Our financing is risky and depends on the success of the case. If the case is not successful, there is no obligation for the applicant to repay taurus Capital`s financing. I believe that the distinction between the dilettant funder and the dedicated funder as a factor in the exercise of discretion for the allocation of costs is not taken up by other jurisdictions and would not stand up to the scrutiny of the SCA or the Constitutional Court. Nevertheless, it will be interesting to see how the courts in the future exercise their discretion to levy fees on trial funders. In particular, in cases where there is no element of Mala Fides or fraudulent behavior, will the courts easily make unfavorable decisions against employers of corporate disputes – which constitutes the vast majority of cases that are brought before the courts? In any event, many corporate litigation financing agreements provide that the funder shall meet all injurious costs incurred against the party to the funded proceedings; However, this is not the same as having joined as a party to the proceedings and being directly subject to an enforceable cost decision. Donors may find this situation a little less tasty, and it will certainly be a factor that should be taken into consideration by potential funders when conducting preliminary case analyses before concluding funding agreements. One thing seems clear: with trial funding coming to South Africa, it probably won`t be long before the courts have the opportunity to develop the law on this point. Taurus Capital`s financing is managed by its Risk and Investment Legal Committees, composed of experienced legal advisors and private equity specialists. Curiously, the court added another reason that argues in favour of exercising its discretion vis-à-vis the funder; namely, that it was not a commercial lender of litigation that financed litigation in the course of its commercial affairs. Consequently, the Court argued, the deterrent effect of a possible adverse provision on costs, which might stifle third-party business assets and thus impede access to justice for the indigent parties to the proceedings, was not applicable to them.
This argument is difficult to understand, because there does not seem to be a moral difference between an individual who finances a single share of financial profit and a company that finances several actions of financial profits. In both cases, the funder makes a calculated investment in the hope of a return. The court certainly did not intend to suggest that the malafide behavior of the funder in Casu would have been tolerated if the funder had been a committed trial finance company and not a person who would have made an opportunistic investment. The landscape changed with the SCA`s decision in PricewaterhouseCoopers Inc v. National Potato Cooperative Ltd, which set aside uncertainty by finding that a procedural funding agreement is not contrary to public policy or is not contrary to public policy. The Tribunal, which played a decisive role in the constitutional requirement of access to justice in determining public order in this matter, stated that “. the need to fight against maintenance and Champerty has diminished, if not completely disappeared.” The courts retain the power to prevent the funding of litigation when it is an abuse of process, but this is no different from the power of the courts to deal with any other type of abuse of process. Rather, it appears that the Tribunal has become aware of the impact that its judgment could have on the trial funding sector in South Africa, with collateral damage to the constitutional imperative of access to justice, and has sought to assure potential funders that they will not simply be held accountable for the injurious costs inflicted on the funded trial parties. FUNDING AGREEMENT: Taurus and the client enter into a trial financing agreement Trial financing balances the interests between a plaintiff who wishes to achieve results on a case and a paid legal team regardless of its outcome….