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[2017] ZAWCHC 17
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A.D and Another v MEC for Health and Social Development, Western Cape Provincial Government (27427/10) [2017] ZAWCHC 17; 2017 (5) SA 134 (WCC) (1 March 2017)
THE HIGH COURT OF SOUTH
AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
In
the matter
between Case
No: 27428/10
AD FIRST
PLAINTIFF
IB SECOND
PLAINTIFF
and
MEC
FOR HEALTH AND SOCIAL
DEVELOPMENT,
WESTERN CAPE
PROVINCIAL
GOVERNMENT DEFENDANT
Coram
:
ROGERS J
Heard:
13 & 17 FEBRUARY 2017
Delivered:
1 MARCH 2017
SECOND SUPPLEMENTARY
JUDGMENT
ROGERS J:
Introduction
[1]
This supplementary judgment deals with costs. The parties have placed
before me affidavits (including annexures) running to
299 pages and
an agreed bundle of correspondence of 156 pages. The plaintiffs’
heads of argument cover 53 pages and the defendant’s
79 pages.
I have also been given two lever arch files containing the
authorities cited in the heads. I heard argument over two
days.
[2]
The defendant did not make a rule 34 offer. It is thus uncontentious
that, with possible minor exceptions, the defendant should
pay the
plaintiffs’ costs relating to the quantum trial, including (i)
the costs associated with the defendant’s conditional
counterclaim; (ii) the costs attendant on the employment of two
counsel; and (iii) the preparation and qualifying costs of
the
plaintiffs’ experts. The defendant submits that these costs
should be on the party/party scale.
[3]
The plaintiffs seek certain special costs orders as follows:
· that the
defendant should be liable for the fees not only of their principal
attorney, Mr Joseph (who is based in Johannesburg),
but also of a
second attorney, Mr Ginsberg (who is based in Cape Town);
· that the fees of
the said attorneys should be taxed on the attorney/client scale;
· as to the costs
of the plaintiffs’ main two advocates (Mr Irish SC and Ms
Munro), that Ms Munro’s fees be allowed
at two-thirds of the
fee allowed for Mr Irish rather than the one-half permitted by rule
69(2);
· that the
defendant should be liable for the reasonable fees charged by three
further advocates, Mr P de Waal SC (who was
involved in drafting the
trust deed) and Mr Marcus SC and Ms Pillay (who were engaged to argue
the trust issues);
· that the costs
recoverable in respect of expert witnesses based in Gauteng should
include their reasonable costs of travel
to Cape Town (economy class)
and accommodation;
· that the costs
recoverable in respect of Dr Strauss, who lives in California, should
include his return flight (business
class);
· that the costs
recoverable in respect of Mr Joseph and Ms Munro should include their
reasonable costs of travelling to
Cape Town (economy class) and Ms
Munro’s reasonable accommodation costs in Cape Town;
· that the costs
recoverable in respect of Mr Irish should include his costs of
travelling to Johannesburg (business class)
and accommodation costs
in those instances where he consulted with Gauteng-based experts in
Gauteng;
· that the
defendant should be liable for the travelling costs of the plaintiffs
and IDT (economy class) in those instances
where they consulted with
experts in Gauteng.
Admissibility
of evidence on costs
[4]
The plaintiffs filed two affidavits by Mr Joseph as being relevant to
costs. The first affidavit (to which I shall refer as
the founding
affidavit) was made in support of an application for the court to
receive into evidence (i) an attached affidavit
by Mr Joseph
providing an estimate of the plaintiffs’ costs (to which I
shall refer as the costs affidavit); (ii) a secret
offer of
settlement made by the plaintiffs on 31 October 2013. The defendant
opposed the application but dealt at length with the
costs affidavit
and the secret offer in the event of the court finding them to be
admissible.
[5]
Legal costs are a very substantial feature of this case. Mr Joseph’s
cost estimates were germane to certain submissions
which the
plaintiffs’ counsel wished to make. Although the defendant
complained that the costs affidavit was an attempt to
draw the court
into matters of taxation, the plaintiffs made clear that this was not
the intention. They wanted the court to have
a sense of what the
actual costs of running the case were. Although the filing of such
affidavits in the ordinary run of cases
is not to be encouraged, I
think it was legitimate in this matter for the plaintiffs to place
this material before the court. I
thus rule that the costs affidavit
and the answering and replying material relating to the costs
affidavit are admissible as evidence. (Both
sides argued costs
on this basis, in the defendant’s case while advancing as her
primary contention that the costs affidavit
was inadmissible.)
[6]
I shall deal later in this judgment with the admissibility of the
secret offer.
The
costs of two attorneys
[7]
The costs of the second attorney, Mr Ginsberg, cover work as a second
attorney and work as a Cape Town correspondent.
[8]
In terms of rule 70(8) the taxing master may allow the costs of more
than one attorney where he is of the opinion that more
than one
attorney was necessarily engaged in the performance of any of the
services covered by the tariff. In the affidavits to
which I have
referred Mr Joseph sets out circumstances which in his view justified
Mr Ginsberg’s active involvement as an
attorney and not merely
as a correspondent. The defendant denies that the services of a
second attorney were needed, claiming that
at least some of the tasks
mentioned by Mr Joseph could have been done by a secretary or
candidate attorney.
[9]
I am neither inclined nor able on the material before me to determine
those attendances, if any, where a second attorney was
necessarily
engaged. I do not intend to make a special order usurping the taxing
master’s function (cf
Marshall v Minister of Police
1970 (1) SA 251
(E) at 252A-C;
Aaron’s Whale Rock Trust
v Murray & Roberts Ltd & Another
1992 (1) SA 652
(C) at
661C-H). The litigation was complex and onerous. The taxing master
may well be persuaded that a second attorney was necessarily
engaged
on some aspects of the litigation but that will be a matter for his
discretion. I do not feel better placed than he will
be to decide the
question.
[10]
In regard to Mr Ginsberg’s engagement as a correspondent, this
was necessitated by the plaintiffs’ decision to
employ Joseph’s
Inc as their main attorney. The plaintiffs justify this on the basis
that Mr Joseph is very experienced in
medical cases and that his firm
was willing to act on contingency and fund the cost of the
litigation. Since counsel were not acting
on contingency, the funding
of the litigation was no small matter.
[11]
The contingency fee agreement was concluded in April 2010 and summons
issued in December 2010. The defendant conceded the merits
on 31 July
2012. Because the defendant made no secret tender, the plaintiffs –
who were always going to recover a substantial
amount – were no
longer at risk of not being able to pay an attorney’s normal
fees. However the position was anything
but certain when the
contingency agreement was concluded and summons issued. Joseph’s
Inc, having taken a substantial risk
for more than two years, was
entitled to the benefit of its contingency agreement even though the
risk of defeat abated with the
defendant’s concession of the
merits.
[12]
The plaintiffs could not have afforded to run this litigation at
their own expense. They could only have brought the case by
reaching
a special arrangement with their attorneys.
[13]
The general rule is that a litigant who resides in a town distant
from the seat of the court is entitled to engage an attorney
in the
place where he resides and that in such cases the cost of a second
(correspondent) attorney at the seat of the court is
justified
(
Sonnenburg v Moima
1987 (1) SA 571
(T)). The general rule would thus not, in the present case, permit
the plaintiffs to recover additional costs occasioned by their
choice
of a Johannesburg attorney. I cannot find on the evidence before me
that the plaintiffs could not have found a competent
firm in Cape
Town to act on a contingency basis. Put differently, I cannot on the
material before me conclude that the plaintiffs
could not have
instituted action except by engaging Joseph’s Inc or some other
out-of-town firm willing to act on a similar
basis. The plaintiffs
may be able to persuade the taxing master that this was indeed the
case in which event the taxing master
in his discretion might
properly allow the further costs occasioned by the engagement of a
main attorney in Johannesburg.
Mr
Joseph’s travel costs
[14]
In the light of what I have just said, the allowance of Mr Joseph’s
travel costs should be left to the taxing master
pursuant to any
decision he may make to allow the costs associated with the
engagement of a Johannesburg attorney.
Ms
Munro’s travel and accommodation costs
[15]
I do not know what the taxing master’s attitude would be to the
costs associated with engaging junior counsel from Johannesburg.
Ms
Munro is clearly an experienced counsel in medical matters. She is an
advocate with whom Mr Joseph has previously worked in
similar cases.
