City of Cape Town v Arun Property Development (Pty) Ltd and Another (250/2006) [2008] ZAWCHC 22; 2009 (5) SA 227 (C) (7 May 2008)

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[2008] ZAWCHC 22
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City of Cape Town v Arun Property Development (Pty) Ltd and Another (250/2006) [2008] ZAWCHC 22; 2009 (5) SA 227 (C) (7 May 2008)

“
REPORTABLE”
IN THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL DIVISION)
Case
Number:
250/2006
In
the matter between:
THE
CITY OF CAPE TOWN
Appellant
and
ARUN
PROPERTY DEVELOPMENT (PTY) LTD
F
irst
Respondent
THE
TAXING MASTER
Second
Respondent
JUDGMENT:
delivered on 7 May 2008
SHOLTO-DOUGLAS
AJ
:
BACKGROUND
[1] The
appellant in this matter took an exception to the first respondent’s
particulars of claim on the grounds that in three principal
respects
they were vague and embarrassing. The matter was heard by Blignault,
J over two days and his judgment is reported as
Arun
Property Development (Pty) Ltd v The City of Cape Town
2003
(6) SA 82
(C). The exception was upheld with costs, including the
costs of two counsel.
[2] We were informed by
counsel for the appellant that the issues in the exception were
complex. The claim was for payment of some
R57 million. There was
an alternative prayer for a declarator to the effect that the first
respondent had become the owner of certain
land and there were
apparently wide-ranging aspects of law which required to be
addressed. Other than pointing out that the issues
were not as
complex on exception as they may be at trial, counsel for the first
respondent did not express any serious disagreement
with the
applicant’s counsel’s assessment of the nature and complexity of
the matter.
[3] The appellant’s
attorney drew a bill of costs which was, in due course, submitted to
the second respondent (“the taxing matter”)
for taxation. The
bill reflected disbursements of R136 147.20 excluding VAT, most of
which were made up of counsels’ fees. Senior
counsel charged R71
250,00 and junior counsel charged R48 150,00, both figures excluding
VAT.
[4] As uniform rule 69(2)
restricts the amount recoverable in respect of junior counsel’s
fees – where two counsel are employed
– to one half of senior
counsel’s fees, it is to senior counsel’s fees that attention
must be given for present purposes.
His detailed schedule of fees
and attendances records attendances and charges which can be
paraphrased as follows:
Conferring
with junior counsel, settling heads of argument and notice of
amendment and research – 2 hours
Perusing
papers and conferring with junior counsel - 4½ hours
Perusing
and considering plaintiff’s heads of argument, relevant
legislation and authorities and preparing heads of argument
in
reply – 5 hours
Research and preparing
heads of argument in reply and conferring with junior counsel - 3¾
hours
Preparing heads of
argument in reply – 3 hours
Settling heads of
argument in reply – 1 hour
Conferring with junior
counsel re heads of argument – 2 hours
Preparing for hearing
with junior counsel - 5½ hours
Hearing – 1 day
[5] Senior counsel
charged a fee (excluding VAT) of R1 500 per hour and R15 000 per day.
At no stage has it been suggested that the
rate at which senior
counsel charged is unreasonable. In fact, it was drawn to our
attention during argument by the first respondent’s
counsel that
the fee charged fell in the middle of the range indicated for a
senior counsel of his rank in the bar council’s guidelines.
[6] Senior
counsel clearly charged his fee for appearing in court on the basis
of a daily (some times referred to as a “refresher”)
basis, i.e.
the fee was intended to remunerate him for his day in court and not
for additional or preparatory work (see
Sliom
v Ziman
1934
TPD 307
at 309). He was engaged in the matter for two days and, as I
have said, it has not been suggested that his fee in this regard was
unreasonable.
[7] In
addition to his daily fee, he charged for a total of 27½ hours for
work on the matter. This time can be divided roughly as
follows:
Settling heads of
argument, perusing papers, research and settling notice of amendment
- 6½ hours
Perusing
the plaintiff’s heads of argument and matter referred to therein –
about 5 hours.
Attendances relating to
the preparation of heads of argument in reply – about 9¾ hours
Preparation
for oral argument - 5½ hours
[8] Unfortunately,
counsel did not specify what time had been allocated to settling the
notice of amendment. Such an indication would
have been of
assistance to the taxing master, since Blignault, J’s costs award
did not include an award of costs in relation to
an amendment.
