TSB Developments Pty Ltd v HCH and K Fisheries Pty Ltd
[2003] TASSC 136
•12 December 2003
[2003] TASSC 136
CITATION: TSB Developments Pty Ltd v HCH & K Fisheries Pty Ltd [2003] TASSC 136
PARTIES: TSB DEVELOPMENTS PTY LTD
v
HCH & K FISHERIES PTY LTD
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 213/1997
DELIVERED ON: 12 December 2003
DELIVERED AT: Hobart
HEARING DATE: 14, 15, 16 October 2003
JUDGMENT OF: Cox CJ
CATCHWORDS:
Contracts – Offer and acceptance – Matters not giving rise to binding contract – Vagueness and uncertainty – Uncertain promises – Promise to pay "interest".
Placer Development Ltd v The Commonwealth (1969) 121 CLR 353, applied.
Aust Dig Contracts [6]
REPRESENTATION:
Counsel:
Plaintiff: R W Pearce
Defendant: W M Griffiths
Solicitors:
Plaintiff: Douglas & Collins
Defendant: Bishops
Judgment Number: [2003] TASSC 136
Number of paragraphs: 25
Serial No 136/2003
File No 213/1997
TSB DEVELOPMENTS PTY LTD v HCH & K FISHERIES PTY LTD
REASONS FOR JUDGMENT COX CJ
12 December 2003
This is a claim for interest on a sum of money owing in respect of modifications performed by the plaintiff company during the course of the year 1987 on a fishing vessel the "Edward James Fairnie" owned by the defendant company.
The plaintiff company was a boat builder carrying on business in Launceston. In the 1970s and 1980s it had a lucrative contract with the Adelaide Steam Ship Company to build a series of tugs, and in addition it undertook repairs and modifications to other vessels, including fishing boats. The defendant company's directors were fishermen, Messrs Hammond, Clinton and Horton, and a man named Kypros Kotsikis who appears to have been stationed in New Zealand. He had negotiated a loan in that country to enable the company to purchase the vessel Edward James Fairnie from Mr Horton, its previous owner, and to carry out certain modifications upon it. These modifications were necessitated by the fact that the defendant company wished to engage in fishing for orange roughy, then perceived to be a boom industry. The modifications included installing extra power for stern trawling, hydraulically operated heavy winches and the fitting of blocks, tackle and wires. Initially work was carried out by Horton and Clinton at Bell Bay, but subsequently it was decided to engage the plaintiff company to carry out the work in Launceston, with Horton and Clinton supplying some of the labour. The contract was a do and charge one. The vessel was brought to the plaintiff company's ship yard in about March 1987, but it seems the manufacture of some parts needed for the modifications was commenced earlier and charged to the defendant company.
By June 1987, a substantial amount of work had been done and monthly statements of account totalling some $101,310 had been rendered. A sum of $36,858 had been paid in April 1987 and this left a balance of $64,452 owing.
By the end of June, two further payments of $10,000 were received. Some time in June, the directors of the defendant company realised that they had insufficient funds in hand to pay the then outstanding balance, let alone the cost of completing the work which was still far from complete. Accordingly, the three local directors went to see the managing director of the plaintiff company, Mr Fogarty, and explained their dilemma to him. At the end of that meeting, Fogarty agreed that he would continue work on the vessel without immediate payment and that he would postpone payment until the defendant company could get the vessel fishing productively. Whether or not the price of this forbearance was a promise by the defendant company to pay interest on the moneys outstanding, which amounted to a binding contractual obligation, is at the heart of this action.
Mr Fogarty gave evidence that he agreed to help the defendant company and he believed he "would have said, and yet I can't swear to it now because it was so long ago, that, you know, they were expected to pay bank interest and to pay it monthly". He said that within 24 hours of that meeting he had advised his book-keeper, Mr Buck, of the arrangement so that he would know what to do with the accounts. Again he claimed no specific recollection of having done so, but assumed he "would have". In cross-examination he was no more definite about the terms of the arrangement concerning the payment of interest. The plaintiff company also called Messrs Horton and Clinton. Horton said he recalled the visit to Fogarty's office. Hammond had said they were running out of money and would he let them finish the boat and then they would sort it out. He said Fogarty had said "that'll be all right. What about interest?" Horton had then suggested "that we would have to borrow the money from somewhere to refinance it and we would have to pay them interest. And that was about it". He had left the meeting with an expectation that they would have to pay some interest, but no rate had been mentioned, nor had there been any discussion about when interest was to be paid. Clinton's evidence was that Fogarty had agreed to finance the defendant company to get the boat back in the water and "we sort of mutually agreed that we'd pay the money off once we got fishing, got income from the boat". Asked about any mention of interest, he said that at the end of the meeting Fogarty said something like "Now what about, what are we going to do about interest?" and Horton answered "Well I guess we have to pay interest or else we'd have to pay the bank". His expectation on leaving the meeting was that they would pay interest when they could afford it. There was no discussion about a rate and he did not recall Fogarty using the term "bank interest".
