Later decisions that cite Miliangos v George Frank
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[HOUSE OF LORDS] |
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Currency - Contract - Foreign debt - Contract made in Switzerland stipulating payment in Swiss currency - Whether English judgment can be expressed in foreign currency - Date for conversion |
Judicial Precedent - House of Lords decision - How far binding? - English judgment to be expressed in sterling - Fresh considerations arising - Instability of currencies - Grounds for departing from previous decision |
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 |
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On appeal to the House of Lords: - |
Held (Lord Simon of Glaisdale dissenting), (1) that it was legitimate for the House of Lords to depart from the "breach date conversion" rule and recognise 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 (post, pp. 463E, 467G-H,497H, 500A-B, 501F). |
(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 (post, pp. 468F-G, 497H - 498A,501A-B, H - 502A). |
(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 (post, pp. 467E-F, 469E,497E-F, 501D). |
Manners v. Pearson & Son [1898] 1 Ch. 581, C.A.; Young v. Bristol Aeroplane Co. Ltd. [1946] A.C. 163, H.L.(E.) and Schorsch Meier G.m.b.H. v. Hennin [1975] Q.B. 416, C.A. considered. |
In re United Railways of Havana and Regla Warehouses Ltd. [1961] A.C. 1007, H.L.(E.) not followed. |
Per curiam. The only judicial means by which decisions of the House of Lords can be reviewed is by the House itself under the declaration of 1966 (post, pp. 459E-F, 470G-H, 476C-D,496A-C). |
Decision of the Court of Appeal [1975] Q.B. 487; [1975] 2 W.L.R. 555; [1975] 1 All E.R. 1076 affirmed. |
The following cases are referred to in their Lordships' opinions: |
Admiralty Commissioners v. S.S. Amerika (Owners) [1917] A.C. 38, H.L.(E.). |
Baker v. The Queen [1975] A.C. 774; [1975] 3 W.L.R. 113; [1975] 3 All E.R. 55, P.C. |
Beswick v. Beswick [1966] Ch. 538; [1966] 3 W.L.R. 396; [1966] 3 All E.R. 1, C.A.; [1968] A.C. 58; [1967] 3 W.L.R. 932; [1967] 2 All E.R. 1197, H.L.(E.). |
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British American Continental Bank Ltd., In re, Credit General Liegeois' Claim [1922] 2 Ch. 589. |
Broome v. Cassell & Co. Ltd. [1972] A.C. 1027; [1971] 2 W.L.R. 645; [1972] 1 All E.R. 801, H.L.(E.). |
Broome v. Cassell & Co. Ltd. (No. 2) [1972] A.C. 1136; [1972] 2 W.L.R. 1214; [1972] 2 All E.R. 849, H.L.(E.). |
Celia (S.S.) (Owners) v. S.S. Volturno (Owners) (The Volturno) [1921] 2 A.C. 544, H.L.(E.). |
Chesterman's Trusts, In re [1923] 2 Ch. 466, Russell J. and C.A. |
Deutsche Bank Filiale N�rnberg v. Humphrey (1926) 272 U.S. 517. |
Di Ferdinando v. Simon, Smits & Co. Ltd. [1920] 2 K.B. 704; [1920] 3 K.B. 409, C.A. |
Director of Public Prosecutions for Northern Ireland v. Lynch [1975] A.C. 653; [1975] 2 W.L.R. 641; [1975] 1 All E.R. 913, H.L.(N.I.). |
Halcyon the Great, The [1975] 1 W.L.R. 515; [1975] 1 All E.R. 882. |
Harper v. National Coal Board (Intended Action), In re [1974] Q.B. 614; [1974] 2 W.L.R. 775; [1974] 2 All E.R. 441, C.A. |
Jugoslavenska Oceanska Plovidba v. Castle Investment Co. Inc. [1974] Q.B. 292; [1973] 3 W.L.R. 847; [1973] 3 All E.R. 498, C.A. |
Launchbury v. Morgans [1973] A.C. 127; [1972] 2 W.L.R. 1217; [1972] 2 All E.R. 606, H.L.(E.). |
Liddell's Settlement Trusts, In re [1936] Ch. 365; [1936] 1 All E.R. 239, C.A. |
Lloyd Royal Belge S.A. v. Louis Dreyfus & Co. (1927) 27 Ll.L.Rep. 288, C.A. |
Nederlandsch-Amerikaansche Stoomvaart Maatschappij N.V. v. Royal Mail Lines Ltd. [1958] 1 Lloyd's Rep. 412. |
Plaine v. Bagshaw (1594) Moo.K.B. 704; sub nom. Bagshaw v. Playn, Cro. Eliz. 536. |
Reg. v. Knuller (Publishing, Printing and Promotions) Ltd. [1973] A.C. 435; [1972] 3 W.L.R. 143; [1972] 2 All E.R. 898, H.L.(E.). |
Schorsch Meier G.m.b.H. v. Hennin [1975] Q.B. 416; [1974] 3 W.L.R. 823; [1975] 1 All E.R. 152, C.A. |
Shaw v. Director of Public Prosecutions [1962] A.C. 220; [1961] 2 W.L.R. 897; [1961] 2 All E.R. 446, H.L.(E.). |
Smith v. Central Asbestos Co. Ltd. [1973] A.C. 518; [1972] 3 W.L.R. 333; [1972] 2 All E.R. 1135, H.L.(E.). |
Soci�t� des Hotels Le Touquet Paris-Plage v. Cummings [1922] 1 K.B. 451, C.A. |
Teh Hu, The [1970] P. 106; [1969] 3 W.L.R. 1135; [1969] 3 All E.R. 1200, C.A. |
United Railways of Havana and Regla Warehouses Ltd., In re [1961] A.C. 1007; [1960] 2 W.L.R. 969; [1960] 2 All E.R. 332, H.L.(E.). |
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Vionnet (Madeleine) et Cie. v. Wills [1940] 1 K.B. 72; [1939] 4 All E.R. 136, C.A. |
Ward v. Kidswin (1625) Latch 77, 84; sub nom. Ward v. Kedgwin, Palm. 407. |
West Midland Baptist (Trust) Association (Inc.) v. Birmingham Corporation [1970] A.C. 874; [1969] 3 W.L.R. 389; [1969] 3 All E.R. 172, H.L.(E.). |
Young v. Bristol Aeroplane Co. Ltd. [1944] K.B. 718; [1944] 2 All E.R. 293, C.A.; [1946] A.C. 163; [1946] 1 All E.R. 98, H.L.(E.). |
The following additional cases were cited in argument: |
Algemene Transport- en Expeditie Onderneming Van Gend en Loos (N.V.) v. Nederlandse Tariefcommissie [1963] C.M.L.R. 105. |
British American Continental Bank Ltd., In re, Goldzieher and Penso's Claim [1922] 2 Ch. 575. |
British Bank for Foreign Trade Ltd. v. Russian Commercial and Industrial Bank (1921) 38 T.L.R. 65. |
Cummings v. London Bullion Co. Ltd. [1952] 1 K.B. 327; [1952] 1 All E.R. 383, C.A. |
Director of Public Prosecutions v. Shannon [1975] A.C. 717; [1974] 3 W.L.R. 155; [1974] 2 All E.R. 1009, H.L.(E.). |
Grosvenor Hotel, London, In re (No. 2) [1965] Ch. 1210; [1964] 3 W.L.R. 992; [1964] 3 All E.R. 354, C.A. |
McDonald (A. H.) & Co. Pty. Ltd. v. Wells (1931) 45 C.L.R. 506. |
Salim Nasrallah Khoury (Syndic in Bankruptcy) v. Khayat [1943] A.C. 507; [1943] 2 All E.R. 406, P.C. |
Tillam Boehme and Tickle Pty. Ltd., In re [1932] V.L.R. 146. |
APPEAL from the Court of Appeal. |
This was an appeal against an order of the Court of Appeal (Lord Denning M.R., Stephenson and Geoffrey Lane L.JJ.) dated February 10, 1975. The order allowed the appeal by the present respondent, Michael Miliangos, from a judgment of Bristow J. given on December 4, 1974, whereby he refused to order payment by the appellants, George Frank (Textiles) Ltd., to the respondent of Swiss francs 416,144.20 but instead gave judgment for the respondent in the sum of �42,038.49, which the parties agreed was the sterling equivalent of Swiss francs 416,144.20 at the date when payment thereof fell due. |
