South Africa
In South Africa, current litigation trends reflect a dynamic legal landscape influenced by evolving regulatory frameworks, socioeconomic challenges, and emerging technologies.
It is anticipated that more organisations will face investigations and enforcement actions driven by heightened regulatory scrutiny across multiple sectors.
Litigation in relation to data breaches and cybersecurity are also expected to rise as businesses continue to digitise and cyber threats become more sophisticated. Similarly, as technology continues to evolve, IP disputes, particularly those involving artificial intelligence (AI) and digital innovations, are expected to increase.
In light of the above trends, there is a growing demand for alternative legal fee structures, reflecting a shift in client preferences towards more flexible and cost-effective billing arrangements.
1. Is third party funding permissible for disputes?
Third-party funding for disputes is permissible in South Africa. However, it’s worth noting that while it is allowed, there is currently no specific legislation regulating third-party funding arrangements in South Africa.
A significant case that has shaped the legal landscape regarding third-party funding is PriceWaterhouseCoopers Inc. v National Potato Co-operative Ltd 2004 (6) SA 66 (SCA), decided by the Supreme Court of Appeal in 2004. This case played a crucial role in the development of the law surrounding third-party funding, establishing important principles and guidelines for such arrangements within the South African legal system.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
Yes. The Contingency Fees Act 66 of 1997 (which came into operation on 23 April 1999) (“the Act”), provides for two forms of contingency fee agreements which attorneys and advocates may enter into with their clients.
The first, is a ‘no win, no fees’ agreement and the second is an agreement the terms of which provide that the legal practitioner is entitled to fees higher than the normal fee if the client is successful.
The second type of agreement is subject to limitations. Higher fees may not exceed the normal fees of the legal practitioner by more than 100 per cent and in the case of claims sounding in money this fee may not exceed 25 per cent of the total amount awarded or any amount obtained by the client in consequence of the proceedings, excluding costs.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes, in South Africa, the court or tribunal has a discretion to order one party to pay the other’s legal costs. The general rule is that the costs follow the result, meaning the unsuccessful party will be ordered to pay the successful parties costs. Costs can be broadly categorized into two main types: ‘party and party’ costs and ‘attorney and client’ costs:
- Party and Party Costs: commonly called “ordinary costs,” forms the most typical cost order. These costs are subject to court tariffs, which vary between Magistrates’ Courts and High Courts and are determined with reference to what is deemed reasonable legal costs. The successful party will not recover all of the costs they have incurred from the other party and will have to pay the difference to their legal practitioner.
- Attorney and Client Costs: the costs go beyond party and party expenditures and allow some of those costs, charges, and expenses as between Attorney and Client which ordinarily the client cannot recover from the other party. These costs are not often ordered by the court and are usually a sign of the courts displeasure with the other party’s conduct, for example, the other party acted unreasonably or in bad faith. Alternatively, the court will order such costs in circumstances where the parties have agreed to such a cost order in an agreement.
All costs orders undergo taxation by the taxing master, a procedural step aimed at ensuring fairness in assessing legal costs. This involves the preparation of a detailed bill of costs, which the other party can raise objections to. Following this, the taxing master evaluates the bill of costs, considering the nature of the legal services rendered, the complexity of the case, and any objections raised. The taxing master then decides to allow, disallow, or adjust the costs reflected in the bill.
4. Is insurance available to protect against adverse outcomes for funded litigation?
Yes, there are two types of insurance available in South Africa to protect against an adverse outcome and in particular, meeting the costs of the successful counterparty, namely, “before-the-event” and “after-the-event” insurance. “Before-the-event” insurance usually covers a person for potential litigation costs which could be incurred in the future, whereas “after-the-event” insurance provides cover for an event which has already taken place, such as an accident.
Contact
Peter van Niekerk Head of Litigation and Dispute Resolution (South Africa)
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