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Panga Coffee Factory Pty Ltd v Coffee Industry Corporation Ltd [2002] PGNC 56; N2283 (27 September 2002)

N2283

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE AT WAIGANI]

WS 362 of 1996

BETWEEN:

PANGA COFFEE FACTORY PTY LIMITED

First Plaintiff

AND:

HIGHLANDS COFFEE EXPORT PTY LIMITED

Second Plaintiff

AND:

POUS TRADING COMPANY PTY LIMITED

Third Plaintiff

AND:

KUM FARMING & TRADING COMPANY PTY LIMITED

Fourth Plaintiff

AND:

COFFEE INDUSTRY CORPORATION LIMITED

Defendant

AND:

PNAGA COFFEE FACTORY PTY LIMITED

First Cross-Defendant

AND:

HIGHLANDS COFFEE EXPORT PTY LIMITED

Second Cross-Defendant

AND:

POUS TRADING COMPANY PTY LIMITED

Third Cross-Defendant

AND:

KUM FARMING & TRADING COMPANY PTY LIMITED

Fourth Cross-Defendant

AND:

WALTER PERDACHER

Fifth Cross-Defendant

AND:

PETER KEWA, WAGUO GOIYE,
RODERICK FONOVEE, EDWIN GAWONG,
LETE LYAKIS, JIMMY WARA and
JOHN KAUPA and STAFFORD OGAITA

Seventh Cross-Defendants

AND:

TEKURA RENAGI

Eighth Cross-Defendant

Waigani: Kapi DCJ
20th, 27th September 2002

INTEREST – Whether Judicial Proceedings (Interest on Debts and Damages) Act (Cap. 52) is applicable where there is provision for interest in an agreement – Whether interest is compound interest or single interest is to be determined by reference to the agreement – The agreement must make clear provision for compound interest.

Counsel:
K. Kua for the Plaintiffs – Cross Defendants
I. Molloy for the Defendant – Cross Claimant

27th September 2002

KAPI, DCJ: On 16th February 2001, I dismissed the cross claim by the Defendant – Cross Claimant against the Plaintiffs – Cross Defendants and I made the following orders:

"1. That Panga pay to CIC K10,918.80 as money due under the stock retention agreement.

2. That Panga pay interest on this at 24% per annum as agreed in the stock retention agreement as from June 1991.
   
3. Declare that the deed entered in 1995 is null and void.
   
4. The claim for damages for fraud is dismissed"
   

The Defendant – Cross Claimant entered the formal orders in these terms:

"1. The First, Second, Third and Fourth Defendants referred to as Panga in the judgment (hereinafter referred to as the Cross-Defendants) pay the Cross-Claimant K10,918.80 as money due under the stock retention loan agreement.

2. The Cross-Defendants pay to the Cross-Claimant, interest in the sum of K77,937,319.07 being interest calculated on the above at 24t% per annum as agreed in the stock retention loan agreement from June 1991.
   

3. The Deed entered in 1995 is null and void.

4. The claims for damages for fraud by the Cross-Claimant is dismissed.
   
5. The question of costs will be argued at a date to be fixed on 15th March 2001.
   
6. Time of entry of judgment be abridged to the date of settlement of the Order."
   

The Plaintiffs – Cross Defendants filed notice of motion on 22nd March 2001 seeking the following orders:

"1. An order under Order 8 Rule 59 of the effect that the Orders filed and sealed by this Court on or about 20th February 2001 in proceedings commenced by Writ of Summons No. 362 of 1996 be amended by:

(1) deleting paragraph 1 of the order and it its place inserted the following:-

‘The First Cross-Defendant namely, Panga Coffee Factory Industry Ltd pay the Cross-Claimant Coffee Industry Corporation Ltd K10,918,088 as money due under the Stock Retention Agreement.’

(2) Deleting paragraph 2 of the order and its place inserting the following:-

"That Panga Coffee Factory Ltd pay interest on the sum (K10,918,088.80) at 24% per annum as agreed in the Stock Retention Agreement as from June 1991."

