There is a common misconception that you would be entitled to recover all legal costs which you incurred if you were the successful party in a law suit. Unfortunately, the court differentiates between the costs which you are liable to pay to your attorneys, on the one hand, and the costs which you are entitled to recover from the unsuccessful party, on the other.
Understandably, the jargon surrounding the issue of costs can be as confusing as some of our more complex Latin phrases. Here are a some of the frequently asked questions pertaining to legal costs: –
1. When are costs awarded?
Generally, a costs order is made on each occasion that a matter comes before the court. Naturally, there is a costs order associated with the conclusion of the matter, but cost orders may also be awarded for smaller court appearances along the way (often referred to as interlocutories). Upon handing down judgement, the court has the discretion to declare that each party is required to pay their own legal costs, that it is appropriate in the circumstances not to make an order as to costs or (as is more often the case) that costs are to be awarded to the successful party.
There are a number of other variations which you may encounter, particularly when dealing with interlocutory applications. For example: an award for costs in the cause means that the costs of the interlocutory application will be awarded to the party who is successful at the conclusion of the main matter, while a reserved costs order means that the court will hear argument, at a later stage, as to who should be liable for the costs incurred.
It is also important to note that whilst cost orders are immediately payable in the High Court, costs awarded in the Magistrates’ Court are not payable until the conclusion of a matter.
2. Why are costs generally awarded to a successful party?
Simply put, a costs award is meant to compensate a successful party for the legal costs which it was forced to incur in having to initiate and / or defend legal proceedings. The award is not intended to punish the unsuccessful party by forcing it to pay exorbitant fees which it cannot afford, but rather to compensate the successful party for the reasonable costs which it should be entitled to recover, regardless of its choice of attorney and the depth of its pockets.
3. What types of costs can be recovered?
In order to even the playing field, costs are often awarded on the party and party scale (often referred to as tariff). These costs are prescribed by the rules of court and comprise of those costs which were necessary to bring the matter to finality. Occasionally, the court will award costs on the attorney and client scale. This is usually as a result of a contractual provision or where the court has elected to make a punitive award for a party’s abuse of the court process and / or contempt of court. The costs allowed under this award are more flexible, particularly when consideration is given to the complexity of a matter. Although attorney and client costs are awarded at a slightly higher scale, they will seldom cover all legal fees paid by a litigant.
4. When must you pay your attorney?
Although you are entitled to recover costs from the unsuccessful party, this does not absolve you from your obligation to settle your attorney’s account. Payment terms vary from attorney to attorney. Some attorneys require you to make payment of a large deposit from which fees may be deducted, whilst others are happy to render invoices which are payable as and when work is done. Occasionally, attorneys may agree to work on a “no-win no-charge basis” (often referred to as contingency), and take their fee from any costs awarded to you, in the form of a percentage.
5. How are costs calculated?
Subject to the costs order awarded by the court, a statement of costs which the successful party is entitled to recover (referred to as a bill of costs) is presented to the Taxing Master of the court for consideration. The unsuccessful party is entitled to oppose the taxation and submit reasons as to why it considers certain items contained in the bill of costs to be unreasonable. At taxation, the Taxing Master will hear argument for both sides, consider each item contained in the bill of costs and will then determine whether the items contained therein are to be allowed, disallowed or reduced. Given the specialised nature of costs, most firms instruct a cost consultant to attend to the drawing and taxing of the bill of costs on their behalf.
6. How are costs recovered?
Once taxed, the amount awarded at taxation (often referred to as the allocator) is enforced in much the same way as a judgment sounding in money. Although costs are immediately payable, it is often collegial courtesy to afford the unsuccessful party a few days’ grace within which to make payment. If payment is not made, not only will the taxed costs bear interest at the legal rate of interest, but a warrant may be issued for attachment and sale of the unsuccessful party’s property.