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www.ipsofactoJ.com/archive/index.htm [1981] Part 6 Case 13 [FCM] |
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Judgment
M.T. Chang FJ
(delivering the judgment of the Court)
In this action the plaintiff Bank issued out a writ for money owing to it by the defendant on three over-draft accounts and interest. On 17 July 1970 the Bank signed final judgment in default of defence. It is never suggested that the defendant had any defence to the claim and perhaps for this reason, he did not bother to defend. The judgment was for the sum of $674,539.53 with interest thereon at the agreed rate of 10.8% pa with monthly rests from 1 January 1970 to date of judgment and thereafter at 6% pa on the decretal sum to date of payment and costs.
Next, so far as the court is concerned, the Bank on 30 December 1978 applied for leave, as required by O 42 r 23, Rules of the High Court, 1957 (now O 46 r 2(1)(a) Rules of the High Court, 1980), to levy execution, since six years had elapsed from the judgment. It did not do so ex parte as it was entitled to do, though of course the court had at all times the power to order service on the defendant. To that inter partes summons, the defendant filed an affidavit in reply.
The matter came up before a Judge of the High Court on 31 May 1979. It was heard in open court and decided promptly enough. After hearing argument, he dismissed the application for leave and gave leave to appeal. Notice of appeal was filed, within time.
The solicitors for the Bank applied, in the usual manner, for the notes of the argument taken by the judge and the grounds of his decision, but after waiting for a reasonable time and finally despairing of ever getting both, filed an appeal record without them. That was on 4 November 1980, that is, more than 17 months after the hearing. Neither counsel filed or submitted his own note of the proceedings which, in the absence of the judge’s own notes, would, if agreed between the parties, be of some assistance to us on appeal. But, fortunately, two days or so before the appeal was brought on for hearing on 12 January 1981, a copy of the judge’s notes of the argument was made available. It consisted of only 2 1/2 pages of double-spaced typescript. But no grounds of decision. So we still do not know the reasons for the dismissal of the Bank’s application for leave.
It becomes necessary therefore for us at the appeal to note the various submissions made in the High Court and to consider their validity. But first, some of the pertinent and relevant facts.
Briefly, it was the first contention of the defendant that the judgment-debt had been fully settled by the Bank agreeing to accept a sum of $750,000 which he had paid. That had been described by the Bank as a blatant lie. This is but one instance where the affidavits conflict, but the truth can be gathered from the contemporaneous correspondence that passed between the parties through their solicitors.
Quite clearly, after failing to defend the claim and having considerable properties against which the judgment could be executed, and especially in view of the fact that he was at that time bound contractually to sell these properties which formed part of a housing estate developed by him, the defendant had to prevent the execution. The best way would, of course, be to pay off the judgment-debt but lacking the liquidity, another way would be to enter into negotiations with the Bank for time to make the payment and for the payment to be made by instalments. The negotiations were put down in several letters, all, prudently, expressed to be without prejudice.
It is settled law that letters written without prejudice are inadmissible in evidence of the negotiations attempted. This is in order not to fetter but to enlarge the scope of the negotiations, so that a solution acceptable to both sides can be more easily reached. But it is also settled law that where the negotiations conducted without prejudice lead to a settlement, then the letters become admissible in evidence of the terms of the agreement, unless of course the agreement has become incorporated in another document which would then be the evidence of the agreement.
An objection was taken in the High Court to the admissibility of these letters. How the judge regarded this submission we do not know. But before us, this objection to the admissibility of the correspondence was not pursued. If that is a tacit concession that it led to an agreement between the parties and it contained the terms of this agreement, counsel at the appeal is right, as the following letters show.
On 21 July 1975, the then solicitors for the defendant wrote the following letters to the Bank:
Sirs,
Re: Kota Bahru High Court Application for Execution No 3 of 1975 We refer to your letter dated 18 July 1975 contents of which are noted.
Yours faithfully, Sgd M/s Shook Lin & Bok cc Client. |
It clearly contained certain proposals.
In a reply, stated also to be without prejudice, the Bank made the following counter-proposals:
Dear Sirs,
Re: Kota Bahru High Court Application for Execution No 3 of1975 We refer to the above matter and the conference at our office on 26 July 1975 between your Mr Ong and the writer hereof.
Yours faithfully, Sgd Messrs Mah Kok & Din cc Malayan Banking Berhad (Attn: Mr Teh Soon Poh) |
The main proposal by the defendant for payment of $850,000 by way of full settlement was therefore acceptable though the amount due at that time had increased to $961,175.25 but other terms as to costs and the result of delay or default were added.
The next relevant letter is the following from the defendant to the Bank:
Sirs, Re: Kota Bahru High Court Application for Execution No 3 of 1975 We refer to your letter dated 18 November 1975.
Yours faithfully, Sgd M/s Shook Lin & Bok cc Client. |
This letter has not been expressed to be without prejudice. It could only be a deliberate omission and for a good reason. An agreement had been reached, and it was on the terms of the Bank’s counter-proposals.
