N1161

PAPUA NEW GUINEA
[In the National Court of Justice]

Appeal 14 OF 1993

GILSENAN MELPA PTY LTD

V

TOM YALU

Mount Hagen: Woods J.
2 & 16 July 1993

Interest on debts - Notice on invoice - Whether agreement for interest - Interest sole cause of action - powers of court limited - Judicial Proceedings (Interest on Debts and Damages) Act Ch.52.

CASES CITED:

The following cases are cited in this judgement:
F.A.Pidgeon & Son v Danehurst [1986] 1 Qd R. 448
London, Chatham and Dover Railway Co v South Eastern Railway Co [1893] A.C. 429 
W. Thomas & Co Ltd V Welk [1935] S.A.S.R. 165
Wallace v M.V.I.T. [1991] Unreported N1037

P Dowa for the Appellant
P Kunai for the Respondent

16 July 1993

WOODS J. This is an Appeal from a decision of the District Court dismissing a claim for interest on an amount owing for work done.

The history of this matter commences with an arrangement for the appellant to do some renovation work on the respondents premises to the value of K24,153.50 in 1991. There was no written contract or quote specifying in exact detail the work to be done or the terms and conditions. According to the evidence the arrangement was oral and there is no dispute that the work was performed satisfactorily by August 1991 and an invoice was rendered for K24,153.50 for the work. Printed at the bottom of the invoice were the words "Terms 30 days nett. Interest at 2% per month will be charged on all overdue amounts." The invoice was rendered monthly and the respondent did not pay for over a year. Apparently there was some problem with a loan from the bank and the appellant knew about this but by mid 1992 was getting anxious about the delay in payment. In February 1992 the appellant had drawn the attention of the respondent to the delay and that a charge of 2% as stated on the invoice would have to be paid. In September 1992 the respondent paid the principal owing the K24,153.50.

The only legislation which refers to interest on debts is firstly the Goods Act Chapter 251 which at Section 54 states; This division does not affect the right of a buyer or a seller to recover - (a) interest or special damages in a case where by law interest on special damages are recoverable; and secondly the Judicial Proceedings (Interest on Debts and Damages) Act Chapter 52, Section 1. "in proceedings in a court for the recovery of a debt or damages the court may order that there be included in the sum for which judgement is given interest, at such rate as it thinks proper, on the whole or part of the debt or damages for the whole or part of the period between the date on which the cause of action arose and the date of judgement."

This latter piece of legislation makes it clear that interest under that section can only be awarded where there is an action and consequent order for the recovery of a debt or damages, thus the original action must be for the original debt, there cannot be an action merely for interest. This point has been clearly stated in cases and as Connolly J stated in F.A.Pidgeon & Son v Danehurst Investments [1986] QED R. 448 at 451 when referring to legislation similar to the above:

"Lord Denning M.R. at p 661 of Techno-Impex had said that the Act only applied where judgement was given for the principal sum. The restrictive language in which S.3(1) (similar to our S. 1) was framed reflects the fact that neither the Admiralty Court nor Courts of Chancery awarded interest except in respect of Moines for which they were giving judgement. See Lord Brandon's speech at P.116 and of course it was the established view that courts of common law had no jurisdiction to award interest, contract apart, save pursuant to statute. It follows that the plaintiff cannot obtain a judgment for interest in these circumstances pursuant to the Common Law Practice Act."

Of course our Act in section 2 notes that this section 1 does not apply where there is a clear agreement for interest. Here there is no evidence that there was any agreement for the payment of interest, the agreement for the work was oral and made no reference to interest, interest only arose after the work was done and the words appeared on the bottom of the invoice. 

The Pidgeon Case above does refer to the history of the legislation similar to Judicial Proceedings Act which was enacted to overcome the principles laid down in cases such as London, Chatham and Dover Railway Co v South Eastern Railway Co [1893] A.C.429 that at common law in the absence of any agreement or statutory provisions for the payment of interest, a court had no power to award interest simple or compound, by way of damages for the detention (i.e. the late payment) of a debt. Connolly J. in the Pidgeon case emphasised that there has been nothing in any more recent cases to lend support to the view that, putting aside contractual and statutory provisions, there is a general jurisdiction at law to award damages for the late payment of money. 

In Wallace v M.V.I.T. [1991] Unreported N1037 Doherty J discussed the effects of the Judicial Proceedings (Interest on Debts and Damages) Act and also noted that the authorities are quite clear that the court has no jurisdiction to give a Judgement solely on a claim for interest in the absence of any clear agreement, the power in court to order interest only exists when there is a principal sum of damages or debts for which Judgement is given. However in that case the Judge was able to enter a Judgement for the amounts which had been the subject of prior negotiation and settlement and then consider and award interest. 

The Goods Act referred to above really only reiterates the common law rule that interest is only recoverable where the law specifically allows it or where there is a specific agreement to pay interest.

This case before me now can be distinguished from the instances where interest is charged by Banks and Credit agencies. With banks there is always an agreement to pay interest whether in the mortgage document or the loan application. With credit agencies interest is usually covered in the original application for credit facilities, and anyway the penalty can be immediate by withdrawal of all credit facilities. The noting of an intention to charge interest on the bottom of invoices after goods have been supplied or work done does not assume thereby an agreement to pay interest but it can be used as a claim for interest if court proceedings are taken for a debt and the Judicial Proceedings (Interest on Debts and Damages) Act is relied upon. However as stated already this does not cover a claim for the interest alone in such situations after the principal sum has been paid.

A case which clearly outlines the status of the reference to interest at the bottom of an invoice is W. Thomas & Co Ltd v Welk & Os [1935] SASR 165 at 169 where Murray CJ said of an exactly similar clause: "But this is not enough without evidence that the defendants admitted their liability by express words or by conduct amounting to an admission after a claim was made."

I therefore find that the Magistrate was correct in the District Court in dismissing the claim although it was a pity that he was not referred to the relevant authorities and principles and that is why he did express some doubts in his ruling.

I dismiss the appeal.

___________________________________________________

Lawyer for the Appellant: P Dowa
Lawyer for the Respondent: P Kunai