The defence called Mr Hammond. His version of the meeting was that Fogarty had agreed to finance the finishing of the job and give the company time to pay later. Asked if there had been any discussion about interest, he said "There was some mention of interest if we went down that track but there was no figures or any details". He went further, however, and claimed that he had a second conversation with Fogarty about a month later in which a firm agreement was reached which superseded any previous arrangement. He claimed that he and his co-directors were concerned at the escalating cost and did not consider they were receiving value for money. The plaintiff's charges were excessive and Fogarty had not kept certain promises, such as a promise to supply a generator at cost. Instead he had charged a mark-up of some $5,000 on that item alone. Furthermore, Hammond claimed he was very concerned that the hydraulic winches might fail. At the time of this later discussion with Fogarty, another fishing vessel which had been fitted out with identical winches had been brought in for repair because the winches had failed and caused a catastrophic loss to the vessel's owners. Alarmed at the prospect of his vessel suffering a similar fate, he had raised his concerns with Fogarty, who reassured him that there would be no such failure on the Edward James Fairnie. Hammond claimed that an agreement was then reached that in consideration of the plaintiff company not charging interest on the moneys then or thereafter to become due on the vessel, the defendant company would pay the balance outstanding for work already done without disputing any alleged over-charge, would likewise not quibble about the plaintiff's charges for work yet to be done and would waive any right of recourse against it should the Edward James Fairnie winches fail when they went to sea. I reject this evidence as fanciful in the extreme. Hammond claimed he told his co-directors of the bargain he had struck, but neither Horton nor Clinton had any recollection of his doing so. It was categorically denied by Fogarty.
Work continued on the vessel until September 1987, when it was returned to the defendant company. By this stage additional work to the value of approximately $132,700 had been completed and it is an agreed fact that, no further payment having been made since the $20,000 paid in June, the balance due and owing by way of principal as at September 1987 was $177,147.61.
On 15 December 1987, the plaintiff company's book-keeper, Buck, wrote a letter to the defendant company sending a statement of account for that sum. The letter said:
"This account is now overdue for payment, and we request payment of same by return.
Failing this, we will have no alternative but to seek other remedies for payment.
Your urgent attention to this matter is requested."
That same month, Buck sent the first of several invoices seeking the payment of interest calculated initially at 15½ per cent per annum. These invoices were sent monthly until 30 September 1988 and thereafter at longer intervals, but claiming interest for each month until September 1989. There is then a gap in the invoices in evidence, but further monthly invoices for interest at 20 per cent per annum for February to June 1990 have been placed in evidence. Statements of account incorporating demands for interest were sent regularly each month to the defendant company from December 1987 to 30 June 1989. Thereafter the documentation is incomplete, but it appears that statements continued to be sent incorporating monthly demands for interest. There are in evidence statements for the months of February, March, April, May and June 1990 by which month the balance shown as owing was $177,726.49, while the next one in evidence is one dated 30 June 1992 which brings forward the last mentioned balance and adds to it a separately invoiced claim for interest for the preceding two years amounting to $56,898.91. This invoice is endorsed "Interest rate 12½%pa from 1/1/1992". How interest was calculated on the 18 months prior to that is not explained, but it represents a mean of approximately 18½ per cent per annum.
Throughout the period up to 30 June 1992 when claims for interest were made by invoices and statements, the defendant company made no payments of sums identifiable as referable to interest. There were only two payments made in this time, namely one of $10,000 on 31 March 1988 and one of $50,000 on 30 November 1988.