It is to be noted that of the $850,000 agreed to be paid in two instalments, $800,000 had been paid. The balance of $50,000 which was to be paid in the second instalment remained outstanding. The defendant needed time, time to gather the money from the purchasers of his lands and the houses to be built thereon. He had hoped to get this money before the second instalment of $150,000 became due but he had met with some delay and had encountered certain difficulties, as can be gathered from the several actions taken against him by these purchasers. Therefore he wrote on 29 January 1976 the following letter to the Bank:
Sirs, Re: Kota Bahru High Court Application for Execution No 3 of1975 We refer to your letter dated 22 January 1976.
Yours faithfully, Sgd M/s Shook Lin & Bok, cc Foo See Moi. |
At this request, and very possibly on other occasions as well, the Bank gave him time, instead of rescinding the agreement under para (c) of the letter of 28 July 1975, supra.
It was not until 10 May 1978, that the Bank rescinded the agreement and demanded, as it contractually could do, the payment of the balance of the decretal sum then outstanding together with interest in accordance with the terms of the judgment. As at 31 December 1977, this balance stood at $187,401.10. It was rather more when the application for leave was heard. It is even more now, since interest at the court rate of 6% has been accumulating.
From the notes of the submission, objection appears to have been taken to the delay in the proceedings occasioned by the Bank. It seems to have been stressed with a certain didactism that delay defeats equity and that a court in the exercise of its equitable discretion will not forgive laches. But clearly, if there had been any delay in rescinding the agreement and in levying execution for the balance of the judgment-sum, it had been occasioned only by the grace asked for by the defendant and given to him at his request by the Bank. In Tio Chee Hing v Chung Khiaw Bank [1981] 1 MLJ 227 this court had not the slightest hesitation in similar circumstances in upholding the decision of the High Court to grant leave. In our view, the High Court in that case had properly exercised the discretion vested in it. Indeed, this court was unable to see how the High Court could have acted otherwise.
If in the present case, in such similar circumstances, the High Court had dismissed the application for leave merely on the grounds of delay and laches, it would have, in our respectful view, exercised its discretion wrongly.
On the interest due on the debt, the defendant’s then counsel contended, first, that the balance of the decretal sum represented only interest since the decretal sum of $674,539.53 had been paid by the $800,000 received by the Bank from him or paid on his account and, secondly, that by reason of s 6(3) of the Limitation Ordinance, 1953, no arrears of interest in respect of any judgment-debt shall be recovered after the expiration of six years from the rate on which the interest became due.
There is a statement of account prepared by the Bank which showed that the total of the overdraft accounts stood at $674,539.53 as at 1 January 1970, that interest at 10.8% pa, presumably the agreed rate, accrued with monthly rests, the whole amount increased to $715,636.77 on 18 July 1970 when judgment was entered, thereafter interest at the judgment rate of 6% pa was added with yearly rests, and taking into account the payment of $700,000 on 30 July 1975 and $100,000 on 22 October 1975, the balance of the decretal sum due on 31 December 1977 was $187,401.10. It is beyond argument that in arriving at the balance, the Bank had adhered strictly to the terms of the judgment.
No submission was made at the appeal before us on the propriety of the interest, but if the submission made in the High Court had any influence on the decision, then it is clearly irrelevant as a ground for the refusal of the leave sought. In Yourell v Hibernian Bank [1918] AC 372. Lord Atkinson described the practice of bankers in debiting interest to an overdrawn current account periodically and thereby increasing the capital sum, which is the effect of the provision for periodical “rests”, as “a usual and perfectly legitimate mode of dealing between banker and customer”, though it meant securing for the bank the benefit of compound interest. Paget on Banking (8th Ed) at page 133 justifies it thus:
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There is no common law right to charge even simple interest on an overdraft but the claim could be supported on the ground of universal custom of bankers or on the basis of implied agreement. Where the customer has acquiesced in the system under which the interest is charged, that also would justify the claim. Such acquiescence will justify the charging compound interest or interest with periodical rests, so long as the relation of banker and customer exists, and the relationship is not changed into that of mortgagee and mortgagor. The taking of a mortgage or a charge by way of legal mortgage to secure the fluctuating balance of an account is not, however, inconsistent with the relation of banker and customer so as to preclude compound interest. |
Insofar as limitation is concerned, we agree with the view expressed by counsel for the respondent that this is not a matter before us at the appeal. We are also of the opinion that unless limitation applies in respect of the whole sum remaining due, for instance, after the expiry of 12 years from the date on which the judgment became enforceable and in the absence of any consideration disentitling the judgment creditor to leave, the parties should be left to themselves to work out the proper amount due in respect of which execution could be levied.
We are consequently unable to see how on the submission made to him and, presumably considered by him, the judge could have judicially exercised his discretion in the circumstances of the case to dismiss the application for leave. We therefore allow the appeal with costs here and in the court below.
Cases
Tio Chee Hing v Chung Khiaw Bank [1981] 1 MLJ 227
Yourell v Hibernian Bank [1918] AC 372
Representations
H.Y. Too (M/s Shook Lin & Bok) for the appellant.
N.A. Marjoribanks (M/s Lovelace & Hastings) for the respondent.
Notes:-
This decision is also reported at [1981] 2 MLJ 17.
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