Is Interest Payable on Damages Against MVIL?

In a long-delayed case interest can approach or exceed the damages themselves — K58,511 on K87,070 in one 2021 judgment. Because it is awarded in addition to the capped damages, it is a head worth understanding.

Interest is not damages

The Supreme Court settled the point in Motor Vehicles Insurance (PNG) Trust v Reading [1988] PGSC 23; [1988-89] PNGLR 236. The Trust argued that the statutory limit in section 49(2) covered interest as well as damages. The Court disagreed: “Interest is not damages. No authority is required to support that. It is common sense.” Interest “is an incident of litigation and quite distinct from the liability for damages”, awarded under a separate statute as “compensation for being kept out of his money”. Every cap case since has added interest on top: Kumbe v MVIL [2005] PGNC 110; N2860 and Yakupi v MVIL [2006] PGNC 214; N2981, each K150,000 plus K11,103.20 interest.

The statute

The power comes from the Judicial Proceedings (Interest on Debts and Damages) Act 2015, which repealed and replaced the old Chapter 52 under which the earlier cases were decided. Section 4(1) allows the court, in proceedings for the recovery of damages, to order interest “at a rate as it thinks proper” on the whole or part of the damages for the whole or part of the period between the date the cause of action arose and the date of judgment. Section 5 forbids interest on interest. Section 4(2) provides that where the proceedings are against the State, the rate “shall not exceed 2% yearly”, and section 4(4) makes a judgment exceeding that rate a nullity. The award is discretionary: Pioro v MVIL [2022] PGNC 235; N9667. The site’s general article on interest on a judgment covers the Act more fully.

The three working rules

From Moka v MVIL [2001] PGNC 90; N2098

Interest on special damages, including past loss of wages, runs from the date of the accident to the date of trial.
Interest on pain and suffering and loss of amenities runs at the appropriate rate from the date of the writ (or, in some cases, the accident) on the pre-judgment portion only.
No interest is allowed on damages for loss of future earnings, because that loss has not yet been suffered.

The same rules appear in the dependency cases: Pagau v MVIT [1992] PGLawRp 599; [1992] PNGLR 26 divided the award into loss to trial, with interest from the date of death, and future loss, with none.

The rates

For most of the reported period the pattern was 8 per cent on pre-judgment general damages and 4 per cent — half the commercial rate — on special damages and past economic loss. Koieba v MVIT [1984] PGLawRp 459; [1984] PNGLR 365 explained the halving: interest on pre-judgment non-economic loss should be at half the ordinary commercial rate, “eight per cent halved to four per cent”. Judges have varied the split. Brown v MVIT used 8 per cent on general damages and 4 per cent on specials; Kumbe did the same, computing K60,000 × 0.08 × 1.99 years on general damages and K14,000 × 0.04 × 2.77 years on specials; Kawage v MVIL [2016] PGNC 159; N6351 applied 8 per cent for eleven years and then merged the interest into the judgment debt so that post-judgment interest ran on the whole.

The 2 per cent question arose after 2015. Because the National Court has held MVIL to be “the State” for the purposes of the Claims By and Against the State Act (Gabriel v MVIL [2017] PGNC 122; N6777), the 2015 Act’s cap on interest against the State has been applied to it. In Vali v MVIL [2022] PGNC 220; N9661 the plaintiff sought 8 per cent; the court, noting it was not bound by an earlier National Court decision, awarded 2 per cent for three years, K6,693.15 on K111,552.85. The Supreme Court in MVIL v Tambo [2024] PGSC 73; SC2604 likewise ordered interest at 2 per cent against MVIL. Other recent National Court judgments — Waso (8 per cent, K58,511), Pelen (4 per cent) — have not applied the cap. The point is unsettled at National Court level, and the Supreme Court has not yet ruled on it directly in a personal injury case.

Delay and the size of the interest award

Interest rewards the claimant for MVIL’s delay but also for his own. In Waso the writ was filed in 2013 and judgment given in 2021: 8.4 years at 8 per cent on K87,070 produced K58,511. In Takura v MVIL [2010] PGNC 113; N4105 interest of K28,822.66 was added to damages of K38,328. Courts have occasionally limited the period to reflect a plaintiff’s own inactivity, as Vali did by awarding three years only. MVIL, for its part, has an incentive to resolve claims quickly, since it cannot rely on the cap to contain the interest.

Post-judgment interest

Section 6 of the 2015 Act provides for interest on the judgment debt from judgment until payment. Where MVIL is treated as the State, the 2 per cent ceiling applies to that too. Enforcement against MVIL is dealt with in a later article.

Sources

Check the section yourself

Before relying on anything here, read the current text of the Motor Vehicles (Third Party Insurance) Act (Chapter 295) and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.