R. Prasad Ltd v Deo [2011] FJHC 683; HBC178.2004 (28 September 2011)

IN THE HIGH COURT OF FIJI ISLANDS
AT SUVA
CIVIL JURISDICTION

Civil Action No: HBC 178 of 2004

BETWEEN:

R. PRASAD LIMITED & LAMI INVESTMENTS LIMITED
1st Plaintiffs

AND:

RATTAN DEO
2nd Plaintiff

AND:

RUDRA PRASAD & PRATITA PRASAD
1st Defendants

AND:

ANIL PRASAD
2nd Defendant

Counsel: Mr. B. C. Patel for the 1st & 2nd plaintiffs
Mr. V. Kapadia for the 1st defendant
Mr. V. Naidu & Mr. N. Nand for the 2nd Defendant.

Date of Judgment: 28th September, 2011

JUDGMENT

1. This is the 1st defendant's motion seeking an order against the plaintiffs and the second defendant to pay interest on the Arbitration Award in a sum of $1,341,422.44 from 1st December 2000 to 31st July 2008 at the rate of 12%.
   
2. In support of the motion two affidavits were filed by Rudra Prasad, the 1st named 1st defendant.
   
3. Opposing the summons the 2ndplaintiff has filed an affidavit dated 08.10.2008.
   

Background of the case

4. This action concerns a dispute between Rudra Prasad, the 1st defendant and Anil Prasad relating to the business and properties of the R. Prasad Companies. Rudra Prasad, Anil Prasad and the 2nd plaintiff Rattan Deo are brothers.
   
5. Due to some differences among the parties, they agreed to distribute the assets and business of the R. Prasad Group between shareholders with effect from 1.12.2000.
   
6. On 12.03.2002, the parties executed a Deed of Settlement, which gave effect to the distribution of the assets and the business, based on a valuation dated 26.02.2002, prepared by Shyam Narayan, the group accountant of R. Prasad group with the agreement of all parties. The assets and the business were distributed in accordance with the deed.
   
7. However, the Deed of Settlement acknowledged that all the parties did not accept the first valuation as a final valuation. It further provided for a mechanism to make submissions to Shyam Narayan on the matters objected to, so that the final valuation would be made by Shyam Narayan.
   
8. Having received representations from the parties, Shyam Narayan issued his final valuation on 13.04.2004. There, he decided that a sum of $1,486,628.61 payable to the 1st defendant but subject to 11 outstanding issues.
   
9. Before those 11 issues were resolved, the 1st defendant made demand on the 1st and 2nd plaintiffs for the sum of $ 1,486,628.61, and served winding-up notice on the companies.
   
10. Consequently, the plaintiffs obtained an interim injunction restraining the 1st defendant from proceeding with the claim and winding up action.
    
11. The Deed of Settlement also provided for arbitration in the event of Shyam Narayan failing to resolve all the issues. Subsequently, the 1st defendant's solicitors wrote to the 2nd plaintiff suggesting the name of Vishnu Deo as the arbitrator to resolve the 11 issues.
    
12. Due to failure of the parties to agree upon an arbitrator, an application was made to the court, and on 27.01.2006, High Court made order for arbitration and Waton Morgan was appointed arbitrator on 27.01.2006. Pursuant to the arbitration agreement, the arbitration was concluded and the award was made on 31.07.2008. Accordingly, the 1st defendant transferred their shares in Lami Investments Ltd, and R.Prasad Ltd from 01.12.2000.
    
13. In accordance with the arbitration award the 2nd plaintiff paid the sum of $801,497.00 on 13.08.2008 and $539,924.95 on 19.08.2008.
    
14. The 1st defendant thereafter filed the Notice of Motion seeking an order that the 2nd plaintiff and the 2nd defendant should pay interest on the Arbitration Award from the 1st of December 2000 to the 31st day of July 2008 at the rate of 12%.
    
15. In his affidavit in support, the 1stdefendant states that the first defendants effectively transferred their shares in Lami Investments Limited and R Prasad Ltd from 1st December 2000.
    
16. It is further stated that the arbitration award fixed the amount taking into account the 11 outstanding issues and the amount arrived in the award was $1,341,422.44 payable to the first defendants.
    
