30 January 2020 by Dispute Resolution Alert

An empty judgment can be valuable insurance for better times ahead

A matter which we recently finalised for a client pertinently demonstrates the value of obtaining a judgment carrying interest even if, at the time, there is no prospect of the judgment being satisfied by the debtor.

In June 1994, we obtained a judgment for our client for payment of the capital amount of R45,000. The judgment provided that the capital amount would attract interest at the rate of 15.5% per annum - the then promulgated legal rate of interest recoverable on outstanding debts. The circumstances of the judgment debtor rendered recovery of the judgment debt not possible at the time.

Fortunately for our client, after some 25 years, the circumstances of the judgment debtor had significantly improved, rendering recovery of the judgment debt viable. This resulted in our client receiving payment of an amount exceeding R230,000 - the substantial majority of which comprised interest on the original judgment debt.

The important aspects to note from this happily-ending story are the following:

  • A judgment debt survives for 30 years, appreciably longer than the three-year prescription period applying to ordinary, unsecured debts;
  • The legal rate of interest recoverable on a judgment debt remains the one in force and promulgated at the time of judgment, notwithstanding that the promulgated rate may have been reduced (and in this case was) during the intervening period; and
  • Most importantly, the in duplum rule which prohibits the recovery of interest exceeding the amount of the capital debt or claim, does not operate in respect of judgment debts carrying interest. Therefore, the judgment interest recoverable on such a debt is unlimited.

The cost of obtaining a judgment, which is not immediately or even in the medium term recoverable, may therefore prove to be money well spent and an investment with a very reasonable return.

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