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DCCJ005215/1976
IN THE DISTRICT COURT OF HONG KONG
HOLDEN AT VICTORIA
CIVIL JURISDICTION
ACTION NO. 5215 OF 1976
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| BETWEEN |
Stibbe (Burtotex) Limited |
Plaintiff |
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and |
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A.J. Bayman trading as A.J. Bayman & Co. |
Defendant |
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Coram: Addison, D.J. in Court.
Date of Judgment: 4th November, 1976.
Mr. Taylor of (Johnson, Stokes & Master) for plaintiff.
Mr. Bayman, defendant in person.
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JUDGMENT
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1. The question for determination in these review proceedings may be stated as follows:
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In an action brought in Hong Kong for a debt or liquidated sum arising out of a breach of contract which contract specifies an amount payable in pounds sterling, what is the appropriate date for conversion of that sum into local currency where the claim itself is made not in sterling but in Hong Kong dollars? |
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2. So far as I am aware this point has not previously been considered by any of the courts of the colony.
3. The facts of the case are simple. In July 1975, the plaintiff sold to the defendant certain parts of machinery under a written contract the price for which was specified in English pounds. The goods were delivered but default was made in payment. At the time of the breach in August, 1975, the contract sum remaining payable was £239.70. The prevailing rate of exchange was 11.20 Hong Kong dollars to the pound. At the time judgment was entered it was then 8 dollars.
4. Judgment was entered for the plaintiff in the sum of $2,684.64 being the amount in local currency of the expressed sterling amount converted at 11.2 dollars to the pound, being the rate of conversion at the date of the breach.
5. At the hearing of the action Mr. Taylor, who appeared on behalf of the plaintiff company, referred me to the decision of the House of Lords in the recent case of Miliangos v. George Frank (Textiles) Ltd. [1975] 3 W.L.R. 758. It was submitted by him that that decision did not require the court to convert the sterling claim into Hong Kong dollars at the date when the court authorized enforcement of the judgment. He argued that the decision was inapplicable to this case and, agreeing with him, I awarded the sum stated above, which, as I have already said took the breach-date as the date for conversion.
6. After giving judgment I happened to receive Part 27 of the Weekly Law Reports which contains the decision of Oliver, J. in the case of In re Dynamics Corporation of America (In liquidation) reported in [1976] 1 W.L.R. 757. That case concerned the date for conversion of claims into sterling in liquidation proceedings.
7. It is not necessary to set out the facts of that case save to say that certain dicta of Lord Wilberforce and Lord Cross of Chelsea in the Miliangos case were not followed. Speaking of the Miliangos case Oliver, J. at page 774 of the report said:
"The effect of the Miliangos case, so far at any rate as debts are concerned, is to negative the breach date as the appropriate date for conversion and to give the foreign creditor the right to receive whatever is the appropriate sterling equivalent at the date when he enforces his judgment."
8. Having read this dictum I considered that the matter should be re-opened and hence there has been this review.
9. The defendant was unrepresented, consequently I have not had the benefit of opposing argument, but I am satisfied that the judgment formerly entered should stand. I now give my reasons for this conclusion.
10. As I have already stated, in this action for debt, the plaintiff has throughout claimed a sum in Hong Kong dollars. That sum is the equivalent of the sterling selling price converted as at the time of the breach. The plaintiff did not claim a specific sum in sterling, a foreign currency so far as this court is concerned. This fact, I consider, removes the application of the decision of the House of Lords in the Miliangos case. Mr. Taylor has argued that that decision is permissive and not mandatory: in other words it is open to a party to sue for a sum of money expressed in a foreign country if he so chooses and where he elects not to do so then the breach date is the appropriate date for conversion.
11. The argument of the defendant is that the contract was for a specific sum in English pounds and that is all the plaintiff is entitled to. He contends that the vagaries of sterling should not operate against him so as to require him to pay more than its equivalent in local currency at the time of payment. Such fluctuations in sterling should be stoicly borne by the plaintiff. Although the defendant has not made the point he might have added that, to some extent, the court rate of interest would mitigate the plaintiff's loss.
12. The plaintiff, on the other hand, counters this argument by saying that if the defendant had not defaulted he would have received a greater equivalent in Hong Kong dollars than what the defendant now suggests he should receive.
