Legal Cost Consulting Services

Collapse Fees and the Taxing Master's Discretion

Posted 11 June 2024

Teresa Maritz (Senior Associate)

Counsel will have reserved a day or a number of days to attend to the trial or hearing. If the matter does not proceed or continue on the days reserved, counsel will usually charge a collapse or reservation fee because he or she has reserved those days and so could not accept other briefs for that period. Attorneys, in their capacity as attorneys are not awarded collapse fees because they can remain at the office and perform other fee-paying work, although, when acting as counsel, they should be entitled to charge a collapse fee in terms of the amended court rules as discussed below.

Reservation or collapse fees for counsel in the high court have been extensively discussed in case law. One of the reasons for this is because they have not been dealt with in the High Court Rules. The recent publication of Government Gazette No. 50272 on 8 March 2024, which came into operation on 12 April 2024, now provides clarity on first day collapse fees for counsel in the high court. The Tariff of Fees now includes either a first full day fee if a trial matter or opposed application is settled, postponed or withdrawn on the day for which the matter has been set down or two days before, and two-thirds of a day fee if the matter is settled, postponed or withdrawn three to seven days before the day of set down. No reservation fee is allowed if the matter is settled, postponed or withdrawn, more than seven days before this date.

The Magistrates’ Courts Rules have included provisions on reservation fees for counsel for some time. Counsel is awarded a full day fee, two thirds of a full day fee or half of a full day fee depending on the time when the matter was settled, postponed or withdrawn in relation to the date of hearing. No provision is made for anything more than a first-day reservation fee.

A first day fee is exactly what the name suggests. It is a fee for the first day of a trial or hearing when spending the day in court. Reservation or collapse fees are fees for days which have been set aside by counsel to appear in court but, because the matter settled, was postponed or was withdrawn, these court appearances did not occur. The allowance of a first day fee before the Rules were amended can be summarised as follows: when counsel is briefed for a matter and reserves a day, or several days, for trial, counsel runs the risk of not being compensated if the matter is settled, withdrawn or postponed, shortly before or on the day of trial or the hearing. In these circumstances, counsel is unlikely to be able to obtain a brief for another matter on such short notice and so is out of pocket due to the matter not proceeding.

Until April of this year, provision was not made for reservation fees for counsel in the High Court Rules, and as a result the ‘first day rule’ was frequently the subject of dispute. The inclusion of this provision in the Rules now clarifies what counsel is allowed in the High Court as a first day fee. This clarification now no longer necessitates investigation into counsel’s entitlement to a first day fee or portion thereof by the Taxing Master.

The question remains whether counsel is entitled to more than a ‘first day fee’ when a matter is postponed, settled or withdrawn on or before the trial date and the matter was set down for a long duration. The parties may agree among themselves that counsel’s fees for certain days should be included in the court order, or the presiding officer may include specific days in the order. In this discussion, I will focus on the position when agreed or awarded reservation fees for counsel are included in court orders, and discuss whether the Taxing Master still retains a discretion to allow or disallow these fees.

One needs first to draw a distinction between party and party costs and attorney and client costs. As the court held in Miya v MEC for Health KZN (11036/2015) (2022) ZAKZPHC 16, ‘Party-and-party costs are those costs charged and expenses incurred by a party to legal proceedings that appear to the taxing Master to have been necessary or proper for the attainment of justice’ [para 8]. In contrast, ‘attorney-and-client costs are fees that a client has to pay to his or her attorney regardless of the outcome of the case’ [para 9].

The discretion to determine which costs have been necessarily or properly incurred vests in the

Taxing Master and not in the court. I interpret this to mean that even if specific days are included in the court order, whether agreed to by the parties or ordered by the presiding officer, a determination of whether the fees charged by counsel for that period of time have been properly or necessarily incurred, still vests in the Taxing Master. Counsel should not receive more than one day’s fee for trial work per day. Therefore, if counsel receives another brief during the period for which counsel charged a collapse fee, he or she will receive more than one day’s fee on a given day. Does the Taxing Master have a discretion to prevent this occurring? Although the determination of liability for costs rests with the courts, if work did not take place or costs were not necessarily or properly incurred, the Taxing Master should not be deprived of his or her discretion to decide whether these fees form part of party and party costs or costs payable by the other party, only because such costs are included in the court order. 

In JB Scott Attorneys v Tetani (Review) (36381/2019) [2023] ZAGPPHC 358, it was stated that the Taxing Master can only quantify the costs as allowed in the court order but cannot vary or read into a court order, costs that are not included.  In this decision, the court cites as authority the earlier decision of Benson v Walters 1984 (1) SA 73 (A) where it was held that liability for costs is determined by the court, while the amount thereof is determined by the Taxing Master.

The recent taxation review of Naskar Spares and Accessories Silverton CC v Naskar Spares and Accessories (Pty) Ltd (52724/2016) dated 19 May 2023 discusses tendered wasted costs and costs of counsel. The matter was set down for two days. On the first day, the parties agreed to a postponement and the respondent tendered wasted costs for these two days, including the costs of two counsel. The matter was later settled between the parties. Counsel charged a day fee for the first day and a collapse fee for the second day. This collapse fee was allowed on taxation based on the tender covering both trial days. The respondent, as the party who was liable for costs, objected to this, and to counsel’s hourly tariff.

