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TMI Blog1945 (6) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... claim to a sum of Pound 36,255. He had justly claimed to be entitled to a half share of the profits realised by Mr. Ridsdel in a certain transaction. Mr. Ridsdel had paid him a sum much less than that to which he was entitled, and Pound 32,255 was the balance which remained due. A plea of accord and satisfaction failed, because, as the judge found, Mr. Riches" consent to take the smaller sum had been induced by the fraudulent misrepresentations of Mr. Ridsdel. After giving judgment, the learned Judge exercised in favour of Mr. Riches the discretion given to him by Section 3(1) of the Law Reform (Miscellaneous Provisions) Act, 1934, which is as follows : "In any proceedings tried in lay Court of record for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall 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 the judgment." The learned Judge awarded interest at 4 per cent per annum from June 14, 1936, to May 14, 1943. The formal judgment, as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow, but that is not the language of the Act. The provision that the interest awarded is to be "included in the sum for which judgment is given" seems to me to carry the matter no further. Nor can I attach importance to the fact that the interest awarded to compensate the plaintiff for what age has lost thought the defendants delay in paying a just debt. Finally, I am by no means persuaded that this interest is excluded from the wide words of the taxing Act because, as was said, it is non-recurrent. What the judge does in a case like this is, first to him to say, if he thinks fit, that, as the sum ought to have been paid at that date, it is right that it should bear interest as from that date. The order is retrospective, but I see no reason to think that a right to receive interest, in the sense in which that word is used in Schedule D, may not come into being as the result of a retrospective order. If we were dealing, not with a statute, but with a contract with resulted in an analogous position, I think that there could be little doubt about the matter. Suppose, for instance, that A lends Pound 1,000 to be repaid at the end of three years with such interest, if any, as C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be one of some difficulty. It follows necessarily from the language of Section 3 of the Act of 1934 that the sum awarded by way of interest is included in the judgment debt. Throughout the argument I felt, and I fear that I too often expressed, a doubt whether a defendant who is required by the order of the Court to pay a judgment debt for a fixed sum (which includes interest) can be said to be making a payment of interest when he pays that sum. As between himself and the judgment creditor, there is no longer a liability to pay the interest which is included in the judgment debt. That liability to lay the interest which is included in the judgment. debt. That liability is superseded by, or merged in, the judgment debt. If the judgment debtor fails to pay the judgment debt, he cannot be made liable in a further action for interest, but he is technically liable to be sued on the judgment. This is trite law, and no authority need be cited for it. Suffice it to say that the principle was stated by B., in King v. Hoare, and that some of the relevant cases are collected in Bullet and Leakes Precedents of Pleading (9th ed.), at P. 212. Counsel for the respondents did his best on dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was that which the House of Lords decreed to be due in Regal (Hastings), Ltd. v. Gulliver. We are obliged to Cassels, J., for furnishing us with a copy of his written judgment. After full consideration, I am bound to say that the doubt which I have expressed seems to me to have a sound logical foundation and has not been wholly removed. When Oliver, J., awarded interest he, at the same time, uno flatu, included it in the judgment debt. It cease, therefore, to be due as interest, and I find some difficulty in saying that payment of a judgment debt is payment of interest, even when an examination of the record shows that the debt includes interest. Since interest as such is not due and owing, it is difficult to see how what the doubter pays can be called interest. I confess that I was the more attracted by this view of the matter because of the inconvenience of deciding a question of liability to income tax in proceedings in which the Crown is not a party, and the desirability of the determination of such a question by the tribunals descend for the purpose by the Legislature. In the end, however, I have come to the conclusion that the view which at first attracted me is too tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any debt or damages, to give "interest at such rate as it thinks find 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 the judgment." Thus, that which the statute empowers is the giving of interest, and the sum in question was rightly described as "interest" in the order of Oliver, J. Again, if on asks the question "On what was it interest" ? or, to use a ore modern expression, "On what was it interest" ?, the answer would seem to be : "It was interest on money, that is, on the debt of Pound 36,255 which Ridsdel; owed to Riches and ought to have paid to Riches in 1936. More particularly described, it was interest on that debt at the rate of 4 per cent per annum from June 14, 1936, to May 14, 1943." It may be neither the use of the works "interest" in the Act, nor the use of the same word in the order, is conclusive of the matter, but it is difficult to see how the sum in question could be more accurately described than by calling it "interest on money" or "interest of money." I may add that if a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awarded under Section 28 was not interest properly so called. As to (b), I agree that the quality of sums awarded under Section 3 of the Act of 1934 is the same as three quality of sums awarded under Section 28 of the Act of 1833, but, in my view, sums awarded under Section 29 of the earlier Act are on a different footing. As to (c), I think the true view is that a sum awarded as interest does not loses its quality of interest because that sum awarded as interest does not lose its quality of interest because it is awarded as compensation to the plaintiff for being deprived of the use of his money. On the other hand, a sum awarded as damages does not cease to be damages because it is arrived at by calculation of interest on a particular sum at a particular rate for a particular period. As Lord Buckmaster said in Glenboig Union Fireclay Co. v. Inland Revenue commissioners (12 Tax Cas. 464) : "There is no relation between the measure toast is used for the purpose of calculating a particular result and the quality to the figure that is arrived at by means of the application of that test." Counsels second point is that it is one of the essential characteristics of "inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . K. B. 542: [1943] A. C. 619 : "The requirement that the recipient must allow the deduction and treat the payer as acquitted of liability in respect of this amount is not repeated in rule 21, but must be implied." Thus the plaintiff bank, having made the deduction in respect of tax, is in the same position as if the whole sum had been actually paid. The result is that, in may view, the decision of the learned Judge was correct in all respects, and this appeal must be dismissed with cost. Since writing this judgment I have had the advantage of reading the written judgments of my brethren. As we are in agreement, I need only in regard to the case of National, Bank of Wales, Ltd., In re. COHEN, J. - Like Morton, L. J., I find it necessary to add to the full and clear statement of the facts contained in the judgment in the court below. Evershed, J., heard arguments from the parties, and also grin the Attorney-General and Mr. Hills as amici curia, and by a reserved judgment delivered that the judgment obtained against them in the Kings Bench action as judicial trustees of the will of the late Mr. Ridsdel had been satisfied. From this judgment the defendant now appeals. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court below, and it will be convenient to deal with it first. It is based on a dictum of Lord Maugham in Moss Empires, Ltd. v. Inland Revenue Commissioners 106 L. J. P. C. 142: [1937] A. C. 795. This dictum is as follows : "In rule 21 annual must be taken to have, like interest on money or an annuity, the quality of being recurrent or being capable of recurrence." Now, in that case, Lord Maugham was dealing with annual payments, and had not to direct his mind to the specific point of "interest of money," but, assuming that he did intend to lay down that a payment must have the essential characteristic recurrence if it is to be interest of money within rule 21, I agree with Evershed, J., that an award of interest under Section 3 of the 1934 Act possesses this characteristic. In making such award the Judge has to determine the amount of the debt on which interest is to be calculated, the rate at which it is to be calculated, and the period over which it is to run. In may view, such interest must be deemed to have accrued during the whole of the period so specified, notwithstanding that it only becomes payable in one sum by reason of the exercise by the Judge of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 28 must mean interest in the nature of damages. He says that interest in the ordinary sense is only payable under contract or by custom, and cannot be given merely for the wrongful detention of money (see per Lord Herschell, L. C., in London, Chatham and Dover Railway v. South Eastern Railway). Accordingly, when Section 28 purports to authorise a jury to award interest, it is really allowing them to award damages under the guise of interest. This argument seems to ignore the contrast between the language of Section 28 and that of Section 29, but counsel says that its correctness is established by the decision of the House of Lords in Cook v. Fowler, and of this court in Webster v. British Empire Mutual Life Assurance Co. The former case had, as Evershed, J., pointed out, nothing to do with Section 28 of the Civil Procedure Act, 1833, and I agree with him that the noble Lords in that case were stating a general principle in regard to interest not limited to the application of the Civil Procedure Act, that they were explaining that the principle on which Courts of enquiry allow interest in cases where it would not have been allowed at common law is compensation, but that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as they thought fit, they would grant it by way of damages." I think, however, that these observations were directed merely to showing the principle on which interest is awarded in such cases, and that their Lordships minds were not directed to the quality of the interest in the hands of the recipient. They were concerned to show that the under his principle on which the jury were to award interest under Section 28, or damages in the nature of interest under Section 29, was in each case compensation, but I do not think they were holding that, although Section 28 authorised the award of interest, what the jury awarded under that section was in fact damages. I think the true contrast is between an award of interest by way of compensation for the detention of a sum of money and an award of damages, the damages being ascertained as a matter of convenience by an interest calculation. This distinction is a fine one, but it is recognised in the tax cases to which counsel for the appellant called our attention. On the one side of the line fall Schulze v. Bensted, In Schulze v. Bensted the income on which tax was claimed was interest at the rate of 3 1/2 per cent on a sum which a neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case, to quote the language of Lord Johnson (7 Tax Cas. 34) : "In these circumstances there was restored to the trust a principle sum which ought throughout to have been in the trustees hands and bearing interest, and there was also restored to the trusts a sum representing that interest at the rate of 3 1/2 per cent. But this latter sum was so restored as at November, 1911, in one sum without reference to its accrual termly between 1902 and 1911 at a modified act assumed to be the average return on the trust investments and without compound interest. When it reached the hands of the trustees it was a surrogatum for that which ought to have termly reached the hands of the trustees and have been applied by them as income, in which case it would have been subject to income tax, in the hands of the trustees when received." So here, the principal sum of Pound 36,255, being the amount due to Mr. Riches on taking the account of profits, ought to have reached his hands by June 14, 1936, and he could have invested it at interest. Oliver, J., in is discretion, awarded interest thereon at the rate of 4 per cent., and it may, I think, be taken that such rate of interest represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deduct tax, since any right to interest had merged in the judgment, and the bank was not paying interest but merely satisfying a judgment for a lump sum of Pound 46,283. Counsel on both sides were agreed that this point was not well founded, and I think counsel for the respondents was correct when he said that, although Mr. Riches only remedy after judgment was to enforce the judgment, the quality of the element making up that judgment was not changed, and that, at any rate for the purpose of determining whether Income Tax was chargeable on the payer or was deductible by the payer, interest retained its original quality. The opposite conclusion might well deprive the Crown, who are not parties to the litigation, of a vested interest. It is true that if the judgment had not been satisfied the duty of the sheriff would have been to levy execution for the full amount of the judgment, but the only result would have been that rule 21 would never have come into operation, and the Crown would still have been able to claim tax from Mr. Riches. The principal sum and interest less tax having been paid, the judgment is, in my opinion, satisfied, since Mr. Riches is bound to acquit the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X
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