13. What is the answer to these opposing views?
14. I start by referring to Halsbury's 3rd Edition of the Laws of England, Volume 27 page 6 paragraph 5 entitled:
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"Foreign currency liabilities converted into sterling for enforcement." |
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It reads: |
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"For the purpose of enforcing any liability or obligation in the English courts all claims must be expressed in terms of English currency, since an English court cannot give judgment for the payment of a sum of money expressed in any other currency. (Manners v. Pearson & Son (1989) 1 Ch. 581 C.A.) For this purpose the rate of exchange for converting into sterling any sum expressed, or any damages to be calculated, in a foreign currency is generally speaking the rate prevailing commercially when payment became due or the liability to pay damages was incurred, that is, in the case of a bill of exchange, the date of maturity, in the case of any liquidated debt the date on which it became due and payable, in the case of damages for breach of contract, the date of breach, and in the case of damages for tort, the date when the damage or loss occurred ....." |
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15. Cases supporting the proposition that the conversion date for liquidated debts is the date when the debt became due are cited in Halsbury. There is the decision of the Court of Appeal in the case of Madeleine Vionnet et Cie v. Wills [1940] 1K.B. 72 and although Lord Wilberforce in the Miliangos case [1975] 3 W.L.R. 758 at page 772 expressed the view that he did not think that case could any longer be followed, nevertheless it is, I think, necessary to consider it in these proceedings. In that case it was held that in an action in England to recover the price of goods sold in France and payable in French currency, the correct date on which that debt ought to be converted into English money for the purpose of ascertaining the amount which the plaintiffs ought to recover, is the date when the debt became due in France.
16. Clauson L.J. in the course of his judgment at page 78 of the report said:
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"It is now settled law in this country, since the decision of the House of Lords in S.S. Celia v. S.S. Volturno [1921] 2 A.C. 544, following and approving the decision of this Court in Di Ferdinando v. Simon, Smits & Co. [1920] 3 K.B. 409, (1) that in the case of a claim for damages for breach of contract, or in the case of a claim in tort for fixed and definite damage due to conditions determined at a particular date, the amount of damage has to be assessed by reference to the circumstances existing at the material date, namely, in the case of contract, the date of breach, and in the case mentioned above of tort, at the particular date for determination of the damage, and consequently (2) that where in any such case the damages are primarily assessed in a foreign currency, the relief given by a Court in this country, which must express its judgments in sterling, must be calculated upon the rate of exchange prevailing at the material date, namely, in the case of contract the date of breach. |
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If this be the position the only question open in this Court would seem to be whether any distinction can in principle be drawn between the case of a claim in respect of breach of contract which results in relief by way of a judgment for a fixed sum. We can find no logical ground for such a distinction either in reason or in any principle which can be deduced from the decided cases; indeed counsel supporting the judgment below was not able to formulate any such principle, still less to point to any decided cases from which any such principle could be deduced. |
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It was argued, in our view correctly, that there is on the precise point no decision binding this Court. It is the fact that Lord Sumner speaking in the House of Lords on July 28, 1921, is careful to state the reasons given for his opinion in S.S. Celia v. S.S. Volturno [1921] 2 A.C. 544 in terms which cover only the case of a claim for damages and do not expressly deal with a claim for a debt. It is also the fact that in Societe des Hotels le Toucuet Paris-Plage v. Cummings [1922] 1K.B. 451, 465 Atkin L.J. sitting in this Court on December 20, 1921, was careful to keep open the precise point which it now falls to us to determine. |
