Awarded pursuant to Section 11 of the Civil Law Act 1956
The section provides that:
“In any proceedings tried in any Court for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment:
Provided that nothing in this section:
(a) shall authorise the giving of interest upon interest;
(b) shall apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise; or
(c) shall affect the damages recoverable for the dishonour of a bill of exchange.” (Emphasis ours)
Discretionary
In Lim Eng Kay v Jaafar bin Mohamed Said [1982] 2 MLJ 156, Salleh Abas FJ (later LP) held:
“The ordering of interest to be included in a sum awarded for damages is a judicial discretion. Section 11 of the Civil Law Act 1956 (Malaysia Act 67) gives a fairly wide discretion to the court to order interest on a sum adjudged by the court in cases where a claimant succeeds in proceedings for the recovery of debts or damages.”[1] (Emphasis ours)
Ranges
Courts in the past have awarded:
(a) 8% interest;[2]
(b) 5% interest;[3]
(c) 4% interest;[4]
(d) 3% interest;[5] and
(e) 2.4%.[6]
In Karpal Singh a/l Ram Singh v DP Vijandran [2003] 2 MLJ 385, the Federal Court alluded to 8% interest being the normal rate.[7] However, on the facts of the case, a pre-judgment interest of 4% was awarded.
Not a punishment but a compensation
Salleh Abas FJ in Terengganu State Economic Development Corporation v Nadefinco Ltd [1982] 1 MLJ 365 opined the following:
“Interest is a sum of money representing the return for the use of the compensation for the retention by one person of a sum of money belonging to or owed to another. In essence it is regarded as representing a profit which the other person might have made if he had the use of the money or conversely the loss which he had suffered because he had not that use. In other words interest is a compensation for the deprivation of the use of money, which he is lawfully entitled to (per Lord Wright in Riches v Westminister Bank Ltd). As a result of almost two centuries of development by the common law courts and the courts of equity and also by Acts of Parliament it has now become a settled principle that interest is only payable, where there is an agreement express or implied or where the principal money has been wrongfully withheld or where there is a statute authorising the charging of interest, (per Collin MR in Borthwick v Elderslie SS 27 Halsbury’s Laws of England (3rd Ed), p 8 and per Lord Herschell LC in LCD Rly v SE Rly quoting with approval the judgment of Lord Tenterden in Page v Newman).
…
The sum total of all these cases is that interest is not a punishment but a compensation for the party entitled to the money for being deprived of its use and that interest would be simple or at rests depending upon the circumstances of the case.”[8] (Emphasis ours)
Disclaimer: The contents of this article are intended for information dissemination and academic discussion only and should not be construed as legal advice on a specific set of facts or circumstances. Should you require legal assistance, you may contact us via email (liti@pelim.my) or via WhatsApp/telephone call (+6011-5672 7813).
[1] Lim Eng Kay v Jaafar bin Mohamed Said [1982] 2 MLJ 156 (FC), at p. 161
[2] See e.g. Novotel Societe D’ Investissements Et D’ Exploitation Hoteliers & Anor v Pernas Hotel Chain (Selangor) Bhd [1987] 1 MLJ 210 (SC), p. 214; Lee Guan Par v Hotel Universal Sdn Bhd (CA), at p. 597
[3] See e.g. Messrs J Tan Teoh Assoc (suing as a firm) v MSIG Insurance (M) Bhd [2023] 2 MLJ 22 (CA), at para 72; Zuraimy bin Kushaili v Sarawak Energy Bhd [2021] MLJU 286 (CA), at paras 156 to 157; Zerin Properties v Naza Ttdi SDN. BHD. [2019] MLJU 517 (CA), at para 54(b)
[4] Karpal Singh a/l Ram Singh v DP Vijandran [2003] 2 MLJ 385 (FC), at p. 392
[5] See e.g. New Kok Ann Realty Sdn Bhd v Development & Commercial Bank Ltd New Hebrides (In Liquidation) [1987] 2 MLJ 57 (SC), at p. 66; Chong Pik Sing & Anor v Ng Mun Bee & Ors [1985] 1 MLJ 433 (SC), at p. 437
[6] See e.g. Era Kemuncak Jaya (M) Sdn Bhd v Tenaga Switchgear Sdn Bhd [2021] MLJU 1855 (HC), at para 53, per Wong Kian Kheong J (now JCA)
[7] Karpal Singh a/l Ram Singh v DP Vijandran [2003] 2 MLJ 385 (FC), at p. 392
[8] Terengganu State Economic Development Corporation v Nadefinco Ltd [1982] 1 MLJ 365 (OCJ), at pp. 368-369