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IN THE CAPE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOOD HOPE PROVINCIAL DIVISION)

 

CASE NO:  4582/2003

In the matter between:

 

AFRICON ENGINEERING INTERNATIONAL (EDMS) BPK      First Applicant

H DE CLERCQ                                                                                 Second Applicant

 

and

 

DIE TAKSEERMEESTER N.O.                                                     First Respondent

WPK LANDBOU BPK                                                                     Second Respondent

BESSEMER STAALKONSTRUKSIE (EDMS) BPK                    Third Respondent

JUDGMENT DELIVERED ON:   20 APRIL 2005

 

Meer, J:

 

Introduction.

 

[1]     This is an application for the review and setting aside of a decision by the first respondent, The Taxing Master of The Cape of Good Hope Provincial Division, to tax two bills of costs in an action between second respondent, as plaintiff and third respondent, as defendant.

 

[2]     Applicants contend that the taxation was irregular in that they were not given notice thereof in terms of Rule 70 (4) of the Uniform Rules of Court. They submit that they were entitled to notice of taxation on a proper interpretation of Rule 70(4) read with Rule 13, by virtue of their status as parties properly joined to the action who were jointly and severally liable with third respondent for payment of second respondent’s costs.

 

BACKGROUND FACTS

 

[3]     In an action for breach of contract the second respondent claimed damages from the third respondent in the sum of R2 922 355.90 with interest and costs. The claim arose out of the collapse of two grain silos which second respondent contracted third respondent to develop and build.

 

[4]     The third respondent in turn caused the applicants to be joined as parties to the action by serving a third party notice upon them in terms of Rule 13 of the Uniform Rules of Court. The third party claim was based on an indemnification agreement between applicants and third respondent. In terms thereof the applicants, who were responsible for the actual construction of the grain silos, had undertaken to indemnify the third respondent against any amount it might be liable to pay to the second respondent arising from the defective construction of the silos.

 

[5]     Notwithstanding the fact that there was no lis between the applicants and the second respondent, all three parties concluded a written agreement on 25 February 2002 in which both the third respondent and applicants admitted the merits of second respondent’s claim. On 26 February 2002 the third party claim between the third respondent and the applicants was settled on the basis that the first applicant would indemnify the third respondent for any amount it was liable to pay to the second respondent, and it would also pay the third respondent’s costs. Whilst there appears to have been at that stage a difference of opinion between the parties as to precisely up until which date the applicants were liable for costs, it was accepted and indeed common cause that applicants and third respondent were jointly and severally liable for the second respondent’s party and party costs.

 

[6]     Also on 26 February 2002 the applicants’ attorney notified the second respondent’s attorney of the agreement between the applicants and third respondent pertaining to the third party claim. He informed him further, that, as agreed between third respondent and applicants, the first applicant would commence negotiations with the second respondent for the settlement of the quantum of the second respondent’s claim against the third respondent.

 

[7]     As a pre-requisite for negotiating with the first applicant, the second respondent insisted on and obtained a written undertaking by third respondent to the effect that it irrevocably accepted and was bound by such negotiations. Thereafter negotiations on the issue of quantum ensued between first applicant and second respondent, represented by their attorneys.

 

[8]     On 1 August 2002 a written settlement offer (in terms of Rule 34) was made by applicants and on 22 August 2002 same was accepted by second respondent. In terms thereof the action was settled on the basis that applicants and third respondent would jointly and severally pay second respondent the sum of R2 448 504.50 plus interest thereon at 15.5% per annum. They would also pay the second respondent’s taxed costs including the costs of two advocates up until the date the offer was presented.

 

[9]     During the negotiations on quantum attempts to settle also the amount of costs proved unsuccessful. On 16 September 2002 applicants’ attorney wrote to second respondent’s attorney requesting the latter’s bill of costs in draft for their consideration. There was no response. On 22 October 2002 applicants’ attorney enquired a second time after second respondent’s bill of costs. Once again there was no response.

 

[10]    Second respondent did not furnish applicants with a draft bill as requested and instead proceeded to tax two bills of costs in the absence of any notification to applicants or their attorney. The first bill, taxed on 3 April 2003, pertained to services rendered by a correspondent in Malmesbury, whilst the second, taxed on 9 April 2003 was in respect of second respondent’s attorney himself. A notice of taxation in terms of Rule 70(4) specifying the date and time of the respective taxations was served only on third respondent.

 

[11]    On 15 April 2003 applicants learnt from third respondent that the bills had been taxed, whereupon they attempted to persuade second respondent to re-tax the bills, so as to afford them an opportunity to be present at and oppose taxation thereof. The second respondent refused. Consequently applicants launched the present application to set aside the decision of first respondent to tax the bills in the absence of a Rule 70(4) notice to them.

