3PLR – ALEX LAWRIE FACTORS LTD V. MODERN INJECTION MOULDS LTD

POLICY, PRACTICE AND PUBLISHING, LAW REPORTS 3PLR

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ALEX LAWRIE FACTORS LTD

V.

MODERN INJECTION MOULDS LTD

QUEEN’S BENCH DIVISION

19 MARCH, 12 MAY 1981

3PLR/1981/5 (QB)

BEFORE: DRAKE J

REPRESENTATION

P J Susman for the defendant.

Paul Norris for the plaintiff.

MAIN ISSUES

DEBTOR AND CREDITOR:- Recovery of Debt – Liquidated sum for goods sold and delivered – Interest -Jurisdiction to include interest in default judgment

COMMERCIAL LAW – CONTRACT:– Sale of goods – Recovery of liquidated sum for goods sold and delivered

PRACTICE AND PROCEDURE:- Judgment – Judgment in default of appearance – Whether proceedings ending with entry of judgment in default `tried’ in court – Whether court having jurisdiction to award interest up to the entry of judgment — Interest – Discretion of court to award interest – Equitable basis

Cases referred to in judgment

Cousins (H) AND Co Ltd v D AND C Carriers Ltd [1971] 1 All ER 55, [1971] 2 QB 230, [1971] 2 WLR 85, [1970] 2 Lloyd’s Rep 397, CA, Digest (Cont Vol D) 549, 2592a.

Gardner Steel Ltd v Sheffield Brothers (Profiles) Ltd [1978] 3 All ER 399, [1978] 1 WLR 916, Digest (Cont Vol E) 172, 108Ab.

London, Chatham and Dover Railway Co v South Eastern Railway Co [1893] AC 429, HL, 50 Digest (Repl) 157, 1356.

Ozalid Group (Export) Ltd v African Continental Bank Ltd [1979] 2 Lloyd’s Rep 231.

Tehno-Impex v Gebr van Weelde Scheepvaartkantoor BV [1981] 2 All ER 669, [1981] 2 WLR 821, CA.

Wallersteiner v Moir (No 2), Moir v Wallersteiner (No 2) [1975] 1 All ER 849, [1975] QB 373, [1975] 2 WLR 389, CA, Digest (Cont Vol D) 570, 518a.

HISTORY AND SUMMARY OF CASE

The plaintiff brought an action against the defendant claiming a liquidated sum for goods sold and delivered and also claiming interest pursuant to s 3(1)a of the Law Reform (Miscellaneous Provisions) Act 1934. The defendant failed to enter an appearance to the writ and the plaintiff obtained final judgment against him for a liquidated amount in default of appearance which was entered in the court records by the appropriate court official. The plaintiff claimed that he was entitled to interest under s 3(1) of the 1934 Act from the date the debt became payable to the date of the default judgment, while the defendant claimed that there was no jurisdiction under s 3(1) to award interest prior to the date of the judgment. The matter was referred to a master, who upheld the plaintiff’s claim and awarded interest accordingly. The defendant appealed, contending that where judgment for a debt was entered in default of appearance there was no jurisdiction to award interest under s 3(1) because proceedings ending with the entry of a default judgment were not `proceedings tried in any court of record’ within s 3(1). The plaintiff submitted that the court had jurisdiction to award interest up to the entry of a default judgment both under s 3(1) and under the court’s inherent equitable jurisdiction.

Held – The word `tried’ in s 3(1) of the 1934 Act meant `determined’ and covered any situation in which proceedings in a court of record had been commenced by writ or other originating process and had been ended by a judgment, irrespective of how the judgment had been arrived at, and therefore, although a court official’s act in entering a judgment in default was merely an administrative act and not a judicial act in the proceedings, proceedings which were ended by the entry of a default judgment were `proceedings’ which had been `tried’ within s 3(1). The court accordingly had jurisdiction under s 3(1) to award interest for the period between the date when the principal sum recovered by the plaintiff became due and the date of the default judgment. It followed that the appeal would be dismissed (see p 663 a to e and j, post).

Dictum of Ormrod LJ in Gardner Steel Ltd v Sheffield Brothers (Profiles) Ltd [1978] 3 All ER at 402 applied.

Per Curiam. The inherent equitable jurisdiction of the court to award interest does not include jurisdiction to award interest in the case of a simple contract debt, in the absence of a fiduciary or other special relationship (see p 663 h, post).

