Equitable interest on wrongfully retained funds may be granted despite no contract, while mental agony damages remain unrecoverable.

In development scheme disputes, compensation for mental agony is not ordinarily recoverable on ordinary contractual principles; such damages require a foundation in administrative law, including mala fide or capricious exercise of power, which was absent here. Interest may still be awarded on equitable grounds even without an express or implied contractual term where the authority has retained money without justification, because the relief compensates for deprivation of funds. The brochure clause excluding interest was not enforceable in favour of the authority on these facts. The rate of interest must be fair and proportionate; 12 per cent per annum was treated as appropriate on the circumstances stated.

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Issues: (i) whether compensation can be awarded for mental agony suffered by the claimants; (ii) whether, in the absence of any contract or promise, interest can be directed to be paid on the amount found due and payable by the Development Authority; (iii) if interest is payable, what should be the rate of interest, and whether the brochure term excluding interest is enforceable.

Issue (i): whether compensation can be awarded for mental agony suffered by the claimants.

Analysis: In a development scheme dispute, damages flowing from breach of contract are governed by ordinary principles of contractual compensation. In an ordinary commercial arrangement, damages are not ordinarily awarded for injured feelings, mental distress, anguish, or annoyance. The award of compensation for mental harassment in public authority cases is sustainable only where the liability is founded on administrative law principles and mala fide or capricious exercise of power is established on the record. No such foundation existed in the present matters.

Conclusion: Compensation for mental agony was not legally sustainable and the award made on that basis was liable to be set aside.

Issue (ii): whether, in the absence of any contract or promise, interest can be directed to be paid on the amount found due and payable by the Development Authority.

Analysis: Even where the governing scheme and correspondence do not create an express or implied term for interest, interest may still be awarded on equitable grounds when refund of money becomes due and the authority has retained the claimant's funds without justification. The power to grant such relief is based on justice, equity and good conscience and may operate as compensation for the deprivation of money. The absence of an express contractual clause does not bar such equitable relief where the authority is at fault.

Conclusion: Interest could be awarded on equitable grounds despite the absence of an express contractual stipulation.

Issue (iii): if interest is payable, what should be the rate of interest, and whether the brochure term excluding interest is enforceable.

Analysis: The rate of interest must be fair and proportionate to the circumstances, neither excessive nor nominal. The Court held that 12 per cent per annum would appropriately meet the ends of justice on the facts before it. The brochure stipulation excluding interest was held to apply only where the claimant himself created the circumstance necessitating refund, and not where the authority was found at fault.

Conclusion: Interest was payable at 12 per cent per annum, and the exclusionary brochure term did not protect the authority in the present cases.

Final Conclusion: The award of compensation for mental agony was annulled, while the refund directions were sustained with interest modified to 12 per cent per annum, resulting in partial relief to the appellant authority.

Ratio Decidendi: In disputes arising from development schemes, compensation for mental distress is not ordinarily recoverable on contractual principles, but refund of money wrongfully retained may carry equitable interest even without an express contractual term, subject to a fair rate fixed on the facts of the case.

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