A hot debate for years has been whether or not Attorney and Client costs, when ordered by a court (and payable by the other side), has the same effect on taxation as an Attorney and Client bill payable by your own client. Some authorities hold the view that there should not be a difference between the two and that the net-effect on taxation should yield the same result. Is that really so? And if not, why is that?
One must remember that the Attorney is, for all intents and purposes, the agent of the client. The relationship between the Attorney and client is really the same as that of special agent and principal. It therefore goes without saying that the Attorney (or agent) will have a mandate to do whatever the client (or principal) requires or instructs to be done, and therefore all costs incurred on the client’s behalf shall be for his own account. This relationship, however, does not exist between the Attorney and the losing party, who is ordered to pay costs on an Attorney and Client scale.
The indemnity rule determines that an unsuccessful party should meet the costs reasonably incurred by the successful side. So, if a principal’s instruction to his agent includes all sorts of unreasonable actions to be taken, should the unsuccessful side be burdened with the luxurious litigation? Our respectful view on this is a “no”.
Keep in mind that it is always the function of a Taxing Master to control costs: to allow only what was necessarily incurred and disallow any excessive costs.
An example hereof would be an agreement between the principle and his agent for fees higher than what is prescribed in the Tariff. It is our view that it would not be fair or reasonable to burden an unsuccessful party with the costs resulting from a private arrangement between the client and his attorney, to which s/he has not been party to.
There are obviously many other examples like this, but fundamental to our concept of costs is that a Taxing Master shall, on taxation, control the costs and that the loser shall not be burdened with any costs other than what was necessarily incurred for the sake of the attainment of justice.
It is therefore my advice not to create the illusion with a client that all legal expenses will be fully met should Attorney and Client costs be awarded in the client’s favour. The situation may not turn out that way.
In our next article we’ll continue with the topic of Attorney and Client costs and look at what an Attorney can and cannot recover from his/her client.