Lee Hun Hoe CJ (Borneo):

We dismissed the appeal and stated we would give our reasons later. We do so now.

The only issue in the appeal concerned the rate of interest to be given after date of judgment. The facts were not in dispute. Briefly, Macina Enterprise Sdn. Bhd. (the borrower) obtained a loan of RM392,000 from the appellant. As security for the loan the respondent, a director of the borrower, charged to the appellant a piece of land described as CT. No. 9408 Lot No. 78-N in the Town of Ipoh (the land). The respondent was to pay the appellant interest on the loan at the rate of 18% per annum. It was also provided that in default of the loan or interest the appellant should be entitled to agreed damages at the rate of 0.685% per day on the sum owing from the date of default until the date of payment. The respondent failed to pay interest for the months of December 1982 to April 1983. Notice recalling the loan was given to the respondent. On 29 June 1983 the appellant sent the respondent the statutory notice in Form 16E pursuant to s. 255 of the National Land Code. As on 30 April 1983 the total amount (including interest) outstanding was RM416,653.78. Consequently, the respondent was ordered to show cause why his land should not be sold by public auction for the recovery of the amount due, that is, RM416,633.28 being the principal sum including interest at the rate of 18%per annum as at 30 April 1983 together with further interest at 0.685% per day until 5 December 1983 and thereafter at 18% per annum until the date of full satisfaction.

In his grounds of judgment the learned Judge stated:

The defendant claims that the interest as provided for by the agreement at 18% per annum should only be chargeable up to the date of judgment. Thereafter the interest should be at 8% per annum.

I agree with the defendant. Interest should be at 8% per annum from the date of judgment until the judgment is satisfied. Order 42 r.12 clearly provides that every judgment debt shall carry interest at the rate net exceeding 8% per annum from the date of judgment. The interest chargeable before and up to the date of judgment could however be at the rate specified in the agreement.

The appellant contended that the learned Judge was wrong in law. He made two submissions. First, what he called the broader approach, that is, s. 16(1) of the Courts of Judicature Act 1964 preserves the contractual rights and does not confer power upon the Rules Committee to interfere with private rights of the parties acquired under contracts. In other words, s. 6(1) allows for contractual interest rates to be chargeable on a judgment sum. Secondly, the narrower approach, that is, the merger doctrine has no application to the present case. However, during the hearing the appellant abandoned the broader approach. For the narrow approach he relied on the case of American International Assurance Co. Ltd. v. Union Builders (Malaysia) Sdn. Bhd. [1971]. There the appellants were the chargees of certain lands on the security of which the respondents were given a loan of RM1,250,000 bearing interest at 11% per annum. The respondents defaulted in payment of a number of instalments. An order for sale of the lands was made by the High Court to recover the sum of RM1,401,596.24 due to the appellants as on 31 August 1970 together with interest at 11% per annum from 1 September 1970 to date of order and further interest at 6% per annum to date of payment or realization. The appellants appealed against the order of the High Court in so far as it related to the payment of interest at 6% from the date of the order. They claimed interest at 11% per annum until the date of realization of the security. In allowing the appeal the Federal Court held that as the appellants' claim as chargees in this case was not on the covenant but in the exercise of their statutory remedy against a chargor in default there could not be any merger in the judgment and the appellants were therefore e