Legal Costs Orders - An Underused Tool For Accountability - Part I: A Look Through The Case Law

The second part will focus on current cases where this remedy will potentially be applied as well as consider several aspects deserving of further attention.

Strike Where It Hurts: The Pocket

Corrupt government officials gladly flout their solemn oaths of office and sacrifice their reputations in pursuing money, power, or both. Further, as witnessed in news media many times, even those who are not corrupt per se appear to act with a wilful recklessness and complete disregard for the cost of their decisions. It follows that something more than public condemnation is required to deter this behaviour, especially when holders of political office are shielded from the consequences of their unethical activities by complicit political institutions.

What is needed is a legal mechanism to jolt malicious or grossly incompetent officials to act in the public interest and being responsible for the consequences of their conduct. Further, where applicable, this accountability should extend not just to specific decision-makers, but also to those who are responsible for supervising them. The question is: what can be done in law to hold such persons liable for their misdeeds in office in their personal capacity?

Looking to the Law

In more egregious cases, criminal law such as the Prevention and Combatting of Corrupt Activities Act[i], the Prevention of Organised Crime Act[ii] and common law rules in relation to theft and fraud can be applied. But what of conduct that is not overtly criminal yet is still carried out in bad faith or is grossly incompetent?

Wayward public officials have demonstrated many times how titles and offices can be used to evade calls for accountability by deftly wielding excuses - such as receiving insufficient information or bad advice from subordinates - to deflect responsibility away from themselves. An alarming trend that has emerged is that when such officials are called upon to account for their conduct in court, they use state funding afforded to their offices to defend themselves, even when the charge laid against them is that they have acted maliciously or incompetently.

It is generally understood that political appointees such as ministers will not always have experience in the sector that they are assigned to lead. Even so, their appointment comes with the expectation that they will conduct themselves diligently and in good faith, surrounding themselves with skilled advisors and enquiring after relevant information so that they can fulfil their duties. In accepting office, they undertake to meet that expectation.[iii]

In addition, it appears to be forgotten that public officials do not act in isolation. They are part of a system that is equipped with structures for reporting and oversight. Accountability must extend upwards. Every person at each “link” in the accountability chain should also be responsible for bad decisions.

And yet such bad decisions persist in the civil service. At times officials are called to account for this failure in court. This creates a valuable window of opportunity for courts to craft orders that pierce the shield of office and hold them liable as individuals.

A case law guide to personal costs orders against public officials

What not to do – the Lushaba case

The 2016 Constitutional Court case of Minister for the Executive Council for Health, Gauteng v Lushaba[iv] (“Lushaba”) is instructive as to how courts should not approach granting relief in the form of a personal costs order. The matter came on appeal from the Gauteng High Court which had ordered that the Minister for the Executive Council (MEC) was liable for damages in respect of a claim based on medical negligence. It had issued a punitive costs order against the MEC in his nominative capacity. The Court then went further by calling on the MEC to show cause on affidavit why he should not also be held liable personally for costs on a punitive scale. If the MEC’s view was that he was not liable, he was required to identify persons in his department or in the office of the State Attorney who should be held responsible for costs.

The MEC’s affidavit referred to two other persons but averred that their decisions were reasonable in the circumstances and in line with procedure. They, together with a third person (from the office of the State Attorney) also filed affidavits explaining their role in relation to the case. The High Court used this evidence as a basis for an order to the effect that these three individuals (and not the MEC) were liable for costs in their personal capacity and on a punitive scale.

In its judgment, the Constitutional Court acknowledged the “flood of medical negligence litigation aimed at provincial health departments”, noting that “worst of all, litigious lawyers seem to prosper and bureaucrats seem to get off scot-free”. However, it found that the High Court had attempted to apply “inapposite implements” to a structural problem: the first order, which had called upon the MEC to identify individuals who should bear responsibility, had impermissibly authorised the MEC to exercise a judicial power. It had effectively allowed the MEC to decide for himself whether he was responsible, and if not, to identify persons who (in his view) were.

But the MEC had not done this – rather, his affidavit did not attribute liability to any other person. The Court also took issue with the High Court’s conclusion that, as the three individuals had deposed to affidavits, the requirement that they be given an opportunity to be heard had been satisfied.

The defects in the High Court’s order were substantial: the three individual officials had not been joined as parties to the matter, and as the court’s initial order did not call on them to make representations as to why they should not be held liable, there was no basis in law for the Court to exercise its judicial authority over them. Further, the Court had punished them without a hearing, in breach of a fundamental principle of the rule of law and section 34 of the Constitution. The personal costs order made by the High Court was accordingly set aside.

It emerged from this judgment that while the Court is not blind to the injustice in taxpayers having to foot legal bills for the failings of errant officials, it is imperative that any person that may be mulcted with a personal costs order should have an adequate opportunity to be heard – either by being joined in the proceedings or being allowed to make representations.

Treading carefully: the case of Westwood

Courts in subsequent cases have internalised the warnings in Lushaba. This much is clear from the 2016 judgment of the KwaZulu-Natal High Court in Westwood Insurance Brokers (Pty) Ltd v eThekwini Municipality[v] (“Westwood”), which concerned the review of a tender. In its initial order, the Court per Pillay J had reserved the question as “to any further order that the Court may make regarding the recovery of costs by the first respondent from its officials involved in the process of the tender” and invited any person who had an interest in this further order to make submissions to the Court.

The Court’s judgment acknowledged the need “not to trench on the rights of potential transgressors, especially the rights to due process and fairness” as well as addressing the concern that certain costs orders could result in incurring more costs or infringe on the principle of the separation of powers.