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It is, however, the fact that in the year 1921, the precise point was decided in favour of the appellants' contention, by a judgment which must in our opinion now be treated as deciding the matter conclusively so far as a Court of first instance is concerned. On March 15, 1922, P.O. Lawrence J. delivered two judgments, both in the matter of the liquidation of the British American Continental Bank. In the first case, Goldzieher and Penso's Claim [1922] 2 Ch. 575, he had to deal with a claim for damages for breach of contract to deliver foreign currency; and in that case, as in the subsequent similar case, in the same liquidation, of Lisser and Rosenkranz's Claim [1923] 1 Ch. 276 he had no difficulty in applying the principles enunciated in S.S. Celia v. S.S. Volturno [1921] 2 A.C. 544 to the case of a contract to deliver foreign currency; and in each case his decision was affirmed in this Court. The second judgment, however, which P.O. Lawrence J. delivered on that day (Credit General Liegeois' Claim [1922] 2 Ch. 589) dealt with the exact point which is now before us, and is a clear decision that a claim in debt is on the same footing for the present purpose as a claim for damages for breach of contract. That case was not taken to the Court of Appeal; but the same conclusion was reached in Peyrae v. Wilkinson [1924] 2 K.B. 166, and P.O. Lawrence J.'s decision was mentioned in this Court in In re Chesterman's Trusts [1923] 2 Ch. 466, 485 without any indication of disapproval, and indeed in a connection which suggests that Warrington L.J. felt no doubt as to the correctness of the principle on which it proceeds, a principle supported by the well known dictum of Vaughan Williams L.J. in Manners v. Pearson. [1898] 1 Ch. 581, 592 The exact point is one which must arise almost daily in commercial practice, and there is no indication to be found in the books that during the seventeen years since Lawrence J.'s decision it has been regarded as open to question. In these circumstances we should not be prepared to overrule that decision, even if we thought, as we do not, that any other conclusion could be reached consistently with the decision of the House of Lords in S.S. Celia v. S.S. Volturno. [1921] 2 A.C. 544." |
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17. The principle established in Madeleine Vionnet et Cie v. Wills was applied by the Court of Appeal in Cummings v. London Bullion Co. Ltd. [1952] 1 K.B. 327, although in that case the court was then required to consider the impact of the Exchange Control Act, 1947.
18. The headnote in Cummings' case reads:
"Held; that the date on which to convert a debt in foreign currency sued for in this country was the date on which the defendant was in default by reason of his failure to pay for it: and though normally that date was the date on which the debt became due, in this case the defendants were not in default until the permission of the Treasury to pay it had been obtained, and it was their failure to act on that permission when obtained that constituted the default. It was therefore at the rate of exchange prevailing on September 29th, 1949 that the conversion into English currency was to be effected. Semble, if before the debtor obtained the consent of the Treasury, the creditor brought an action in England against him, by virtue of paragraph 4 of Schedule IV to the Exchange Control Act, 1947 and the rules of court made thereunder, the debtor could pay the debt into court as soon as the writ was served on him; the debt would therefore become payable on that date and the conversion into English currency accordingly should be made at the rate prevailing on that date."
19. Suffice it to say that the basic proper date for conversion was the default date.
20. Denning L.J. (as he then was) remarked at page 335 of the report:
"I take it to be clear law that when a creditor comes to the courts to enforce a debt payable in a foreign currency the creditor is entitled to be put into as good a position as if the debtor had done his duty under the contract and had paid the debt in the foreign currency without the intervention of the courts. To do this judgment must be given for the creditor for the debt turned into sterling at the rate of exchange ruling at the date when it should have been paid. The critical date is not so much when the cause of action arose but rather the date when the debt should have been paid."
21. In the case of S.S. Celia v. S.S. Volturno, a decision of the House of Lords and reported in [1921] 2 A.C. 544, their Lordships had before them an action in tort. It was there held that the conversion date was the date when the loss or damage occurred. This case was relied upon in the Vionnet case and Lord Wrenbury in the S.S. Celia case at page 564 of the report said, when referring to the case on appeal of Di Fernando v. Simon Smits & Co. [1920] 3 K.B. 409,
"In my opinion that case was well decided. No difference arises by reason of the fact that this is an action in tort while that was an action for breach of contract. There is here no continuing tort."
22. This the statement of the law appearing in the 3rd Edition of Halsbury was well established by the authorities.
23. Two things however must be borne in mind. There was no jurisdiction for an English court to give judgment in a foreign currency. This view of the law was ultimately stated by the House of Lords in 1960 in the case of Re United Railways of the Havana and Regla Warehouses Ltd. [1960] 2 All E.R. 332. However the Court of Appeal, by a majority, in the case of Schorsch Meier G.m.b.H. v. Hennin [1975] 1 All E.R. 152 held that the rule established in Havana's case was no longer "justifiable", and, in conformity with Article 106 of the E.E.C. Treaty the English court should give judgment in favour of a creditor of a member state in the currency of that state or its sterling equivalent at the time of payment.
24. In the course of his judgment in the Schorsch Meier case Lord Denning M.R. at page 155, gave his reasons why formerly the court could not give judgment in a foreign currency.
