Legal Fees: Who Pays the Legal Costs in Litigation?
Legal costs are an essential but often misunderstood part of litigation. Many individuals involved in legal disputes are unsure about who will bear the costs of litigation, how expenses are calculated, and what happens if they lose a case. Understanding these costs can help litigants make informed decisions and avoid unexpected financial burdens.
In South Africa, legal costs are categorised into three main types: party-party costs, attorney-client costs, and de bonis costs. Each type has specific implications for litigants and can significantly impact the financial outcome of your case.
Party-Party Costs: The Standard Cost Order
Party-party costs are the most commonly awarded legal costs we encounter in litigation. When a court rules in favour of one party, it may order the losing party to pay a portion of the winner’s legal fees. However, this does not mean that the successful party is fully reimbursed for their legal expenses.
The purpose of a party-party cost order is to ensure that a litigant who has been successful in court is not left with the entire financial burden of the legal process. However, the awarded costs typically only cover a portion of the actual legal fees incurred, often in the range of 60-70%. The court will assess reasonable expenses, and any additional costs beyond what is deemed fair will still be the responsibility of the successful litigant.
If a party loses a case, they may be required to pay the bulk of the winning party’s legal costs on this basis. This is why it is crucial to weigh the risks before proceeding with litigation, as an unsuccessful outcome could lead to significant financial liability.
Attorney-Client Costs: A Higher Cost Burden
Attorney-client costs differ from party-party costs in that they provide for a higher level of reimbursement to the successful litigant. These costs are typically awarded in specific circumstances, such as when a contractual agreement stipulates that legal costs will be recovered on an attorney-client scale or when the court finds that one party acted unreasonably or in bad faith during proceedings.
Unlike party-party costs, attorney-client costs shift a greater financial burden onto the losing party. This serves as a deterrent against frivolous litigation and ensures that parties conduct themselves fairly throughout the legal process. However, courts are cautious when awarding attorney-client costs, as they recognise that excessive cost orders could create an unfair disadvantage for litigants.
For those involved in legal disputes, an attorney-client cost order can significantly reduce the financial strain on the successful party. However, for the losing party, this type of order can result in substantial financial consequences.
De Bonis Costs: Personal Liability for Misconduct
De bonis costs represent a form of cost order that is a bit less common, as they impose personal financial liability on individuals such as attorneys, trustees, executors or public officials. These costs are typically awarded in cases where a court determines that an individual acted negligently, dishonestly or in a manner that wasted the court’s time or resources.
This cost order ensures accountability by holding individuals personally responsible for their actions rather than allowing them to pass the financial burden onto their employer or client. For example, if a trustee mismanages estate funds or an attorney acts recklessly in legal proceedings, the court may order them to pay de bonis costs out of their own pocket.
De bonis costs serve as a disciplinary measure, reinforcing the principle that those in positions of responsibility must act with integrity and diligence.
Final Considerations
The burden of legal costs can often influence parties’ willingness to pursue or defend their claims. Before proceeding with legal action, you should consider the potential financial risks, the likelihood of recovering costs and whether alternative dispute resolution methods may offer a more cost-effective solution. Contact Cawood Attorneys today for expert legal assistance. We’re here to guide you with clarity and confidence, helping you make informed decisions every step of the way.