By a writ and statement of claim dated April 20, 1972 [1972 M. No. 1915], Miliangos, a Swiss, resident in Zurich, brought an action against George Frank (Textiles) Ltd., an English company, claiming the sum of Swiss francs 415,522.45 (�44,440.90) due but unpaid for the price of polyester yarn sold and delivered to the defendants under a written contract dated May 14, 1971. The claim stated that the goods had been delivered between June and November 1971 and that invoices had been sent to the defendants |
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at various dates in 1971 for the total sum claimed. Alternatively the plaintiff claimed against the defendants on two bills of exchange drawn by the plaintiff at Payerne in Switzerland and accepted by the defendants but which had been dishonoured on presentation on the due date, January 31, 1972, the sums of Swiss francs 273,619.45 (�29,264.11) and Swiss francs 27,394 (�2,929.90) respectively and the cost of protesting the bills, totalling Swiss francs 621.75 (�66.49); and interest on the sums claimed under section 3 of the Law Reform (Miscellaneous Provisions) Act 1934. By their defence the defendants admitted the deliveries but claimed that in breach of the contract part of the yarn so delivered was unfit for its purpose and of unmerchantable quality; and they assessed their loss in English weight and pounds sterling, and counterclaimed for damages. |
By a second writ [1972 M. No. 2957] issued on June 29, 1972, further sums were claimed under another contract and other invoices, and an alternative claim on dishonoured bills of exchange. The actions were consolidated by an order of October 19, 1973, and set down for hearing on December 2, 1974. By a letter dated November 22, 1974, the defendants abandoned their defence and counterclaim and stated that they would submit to judgment. |
The underlying principle of the rule as to the conversion of foreign currency into sterling is set out in Dicey & Morris, The Conflict of Laws,9th ed. (1973), p. 908, r. 174. |
It is submitted: (1) A debt expressed in a foreign currency is converted |
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(3) The rule has been adopted respectively by the legislature and in the Rules of the Supreme Court in (a) (i) section 72 (4) (payment) and section 57 (2) (damages) of the Bills of Exchange Act 1882; (ii) section 2 (3) of the Foreign Judgments (Reciprocal Enforcement) Act 1933; and (b) R.S.C., Ord. 42, r. 1 (4) (form of judgment), Ord. 45, r. 1 (5) (enforcement of money judgments), Ord. 45, r. 5, see also Ord. 1, r. 4 (decimal currency). |
(4) If the rule were otherwise, practical difficulties would arise in relation to (a) set off (R.S.C., Ord. 18, r. 17), (b) payment in (R.S.C., Ord. 22, r. 1), (c) costs, (d) interest, (e) conversion into sterling, (f) county court jurisdiction, since that jurisdiction is fixed at �1,000 and, if the rate of exchange from day to day were to be the criterion, a case might be within the jurisdiction one day and outside it the next. |
(5) The rule has not been abrogated by article 106 (1) of the European Economic Community Treaty 1972. |
(8) A creditor under a foreign contract who obtains a judgment expressed in foreign currency can convert it into English currency at the rate of exchange prevailing on the date of the judgment, (a) when the judgment is registered in England under the Foreign Judgments (Reciprocal Enforcement) Act 1933 (see section 2 (3)) or (b) for the purposes of an action brought in England to enforce the judgment. |
Here there is a breach of a contract to pay in Swiss francs and the rate |
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It is not open to the Court of Appeal to take the view that a previous decision of the House of Lords is no longer applicable because of a change of circumstances. |
Lord Denning M.R. erred in holding on the two grounds on which he relied that the former rule no longer existed: see also section 2 (3) of the Foreign Judgments (Reciprocal Enforcement) Act 1933. |
The established rule now in question should not be overturned: |
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Admiralty Commissioners v. S.S. Amerika (Owners) [1917] A.C. 38, 41, 42, 43, 56. |
As to the enforcement of money judgments, after the Debtors Acts 1869 and 1875 there could be enforcement by imprisonment on proof that the debtor had had means to pay, but since the Administration of Justice Act 1970 the jurisdiction to commit a defaulter is only exercisable by the High Court in respect of a High Court maintenance order: see The Supreme Court Practice 1973, pp. 675-676 in the notes to R.S.C., Ord. 45, r. 1. Under R.S.C., Ord. 45, r. 5 a judgment to do or obstain from doing any act can be enforced by committal. Since the procedure by committal under the Debtors Acts is no longer available there is no means of enforcing a foreign money judgment unless it is said that an order for payment in a foreign currency is not an order for payment of money within the Debtors Acts. |
In the light of the procedures in the English courts the respondents' contentions give rise to obvious difficulties, for example, in the case of a claim in one currency and a set-off in another. Further, if there was no conversion into English currency, the judge would not know at the date of judgment whether the set-off constituted a sufficient defence. In the case of payment in a foreign currency there would be embarrassing repercussions in the realm of costs. There would also be difficulties in calculating interest rates: should the place of calculation be the plaintiff's country or the country where the debt was incurred or some other place? Difficulties would also arise under sections 57 (2) and 72 (4) of the Bills of Exchange Act 1882. The effect of the respondents' contentions is to render the provisions of section 72 (4) otiose. |
The principal merit of the current rule is its certainty. It is for the respondents to show why a rule which has stood for more than three centuries should now be upset. |
