(1967) 1 CLR 24
1967 March 30
[*24]
[JOSEPHIDES, STAVRINIDES AND HADJIANASTASSIOU JJ.]
ELLI GEORGHIOU SAVVA,
Appellant-Defendant,
v.
NICOS IOANNOU AMBIZA,
Respondent-Plaintiff
(Civil Appeal No. 4608).
Interest-Due on a bond-Creditor not entitled to recover interest on the first year’s interest on the debt, charged at 9 per cent per annum, as this would result in recovering interest on the said debt at a rate exceeding the maximum rate of interest allowed by law--The Courts of Justice Law, 1960, (Law of the Republic No. 14 of 1960), section 33 (1) and (3)-The Interest Law, Cap. 150, section 2-Cfr ; The Civil Procedure Law, Cap. 6, section 11 (now repealed by the aforesaid Courts of Justice Law, 1960); The Usury (Farmers) Law, Cap. 101.
Contract-Agreed interest-Interest on the first year’s interest on the debt charged at 9 per cent per annum-Not recoverable-See above.
The plaintiff’s-respondent’s claim in this case is based on a bond dated the 10th August, 1959, for the sum of2,750-on which there was added interest at the rate of 9 per cent per annum for one year ending on the 8th August, 1960, amounting to £247.500 mils. Thus, the total sum due under the bond is stated therein to be £2,997.500 mils payable on the 9th August, 1960, with interest thereon at 9 per cent per annum, after the date of expiry i.e. the 9th August, 1960.
The question which falls to be determined in this case is whether the creditor (plaintiff-respondent) was entitled to charge and recover interest at the rate of 9 per centum per annum on the interest of the first year, i.e. £247.500 mils, which represented interest for the first year at the rate of 9 per centum per annum on the money lent to the debtor (appellant) as aforesaid i.e. on £2.750.
The Court, (Stavrinides J. dissenting) in allowing the appeal on the said point: [*25]
Held, (Stavrinides, J. dissenting):
(1) The statutory provision applicable to this case is section 33 of the Courts of Justice Law, 1960 (Law of the Republic No. 14 of 1960), and it is really a matter of construction of that section (Note: The material parts of section 33 are set out in the judgment of the Court, post).
(2) Here we are concerned with the proviso to subsection (1) of section 33 which provides that the rate of interest shall not exceed the maximum rate of interest allowed by any law in force for the time being. The law in force for the time being is the Interest Law, Cap. 150 which by section 2 provides:
“2. The rate of interest on any debt or obligation... shall not exceed nine per centum per annum and no interest at a greater rate shall be recovered oh any such debt or obligation”.
So that, if the Court allows interest to be charged on the first year’s interest on the debt, the net result will be that the total amount to be recovered by the creditor will include interest on the debt at a rate exceeding 9 per cent per annum, which would exceed the maximum rate of interest allowed by law.
(3) On this construction of the law we are of the view that the sum of £44 which, as it was conceded, is interest at the rate of 9 per cent per annum on the first year’s interest, at 9 per cent per annum,-is not recoverable.
Appeal partly allowed. Judgment
of the Court below varied as above.
No order as to costs.
Appeal.
Appeal against the judgment of the District Court of Nicosia (Attalides Ag. D.J.) dated the 26th November, 1966, (Action No. 2569/66) whereby the defendant was adjudged to pay to the plaintiff an amount of £275.-by virtue of a bond.
A. Georghiades, for the appellant.
Ch. Velaris, for the respondent.
The following Judgments were delivered by:
JOSEPHIDES, J.: The plaintiff’s-respondent’s claim in this case is based on a bond dated the 10th August, 1959, for [*26] the sum of £2,750-on which there was added interest at the rate of 9 per cent per annum for one year ending on the 9th August, 1960, amounting to £247.500 mils. The total sum due under the bond is stated therein to be £2,997.500 mils, payable on the 9th August, 1960, with interest thereon at 9 per cent per annum after the date of expiry, and with a provision for compound interest.