25. He said this:
"Why have we in England insisted on a judgment in sterling and nothing else? It is, I think, because of our faith in sterling. It was a stable currency which had no equal. Things are different now. Sterling floats in the wind. It changes like a weathercock with every gust that blows. So do other currencies. This change compels us to think again about our rules. I ask myself: why do we say that an English court can only pronounce judgment in sterling? Lord Reid in the Havana case thought that it was 'primarily procedural'. I think so too. It arises from the form in which we used to give judgment for money. From time immemorial the courts of common law used to give judgment in these words, 'It is adjudged that the plaintiff do recover against the defendant £X. in sterling'. On getting such a judgment the plaintiff could at once issue out a writ of execution for £X. If it was not in sterling, the sheriff would not be able to execute it. It was therefore essential that the judgment should be for a sum of money in sterling: for otherwise it could not be enforced."
26. Denning M.R. and Foster J. held, for reasons which are unnecessary to detail in this judgment, that since the courts were no longer precluded from ordering a defendant to pay a sum of money or from granting a decree of specific performance for the payment of a sum of money there was no longer any justification for the rule that judgment could only be given for a sum of money in sterling.
27. The Schorsch Meier case was considered by the House of Lords in the Miliangos case.
28. The headnote of that case as reported in the Weekly Law Reports [1975] 3 WLR 758 is as follows:
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"By written contracts made in 1971 a Swiss seller agreed to supply English buyers with goods at a price expressed in Swiss francs payable within 30 days of date of invoice to a Swiss bank. The goods and invoices were delivered in the autumn of 1971 but the price was not paid, and bills of exchange drawn in Switzerland and accepted by the buyers were dishonoured on the due dates. In 1971 the seller started two actions, later consolidated, in England, claiming the sums due in Swiss france converted to sterling at the breach date. On November 22, 1974, the buyers intimated that they would submit to judgment. On November 26, 1974, the Court of Appeal in Schorsch Meier G.m.b.H. v. Hennin [1975] Q.B. 416 held (inter alia) that the rule that English courts could express their money judgments in sterling only should be discarded and that judgments should be given in the currencies of foreign countries when the foreign currency was that of the contract and the money of payment. The seller in the present case thereupon amended his pleadings to ask for judgment in Swiss france as an alternative to claiming judgment in sterling. |
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Bristow J. gave judgment for the moneys due expressed in sterling, holding that the rule that the English courts could express their judgments only in sterling had not been altered either by Parliament or by any decision of the House of Lords. The Court of Appeal reversed his decision and, following Schorsch Meier G.m.b.H. v. Hennin, gave judgment for the seller ordering the buyers to pay the sum due in Swiss francs, the currency of the contract, or the equivalent in sterling at the time of payment. |
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On appeal to the House of Lords:- |
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Held (Lord Simon of Glaisdale dissenting), |
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(1) that it was legitimate for the House of Lords to depart from the 'breach date conversion' rule and recognize that an English court was entitled to give judgment for a sum of money expressed in a foreign currency in the case of obligations of a money character to pay foreign currency under a contract the proper law of which was that of a foreign country and when the money of account was that of that country or possibly some country other than the United Kingdom. |
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(2) That the claim had to be specifically for foreign currency or its sterling equivalent and conversion should be at the date when the court authorised enforcement of the judgment in terms of sterling. |
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(3) That the instability which had overtaken the pound sterling and other major currencies since the decision of the House of Lords in In re United Railways of Havana and Regla Warehouses Ltd. [1961] A.C. 1007, as well as the procedures evolved in consequence by the English courts and by arbitrators in the City of London to secure Payment of foreign currency debts in foreign currency, justified departure from that decision in terms of the Practice Statement (Judicial Precedent) [1966] 1 W.L.R. 1234 since a new and more satisfactory rule could be stated to enable the courts to keep step with commercial needs and would not involve undue practical and procedural difficulties." |
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29. It might not be inappropriate at this stage to interpose a passage in the commentary on Miliangos' case appearing in (1975) 119 S.J. 765 where the editor, doubtless having an eye on the practicalities involved, says:
"With sterling a weaker currency, we might lose our pre-eminence as a forum for international commercial disputes if we stuck to the old rule."