Nonetheless, an enquiry directed to the appellant’s attorney may
have elicited an informative response. The taxing
master would, of
course, be perfectly correct to disallow the fee charged in relation
to settling the notice of amendment.
[9] In taxing the bill,
the taxing master allowed an amount of R37 500,00 in respect of
senior counsel’s fee for all his attendances.
The appellant was
dissatisfied with the taxing master’s ruling in this regard (as
well as in regard to the effect that it had
on junior counsel’s fee
by virtue of the operation of rule 69(2)) and requested the taxing
master to state a case for the decision
of a judge in terms of rule
48(1). The taxing master duly stated a case in terms of rule 48(2)
in which she sought to justify her
taxation of the bill and, more
particular, the taxing off of a substantial portion of counsel’s
fees.
[10] In addition, the
parties availed themselves of their right to make submissions on the
stated case in terms of rule 48(5)(a) and
the taxing master then
furnished her report as contemplated in rule 48(5)(b). This report
was in two parts; the first dealing with
the first respondent’s
submissions and the second dealing with those of the appellant.
[11] The
stated case, submissions and reports were then placed before a judge
in chambers in terms of rule 48(5)(c) for determination
in terms of
rule 48(6). The learned judge
a
quo
made an order in which she,
inter alia
,
dismissed the review of taxation in respect of the items for
counsels’ fees and ordered each party to pay its own costs in
relation
to the review.
[12] With
the leave of the learned judge
a
quo
,
the appellant has appealed against those aspects of the judge
a
quo’s
orders
to which reference has been made above.
GENERAL PRINCIPLES
[13] The principles
applicable to the taxation of party and party bills of costs in
general were not in issue and require little comment.
The starting
point is Rule 70(3), which reads:
“
(3)
With a view to affording the party who has been awarded an order for
costs a full indemnity for all costs reasonably incurred
by him in
relation to his claim or defence and to ensure that all such costs
shall be borne by the party against whom such order
ha
s
been awarded, the taxing master shall, on every taxation, allow all
such costs, charges and expenses as appear to him to have been
necessary or proper for the attainment of justice or for defending
the rights of any party, but save as against the party who incurred
the same, no costs shall be allowed which appear to the taxing master
to have been incurred or increased through over-caution, negligence
or mistake, or by payment of a special fee to an advocate, or special
charges and expenses to witnesses or to other persons or by
other
unusual expenses.”
[14] In
what has been described by Cilliers in his
Law
of Costs
(loose-leaf
edition par 13.02) as a leading case dealing with a taxation
provision practically identical to rule 70(3), Milne JP in
Hastings
v The Taxing Master
1962(3)
SA 789 (N) at 793 A-D found its meaning to be:
“
(1)
that the words in the Rule, “ a full indemnity for all costs
reasonably incurred by him in relation to” were taken from the
judgement of ATKIN, LJ; in the
The
Merchants’ Marine Insurance Company
case,
(1928) 1 KB 750
CA at p 762 , and that there can be no manner
of doubt that, subject to the specified exceptions, the rule is
intended to give to
the successful party a full, not a partial,
indemnity for all costs reasonably incurred in relation to any legal
proceedings;
(2)
That costs may be reasonably and properly incurred within the
meaning of the Rule, even though they may not have been strictly
necessary at the time they were incurred, or at all;
(3)
That costs may be reasonably and properly incurred before the
institution of the relative legal proceedings depending entirely
on
the circumstances;
(4)
That whilst the Court will not, in general, substitute its
discretion for that conferred upon the Taxing Master, it will
interfere
with the taxation if it appears that the Taxing Master has
not exercised his discretion in the manner contemplated by the Rule.”
[15] Of
course, the successful party is not entitled to a full indemnity in
respect of all of its costs, but only those recoverable
as party and
party costs. This is illustrated in the following passage of the
report of the judgment of
Kriegler,
J
in
President
of the Republic of South Africa and Others v Gauteng Lions Rugby
Union and Another
2002(2) SA 64(CC) at par [47].