However I think it would be going quite far to say that the
plaintiffs could not have secured a competent and experienced
junior
in Cape Town to assist Mr Irish. I certainly do not feel comfortable
in making a special order on that premise. This should
be left to the
taxing master.
Ms
Munro’s fees
[16]
The plaintiffs seek a direction that on taxation Ms Munro’s
fees be allowed at two-thirds of Mr Irish’s fees rather
than
the one-half prescribed in rule 69(2).
[17]
Ms Munro is very experienced in medical matters. She has been at the
bar for more than ten years and was an attorney for some
years before
that. The present case was lengthy and complex. She played an active
role, leading and cross-examining some of the
witnesses and making
closing submissions on parts of the case. If it were within my power
to direct the taxing master to allow
her fees at two-thirds of Mr
Irish’s fees, I would make such an order as I think it would be
fair and just.
[18]
However I do not think I have the power to give such a direction.
Rule 69(1) empowers the court to authorise fees consequent
upon the
employment of more than one advocate. I will be granting this
authorisation. Rule 69(2) states that where fees in respect
of more
than one advocate are allowed in a party and party bill, the fees
permitted in respect of the additional advocate shall
not exceed one
half of those allowed in respect of the first advocate. This rule is
cast in peremptory terms. Rule 69(5) provides
that the taxation of
advocates’ fees as between party and party shall be affected by
the taxing master in accordance with
rule 69 and, where applicable,
the tariff. Again, the language is peremptory. Unlike rules 69(1) and
69(3), there is no provision
for the court to authorise a departure.
[19]
The rules, which are made by the Rules Board in accordance with Act
107 of 1985, are a species of subordinate legislation (
Computer
Brilliance CC v Swanepoel
2005 (4) SA 433
(T) para 36). The court
has no power to override them except in accordance with authority
granted by the rules themselves. In terms
of rule 27 the court has
wide powers to condone non-compliance and to extend or abridge time
limits but this does not empower the
court to order a departure from
rule 69(2). The court’s inherent jurisdiction caters for
matters on which the rules are silent
and thus cannot justify
overriding something the rules expressly address.
[20]
Rules 69(2) and (5) refer to bills and taxations as between ‘party
and party’. I would be inclined to accept that,
if an opposing
party is ordered to pay the successful litigant’s costs on an
attorney and client scale (or on an attorney
and own client scale, if
such an order is permissible), the taxing master may depart from rule
69(2) even though in a sense the
taxation is still one as between
party and party (see
Cambridge Plan AG v Cambridge Diet (Pty) Ltd
& Others
1990 (2) SA 574
(T) at 587I-588D, 598F and 618D-F)).
Perhaps in seeking a departure from rule 69(2) the plaintiffs were by
necessary implication
seeking an order that Ms Munro’s fees be
taxed on the attorney/client scale. If so, the request for a punitive
scale must
fail for the same reasons dealt with more fully below in
relation to attorneys’ fees. I should add that an order for
costs
on an attorney/client scale is not an appropriate response to
perceived inadequacies in the rules (
Bowman NO v Avraamides &
Another
1991 (1) SA 92
(W) at 95B-E)).
[21]
In my respectful view rule 69(2) should be reconsidered by the Rules
Board. The restriction contained in the rule inhibits
the recovery by
the successful party of his reasonable expenditure. There is no logic
in the correlation which the rule lays down.
What is worse, the rule
provides a perverse incentive for litigants to engage more expensive
advocates as their lead counsel. In
a case warranting the engagement
of two counsel, the attorney and client might consider that two
experienced juniors, or a silk
who charges modestly together with an
experienced junior, would be the best combination. The attorney would
be aware, however,
that in such a case a substantial part of the
second advocate’s fees will be disallowed on taxation. The
attorney might thus
recommend the employment of a more expensive silk
(whose fees would nevertheless be regarded by the taxing master as
reasonable),
since that would permit a higher recovery of the
junior’s fees. This is detrimental to litigants (both in regard
to cost
and choice of counsel) and to those advocates who charge
modestly (who might be passed over in favour of more expensive
seniors).
Additional
advocates
[22]
The work done by Mr de Waal, who is from the Pretoria bar, did not
duplicate work done by other counsel. If he had not settled
the trust
deed or attended the one pre-trial conference which he did in Cape
Town, another counsel would have had to do so. Even
if in some
respects he was assisted by one of the juniors (whether Ms Munro or
Ms Pillay), his reasonable fees would be covered
by the order
allowing the costs of two counsel. (The order to that effect is not
limited to the costs of two specific advocates
but covers any service
which one or two advocates – whoever they might be – were
engaged to perform.)
[23]
However for the avoidance of doubt I shall make clear in my order
that Mr de Waal’s reasonable fees shall be allowed
for work on
which he and not more than one other advocate were engaged.
[24]
In regard to Mr de Waal’s travel costs (he attended one
pre-trial conference in Cape Town), I intend to leave this to
the
taxing master. At the time he attended the pre-trial conference in
Cape Town he was the only counsel on brief for the plaintiffs.
He had
been on brief for the merits of the case and remained on brief for a
short while after the merits were conceded. The taxing
master will
need to determine whether it was reasonably necessary for the
plaintiffs to engage counsel from out-of-town.
[25]
The same applies to any work done by Mr Marcus and Ms Pillay in
relation to the constitutional dimensions of the trust issues.
To the
extent that they performed work which would otherwise have been done
by Mr Irish (or Mr de Waal) and Ms Munro, their reasonable
fees
should be allowed.
[26]
Mr Marcus was present on the first day of the trial but did not
address the court. Ms Pillay was present for several further
days
during the evidence of Dr Strauss and the second plaintiff. The costs
occasioned by their attendance would require me to make
an order
permitting the costs of three or four counsel on the days in
question. I do not think such an order is justified. Anything
of
relevance to their areas of interest would have been apparent from
the transcript and would not have required their attention
on the
opening days of the trial.
[27]
Ms Pillay assisted with the heads and appeared with Mr Irish and Ms
Munro on the last day of argument (which was set aside
for the trust
issues). Her input was confined to the trust issues. Although Mr
Irish and Ms Munro no doubt also applied their minds
to those matters
(and Mr Irish eventually argued them), it would be just to allow the
costs of a third advocate in relation to
the trust issues, including
the costs of Ms Pillay’s attendance on 12 August 2016. (The
defendant, I may note, employed Mr
Budlender SC to argue the trust
issues.)
Gauteng
experts
[28]
Most of the plaintiffs’ expert witnesses are based in Gauteng.
This meant that they had to travel to Cape Town to testify
while the
plaintiffs, IDT and Mr Irish had to travel to Gauteng to consult with
them. The experts in question may well be persons
with whom Mr Joseph
has a good working relationship. However I did not gain the
impression that any of them boasted unique expertise
which could not
have been sourced in the Cape Peninsula. I am thus not willing to
make a special direction regarding these disbursements
and travelling
time. The plaintiffs may be able to persuade the taxing master that
in some or all instances the use of Gauteng
experts was justified but
that will be a matter in his discretion.
Dr
Strauss
[29]
Dr Strauss’ high standing appears from my main judgment. I
substantially accepted his evidence. Life expectancy was an
important
issue which affected the computation of many of the claims. The
defendant’s expert on this topic, Prof Cooper,
acknowledged
that there were no experts in South Africa with specific expertise in
the life expectancy of cerebral palsy sufferers.
Particularly since
the plaintiffs bore the onus, their engagement of Dr Strauss, despite
the fact that he resided in California,
was reasonable.
[30]
Dr Strauss travelled only once to South Africa, this on the occasion
when he testified. He flew business class. Given his seniority
and
eminence, and given the tiring nature of a transatlantic flight
coupled with what was a short turnaround time, I am satisfied
that
the cost of a business class flight was reasonable. I very much doubt
that the plaintiffs could have secured Dr Strauss’
attendance
in Cape Town on any other basis.
[31]
Dr Strauss, apparently in accordance with the usual practice of
American experts, billed for his entire time in South Africa
and not
merely for the time spent in consultation and in testifying. Since he
was from a foreign country and could not reasonably
have been
expected to have other professional work here, I think this basis for
charging is reasonable. It will be for the taxing
master to determine
whether his stay in South Africa was longer than reasonably necessary
in all the circumstances, having regard
inter alia to the need for
preparatory consultation, the length of time which he was expected to
spend in the witness box and the
availability of suitable flights.