Despite Fogarty's claim to have told his book-keeper he had an agreement with the defendant company that it should pay interest at bank rates monthly from the time of that agreement, no interest was ever charged on the amounts owing from time to time up till December 1987, notwithstanding that $44,452 was owing as at late June and the debt rose progressively to $177,147.61 by the end of September 1987. Furthermore, the letter sent by Buck to the defendant company in December 1987 and quoted above demanded immediate payment of the entire balance and made no mention of interest, thereby suggesting that Buck was not then aware of any arrangement for the postponement of the debt or the payment of interest as consideration therefor. Two months later, when the first two invoices claiming interest had been sent, a firm of accountants acting on behalf of the plaintiff company sent a further letter seeking payment of the principal sum and the two monthly amounts of interest. It read as follows:
"We have been requested by our client Tamar Steel Boats Pty Ltd to arrange for collection of your outstanding account of $181,808.49.
The account consists of the following components:
Work performed by Tamar Steel Boats Pty Ltd
up to 30th September, 1987 177,147.61
Interest for the Months:
December 1987 2,330.44
January 1988 2,330.44
Total amount outstanding at 31st January, 1988 $181,808.49
We draw your attention to the fact that the account is now in excess of 120 days old and while favourable terms were initially provided to you for payment, interest is currently accruing at the rate of $2,330.44 per month.
Would you please contact us with a view to making arrangements for payment of the account as soon as possible.
Should no repayments be forthcoming by 28th February, 1988 it is proposed to undertake formal recovery action."
Buck gave evidence that it was his normal practice to demand interest on outstanding accounts, although it appears that there were relatively few customers other than the Adelaide Steamship Company which always paid its bills on time. Buck also said that he took it upon himself to determine the rates of interest demanded. Sometimes he chose the interest rate shown on the company's bank statements as being charged to customers by the company's bank (the company for the most part was in credit with the bank); at other times he charged the rates at which he could invest surplus funds on the short term money market. These were substantially higher. Although initially agreeing that it was his usual procedure to send out invoices for interest on outstanding accounts, he claimed that he never charged interest without instructions from Fogarty.
While the work was being done on the boat and when it first went fishing for orange roughy, Horton and Clinton played a minor role in the business affairs of the defendant company. It was Hammond who had been spokesman at the June meeting with Fogarty. Although Mrs Clinton initially did the book work, Hammond's wife took over subsequently. The statements were sent from February 1988 to Hammond, who lived on Flinders Island. He claimed he had not seen them at the time of their delivery and had first seen them in 1996. In November 1988, the plaintiff's accountants again wrote to the defendant company, care of Hammond, and referred to a discussion with Mrs Hammond on 21 March 1988 in which, they stated, she had advised them that the defendant company "would make an initial payment of $10,000 followed by regular payments after that". The letter continued:
"While an initial payment of $10,000 has been received no further payments have been forthcoming.
Would you please contact Mr Simon Lester of this office with a view to making arrangements for the repayment of the balance of the account.
We enclose a statement of your account as at 30th September, 1988 together with an invoice for interest for the month of September."
The conversation with Mrs Hammond was followed by the payment of $10,000 on 31 March 1988, while the payment of $50,000 on 30 November 1988 appears to have been prompted by this letter.
The defendant's fishing venture was not successful and the vessel was put on the market in early 1988. A Melbourne syndicate agreed to purchase it and paid a deposit, which was ultimately forfeited when the purchaser failed to complete. The deposit was the source of the $50,000 payment in November of that year. The following year, Horton and Clinton sold their shares to people named Cull. Mr Bill Cull was a professional fisherman from Victoria. His brother was interested in entering the orange roughy industry and he made enquiries of the defendant company on his brother's behalf in the first half of 1989, looking into its financial affairs. He had been a previous customer of the plaintiff company and knew, and was on good terms with, Fogarty. He gave evidence that about the middle of the year, having been told by Hammond that there was a debt to the plaintiff "of about $175,000" but that this was to be paid off from profits without interest being charged, he telephoned Fogarty. He said they spoke about the fact that interest was not being charged on the debt of about $175,000 and that Fogarty confirmed it. His brother had bought into the business and he then took over the bookwork of the defendant company as he had the necessary infrastructure. He said that in the following year, 1990, he had received a statement which showed a claim for interest and that he had thereupon rung Fogarty. Cull said he told Fogarty, "I've received this account, Alan, and it's showing that you're charging interest and I am just wondering if there's something that's changed or what's going on". Fogarty had replied, "Look, Bill, it's an oversight. It's the system that we've got here and after a period of time accounts get sent out and interest charged". Cull said he remembered the conversation clearly because it was the first time he had seen interest charged. This is a rather strange claim for a person who had actively involved himself in investigating the financial affairs of a company his brother intended to invest in, especially as that company was in possession of numerous statements and invoices showing the regular addition of monthly interest.
The defendant company's balance sheet for the year ending 30 June 1991 shows a debt under the heading "Trade Creditors" of $175,802 and an identical figure for the previous year. It was brought forward in balance sheets for 1992 and 1993 and, after a payment of $100,000 in 1994, it appears in the following three years' balance sheets reduced by that amount. In a statement for May 1990, the balance, inclusive of monthly interest, was $175,802.09. The following month this balance was brought forward and a further $1,924.40 added for interest. It seems highly likely, if Cull had the conversation with Fogarty which he claims, that it was the receipt of the statement for June 1990 which prompted his query and that he treated the sum brought forward as the principal, incorporating that figure in the defendant company's balance sheets. Significantly, as I have noted, the plaintiff company made no further claims for interest thereafter until June 1992, when two years' interest was added.
In October 1991, the defendant company was forced to re-arrange its finance and approached the Commonwealth Development Bank. The bank queried what arrangements were in hand in respect of the debt of $175,802 shown in the balance sheets. Cull thereupon telephoned Fogarty and made an arrangement with him for the deferment of the debt for a further five years, with the defendant company paying interest only. He sent a facsimile the following day to this effect:
"After speaking with the Commonwealth Development Bank, they requested that we clarify exactly our agreement in relation to the $175,000 debt to your company (or you personally).
If you could confirm your meeting with John Hammond and conversation with me on the phone yesterday, agreeing that interest only be paid over the next 5 years with principal payments from time to time.
Once this loan with Commonwealth Development Bank is settled and we can see where we are heading we hope to decrease the principal substantially. Alan we appreciate your support, and confidence in us over the past few years, a [sic] we will finalise as soon as is practicable."
Fogarty responded on 25 October 1991 by letter stating:
"Further to the discussions we have had with Messrs Cull and Hammond it is confirmed that repayment of interest only for the next five years is acceptable.
It is understood that as surplus funds become available capital will be reduced."
No payment was received from the defendant company for at least 18 months thereafter.
In May 1993, the plaintiff company was placed in receivership. On a day when the receiver had called on Fogarty at his office, Hammond appeared and tendered a cheque for $100,000 to Fogarty. Fogarty asked him to keep it for the time being because the receiver had just arrived. He did not disclose the debt owing to his company by the defendant company in a statement verifying a report as to the affairs of his company required by the Corporations Law. He said he verbally told the receiver about it and that the receiver "didn't want to know about it". In September of that year, Hammond again tendered a cheque for $100,000 which Fogarty took and it was placed in a personal account of his with a credit union.
The receivership continued until November 1995. No demands were made on the defendant company during its course by the plaintiff company or any of its officers. On 28 November 1995, Fogarty sent a statement to the defendant company with a covering letter stating:
"Herewith is a statement of HCH & K Fisheries from its inception in 1987 until October 1995. As the repayments have never been in accordance with our written agreement dated the 23 October 1991 we consider a positive response is due."
The statement contained calculations of monthly interest on the principal, allowing for previous payments and showing a final balance owing of $228,369.66 as at October 1995. On 29 October 1996, Fogarty sent two further statements, one calculated with interest capitalised to that date and amounting to $246,538 and the second calculated with simple interest. It amounted to $196,416. On 12 December 1996, Fogarty swore an affidavit accompanying a statutory demand under the Corporations Law, s459E, in which he stated that the sum of $137,656.95 principal and $57,182.74 for interest amounting to $194,839.69, was due and payable to the plaintiff by the defendant and acknowledging receipt of payment since 1987, acknowledging $160,000. The defendant company tendered $45,213 on 30 November 1996. This was calculated by deducting the $60,000 paid prior to October 1991 from the original debt of $177,147.61, adding simple interest of 10 per cent from that time until the $100,000 was paid in September 1993 and thereafter on the reduced balance, and making a further deduction of four months' interest in respect of the period between the tender of the $100,000 in May 1993 and its acceptance in September of that year. The defendant company claims that this fully discharged its obligations to the plaintiff company.
As the defendant company had paid $60,000 off the initial principal sum of $177,147.61 before Cull made any enquiry of Fogarty in mid-1989, and by that time the balance, inclusive of interest, was in the order of $153,000, it is curious that both should have spoken of the debt as being "about $175,000", as Cull claimed. While this sum roughly approximated the initial debt, Fogarty ought to have been aware of the payments totalling $60,000, even in the unlikely event that he did not realise Buck was regularly adding interest. It is equally surprising that Hammond should not have advised Cull of those payments and, if he told him that interest was not payable, should not have asserted that the company's debt was now only $117,146 or "about $115,000". Cull, in his evidence, claimed that he only learnt in 1996 of the $60,000 reduction in 1988 and that the figure of "about $175,000" mentioned in the telephone conversation with Fogarty in mid-1989, appearing in the balance sheet as $175,802 in 1990 and referred to in his facsimile of 23 October 1991 as "the $175,000 debt to your company (or you personally)" which was postponed for five years with "interest only" being paid, was, until 1996, always believed by him to have been the sum owed by the defendant company.
I have considerable reservations about the evidence of Fogarty. He swore an affidavit in which he gave a different account of when the agreement was made. In it he claimed it was made in December 1987, a couple of months after work was completed; whereas his evidence at trial was that it was made in September 1987 and before the work was completed. I find that the visit to him of Hammond, Clinton and Horton, when he agreed to finish the work and allow time for payment, was in June 1987. The passage of time may well account for these discrepancies, but his explanation for not disclosing the debt when the company went into receivership is quite unsatisfactory, as is his pocketing of the $100,000 part repayment in September 1993. Nevertheless, I accept that he was generous in his treatment of the defendant company when it could not pay for the completion of the repairs and he gave it time to pay off the debt. It was not an unreasonable condition to impose that the company should pay interest on the debt and no satisfactory explanation has been offered for why he should have allowed Cull to persist in a belief that throughout the time they had contact with each other prior to 1996, the debt had remained static at $175,802, or "about $175,000". The fact that the plaintiff company ceased sending monthly payments demanding interest after June 1990 is explicable by reason of a change in the fortunes of the plaintiff company. At about that time, the company ceased its ship building and repair activities at Kings Wharf, Launceston and concentrated on an ultimately unsuccessful fish processing enterprise which was being carried on at Triabunna. This absorbed most of Fogarty's time and energy and Buck ceased to be a full time employee. Instead, he went to work for another company and spent only a short time in casual work for the plaintiff company. The documentation after June 1990 is far less regular and detailed than it had been.
While I have no criticism of Cull in respect of his evidence, and Mr Pearce of counsel for the plaintiff said of him in his final address that he seemed an honest and genuine witness, I do not accept the accuracy of his accounts of the telephone conversations concerning interest, which he said took place in mid-1989 and mid-1990. Perhaps with the passage of time he has come to an erroneous belief that he was unaware of the regular demands for interest prior to his brother buying into the defendant company and that the figure of "about $175,000" was the initial debt which had not been reduced. Nevertheless, I accept that there was an understanding reached in June 1987 that the defendant company would pay interest on the outstanding account and, although the accounting methods of Buck may have been somewhat haphazard, that he purported to give effect to that arrangement from the end of December 1987. The demands for interest made regularly thereafter were not challenged by the defendant company and the sum of $175,802 incorporated into the balance sheet in June 1990 as a debt owing to a trade creditor was the balance, inclusive of interest, which had been demanded in May 1990. Even the terms of Cull's facsimile of 21 October 1991 referring to Fogarty's agreement "that interest only be paid over the next 5 years with principal payments from time to time", suggest that a concession had been made by way of a reduction in the obligation to pay principal and interest to one which required payment of interest only and that the arrangement was not an agreement to pay interest for the first time, and then only from that date. I find that Cull is mistaken in his recollection of the telephone conversations, if they took place, and that Fogarty did not confirm to him that interest was not payable prior to October 1991.