Stuart McKinnon and David Hunt for the respondents. The respondents' basic proposition is that where the parties to an agreement provides for the money of account and the money of payment to be in a foreign currency, English law recognises as a substantive obligation that the price should be paid in that currency: see Dicey & Morris, The Conflict of Laws,9th ed., p. 894, r. 172; see also p. 877, r. 169. The principle there expressed is a correct statement of English law. The comment following rule 172 is fundamental. The rule as to conversion into sterling is a procedural rule and is not concerned with substantive rights but only with enforcement and procedure: see the sixth report of the Private International Law Committee 1962 (Cmnd. 1648), pp. 3-4, paragraphs 3-5, p. 5, paragraph 10 and appendix A, article 1. |
It is a matter of substantive law giving rise to a substantive right that, when a debtor has agreed to pay in Swiss francs, judgment should be in Swiss francs and specific performance can be granted. |
If the commodity argument is right as a matter of substantive law (outside the narrow confines of the conversion rule) the foreign buyer has no right to recover his debt, not because his debt is a claim for damages but because by reason of the conversion rule he is prevented from recovering his debt. |
In England the pound sterling can be just as much a commodity as is |
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In 1455 a creditor had a choice between two actions: see Year Books, 34 Hen. 6, pl. 12. He could sue in debt in the detinet. or in debt. The action of debt in the detinet entitled him to a judgment in a foreign currency and there followed a writ of inquiry to assess the value of the foreign currency in English currency. The judgment was conditional, in effect a judgment for damages to be assessed. Alternatively, the creditor could sue in an ordinary action of debt for the equivalent of the foreign currency in English money. Both debt and detinet were writs of debt and there were close links between them. Today there is existing no true parallel and no lesson is to be learnt by considering which of the two writs was applicable between 1455 and 1625. They do not establish that a foreign currency debt was then regarded as an obligation to deliver a commodity, breach of which sounded in damages. Nor do the cases in the ear Books (1481) 21 Edw. 4, pl. 38 and (1495) 11 Hen. 7, pl. 5. |
A debtor is entitled to discharge his debt in the currency of the contract if that is done at the place of payment. If the actual value of that currency is the same as at the prescribed date of payment, the payment is acceptable. This tender is a purely procedural matter which does not affect the substantive right. |
If the money of account and of payment is Swiss francs there is a debt in Swiss francs and an obligation to pay in Swiss francs. The only objection made to that proposition is that the Swiss francs are said to be a commodity. The old cases which have been said to support this cannot be regarded as parallel to a modern commercial transaction. If the Swiss francs were a commodity it would be hard for the appellants to maintain that the obligation was a debt and the only action available would be one for damages for failure to deliver up that commodity. But if suing in debt for an amount of Swiss francs payable for goods sold and delivered amounts to a claim for specific performance, that is what the respondent has done here. |
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Six reasons have been suggested against the respondent: (1) that the English courts do not know the value of foreign currencies; (2) that foreign currency is a commodity; (3) that there cannot be execution in a foreign currency; (4) that sterling is a stable currency; (5) that there cannot be specific performance of a contract to pay money; (6) that the old forms of judgment use the words "do recover." |
[LORD WILBERFORCE intimated that their Lordships did not require to hear argument on the first point.] |
As to (2), the commodity argument is not a reason which supports the rule; it arises out of applying the rule. If it is suggested that it is a reason for the rule, it cannot be supported. In debtor cases it was never used as a reason for the conversion rule but only as a justification for applying the breach date rule. |
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As to (6) and the difference between the words "do recover" and "do pay" in the forms of judgment, the former words implied that the judgment would be expressed in sterling. The change to the words "do pay" suggest that there can be execution in a different currency. |
These points present no obstacle to recovering judgment in a foreign currency. Unless the hitherto accepted rule has some other form, it should be disregarded. |
As to the alleged difficulty with regard to county court jurisdiction arising out of the fluctuations of foreign exchange, see section 41 of the County Courts Act 1959 dealing with the abandonment of part of a claim in order to give the court jurisdiction. |
If the respondent had sought a declaration as to the amount he should |
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The appellants relied on sections 72 (4) and 57 (2) of the Bills of Exchange Act 1882. As to section 72 (4), see the sixth report of the Private International Law Committee, pp. 3-5, paras. 3, 4 (b), 5 and 10 and Mann, The Legal Aspect of Money, 3rd ed., p. 321. It would be absurd if a debtor, having agreed to pay in one currency could only be forced to pay in another. As to section 57 (2), see p. 365 of Mann's book. The judgment date or the payment date could be argued for as the proper date of conversion in reliance on various cases. The majority report of the Private International Law Committee accepts that the creditor should get what he bargained for (p. 3, para. 3). Parties who have agreed on payment in Swiss francs must accept the good or bad luck of appreciation or depreciation. The breach date rule is acknowledged to be unjust and not to give effect to what the parties wanted to achieve. |