30. Lord Wilberforce in the course of his judgment at page 763 of the report said:
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"My Lords, although the 'breach date rule' has a long history, possibly, but I think, not clearly, extending back to the Year Books, consideration of it at the present time as regards foreign money debts must start from the Havana Railways case. For that was a case of a money debt as to which it was sought to persuade this House that a different rule should be applied from that which was admitted to be relevant to claims for damages for tort and for breach of contract. The claim there was for a debt (or debts) in U.S. dollars, due under a contract the proper law of which was held to be the law of Pennsylvania. The debtor (the United Havana Railways Co.) was English: the creditor was American. The proceedings were by way of proof in the liquidation of the debtor, not by action by writ, but it was not suggested that this made any difference, and I say at once that I do not think that any distinction can be drawn on this ground. On the arguments presented which were at least strenuous, and after examination of the cases extending over a long period, the House unanimously decided that the provable sum in U.S. dollars had to be converted into sterling at the rate of exchange prevailing when the relevant sums fell due and were not paid. They rejected the counter-suggestion that conversion should be made at the date of judgment. They did not take up or accept suggestions which had been made in some earlier cases that a separate rule applied to foreign money claims. |
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My Lords even if, I were inclined to question some of the arguments used in the speeches, I should find it inappropriate and unnecessary to say that, in the circumstances of the time and on the arguments and authorities presented, the decision was wrong or is open to distinction or explanation. |
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What we can do, and what is our responsibility, is to consider whether this decision, clear and comparatively recent, should be regarded as a binding precedent in today's circumstances." |
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Then at page 769 he made the following observation:
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"First, I do not for myself think it doubtful that, in a case such as the present, justice demands that the creditor should not suffer from fluctuations in the value of sterling. His contract has nothing to do with sterling; he has bargained for his own currency and only his own currency. The substance of the debtor's obligations depends on the proper law of the contract (here Swiss law); and though English law (lex fori) prevails as regards procedural matters, it must surely be wrong in principle to allow procedure to affect, detrimentally, the substance of the creditor's rights. Courts are bound by their own procedural law and must obey if, if imperative, though to do so may seem unjust. But if means exist for giving effect to the substance of a foreign obligation, conformably with the rules of private international law, procedure should not unnecessarily stand in the way. |
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There is, unfortunately, as Lord Radcliffe pointed out in the Havana Railways case, a good deal of confusion in English cases as to what the creditor's rights are. Appeal has been made to the principle of nominalism, so as to say that the creditor must take the pound sterling as he finds it. Lord Denning said so in the Havana Railways case and I can safely and firmly disagree with him in that because he has himself, since then, come to hold another view. The creditor has no concern with pounds sterling; for him what matters is that a Swiss franc for good or ill should remain a Swiss franc. This is substantially the reasoning of Holmes J. in the important judgment of US Supreme Court in Deutsche Bank v. Humphrey (1926) 272 US 517. Another argument is that the 'breach date' makes for certainty whereas to choose a later date makes the claim depend on currency fluctuations. But this is only a partial truth. The only certainty achieved is certainty in the sterling amount - but that is not in point since sterling does not enter into the bargain. The relevant certainty which the rule ought to achieve is that which gives the creditor neither more nor less than he bargained for. He bargained for 415,522.45 Swiss francs; whatever this means in (unstipulated) foreign currencies, whichever way the exchange into those currencies may go, he should get 415,522.45 Swiss francs or as nearly as can be brought about. That such a solution, if practicable, is just, and adherence to the 'breach-date' in such a case unjust in the circumstances of today, adds greatly to the strength of the argument for revising the rule or, putting it more technically, it adds strength to the case for awarding delivery in specie rather than giving damages." |
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31. A little later at page 771, of the report, Lord Wilberforce continued:
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"1. Can a better rule be stated? I would make it clear that, for myself, I would confine my approval at the present time of change in the breach-date rule to claims such as those with which we are here concerned i.e. to foreign money obligations, so. obligations of a money character to pay foreign currency arising under a contract whose proper law is that of a foreign country and where the money of account and payment is that of that country, or possibly of some other country but not of the United Kingdom. |