Notes

For the court’s jurisdiction under statute to award interest in actions for debt, see 32 Halsbury’s Laws (4th Edn) para 110.

For the court’s equitable jurisdiction to award interest, see ibid para 109.

For the Law Reform (Miscellaneous Provisions) Act 1934, s 3, see 25 Halsbury’s Statutes (3rd Edn) 752.

Appeal from master

By a writ indorsed with a statement of claim issued on 5 August 1980 and served on 6 August 1980, the plaintiff, Alex Lawrie Factors Ltd, claimed against the defendant, Modern Injection Moulds Ltd, £23,946.45 as the balance of the price of goods sold and delivered to the defendant and interest pursuant to the Law Reform (Miscelaneous Provisions) Act 1934. The defendant failed to enter an appearance to the writ and on 26 August 1980 the plaintiff obtained final judgment in default of appearance for £18,946.45. The plaintiff’s claim for interest on that sum from the date the sum became due to the date of the default judgment was referred to a master. The defendant contended that the master had no jurisdiction to award interest prior to the date of the judgment in default. On 24 October 1980 Master Elton gave judgment for the plaintiff and assessed the interest due up to the date of the default judgment at £1,425.87. The defendant appealed from the master’s order. The appeal was heard in chambers but judgment was given by Drake J in open court. The facts are set out in the judgment.

MAIN JUDGMENT

Cur adv vult

12 May 1981. The following judgment was delivered.

DRAKE J read the following judgment: This is an appeal against a decision of Master Elton given on 24 October 1980 whereby he ordered the defendant to pay interest, which he assessed, on a sum of £18,946.45, the balance of moneys due to the plaintiff.

On 26 August 1980 the plaintiff had obtained final judgment in default of appearance to the writ. The statement of claim indorsed on the writ had claimed interest `pursuant to the Law Reform (Miscellaneous Provisions) Act 1934′, and at the time when final judgment in default was entered the claim for interest on the debt, from the date on which the sum had become due up to the date of the judgment, had been referred to the master for the interest to be assessed.

On the hearing before the master the defendant appeared by counsel and argued that the court had no jurisdiction to award any interest prior to the date of final judgment in default. This was a novel point to be taken by any defendant, and one of very widespread general importance in view of the fact that masters have been assessing and awarding interest in similar cases with great frequency for at least the last 15 years.

As it was quite clear that, whatever his decision, the matter would be appealed to the judge in chambers the master did not in fact hear any argument. He gave judgment for the plaintiff, assessed the interest due up to the date of the default judgment and expressed the hope that the judge in chambers would give his judgment in open court. I now do so.

I should add, to complete the picture, that the plaintiff also claimed interest under the Judgments Act 1838, on the judgment debt from the date of the judgment until the date of the master’s order. The plaintiff’s right to this interest was not disputed and does not concern me on this appeal.

In argument before me, counsel for the plaintiff submitted that the court had jurisdiction to award interest prior to judgment (1) under the provisions of the Law Reform (Miscellaneous Provisions) Act 1934 and/or (2) under its inherent equitable jurisdiction.

The defendant, by his counsel, submitted (1) that it is well settled law that interest is not recoverable as damages for failure to pay a debt: see London, Chatham and Dover Railway Co v South Eastern Railway Co [1893] AC 429; (2) that this was not one of the recognised cases in which the court would exercise its inherent equitable jurisdiction to award interest; and (3) that the Law Reform (Miscellaneous Provisions) Act 1934 does not cover a case where judgment is entered in default of appearance. As my decision on the construction of the 1934 Act is sufficient to dispose of this appeal I shall deal with it first.

Section 3 of the 1934 Act provides, so far as is relevant to this appeal, as follows:

`(1) In any proceedings tried in any court of record for the recovery of any debt or damages, the court may … order that there shall be included in the sum for which judgment is given interest … on the whole or any part of the debt … for the whole or any part of the period between the date when the cause of action arose and the date of judgment … ‘

The submission made by counsel for the appellant defendant is that in the case of a judgment entered in default of appearance there have been no proceedings `tried in any court of record’, and therefore the proceedings ending with the default judgment do not fall within the provisions of s 3. In order to consider this submission it is necessary to consider precisely what takes place in the proceedings prior to judgment in default being entered. I confess that before this appeal I was aware of only the bare outline of what happens when a plaintiff applies for judgment in default of appearance; and my inquiry to counsel revealed that they, too, lacked detailed knowledge of the procedure. This is not surprising since counsel are rarely concerned with such procedure, and probably never attend to ask for judgment to be entered in default of appearance.

