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Nebulite Aluminium Ltd v Padarath [1995] FJHC 24; Hbc0228j.88s (27 January 1995)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. 0228 OF 1988

Between:

NEBULITE ALUMINIUM LIMITED
Plaintiff

- and -

1. RAM PADARATH
2. RAM NIVAS
3. SHIU SHANKAR
4. VINOD
5. SURENDRA PADARATH
(all sons of Audh)
Defendants

Mr. G. Keil for Plaintiff
Mr. D. Sharma for 1st, 2nd, 4th and 5th Defendants

JUDGMENT

On the 5th of April 1988 the plaintiff company issued a writ in the High Court claiming under a Deed of Guarantee jointly and severally entered into by the defendants guaranteeing payment to the plaintiff company for goods supplied to the defendants' company up to an agreed limit. In its writ the plaintiff company claims the following relief:

"(a) The sum of NZ$102,150.00 being the sum of NZ$90,000 together with one year's interest thereon at 13.5% per annum;

(b) Interest on such sum from the 1st September 1987 until payment or judgment under the Law Reform (Misc Provisions), (Death and Interest) Act Cap. 27;

(c) Such other relief as this Honourable Court deems just;

(d) Costs."

The writ was served on each of the 5 named defendants who, with the exception of the 3rd defendant, entered appearances through their solicitors.

On the 9th of August 1988 in the absence of any defence being filed by or on behalf of the defendants, 'default judgment' was entered in the following terms:

"No defence having been served by the first, second, fourth and fifth defendants herein IT IS THIS DAY ADJUDGED that the first, second, fourth and fifth defendants do pay the Plaintiff the sum of NZ$102,150.00, $80.00 costs plus interest to be assessed."

No application has been made to set aside the 'default judgment' which appears to have been accepted by the defendants who paid it off over some 5 odd years after judgment was entered, with the first payment being made on the 15th of April 1989 and the last payment on the 9th of September 1993.

A month after the final payment was made the solicitors for the plaintiff company wrote to the defendant company on the 19th of October 1993 demanding the payment of interest at the rate of 13.5% on a reducing balance over the several years that the judgment debt was repaid and which amounted to F$33,411.95.

No response was received from the defendants and this prompted the plaintiff company to issue a notice of intention to proceed on the 2nd of February 1992 which was eventually served on the first named defendant some 2 years later on the 28th of February, 1994.

Then on the 14th of April 1994 the solicitors of the plaintiff company issued a Summons to fix a date to hear:

"An application on behalf of the Plaintiff that the Court assess interest on the sum of NZ$120,150 in accordance with the claim for interest in the Statement of Claim and for an Order that the Defendants pay the costs of this application."

After several adjournments the plaintiff's summons was argued before me on the 27th of September '94. Learned counsel for the plaintiff company briefly outlined the history of the proceedings and after referring to para (b) of the relief claimed in the Writ and the terms of the 'default judgment' submitted that, considering the time taken by the defendants to pay off the judgment debt and the numerous indulgences granted by the plaintiff company, the Court should order interest on the judgment debt in two (2) categories:

(1) from the date of demand to the date of judgment; and

(2) from the date of judgment until the date of the final payment.

Counsel also claimed to be entitled to interest at the rate of 13.5% on the basis that it was the current rate of interest charged by commercial banks on over-draft facilities.

Counsel for the defendants in opposing the claim for interest submitted that any interest granted should be strictly limited to the plaintiff company's statutory entitlement and, in the absence of any agreement, no interest should be awarded under the plaintiff's 'second category'. Counsel also vigorously opposed the 'rate' of interest proposed and submitted that the fairer rate would be that charged by commercial banks on short term fixed deposits which is said to be in the vicinity of 3-5% per annum.

Dealing then with counsel's 'first category' of interest, Section 3 of the Law Reform (Misc. Provisions) (Death and Interest) Act Cap 27 provides:

"3. In any proceeding tried in the Supreme Court for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment."

(hereafter referred to as the 'Section')

It will be seen at once that the court is granted a broad discretion to award interest "... in any proceedings tried ... for the recovery of any debt". No issue was raised on the meaning of those words in view of the fact that this case concerned a 'default judgment', but in light of the decision of Drake J. in Alex Lawrie Factors v. Modern Injection Moulds (1981) 3 ALL E.R. 658 and the judgment of the Fiji Court of Appeal in Jai Narayan v. Savita Chandra Civil Appeal 37 of 1985 (unreported) it must be taken as settled that interest may be awarded under the 'Section' where a 'default judgment' has been regularly entered.

In this case there can be no doubt that the plaintiff company claimed interest under the above provision in its Writ and further that 'default judgment' was clearly entered for "interest to be assessed".

In this latter regard however learned counsel for the plaintiff company submits that until interest has been assessed there has been no judgment for interest which would fix the rate and duration. I disagree. The entry of default judgment in this case was a judgment not only for the liquidated sum claimed in para (a) but also for interest under para (b) of the reliefs sought in the Statement of Claim, and the absence of any assessment thereafter does not alter the character or terms of the 'default judgment' entered. Nor in my view can the clear limitation of the 'Section' be so easily over-ridden or extended by the mere delay in obtaining an assessment.

