Costs in the Labour Court: Understanding discretion in withdrawn applications

Summary of relevant facts

The matter originated with an urgent application lodged by Springpoint Finance (Pty) Ltd, an employer, against a former employee and her new employer, Multivest Financial Planning (Pty) Ltd. The application sought to enforce a restraint of trade agreement. The respondents, the employee and Multivest, opposed the application.

Shortly after the respondents had fully engaged in the legal process, Springpoint Finance elected to withdraw its urgent application. Significantly, the employer withdrew the application without tendering any payment for the respondents’ incurred costs, indicating its intention to pursue the restraint of trade matter in the High Court instead. This withdrawal prompted the respondents to return to the Labour Court, seeking an order for their legal costs under Rule 43 of the Labour Court Rules. They contended that they had incurred substantial and unnecessary expense and that fairness dictated that Springpoint Finance should bear these costs, potentially on an attorney-and-own-client scale.

Legal issues considered

The central legal issue before the Labour Court was whether an employer who withdraws an urgent restraint of trade application should be ordered to pay the legal costs of the respondents. Key to this was the interpretation and application of section 162 of the Labour Relations Act, which governs costs orders in the Labour Court. The Court also had to consider the extent to which the conventional civil law principle of “costs follow the result” applies in the specialised context of labour disputes. Furthermore, the application explored whether the mere withdrawal of an application, particularly without a tender for costs, automatically obliges the withdrawing party to pay the other side’s costs.

The Court’s application of the law to the facts

In its deliberations, the Labour Court underscored that its power to award costs under section 162 of the Labour Relations Act is rooted in a broad discretion, guided by the overarching principles of law and fairness. This statutory framework distinguishes Labour Court proceedings from ordinary civil litigation, where the successful party typically recovers costs. The Court reiterated previous warnings from the Constitutional Court against imposing costs orders that might deter parties from seeking redress in the Labour Court, especially given that labour disputes often involve fundamental constitutional rights, such as the right to fair labour practices or the right to choose one’s trade or occupation.

Crucially, the Court clarified that the withdrawal of an application does not automatically signify a “win” for the opposing party, nor does the absence of a costs tender by the withdrawing party necessarily compel the Court to penalise them. Instead, the determining factor is whether, in the totality of the circumstances, it would be fair to make a costs order. While acknowledging the financial prejudice and inconvenience caused to the respondents by Springpoint Finance’s withdrawal, the Court assessed whether the employer’s conduct crossed the threshold into mala fides, vexatious litigation, or an abuse of process.

The Court’s findings

After considering all submissions, the Labour Court was not persuaded that the employer’s conduct in withdrawing the application amounted to bad faith, vexatious litigation, or an abuse of the court’s process. In the absence of such aggravating factors, the Court was reluctant to depart from the well-established Labour Court principle that costs are not awarded lightly. The Court ultimately concluded that the circumstances did not justify an order for costs against Springpoint Finance.

Key takeaways

Employers must recognise that the Labour Court’s approach to costs is discretionary, guided by law and fairness, rather than a rigid adherence to the “costs follow the result” principle. This means that even if an application against an employer is withdrawn, a costs order in their favour is not automatic.