[32]
I am thus satisfied that I should make a special direction permitting
the recovery of Dr Strauss’ travelling and accommodation
costs,
including a business class return flight, and the recovery of fees
for the time reasonably taken up in travelling to and
from Cape Town
and in being in South Africa. While I have no reason to question the
reasonableness of the hourly rate and time
actually charged by Dr
Strauss, the taxing master will have to determine these matters if
there is an objection.
Dr
Versfeld
[33]
By the time Dr Versfeld came to Cape Town to testify, the only
orthopaedic item which depended on his evidence was item 43
of “POC1”
(the claims for treatment of scoliosis), quantified by the plaintiffs
at R403 201. Items 38 - 41 were settled
as part of the memorandum of
agreement dated 29 February 2016 (treatment for minor and major
fractures). It was never contentious,
on my understanding, that IDT
would require physiotherapy following surgery for fractures (items 42
and 43) but the extent and
cost of the physiotherapy were in issue,
something which turned on the evidence of the physiotherapists (Ms
Jackson and Ms Scheffler).
Items 42 and 43 were settled as part
of an agreement dated 17 June 2016. Dr Versfeld did not give evidence
on these items.
[34]
In regard to item 43 the plaintiffs failed in toto. I preferred the
evidence of Prof Dunn. The evidence of these two experts
related
exclusively to item 43. It seems to me, in the circumstances, that I
would not be exercising my discretion judicially if
I allowed the
plaintiffs to recover the costs associated with Dr Versfeld’s
oral testimony (see
Estate Wege v Strauss
1932 AD 76
at 86;
Penny v Walker
1936 AD 241
at 260-261;
LAWSA
2
nd
Ed Vol 3(2) para 295). However, because the plaintiffs recovered
amounts which were not trivial in respect of items 38-43 and because
it does not seem practicable to apportion Dr Versfeld’s earlier
attendances, the disallowance will affect only those attendances
post-dating the settling of items 38-43.
[35]
Dr Versfeld’s testimony was completed in just under two days.
Prof Dunn’s evidence covered one full day and the
first session
of the following day (a shortened day because the defendant was not
ready to proceed with her next witness). I think
it follows from what
I have said that I should disallow the costs of three trial days.
Dr
Choonara
[36]
The defendant submits that I should allow the costs associated with
Dr Choonara’s addendum report of 21 November 2014
on the basis
that it was not served as an expert report and only came to light
because Dr Choonara’s secretary sent it the
defendant’s
urologist, Prof Lazarus. The plaintiffs’ own counsel had not
seen the addendum until the defendant made
discovery thereof shortly
before Dr Choonara was to testify. Upon such discovery, the
plaintiffs said the document should not have
been disclosed and was
privileged.
[37]
I do not intend to go into the heat which the production of this
report generated. I think the defendant is correct, though,
that the
costs associated with the addendum report should be disallowed, not
as a mark of disapproval but because the report was
not served and
relied upon by the plaintiffs as part of their case. There are no
grounds for disallowing any other qualifying expenses
relating to Dr
Choonara.
Mr
Freedman
[38]
The plaintiffs do not seek qualifying or other witness expenses in
respect of Mr Freedman. The defendant says that the costs
associated
with calling him should be disallowed because the purpose was to
impugn Dr Bass’ integrity. I am not persuaded
to follow this
course. His evidence was completed in a single session, the greater
part of it under cross-examination. His testimony
was not confined to
the circumstances under which he was engaged by the defendant to do a
joint assessment of IDT with Ms Scheffler.
Attorney/client
costs in respect of attorneys’ fees
[39]
The plaintiffs do not seek attorney/client costs across the board but
only in relation to the fees of Mr Joseph and Mr Ginsberg.
Whether
the fees of Mr Ginsberg will be allowed at all is something I am
leaving to the taxing master. What I address under this
heading is
the question whether Mr Joseph’s attendances and (if they are
allowed at all) Mr Ginsberg’s attendances
should be assessed on
an attorney/client rather than party/party basis.
[40]
Central to the plaintiffs’ argument in support of
attorney/client costs is a secret offer of settlement which the
plaintiffs
made on 31 October 2013 in which they offered to settle
the case on the basis that the defendant pay the plaintiffs R20
million
plus interest from date of acceptance plus party/party costs
plus the qualifying and preparation expenses of 25 listed experts.
The plaintiffs contend that the defendant unreasonably rejected this
offer and unreasonably failed to make their own globular
counter-offer, thus requiring the plaintiffs to run a lengthy trial
at enormous expense. The residual amount available for IDT would
be
significantly reduced if the plaintiffs were confined to party/party
costs.
[41]
The plaintiffs’
secret offer was referred to in argument as a Calderbank offer, with
reference to the judgment of the English
Court of Appeal in
Calderbank
v Calderbank
[1975]
3 All ER 333
(CA). In that case Cairns LJ said that he saw no reason
in principle why, in cases not covered by the rules of court
permitting
secret offers, a litigant should not be permitted to make
a settlement offer ‘without prejudice save as to costs’
and
to rely on such offer, once judgment has been granted, in support
of a particular costs order. This view was approved and acted
upon in
Cutts v
Head & Another
[1983] EWCA Civ 8
;
[1984]
1 All ER 597
(CA). The courts in Australia,
[1]
New Zealand
[2]
and Canada
[3]
have followed suit. In some jurisdictions the rules relating to
secret offers have been amended to fill the gaps where Calderbank
offers previously operated. In these jurisdictions it is accepted
that a Calderbank offer by a plaintiff can, after judgment, be
adduced in support of a request for what we would call
attorney/client costs.
[42]
There are two discrete questions on this part of the case, namely
(i) whether a Calderbank letter is admissible at all
in relation
to costs; (ii) if so, what effect the letter has on the court’s
discretion as to costs.
[43]
As I have said, in England and other Commonwealth jurisdictions it
has been held that the privilege attaching to without prejudice
communications does not bar the production of so-called Calderbank
letters in relation to costs. In order to be admissible for
that
purpose, the offer must explicitly state that it is made without
prejudice ‘except in relation to costs’ (or words
to
similar effect). In
Cutts
the court drew a distinction between
communications which are unqualifiedly without prejudice and those
which are without prejudice
‘except in relation to costs’.
The rule that without prejudice communications are inadmissible was
said to be based
partly on public policy and partly on the agreement
or understanding conveyed by the use of the phrase ‘without
prejudice’.
The considerations of public policy largely fall
away once the substantive issues between the parties have been
determined. The
inadmissibility of without prejudice communications
thereafter rests mainly on the agreement or understanding conveyed by
the words
‘without prejudice’. If these words are
expressly qualified by the phrase ‘except in relation to
costs’,
there are no reasons of policy to treat the
communication as inadmissible for purposes of determining a just and
equitable costs
order. On the contrary, the public policy of
encouraging settlements would be better served if litigants
appreciate the risk of
adverse costs orders if they disregard
reasonable offers of settlement.
[44]
The plaintiffs submitted that there was a gap in our law because rule
34 contained no provision permitting a plaintiff to protect
himself
against the attorney/client component of his legal costs by making a
settlement offer. They argued that I should reach
the same conclusion
as in the Commonwealth cases cited earlier, if necessary by
developing the common law in terms of s 39
of the Constitution.
They submitted that this development is required by the rights
enshrined in ss 8, 9 and 34.
[45]
The defendant reminded me of the approach laid down in
Mighty
Solutions t/a Orlando Service Station v Engen Petroleum Ltd &
Another
2016 (1) SA 621
(CC) para 39 where a court is asked to
develop the common law and of the need to exercise caution, bearing
in mind that the ‘major
engine for law reform should be the
Legislature and not the Judiciary’ (para 40; and see also
Paulsen v Slip Knot Investments 777 (Pty) Ltd
2015 (3) SA 479
(CC) para 57). The defendant submitted that the plaintiffs’
argument was in reality a constitutional challenge to rule 34
and
that no such challenge had been pleaded and that interested parties,
including the Minister of Justice, had not been joined.
[46]
I do not agree that the plaintiffs are challenging the validity of
rule 34. Rule 34 permits a defendant to make a secret tender.