The appellants also relied on the Foreign Judgments (Reciprocal Enforcement) Act 1933 as giving an apparent advantage to creditors, but the debtor could simply pay the debt and the creditor could not sue and his cause of action would be satisfied. |
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(2) When a debtor defaults on a foreign currency obligation the creditor may go either to court or to arbitration. (a) If the law remains as it now is, the creditor's right to avail himself (if he can) of the Foreign Judgments (Reciprocal Enforcement) Act 1933 will remain, but there will be cases in which there are difficulties of jurisdiction in suing abroad. |
If sterling depreciates, then on the appellants' argument, all the debtor has to do is to wait to be sued here. The more the pound goes down, the more it is to the debtor's benefit to delay as long as he can. In this case the debt in terms of pounds at the date of breach was worth some �42,000. Now the same Swiss francs are worth some �72,000. Thus on the application of the breach date rule the creditor stands to lose some �30,000. It is no answer to say that the creditor should pursue his remedy in this country with dispatch, since a debtor who adopts delaying tactics will take the matter out of his hands. In the present law the debtor will know that he will have to pay in sterling, but the creditor does not know what that will be worth in the currency of the contract at the date of judgment. |
(b) If the respondents succeed, foreign creditors will be able to invoke |
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the Act of 1933 and if they sue in England they will be able to obtain judgment in a foreign currency. If the claim and the judgment were in a foreign currency neither side would benefit by a fluctuation in the exchange rate. If the debtor does not pay there must be a conversion of some sort, but it takes only a short time to get execution. The debtor's area of delay would be diminished. |
If a creditor has elected to be paid in a particular currency, he must stand by his election and claim for that currency; otherwise the creditor would have the best of both worlds. |
The result would be that the law would be the same in court proceedings and in arbitrations. |
(3) As to garnisheeing, see R.S.C., Ord. 49, r. 1 (1). It is accepted that the word "money" there means English decimal currency. But there is no need for the debt being garnisheed to be an English currency debt. There is nothing in Ord. 49 to prevent a judgment creditor of a sum in foreign currency from garnishing that sum. |
Set off and payment into court can also be operated workably within the framework of the present rules. A payment in would be made on the basis of a stated rate of exchange. On judgment the court would decide whether the payment was sufficient to satisfy the judgment. |
Because Miliangos was outside the jurisdiction the contract could not have been enforced specifically against him; the contract thus lacked mutuality and accordingly could not have been made the subject of an order for specific performance against the English defendants. When there is a failure to pay the price under an English contract for the sale of goods it is irrelevant whether the action is for the price or for damages for failure to pay the price, because at a particular date the sum was due and the defendant failed to pay it and what is claimed is a sum corresponding to what would have been the value at the date of the breach. The right is the same when the contract is to pay in a foreign currency. |
The subject matter of the court's order is a sum of money and not a |
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The Jugoslavenska case [1974] Q.B. 292 should be overruled or at least the question whether or not it was rightly decided should be reserved. |
Once it is accepted that there must be a conversion into sterling, the only question is: when? Within the confines of a case such as this an anomaly ought not to be created by acceding to the respondent's arguments. |
Their Lordships took time for consideration. |
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The action was begun by writ on April 20, 1972. In his statement of claim the respondent claimed the amount of the price or, alternatively, the amount due on the bills expressed, in each case, in the sterling equivalent of the sum due in Swiss francs as at the dates when payment should have been made. The appellant delivered a defence and a counterclaim alleging that the yarn was defective and there followed a number of interlocutory steps arising out of this allegation. But on November 22, 1974, just before the action was due to come on for trial the appellant wrote to say that it abandoned the defence and counterclaim and would submit to judgment. |
This decision was naturally welcomed by the respondent. So when this action came on for hearing on December 2, 1974, he applied to amend his statement of claim so as to claim the amount due to him in Swiss francs. This amendment was allowed by Bristow J. so that the claim became one for 415,522.45 Swiss francs for the price plus 621.75 the cost of protesting the two bills, making together 416,144.20 Swiss francs. Since, between the date in 1971 when payment was due and the date of the hearing, sterling had fallen in value as against the Swiss franc from Sw.Frs.9.90 to 6.00 (approximately) to the �, this meant that if the respondent could obtain judgment in Swiss francs he could recover in sterling terms some �60,000, whereas if he had to accept the sterling equivalent at the 1971 rate he could recover only some �42,000. |
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decision of this I louse and that the decision in Schorsch Meier was given per incuriam. |
My Lords, it is clear from this account that some distortion of the judicial process has been brought about. As Bristow J. said [1975] Q.B. 487, 492: |
It has to be reaffirmed that the only judicial means by which decisions of this House can be reviewed is by this House itself, under the declaration of 1966. Whether it can or should do so is a difficult enough question, which I shall now examine. |
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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. |
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. |