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I do not think that we are called upon, or would be entitled in this case, to review the whole field of the law regarding foreign currency obligations: that is not the method by which changes in the law by judicial decision are made. In my opinion it should be open for future discussion whether the rule applying to money obligations, which can be a simple rule, should apply as regards claims for damages for breach of contract or for tort. It is only because it has been thought that the same rule need apply to all these situations that we have been forced into straitjacket solutions based on concepts, or on forms of action ("archaic legalistic nonsense" in the words of Lawton L.J. in Schorsch Meier [1975] Q.B. 416, 430). But the principles on which damages are awarded for the tort or breach of contract are both very intricate and not the same in each case, involve questions of remoteness (of. the speech of Lord Parmoor in S.S. Celia (Owners) v. S.S. Volturno (Owners), The Volturno [1921] 2 A.C. 544) and have no direct relevance to claims for specific things, in which I include specific foreign currency. To take one familiar point. Whereas in the case of the inevitable contract to supply a foreign cow, the intending purchaser has to be treated as going into the market to buy one as at the date of breach, this doctrine cannot be applied to a foreign money obligation, for the intending creditor has nothing to buy his own currency with - except his own currency. I therefore see no need to overrule or criticise or endorse such cases as The Volturno [1921] 2 A.C. 544 or Di Ferdinando v. Simon, Smits & Co. Ltd. [1920] 3 K.B. 409. I would only say, in agreement with Scrutton L.J. (The Baarn [1933] P.251, 266), that the former case leaves a number of difficulties unsolved and that the mere fact that as a general rule in English law damages for tort or for breach of contract are assessed as at the date of the breach need not Preclude, in particular cases, the conversion into sterling of an element in the damages, which arises and is expressed in foreign currency, as at some later date. It is for the courts, or for arbitrators, to work out a solution in each case best adapted to giving the injured plaintiff that amount in damages which will most fairly compensate him for the wrong which he has suffered. As examples in which acceptance of this principle might have led to a juster result I may refer to The Teh Hu [1970] P.106 and Nederlandsch-Amerikaansche Stoomvaart Maatschappij N.V. v. Royal Mail Lines Ltd. [1958] 1 Lloyd's Rep. 412, and as an example where it did so to In re Dawson, decd. [1966] 2 N.S.W.R. 211. |
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As regards foreign money obligations (defined above), it is first necessary to establish the form of the claim to be made. In my opinion acceptance of the argument already made requires that the claim must be specifically for the foreign currency - as in this case for a sum stated in Swiss francs. To this may be added the alternative "or the sterling equivalent at the date of ..." (see below). As regards the conversion date to be inserted in the claim or in the judgment of the court, the choice, as pointed out in the Havana Railways case [1966] A.C. 1007, is between (i) the date of action brought, (ii) the date of judgment, (iii) the date of payment. Each has its advantages, and it is to be noticed that the Court of Appeal in Schorsch Meier and in the present case chose the date of payment meaning, as I understand it, the date when the court authorizes enforcement of the judgment in terms of sterling. The date of payment is taken in the convention annexed to the Carriage of Goods by Road Act 1965 (article 27(2)). This date gets nearest to securing to the creditor exactly what he bargained for. The date of action brought, though favoured by Lord Reid and Lord Radcliffe in the Havana Railways case, seems to me to place the creditor too severely at the mercy of the debtor's obstructive defences (cf. this case) or the law's delay. It may have been based on an understanding of the judgment of Holmes J. in the Deutsche Bank (272 US. 517) now seen to be probably mistaken (see Mann, The Legal Aspect of Money, 3rd ed. (1971), p.355 and cases cited). The date of judgment is shown to be a workable date in practice by its inclusion in the Carriage by Air Act 1961 which gave effect to the Hague Convention of 1965 varying, on this very point, the Warsaw Convention of 1929, but, in some cases, particularly where there is an appeal, may again impose on the creditor a considerable currency risk. So I would favour the payment date, in the sense I have mentioned. In the case of a company in liquidation the corresponding date for conversion would be the date when the creditor's claim in terms of sterling is admitted by the liquidator. In the case of arbitration, there may be a minor discrepancy, if the practice which is apparently adopted (see Jugoslavenska case [1974] Q.B. 292, 305) remains as it is, but I can see no reason why, if desired, that practice should not be adjusted so as to enable conversion to be made as at the date when leave to enforce in sterling is given. |
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2. A rule in the form suggested above would not, in my opinion, give rise to any serious procedural difficulty. Suggestions were made at the Bar that as regards such matters as set-off, counterclaim, payment into court, it would be difficult or impossible to apply. I would say as to these matters that I see no reason why this should be so: it would be inappropriate to discuss them here in detail and unnecessary since the Court of Appeal has assessed the procedural implications and has not been impressed with any difficulty. I have no doubt that practitioners, with the assistance of the Supreme Court, can work out suitable solutions - not overlooking the provisions of the Exchange Control Act 1947. I would only add that while the rule I have suggested would fit perfectly well into such a situation as existed in Societe des Hotels Le Touquet Paris-Plage v. Cummings [1922] 1 K.B. 451 it would not be reconcilable with the later case of Madeleine Vionnet et Cie v. Wills [1940] 1K.B. 72. I do not think that case can any longer be followed." |
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32. I think that the observation to Vionnet's case is that if it were to arise again it would be differently decided. The pound has fallen against the franc whereas formerly it was the reverse. It is, I think, only in the limited circumstances stated in the judgment above that the breach-date rule is abolished.
33. Lord Cross of Chelsea in his judgment at page 799 uttered these words:
"... I would go no further on this occasion than to say that the court has power to give judgment for payment of money in a foreign currency and that one case in which such a judgment should be given is where the action is brought to enforce a foreign money obligation. In that case if the defendant fails to deliver the foreign currency the date for its conversion into sterling should be the date for its conversion into sterling should be the date when the plaintiff is given leave to levy execution for a sum expressed in sterling. I say nothing one way or the other as to the date for conversion into sterling of sums ascertained in foreign currency for damages for breach of contract or tort."
34. Lord Edmund-Davies, in his judgment reported at page 801 of the report had this to say:
"To my way of thinking, the respondents succeeded in demonstrating that the procedural and practical difficultles of side-stepping the rule which Lord Read recognised could be "unjust" are not insurmountable. Rules of procedure are designed to serve justice, and if they are found to defeat it they must be replaced by other and better rules. Speaking for myself, I should hesitate long before I resigned myself to reluctant acceptance of the inevitability of a rule which would lead to the plaintiff in these proceedings recovering, in effect, judgment for a mere £41,000 in what turned out to be an undefended action in which he should have recovered at least £60,000; indeed, at one stage we were told that the sterling equivalent of the sum due might be as great as £71,000. Faced by such a situation, I regard as profoundly unsatisfactory the submission of the appellants (set out in paragraph 12 of their case) that:
'Breach of an obligation to pay in a foreign currency sounds in damages. Just as changes in the market value of goods must be excluded in the ascertainment of damages, so must changes in the value of currency ... To include in the calculation alterations in the rate of exchange would be tantamount to awarding damages not only for the breach itself but also for the postponement of payment of those damages until the date of judgment. That loss is normally mitigated, if not wholly compensated, by an award of interest.' ........
Being governed by sections 26 and 36(1) of the Arbitration Act 1950, the award of American dollars in that case of necessity had to be converted into sterling at the rate of exchange prevailing at the date when the award was made. But for that fact, the most just rate would be that prevailing when the award was being enforced, for the plaintiff had been kept out of his money until then, and I see no reason why this latter rate should not be the one adopted when judgments expressed in a foreign currency are being enforced. Accordingly, in my view the plaintiff in the present case should have been given judgment, mutatis mutandis, in the form approved of by Lord Denning M.R. in Schorsch Meier G.m.b.H. v. Hennin [1975] Q.B. 416,425, namely, that:
'It is this day adjudged that the defendant do pay to the plaintiff 416,144.20 Swiss francs or the sterling equivalent at the time of payment.'
I confess myself glad to have arrived at the conclusion that, for the reasons given in the speeches of my noble and learned friends, Lord Wilberforce and Lord Cross of Chelsea, the circumstances of today are so greatly different from those prevailing when the Havana case [1961] A.C. 1007 was decided 14 years ago that this House is now free to depart from it. We can therefore avoid perpetrating the great injustice which would result were the ratio decidendi of that case applied to the present claim. Accordingly, while respectfully finding myself unable to regard as valid the points relied upon by Lord Denning M.R. in the Schorsch Meier case as justifying a departure from the Havana case, I would concur in dismissing this appeal."
