Why litigation strategy matters
When a dispute cannot be resolved amicably or by alternative dispute resolution methods (ADR) and a case goes to court, this is called litigation. It is often referred to as “suing someone” or a lawsuit. Although the two terms are similar, they do not have identical meanings. A lawsuit is an action brought by one party against another to obtain a remedy for damages or compensation, or to seek interdictory/declaratory relief. Litigation is the entire legal process that involves bringing a case to court to settle a dispute. It includes the investigation and pre-trial motions through to discovery, courtroom proceedings and potential appeals. Every lawsuit is part of litigation, but litigation can begin before a lawsuit is ever filed. Court time is expensive, as are attorneys’ fees. The cost of litigation is one reason most clients – and we at SD Law – seek to resolve disputes without going to court. But if all else fails and litigation becomes necessary, who pays the costs? This will depend on the cost order issued by the court.
A cost order is a directive that determines the party responsible for covering the costs of litigation. Cost orders have the power to shape settlement negotiations, trial preparation and post-judgment reality.
The basics
A cost order is handed down by the court (judge or magistrate) assigning the legal expenses incurred in the matter to one party or the other. Cost orders are typically issued following the action, allowing the successful party to recover the costs. However, this is not always the case. Courts have discretion in awarding costs and will consider factors such as the parties’ conduct, the complexity of the case, and whether the litigation was necessary or frivolous. For example, if one party unreasonably prolongs proceedings or acts in bad faith, the court may deviate from the standard rule.
There are several types of cost orders:
- Costs in the cause: the costs are determined after the final outcome of the main matter
- No order as to costs: each party bears their own expenses, which often happens in settlements
- Reserved costs: these are decided later, perhaps after further hearings
- Wasted costs: these are awarded for unnecessary steps, like postponements caused by one side’s negligence
An appreciation of the types of cost order can help litigants avoid a misstep in strategy, which could result in one party bearing the all the costs.
Cost scales – party and party costs
When a cost order is granted, the scale is specified. This will determine how much must be paid toward the other side’s costs, called “party and party costs”. These are the reasonable and necessary expenses incurred in litigation. They cover counsel’s fee for appearances, preparation fees and essential disbursements but exclude expenses deemed as luxuries or over-preparation.
Uniform Rule 67A (effective 12 April 2024) applies only to party and party costs orders in the High Court. When making a party and party costs order, the court must indicate whether scale A, B or C applies. These scales (in Rule 69(7)) set maximum quarter-hour rates recoverable on taxation for party and party bills. Rule 67A does not regulate attorney and client or attorney and own client costs orders.
Attorney and client costs
These include party and party costs along with additional amounts for consultations, correspondence and strategy sessions between attorney and client that may not be strictly necessary for the court process but are vital parts of the attorney–client relationship.
The costs are subject to taxation and must be reasonably incurred, though the scale allows fuller recovery than party and party. It is broader and covers more than the essentials; it is not punitive but provides fuller compensation when the base scale is considered insufficient.
Courts do not grant attorney and client costs lightly. They are reserved for situations where the opposing party’s conduct warrants extra indemnity. Examples include:
- Vexatious litigation: where a baseless claim is pursued or defended, wasting court time
- Breach of court rules or orders: non-compliance such as failing to file documents on time or misleading the court
- Contractual agreements: contracts may stipulate that any disputes will be resolved with costs at this scale
- Obstruction: where one party acts obstructively, particularly in family law matters
Attorney and own client costs
The highest scale – attorney and own client costs – is based purely on the contract between the attorney and the client. It can include all agreed fees. Courts rarely grant this without severe misconduct.
Why litigation strategy matters
Litigation strategy is not about winning the argument but about managing risk, which includes costs. A poorly planned approach can lead to adverse cost orders, turning a potential victory into a financial loss. There are ways to mitigate the financial impact of the cost order:
- Consider settlement: offering a reasonable compromise can avoid the risk of higher costs if the case is lost
- Prepare well: gather all evidence thoroughly and comply with the rules to minimise chances of “wasted costs” orders
Access to justice is a constitutional right and costs orders enforce that. Parties considering litigation should bear in mind that the pursuit of a weak claim can invite cost order penalties. A proper strategy can align the goal of the litigation with financial reality and turn a cost order into a tool rather than a threat.
Cape Town attorney can help
SD Law is a firm of attorneys based in Cape Town, with offices in Johannesburg and Durban. If you are considering litigation, transparent advice on costs can make all the difference to your case. At SD Law, we encourage settlement and provide solutions that respect both your rights and your financial position. Call attorney Simon Dippenaar on 086 099 5146 or email sdippenaar@sdlaw.co.za for a confidential discussion.