Litigation Funding and Costs

Introduction

Litigation funding and costs are critical issues in South African civil procedure, affecting access to justice and the conduct of litigation. The legal framework addresses contingency fees, legal aid, cost orders, and the allocation of the financial risks of litigation. The constitutional right of access to courts (section 34) informs the development of this area.

Contingency Fees

Contingency fee arrangements are regulated by the Contingency Fees Act 66 of 1997. The Act permits attorneys to enter into contingency fee agreements in certain matters, including personal injury claims and medical malpractice cases. The agreement may provide for a success fee of up to 100% of the normal fee, or up to 25% of the amount recovered. The Act aims to improve access to justice by allowing litigants to pursue claims without upfront costs.

Legal Aid

Legal Aid South Africa, established under the Legal Aid Act 22 of 1969, provides legal representation to indigent persons. Legal aid is available in criminal matters (where there is a risk of imprisonment) and in certain civil matters, including family law, housing, and social grants. Legal aid is means-tested. The constitutional right to legal representation in criminal matters (section 35) imposes obligations on the state to provide legal aid.

Cost Orders

Costs are generally awarded to the successful party (costs follow the result). The court has discretion to make different cost orders. Party-and-party costs cover the necessary costs of litigation, while attorney-and-client costs cover all costs incurred. Punitive costs may be awarded for unreasonable conduct. The scale of costs may be increased for complex matters.

Special Cost Orders

The court may make special cost orders including: wasted costs (against a party who causes a postponement); costs de bonis propriis (against a representative in their personal capacity for misconduct); and costs against non-parties in exceptional circumstances. The Constitutional Court has emphasised that costs orders must not deter litigants from pursuing constitutional claims.

Third-Party Funding

Third-party funding of litigation is permitted in South Africa, subject to the common law rules against champerty and maintenance. The common law prohibitions have been relaxed, particularly in class actions and public interest litigation. Litigation funders may fund proceedings in exchange for a share of the proceeds, subject to court supervision.

Conclusion

Litigation funding and costs in South Africa involve a complex balance between ensuring access to justice and managing the financial risks of litigation. The Contingency Fees Act, Legal Aid South Africa, and the courts’ discretion in cost orders all contribute to making the legal system accessible while maintaining appropriate incentives for efficient litigation.