Papua New Guinea Law Reports - 1985
[1985] PNGLR 44
N499
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
POST AND TELECOMMUNICATION CORPORATION
V
TAKOA PASTORAL COMPANY PROPRIETARY LIMITED
Waigani
McDermott J
23 February 1985
1 March 1985
PRACTICE AND PROCEDURE - Judgment by default - Claim for liquidated sum plus statutory interest - Statutory interest discretionary - Statutory interest not to be included in judgment by default - Interest severable - National Court Rules, O 12, r 27 - Judicial Proceedings (Interest on Debts and Damages) Act (Ch No 52), s 1.
INTEREST - Interest on judgment - Statutory provision for - Award of within discretion of court - Award of not part of claim for liquidated demand - Award of not to be included in judgment by default - Award of severable - Judicial proceedings (Interest on Debts and Damages) Act (Ch No 52), s 1.
JUDGMENTS AND ORDERS - Judgment irregularly obtained - Judgment by default - Statutory interest improperly included - Award of interest severable.
A plaintiff issued a specially endorsed writ claiming therein liquidated damages and “interest” on the said sum pursuant to the provisions of the Judicial Proceedings (Interest on Debts and Damages) Act (Ch No 52). The defendant having failed to file a defence within time the plaintiff obtained judgment by default pursuant to the National Court Rules, O 12, r 27, for the sum of the liquidated damages claimed and interest until judgment of K806.58 and thereafter calculated at eight per cent until payment.
The Judicial Proceedings (Interest on Debts and Damages) Act, s 1, provides in respect of proceedings for recovery of a debt that “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 an application to set aside the judgment;
Held
(1)      Interest awarded under the Judicial Proceedings (Interest on Debts and Damages) Act, being a matter for the exercise of the court’s discretion cannot form part of a default judgment for a debt or liquidated demand for the purposes of the National Court Rules, O 12, r 27.
Spain v Union Steamship Company of New Zealand Ltd (1923) 32 CLR 138 at 142 and Dalgety Futures Pty Ltd v Poretsky [1980] 2 NSWLR 646 at 650, followed.
Smeeton v Davara House Pty Ltd [1979] PNGLR 324, considered.
(2)      As the only part of the judgment which had been irregularly obtained was the judgment for interest justice would be done between the parties by excising the sum for interest from the judgment.
Cases Cited
Bank of South Pacific Ltd v Spencer [1983] PNGLR 239.
Dalgety Futures Pty Ltd v Poretsky [1980] 2 NSWLR 646.
Philips Industries Holdings Ltd v Debrueys [1977] Qd R 193.
Provex Pty Ltd v Yule Lobster Enterprises Pty Ltd (Unreported judgment, 20 November 1981).
Ruby v Marsh (1975) 132 CLR 642; 6 ALR 385.
Smeeton v Davara House Pty Ltd [1979] PNGLR 324.
Spain v Union Steamship Company of New Zealand Ltd (1923) 32 CLR 138.
Summons
This was an application made pursuant to the National Court Rules, O 1, r 9, to set aside a judgment by default.
Counsel
N Diakos, for the applicant/defendant.
R Gunson, for the respondent/plaintiff.
Cur adv vult
1 March 1985
MCDERMOTT J: On 6 November 1984, a judgment was obtained against the defendant, in default of the defence, filing for K80,000 plus interest calculated from the date of filing the statement of claim until judgment (K806.58) and thereafter, calculated at eight per cent per annum until payment, plus costs.
The claim was for return of deposit paid to the defendant allegedly pursuant to a conditional contract entered into between the parties whereby the plaintiff agreed to buy from the defendant certain land and the buildings thereon situated in Boroko. This agreement was negotiated over a period between December 1983 and January 1984. Certain conditions were not fulfilled and the return of the deposit was demanded on 3 August 1984.
There was an alternative claim for the return of the K80,000 — this time as money paid to the defendant “in contemplation of the parties entering into an agreement for sale...”. I leave aside the cause of action for the moment.
There is no written agreement for sale as such — it has to be constructed out of the correspondence passing on behalf of the principals. There is thus no written term, express or implied, as to the payment of any interest. How is it therefore claimed?
In the writ of summons the claim for interest is in the following terms:
“Interest on the said sum pursuant to the provisions of the Judicial Proceedings (Interest on Debts and Damages) Act (Ch No 52).”
The Act allows interest on proceedings for the recovery of a debt: “... 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 the judgment.” (s 1)
The section relied upon by the plaintiff is in similar terms to the Supreme Court Act 1970 (NSW), s 94. The rate of interest there is not specified either, but it is clear it is one “... related to the marketplace subject to the limit allowed by the legislature”, per Barwick CJ in Ruby v Marsh (1975) 132 CLR 642; 6 ALR 385 at 395. Eight per cent was chosen pursuant to the National Court Rules, O 4, r 10(2).
The plaintiff made a money claim for a sum certain — the return of a deposit. This claim was not met and was sued for, together with interest, under the Act. Clearly, from the wording of the section, the award of interest involves the exercise of a discretion. What the plaintiff is really doing in the claim is asking for an order for interest. By obtaining a default judgment with interest included, in reliance upon O 12, r 27 of the National Court Rules, the plaintiff in effect exercised the court’s discretion. The plaintiff chose the rate of interest to be applied and the period over which it would run. This presented the Registrar with a fait accompli.