I am fortified in my view by the judgment of the House of Lords in Hunt v. R.M. Douglas (Roofing) Ltd. (1988) 3 W.L.R. 975 which established the principle that interest on awards of costs ran from the date upon which judgment was pronounced and not from the date upon which the taxation of costs was thereafter completed by the issue of the taxing master's certificate. In particular, Lord Ackner in rejecting the argument that an order for payment of costs to be taxed cannot be a 'judgment debt' said at p.988:

"... a judgment for costs to be taxed is to be treated in the same way as a judgment for damages to be assessed, where the amount ultimately ascertained is treated as if it was mentioned in the judgment - no further order being required."

The 'Section' expressly limits any award of interest to "... the period between when the cause of action arose and the date of judgment ...", and given the judgment of the Fiji Court of Appeal in Queensland Insurance v. Surendra Prasad Civil Appeal No. 24 of 1989 that:

"Under Section 3 (the Court) could only award interest to the date of judgment."

it is clear that any award of interest under the 'second category' enumerated by learned counsel for the plaintiff company could not be granted under the 'Section'. It is equally clear that the court is given a discretion under the 'Section' to award interest at such rate as the court thinks fit on the 'first category' put forward by learned counsel for the plaintiff company.

In this latter regard counsel for the plaintiff company referred to two judgments of the Fiji Court of Appeal in Maganlal Bros. Ltd. v. L.B. Narayan & Co. Civil Appeal No. 31 of 1984 and Jai Narayan v. Savita Chandra (op. cit) in which the Court of Appeal awarded interest at the rate of 13.5% per annum.

The only question that remains is: Should the Court award the plaintiff company interest under the 'Section'? In Riches v. Westminster Bank Ld. (1947) A.C. 390, Lord Wright described the classic rationale for an award of 'interest' when he said at p.400:

"... the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation. From that point of view it would seem immaterial whether the money was due to him under a contract express or implied or a statute or whether the money was due for any other reason in law. In either case the money was due to him and was not paid, or in other words was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation, whether the compensation was liquidated under an agreement or statute, ... or was unliquidated and claimable under [S.3 Law Reform Misc. Provision Act 1934 (U.K.)] as in the present case. The essential quality of the claim for compensation is the same and the compensation is properly described as interest ..."

Viewed in that light there is no doubt in my mind that the plaintiff company should be compensated by way of an award of interest. The 'Section' however contains the following relevant 'provisos' where it says:

"Provided that nothing in this section -

(a) Shall authorise the giving of interest on interest; or

(b) Shall apply in relation to any debt upon which interest is payable as of right, whether by virtue of any agreement or otherwise."

In this latter regard it is common ground that the liquidated amount claimed in para (a) of the reliefs sought in the Statement of Claim is comprised of a principal sum of: "N.Z. $90,000 together with one year's interest thereon at 13.5% per annum." Furthermore the Deed of Guarantee upon which the plaintiff company's claim was based contained an express agreement by the defendants to pay a sum equal to one year's interest on an agreed maximum amount to be computed at the prevalent rate charged by commercial banks in Fiji on overdraft accounts.

In the circumstances the plaintiff company's claim for interest under the 'Section' falls fairly and squarely within the above-mentioned exclusions in the 'proviso' and accordingly I hold that no award may be made under Section 3 of the Law Reform (Misc. Provisions) (Death & Interest) Act Cap. 27. The claim under para (b) of the prayers for relief must be and is hereby dismissed.

I turn next to the 'second category' of interest claimed namely, from the date of judgment until the date of final payment. Upon this category little assistance was provided by counsel for the plaintiff company who appeared to base this part of the claim on Section 3 of the Law Reform Act (ibid). Equally learned counsel for the defendants in opposing it merely asserted that the plaintiff company should not have accepted any payments from the defendants without first obtaining an assessment of the interest payable on the judgment debt.

The position with regards 'post-judgment interest' was recently dealt with in the judgment of the Fiji Court of Appeal in John Byrne and Anor v. J.S. Hill and Associates Civil Appeal No. 33/93 (unreported) where the court accepted that pursuant to Section 22 of the High Court Act (Cap. 13) the provisions of the Judgments Act 1838 (U.K.) continues to apply in Fiji.

In this latter regard Section 17 of the Judgments Act 1838 provides:

"Every judgment debt shall carry interest at the rate of four pounds per centum per annum from the time of entering up the judgment ... until the same shall be satisfied."

Of this section the Court of Appeal said in Byrne's case at p.26:

"Its provisions are mandatory: interest is payable at the rate of 4%. That is unrealistic in the current economic climate ... However unless and until (amended), the Court's have no power to award interest after judgment at any rate other than 4%."

(See also the observations of Denning L.J. in Jefford v. Gee [1970] EWCA Civ 8; (1970) 2 Q.B. 130 at 148)

Accordingly there will be judgment entered in favour of the plaintiff company for interest at the rate of 4% per annum on the judgment debt of $102,150 calculated from the 9th of August 1988 until the 9th of September 1993 (to be computed by learned counsel for the plaintiff company and attached to the court's order when submitted for sealing).

The plaintiff company is also granted the costs of this application to be taxed if not agreed.

(D.V. Fatiaki)
JUDGE

At Suva,
27th January, 1995.

HBC0228J.88S