 

ARGUMENT.

 

[12]    Mr van der Westhuizen for applicants argued that the applicants, as parties to the action joined in terms of Rule 13, who were jointly and severally liable for costs, were entitled to a notice of taxation on a proper interpretation of Rule 70(4) read with Rule 13(5).

 

[13]    Quoting Rule 13(5) which states:

“The third party shall, after service upon him of a third party notice, be a party to the action and, if he delivers notice of intention to defend, shall be served with all documents and given notice of all matters as a party”,

Mr van der Westhuizen submitted that the reference therein to “notice of all matters”, included notice pertaining to the matter of taxation.

Referring to the case  Bills of Costs (Pty) Ltd and Another v The Registrar, Cape, NO and Another 1979(3) SA 923A at 940F-G and 946B Mr van der Westhuizen emphasized that  taxation is an integral part of the judicial process and the determination of the respective rights and obligations of the  parties. Notice of taxation he argued had therefore to be given to parties affected thereby.

 

[14]    Turning to Rule 70(4), which states:

“The taxing master shall not proceed to the taxation of any bill of costs unless he is satisfied that the party liable to pay the same has received due notice as to the time and place of such taxation and notice that he is entitled to be present thereat; …”

Mr Van der Westhuizen submitted the words “party liable to pay” referred to any party properly joined who is liable for costs. This included parties like the applicants, joined under Rule 13 who were jointly and severally liable with third respondent for costs. The fact that of the parties jointly and severally liable for costs, second respondent had chosen to proceed against third respondent for the recovery thereof, to the exclusion of applicants, did not, he argued, alter applicants’ entitlement to notice of taxation.

 

[15]    In the event of my not accepting the aforementioned interpretation of Rule 70(4) as read with Rule 13 (5), Mr van der Westhuizen invited me to exercise my inherent jurisdiction, in furtherance of the administration of justice, to purposively interpret Rule 70(4) to require notice of taxation to be served on any party properly joined like the applicants, who is liable for costs.

 

[16]    Mr van der Walt for second respondent argued that applicants were not entitled to notice of taxation. The election by second respondent to proceed against third respondent for the recovery of costs, he argued, identified the third respondent as the party liable to pay costs in terms of Rule 70(4) and accordingly, as the party entitled to service of the notice of taxation. As second respondent had not claimed costs against the applicants, they were entitled neither to notice of taxation, nor to be present at and oppose taxation and the quantification of costs.

 

[17]    Nor, submitted Mr van der Walt, was second respondent obliged to give notice of taxation to the applicants simply because of its knowledge of the indemnification agreement between applicants and third respondent. The second respondent, he emphasized was not a party to that agreement, the rights and obligations whereof existed only between the applicants and third respondent. Just as an insurer who indemnifies a party against costs in terms of an insurance contract is not entitled to receive notice of taxation in terms of Rule 70(4), so too, he argued, are the applicants not so entitled.

 

[18]    I am of the view that a distinction stands to be drawn between a third party who agrees prior to taxation to pay certain taxed costs between litigants but who is not joined as a party to the action, and third parties like the applicants, who are joined by service upon them of a Rule 13 (5) third party notice¹ and become jointly and severally liable for costs. The latter, as parties joined in the action, significantly, are entitled to receive notice of all matters, whilst the former does not enjoy that privilege².

 

[19]    In enabling the joinder of a third party to an action and according such party the right to receive notice of all matters, Rule 13(5) gives effect to the substantive law and the important principle that parties with a direct and substantial interest³ in the subject matter of an action have the right to be heard, are brought before the court and given an opportunity to state their position.⁴ The right to be heard is similarly reflected at Rule 70 (4) which accords a party liable to pay costs a right to receive notice of taxation and be present at taxation.

 

[20]    It follows from this that where the direct and substantial interest of a third party joined under Rule 13 (5) relates to the payment of a bill of costs, such party must have a right to be heard at the taxation stage, similar to its right to have been heard at trial, and the entitlement of such a party to notice of all matters in terms of Rule 13(5) must include notice of taxation as specifically provided for at Section 70 (4).

 

[21]    Just as the applicant third parties would have been entitled to receive notice of the trial date to determine the quantum of damages for which they were liable, so too ought they to have been entitled to notice of a taxation at which the scope of their liability for costs stood to be determined. Their entitlement in this regard flows from their status as parties properly joined who are jointly and severally liable for costs, and consequently have a direct and substantial interest in the determination of costs. Their entitlement to notice of taxation is in my view unaffected by the fact that second respondent did not elect to claim costs against them. Their entitlement to notice of taxation is moreover independent of the indemnification agreement to which, as Mr Van der Walt correctly stated, second respondent was not bound. Second respondent was however, it must be remembered, a party to the Rule 34 settlement agreement with applicants, an agreement which made applicants’ direct and substantial interest in this matter manifest, and reinforced their entitlement to notice of taxation.