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. For that purpose it is permissible to examine the speeches in order to understand the considerations upon which the opinions there reached were based, for the ultimate purpose of seeing whether there have emerged fresh considerations which might have appealed to those who gave those opinions and so may appeal to their successors. |
The leading opinion was given by Viscount Simonds: Lord Radcliffe added some important observations but expressed agreement with it, and Lord Morris of Borth-y-Gest concurred without comment. The kernel of this opinion is in the critical paragraph where Viscount Simonds says [1961] A.C. 1007, 1043: |
There are three essential steps here: the first, which was accepted or assumed without argument, is that the claim must be in sterling and that judgment must be in sterling: the second, that an action to recover a foreign debt is an action in damages: the third, that authority and |
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convenience requires that the same rules should obtain for all actions in damages whether for failure to pay a foreign debt or founded on tort or breach of contract. It is obvious that of these the first is fundamental and that the others in some degree follow from it. |
Lord Reid opens his remarks (p. 1050) by saying that, although the weight of authority in favour of the "breach date" is very great, the House was not bound by authority so that the whole matter could be re-examined. He examines and analyses various types of contract, for the supply of goods, where the contract is governed by English or by foreign law, and for repayment of money lent. I think it is fair to say that, in logic, he saw good reason for treating money claims separately (pp. 1051-1052): |
"The original reason for the rule has no application in such a case... dollars lent in America are not a commodity, and if they are not repaid at the due date there can be no question of an American going into the market and buying dollars to replace those which the debtor failed to deliver." |
There is then the critical passage, at p. 1052: |
"The reason for the existing rule is, I think, primarily procedural. A plaintiff cannot sue in England for payment of dollars, and he cannot get specific performance of a contract to pay dollars - it would not be right that he should. So at best he could only have the dollars converted to sterling at the date of judgment." |
His Lordship then mentions a number of practical objections against the date of judgment, the date of payment and the date of the writ and concludes at p. 1053: |
"That rule may in some cases be artificial, it may even be unjust, but it has been accepted for a long time, it is clear and certain, and no other rule could be relied on to produce a more just result: indeed, no other rule is really practicable." |
The fair conclusion from this, I think, is that if Lord Reid had been persuaded that action could be brought for payment of dollars, and procedural and practical difficulties in doing so could be overcome, his inclination on grounds of justice would have been in favour of a separate rule relating to payment of money debts expressed in foreign currency, at least where they arise under a contract whose proper law is foreign. |
Lord Radcliffe, as I have stated, expresses agreement with the opinion of Viscount Simonds. He continues with a passage in which he rejects the "commodity" theory of foreign money, at p. 1059: |
"... this notwithstanding the fact that, if action is taken in England for breach of the contract, the remedy sought must be damages, not debt, and those damages expressed in sterling for the purposes of judgment." |
Again, the basic supposition is that the action in England can only be for damages, expressed in sterling, from which presupposition the logical |
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conclusion is drawn that, as in other claims for damages, the breach date for conversion must be applied. His Lordship continues, at p. 1060: |
"I share the theoretical objection to applying this rule to debts due in foreign currency. The effect of it is to express the creditor's rights in terms of sterling at a date earlier than that at which, assuming default, he has any means of obtaining the sterling and reconverting it into the currency which was due.... One looks for a rule by which the creditor takes what risk there is, at any rate as long as possible, in terms of the currency for which he has stipulated by his contract. This argues for a date of conversion later than the date of breach. But neither the date of execution nor the date of judgment offers itself as a practical proposition in litigation, and the only real alternative to the date of breach is the date at which legal proceedings are begun in this country." |
But finally Lord Radcliffe rejects these alternatives as not really workable, or, indeed, necessary. |
Lord Denning opens with an emphatic statement, at pp. 1068-1069: |
"And if there is one thing clear in our law, it is that the claim must be made in sterling and the judgment given in sterling. We do not give judgments in dollars any more than the United States courts give judgments in sterling." |
He then examines the consequences of regarding the claim as a claim in damages and refers to the change in the status of sterling as a currency, at pp. 1069, 1071: |
"It may be said that in these conditions the rule is apt to produce an injustice to a creditor in the United States who is owed money in dollars: because, if he comes to our courts after devaluation, he does not recover sufficient sterling to compensate him for his loss. But I am afraid that, if he chooses to sue in our courts instead of his own, he must put up with the consequences... coming here, it must accept the rule of our law that we can only give judgment in sterling,..." |
It is clear, and I think significant, that his Lordship, in the light of developments, has departed from these views in recent decisions. |
