Understanding Legal Costs

Louis Pasteur would turn in his grave!

Back in 1994, a company now known as Louis Pasteur Hospital Holdings (LPH) embarked on a joint venture with Bonitas Medical Fund to establish a private hospital in Pretoria. The case centred on which party had the right to the proceeds of two investment policies on maturity.

The policies matured in 2006 and paid the proceeds amounting to R44 million to LPH. Bonitas were adamant that LPH had no right to the proceeds and sued for the recovery of the R44 million plus interest.

One Dr Adam who was the controlling mind behind LPH was the only witness for his company. He testified that for various reasons the proceeds belonged to LPH. Unfortunately, his testimony was overwhelmed by the evidence led on behalf of Bonitas and the Judge, noting that his evidence was “long-winded, rambling and evasive” held that it was entirely at odds with the objective evidence.

Dr Adam’s petulant conduct in the witness box and his “manifestly vacillating and manufactured testimony” did not go down well. He appeared to make things up as he went along and made personal attacks on the counsel employed by Bonitas. All this persuaded the court to make an order of costs on the attorney and client scale (often termed as punitive costs) against LPH as opposed to the usual order of costs on the party and party scale.

In law, party and party costs are those costs someone necessarily incurs in prosecuting or defending a claim. This refers only to the fees and disbursements that the party’s Attorney reasonably incurs, and only in respect of the matter at hand.

On the other hand, attorney and client costs refer broadly to those fees and disbursements that a litigant incurs in performing a mandate. These need not be limited to a matter at hand. As such, they can refer to a broader range of services. An award of costs as between attorney and client is an extraordinary one which the court reserves for cases where it finds that a litigant conducted itself in a clear, indubitably vexatious and reprehensible manner. Such an award is exceptional and is intended to be very punitive and to indicate extreme opprobrium (harsh criticism and censure).
Not only did LPH have to pay costs on the punitive scale, but it also had to pay the interest on the R44 million at 15.5%. This interest was limited to R44 million as in law interest cannot exceed the capital amount. At the end of the day then, LPH had to pay R88 million plus punitive costs!

Widely considered one of the most brilliant scientists in history, Louis Pasteur revolutionised the world as we know it. No doubt he would have been somewhat surprised to see an institution bearing his illustrious name behaving in this manner.

Ken Lawrence
print
2018-09-18T17:00:15+00:00

About the Author: