TMI Blog1945 (6) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 was finally drawn up after some discussion at the bar, expressed the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 (an impartial friend acting as arbitrator) may in this discretion think it fair and just, in all the circumstances, that B should pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dispel my doubts, and counsel for the appellant said nothing to encourage them. Both learned counsel contended that if indeed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing 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 technical. The law is not always completely logical. It is our duty to give effect to the intention of Parliament, as expressed in the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 sum awarded under this section as interest on a debt is not liable to Income Tax certain curious results would follow. For instance, if the debt for which judgment was given happened of be instalments of an annuity payable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interest of money that it should have the quality of being recurrent or of being capable of recurrence. This sum of Pound 10,028, he says, has not got this quality; there was no right to it until judgment was given by Oliver, J., and that judgment was the beginning land the end of it. Counsel bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. Before considering the arguments addressed to us it will be convenient to refer to the relevant provisions of the Income Tax Acts. I need not read them in full, as they have been stated by du Parcq, L. J. Suffice it to say that although rule 19(1) of the General Rules is not directly applicable to the present case, since it is common ground between the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 discretion conferred on him by section. I turn to the first point. Counsel for the appellant argues that (1) the quality of sums awarded under Section 3 of the 1934 Act is the same as the quality of sums awarded under Section 28 and 29 of the Civil Procedure Act, 1833, which were repealed by sub-section (2) of Section 3 of the 1934 Act, and (2) interest awarded under Section 28 of the 1833 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 were not purporting to alter the quality of interest so awarded or to distinguish, so far as relevant to the pre-extent enquiry, interest so awarded as, for example, in the case of a mortgage silent as to interest after the redemption date, from the interest in terms stipulated in a contract, for example, stipulated interest up to the redemption date in a mortgage. I also find myself in complete agreement with Evershed, J.s, two final observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsation, 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 negligent trustee had failed to get in to the trust. In Sweet v. Macdiarmid it was interest on balances of jus relictae recovered by the respondent from the trustees of her deceased husbands estate. In Inland Revenue Commissioners v. Barnato it was competent interest recovered by the defendant from two gentlemen who had been trustees of two wills under which he was interested, and who had for a short time been partners with him in business, in interest being recovered as the result of an order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 represents his estimate of the return which the principal sum would have earned and it had been duly paid. Had the principal sum in fact been paid and earned interest, that interest would have been subject to income tax and, like Lord Johnston, I can see no sound reason for holding that the substituted sum awarded by Oliver, J., is not equally liable to tax. v. Bensted there was no element of wrongdoing, whereas in the present case there was an element of fraud. As I have already said, I agree with Evershed, J., that the element of wrongdoi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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