My Lords, I have quoted extensively from these opinions, not only because they embody the standing authority on the question now at issue, but also in order to make clear what, I think, appears from all of them to be the basic presupposition. This is that procedurally an action cannot be brought here for recovery or payment of a sum expressed in foreign currency, and that, in effect, it can only be brought for a sum expressed in sterling, recoverable by way of damages. I now have to ask, what is the position at the present time? Have any fresh considerations of any substance emerged which should induce your Lordships to follow a different rule? I will endeavour to state those which appear to me to be significant. |
1. The courts have evolved a procedure under which orders can be |
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made for payment of foreign currency debts in the foreign currency. The Court of Appeal has given its approval to the form: |
"It is adjudged... that the defendant do pay to the plaintiff [the sum in foreign currency] or the sterling equivalent at the time of payment." |
2. The situation as regards currency stability has substantially changed even since 1961. Instead of the main world currencies being fixed and fairly stable in value, subject to the risk of periodic re- or devaluations, many of them are now "floating," i.e., they have no fixed exchange value even from day to day. This is true of sterling. This means that, instead of a situation in which changes of relative value occurred between the "breach date" and the date of judgment or payment being the exception, so that a rule which did not provide for this case could be generally fair, this situation is now the rule. So the search for a formula to deal with it becomes urgent in the interest of justice. This leads to the next point. |
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6. Finally, I wish to express my agreement as to what my noble and learned friend Lord Simon of Glaisdale has said about the maxim "cessante ratione," etc. |
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 upon 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 it, 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. |
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 |
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"'... when an agreement for valuable consideration... has been partially performed, the court ought to do its utmost to carry out that agreement by a decree for specific performance.'" |
If this is so as regards money of this country, I can see no reason why it should not be so as regards foreign money: indeed, the latter seems to have a more "specific" character than the former. |
I return then to the two preconditions. |
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 a change in the breach-date rule to claims such as those with which we are here concerned, i.e., to foreign money obligations, sc. 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. |
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 |
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My Lords, in conclusion I would say that, difficult as this whole matter undoubtedly is, if once a clear conclusion is reached as to what the law ought now to be, declaration of it by this House is appropriate. The law on this topic is judge-made: it has been built up over the years from case to case. It is entirely within this House's duty, in the course of administering justice, to give the law a new direction in a particular case where, on principle and in reason, it appears right to do so. I cannot accept the suggestion that because a rule is long established only legislation can change it - that may be so when the rule is so deeply entrenched that it has infected the whole legal system, or the choice of a new rule involves more far-reaching research than courts can carry out. A recent example of the House changing a very old established |
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Young v. Bristol Aeroplane Co. Ltd. [1944] K.B. 718; [1946] A.C. 163, 169. Any change in this respect would require legislation. |
The issues |
Schorsch Meier and the maxim "Cessante ratione..." |
This raises two questions. First, does the majority's application of the |
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"... our change of practice in no longer regarding previous decisions of this House as absolutely binding does not mean that whenever we think that a previous decision was wrong we should reverse it. In the general interest of certainty in the law we must be sure that there is some very good reason before we so act." |
Obviously then, as with the legislature when changing the law, one (but only one) of the matters which will weigh with your Lordships sitting judicially is whether the reason which led to the original formulation of the questioned rule of law has lost cogency with changed conditions. The maxim as reformulated by Mr. Peppitt, and approved by Bristow J. [1975] Q.B. 487, 492, "cessante ratione cesset ipsa lex apud senatum" ("If the reason for a law ceases to be valid, then let the law itself cease when Parliament, or the House of Lords sitting judicially, so determines") is thus not indeed a rule of law but a piece of political wisdom - so long as it is not taken to be an exhaustive injunction. |
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"When a rule has become inveterate from the earliest time, as this rule appears to have been, it would be legislation pure and simple were we to disturb it." |
Lord Parker of Waddington said, at p. 43: |
"This House, however, is bound to administer the law as it finds it. The mere fact that the law involves some anomaly is immaterial unless it be clear that the anomaly has been introduced by erroneous judicial decision.... [p. 50] I do not think the appellants can be said to have advanced any sound reasons why your Lordships' House should disturb a rule of law which has been so long recognised in our courts, and which, however anomalous it may appear to the scientific jurist, is almost certainly explicable on historical grounds." |
Lord Sumner said, at p. 56: |
"... nor does it follow, in the case of a legal system such as ours that a principle can be said to be truly a part of the law merely because it would be a more perfect expression of imperfect rules, which, though imperfect, are well established and well defined. Again, an established rule does not become questionable merely because different conjectural justifications of it have been offered, or because none is forthcoming that is not fanciful.... [p. 60] I think that the argument... is really an appeal to this House in its legislative and not in its judicial capacity." |
