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Corporate and Commercial

COMMON MISCONCEPTIONS OF COSTS AWARDS ON AN ATTORNEY AND CLIENT SCALE

Posted 29 March 2022

Teresa Maritz

As a litigation attorney, nothing is more satisfactory than telling a client that they are the successful litigant. Even more so if costs are awarded on attorney and client scale. This feels like the icing on the cake, but only until the bill is being negotiated or taxed. Then you, and the client, realize that not all costs are covered by such an award and that it is probable that the client will still have to pay quite a large portion of your costs.

Why? This is what the Constitutional Court says “There is a considerable difference between the amount of the attorney and client bill which a successful party is bound to pay to his own attorney and the amount of an attorney and client bill which has been taxed against the losing party.” (President of the Republic of South Africa & others v Gauteng Lions Rugby Union & another 2002 (2) SA 64 (CC)).

There are two types of costs orders. What are their various applications and limitations? Here, I limit the discussion to costs awarded against an opponent, not your own client, in the High Court. Both the taxation and the tariff of attorneys’ fees are dealt with in Uniform Rule 70.

1. Party and party costs

These costs are on the most conservative scale and are allowed strictly according to the tariff.  Costs incurred as a result of overcaution, errors, unnecessary steps and duplication are not allowed. The rule allows only for the most cost effective and shortest route which could have been followed during litigation. Also, such costs generally do not include pre-litigation costs. Rule 70(3) provides for a “full indemnity for all costs reasonably incurred” which includes “all such costs, charges and expenses as appear to him to have been necessary or proper for the attainment of justice or for defending the rights of any party”.  I have italicized the key words in this provision; the taxing master usually interprets them strictly.

2. Attorney and client costs

These costs are on a more liberal scale and, while they include party and party costs, other costs might be allowed by the taxing master. However, while this is potentially a more punitive scale than the party and party scale, the tariff in terms of Rule 70 still applies. While Rule 70(5)(a) stipulates that a taxing master has the discretion ’to depart from any of the provisions of this tariff in extraordinary or exceptional cases’, it is not always clear what, if any, additional items of costs will be included here.

The leading decision on what may be included in such costs is Aircraft Completion Centre (Pty) Ltd v Rossouw 2003 (3) All SA 617(W), where the court held that: “On a taxation as between attorney and client, irrespective of whether it is an attorney's own client, or the opposing party, who may be obliged to pay the amount taxed, more is required than the mere fact that it is a taxation as between attorney and client before a departure from the tariff is justified. Rule 70(5)(a) determines what more is required. The Taxing Master is bound to apply the tariff in any taxation as between attorney and client unless, in the exercise of his discretion in terms of Rule70(5)(a), he comes to the conclusion that the case is 'extraordinary or exceptional' within the meaning of that subrule, and that it would be inequitable to adhere strictly to the tariff … There need not be anything 'extraordinary or exceptional' about a case in which the costs are to be taxed as between attorney and client. When there is nothing extraordinary or exceptional, or if adherence to the tariff would in any event be equitable, the Taxing Master will rightly adhere to the tariff.”

What, then, is the criterion for an award of higher costs than that allowed by the usual tariff? In Coetzee v Taxing Master, South Gauteng High Court 2013(1) SA 74 (GSJ), the court held that an award of double the tariff in all instances of costs on attorney and client scale, and triple the tariff on awards of attorney and own client scale, was not a ‘proper exercise of the taxing master’s discretion’ and ordered that the bill be resubmitted for taxation.

Attorney and own client costs are those costs which a client has contractually undertaken to pay to his attorney. In the Aircraft Completion Centre decision, the court held that there is essentially no difference between an attorney and client costs award and an attorney and own client costs award, as against an opponent. This was confirmed in Society of Advocates of Kwazulu-Natal v Levin [2015] 4 All SA 213 (KZP) where the court stated that “an attorney and client bill will be taxed more strictly when taxed against an unsuccessful party than when taxed against the attorney’s client, subject to the general rule that each bill will be taxed with due consideration of the factors relevant to the assessment of its reasonableness”.

If attorney and client costs are more liberal or punitive than party and party costs, why then are some items still excluded from forming part of the costs to be paid by opponent?

Some basic principles have emerged from court decisions on costs orders. An agreement or order for costs which does not specifically state that attorney and client costs are allowed or awarded, will not be recoverable on attorney and client scale, despite any previous agreement entered into between the parties.  Fee agreements entered into between an attorney and a client will not be enforceable against the opposing party as this party was not a party to the agreement. The qualification of an ‘extraordinary or exceptional’ case must always be established in order to depart from the tariff.  The costs to be paid by an opponent must still be reasonable. Disbursements accrued, or steps taken, due to the fault of the attorney or client cannot be recovered from an opponent, irrespective of the type of costs order. Specific items which were not included in a court order cannot be remedied by an attorney and client cost order. So, if the costs of two counsel were not specified in the court order, such costs cannot be recovered despite the award of costs on an attorney and client scale.  Overreaching by an attorney, counsel, expert or anyone else involved in the litigation cannot be remedied by an attorney and client cost order. Attorney’s or Counsel’s fees may be allowed on a slightly higher tariff, as well as more time, or more preparation time, than usual under the specific circumstances of the case, but this will not entitle the successful party to all such costs if they can be considered overreaching or unreasonable. Costs awarded on an attorney and client scale against the opposing party will still be taxed according to the tariff, but with the allowance of further attorney and client items. These might include certain travelling expenses, further consultations and correspondence not allowed under a party and party cost order. All costs expended must be weighed up against the principles of reasonableness.

Theory Versus Practice

The discretion which the Taxing Master may exercise deserves a separate article. Suffice to say that an experienced practitioner will know what costs and expenses will usually be allowed by the Taxing Master of a particular division of the High Court, depending on the scale of costs at which taxation takes place. This is of great importance, as once some more elaborate fees or expenses are disallowed, the trend during a taxation appears to be that the whole bill is scrutinized more closely.  However, bear in mind that the discretion exercised by the Taxing Master may not always be in line with the principles enumerated above and, if taken on review, such practices could be either confirmed or altered.

Conclusion

Every matter must be looked at individually. The circumstances, experience of the attorney, complexity of the matter, steps taken, experts or witnesses appointed, documentation necessary to prove the client’s claim and other factors will all be taken into account to determine the costs to be paid by opponent. The saying that “anything goes” does not apply to an attorney and client cost award and you will rarely, if ever, recover all costs from an opponent in litigation. As was held in one decision on costs: “Rule 70 (3) prescribes that the object of the defeated adversary paying the successful litigant’s costs is to provide a ‘full indemnity’ to the successful litigant. The tariff is deemed to do so even if common sense reveals the contrary Bowman NO v Avraamides 1991 (1) SA 92 (W).

All you can do is ensure that any costs order correctly reflects everything that should be included and, in particular if costs have been awarded on an attorney and client scale, that you approach a skilled costs consultant to ensure that your client receives the maximum amount that may be taxed.