“
In
addition it should be remembered that although a rate per unit of
time worked can be a useful measure of what would be fair
remuneration
for work necessarily done and although the need for
written submissions in this Court may permit this method more readily
that in
the SCA, the overall balance between the interests of the
parties should be maintained. The rate may be reasonable enough and
the
time spent may be reasonable enough but in the ultimate
assessment of the amount or amounts to be allowed on a party and
party basis
a reasonable balance must still be struck. Here the
inherent anomaly of assessing party and party costs should be borne
in mind.
One is not primarily determining what are proper fees for
counsel to charge their client for the work they did. That is mainly
an attorney and client issue and when dealing with a party and party
situation it is only the first step. When
taxing
a party and party bill of costs the object of the exercise is to
ascertain how much the other side should contribute to the
reasonable
fees the winning party has paid or has to pay on her or his own side.
Or, to put it differently, how much of the client’s
disbursement
in respect of her or his own counsel’s fees would it be fair to
make recoverable from the other side?”
Although
the quoted portion of the judgment deals particularly with counsel’s
fees, the principle articulated in regard to the distinction
between
the attorney and client and party and party scale of fees is, I
believe, of wider and more general application.
[16] As
Howie
JA
(as he then was) said in
Price
Waterhouse Meyernel v Thoroughbred Breeders’ Association of South
Africa
2003(3) SA 54 (SCA) at 61 E-F.
“
A
costs order – it is trite to say – is intended to indemnify the
winner (subject to the limitations of the party and party costs
scale) to the extent that it is out of pocket as a result of pursuing
the litigation to a successful conclusion. It follows that
what the
winner has to show – and the Taxing Master has to be satisfied
about – is that the items in the bill are costs in the
true sense,
that is to say, expenses which actually leave the winner out of
pocket.”
THE TAXING MASTER’S
DISCRETION AND REVIEW
[17] The
taxing master has discretion to allow, reduce or reject items in a
bill of costs. She must exercise this discretion judicially
in the
sense that she must act reasonably, justly and on the basis of sound
principles with due regard to all the circumstances of
the case.
Where the discretion is not so exercised, her decision will be
subject to review. In addition, even where she has exercised
her
discretion properly, a court on review will be entitled to interfere
where her decision is based on a misinterpretation of the
law or on a
misconception as to the facts and circumstances or as to the practice
of the court.
Cash
Wholesalers, Ltd v Natal Pharmaceutical Society and the Taxing Master
1937
NPD 418
at 425; see also
Duvos
(Pty) Ltd v Newcastle Town Council and Others
1965
(4) SA 533
(N) at 558 A-C;
City
Deep Ltd v Johannesburg City Council
1973
(2) SA 109
(W) at 113 E; the
Gauteng
Lions
case at par [13] and the cases there cited. In the
Price
Waterhouse
case
(at par [25]), the court considered the fact that the taxing master
had used the fee charged by the defendant’s leading senior
counsel
as the yardstick by which to determine the fee allowable in respect
of the plaintiff’s senior counsel as “enough reason
for
interference”.
THE APPROACH TO THE
TAXATION OF COUNSEL’S FEES
[18] The
taxing master in her stated case reveals clearly the stance she
adopted to the taxation of senior counsel’s fees. I believe
I do
her no disservice in summarising it as follows: Having commenced
with a recitation of rule 70(3) and a reminder of the nature
of the
discretion with which a taxing master is vested, she proceeded to
deal with counsel’s charges for the preparation of heads
of
argument. She asserted that no separate fee was allowable on taxation
for the preparation of heads of argument and disallowed
counsel’s
fee in this regard. She then turned to the fee charged for
preparation and, on the basis of her understanding that in
motion
proceedings no separate fee should be allowed for preparation and
reading papers, she disallowed most of the fee charged for
these
attendances. Relying on “the established practice” and the
authority of
Ocean
Commodities Inc and Others v Standard Bank and Others
1984(3)
SA 15 (A), she allowed “one composite fee, including the drawing of
heads of argument and preparing and arguing the appeal”.
She
considered counsels’ fees, “found them to be unreasonable and
also not allowable in terms of the rules relating to the taxation
of
party and party bills of costs” and taxed twenty-two and a half
hours from senior counsel’s bill. It seems that in effect,
she
allowed senior counsel his fee for the two days in court at R15 000
per day and allowed a fee for a further five hours as the
remaining
component of the composite fee for heads of argument and preparation.
