In litigation matters, a successful litigant will generally be awarded a costs order in their favour, to allow them to recover at least a portion of the legal fees that they have incurred. What should ordinarily follow is that the said litigant presents a bill of costs to the Taxing Master for taxation – in essence, the Taxing Master’s pronouncement on the sum that the successful litigant is entitled to claim from its opponent.
When it comes to taxed litigation costs, the issue of interest may often be overlooked. One of the lesser-known aspects of taxed costs is that, for the losing party to become liable to pay the taxed costs set out in what is known as the allocatur, the winning party is not legally obligated proactively to request payment thereof from the losing party– this liability for payment of interest is automatic, with the interest accruing from the date of the taxation award until the date of final payment. This principle, firmly rooted in South African law, could have significant financial implications for the losing party in litigation.
The Legal Framework
South African law recognizes taxed costs as a form of judgment debt, and Section 2 of the Prescribed Rate of Interest Act 55 of 1975 governs the accrual of interest on such debts. Simply put, the Act provides that interest becomes payable on a judgment debt from the date of the judgment, regardless of when payment therefor is demanded. This includes orders for taxed costs.
This position was recently reinforced in the case of RAF v Lolwana & Sheriff Centurion East (23221/2016) [2024] ZAGPPHC 253 (4 March 2024). The court essentially highlighted that taxed costs constitute a judgment debt, and interest on a judgment debt accrues automatically from the date of the order, unless expressly excluded. Consequently, even if interest is not explicitly mentioned in the allocatur, it still accrues by operation of law.
This principle ensures that winning parties are compensated for any delays in receiving their rightful costs, even if those delays are due to their own silence. Considering that allocaturs remain valid for 30 years (a significant period of time in which to allow the running of interest), the consequences of this principle can be substantial.
A Cautionary Tale for Losing Parties
The moral of the story is simple: pay taxed costs as soon as possible. Delays in payment could lead to substantial interest liabilities, even if you pay promptly upon receiving the request for payment. Losing parties should proactively settle the amount due without waiting for a formal demand from the winning party. This approach minimizes the risk of additional financial burdens arising from accrued interest.
Final Thoughts
Understanding the implications of interest on taxed costs is crucial for litigants on both sides of a dispute. For winning parties, the law provides a safety net to ensure they are not prejudiced by delayed payments. For losing parties, vigilance and prompt action can prevent unnecessary interest from piling up.
If you are dealing with taxed costs, it is essential to be aware of these principles and to act accordingly. For more information, please feel free to contact Waldeck Attorneys.