The defendant-appellant did not pay off the debt on the expiry date but he effected several payments as from the 2nd January, 1962 onwards, which are shown in an account, consisting of three-and-a-half pages, attached to the statement of claim and, put in evidence by the plaintiff-respondent before the trial Court.
Appellant’s counsel to-day took a number of points before us, which we do not think are of any real substance except one which we propose considering.
The account in support of the claim shows that to the principal debt of £2,750.-the sum of £247.500 mils was added as interest at the rate of 9 per cent per annum for the first year, and this is shown in the account as “the capital of the bond” To that sum, namely, £2,997.500 mils, interest at 9 per cent per annum from the 9th August, 1960 to the 2nd January, 1962, which is stated to be £377.685 mils, is added, and then the first instalment which was paid on the 2nd January, 1962, i.e. £865.500, is deducted.
The question which falls to be determined in this case is whether the creditor (respondent) was entitled to charge and recover interest at the rate of 9 per cent per annum on the interest of the first year, i.e. £247.500 mils, which represented interest for the first year at the rate of 9 per cent per annum on the money lent to the debtor (appellant). The statutory provision applicable to this case is section 33 of the Courts of Justice Law, 1960, and it is really a matter of construction of that-section.
Section 33 reads as follows:
“(1) In any proceedings tried in any court for the recovery of any debt upon which interest is payble whether by virtue of any agreement or otherwise as by law provided the Court shall award interest at he rate agreed upon or otherwise as by law provided, for the period commencing on the date when such interest became payble until final payment: [*27]
Provided that such rate or interest shall not exceed the maximum rate of interest allowed by any law in force for the time being.
(2)…
(3) Nothing in this section contained shall authorise the giving of interest upon interest”.
Here we are concerned with the proviso to sub-section (1) of section 33, which provides that the rate of interest shall not exceed the maximum rate of interest allowed by any law in force for the time being. The law in force for the time being is the Interest Law, Cap. 150. Section 2 reads as follows:
“2. The rate of interest on any debt or obligation… shall not exceed nine per centum per annum and no interest at a greater rate shall be recovered on any such debt or obligation”.
It is conceded by the creditor that if interest at 9 per cent per annum is allowed to be charged on then the sum of £44.-would have been by the creditor in excess of the rate of Apart from this sum no other interest Section 2 of the Interest Law provides of interest on any debt shall not exceed and that no interest at a greater rate the first year’s interest charged and recovered 9 per cent per annum on interest is claimed. expressly that the rate 9 per cent per annum, and that no interest at a greater rate shall be recovered on any such debt; so that, if the Court allows interest to be charged on the first year’s interest on the debt the net result will be that the total amount recovered by the creditor will include interest on the debt at a rate exceeding 9 per cent per annum, which would exceed the maximum rate of interest allowed by law and the excess is not recoverable.
On this construction of the Law, I am of the view that the sum of £44.-, which, as already stated, is interest at the rate of 9 per cent per annum on the first year’s interest at 9 per cent per annum, is not recoverable and should be deducted from the judgment debt. I would accordingly allow the appeal to that extent and vary the Judgment of the Court below by the deduction of £44.-
STAVRINIDES, J.: In my opinion neither s. 2 of the Interest Law, Cap. 150, nor s. 33 of the Courts of Justice Law, [*28]
1960, prevents the recovery by action of compound interest, for any period down to the date of Judgment, up to a maximum of 9 per cent per annum on the principal amount as increased by interest already accrued.
Section 2 of Cap. 150 reads as follows:
“2. The rate of interest on any debt or obligation contracted after the 16th day of November, 1944, shall not exceed nine per centum per annum and no interest at a greater rate shall be recovered on any such debt or obligation”.
