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Cybula v Nings Agencies Pty Ltd [1981] PNGLR 120 (22 April 1981)

Papua New Guinea Law Reports - 1981

[1981] PNGLR 120 - John Cybula v Nings Agencies Pty Ltd 

[1981] PNGLR 120

N290

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

JOHN CYBULA

V

NINGS AGENCIES PTY. LTD.

Waigani

Kearney DCJ

16 February 1979

22 April 1981

INTEREST - Award of interest as damages - Damages for personal injuries - Discretionary power to award - Mode of exercise of power - Method of calculation - Apportionment of award for pre-judgment non-economic loss - Interest allowable at ordinary commercial rates - Law Reform (Miscellaneous Provisions) Act, 1962, s. 42.

DAMAGES - Interest on award - Damages for personal injuries - Discretionary power to award - Mode of exercise of power - Method of calculation - Apportionment of award for pre-judgment non-economic loss - Interest allowable at ordinary commercial rates - Law reform (Miscellaneous Provisions) Act, 1962, s. 42.

In exercising the discretion under s. 42 of the Law Reform (Miscellaneous Provisions) Act 1962, to award interest on an award of damages for personal injuries:

(1)      The guidelines set out in Aspinall v. The Government of Papua New Guinea [1980] P.N.G.L.R. 50, should be observed subject to the following:

(a)      method of calculation should be that set out by Moffitt P. in Bennett v. Jones [1977] 2 N.S.W.L.R. 355 at pp. 371-372;

(b)      the general rule that there should be, for the purposes of calculating interest, an apportionment of the award of damages for non-economic loss as between pre-judgment loss and post-judgment loss is discretionary and in particular cases may be unnecessary; Cullen v. Trappell [1980] HCA 10; (1980) 54 A.L.J.R. 295; 29 A.L.R. 1 per Gibbs J. at p. 15 applied; and

(c)      the interest on pre-judgment non-economic loss should be allowed at ordinary current commercial rates. Cullen v. Trappell [1980] HCA 10; [1980] 54 A.L.J.R. 295; 29 A.L.R. 1 per Gibbs J. at p. 15 adopted and applied.

Action.

This was an action for damages for personal injuries arising out of a motor vehicle accident in which there had been an award of damages and in which the plaintiff then sought an award of interest under s. 42 of the Law Reform (Miscellaneous Provisions) Act 1962.

Counsel:

I. Molloy, for the plaintiff.

G. Evans, for the defendant.

Cur. adv. vult.

22 April 1981

KEARNEY DCJ:  When judgment was delivered on 15th and 16th February, 1979, the question of whether interest on damages should be awarded was the subject of further argument.

Counsel for the plaintiff sought an award of interest at the rate of eight per cent per annum on the whole of the damages from 13th May, 1976, to 15th February, 1979; that is, from issue of writ to judgment. He referred to Jefford v. Gee[clxxix]¹ and Cookson v. Knowles[clxxx]².

I turn first to the law.

The power to award interest on damages is purely discretionary, under s. 42 of the Law Reform (Miscellaneous Provisions) Act 1962.

The guidelines to be observed in exercising that power are most lucidly set out by Wilson J. in Aspinall v. The Government of Papua New Guinea (No. 2)[clxxxi]³. I respectfully agree with his Honour’s views, subject to the following three matters.

First, there is the question of how to calculate the interest. I consider, with respect, that the correct method is described by Moffitt P. in Bennett v. Jones[clxxxii]⁴; I adopt that method, substituting the words in brackets below, for certain words used by Moffitt P., who proceeded from a commencing time of the death or accident, rather than the date of issue of writ. I take no account of the actual interest rates quoted by Moffitt P. which relate to the then state of the Australian economy. It will be seen later that I consider that only one rate of interest should apply to both non-economic and economic loss, so no problem of averaging arises. The method as described by Moffitt P. is:

“Where two or three years only elapse from (issue of writ) to the date of trial, usually it will be appropriate to award interest back to the date of (issue of writ), the rate of interest being at 4 per cent in respect of those parts, if any, of the component for the personal side of the award (i.e. for non-economic loss) which relate to detriments sustained prior to the trial, such interest to be applied from the (date of issue of writ for pre-writ detriments, and for post-writ detriments from the) time the respective detriments occur to the date of trial; and 10 per cent upon other components or parts thereof as they accrue. If, of course, the respective accruals are uniform, the foregoing will be achieved by allowing about 2 per cent for the full period on the total of the personal loss accrued to the date of trial, and about 5 per cent for the full period on the total of other losses accrued to the date of trial.

