Image credit: https://www.wallstreetmojo.com/accrued-interest-formula/ (though you really ought to know how simple interest is calculated)
I was instructed recently for a rather atypical COA motion. The facts bear repetition.
Late payment interest
The Plaintiff (P) took-out a claim against the Defendant (D) for a sum of RM243,000. P also sought contractual interest, at the rate of 1.5% per annum.
The claim was filed in July 2021. However, P sought interest from March 2021 (when the alleged breach of contract occurred). P filed for summary judgment in the Sessions Court and was successful (in December 2021). D claimed his signature was forged.
At that juncture, the principal sum was RM243,000 but the contractual, pre-judgment interest that had accrued was RM36,450 (March 2021 until December 2021 being 10 months, accruing interest of 15%).
P’s appeal to the HC was unsuccessful and D's solicitors thereafter filed an appeal to the COA.
The motion to strike
At the COA, P’s solicitors took-out a motion to strike the appeal. They claimed that the failure to file an application for leave, pursuant to s. 68(1)(a) CJA 1964, rendered the appeal incompetent (Harcharan Singh v Ranjit Kaur [2011] 3 CLJ 593; [2011] MLJU 78, FC).
I was instructed to argue the motion. The core issue before the COA would be whether the contractual pre-judgment interest (i.e., the 1.5% per month) was to be calculated in determining the term “exclusive of interest” as per s. 68(1)(a) CJA 1964.
Phung Hoe Seng v UMBC
In researching the point, I came across the COA decision of Phung Hoe Seng v UMBC [1995] 3 MLJ 487. Here, the COA specifically interpreted the term “exclusive of interest”. A very strong panel stated as follows:
Here we must explain that the words exclusive of interest under s68(1)(a) of the Act must, in our view, refer to the amount of the interest which the court awards upon its judgment on the date on which it pronounces its final order. In our opinion, it does not apply to interest which has accrued up to the date of the judgment because any other construction of these words would be to strain its purpose beyond permissible limits of construction.
Refer also: Yai Yen Hon v Teng Ah Kok [1997] 1 MLJ 136
The decision in Phung Hoe Seng is easily reconciled with the FC decision of Harcharan. The FC in Harcharan stated as follows:
[21] The time for determining the current value of the subject matter of the claim (exclusive of interest) as raised in Question No. 2, would be at the time of filing the claim. (See Yai Yen Hon v Teng Ah Kok & anor. supra).
It follows therefore that the term “exclusive of interest” applies only to the 5% court-ordered interest (which is granted as-of right). If there is any contractual interest that has accrued prior to the judgment, that figure won’t be considered. This makes complete sense when one considers that contractual-interest may amount to a triable issue (Agromate v Felcra Niaga, Civil Appeal No: W-02(NCC)(W)-1162-08/2020).
An illustration
To provide an example, imagine a claim for goods sold and delivered.
Scenario A
In Scenario A, goods are sold for RM249,000. P is not paid and a claim is filed in the Sessions Court. P also prays for 5% court-ordered interest, to run from the date of filing the claim. P applies-for and obtains Summary Judgment.
In such a situation, any appeal to the COA (after failing at the HC) must be prefaced by an application for leave. This is because the subject matter (exclusive of mandatory Court-ordered interest) falls under the RM250,000 threshold.
Scenario B
In Scenario B, goods are sold for RM200,000 on 01.01.2021. The contract contains a contractual-interest clause which mandates that interest shall accrue at a rate of 1.5% per month 1-month after delivery.
The Plaintiff files to recover the sum of RM200,000 on 01.09.2022. At this point, 31.5% of interest has accrued, bringing the interest alone to RM63,000. The total claim would, in effect, be RM263,000.
In such a scenario, the ratio in Phung Hoe Seng states that leave need not be obtained. D can file an appeal to the COA as of right (should the HC dismiss its appeal).
Conclusion
The COA panel that I argued before was with me. They accepted the ratio in Phung Hoe Seng and dismissed P’s motion to strike.
Practitioners would do well to carefully consider the motion for leave to appeal, though. Failing to determine the threshold issue adequately may cause one to fall afoul of time limits.
Considering Scenario B above, assume that the Appellant, in an abundance of caution, files a motion for leave. One may envisage a situation where the Respondent then takes out an application to strike, on the basis that leave is not required and the Appellant is out of time to file his Notice of Appeal.
A careful consideration of Phung Hoe Seng, read together with Harcharan Singh, is warranted in such a scenario. Always best to measure twice and cut once.
GAVIN JAYAPAL
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