that costs follow the event) is where the pursuit of public interest litigation could be unduly chilled by adverse costs orders.

There are therefore 2 factors that could determine costs awards in private litigation involving constitutional issues:

  • The implications of an adverse costs order on constitutional litigation and
  • The broader implications of constitutional litigation.

Taken together, they highlight the importance of considering the public interest dimension and could influence a decision as to whether there should be an exception to the general rule.

Examples of exceptional cases:

  • Campus Law Clinic v Standard Bank of SA
    A NGO sought unsuccessfully to intervene in a dispute between a bank and a mortgagor. The court did not award costs to the bank.
  • Barkhuizen v Napier
    A private person unsuccessfully sought an appeal against a decision of the Supreme Court of Appeal rejecting a challenge on constitutional grounds to a contractual time bar. The court did not order costs.

Financing Litigation

“Those members of the community who can least afford legal representation are those who need it most. … It is therefore important that the legal community should develop and accept methods of financing legal proceedings that will enable constitutional rights to be fully realised, and courts must not astute to create obstacles to them doing so” (Thusi case).

The question is how do we do this? Can you get costs if you act without charge?
Yes, when the following apply:

  • Contingency fee agreements;
  • Legal Aid and Law Clinic instructions;
  • In forma pauperis instructions and
  • Limited exceptions to the indemnity principle (as discussed in the Thusi matter): Where costs orders are granted in favour of indigent litigants against the State, where attorneys/advocates accept liability for all disbursements and where the litigant agrees to cede costs awards.

Other options:

  • Funders (where companies or individuals ‘donate’ money for litigation, EP Property Projects (Pty) Ltd v Registrar of Deeds, CT);
  • Insurance;
  • “After the event” insurance;
  • Conditional Fee arrangements: No Win No Fee; and
  • Protective costs orders (allows a party to approach the court for a hearing for an order to cap costs – Queens Bench)

FEES

There is genuine public concern about legal costs and the level of legal fees (Camps Bay Ratepayers and Residents Association).

So what can be done?

There are already 3 exceptions to the indemnity principle where attorneys can obtain cost orders. These are:

  • High Court Rule 40(7) which allows for taxation of the bill of costs by a successful attorney in forma pauperis matters;
  • Section 8A of the Legal Aid Act and
  • Section 79A of the Attorneys Act (where cession agreements with law clinics allow for costs to be ceded).

However, the Thusi judgment sanctions legal representatives acting on a contingency fee basis for recovery of their fees and disbursements in matters where indigent litigants seek to enforce constitutional rights against the State.

The effect of this judgment is that, notwithstanding that the indigent litigant is not liable to pay any fees or disbursements to his/her instructing attorney; the attorney may recover costs and disbursements from the unsuccessful party.

In the area of assisting the indigent to obtain access to justice there is no public policy precluding the attorney from recovering costs on an order in favour of the client. What then about counsel?

The principle in Thusi needs to be extended to include the Bar. This would mean an amendment to the Uniform Rules of Professional Conduct to accommodate the development of the law regarding fee arrangements. The Bar is of the view that amending this Rule would make legal services more widely available to the indigent.

Monica Voigt (cost consultant) made the following comments regarding costs and asked me to include it as she could not attend the seminar.

Where attorneys do pro bono work:

  • An attorney doing pro bono work renders the professional service free of charge.  In the event that a costs award is made in favour of the client, the client should be entitled to tax a bill of costs as the costs belong to the party and not the legal representative.
  • Cost consultants can draw and tax bills for attorneys doing pro bono work. This would be done in terms of a relevant court order pertaining to the costs award.
  • Taxing Masters have always allowed costs as per the costs orders.  In other words, if the Order is for “party/party costs”, a bill drawn on the party/party tariff should be allowed at taxation.
  • It can be argued that the party is not out of pocket as there were no costs payable to the attorney acting on the party’s behalf.  However, the winning party’s taxing a bill of costs, is still entitled to be reimbursed for costs, which actually leaves him/her out of pocket (i.e. proper and necessarily incurred disbursements).
  • Costs are customarily not directly awarded to legal practitioners, but to the litigants for whom they act.  This means that even if the “fees” are disallowed at taxation, the “disbursements” will most certainly be allowed and should be recovered.
  • Monica suggests a bill should therefore always be drawn as per Court Order and then taxed.  The taxing masters then have discretion to allow costs (awarded in the court order).
  • The relevant cost consultant will then argue the “fees” and “disbursements” at taxation.

References and further reading:

  • Lord Justice Brooke “David Hall Memorial Lecture –Environmental Justice – the Cost Barrier” (2006) 18(3) Journal of Environmental Law 341
  • Ex parte Gauteng Provincial Legislature 1996 (3) SA 165 (CC)
  • Biowatch Trust v Registrar, Genetic Resources and Others 2009 (6) SA 232 C
  • Weare v Ndebele NO 2009 (1) SA 600 (CC)
  • Democratic Alliance v President of SA and Others 2014 (4) SA 402 (WCC)
  • Bothma v Els 2010 (2) SA 622 CC
  • Loureiro v imvula Quality Protection (Pty) Ltd 2014 (3) SA 394 (CC)
  • Thusi v Minister of Home Affairs and Another and 71 other cases 2011 (2) SA 561 (KZP)
  • EP Property Projects (Pty) Ltd v Registrar of Deeds, CT and Four Related Applications 2014 (1) SA 141 (WCC) and Scholtz and Another v Merryweather and Others 2014 (6) SA 90 (WCC)
  • Camps Bay Ratepayers and Residents Association and Another v Harrison and Another (CCT 76/12) [2012] ZACC 17; 2012 (11) BCLR 1143 (CC)
  • General Council of the Bar of SA v Geach 2013 (2) SA 52 (SCA)
  • Wallis: Middle Temple Septmber 2010
  • Rogers “High fees and questionable practices” (April 2012) vol 25 (1) Advocate at 40-2
  • Gravett “I am not overcompensated enough”: the moral compass of the America lawyer” (April 2012) vol 25 (1) Advocate at 43-8
  • Wallis “Some thoughts on the commercial side of practice” (April 2012) vol 25 (1) Advocate at 33-6