 

[22]    In Bills of Costs (Pty) Ltd and Another v The Registrar, Cape, NO and Another it was aptly stated at 946D:

“…taxation has been, and still is, regarded as an integral part of the judicial process and that the rights and obligations of the parties to a suit are not finally determined until the costs ordered by the Court have been taxed.”

 

[23]    Applicants’ obligations in respect of costs stood to be finally determined only upon taxation. The effect of their joinder as parties to the action under Rule 13, their liability for costs, together with the notice provisions at  Rules 13(5) and  70(4)  ought, in my view, to have accorded them an opportunity to be heard before the determination of their obligations in respect of costs. Not only were they parties jointly and severally liable for costs properly joined, and with a direct and substantial interest in the taxation thereof, but, as was common cause, the parties who were to pay the costs notwithstanding their joint and several liability status.

 

[24]    I am of the view that in providing for notice of taxation to the party  liable to pay costs,  Rule 70 (4) contemplates the service of a notice of taxation upon third parties like the applicants properly joined and jointly and severally liable for costs, notwithstanding second respondent’s election not to claim costs from them. Such an interpretation of the Rule is in my view particularly apposite in the circumstances of this case where costs are for applicants’ account alone because of the indemnification agreement.

 

[25] It is in the interests of justice for taxation to take place in the presence of all parties liable for costs, all the more where several parties have jointly and severally accepted liability for costs. Such a course has the advantage of avoiding a multiplicity of actions as all parties ultimately responsible for costs are notified of a taxation and a bill of costs is taxed in their presence.

As was stated by Van der Riet J In Scott v Nel NO and Another 1963 (2) SA 384 E at 387A-B,  “ There is  however a salutary practice that save in exceptional cases the costs of a law suit are taxed at one and the same time in one bill of costs.”

 

[26]    Regard being had to the above, I am of the view that on a proper interpretation of Rule 70(4) read with Rule 13(5) the applicants were entitled to receive notice of taxation from second respondent as specified at Rule 70(4) before the bills were taxed.

 

 

 

Costs

[27]    Applicants seek attorney and own client costs as against the second respondent. Second respondent’s failure to serve a notice of  taxation on applicants, knowing full well that applicants had a real interest in taxation as the parties liable for costs who were to actualy foot the bill therefor, was  reprehensible, more so given applicants’ expressed wish to participate in the taxation process,  and the repeated requests for copies of the bill. The effect of second respondent’s failure to notify applicants was that any opposition to the taxation of the bills was thwarted. I am of the view that such conduct warrants a punitive cost order on a scale as between attorney and client.

 

[28]    I accordingly make the following order:

 

1.           The first respondent’s decision to tax the bills of costs placed before him on 3 and 9 April 2003 in case no. 9326/2000 as well as the taxation of the said bills of costs is hereby reviewed and set aside.

2.           The second respondent is ordered to pay the costs of the application on a scale as between attorney and client.

 

 

 

 

               

MEER, J   

IN THE CAPE HIGH COURT OF SOUTH AFRICA

(CAPE OF GOOD HOPE PROVINCIAL DIVISION)

REPORTABLE                                            CASE NO:  4582/2003

In the matter between:

AFRICON ENGINEERING INTERNATIONAL      Applicant

and

THE TAXING MASTER N.O. & 2 Others                 Respondent

JUDGMENT BY             :         MEER, J

 

For the Applicants           :         Adv. J van der Westhuizen

 

Instructed by                   :         Weavind & Weavind

                                                (Johnson/NS/AS/G13138)

                                                C/o HEROLD GIE

                                                H C  STUBBINGS

Herold Gie Buildings

                                                8 Darling Street

                                                CAPE TOWN

                                                (Ref: HCS/mdg/229150)

 

1^st & 3^rd Respondents     :         Not represented.

 

For the 2^nd Respondent   :         Adv. D J  van der Walt

 

Instructed by                   :         SANDENBERGH NEL HAGGARD 

                                                PER: L SANDENBERGH

Golden Isle, Durbanweg 281

                                                BELLVILLE                    

                                                13de Vloer                       

                                                101 St Goerge’s Wandellaan

                                                KAAPSTAD

 

Date(s) of hearing            :         Tuesday, 08 March 2005

 

Judgment delivered          :         Wednesday, 20 April 2005

 

       

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