In my view this cannot be done. It confuses the nature of the claim and the procedural remedy used to obtain it. The claim is a debt or liquidated demand, the default judgment is not for a liquidated sum. The statement in Odgers on Pleading and Practice (5th ed) at 41, that “whenever the amount to which the plaintiff is entitled ... can be ascertained by calculations fixed by any scale of charges, or other positive data, it is ... liquidated”, was approved by Knox CJ and Starke J in Spain v Union Steamship Company of New Zealand Ltd (1923) 32 CLR 138 at 142. The total default judgment does not represent a liquidated demand, as it includes the statutory interest claim as Rogers J said in Dalgety Futures Pty Ltd v Poretsky [1980] 2 NSWLR 646 at 650:
“... It is clear enough that an award of interest under s 94 is an award of damages in the nature of interest .... Until the Court determines, at a hearing of some kind, whether or not interest should be awarded; and if so, at what rate and for what period, there can be no means of determining what payment of money would be sufficient to discharge that part of the claim. Again the provision which the rules make for signing default judgment in respect of a liquidated demand only (Pt 17, r 4) — (our O 12, r 27) are incapable of accommodating a situation in which there is, in addition to the sum being a liquidated demand, a claim for interest under s 94.”
Earlier in Smeeton v Davara House Pty Ltd [1979] PNGLR 324, Saldanha J came to the same conclusion after considering the Law Reform (Miscellaneous Provisions) Act (1962), s 42(1), the source of the present provision, even though it refers to “proceedings tried in a court”, and he particularly referred to the “tried” provision. It may well be arguable that the editors of the Revised Laws have effected a substantial change in the law. However, I have not heard argument on that and have concluded the matter upon the discretionary provision which remains essentially the same. On the authority of this decision and the authorities therein quoted, the defendant seeks to have the whole judgment set aside as it was irregularly obtained.
Certainly the judgment for interest cannot stand. It seems to me that is the only part of the judgment which can be said to be irregular. Is it severable from the liquidated sum?
In Philips Industries Holdings Ltd v Debrueys [1977] Qd R 193, the Registrar referred a question to the court on the amount of a default judgment to be entered on a specially endorsed writ claiming money for goods sold and delivered plus interest which was not mentioned in the contract but was claimed in the writ. This is similar to what is before me. Mathews J gave a direction that judgment be entered for the liquidated sum only, but, of course, judgment had not previously been entered. Here it has. In an unpublished judgment Bredmeyer J in Provex Pty Ltd v Yule Lobster Enterprises Pty Ltd dated 20 November 1981, excised the interest, to do justice between the parties (Constitution, s 158(2)). In my view the present case can be distinguished from Smeeton (supra) and Bank of South Pacific Ltd v Spencer [1983] PNGLR 239. I consider that by excising the amount given for interest justice can be done, and I so order. That then leaves a judgment on foot for K80,000 plus costs.
The second limb of the argument to set aside is the conventional one based upon explanation of delay, no prejudice to the plaintiff and more importantly disclosure of a good defence on the merits of the plaintiff’s claim.
The writ issued on 20 September 1984, judgment was entered on 6 November and the application to set aside was filed on 13 November 1984. A notice of intention to defend was filed on 4 October 1984, but the defence was not. A letter of forbearance from the defendant’s lawyers was not received prior to judgment. I do not consider delay a problem or that in setting the judgment aside the plaintiff will be prejudiced: but what of the defence?
As a matter of law the consent of the Minister for Finance is required for this sale, see Public Bodies Financial Administration Act (Ch No 6), s 14. A conditional contract is denied. In a draft defence it is intended to plead: “That it was a contractual obligation of the plaintiff to obtain such approval.” I find this suggestion difficult to accept. In the little correspondence before me which is said to constitute the contract, this approval seems to have been forgotten by both parties, yet it is one which binds them and cannot be ignored.
The second alleged condition — satisfaction of requirements under the Building Act (Ch No 301), and Regulations and Town Planning Act (Ch No 205) — is also denied. The defendant says that renovation and upgrading done to the property as a result of the negotiations was done at the plaintiff’s request and not to meet statutory requirements. This has given rise to a substantial counter-claim which also includes loss of rental to comply with vacant possession demands. It is submitted that the work done to the premises is indicative of a subsisting contract.
If the correspondence constitutes a contract it leaves out as much as it says. It is a most unsatisfactory way to conduct business on this scale. On my reading of it there is agreement on lease occupation prior to settlement and agreement for certain works to be done — for whatever reason, and this work appears to have been done. The defendant intends to plead simply that the correspondence is a contract to purchase. There cannot be such a contract without the Minister’s consent.
As to the counter-claim, again it is founded upon “the contract”. No alternatives have been alluded to. A counter-claim is in reality the defendant’s statement of claim. I am in no position to conclude that a defence on the merits is open on the proposed pleadings. What I perceive to be the possibilities of a counter-claim have not been pleaded. The affidavits in support of a defence on the merits do not really address the possibilities I allude to either. I, therefore, come to the conclusion that the judgment must stand.
Orders accordingly
Lawyer for the applicant/defendant: Kirkes.
Lawyer for the respondent/plaintiff: R C Gunson.