If a longer period than two to three years from (issue of writ) elapses before trial, normally the lesser rate of about 4 per cent will be appropriate to be applied to the whole of the past components from the time they accrue respectively during the period from the date of (issue of writ) to the date of trial, except that it will normally be appropriate that about 10 per cent be applied for a period of about two to three years before the trial upon the total economic components which have accrued by the commencement of that period, and thereafter at the same rate as they accrue to the date of trial. Again some rule of thumb may be appropriate to be applied. For example, if there has been a delay of say five or six years from (issue of writ) to trial, on examination, it may be found appropriate simply to apply a rate overall on losses as they accrue at say 6 per cent to 8 per cent, which result could be achieved by applying say about 3 per cent to 4 per cent for the total period to the total of the loss which has accrued by the date of trial, provided, of course, the accrual for practical purposes is considered more or less uniform. In selecting an average rate in this way it would be necessary to have regard to the relative size of the components which attract the higher and lower rates of interest, and to the circumstance that when the higher rate is applied it will operate thereafter on the loss already accrued at the beginning of the period. The last factor will tend to make the average higher than the mean between the high and low rate, in the example I have given higher than 7 per cent, or, on the rule of thumb, higher than 3½ per cent.”

Secondly, there is the question whether it is necessary for interest purposes to apportion the damages for non-economic loss as between pre-judgment loss and post-judgment loss. Wilson J., following Bennett v. Jones (supra) and Fire and All Risks Insurance Co. Ltd. v. Callinan[clxxxiii]⁵, indicates that this apportionment should be made as a “general rule”. I agree, but I think that there must be borne in mind the following words of Gibbs J., in Cullen v. Trappell[clxxxiv]⁶:

“The power to award interest ... is a discretionary power, and in the proper exercise of the discretion the judge must of course have regard to the facts of the particular case. It may sometimes be appropriate in the particular circumstances to dissect that part of the award which relates to non-economic loss and to allow interest only on the part that is awarded in respect of past loss. However I do not understand Fire and All Risks Insurance Co. Ltd. v. Callinan to require that the discretion should necessarily be exercised in that way. There is obviously a greater difficulty in dissecting into past and future loss that part of an award which is made in respect of pain and suffering and loss of amenities than there is in dealing with economic loss, and in many cases it will be unnecessary to make a dissection in the former case.” (Emphasis mine.)

The third matter is the rate of interest on non-economic loss.

In Cullen v. Trappell (supra) the trial judge had allowed interest at the rate of ten per cent on an amount of $40,000 damages for non-economic loss, without apportioning that sum as between pre-judgment and post-judgment loss. The Court of Appeal however made that apportionment, and allowed interest only on the portion allocated to pre-judgment non-economic loss. The interest allowed appears to have been four per cent; that would have been in accord with the views of Moffitt P. in Bennett v. Jones (supra). In the High Court, however, Gibbs J. disapproved of the view taken in Bennett v. Jones (supra), that the rate of interest on the non-economic loss component should be lower than the commercial rate which is allowed on that component of the award which compensates for economic loss. The rationale for the view in Bennett v. Jones (supra) and other cases had been that since damages for the non-economic loss component are calculated in terms of money-values as at the date of judgment, they automatically contain a built-in inflationary factor and so there is no reason to allow interest at normal rates as well. As to this rationale, Gibbs J. said[clxxxv]⁷:

“With all respect, this seems to me to be the same fallacy as that which misled the Court of Appeal in Cookson v. Knowles, and which was condemned by the House of Lords in Pickett v. British Rail Engineering Ltd.”

And accordingly, dealing with the rate of interest on non-economic loss, Gibbs J. held:

“Where interest is allowed, it should be allowed at ordinary commercial rates.”

In the result his Honour considered that the Court of Appeal had erred in the interest rate it allowed on the pre-judgment portion of non-economic loss; and in lieu thereof, his Honour:

“... would adopt the rate of 10 per cent taken by the learned trial judge because no effective challenge was made to its applicability.”

His Honour’s views were adopted by all but one of the Judges in Cullen v. Trappell (supra); and so do I, with respect, though not the actual interest rate quoted, which reflects the Australian economy.

Applying the guidelines formulated by Wilson J. in Aspinall v. The Government of Papua New Guinea[clxxxvi]⁸ varied as I have indicated, to the present case, I consider that interest should be allowed for the period from issue of writ to judgment, a period of two years and nine months.

As to the pre-judgment economic loss of K6000, I think it reasonable to treat all the accruals as uniform over that period.

As to general damages of K20,000, this comprises components of non-economic loss (K10,000) and future economic loss (K10,000). No interest is payable on the latter. As to non-economic loss, the greater part was sustained in the pre-judgment period; I would allocate K6500 of the K10,000 to that period, for purpose of interest calculation. Again I think it reasonable to treat the accrual of non-economic loss as uniform over that period.

The commercial rate of interest for the period in question can be taken as eight per cent.

Applying the method of calculation of the interest as described by Moffitt P. in Bennett v. Jones (supra), varied as I have indicated:

Accordingly, I award to the plaintiff the sum of K1375 by way of interest on the damages he has recovered from the defendant.

Ordered accordingly.

Solicitor for the plaintiff: Craig Kirke & Wright.

Solicitor for the defendant: Gadens.