While it is true that the arrangement of June 1987 did not specify any formula for determining a rate of interest nor a time for payment of principal or interest, courts are reluctant to find contracts void for uncertainty and strive to give a meaning to the words used by the parties if a contractual intention can be discerned. Here the plaintiff agreed to postpone the defendant's obligation to pay the cost of modifications until the vessel could be put to productive use in an industry where quick and high returns were anticipated, and the defendant's directors agreed to pay interest as consideration therefor. A sum equal to the principal has been paid and some interest, but that interest has been unilaterally calculated by the defendant at an arbitrary 10 per cent per annum, and then only from October 1991. The question is, what meaning can be given to the word "interest", for it is clear that interest was to be paid while the principal remained outstanding and that the defendant agreed to pay interest from June 1987 on the balance outstanding from time to time.
In Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1967 – 1968) 118 CLR 429, a contract containing a term that certain variations would apply "if the supplier's costs" were to vary was challenged as void for uncertainty. Barwick CJ said at 436 – 437:
"… a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, at p 512 ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright's words in Scammell (G) & Nephew Ltd v Ouston (1941) AC 251 is not 'so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention', the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved."
In Meehan v Jones (1982) 149 CLR 571, an agreement for the purchase of real estate made conditional upon the purchaser obtaining finance "on satisfactory terms and conditions in an amount sufficient to complete the purchase" was under consideration. Gibbs CJ, at 579, said:
"On the other hand, if the test is an objective one, and the question is whether the finance ought reasonably to be regarded as satisfactory, I should not have thought that the clause is too indefinite for the courts to be able to attribute any particular contractual intention to the parties. It is true that the condition may, as Holland J. said in Grime v Bartholomew (1972) 2 NSWLR 827, at p 838 , be 'silent as to amount, term of the loan, rate of interest, conditions of repayment, class of lender, secured or unsecured or form of security'. Nevertheless, a court which had evidence of the financial position of the purchaser, the amount required the complete the contract and the prevailing rates and conditions on which loans are made by various classes of lenders should not find it unduly difficult to decide what finance a reasonable man, in the position of the purchaser, would regard as satisfactory."
Mason J, at 589, said:
"To say that clauses of this kind are void for uncertainty is to ignore the traditional doctrine that courts should be astute to adopt a construction which will preserve the validity of the contract. Moreover, it is a draconian solution ¾ one which is best calculated to frustrate the expectations of the parties, because in an increasing number of cases purchasers depend on the provision of finance in order to complete. The problems of uncertainty can be avoided by drafting a clause which specifies the details of the finance to be sought, but such a clause, by reason of its greater precision, may be too inflexible in its operation."
In Placer Development Ltd v The Commonwealth (1969) 121 CLR 353, Windeyer J made the following observations:
"When an agreement produces a liability to pay some sum of money, and the amount is not determined by the agreement, there is ordinarily no obstacle to saying that a reasonable sum was intended : and, if what is a reasonable sum can be determined by a court, a judgment for that amount can be given. If what has to be determined is a reasonable price for a thing sold or a quantum meruit for services rendered a jury can determine it. (at 371)
…
Whatever may have been the position in early nineteenth century times when contract law was still influenced by recollections of assumpsit, we can I think take our stand on broader ground today. An often quoted sentence from Lord Tomlin's judgment in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, at p 512 , will bear quotation once again:
'The problem for a court of construction must always be so to balance matters, that without violation of essential principle the dealings of men may as far as possible be treated as effective, and that the law may not incur the reproach of being the destroyer of bargains.' (at 373)
…
A basic assumption of our law is that bargains are to be kept." (Ibid)
Applying these statements of principle to the facts of this case, I think it is clear that the parties agreed that the rate of interest would be that which was being charged from time to time by banks on unsecured commercial borrowings. The statement of claim sought compound interest, but Mr Pearce did not press for interest other than simple interest. It has been held that "unless there is a clear agreement to pay compound interest, interest is taken to be simple interest" (Bakker v Chamdri (1986) 4 BPR 9234 at 9236; Farrow Mortgage Services Pty Ltd (in Liq) v Victor Tunevitsch Pty Ltd (1998) 8 Tas R 65 at 73).
Accordingly, I find that in accordance with the agreed interest calculations, the plaintiff company is entitled to judgment for $259,841.52 as at 30 November 2003. I will hear counsel as to the daily rate thereafter.
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