It does
not provide, expressly or by necessary implication, that a secret
tender made by the plaintiff, outside the rules, cannot
be relied
upon when it comes to costs. Furthermore I do not think that the
answer to the admissibility question requires recourse
to the
Constitution save to the extent that the Constitution in the nature
of things influences prevailing public policy.
[47]
The question is whether our law in respect of without prejudice
communications should permit the same exception that has been
recognised in England and other Commonwealth jurisdictions. Our law
of evidence regarding without prejudice privilege is the English
law
as at 31 May 1961 (see s 42 of the Civil Proceedings Evidence
Act 25 of 1965;
Naidoo v Marine & Trade Insurance Co Ltd
1978
(3) SA 666
(A) at 677F-H;
KLD Residential CC v Empire Earth
Investments 17 Pty Ltd
2016 (5) SA 485
(WCC) para 30). English
law, and accordingly South African law, allows some exceptions to the
privilege. The exceptions have developed
with reference to the public
policy underlying the without prejudice rule. Public policy is not
immutable and the list of recognised
exceptions is not closed (
KLD
Residential
para 60).
[48]
Although
Calderbank
and
Cutts
were decided in England
after 1961, they do not represent a change in the law relating to
without prejudice communications. The
main case raised against the
conclusion reached in
Cutts
was
Walker v Wilsher
(1889)
23 QBD 335
(CA). In
Cutts
the court did not overrule
Walker
but distinguished it on the basis that in
Walker
the
without prejudice offer did not contain the qualification ‘except
in relation to costs’. Oliver LJ’s analysis
(which I have
already attempted to summarise) begins thus (at 605d-e):
‘
Now, it is
certainly the case, and the contrary is not argued, that the use of
the words “without prejudice” as a cover
for negotiations
and with no reservation of the sort suggested in the
Calderbank
case has today the same consequences as it had in 1889 when
Walker
v Wilsher
was
decided. Thus, it cannot be contended that the meaning of the
expression has changed. The answer to the question whether, accepting
that meaning, it is yet open to a party taking advantage of the
protection afforded by the use of the formula to qualify its
operation
must, I think, therefore be sought in an analysis of the
underlying basis for the protection and the practice of the courts
generally
in relation to its application…’
[49]
There is nothing in
Cutts
to suggest that the policy
considerations which led to the court’s conclusion were
different in 1984 from what they were in
1961. The court was in
essence declaring the state of the law, not changing it.
[50]
In my view there is no reason why our law, based as it is on English
law, should not recognise the same exception as has found
favour in
England and other Commonwealth jurisdictions. The considerations of
public policy in favour of settlements and discouraging
costly
litigation are as compelling now as they ever were.
[51]
The defendant relied on
Magxola v Skilingo
1914 CPD,
Ovenstone Farmers v Villiersdorp
1975 (2) SA 278
(C)
and
Tshabalala v Presidents Versekeringsmaatskappy Bpk
1987
(4) SA 72
(T) as authority for the proposition that without prejudice
communications cannot be relied on in relation to costs. In
Magxola
the cases cited in argument were
Walker v Wilsher
and two
Transvaal cases which followed
Walker v Wilsher
.
Ovenstone
in turn simply followed
Magxola
.
The only case cited in
Tshabalala
was
Naidoo
which was
not concerned with costs. In none of these cases, so it seems, were
the without prejudice offers made subject to the qualification
‘except in relation to costs’. I thus do not regard them
as standing in the way of an acceptance in our law of the
admissibility of Calderbank offers.
[52]
There is a line of cases, not mentioned in argument, stating that, in
order to be effective protection against costs, a tender
must be
pleaded and must remain open until the end of the case (see eg
Naudé
v Kennedy
1908 TS 799
at 807-810;
Foord v Lake & Others
NNO
1968 (4) SA 395
(W) at 398H-400A;
De Beer v Rondalia
Versekeringskorporasie van SA Bpk
1971 (3) SA 614
(O) at 616C;
Unit Inspection Co of SA (Pty) Ltd v Hall Longmore & Co (Pty)
Ltd
[1995] ZASCA 3
;
1995 (2) SA 795
(A) at 802H-J). In
Naudé
and
Unit Inspection
the offers appear to have been unconditional
open offers, and in
Unit Inspection
the offer was in fact
pleaded. In
Unit Inspection
Grosskopf JA observed that it has
been held that if a defendant wishes to avail himself of a tender in
order to disavow liability
for costs the tender should be pleaded,
adding, ‘This was of course done in the present case’. I
do not regard this
as a definitive statement of the circumstances in
which a tender must be pleaded.
[53]
In
De Beer
it appears that the offer was made in the course of
settlement negotiations but the defendant in fact pleaded the tender
though
not its precise content. Hofmeyr J held that the plaintiff was
entitled to a copy of the offer by way of a request for further
particulars to the plea. He did not go into the question whether it
would be proper for the trial court to see the offer before
giving
judgment though presumably if the offer formed part of the further
particulars it would be part of the court file.
[54]
In
Foord
the offer was not expressly stated to be without
prejudice but it was tendered without admission of liability and in
settlement
of the plaintiff’s claim so in substance it was
probably without prejudice. The defendants were unable to use the
machinery
of rule 34 because they were the liquidators of an
insolvent company. They said that if their offer was accepted they
would accept
proof of the plaintiff’s claim in the amount of
the tender. The offer letter recorded that if the plaintiff did not
accept
the tender and the matter went to trial the letter would ‘at
the appropriate time’ be brought to the notice of the judge
who
would be asked to disallow the plaintiff’s costs from the date
of receipt of the letter. The letter was thus in essence
a Calderbank
offer, save that it did not specify a time for acceptance. The merits
were subsequently conceded and the trial ran
on quantum. Upon
conclusion of evidence and argument the defendants withdrew their
offer by way of a further letter. The court
awarded damages of
R4998,98 while the withdrawn offer was in the amount of R5448,88.
After delivery of judgment the defendants’
counsel sought to
hand in the letter as being relevant to costs.
[55]
Trollip J relied on
Naudé
in finding that the offer
should have been pleaded (at 399A-B). The defendants’ counsel,
who did not appear at the trial,
submitted that it must have been
understood between counsel that the offer of compromise would be
withheld from the court and only
produced after judgment was handed
down. Since neither of the advocates in the costs argument had
appeared at the trial, they could
not inform the judge of the exact
detail of counsel’s agreement. Trollip J said that in the
absence of such information he
hesitated to rule that the offer of
compromise should be excluded from consideration. He was thus willing
to assume in the defendants’
favour that the offer and its
withdrawal were properly before the court (at 399C-E). He
nevertheless said that the defendants must
be regarded as having been
responsible for non-disclosure of the offer. If the defendant had
pleaded or proved the offer during
the trial, the court would have
awarded the plaintiff the amount tendered if that was more than the
amount proved, since to be
effective the tender must be kept open
until judgment. This accords with earlier authorities including
Greer
v McHarry
1938 WLD 182
, which Trollip J cited and which contains
a review of the provincial decisions.
[56]
In my respectful view, those cases in which
Naudé
was
applied to without prejudice offers failed to appreciate the need to
distinguish between open tenders and without prejudice
offers. It is
inherent in a without prejudice offer that it will not be made known
to the court, at least not until judgment has
been delivered. It is
self-defeating to say that if a defendant wishes to rely on a without
prejudice offer as protection against
costs he must plead it. As
Magxola
and the other cases mentioned in para 51 above make
clear, a without prejudice offer containing no reservation as to
costs is inadmissible
for all purposes, even in relation to costs. A
defendant cannot permissibly plead and prove the making of the
without prejudice
offer, at least not without the consent of the
plaintiff. The defendant could, of course, make the same tender in
his plea, ie
as an open tender, but his protection would then operate
only from the date of the plea. He could not allege that the tender
in
his plea was a repetition of a without prejudice offer made at an
earlier stage.
[57]
If it is permissible to make an offer which is without prejudice
‘save in relation to costs’, the same rule would
preclude
the pleading and proving of the offer for any purpose other than
costs. The recipient of the offer could not disclose
it during the
trial and seek to take advantage of it.
[58]
It thus seems to me that if our law inflexibly lays down that a
tender (outside of rule 34) is ineffective as a protection
against
costs unless pleaded and proved, a without prejudice offer can never
be relied upon as a protection against costs because
it is not
permissible to plead and prove a fact of which evidence is by its
nature inadmissible.