It addressed these concerns in its judgment. In order to prevent further costs, the Court chose to dispose of the matter having regard to evidence on affidavit and in-chamber consultations (unless a party wished to be heard in open court). The issue of separation of powers also required a careful touch. Therefore, it did not rush into making an order. It directed that the eThekwini Municipality serve its order on a number of political office bearers who were in positions of responsibility with regard to the award of the tender, including its Mayor, Municipal Manager, and the Auditor-General.

Further, in acknowledging that it was not in a position to name the persons who had acted “unlawfully, unconstitutionally and unethically” regarding their involvement in the unlawful tender award, the Court ordered the Mayor and Municipal Manager to provide affidavits naming those persons who were so involved. Those individuals were to be provided with a copy of the judgment and given leave to file affidavits to assist the Court to determine why the contract was awarded. The Court made a wide-ranging order targeting those who were involved with the award of the contract, inviting them to file affidavits to show cause why they should not be held liable for the Municipality’s costs in their personal capacity.

On 5 April 2017, the Court delivered a further judgment which found the explanations proffered to it pursuant to its prior order to be deeply insubstantial. This caused it to characterise the decision to award the tender unlawfully as “so bizarre that unsurprisingly even those who participated in making it cannot explain it”.

It took a dim view of the information provided, noting a recurring theme of non-disclosure by the officials called upon to give an explanation for the tender award. This tight-lipped stance was telling in itself, but it also prevented the court from being able to uncover why the participants were, in its words, “negligent, inattentive to their responsibilities and unaccountable” and ultimately left the mystery unsolved as to why a plainly unsuitable bidder was awarded a tender. Instead of enlightening the court, the responses provided were found by the Court to “fortify their failure and continuing refusal to be not only accountable and transparent but also remorseful for their manifestly inexplicable decision which renders them liable for costs”. The language used by the Court clearly shows its frustration with the officials’ conduct, and the pains that it took to uncover the reasons behind it. Ultimately, however, evidence on affidavit can only go so far, and in this case, there was not enough for the Court to root out which individuals were responsible and whether they were motivated by corrupt purposes.

In the circumstances, the best it could do was to make an order requiring a number of identified officials to pay fifty per cent of the eThekwini Municipality’s costs in their personal capacity. A further order was made instructing the municipality’s accounting officer to report to the Court regarding the steps taken to recover the costs as per the judgment.

The Court, overcautious, granted “any person having an interest in [its] judgment” leave to apply for leave to appeal against it as part of its order. Unsurprisingly, the officials have done so[vi].

The Westwood appeal is not yet finalised, and so at this stage it is not clear whether the Court’s efforts to provide a fair procedure were enough to ensure that the officials will be made to dig deep to pay the municipality’s legal costs. What is clear is that in its (laudable) pursuit to compel the officials to take responsibility personally, the court was pulled in two directions: on the one hand, it tried to prevent the parties from incurring further costs by taking evidence on affidavit instead of in a hearing. On the other, however, the evidence provided to it on affidavit was grossly inadequate and shed no light on how or why the unlawful decision was taken. There was no opportunity for further cross-examination to extract the truth of the matter. Worse still, despite the Court’s best efforts, this procedure may have allowed some officials who were responsible to go unpunished.

A question arises whether the Court could have gone further by calling on the Municipal Manager and the Mayor to show why they too should not be mulcted with a personal costs order for failing to oversee the structures that made the unlawful tender award. The Court itself had highlighted their respective positions of responsibility when it ordered that the judgment be served on them. Perhaps if it had done this, the Municipal Manager and Mayor would have ensured that their subordinates provided a more coherent account of what went wrong in the award of the tender, instead of attempting to shift blame, to the Court’s frustration.

A success story

Shortly after the case brought by the Helen Suzman Foundation against the conduct of the SABC Board collapsed[vii] September 2017 saw the handing down of a costs order in the high profile so-called “SABC 8” case[viii] - one which has been characterised as an instance of “vanity litigation” where officials oppose litigation on highly spurious grounds[ix]. Here, the Labour Court expressed its concern that that the dismissals that formed the subject of the litigation were “authorised with reckless disregard for the pending applications [in relation to the dismissals] and with little regard for the relative costs and benefits to the SABC of doing so”. It allowed the persons involved in the decision to file affidavits as to why they should not be held personally responsible and heard argument on this question over two days.

After considering evidence and argument before it, the Court ordered the SABC along with its former Chief Operating Officer Mr Hlaudi Motsoeneng and the acting Group Executive of News and Current Affairs Mr Simon Tebele pay the applicants’ costs jointly and severally. The costs would not doubt have been substantial, as they related to three hearings over a collective five days in court. Later, Mr Motsoeneng and Mr Tebele were refused leave to appeal the costs order against them[x].

Conclusion

Personal costs orders against public officials are an important remedy in the fight against corruption, malfeasance, and ineptitude in government. There is a need for robust jurisprudence on when this remedy can be applied and the correct procedure to be employed. And so, despite the obvious difficulties, litigants in such matters should persist in seeking this remedy where appropriate[xi] to contribute to and strengthen this aspect of law. Further, courts would do well to interrogate the chain of supervision that applies to bad decision-making and not shy away from granting such orders wherever a person in a position of responsibility failed in their duties.

Part II will explore ongoing litigation where courts have called on officials to show cause why they should not be liable for costs in a personal capacity and look at further issues regarding this remedy.

Cherese Thakur
Legal Researcher
cherese@hsf.org.za

[i] 12 of 2004.