Series on the Judicature Modernisation Bill

Over the last few issues of LawNews, the ADLS Civil Litigation Committee has been looking at Acts relevant to civil litigation under the Judicature Modernisation Bill.

So far, the Trans-Tasman Proceedings Act 2016, the Electronic Courts and Tribunals Act 2016 and the District Court Act 2016 have all been considered in detail. This week, the Committee looks at the Interest on Money Claims Act 2016.

The Interest on Money Claims Act 2016

The Interest on Money Claims Act 2016 (Act) arose from the Judicature Modernisation Bill and will come into effect on 1 January 2018. It will apply to all civil proceedings commenced after that date.

The purpose of the Act is to provide for the award of interest as compensation for a delay in the payment of debts, damages and other money claims in civil proceedings. In order to achieve that objective, the Act applies the following general principles:

  • interest is to be awarded on all money claims except those expressly excluded by the Act;
  • interest is to be paid from the day on which the money claim is quantified until the day of payment;
  • the interest rate is intended to reflect the fair and realistic cost to a creditor of the delay in payment; and
  • in special circumstances, a court is to have the power to award any interest or compensatory lump sum it may direct, or make no award.

The Act also has the additional purpose of providing standard provisions for calculating interest on money claims using an internet site calculator to be maintained by the Ministry of Justice.

Award of interest

Section 9 of the Act provides that, when giving a money judgment, a court must award interest for the period between the day on which the cause of action arose (or the date on which the loss was quantified) and the date on which the judgment debt is paid in full.

Interest is to be awarded unless the Act expressly excludes an award of interest or the court specifies otherwise in any judgment. However, interest does not accrue on amounts paid in full or partial satisfaction of the liability (after the date of the payments).

Section 10 of the Act also provides that, if the full amount claimed (exclusive of interest) is paid after a proceeding for a money claim is commenced but before judgment, the claimant is still entitled to an award of interest, even though the judgment requires no other payment to be made to satisfy liability.

Sections 11 to 16 of the Act provide for setting the amount on which interest is to be calculated and how to calculate the interest itself. The amount of interest to be awarded is to be calculated on a daily basis at the relevant interest rates using the internet site calculator to be established and maintained by the Ministry of Justice.

The Act sets out various requirements that the internet site calculator must meet. It also prescribes how interest is to be calculated if the judgment debt is paid in a single payment and also how the calculation is to be undertaken if the judgment debt is paid by instalments.

Section 17 of the Act contains provisions for calculating interest where the judgment sum is expressed in foreign currency.

Under section 18 of the Act, if, in the opinion of the court, special circumstances make it inequitable to award interest calculated under sections 10 to 17 of the Act, the court may reduce the period of time for which interest is awarded, award a lump sum as compensation for the delay in payment or determine not to award interest or a lump sum.

Where interest is not to be awarded

Part 2 of the Act specifies various circumstances in which interest is not to be awarded. In particular:

  • a court may not award interest on an amount that is a penalty or in the nature of a penalty;
  • interest may not be awarded on costs awarded to a party for a period prior to the date on which the award of costs was made;
  • the court may not award interest on an award of exemplary damages prior to the date on which judgment is given for those damages; and
  • the court may not award interest under the Act for a period if the court has awarded interest on that judgment under another enactment for the same period or if it would be inconsistent with the provisions of another Act to make an award of interest.

The Act also deals with situations where a contract between the parties provides for an award of interest (or provides that no interest is payable) on amounts payable under or for breach of the relevant contract.

In such circumstances, the court may award interest in accordance with the contractual arrangements between the parties instead of making an award of interest under the Act. A court may not make an award of interest under the Act if it would be inconsistent with the provisions of the contract to do so.

In the case of contracts entered into prior to the commencement of the Act, the court will not award interest under the Act. Instead, the court may award interest at a rate not exceeding a prescribed rate and to be calculated in the manner directed by the court, award a lesser lump sum as compensation for the delay or determine not to award either interest or a lump sum.

Miscellaneous provisions

Practitioners should note that, in order to be entitled to an award of interest under the Act, the claimant must specify in its statement of claim (or counterclaim) the relevant section of the Act under which interest is claimed and, as far as possible, the period for which interest is claimed.

A party claiming interest under special circumstances, in respect of a judgment expressed in foreign currency or under a contract, must specify the amount or rate of interest claimed. In that case, the court may not award interest in an amount or at a rate exceeding the amount or rate claimed.

The Act does not limit or affect the ability of any person to bring a claim or continue an existing claim in any court for interest at common law or in equity. A court cannot award interest in a money judgment under the Act if it has awarded interest on that judgment at common law or in equity.

Key transitional provisions

Section 87 of the Judicature Act 1908 and sections 62B and 65A of the District Courts Act 1947 will continue to apply to proceedings commenced in the relevant court prior to 1 January 2018, as if those sections had not been repealed.

Look out for the final update on the Senior Courts Act 2016. There will also be an ADLS CPD seminar entitled “Judicature Modernisation: What’s New, What’s Not” on Tuesday 13 June 2017.

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