[59]
There is no discussion in
Foord
of the without prejudice
privilege and its policy-based exceptions. It would in my opinion be
contrary to public policy to adopt
a rule that a litigant can only
rely on an offer as protection against costs if it is an open offer
which must remain open for
acceptance until judgment and which will
represent the amount awarded if it is higher than what the plaintiff
proves. Relatively
few litigants would find it attractive to attempt
settlement on that basis. The plaintiff is put under scant pressure
to assess
his own case realistically. He can at any stage accept the
offer if his case goes awry. And if he proves less at trial, he has
the comfort of receiving the higher amount offered by the defendant,
even if there be some penalty as to costs.
[60]
I have thus come to the conclusion that in principle Calderbank
offers are admissible in relation to costs and can be disclosed
to
the court for that purpose after judgment has been given.
[61]
As to the effect of a Calderbank offer on costs, the Commonwealth
cases emphasise that a plaintiff who has made such an offer
is not
entitled to attorney/client costs merely because he made a secret
offer which was less than what the court awarded. The
court must
consider whether the defendant behaved unreasonably, and thus put the
plaintiff to unnecessary expense, by not accepting
the offer or
making a reasonable counter-offer. Factors mentioned in the
Commonwealth cases are whether the defendant has engaged
reasonably
in attempting to settle, whether the plaintiff was offering a fair
discount based on a realistic assessment of the case
rather than
holding out for the best conceivable outcome, whether the plaintiff
allowed the defendant a reasonable time to consider
the offer, the
extent of the difference between the amount of the offer and the
amount of the award and the nature of the proceedings
and resources
of the litigants.
[62]
Turning to the facts of the present case, the plaintiffs’
secret tender of 31 October 2013 complies with the principles
laid
down in the Commonwealth cases for Calderbank offers. I thus find it
to be admissible.
[63]
I have nevertheless come to the conclusion that the existence of this
offer and the other relevant circumstances of the case
do not warrant
a punitive scale of costs against the defendant.
[64]
The settlement offered by
the plaintiffs was R20 million. Leaving aside the time-value of
money, how does this compare with the
award determined in accordance
with my main judgment and first supplementary judgment? The only
amount currently undetermined is
the lump sum to be awarded in
respect of the trustee’s remuneration (it is common cause that
if the secret offer is admissible,
the value of the trustee’s
remuneration must be included in determining the total value of the
award). The amounts already
determined total R18 146 167.
The plaintiffs say that the trustee’s remuneration is likely to
be more than R3 million.
This is supported by Mr Whittaker’s
illustrative calculations in his report of 2 May 2016.
[4]
The plaintiffs draw attention to the fact that in argument the
defendant offered to pay a provisional sum of R2 million for
trustee’s
remuneration. So a plausible range for the total
value of the award is R20,1 million to R21,2 million. The offer was
thus modestly
below the total value of the award
[65]
This simple comparison leaves out of account, however, that the offer
was made on 31 October 2013 whereas my award was only
finalised (save
in respect of the trustee’s remuneration) on 1 December 2016
(the date of my first supplementary judgment).
The award probably
carries no right to interest before that date since it was based on
updated costs and rates (cf para 653 of
my main judgment). The
defendant’s actuary, Mr Lowther, has furnished calculations
showing what R20 million as at 6 November
2013 would be worth today,
assuming interest rates ranging from 4% to 10% compound. The range is
from R22,555 million to R26,787
million. In real terms, therefore,
the secret offer was almost certainly more valuable than the amount
eventually awarded.
[66]
I need not decide whether, in matters covered by rule 34, the trial
judge may properly take into account the time-value of
money in
determining whether to award costs in favour of a defendant whose
offer in nominal terms, though not in real terms, was
less than the
amount subsequently awarded (cf
Radell v Multilateral Motor
Vehicle Accidents Fund
1995 (4) SA 24
(A) on the different
question of currency fluctuation). I simply observe that in
Naylor
& Another v Jansen
2007 (1) SA 16
(SCA) the court said that
rule 34 does not dictate any particular outcome. The court retains an
unfettered discretion, provided
the discretion is properly exercised.
It does not seem unjustifiable to take into account the time-value of
money, particularly
where in quantifying a plaintiff’s damages
the court has used costs and rates prevailing at the time of the
trial rather
than when the delict occurred or summons was issued. Be
that as it may, I see no reason why, in relation to Calderbank
offers,
the court may not take into account the time-value of money
as one consideration in assessing whether the defendant acted
unreasonably
in refusing to accept an offer.
[67]
The next relevant consideration is how the offer of R20 million
compares to the plaintiffs’ claims as formulated at the
time
the offer was made. As at October 2013 the plaintiffs claimed
R1 116 416 for themselves and R19 735 100
for
IDT, thus R20 851 516 in total. Their settlement offer was
96% of the amounts claimed. The plaintiffs were thus not
offering a
significant discount. The defendant was effectively being asked to
pay their claims in full plus all their costs.
[68]
The plaintiffs’ claims underwent considerable change after
October 2013. By the time the trial started in February 2016
the
plaintiffs on the pleadings were claiming R2 010 354 for
themselves and R36 225 363 for IDT. If the full
value of my
award, including the trustees’ remuneration, were eventually to
be determined at (say) R21 million, my award
would be about 55% of
their claims as finally formulated. Although the full value of my
award may turn out to be very close to
the secret offer of R20
million, the correspondence is purely coincidental, given the very
substantial differences between the
claims as formulated in October
2013 and the claims as finally formulated.
[69]
I must take into account, next, the extent to which the defendant was
able, as at October 2013, to form its own reasonably
accurate view of
the damages suffered by the plaintiffs and IDT. The particulars of
claim as at October 2013 were in the same form
as when summons was
issued in December 2010. There were no detailed appendices furnishing
a full breakdown of the claims. Certain
claims were described as
estimated globular amounts, including IDT’s loss of earnings in
the amount of R2,04 million. As
at October 2013 the plaintiffs had
not served any expert reports on quantum (though the offer required
the defendant to accept
liability for the costs of 25 experts). The
only expert for the defendant who had assessed IDT was Dr Springer, a
developmental
paediatrician at Tygerberg Hospital.
[70]
There was a case management meeting on 6 May 2013 which provided for
expert reports to be filed in time for the matter to be
certified
trial-ready by 2 September 2013. The plaintiffs complained in August
2013 that the defendant had failed to arrange for
IDT to be examined
by their experts. Mr Gava for the State Attorney replied that the
defendant was having difficulty in retaining
appropriate experts and
required access to the plaintiffs’ expert reports. He said that
if, for example, Dr Strauss’
report were made available and was
found to be balanced and reasonable, this might obviate the need for
the defendant to obtain
an expert in that field. The plaintiffs did
not deliver their expert reports in response to this letter. Their
position was that
the parties were to exchange expert reports, not
file them successively.
[71]
The result, at least initially, was that expert reports were
exchanged in fits and starts as the defendant procured her reports.
The reports of the physiotherapists and paediatricians were exchanged
on 4 February 2014. In terms of agreed case management directions
of
6 February 2014 the parties were to exchange the reports of the
occupational therapists and speech therapists during February
and
March 2014. The plaintiffs were to file all their remaining expert
reports by 1 April 2014. By the time of the pre-trial conference
held
on 13 May 2014 the plaintiffs had served, electronically, the reports
of 13 further experts. In that conference the plaintiffs
indicated
that they were intending to procure expert reports from Dr Campbell
(rehabilitation expert), Dr Strauss, Mr Schüssler
(economist)
and Mr Whittaker (actuary) and that these would be furnished in the
near future ‘once all appropriate investigations
have been
completed to permit the finalisation of such reports’. On 30
May 2014 the plaintiffs’ attorneys indicated
that they also
intended to call Prof LH Hofmeyr (otologist and neurotologist). Dr
Strauss’ first report is dated 16 July
2014 and Mr Whittaker’s
first report 9 July 2014.
[72]
I do not intend to go into the criticisms which each side levelled at
the other regarding the preparation and filing of expert
reports. I
do not feel in a position to apportion blame. The fact is that as at
October 2013 and for many months thereafter the
defendant did not
have all the plaintiffs’ expert reports in support of the
claims and did not have reports from her own
experts. The defendant
was thus not in a position to form a realistic view of claims’
merits.