Though all this now requires some qualification as applicable to your Lordships' House, it applies with full force (mutatis mutandis) to all courts bound by the rule of precedent. It needs no further justification in a court of law than that it is the law of the land. But in fact it has powerful practical vindication, in the superior aids to most decision-making which are available to the legislature in contradistinction to courts of law. This is a theme to which I shall venture to return later. |
If, then, the maxim "cessante ratione cessat ipsa lex" is not a licence |
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to the judiciary, with their limited perspective, to abrogate rules of law where the reason for the original formulation is either no longer discernible to them or appears to them to have been overtaken by changed circumstances, what, if any, is the current legal efficacy of the maxim? It is, in my view, a still valid description of a species of legal reasoning - namely, that which operates to distinguish an instant from a previous legal decision or to justify an exception from a principal legal rule. |
"... if the king give lands to a maior and communalty and their successors, to be holden by knights service, in this case the patentees (as hath beene said) shall doe no homage, neither shall there be any wardship or reliefe, onely they also shall find a man, &c. or pay escuage. But if they convey over the lands to any naturall man and his heires, now homage, ward, marriage, and reliefe, and other incidents belong thereunto. And yet this possibility was remota potentia; but the reason hereof is, Cessante ratione legis cessat ipse lex [sic]; the reason of the immunity was in respect of the body politique, which by the conveyance over ceaseth,..." |
What Coke was saying is this. Tenure by knight service involves, of course, the tenant providing for his lord an armed horseman (or a sum of money, escuage, which may go to pay for one); but it also normally involves lord and tenant entering into the fundamental feudal relationship marked by homage, whereby the tenant became the lord's man, with feudal incidents like wardship and marriage and relief (a succession duty paid by the tenant's heir). A corporation aggregate, however, is only a person in contemplation of law; so that, although it can provide an armed horseman (or pay escuage in default), it cannot become anyone's man, nor has it children who can become the lord's wards, nor daughters or widows whose hands the lord can bestow in marriage, nor heirs to pay relief on succession. It is the metaphysical nature of a body corporate which renders inappropriate the homage, wardship, marriage and relief which are the normal incidents of knight service. But if the corporation alienates the land held by knight service to a natural person, the new situation is distinguishable. The fictitious personality of the corporation was the material fact in the old situation, but it is not present in the new situation; so that the new tenant, notwithstanding that he derives title from a tenant enjoying immunity from feudal incidents, himself enjoys no such immunity. Cessante ratione cessat ipsa lex. Certainly, there is nothing in Coke's use of the maxim to justify judicial abrogation of an established rule of law. |
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"The whole reason and justification for joining a husband in an action against his wife for her post-nuptial tort has therefore disappeared; and it would seem to follow, upon the principle 'cessante ratione cessat lex,' that he is no longer a necessary or proper party to such an action." |
The first thing to be noted is that this was a minority opinion. The second is that the appeal on this point turned on statutory construction of the Act of 1882 (see Viscount Finlay at pp. 17, 18; Lord Atkinson at pp. 26-28; Lord Sumner at p. 36 et seq.). There is no question but that a statute may not only expressly but also by clear and necessary implication repeal a rule of law. The approaches to construction in such a case are well established: and it merely confuses to invoke the maxim "cessante ratione." Lord Atkinson's speech is especially illuminating, since his view of the reason for the common law rule was the same as Viscount Cave's(see p. 26). If an otherwise binding precedents is |
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To sum up on this part of the case: (1) the maxim in the form "cessante ratione cesset ipsa lex" reflects one of the considerations which your Lordships will weigh in deciding whether to overrule, by virtue of the 1966 declaration, a previous decision of your Lordships' House; (2) in relation to courts bound by the rule of precedent the maxim "cessante ratione cessat ipsa lex," in its literal and widest sense, is misleading and erroneous; (3) specifically, courts which are bound by the rule of precedent are not free to disregard an otherwise binding precedent on the ground that the reason which led to the formulation of the rule embodied in such precedent seems to the court to have lost cogency; (4) the maxim in reality reflects the process of legal reasoning whereby a previous authority is judicially distinguished or an exception is made to a principal legal rule; (5) an otherwise binding precedent or rule may, on proper analysis, be held to have been impliedly overruled by a subsequent decision of a higher court or impliedly abrogated by an Act of Parliament, but this doctrine is not accurately reflected by citation of the maxim "cessante ratione cessat ipsa lex." |
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Schorsch Meier: article 106 |
On this question, which does not affect the outcome of the instant appeal, I am content to express my agreement with what has been said by my noble and learned friend, Lord Wilberforce. |
Bristow J. and the per incuriam rule |