17. Furthermore, it is deposed that the shares were transferred from 1st December 2000, and all their interest in the two companies were taken over by the second defendant and the second plaintiff, they should pay interest on the arbitration award from 01.12.2000 to 31.07.2008 at a rate of 12%.
    
18. In response to the 1st defendant's affidavit, the 2nd plaintiff Rattan Deo has filed an affidavit. The facts of the affidavit can be summarized as follows;
    
19. The 1st defendant together with the 1st defendant and his wife joined as shareholders and directors of R. Prasad Ltd. Subsequently, they formed Lami Investment Ltd. Due to differences among the brothers in early 2000 several meetings were held by the shareholders to agree upon a method to distribute the business and assets of the two companies.
    
20. The parties agreed to let the company accountant Shyam Narayan to complete a valuation thereafter. The valuation was to determine what, if any, money was due by Anil Prasad and Rattan Deo to Rudra Prasad and Pratita Prasad. However, there were no discussions to pay any interest to them.
    
21. Accordingly, Shyam Narayan prepared a valuation report and valued the business and properties of the two companies at $ 10,605,532.78 and Rudra's and Pratita's share as $ 5,825,592.66.
    
22. The 2nd plaintiff admits that Shayam Narayan completed a valuation of business and assets but denies the fact that there is any agreement to pay any interest.
23. It is further deposed that Shyam Narayan's valuation dated 26.02.2002 was not a final valuation, but, in fact, a provisional valuation.
    
24. Clause 4(d) and (e) of the Deed of Settlement specifically provided for arbitration in the event Shyam Narayan was not able to resolve all the issues.
    
25. Clause 4 (d) of the Deed of Settlement reads:
    

The parties agree that in the event of any dispute between the parties on the method, principles, omissions, additions or substantiation used by Shyam Narayan to calculate the valuation of shares, then the issues in dispute are to be referred to an arbitrator who shall listen to the dispute and make recommendations to Shyam Narayan. The parties further agree that Shyam Narayan and Ramesh Patel will appoint arbitrator.

Clause 4 (e) of the Deed of Settlement reads:

'Shyam Narayan Shall after considering the submissions made by all the parties and/or their independent experts and the recommendations by the arbitrator, declare the final valuation of the shares which shall be final and binding on all the parties and shall not be subject to any challenge in any court of law.'

26. The deed provides for a procedure for Shyam Narayan to receive representation from the parties to determine their queries and clause 4 (d) and (e) specifically provided for arbitration in the event of Shyam Narayan beings unable to resolve all the issues.
    
27. It is apparent that the valuation prepared by Shyam Narayan although titled 'final valuation' is in fact a provisional valuation because there were some 11 outstanding issues which involved claims and counters claims by the parties. This was further evident by the letter of S. Narayan dated 13.04.2004.
    
28. On 30.05.2007, the parties entered into a formal arbitration agreement. The purpose of an appointing the arbitrator was to resolve the 11 outstanding issues and also to determine what further amount, if any, was due to the 1st defendant.
    
29. The arbitrator made his award on 31.08.2008.
    
30. The issue before this court is very clear; whether the court has jurisdiction to award interest on the arbitration award under section 3 of the Law Reform (Miscellaneous Provisions)(Death & Interest) Act (cap 27), when there is no judgment by the court.
    
31. The paragraph 111 of the Award reads as follows:
    

'I do not accept Mr Nagin's submissions. The plaintiffs were entitled in my view to withhold payment of the $ 1,486,628.61 until the eleven outstanding issues had been resolved. Resolution of the issues could affect the amount due. They had no option but to take out the court proceedings and to obtain the injunction to forestall further action by Rudra on his demands in particular the threatened winding up action. Rudra could also be accused of hardening attitudes by making his demands and threatening winding up action.'(Emphasis added)

32. Therefore, the arbitration award made clear that the plaintiffs were entitled to withhold payment of the $1,486,628.61, until the eleven outstanding issues were resolved. If the plaintiffs were entitled to withhold the payments till the eleven outstanding issues were resolved, the 1st defendant cannot ask for interest on the amount determined by the arbitration award because only after the award was made the 1st defendant became entitled to the amount so awarded.
    