[73]
The defendant’s counsel pointed out in argument that Mr Joseph
himself, in an affidavit of 18 June 2015 (in response
to the
defendant’s application to amend her plea and introduce the
conditional counterclaim), acknowledged the difficulty
of forming an
accurate view of the claims at the earlier stages of the litigation.
He was responding to an allegation that the
plaintiffs had
substantially increased their claims in August 2014. He explained
that when the claims were originally formulated
it was impossible –
in the absence of expert reports, a determination of IDT’s life
expectancy and an actuarial calculation
– to be more precise
than the estimates contained in the pleadings. He surmised that the
reason the defendant had not offered
to settle the case at the amount
of R19 million originally claimed was that she knew the quantum
needed to be explored ‘with
a degree of precision’.
[74]
The State Attorney’s response to the offer of 31 October 2013
was that the defendant was in the process of evaluating
the offer but
the legal team found it practically impossible to advise the client
in the absence of the plaintiffs’ medico-legal
reports. In the
circumstances I have summarised above, I cannot find this response to
have been unreasonable.
[75]
Another circumstance of relevance is that the plaintiffs’
secret offer of 31 October 2013 only remained open for acceptance
until 6 November 2013. Mr Irish said that a time-limit was included
because this accorded with the English practice relating to
Calderbank offers. Even so, a time-limit of one week in the
circumstances which prevailed in October/November 2013 was not a
reasonable
period.
[76]
The plaintiffs’ argument is not merely that the defendant
failed to accept a reasonable offer. They complain that the
defendant
at no stage made a globular counter-offer. That this is so is common
cause. It is certainly surprising that the defendant
did not take the
precaution of protecting herself by making an offer. However I cannot
find that the failure to make a globular
counter-offer was
unreasonable. The defendant’s approach was apparently to engage
in discussions on individual line items
of the claims. Both sides
appeared in argument to acknowledge that details of those discussions
are privileged. I am thus not in
a position to comment on whether
their respective approaches on individual line items were or were not
unreasonable. What can be
said is that by the time the trial started
some of the line items had been resolved while others were settled
during the course
of the trial.
[77]
If one is to penalise the defendant for failing to make a globular
counter-offer, one needs to be able to determine more or
less when
the defendant could be said to have had enough information
realistically to assess the claims as a whole. On 31 July
2014 the
plaintiffs served an amendment notice increasing their claims to
R33,747 million (this was shortly after they obtained
reports from Dr
Strauss and Mr Whittaker). It is not clear that prior to this date
the defendant had enough information to evaluate
realistically the
claims as they were formulated prior to the amendment. Once the
amendment was effected, the increased claims
and the extensively
revised particularity on which they were based had to be assessed.
The plaintiffs do not say that after the
amendment they would still
have entertained a settlement in the region of R20 million.
[78]
The plaintiffs argued that the defendant’s failure to make a
globular counter-offer is explicable only on the basis that
the
defendant was resolutely against settlement and wanted to run the
case as a matter of principle. They submit that even if the
defendant
was bona fide in doing so, it is not fair for IDT to suffer the high
cost associated with the defendant’s choice.
Mr Irish referred
me to certain passages from Ms Bawa’s opening remarks in
support of this thesis. I do not think that I
can find that the
defendant had the attitude attributed to her. The determination of
quantum was never going to be precedent-setting.
The parties did in
fact reach agreement on many items and I have no reason to think that
the defendant was in principle resistant
to resolving all of them. I
am not privy to discussions which took place regarding the line items
which remained unresolved nor
have I endeavoured to compare the
parties’ respective measures of success on the unresolved
items. The defendant may have
been intent on litigating the trust
issues as a matter of principle but this is something which would
only have taken a few days
if the parties had been able to resolve
quantum.
[79]
The plaintiffs submitted that in deciding whether to make a punitive
costs order a court may take into account that without
such an order
the plaintiffs’ success on the merits would be rendered
nugatory. I was referred in that regard to
Savage and Lovemore
Mining Pty Ltd v International Shipping Co (Pty) Ltd
1987 (2) SA
149
(W) at 216-217. I do not think the case bears out the submission.
Stegmann J said that the defendant had conducted the litigation
‘in
a tricky way’, a way calculated to make the plaintiff’s
case ‘extremely difficult to prove and uncertain
in its
outcome’. The judge thought that the ‘low level of
commercial morality’ and lack of bona fides displayed
by the
defendant in its contractual dealings with the plaintiff deserved the
court’s condemnation. A plethora of unmeritorious
defences were
raised. It was in those circumstances that the judge concluded that
it would not be just to leave the plaintiff with
a heavy
attorney/client liability. These types of criticisms cannot be
levelled at the defendant in the present case.
[80]
It is unfortunate that IDT’s award may be substantially eroded
by irrecoverable costs. It is doubtful, however, that
withholding an
attorney/client award in respect of attorneys’ fees will play a
significant role in this erosion. The main
drivers of irrecoverable
costs are likely to be contingency fees, interest on disbursements,
junior counsel’s fees and the
cost associated with the use of
Gauteng experts and a Gauteng attorney:
·
As to contingency fees, the hourly rate permitted for an attorney in
a party/party taxation is R1000. I understand that
in an
attorney/client taxation the taxing masters in this division might,
for a senior attorney, allow up to R1300. In terms of
the contingency
fee agreement (April 2010) the plaintiffs agreed that Mr Joseph could
charge double his usual fee of R2500 p/h,
ie R5000 p/h, increasing at
10% p/a. This means that in the quantum phase of the case
(2013-2016), Mr Joseph’s fees ranged
from R6500 p/h to R8000
p/h (assuming the 10% increase is simple not compound). On a
party/party taxation, therefore, the irrecoverable
portion of Mr
Joseph’s 2016 fees will be R7000 p/h of which only about R300
(4%) might be clawed back if attorney/client
costs were granted. I
appreciate that in an attorney/client bill the taxing master might
allow attendances which he would disallow
in a party/party bill but
it is difficult to know how extensive those are likely to be in the
present case.
·
As to interest on disbursements, the power of attorney forming part
of the contingency fee agreement provides that, if
the plaintiffs are
unable to pay disbursements, amounts paid out on their behalf by
Josephs Inc will bear interest at the maximum
permissible rate. (I do
not have information as to the rate of interest Joseph’s Inc
will in fact levy on his disbursements
in respect of counsel and
experts.)
·
As to junior counsel’s fees, I have explained why I cannot
authorise a departure from the one-half allowance in rule
69(2). The
effect, based on the plaintiffs’ counsel’s current fees
in the case, is that R5000 p/d and R500 p/h of Ms
Munro’s fees
will be disallowed (not, I must emphasise, because her fees are
unreasonable but because of the rule). Based
on information in Mr
Joseph’s affidavit, the disallowed fees could be of the order
of R650 000.
·
As to Gauteng-related costs, the taxing master may well disallow the
travel and accommodation costs of the Gauteng experts
and of the
legal team. Based on the estimates contained in Mr Joseph’s
affidavit, the amounts in question exceed R620 000.
[81]
As a makeweight point for attorney/client costs, the plaintiffs made
certain criticisms of the way the defendant conducted
the trial. The
defendant warded off these criticisms and made some criticisms of the
plaintiffs’ conduct. I do not intend
to discuss the details. I
do not find the various criticisms compelling or discern any clear
balance against one side or the other.
[82]
For all these reasons I have concluded that I should not make a
punitive order in respect of attorneys’ fees.
The
counterclaim
[83]
The defendant submits that the plaintiffs should not be allowed the
costs of Mr Joseph’s answering affidavit of 18 June
2015 since
the plaintiffs were not in fact opposing the amendment of the plea
and the introduction of the counterclaim. Mr Irish
told me that Mr
Joseph filed the affidavit on his advice to deal with allegations
which a professional person could not be expected
to leave
unanswered. I agree. In supporting the establishment of a trust, the
defendant, through Dr Bass, explicitly expressed
concern that the
defendant’s attorneys were not acting in IDT’s best
interests. In order to deny these allegations
Mr Joseph had to deal
with the material in the founding affidavit which was said to justify
the concern. I shall thus allow the
costs of the answering affidavit.
Trustee’s
remuneration and the 25% cap
[84]
In terms of s 2(2) of the Contingency Fee Act Mr Joseph’s
fees may not exceed the lesser of double his usual fees
or 25% of the
total amount awarded. The total amount awarded for this purpose
excludes ‘any costs’. The plaintiffs
argue that the
trustee’s remuneration forms part of the total amount awarded.
