In for a Penny, In for a Pound
Posted on / by VZLR / in Corporate & Commercial Law

In for a Penny, In for a Pound

In for a penny, in for a pound In the recent matter of Price Waterhouse Coopers Inc and Others v IMF (Australia) Limited and Another 2013 (6) SA 216 (GNP), Botha J again confirmed the legality of champertous agreements, as previously decided by the Supreme Court of Appeal in Price Waterhouse Coopers Inc and Others v National Potato Co-operative Limited 2004 (6) SA 66 (SCA).

In for a penny, in for a pound In the recent matter of Price Waterhouse Coopers Inc and Others v IMF (Australia) Limited and Another 2013 (6) SA 216 (GNP), Botha J again confirmed the legality of champertous agreements, as previously decided by the Supreme Court of Appeal in Price Waterhouse Coopers Inc and Others v National Potato Co-operative Limited 2004 (6) SA 66 (SCA).

However, in the present matter Botha J was specifically asked to develop the common law in order to make a direct order for costs against a third party funder (IMF (Australia) Ltd). Although there is no South African precedent for making costs orders against persons who fund litigation, this principle has been established in common-law countries (see Dymocks Franchise Systems (NSW) Pty Ltd v Todd and Others [2005] 4 All ER 195; and Arkin v Borchard Lines Ltd [2005] EWCA Civ. 655). It was accepted that the court can, and should, in terms of its inherent power and in terms of s 173 of the Constitution, develop the common law to cope with modern problems.

Botha J remarked: ‘In my view there is no reason why such relief should not be available. It is already possible to obtain direct orders for costs de bonis propriis against non-parties such as legal representatives and public officials. To enable the applicants to join the first respondent would be a logical progression from the situation created by the Supreme Court of Appeal. …

To allow litigants like the applicants to hold funders directly liable for costs would also be considered to be one of the measures that the courts could adopt to counter any possible abuses arising from the recognition of the validity of champertous contracts’ (at 222E).

With rising concerns regarding excessive litigation costs, the market for funders is expanding. Prospective funders must take note of this important decision and recognise the risks associated with entering into funding agreements with prospective litigants. Theo Steyn, attorney, Pretoria

Article published in Jan/Feb De Rebus

Leave a Reply