This interpretation is borne out by the fact that
the taxing master
records in the stated case that she taxed off junior counsel’s fee
for heads of argument and preparation, save
for five hours of work in
relation to specific attendances. It is also the interpretation
arrived at by the leaned judge
a
quo
.
[19] In
its submissions to the judge
a
quo
–
and in its heads of argument on appeal – the principal contention
advanced by the appellant was that the practice of allowing
a
composite fee on taxation of counsel’s fees in an appeal was not a
practice which was appropriate in this particular matter.
Reliance
was placed on
Louw
v Santam
2000(4) SA 402(T) and, in oral argument, also on the unreported
decision Brand J (as he then was) in
Siebert
v Siebert
(CPD case no 796/99, delivered 13 June 2000). Rather, it was argued,
the approach of charging separately (and more transparently)
for work
actually done in preparation and then charging refresher or day fees
for days engaged in court should be recognised and
allowed on
taxation.
[20] In the alternative,
it was argued that if a composite first day fee was regarded as
appropriate, such fee should have been substantially
higher than a
refresher fee, and should have made provision for the reasonable time
expended by counsel in drafting heads of argument
and preparing for
the hearing.
[21] I
think it is fair to say that counsel who addressed us on behalf of
the appellant placed more reliance on the alternative argument
than
the principal one articulated in the heads. In my view, he was
correct in doing so. Both
Louw
and
Siebert
were
decided before the
Gauteng
Lions
and
Price
Waterhouse
cases and I regard myself as bound by the
ratio
of the later decisions. I should add that I do not read
Siebert's
case as differing in approach from that in the
Gauteng
Lions
or
Price
Waterhouse
cases. In par [9] Brand J expressed himself as follows:
“
A
s
far as counsels’ fees are concerned, it has been established in
principle on more than one occasion that in general, counsel is
not
allowed to charge a separate fee for preparation of argument and for
drafting heads of argument. The stated reason for this
general rule
is that, in general, counsel’s compensation for this work is
included in his appearance fee.”
In
the face of this and the authority of the judgments in the
Gauteng
Lions
and
Price
Waterhouse
cases as well as those preceding them such as
Scott
and Another v Poupard and Another
1972(1) SA 680 (A);
Ocean
Commodities Inc and Others v Standard Bank of SA Ltd and Others
(supra) and
J
D van Niekerk en Genote Ing v Administrateur,Tansvaal
(supra),
it must be accepted that for the purpose of taxing a party and party
bill, it is correct to take preparation and a refresher
or day fee
together for the purpose of assessing the reasonableness of counsel’s
fee. It makes no difference in my view that the
fee was charged for
an exception rather than an appeal or application, or even a trial.
Sieberts
was
a trial and in
City
Deep
Galgut J
(as
he then was) said the following at 116 A-B:
“
Similarly
the Appellate
Division
Rules require “heads of argument” in appeals to that Division.
No fee is allowed to counsel for preparing such “heads”.
The
work is regarded as being part of the preparation of argument and in
practice is part of the fee charged for the appeal brief.
It follows
that, if no such fee is chargeable when the Rules require heads of
argument, no fee is chargeable as between party and
party when the
Court requests such heads. In principle there can be no difference
between briefs on trial and on appeal in this
regard.”
[22] This
is a convenient juncture at which to reiterate a point of
clarification: While the language of some of the cases may suggest
that it is wrong or improper for counsel to charge separately for
drafting heads of argument and preparation, this is not the case.

What is being conveyed is that it is not correct to tax a party and
party bill on that basis. The modern trend – if I may call
it that
– of charging a fee based on time actually expended is both
acceptable and in the interest of transparency. It is likely
to
result in fees that are less troubling than those referred to in, for
example,
Ocean
Commodities
.
In
Price
Waterhouse
at
par [15] the prevalence of this practice was acknowledged without
adverse comment thus:
“
We were also
informed that it is the almost invariable practice throughout the
country nowadays for legal practitioners to make their
charges
time-related and insofar as appeals are concerned, for counsel to
charge separately for preparation, heads of argument and
time in
court.”