However, after help from their respective instructing solicitors, counsel were able to give me a detailed account of what happens, which is as follows:

The claim for a liquidated sum starts with the issue of the writ claiming the sum due. This is served on the defendant who, if the writ is served within the jurisdiction, has 14 days in which to enter appearance; if service is outside the jurisdiction he is given a longer period. If the defendant does not enter appearance within the time allowed the plaintiff may enter final judgment for the sum claimed and for costs. The requirements of what must be done are set out in the Supreme Court Practice 1979(vol 2, p 222, para 952). What happens is that the plaintiff, usually acting by a solicitor’s clerk, attends at the appropriate office of the court and produces to the official on duty (1) the original writ, (2) an affidavit of service and (3) the draft judgment being asked for. The court official then searches the court files to satisfy himself that no appearance has been entered and, if so satisfied, he stamps the draft judgment and enters it by writing it into an official ledger. The judgment may then be enforced and the sum recovered. Interest on the judgment debt runs from that moment until the judgment is satisfied, under the provisions of the Judgments Act 1838.

If the contract under which the debt has arisen provided for an agreed rate of interest to be payable on the debt becoming due then, of course, the interest may be calculated and included as a liquidated sum in the total sum claimed in the writ. It is in cases in which interest is not expressly or impliedly provided for in the contract that the problem with which I am now concerned arises. The practice which has arisen is that the plaintiff frequently includes in the draft final judgment a claim for interest from the date the debt became due up to the date on which final judgment is entered. Since the rate and hence the amount of interest has not at that stage been determined the draft final judgment claims `interest to be assessed’; and on being satisfied that final judgment may be entered the court official enters judgment (1) for the liquidated sum claimed and (2) interest, to be assessed by the master.

What happens next is that an appointment is made for the plaintiff to go before the master; and the plaintiff, when he knows the date of that appointment prepares and serves on the defendant a schedule showing the interest claimed and how the total sum is arrived at. This procedure was followed in the present case and it was on the appointment before the master that the defendant appeared by counsel and contested the jurisdiction of the court to award any interest at all prior to judgment having been entered.

I should add that I have been informed and gathered from published statistics that the number of such judgments in default which are entered is in the order of between 2,000 and 3,000 each month in the Central Office at the Royal Courts of Justice alone, with approximately the same number entered at district registries, ie a total of about 60,000 per year, of which the large majority are in respect of simple claims for a liquidated sum of money due, usually, for services or goods sold and delivered. During the first three months of this year masters were assessing and awarding interest in about 50 cases each month which were referred to them on judgment being entered in default of appearance.

Can it be said that such proceedings, culminating in the entry of judgment in default have been `tried’ in any court of record? Counsel for the defendant say they have not been `tried’ because there has been no trial at all. He says that all that has taken place is a clerical act performed by a court official. Counsel for the plaintiff submits (1) that the actions of the court official in checking the documents, ascertaining that no appearance has been entered and then entering final judgment does amount to a trial; alternatively (2) that in the context of the 1934 Act `tried’ merely means `determined’, so that the High Court does have jurisdiction to award interest in any case started by a writ and concluded, ie determined by a judgment.

The construction of s 3 of the 1934 Act has been considered by the courts on a number of occasions, although never in the context of interest awarded on a liquidated sum for a period prior to judgment in default of appearance.

In Gardner Steel Ltd v Sheffield Brothers (Profiles) Ltd [1978] 3 All ER 399, [1978] 1 WLR 916 the plaintiffs had obtained judgment under RSC Ord 14 in default of any arguable defence. O’Connor J had decided on an appeal from the master that there was no arguable defence and had given the plaintiff leave to sign final judgment; but at the same time he refused to award interest under s 3 of the 1934 Act. Unfortunately the parties were not at all clear whether O’Connor J ruled that he had no jurisdiction to grant interest on the grounds that the proceedings before him were not proceedings `tried in any court of record’, or whether he held that he did have jurisdiction but declined to exercise his discretion to award interest. However, the Court of Appeal appears to have acted on the assumption that O’Connor J had decided that he lacked jurisdiction and held that he was wrong if he had so decided. The Court of Appeal held that an order that the plaintiff was entitled to summary judgment under Ord 14 was the determination of an issue and, as such, was a trial and therefore a proceeding `tried in’ a court of record for the purposes of s 3 of the Law Reform (Miscellaneous Provisions) Act 1934.

Stephenson LJ referred to a note which appeared in the then current (1976) and earlier editions of the Supreme Court Practice under RSC Ord 6, r 2 (vol 2, p 40, para 6/2/7A). This suggested that proceedings concluded by a summary judgment under Ord 14 were not a trial and that interest under s 3 of the 1934 Act could not therefore be awarded; but that the court could direct an issue to be tried whether the plaintiff ought to be awarded interest and if so, at what rate, and for what period. The issue would then become a `trial’ so that s 3 would become operative. Stephenson LJ referred to the decision of the Court of Appeal in Wallersteiner v Moir (No 2) [1975] 1 All ER 849 at 855, [1975] QB 373 at 387-388 in which Lord Denning MR referring to the note on Ord 6, r 2 in the Supreme Court Practice 1973 said:

`” … interest under this section can only be awarded in proceedings that are `tried’, and therefore cannot be awarded on a judgment obtained in default of appearance or defence or failure to comply with an order or the rules, nor presumably in proceedings under O. 14, but in such cases the plaintiff may ask for final judgment for the principal sum, and for interlocutory judgment for the interest to be assessed, by analogy with an assessment of damages.” I think that that note may be putting too narrow a construction on the word “tried”. It seems to me that, after all the evidence and arguments which were heard in this case, it could well be said that those were proceedings “tried” in a court of record. Similarly with proceedings under RSC Ord 14. But it is unnecessary to go into this for this simple reason: we did not order interest to be paid under the 1934 Act, but under the equitable jurisdiction of the court.’

Stephenson LJ said that, whilst those remarks of Lord Denning MR were clearly obiter:

`… it commends itself to me as, if I may respectfully say so, sensible, likely to save costs and in accordance with the ordinary use of language. Summary trial is of course different from a full trial, and summary proceedings in chambers are different from proceedings in open court. I feel the force of those considerations which no doubt led to the existing practice in regarding summary judgment under RSC Ord 14 as judgment not given in proceedings which have been tried. But counsel for the plaintiffs has called our attention to a definition in the current edition of Stroud’s Judicial Dictionary (4th Edn, 1974, vol 5, p 2827): “TRIAL; TRIED. (1) A `trial’ is the conclusion, by a competent tribunal, of questions in issue in legal proceedings, whether civil or criminal.” That seems to me to be a natural interpretation of the words “trial” “tried”. Counsel for the defendants has submitted that all that was tried was an issue, and there was no trial of proceedings. I prefer the wider view indicated by Lord Denning MR, and now, it is to be noted, adopted in the supplement to the Supreme Court Practice (Fifth Cumulative Supplement, 1976, paras 6/2/7A, 14/3-4/19). I see no good reason why interest should not be awarded in accordance with s 3 of the 1934 Act in summary proceedings under RSC Ord 14 concluded by a competent tribunal, a judge in chambers, or, in some circumstances of course, a master. In those circumstances I would hold that O’Connor J had jurisdiction to award interest.’

(See [1978] 3 All ER 399 at 401, [1978] 1 WLR 916 at 918-919.)

Ormrod LJ, agreeing with Stephenson LJ and with the observation of Lord Denning MR referred to above, went on ([1978] 3 All ER 399 at 402, [1978] 1 WLR 916 at 920):

`But I would base my judgment simply on the construction of s 3 of the 1934 Act. “Tried” must mean “determined” in that context, and here the court has decided that there is no defence. It seems extraordinary that where there is a defence and the court has decided that the defence fails it can order interest; but where it has decided that there is no defence it cannot award interest. I think it is wholly illogical. So the opportunity having now arisen, it seems to me a convenient case for saying that in appropriate cases the judge can order interest on an RSC Ord 14 summary judgment.’

It seems to me that the effect of those judgments is that Stephenson LJ held that for the purposes of that case it was sufficient to say that beyond any doubt the determination of an issue under RSC Ord 14 by a judge or master was a `trial’ and therefore on any view fell within the provisions of s 3 of the 1934 Act; whilst Ormrod LJ went somewhat further by holding that in the context of s 3 `tried’ must mean `determined’. The word `tried’ is defined in the current edition of Stroud’s Judicial Dictionary (4th Edn, 1974, vol 5, p 2827) as `TRIAL; TRIED. (1) A “trial” is the conclusion, by a competent tribunal, of questions in issue in legal proceedings, whether civil or criminal’. This definition was considered by Stephenson LJ in Gardner Steel Ltd v Sheffield Brothers (Profiles) Ltd to cover an adjudication by a master or a judge in Ord 14 proceedings.