33. Further, the issue of interest had never been discussed in the arbitration. Also, there is no provision in the Deed of Settlement to pay interest to the 1st defendant.
    
34. Section 3 of the Law reforms (Miscellaneous Provisions)(Death and Interest) Act reads:
    

In any proceedings 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 judgment.

Provided that nothing in this section-

(a) Shall authorize the giving of any interest upon 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; or

(c) Shall affect the damages recoverable for the dishonor of a bill of exchange.

35. In light of the above section, it is explicit that to award interest there must be a judgment by the court. An interest can be ordered for the whole or any part of the period between the date of the judgment and the date when the cause of action arose. In the present case it is apparent that the 1st defendant has not had a cause of action until the arbitration award was made because it was only after the 11 outstanding issues were resolved, the 1st defendant became entitled to the amount awarded.
    
36. The arbitrator made his award on 1.07.2008 and ordered that additional $1,341,422.44 were due and payable to the 1st defendant. It was paid to the 1st defendant in August 2008. It must be noted that the award sum has already been paid to the 1st defendant. Since the award sum has been fully paid there exists no award to be enforced by court. In other words, the parties have fully complied with the award.
    
37. Further, the court can order an interest only upon delivering a judgment. In the present case, there is no judgment as such. The arbitration tribunal award also did not deal with the issue of interest. More importantly, the arbitration award is an out of court decision.
    
38. When there is no judgment delivered by Court, parties cannot ask for an interest upon a sum which was awarded as an out of court award. The arbitration award was also not enforced by the court but was paid by the parties.
    
39. As explicated in Jefford & Another v. Gee [1970] EWCA Civ 8; [1970] 1 A.E.R. 1202, an interest should be awarded to a plaintiff not as compensation but for being kept out of money which ought to have been paid to him. In that case Lord Denning dealt with the issue of interest as follows:
    

'If a plaintiff takes the money out of court in satisfaction of the claim, that is the end of the case. He gets no interest because there is no judgment. The 1934 Act only entitles to interest when he gets a judgment'.

40. Further, in Harbutt's v. Wayne Tank Co. [1970] 2 W.L.R. 198 at 213 Lord Denning dealt with the issue of interest as follows:
    

'An award of interest is discretionary, it seems to me that the basis of an award of interest is that the defendant has kept the plaintiff out of his money; and the defendant has had the use of it himself. So he ought to compensate the plaintiff accordingly'

41. The 1st defendant submits that the arbitration award will be a part of the judgment and interest ought to be included in the same. Further, it is submitted that the plaintiffs were unjustly enriched with large profits while the 1st defendant suffered.
    
42. Furthermore, the 1st defendant submits that the amount decided in the arbitration award was payable on 1.12.2000.
    
43. Having cited Suva City Council v. Ben [2006] FJCA 79, Birch v. Joy 3 H2C 565 and Inglewood Pulp and paper Ltd v. New Brunswick Electrical power Commissioner [1982] AC 492, the 1st defendant argued that the 1st defendant became the owner of the money on 1.12.2000.
    
44. However, a careful analysis of the Inglewood case shows that the facts and the circumstances in that case are totally different from the present action and therefore, is clearly distinguishable from it. In Inglewood case, it was stated that 'the purchaser cannot retain the purchase money and at the same time be placed in occupation of the land or in receipt of the rents and profits, unless he pays interest on the purchase money, representing, as it does, the capital contained in the land. What is significant in the present case is that until the 11 outstanding issues were resolved and the arbitration award was made there was no certainty that the 1st defendant would get the amount determined in the arbitration award.
    
45. Further, at the time of the Shyam Narayan's valuation there was no debt in existence among the parties. The first defendant's entitlement was determined only by the arbitration award. Therefore, it cannot be inferred that the 1st defendant was being kept out of money by the plaintiff since 2000. The arbitrator has also very clearly stated that the plaintiffs were entitled to withhold payments of the $ 1,486,628.61 until the eleven issues had been settled, which further demonstrates that the 1st defendant was not entitled to the amount determined in the award until 31.07.2008.
    