35. In my judgment it is clear that the decision of their Lordships is designed to secure no injustice by reason of the weakening pound sterling. Injustice would result in England today from continued adherence to the breach-date rule coupled with a prohibition against giving judgment in a foreign currency.
36. The rationale behind the decision is that, as was stated in the words of Lord Wilberforce:
"... justice demands that the creditor should not suffer from fluctuations in the value of sterling."
37. This decision or rather the ratio decidendi is binding on this court.
38. The claim before this court was in Hong Kong dollars. It did not suit the plaintiff to bring his claim in sterling for the obvious reason that the Hong Kong dollar is a stronger currency. Their Lordships were not considering a case identical with this. The pound had so lost its value that the foreign creditor suing in England stood to lose more if he were compelled to sue in sterling and was subjected to the breach-date rule.
39. Mr. Taylor argues that the decision of the House of Lords is permissive to the extent that it applies where the requisite conditions are met and where the plaintiff claims a sum in a foreign currency. He argues that the decision does not abolish the breach-date rule in actions for a liquidated sum or debt where, as in this case, the plaintiff elects to claim a sum expressed in local currency. His argument is that the plaintiff has the right to elect which way he wishes to proceed. He has pointed out that leave was given to the plaintiff in the Miliangos case to amend his claim from one for the sterling equivalent of the sum due in Swiss Francs as at the dates when payment should have been made to a claim for Swiss Francs.
40. In my judgment the plaintiff has the right to elect which way he will proceed and there is fortification for this view both in the Miliangos case and in the dicta of Oliver, J. in the Dynamics case, [1975] 1 WLR 757.
41. In the Miliangos case it was held the court was "entitled" to give judgment for a sum of money expressed in a foreign currency but the plaintiff must ask for it. Not that he must accept judgment in that way. The decision is permissive. The request for a judgment in foreign currency will be adopted when it best suits the plaintiff and in England today it is difficult to imagine circumstances when a plaintiff will not sue for a judgment expressed in foreign currency in view of the unhappy financial scene.
42. As Lord Cross said:
"... the court has power to give judgment for payment of money in a foreign currency."
43. Oliver, J. in the Dynamics case [1975] 1 W.L.R. 757 at page 761 said:
"The wind of change, however bloweth where it listeth and the recent decisions of the Court of Appeal in Schorsch Meier G.m.b.H. v. Hennin [1975] Q.B. 416 which I have referred to already, and of the House of Lords in Miliangos v. George Frank (Textiles) Ltd. [1976] A.C. 443 have established a different rule, namely, that at least in the cases of a debt payable in a foreign currency, as opposed to damages for breach of contract or trust, judgment may be given by an English court in the appropriate currency and that, for the purpose of enforcement, the conversion is to be made at the date of the swearing of the affidavit leading to execution."
44. In my judgment the vital words are "may be given."
45. I think that when Oliver, J. said at page 774 of the report,
"The effect of the Miliangos case, so far at any rate as debts are concerned, is to negative the breach date as the appropriate date for conversion and to give the foreign creditor the right to receive whatever is the appropriate sterling equivalent at the date when he enforces his judgment",
the learned judge was not as was suggested to me, being contradictory. He was saying in effect that where judgment is being sought in a foreign currency in the circumstances envisaged in the Miliangos case then the breach date for conversion is negatived. If it were not it would be pointless in suing for foreign currency.
46. I do not think their Lordships were adverting to the effect the judgment would have in other parts of the Commonwealth but were proceeding on the basis of doing justice to the parties suing in the English courts. The ratio decidendi is, I think, clear. I do not think their Lordships had in mind a case such is now under consideration.
47. In my judgment, the decision in the Miliangos case does not erase the breach date as the proper date for conversion in appropriate cases and one such case is where, in Hong Kong, the plaintiff elects to sue for a liquidated sum or debt expressed in the contract in respect of which the action is brought in terms of sterling but claimed in local currency.
48. The plaintiff was deprived of his money for a period beyond that agreed to between the parties. He should not suffer a loss as a result of the depreciation of the foreign currency in the meanwhile.
49. For these reasons I confirm my judgment previously given.
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(F. Addison) |
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District Judge |
Representation:
Mr. Taylor of (Johnson, Stokes & Master) for plaintiff.
Mr. Bayman, defendant in person.
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