Report No. 63
7.6. English law-fraud and other equitable considerations.-
The important cases in which interest is payable by the rules of equity can be thus enumerated1:
(1) Money obtained by fraud or retained by fraud can be recovered with interest.2-3
(2) Interest may also be recovered in equity in some cases where a particular relationship exists between the creditor and the debtor, such as mortgagor and mortgagee, obligor and obligee on a bond, executor and beneficiary, principal and sub-agent, principal and surety, trustee and cestui que trust, and vendor and purchaser. Interest may be recovered on arrears of annuities where there has been misconduct or improper delay in payment.
(3) Interest is allowed on pecuniary legacies not paid within a certain time.4 As regards annuities, the position is as follows:-5
"The general rule of the Court is, that arrears of an annuity do not carry interest. In the older cases an exception was sometimes made in favour of the annuitant where the annuity was a provision for a wife or a child. Lord Hardwicke acted on this principle in Newman v. Aiding, 3 Atk 579. But in Few v. Lord Winterton, 1 Ves Jun 451, Lord Thurlow repudiated this as a ground of decision; and his view of the law has, as I conceive, ever since been treated as sound and satisfactory.
The cases in which, in later times, the Court, in the absence of express contract, has allowed interest have been confined to those where the annuitant has held some legal security which, but for the interference of the Court, he might have made available for the obtaining of interest; or where the accumulation of arrears has been occasioned by the misconduct of the party bound to pay.
In this case contract is out of the question; and as the annuitants certainly held no legal security, the only question is, whether the great accumulation of arrears can be attributed to the misconduct of the owners of the property charged. It is distressing to think for what an excessive length of time the rights of the parties interested in this estate have remained unsettled. But on the best consideration of the facts, I am unable to fix the blame of delay on those who were to pay the annuities rather than on those who were to receive them."
1. Halsbury, 3rd Ed., Vol. 27, pp. 9 and 10, para. 9.
2. Johnson v. N. Ramaswami, 1904 AC 817 (822) (PC) (Lord Mcnaghten). (See also paras. 7, 9A, infra).
3. For Indian cases on fraud, see Appendix.
4. Halsbury, 3rd Ed., Vol. 16 (Executors), pp. 327, 323, 379, 380.
5. Torre v. Brown, (1855) 5 HLC 555 (578).