[23] Counsel before us
acknowledged this to be the prevailing practice, although counsel for
the first respondent submitted that
there were still counsel who
charged on a “first day fee” basis. By this he meant that, when
briefed on an application, exception,
trial or appeal, counsel marked
a globular fee for preparation and the first day’s appearance in
court. Counsel drew attention
to the applicable fee parameters of
the Cape Bar Council and to the fact that it recorded, in a note,
that in some cases (clearly
the exception rather than the rule)
counsel charge first day fees on the basis of about 1.5 times a
refresher, without providing
separately for preparation. It was in
fact counsel’s contention that this is precisely how the taxing
master had approached the
taxation of senior counsel’s bill. She
had accepted the reasonableness of the rate of the daily fee charged
by him and had then
multiplied that rate by 1.5 to arrive at a first
day fee. Other than the obvious coincidence, I cannot find support
for this proposition
in any of the statements of the taxing master.
In my view, had this been her approach it would clearly have been
wrong because it
does not amount to a true assessment of the
reasonableness of the fee charged for the work done as required by
Rule 70(3).
[24] It
seems to me that the correct approach in determining the
reasonableness or otherwise of counsel’s fee for the purpose of
the
taxation of a party and party bill is that used by the taxing master
in the
Gauteng
Lions
case at par [26]. Both parties (at par [27] and par [35]) and the
court (at par [35]) accepted that, in principle, she had considered
the correct factors. In summary, they were the complexity of the
matter; the volume of the case; the level of counsel’s fees (by
this I understand her to mean the actual fees charged rendered as a
globular sum); inflation; and the fact that counsel must be fairly
compensated for preparation and presentation of argument.
[25] This
is clearly not a
numerus
clausus
of
considerations. In some cases certain of these issues will not
arise; in others there will be other factors which should be taken
into account. Nonetheless, the list will probably serve as a
reasonable guide in most cases. As I see it, the taxing master ought
to have approached the taxation of the bill of costs in this matter
along the following lines:
(a) Consideration should
have been given to the importance of the matter, its financial value
to the parties and the complexity of
the issues raised and/or
required to be canvassed. In this regard the taxing master should
have had regard to the nature of the
matter, the issues in dispute,
the volume of the record and such other factors as may have assisted
her in obtaining an impression
of the matter relevant to assessing
its importance and complexity. The taxing master may have been
assisted by the submissions made
by the representatives of the
parties attending the taxation.
(b) The work actually
done by counsel and the rate at which he charged should have been
considered. A comparison between the rate
charged and the Cape Bar
Council’s fee parameters ought to provide a sound basis for
determining the reasonableness of the rate
charged by counsel and, as
long as regard is had to the fee parameters for the appropriate
period, the question of inflation ought
not to play any significant
role, if it arises at all.
(c) An assessment should
have been made as to the reasonableness of counsel’s fees.
[26] In
my view an enquiry along these lines would encompass a consideration
of the five factors listed in the
Gauteng
Lions
case.
[27] In allowing five
hours for drafting or settling heads of argument, reading the first
respondents heads and preparation for trial
on the basis she did (or
on the basis of multiplying senior counsel’s day fee by 1.5), the
taxing master could not have taken the
appropriate considerations
into account. We have not seen the papers in the exception, nor have
we seen the heads of argument and
lists of authorities prepared by
counsel. This would be a prerequisite to assessing the complexity of
the matter and the volume
of the case. However, counsel were agreed
that the matter was a complex one and we know it was argued for two
days (an unusual length
of time) and that senior and junior counsel
were employed by both parties. These facts point to a matter of
greater than usual complexity.
The taxing master should be in a
position to make a more accurate assessment of this given the greater
quantity of information at
her disposal.
[28] Having
considered the complexity of the matter and the volume of the case,
the taxing master ought to have had regard to the
time actually spent
by counsel on the matter and what it is that he said he did in that
time. The authorities vary on the weight
to be attached to this
factor. In
Reef
Lefebvre (Pty) Ltd v SA Railways and Harbours
1978 (4) SA 961
(W) at 964 A,
Coetzee
J
considered
that:
“Whilst
the actual time spent by counsel on any task is of paramount
importance, it is not the only decisive criterion...”
