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Gilsenan Melpa Pty Ltd v Yalu [1993] PNGLR 132 (16 July 1993)

PNG Law Reports 1993

[1993] PNGLR 132 - Gilsenan Melpa Pty Ltd v Tom Yalu 

[1993] PNGLR 132

N1161

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

GILSENAN MELPA PTY LTD

V

TOM YALU

Mount Hagen

Woods J

2 July 1993

16 July 1993

INTEREST ON DEBTS - Notice on invoice - Whether agreement for interest enforceable - Interest sole cause of action - Powers of court limited - Judicial Proceedings (Interest on Debts and Damages) Act Ch 52.

Facts

The respondent owed the appellants a sum of money for work done. There was delay in payment and appellant sought to impose interest at 2% per month on overdue charges. He sued to recover the interest.

Held

1.       The only legislation which refers to interest on debts is the Goods Act Ch 251, which is not relevant here, and the Judicial Proceedings (Interest on Debts and Damages) Act Ch 52, which at s 1 states: "...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 judgment 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 judgment."

2.       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.

Cases Cited

Papua New Guinea cases cited

Wallace v Motor Vehicles Insurance (PNG) Trust (1991) unreported N1037.

Other cases cited

F A Pidgeon & Son v Daneshurst Investments [1986] 1 Qd R 448.

London, Chatham and Dover Railway Co v South Eastern Railway Co [1893] UKLawRpAC 41; [1893] AC 429.

W Thomas & Co Ltd v Welk [1935] SAStRp 15; [1935] SASR 165.

Counsel

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 respondent's 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. 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 Ch 251, which at s 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 or special damages are recoverable"; and, secondly, the Judicial Proceedings (Interest on Debts and Damages) Act Ch 52, which at s 1 states: "... 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 judgment 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 judgment."

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. As Connolly J stated in F A Pidgeon & Son v Daneshurst Investments [1986] 1 Qd R 448 at 451 when referring to legislation similar to the above:

"Lord Denning M R at p 661 of Tehno-Impex had said that the Act only applied where judgment 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 monies for which they were giving judgment. 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 s 2 notes that s 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] UKLawRpAC 41; [1893] AC 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 Motor Vehicles Insurance (PNG) Trust (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 judgment solely on a claim for interest in the absence of any clear agreement. The power in a court to order interest only exists when there is a principal sum of damages or debts for which judgment is given. However, in that case the Judge was able to enter a judgment for the amounts which had been the subject of prior negotiation and settlement and then considered and awarded 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 [1935] SAStRp 15; [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. It was a pity that he was not referred to the relevant authorities and principles, which is why he did express some doubts in his ruling.

I dismiss the appeal.

Lawyer for the appellant: P Dowa.

Lawyer for the respondent: Kunai & Co.