In respect of orders sought in paragraph 1 (1) and (2) in the motion, counsel for the Defendant – Cross Claimant consents to the orders sought.

The matter of dispute is whether the interest referred to in the order means simple interest or compound interest.

Counsel for the Plaintiffs – Cross Defendants at first raised the issue whether this is a matter which falls within the jurisdiction of the Court in an application under O 8 r 59 of the National Court Rules. However, he conceded that I have jurisdiction to deal with the disputed matter on the motion filed before me. I have proceeded to deal with this issue on that assumption.

Counsel for the Plaintiffs – Cross Defendants simply submits that the interest referred to in this order cannot mean compound interest. He relies on ss 1 and 2 of the Judicial Proceedings (Interest on Debts and Damages) Act (Cap. 52):

"Being an Act to make provision for interest on certain judgements.

1. Interest on certain debts and damages.
   

Subject to Section 2, 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 the judgement.

2. Interest on interest, etc.
   

Nothing in Section 1 –

(a) authorizes the awarding of interest on interest; or
(b) applies in relation to a debt on which interest is payable as of right, whether under an agreement or otherwise; or
(c) affects the damages recoverable for the dishonour of a bill of exchange."

On the other hand, counsel for the Defendant – Cross Claimant submits that the Judicial Proceedings (Interest on Debts and Damages) Act is not applicable where there is an agreement. He submits that whether interest payable is simple interest or compound interest is to be determined by reference to the terms of the agreement.

Section 1 of the Act is "Subject to Section 2 ... ." Section 2 (b) expressly states that Section 1 is not applicable to interest payable under an agreement. The Stock Retention Agreement makes provision for interest. Consequently s 1 of the Act is not applicable.

The general rule is that compound interest must be provided in the agreement either expressly or by necessary implication. In absence of such clear indication, the interest should be simple interest (see Daniell v Sinclair (1880-81) 6 AC 181 and Domaschenz v Standfield Properties 17 SASR 56).

Counsel for the Defendant – Cross Claimant submits that the Stock Retention Agreement stipulates that interest should be compound interest. Reliance was placed on paragraph 5 of one of the numerous Stock Retention Agreements:

"If the exporter shall at any time fail to pay to the Board any monies whatsoever required to be paid by the exporter pursuant to the provisions of this Agreement then the exporter shall pay interest on such monies at the rate of 24 percent per annum on so much of the monies as remains unpaid from time to time...till full payment of the said monies and interest is received by the Board. Interest shall accrue from day to day and shall accrue on the basis of a year of three hundred and sixty five days."

Counsel for the Defendant – Cross Claimant submits that this paragraph expressly provides for compound interest. Counsel for the Plaintiffs – Cross Defendants submits that the paragraph as it is drafted is not clear and may be read either way. He therefore submits that the interest should be simple interest.

Having regard to the terms of paragraph 5 of the Agreement, it is not clear whether this provides for simple or compound interest. Counsel have not referred to any other provision or any other evidence which might imply the nature of the interest. In the circumstances; I cannot be satisfied that this paragraph makes provision for compound interest. Consequently I find that the interest in the agreement is for simple interest.

The formal orders of the Court are as follows:

1. That the First Cross Defendant namely, Panga Coffee Factory Ltd pay the Defendant Cross – Claimant Coffee Industry Corporation Ltd K10,918,80.80 as money due under the Stock Retention Agreement.
   
2. That Panga Coffee Factory Ltd pay simple interest on this sum (K10,918,088.80) at 24% per annum as agreed in the Stock Retention Agreement as from June 1991.
   
3. That Defendant – Cross Claimant to pay the costs of the motion on party and party basis.
   

Lawyers for the Defendant – Cross Claimant : Warner Shand
Lawyers for the Plaintiffs – Cross Defendants: Posman Kua Aisi