Whether a particular amount of interest represents a rate of 9 per cent per annum or more or less depends on what the principal sum is taken to be; and specifically, as regards compound interest, turns oh whether the rate is arrived at on the basis of the amount of the original principal or on that amount as increased by interest already accrued. But there is nothing in s. 2 to make it Unreasonable to construe “such debt or obligation” as meaning the original principal as so increased. Further, s. 3 of the Usury (Farmers) Law, Cap. 101, which was enacted for the specific purpose of preventing usury, only bars the charging of interest upon interest for one year from the time when the latter interest has become due; and it seems to me that had the intention of the legislature in enacting s. 2 of Cap. 150 been to restrict the charging of compound interest as such, express mention of compound interest would have been made in it.
Section 33 of the 1960 Law reads:
“33. (1) In any proceedings, tried in any Court for the recovery of any debt upon which interest is payable whether by virtue of any agreement or otherwise as by any law provided the Court shall award interest at the rate agreed upon or otherwise as by any Law provided, for the period commencing on the date when such interest became payable until final payment:
Provided that such rate or interest shall not exceed the maximum rate of interest allowed by any Law in force for the time being.
(2) Every judgment shall, unless other provision is made in the judgment under sub-section (1), carry interest at the rate of four per centum per annum from the date on which the judgment is pronounced until the same shall be satisfied: [*29]
Provided that nothing in this sub-section contained shall apply to any judgment pronounced before the 16th day of November, 1944, and every such judgment shall carry such interest as may be specified therein and in accordance with the terms thereof.
(3) Nothing in this section contained shall authorize the giving of interest upon interest”.
Clearly sub-s.(2) is entirely irrelevant to the matter in hand. Going back to sub-s.(1), at the time of its enactment there was in force s. 11 of the Civil Procedure Law, Cap. 6, which read:
“11 Every judgment debt shall carry interest at the rate of Tour per centum per annum from the date on which the judgment is pronounced until the same shall be satisfied and such interest may be levied under a writ of execution on such judgment:
Provided that nothing in this section contained shall apply to any judgment pronounced before the 16th day of November, 1944, and every such judgment shall carry such interest as may be specified therein and in accordance with the terms thereof:
Provided also that where any judgment relates to a debt carrying interest, no interest shall be paid under the provisions of this section except on the principal debt or any balance thereof remaining due and unpaid”.
That section was repealed by the 1960 Law. Viewing s. 33 (1) of this Law in the Light of the fact that it occurs in a Court of Justice Law, and in fact in a part entitled “Powers of the Courts”, and further in the Light of s. 11 of Cap. 6 and its repeal, it seems to me clear that it was simply intended to enable the courts, in giving judgment on a debt upon which interest was, whether by agreement or otherwise, payable, to award interest at the rate so payable, not exceeding the maximum rate of 9 per cent allowed by s.2 of Cap. 150, not only down to the .late of the judgment, but until payment; it was not concerned with abolishing or restricting any right to recover compound interest which existed at the time of its enactment.
I now come to sub-s. (3) of s. 33. This actually refers to “interest upon interest”, But in view of the words “Nothing in this section contained”, all it means is that a power to award such interest is not to he supposed to be given by sub-s. (1) [*30] of that section. It does not mean that any right of recovering compound interest which existed when the Law was enacted was to be taken away or restricted.
In my view there is no merit in any of the grounds relied upon by the appellant and I would entirely dismiss the appeal.
HADJIANASTASSIOU, J.: I agree with the Judgment of Mr. Justice Josephides. I would, also, allow partly the appeal and vary the Judgment of the Court below by deducting the amount of £44.-from the judgment debt of the creditor (respondent) charged as interest over and above the amount of interest of 9 per cent per annum allowed by law.
JOSEPHIDES, J. In the result the appeal is partly allowed, the Judgment of the Court below is varied by having the judgment debt reduced by £44.-. In the circumstances of this case, there will be no order as to costs.
Order accordingly.
Appeal party allowed. Judgment
of the Court below varied as
above. No order as to costs.
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