46. If the plaintiff was entitled to withhold the payment till the 11 outstanding issues were resolved, the 1st defendant cannot claim interest on the award sum nor can he suggest that the plaintiff unjustly enriched by withholding the said sum.
    
47. Therefore, there is no basis to say that the plaintiffs withheld any money belonging to the 1st defendant or had used the 1st defendant's money between the period of 1.12.2000 and 31.07.2008. Hence, on analysis, I am not persuaded that, any of the above grounds advanced by the 1st defendant had any merits.
    
48. In the present case, the company accountant Shyam Narayan's valuation failed to resolve all the outstanding issues; and, therefore, in terms of the provisions contained in the Deed of Settlement, the parties referred the dispute to arbitration. The award sum was determined by the arbitration tribunal; hence, there is no judgment delivered by court. The 1st defendant became entitled to the award only after 31.07.2008.
    
49. Therefore, it is incorrect to say that the 1st defendant was being kept out of money since 1st December 2000 because the 1st defendant became entitled to the award sum only after the 11 outstanding issues were settled.
    
50. In other words, it is the arbitration award which determined the 11 outstanding issues which could not be settled by the company accountant. The 1st defendant became entitled to the amount only after the arbitration award was made. It must be emphasized that the arbitration award was made as a result of an out of court process. No party sought court's indulgence in order to enforce the award and also there has been no challenge to any part of the award by any of the parties. Further, there is no judgment delivered by the Court. In the absence of a judgment Court cannot award any interest.
    
51. Clause 5.4 of the Arbitration Agreement reads:
    

'The award shall be final and binding on the parties in all respects subject only to the provisions of the Arbitration Act and either party shall have the right to file the award in the High Court at Suva for the purpose of having judgment in terms of the award.'

52. When the dispute was submitted for the award, order and determination of the arbitrator, the parties expressly agreed to be bound by the decision of the arbitrator. Therefore, when the award was made, parties must not expect any relief which was not initially asked for.
    
53. In the present case when the dispute was submitted to arbitration and was being heard in the tribunal, no issue of interest was raised or discussed and, therefore, the 1st defendant cannot ask interest on the award sum once it was delivered and complied with by the parties without any intervention of court.
    
54. Power of Court to award interest on debts paid which were not subject to judgment of Court in relation to section 3(1) of the Law Reform (Miscellaneous Provisions) Act was dealt with by Hewson J. in The Medina Princes [1962] 2 Lloyd's Law Reports 17 at 21 as follows:
    

It is quite unnecessary in a claim for damages or in respect of a debt to claim for interest, but it seems to me that this Court has no power to order, and there is no discretion in the matter of ordering, interest to be paid unless it has given judgment in respect of the damages or debt. The words of the section are "shall be included in the sum for which the judgment is given". This Court has given no judgment in respect of any sum and, so far as I can see, is not empowered to award interest upon sums which have already been paid and which have not been the subject of its judgment.

It seems to me that I am bound by the Law Reform (Miscellaneous Provisions) 'Act 1934, and, reluctantly, I feel I am unable to assent to the plaintiff's request that I deal by way of motion with the matter of interest on wages claimed and already paid.

I have been given to understand, although all the correspondence is not before the Court, that certain negotiations took place, and it may be that in the negotiations these questions of interest were raised and it may be that the plaintiffs have an action there; but in my view this Court is not competent to award interest upon a motion when it has not given judgment upon the principal sum claimed.'

55. Normally, an arbitration award takes effect from the date of its publication and not from a past date unless it is specifically stated in the award. Therefore, the 1st defendant became entitled to the amount only from the date of award i.e. from 31.07.2008.
    
56. It is evident that the award sum became due and payable on 31.07.2008, by virtue of provisions of clause 4(d) and (e) of the deed of settlement, clause 2(iii) of the Arbitration Agreement dated 30.05.2007 and the arbitration award dated 31.07.2007.
    
57. On the above premise, I conclude that the 1st defendant is not entitled to claim interest on the arbitration award. Accordingly, I dismiss the 1st defendant's motion.
    
58. Costs – the plaintiff and the second defendant are awarded costs in the sum of $500.00 each.
    

Pradeep Hettiarachchi
JUDGE

At Suva
28th September, 2011