The defendant argues the contrary.
[85]
If the trustee’s remuneration were excluded from the total
amount awarded, the cap would be R4 536 542 (25%
of
R18 146 167). If the trustee’s remuneration were to
come to (say) R3 million and were included in the cap, the
cap would
increase to R5 286 542, a difference of R750 000.
According to Mr Joseph, there is a distinct likelihood
that an amount
calculated as double his usual fees will exceed the cap, however
calculated. If so, it is necessary to know what
the cap is in order
to determine his maximum entitlement to fees.
[86]
The second attorney, Mr Ginsberg, does not have a contingency fee
agreement. His firm was engaged by Joseph’s Inc in
accordance
with a power of attorney granted by the plaintiffs. The plaintiffs
might strictly speaking be liable for Joseph’s
Inc’s full
fees (up to the amount of the cap) and Mr Ginsberg’s fees.
However Mr Joseph has offered an undertaking
that his fees and those
of Mr Ginsberg will not in total exceed the amount of the cap.
[87]
The defendant does not argue that the trustee’s remuneration
constitutes ‘costs’ for purposes of s 2(2).
The
defendant also appears to accept that in the ordinary course the
amount awarded by the court in respect of the trustee’s
remuneration would, like the costs of protecting an award through the
appointment of a curator bonis, be part of the total amount
awarded
for purposes of s 2(2). I think that view is correct. The lump
sum awarded to cover the costs of the remuneration
of a trustee or
curator bonis is simply part of the damages awarded by the court.
[88]
The defendant’s argument that the trustee’s remuneration
should be excluded when calculating the cap is based on
the wording
of clause 3 of the contingency fee agreement. That clause provides
that Joseph’s Inc’s fees will not exceed
25% of the
‘capital award’. The clause goes on to say that the
capital award, ‘without limiting the generality
of the
foregoing’, includes ‘all amounts awarded in respect of
general damages and special damages and loss of earnings
and future
loss of earnings and medical and related expenses and future medical
and related expenses’. The defendant submits
that because the
trustee’s remuneration is not mentioned in clause 3 the parties
must have intended it to have been excluded
in computing the cap.
[89]
The contingency fee agreement has no bearing on the taxation of the
plaintiffs’ costs, and thus on the costs for which
the
defendant will be liable, except in the unlikely event that the
attorneys’ taxed costs were to exceed the 25% cap (in
which
event there would have to be a deduction from the taxed fees to bring
them within the cap). The defendant nevertheless has
an indirect
interest in the cap by virtue of the following. If the cap were
R4 536 542 rather than (say) R5 286 542,
the
deduction which Joseph’s Inc would be entitled to make from the
award before paying it over to the trust would be less
and the amount
received by the trust (including the amount credited to the medical
fund) would be more. The higher the net amount
paid to the trust,
therefore, the longer it might take for the defendant’s top-up
obligation to be triggered. On the other
hand, I should note, the
higher the net amount paid to the trust, the higher the amount the
defendant has to pay in respect of
the trustee’s remuneration.
[90]
My prima facie view is that clause 3 of the contingency fee agreement
does not have the effect for which the defendant contends
and that
the trustee’s remuneration must be included in calculating the
cap. If the question arose only between the plaintiffs
and the
defendant, that would be my conclusion. The difficulty I feel in
reaching a final decision is that the determination of
the cap is
perhaps of greater importance as between the plaintiffs and their
attorneys than it is between the plaintiffs and the
defendant. If
there were a plausible argument to be made that the trustee’s
remuneration is to be excluded in calculating
the cap, it would be to
the advantage of the plaintiffs and IDT that this argument be made.
In a sense, therefore, the submission
which the plaintiffs’
counsel advanced against the defendant’s argument were to the
advantage of Joseph’s Inc
but to the disadvantage of the
plaintiffs and IDT. I do not know whether the plaintiffs have
considered the matter and have been
able to reach an independent
view. I think it fair to say that this difficulty had not occurred to
the plaintiffs’ counsel
until I raised it during argument.
[91]
There is another matter I raised with counsel, namely whether the
agreed manner for calculating the trustee’s remuneration
does
not give rise to an intractable circularity in calculating the
trustee’s remuneration and the cap. The parties are in
agreement that the trustee’s remuneration must be calculated on
the net amount received by the trust (the trust deed so provides).
The net amount received by the trust will be the total amount awarded
in respect of IDT after subtracting all disbursements and
attorneys’
fees less the legal costs recovered from the defendant. Accordingly,
in order to calculate the trustee’s
remuneration, one needs to
know what the net amount is. In order to calculate the net amount one
will probably need to know the
cap. But if the trustee’s
remuneration is to be included in calculating the cap, one needs to
know the amount of the trustee’s
remuneration in order to
calculate the cap. So the calculation of the trustee’s
remuneration depends on the cap being known;
and the calculation of
the cap depends on the trustee’s remuneration being known. On
the second day of argument Mr Irish
told me that he had discussed
this apparent circularity with Mr Whittaker who said there was an
algebraic solution. Mr Irish handed
up a sheet of Mr Whittaker’s
formulas. I have not been able to follow the algebra and am not
convinced of the solution.
[92]
What one can say for certain is that the cap will be not less than
R4 536 542. It may be that, once the attorneys’
fees
are accurately calculated, they turn out to be less than R4 536 542.
In that event it will be irrelevant whether
or not the trustee’s
remuneration would theoretically have been included in the cap. In my
view, therefore, it would be preferable
to leave open the question
whether the trustee’s remuneration is to be included in the cap
and, if so, whether the problem
of circularity can be resolved. If
the attorneys’ fees exceed R4 536 542, the court will
have to be approached
to solve the problem. The parties can then
consider whether the plaintiffs need independent advice and whether
evidence needs to
be placed before me on the issue of circularity.
[93]
A related matter is whether – assuming the trustee’s
remuneration must be included in calculating the cap –
a pro
rata portion of irrecoverable fees and disbursements must be deducted
from the capitalised amount so that the opening credit
in the
separate account established for the trustee’s remuneration
(clause 10.3 of the trust deed) will be the capitalised
amount less
such pro rata portion. If not, the irrecoverable fees and
disbursements would have to be deducted pro rata from the
other heads
of damages, thus inter alia reducing the opening credit in the
medical fund.
[94]
In the light of clause 10.4 of the trust deed, it may not matter very
much whether or not a deduction is made upfront against
the
capitalised amount awarded for the trustee’s remuneration.
Clause 10.4 provides that if the funds in the separate account
for
trustee’s remuneration are exhausted, the trustee may employ
other assets under administration for paying the remuneration,
such
payments to be proportionately allocated to and subtracted from the
medical fund and the residual fund (unless the trustee
in its
discretion is able to justify an allocation entirely to the medical
fund or to the residual fund as the case might be).
So sooner or
later the medical fund and the residual fund will have to bear any
shortfall in meeting the trustee’s remuneration.
Clause 10.3 is
probably more consistent with a conclusion that the amount to be
credited to the trustee’s remuneration account
should be the
full capitalised amount, with the irrecoverable disbursements and
fees being deducted pro rata from the medical fund
and residual fund.
However this can stand over for final determination if it should be
in dispute.
[95]
I do not think that all of this need hold up the taxation of the
plaintiffs’ bill of costs. The cap will only be relevant
if the
total amount allowed for attorneys’ fees in the party/party
taxation exceeds R4 536 542, something I understand
to be
at best a remote possibility. The defendant’s counsel said that
on their understanding the taxing master will only
tax a bill up to
the amount of the cap, ie he will not tax items appearing after the
item which brought the attorney’s fees
up to the level of the
cap. I do not know whether that is the practice of the taxing master.
If so, it seems to me to be a wrong,
or at least inconvenient, way of
proceeding, given that the decisions of the taxing master on earlier
items in the bill might be
revised following a review. Unless the
taxing master taxes the entire bill, there would potentially be a
succession of taxations
and reviews. I think the bill should be taxed
in its entirety. If the fees so taxed exceed the cap, there should be
a final item
in the bill reducing the allowed fees to the level of
the cap.
[96]
In the present case I will direct the taxing master to proceed with
taxation despite the uncertainty as to the cap. If the
attorneys’
fees as taxed do not exceed R4 536 542, he should finalise
the taxation by allowing the attorneys’
fees as taxed. If the
taxed fees exceed R4 536 542, he should suspend the
finalisation of the taxation pending the court’s
determination
of the cap.