In
the
Gauteng
Lions
case,
Kriegler
J regarded the “rate-per-time basis” as “no more than a
pointer” to what was reasonable. The decisive criterion is the
value
of the work done (
Ocean
Commodities
at 22 H – I), but I venture to suggest that there are and will be
cases where the time spent by counsel will be a very good indication
of the value of the matter, whereas in others it will not. Care
should be taken not to reward slow and inefficient work (c
ƒ
J
D Van Niekerk
at 601 I – 602 A).
[29] Senior
counsel spent in the order of 27½ hours in preparation, including
the preparation of heads of argument. (The question
of the time spent
on the notice of amendment muddies the water somewhat). He spent
approximately one-third of his time preparing
and settling “heads
of argument in reply” in addition to spending 5½ hours preparing
for the hearing itself. The preparation
of heads of argument in
reply is unusual and would probably in the normal course be regarded
as an attorney and client cost. This
will not always be the case,
but the taxing master would be entitled to subject this aspect of the
fee to close scrutiny bearing
in mind that the drafting of heads of
argument in reply probably of necessity includes some preparation
that would in any event have
been required for oral argument. It is
nonetheless clear that senior counsel spent substantially more than 5
hours on those tasks
the taxing master ought to have taken into
account in assessing a “first day fee” or a “fee on exception”.
On the face of
it, she should have allowed substantially more than
she did. Without the wherewithal to do so, I am unable to say how
much more,
and the assessment of the correct quantum if this fee is
best left to the taxing master, applying the correct principles.
[30] To
reiterate, in matters of this nature I would expect the taxing master
in considering the question of counsel’s fees to adopt
an approach
along the following lines:
Consider the nature and
complexity of the mater: What did the matter involve? How
voluminous were the papers? Were there difficult
areas of law
involved or was the claim of particular importance to the parties by
virtue, for example, of the amount of money involved?
Did it
involve an unusual amount of time spent in court?
Consider the work done
by counsel: How difficult or complex were the matters dealt with in
the heads of argument? How long did
counsel spend drafting heads of
argument? How long did counsel spend considering the opponent’s
heads of argument and authorities?
How long did counsel spend
preparing his or her oral address to court?
Consider counsel’s
fee: Do they fall within the parameters familiar to the taxing
master? Is it clear what is being charged
for? Are all the charges
covered by the costs award made?
Consider what is
reasonable: In this regard the consideration that the litigant must
not be out of pocket in respect of party and
party fees charged by
counsel must be taken into account together with the recognition
that a reasonable rate coupled with reasonable
time spent may not
always, but certain can, amount to a reasonable basis for the
taxation of counsel’s fees. If the taxing master
is of the
opinion that the time taken by counsel to perform a given task is
reasonable on a party and party basis and the rate
at which he or
she charged is reasonable, then the litigant should be entitled to
an indemnity in respect of such charges.
Consider the totality of
the fee for the matter: If the fee charged for the work done prior
to the hearing is reasonable and the
work done qualifies as party
and party attendances, then the fee for such attendances should be
added to the fee for the “refresher
fee” charged. By way of
example, if in this matter the taxing master determines that it was
reasonable to spend 5 hours drafting
or settling heads of argument,
5 hours reading and considering the respondent’s heads of argument
and authorities and 5 hours
preparing for the oral argument, she
would allow a fee on exception of the equivalent of 2 days and 15
hours. If she felt an excessive
amount of time was spent on items
of preparation, she should disallow a fee for such excessive time.
[31] I
am of the view that the taxing master failed to apply the correct
principles and take the correct factors into account in taxing
the
bill of costs and that the
allocatur
should be set aside and the matter referred back for taxation, taking
into account the matters referred to in this judgment. It
follows
that in my view the learned judge
a
quo
erred in dismissing the review of taxation and the appeal against her
order ought to succeed.
[32] I
would make an order in the following terms:
The appeal is upheld.
The first respondent is
ordered to pay the costs of the appeal.
Paragraphs
(ii) and (iii) of the order of the judge
a
quo
are
set aside and replaced with the following:
The
taxing master’s
allocatur
in
respect of counsel’s fees is set aside and the matter is remitted
to her for taxation afresh.
The first respondent is
to pay the costs of the review.
______________________
SHOLTO-DOUGLAS,
AJ
TRAVERSO
DJP
:
I agree, it is so ordered
______________________
TRAVERSO,
DJP
LOUW
J:
I agree, it is so ordered
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LOUW, J