National Commercial Bank Staff Association v National Commercal Bank Jamaica Ltd

• Jurisdiction: Jamaica
• Judge: Sykes J
• Judgment Date: 25 October 2017
• Neutral Citation: [2017] JMSC Comm 30
• Docket Number: CLAIM NO. 2016CD00028
• Court: Supreme Court (Jamaica)
• Date: 25 October 2017

[2017] JMSC COMM 30

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

COMMERCIAL DIVISION

Sykes J

CLAIM NO. 2016CD00028

(No 2: Interest on Judgment)

Between

National Commercial Bank Staff Association

(Bringing the claim in a representative capacity on behalf of all the members of the Association)

Claimant

and

National Commercal Bank Jamaica Limited

Defendant

Crafton Miller and Patricia Roberts-Brown instructed by Crafton Miller and Company for the claimants

Walter Scott QC and Anna Gracie instructed by Rattray Patterson Rattray for the defendant

Cases Mentioned:

Sempra Metals v. Inland Revenue Commissioner and others [1998] 1 A.C. 561 – RBTT v. Seaton (No. 2) [2014] JMSC Civ. 139 – British Caribbean Insurance Company Ltd v. Perrier 33 JLR 119.

INTEREST ON JUDGMENT — WHETHER COMPOUND INTEREST OR SIMPLE INTEREST

IN OPEN COURT

INTEREST

1 When the court delivered judgment on the issue of liability the court held that interest should be awarded at a commercial rate and the parties were invited to make further submissions on whether interest should be compounded or it should be simple interest ( [2017] JMSC COMM 18).

2 Written submissions were sent to the court and on September 11, 2017, in open court, the parties indicated that all that they wished to say were to be found in the written submissions and the accompanying cases. Counsel for the parties indicated the passages from the cases they wished to emphasise.

3 The claimant has submitted that compound interest should be awarded and it also submits that Treasury Bill rate should be used as the basis of calculating the compound interest over a period of fifteen years beginning in 2002.

4 It is now accepted that compound interest can be awarded in the Supreme Court (see YP Seaton & Associates Company Limited v The National Housing Trust [2013] JMCA 44 which approved of the House of Lords' decision of Sempra Metals v Inland Revenue Commissioners and another [1998] 1 AC 561). The National Housing Trust (‘ NHT’) case went on to the Judicial Committee of the Privy Council. From the advice of the majority, delivered by Lord Mance, the Board has affirmed the correctness of Sempra Metals and applied its reasoning and conclusion to Jamaica ( [2015] UKPC 43[31]. This is what Lord Mance said at paragraph 31:

31 … Claims for loss of interest or interest incurred might in particular contexts be proved to be within the parties' contemplation under either limb [of Hadley v Baxendale ]. It was thus open to a claimant to plead and prove an actual loss of interest caused by late payment of a debt, which might include an element of compound interest, and such a claim would be subject to the usual principles governing damages for breach of contract, including remoteness and failure to mitigate. But the House underlined the need for pleading and proof. (emphasis added)

5 Mr Miller in his written submissions cited this court's decision in RBTT v YP Seaton (No 2) [2014] JMSC Civ 139 in which it was decided that an award of compound interest is the default position in commercial disputes. This position now has to be abandoned in light of the Privy Council's decision in the NHT case. This court in RBTT (No 2) also held the claim for compound interest need not be pleaded and proved. The premise of this conclusion was that the House of Lords in Sempra had stated that simple interest was an artificial construct and compound interest was more realistic and a fact of commercial life. The following passages from Sempra are the ones on which this court based its reasoning in RBTT (No 2).

6 The issue arose in Sempra because the Revenue accepted that it received the payment prematurely. It also accepted that the tax payer was entitled to interest but the Revenue submitted that the interest should be simple interest.

7 Lord Hope, in Sempra, said at [33]:

Simple interest is an artificial construct which has no relation to the way money is obtained or turned to account in the real world. It is an imperfect way of measuring the time value of what was received prematurely. Restitution requires that the entirety of the time value of the money that was paid prematurely be transferred back to Sempra by the revenue.

8 There is nothing in this passage or the rest of his Lordship's opinion that would lead anyone to think that the comment about simple interest was not one of general application as were the observations about compound interest. This is so because many of the commercial cases do not involve restitutionary claims. There is no reason to suppose that simple interest is artificial only in restitutionary claims but not in others. If simple interest is considered unrealistic in restitutionary claims why is it not unrealistic in commercial cases that do not involve restitution?

9 Lord Nicholls said in Sempra at [52]:

We live in a world where interest payments for the use of money are calculated on a compound basis. Money is not available commercially on simple interest terms. This is the daily experience of everyone, whether borrowing money on overdrafts or credit cards or mortgages or shopping around for the best rates when depositing savings with banks or building societies. If the law is to achieve a fair and just outcome when assessing financial loss it must recognise and give effect to this reality.

10 This is as general statement as one could get on compound interest. This court reasoned that if this was the case why the insistence on the pleading of compound interest if compound interest was a fact of commercial life and reflected commercial reality? After all, shouldn't the reality be the norm? Be that as it may the Board has now held by necessary conclusion from its reasoning that such a view is wrong.

11 In the NHT case the Board reasoned that the arbitrator in that case (and this was before the new Arbitration Act in Jamaica came into force but that does not affect the reasoning because we are here dealing with the unamended Law Reform ( Miscellaneous Provisions Act) and not the new Arbitration Act), by analogy with the courts, was not free to award compound interest as a matter of a general discretionary power to award interest. Lord Mance in NHT held at [29]:

On this basis, the question is whether arbitrators have any such general discretion, or whether their power is (absent contrary agreement) limited to awarding simple interest. Chandris v Isbrandtsen-Molleris the English Court of Appeal authority for the proposition that an arbitrator's discretionary power to award interest is modelled on the court's statutory power, which was in England at the time of that case, and in Jamaica still is, limited to awarding simple interest on any debt or damages found due: see for Jamaica section 3 of the Law Reform (Miscellaneous Provisions) Act 1955. The contrary statement by Lord Denning in Tehno-Impex (at p 666) cited by the Court of Appeal was actually dissenting on this point. The majority held that an arbitrator has no discretionary power to award compound interest. Further, as the law stood at that date, in the light of the House of Lords decision inLondon, Chatham and Dover Railway Co v South Eastern Railway Co [1893] AC 429, the majority also held that neither courts nor arbitrators could awardinterest as damages for non-payment of a debt. Lord Denning's dissenting view of the arbitral discretion was further expressly disapproved, and the decision in Chandris was expressly upheld, by the House of Lords inPresident of India v La Pintada Co Nav SA [1985] AC 104, 116F–119C, in the judgment of Lord Brandon with which all other members of the House of Lords agreed.

12 His Lordship was drawing an analogy between the court's power to award interest under the Law Reform ( Miscellaneous Provisions)...