The
costs of the costs argument
[97]
The plaintiffs have succeeded in their application to have admitted
as evidence the secret offer and Mr Joseph’s costs
affidavit.
In the event the admission of that material has not yielded the
results which the plaintiffs wanted. The plaintiffs
have had only
limited success in persuading me to make special costs orders.
However the defendant did not make a tender on costs.
I do not think
a court should lightly deprive a successful plaintiff of a portion of
costs just because some time was taken up
in urging the court to make
special costs orders. I thus consider that the defendant should pay
the plaintiffs’ costs of
the application dated 7 December 2016
and of the hearing of the costs argument (including the preparation
of heads of argument).
Conclusion
and order
[98]
I make the following orders relating to costs:
(1) The
plaintiffs’ application dated 7 December 2016 for orders
directing that the secret offer of 31 October
2013 and the costs
affidavit of Mr Joseph dated 6 December 2016 be admissible as
evidence is granted with costs, including those
attendant on the
employment of two counsel.
(2) The
defendant shall pay the plaintiffs’ costs in respect of the
defendant’s application for the introduction
of the conditional
counterclaim, including the costs of Mr Joseph’s answering
affidavit dated 18 June 2015 and the costs
attendant on the
employment of two counsel.
(3) The
defendant shall pay the plaintiffs’ costs in respect of the
claims in convention and reconvention, including,
subject to (4)
below, the costs of two counsel, and including the costs
relating to argument on costs, but excluding the costs
of three trial
days (being the days taken up with the evidence of Dr Versfeld and
Prof Dunn).
(4) The
costs allowed in respect of counsel shall include the reasonable
costs of preparing heads of argument on the
claims in convention and
reconvention and heads of argument on costs.
(5) The
plaintiffs shall be entitled to the costs of three counsel for the
preparation of that part of the heads of argument
in (4) above
dealing with the trust and shall be entitled to the costs of the
appearance of a third counsel on the last day of
argument (12 August
2016).
(6) Although
Mr Irish SC and Ms Munro were the plaintiffs’ main counsel, the
order allowing the costs of two counsel
may include fees for work
performed by other counsel (and more particularly Mr P de Waal SC, Mr
Marcus SC and/or Ms Pillay) provided
that, save as set out in (5)
above, fees of only two advocates shall be allowed in respect of any
particular item of work.
(7) Where
the fees of one or more attorneys and/or one or more counsel were
charged for work done jointly in respect
of the present case and the
case in respect of Chelsey Fransman, the fees must, to the extent
otherwise allowed by the taxing master,
be fairly apportioned between
the two cases and on a 50/50 basis if there is no preferable method
of apportionment.
(8) The
costs awarded to the plaintiffs include the reasonable fees charged
by the following experts for the preparation
of medico-legal reports
and for all reasonable related attendances, including where
applicable consultations, meetings with opposing
experts and the
preparation of joint minutes and attendance at court:
· Dr G Marus
(neurosurgeon);
· Dr MM Lippert
(paediatric neurologist);
· Dr L Grinker
(psychiatrist);
· Dr S Choonara
(urologist) but excluding the costs and attendances associated with
the preparation of his addendum report
dated 21 November 2014;
· Dr G Versfeld
(orthopaedic surgeon) and the related costs of the radiology report
of Dr
Pencharz, but excluding the costs and
attendances of Dr Versfeld subsequent to 29 February 2016
;
· Ms P Jackson
(physiotherapist);
· Dr R Campbell
(rehabilitation specialist);
· Dr P Lofstedt
(dentist);
· Dr Maron (ENT
surgeon);
· Ms IM Hattingh
and Ms E van der Merwe (speech and language therapists, audiologists
and AAC specialists);
· Ms Crosbie
(occupational therapist);
· Mr Hakopian
(orthotist);
· Mr Rademeyer
(mobility expert);
· Mr Eybers
(architect);
· Messrs Hope and
Warren (quantity surveyors);
· Ms Bubb
(educational and counselling psychologist);
· Ms Donaldson
(industrial psychologist);
· Mr Schussler
(economist);
· Dr Strauss
(statistician and life expectancy expert);
· Mr G Whittaker
(actuary).
· Prof Hofmeyr
(ENT surgeon);
· Ms Swart
(audiologist).
(9) The
costs allowed in respect of Dr Strauss shall include his travel costs
from California to Cape Town (business
class), his reasonable
accommodation expenses in South Africa, and his reasonable fees for
time reasonably spent in travelling
to and from South Africa and in
being in South Africa to testify.
(10) Save
as aforesaid, it shall be for the taxing master to decide the extent,
if any, of recoverable travel and accommodation
costs for the
plaintiffs’ experts.
(11) The
following witnesses are declared necessary witnesses and their
witness fees and travel costs (if any) shall
be recoverable in
accordance with the relevant tariff:
· the second
plaintiff;
· Jessica Lundy;
· Samantha de
Freitas;
· Sonja Higham;
· Elsabet Bester.
(12) The
taxing master is authorised and directed to tax the entire bill of
costs presented by the plaintiffs in respect
of the costs awarded to
them as set out above. If the amount allowed on taxation for all
attorneys’ fees (including any fees
allowed in respect of a
correspondent attorney and/or additional attorney) is equal to or
less than R4 536 542, the taxing
master shall allow all the
attorneys’ fees so taxed and shall finalise the taxation. If
the amount allowed on taxation for
all attorneys’ fees is more
than R4 536 542, the taxing master shall suspend the
finalisation of the taxation pending
this court’s determination
as to whether the plaintiffs’ attorneys are, in terms of the
contingency fee agreement,
entitled to fees exceeding R4 536 542.
(13) The
issue as to whether the capitalised amount awarded in respect of the
trustee’s remuneration is to be included
in the award for
purposes of calculating the 25% cap contemplated in s 2(2) of
the Contingency Fee Act (‘the cap’)
stands over for later
determination if necessary.
(14) The
issue as to whether, and if so how, the cap and the trustee’s
remuneration are to be calculated in light
of the fact that the
calculation of each is dependent on the calculation of the other
stands over for later determination if necessary.
(15) If,
pursuant to 13 and 14 above, it is determined that the capitalised
amount of the trustee’s remuneration
is to be included in
calculating the cap, the issue as to whether a pro rata share of
irrecoverable legal costs and fees should
be deducted from the said
capitalised amount in arriving at the opening credit to the separate
account to be maintained for the
trustee’s remuneration in
terms of clause 10.3 of the trust deed, stands over for later
determination if necessary.
____________________
ROGERS
J
APPEARANCES
For
Plaintiffs
Mr
D Irish SC & Ms W Munro
Instructed
by
Joseph’s
Incorporated
Unit
1, Bompas Square
9
Bompas Road
Dunkeld
For
Defendant
Ms
N Bawa SC & Ms M O’Sullivan
Instructed
by
The
State Attorney
4
th
Floor, 22 Long Street
Cape
Town
[1]
See
eg
Quirk
v Bawden
[1992]
112 ACTR 1
;
Pirrotta
v Citibank Ltd & Others
[1998]
SASC 6992
;
Evans
Shire Council v Richardson (No 2)
[2006]
NSWCA 61
;
Hulanicki
v Walters
(No
2)
[2015] ACTCA 45
;
Meldov
Pty Ltd v Bank Of Queensland (No 2)
[2015]
NSWSC 740.
[2]
See
eg
Health
Waikato Ltd v Van der Sluis
(1997)
10 PRNZ 514
(CA);
Aldrie
Holdings Ltd v Clover Bank Ltd & Others
[2016]
NZHC 1482.
[3]
See
eg
Cameron
v Cameron & Others
1978
CanLII 1509
(ONSC);
Hamilton
v Canadian National Railway Co
1991
CanLII 8348
(ONCA);
Vukelic
v Canada
1997
CanLII 12547
(BCCA);
Yellowbird
v Chief and Council of the Samsa Cree Nation
No
444 & Others
2006
CanLII 913 (ABQB).
[4]
6/944-945.
On Mr Whittaker’s assumptions, the trustee's remuneration is
likely to be 17% to 17,6% of the total award (apart
from trustee's
remuneration). 17% of R18 146 167 is R3 084 848.