In my judgment the proceedings which culminate in the entry of judgment by the court official who deals with the application for judgment in default of appearance to the writ do not amount to a `trial’, and are no more than an administrative act carried out in the course of proceedings. I do not think it can be said, despite the submissions of counsel for the plaintiff to the contrary, that the actions of the court official culminating in entry of judgment are in any way judicial actions; and I reject the plaintiff’s arguments on that point.

But I respectfully adopt and agree with the construction of s 3 of the 1934 Act given by Ormrod LJ in the Gardner Steel case. In my judgment the word `tried’ in that section simply means `determined’ and s 3 covers any situation in which proceedings in a court of record have been started by a writ or other originating process and ended by a judgment, irrespective of how the judgment is arrived at.

This construction of the 1934 Act seems to me to accord with commercial sense. If a creditor is wrongly kept out of his money he ought in fairness to be able to obtain interest on the sum owing unless there are special circumstances which should disentitle him to interest. The Judgments Act 1838 provided that interest may be awarded to the creditor after judgment; the 1934 Act undoubtedly provided that interest may be awarded after a debtor has appeared but had his defence dismissed or disallowed as unarguable under the Ord 14 procedure. Why then, in logic, should a debtor who appears but unsuccessfully argues his case be in a worse position as regards having to pay interest than a debtor who does not enter any appearance to the writ?

I therefore hold that the master was right to award interest under the provisions of s 3 of the Law Reform (Miscellaneous Provisions) Act 1934. It follows that it is unnecessary for me to deal with the alternative ground on which counsel for the plaintiff contended that interest might be awarded, namely under the inherent equitable jurisdiction of the court. Both counsel addressed full and able argument to me and cited several authorities on this point. Counsel for the plaintiff relied, inter alia, on dicta of Lord Denning MR in Wallersteiner v Moir (No 2) [1975] 1 All ER 849, [1975] 1 QB 373 and in Tehno-Impex v Gebr van Weelde Scheepvaartkantoor BV [1981] 2 All ER 669, [1981] 2 WLR 821. He also relied on the awards of interest by the Court of Appeal in H Cousins AND Co Ltd v D C Carriers Ltd [1971] 1 All ER 55, [1971] 2 QB 230 and by Donaldson J in Ozalid Group (Export) Ltd v African Continental Bank Ltd [1979] 2 Lloyd’s Rep 231 in circumstances which he says must have meant that the court was in each case exercising its inherent jurisdiction to award interest.

Counsel for the defendant in reply submits that (1) the dicta of Lord Denning MR in Wallersteiner v Moir (No 2) were clearly obiter and the case turned on complex facts well removed from a case of simple debt; (2) H Cousins AND Co Ltd v D C Carriers Ltd may well have been argued and decided on the basis that both parties wanted a `test case’ decision on the main issues arising and deliberately ignored the basis on which interest could be claimed, whilst (3) the decision of Donaldson J in the Ozalid case was simply wrong.

In my judgment the equitable jurisdiction of the court to award interest is exercised in a number of well-recognised cases conveniently summarised in 32 Halsbury’s Laws (4th Edn) para 109; and these categories do not include the case of a simple contract debt in the absence of any fiduciary or other special relationship. Although I have given full and careful consideration to the respective arguments of counsel, I do not think any useful purpose would be served by greatly lengthening this judgment, as would be necessary if I were to set out or deal fully with those arguments and all of the many authorities cited on this point.

For the reasons I have already given I hold that the court has jurisdiction in this case to award interest under the provisions of s 3 of the 1934 Act and that the master was therefore entitled to make the decision he did. Accordingly, this appeal is dismissed.

Appeal dismissed; master’s order affirmed. Leave to appeal to the Court of Appeal; application for a certificate under s 12 of the Administration of Justice Act 1969 to appeal to the House of Lords adjourned.

Solicitors: Ambrose Appelbe Associates (for the plaintiff); Wedlake Bell agents for Gartside, Harding AND Davies, Newport, Gwent (for the defendant).

K Mydeen Esq Barrister.