The respondent had tendered costs for both trial days. The Taxing Master had allowed counsel’s fees for both days, and the claimed hourly rate. The respondent then took the matter on review and argued that counsel’s collapse fee should not be included. The other party agreed that, in the usual course of events, a collapse fee could not be included in a party and party bill of costs, but that here it should be allowed because the tender of costs had covered both trial days [para 10].

The court then discussed the decision in Kloot v Interplan Inc 1994 (3) SA 236 (SE), a matter set down for approximately 14 days, which was postponed by agreement. The plaintiff was ordered to pay the wasted costs including the costs of two counsel. In the bill of costs presented for taxation, counsel charged a fee retainer for holding available approximately 14 days for the hearing and stated, in his invoice, that other work which he had obtained had been taken into account.  The court in Kloot held that counsel is entitled to charge only for work done. Generally, if a trial ends sooner than expected, he or she charges the client only for the duration of the trial. Even if counsel and his or her client agreed to payment of collapse fees, there is no reason to saddle the unsuccessful party on the other side with them. The charge of collapse fees, or the difference between what counsel would have made and did make, was considered unreasonable. Counsel is not allowed to charge for services that did not take place, as against the opposing party, who ought not to be saddled with the costs of a collapse fee or a retainer. So, even if a collapse fee was agreed, it could not form part of a party and party bill of costs because it was not necessary or proper for the attainment of justice.

One can argue that this situation holds true even should the court include counsel’s fees for several days (which amounts to a collapse or reservation fee) in its order. Even if this is the express intention of the court, one can still argue that the Taxing Master’s duty is to determine whether the amount of such costs is reasonable and have been necessarily or properly incurred. In Miya v MEC for Health KZN (11036/2015) (2022) ZAKZPHC 16, the matter was settled a day before the fifteen-day trial was to begin. The parties were able to agree on all the costs to be included in the consent order except for the collapse fees of counsel. The court held that counsel’s fee is based on work necessarily and actually done and confirmed that the Taxing Master determines whether costs incurred were necessary and reasonable or not. The court also referred to the Rules of the Society of Advocates that provide that a collapse fee may only be charged if agreed upon or in exceptional circumstances, and must be reasonable in the circumstances.

Miya holds as follows: ’It is irrelevant that the other party agreed to pay counsel collapse fees in order to determine whether the collapse fee forms part of party and party costs or not. The underlying factor for determining party and party costs are reasonable costs actually and necessarily incurred. If there are other counsel who could accept the brief without an agreement to charge a collapse fee, it is difficult to say the collapse fee in that case was a necessary expense. It is not in the interest of a party to assist his opponent to retain services of a particular counsel’ [para 11].

Case law appears loath to allow collapse fees for counsel even if the order is an attorney and client order. In Fluxman Inc v Lithos Incorporated of SA (No1) 2015 (2) SA 295 GP the court held that a collapse fee ‘is regarded as reasonable if it equals no more than half the time a member required to reserve himself’.  Fluxman dealt with an attorney and own client bill of costs.  However, in Daniels v Transnet Ltd [2007] JOL 20001 (D) the litigation had been set down for five days, but was postponed to another date. The defendant was ordered to pay the wasted costs on an attorney and client scale. Counsel charged full day fees for the first two days and collapse fees for the following two days, which were allowed by the Taxing Master. On review, the collapse fees were disallowed, even on an attorney and client scale, as they were considered to be a special fee to counsel, which is not allowed in the rules. The review court considered the collapse fees to be unduly punitive and held that they would compensate counsel for work not done.   

What is the position where the presiding officer orders that certain days and costs for counsel are included in the court order? I feel that because these are fees for work not performed, the Taxing Master’s discretion cannot be done away with completely. Costs incurred for work not done can arguably be referred to as unreasonable costs, which were not necessarily or properly incurred. Clearly then, they do not fall within the ambit of party and party costs. But can they be included in attorney and client costs orders? While the Taxing Master must give effect to the court order and may not read into, or remove, items from this order, I feel that he or she retains the discretion to consider whether they should be included in an attorney and client bill of costs, unless the court order makes specific provision for this, and if so, whether the fees billed are acceptable under the circumstances.

The majority of the case law discussed above has been for trials or appearances of long duration. Questions still remain. In the light of the above discussion, would the inclusion of specific days in the costs order change a collapse fee from work not done, to work done? Or from a special fee to counsel to fees in the normal course of business? Or from something not allowed in an attorney and client bill to something allowed even in a party and party bill? In my opinion it does not. In every situation, the Taxing Master will have to use his or her discretion and look at all the surrounding circumstances of the matter. The court order must be considered, the type of costs awarded and the fact that costs have been awarded for work which was not done. Whether counsel received any further briefs and other work in that time period should also be taken into account. Are the costs incurred in fact reasonable, necessary and proper for the attainment of justice or for defending the rights of any party? The paying party should not be unduly punished, and a balance has to be struck between the recovery of costs on the side of the successful party and the necessity of not being unnecessarily punitive towards the unsuccessful party.