Greatly as I sympathise with Bristow J. in his predicament, I feel bound to say, with all respect, that I think he was wrong. In the first place, it involved misapplication of the concept of a decision given per incuriam. In the second place, it involved such departure from the rule of binding precedent based on a gradation of courts as both offends legal and constitutional principle and is potential of grave practical disadvantage. |
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(Similar considerations apply to the use of the maxim "cessante ratione..."). |
The Court of Appeal and Schorsch Meier |
Should Havana be overruled? |
Naturally, I am deeply impressed by the views of my noble and |
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"... it is an impermissible, or at least an undesirable, mode of law reform to use the occasion of an appeal in a decided case for the purpose of declaring that changing conditions and enlarging opinions have rendered the ratio decidendi of the lower court obsolete and therefore susceptible of being set aside.... It would in my opinion be a necessary preliminary to the reform of that generally accepted version of the common law that consultations, on a far wider basis than discussions among lawyers, including the arguments of counsel before the highest tribunal, should have taken place and been seriously considered. If there is one lesson which has been learned since the setting up of the Law Commissions it is this, that law reform by lawyers for lawyers (unless in exceptionally technical matters) is not socially acceptable. An alteration in a fundamental doctrine of our law, such as this appeal proposes, could not properly be given effect to save after the widest reference to interests, both social and intellectual, far transcending those available in the judicial committee of your Lordships' House.... It will not do to claim that judges have the duty - call it the privilege - of seeing to it that the common law expands and contracts to meet what the judges conceive to be the requirements of modern society. Modern society rightly prefers to exercise that function for itself, and this it conveniently does through those who represent it in Parliament. And its representatives nowadays demand, or should demand, that they be briefed by all those who can qualify an interest to advise them." |
A fortiori, of course, where the "generally accepted version of the common law" has been impressed with the seal of unanimous approval by your Lordships' predecessors. Moreover, although I myself agreed in that case with what my noble and learned friend said, at least that case did not involve overruling a recent (or any) decision of your Lordships' House; and it was ostensibly concerned only with the juristic concept of |
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duress. The instant appeal raises questions the answer to which imperatively demands the contribution of expertise from far outside the law - on monetary theory, public finance, international finance, commerce, industry, economics - for which judges have no training and no special qualification merely by their aptitude for judicial office. All such experience as I have had of decision-making within and without the law convinces me that the resolution of this issue demands a far greater range of advice and a far more generally based knowledge than is available to a court of law - even one assisted, as we have been, by the most meticulous, cogent and profound argument of counsel. Law is too serious a matter to be left exclusively to judges. |
By contrast, the training and qualification of a judge is to elucidate the problem immediately before him, so that its features stand out in stereoscopic clarity. But the beam of light which so illuminates the immediate scene seems to throw surrounding areas into greater obscurity: the whole landscape is distorted to the view. A penumbra can be apprehended, but not much beyond; so that when the searchlight shifts a quite unexpected scene may be disclosed. The very qualifications for the judicial process thus impose limitations on its use. This is why judicial advance should be gradual. "I am not trained to see The distant scene: one step enough for me" should be the motto on the wall opposite the |
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judge's desk. It is, I concede, a less spectacular method of progression than somersaults and cartwheels; but it is the one best suited to the capacity and resources of a judge. We are likely to perform better the duties society imposes on us if we recognise our limitations. Within the proper limits there is more than enough to be done which is of value to society. |
In my respectful submission, therefore, the very nature of the problem makes this a most unsuitable case for a revolutionary change in the law to be undertaken by judges. But this general view is reinforced by a number of particular considerations. |
Secondly, then, an expert committee, albeit an exclusively legal one, has in fact examined the problem. They failed to reach agreement (see paragraph 14): |
"... while some of us consider that there are substantial arguments in favour of some change of United Kingdom law,... there was no evidence of any strong feeling in the commercial community that such a change was necessary or desirable." |
In these circumstances it seems to me that, quite apart from the general inappropriateness of attempts at law reform by the judiciary in a field where so many other considerations than the abstractly juridical are involved, it would savour of temerity for judges to rush in to take this decision out of the hands of the Private International Law Committee, Parliament and the executive. |
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Fourthly, I cannot feel that proper consideration has been given to the effect of the Exchange Control Act 1947. It is liable to affect in many ways the relationship of domestic debtor and foreign creditor. It may, indeed, affect the situation fundamentally by actually preventing the domestic debtor discharging his debt before sterling has comparatively depreciated. |
"I do not know on what principle your Lordships acting judicially can prefer one of these systems to the others or on what basis any one can be formulated with sufficient precision or its exceptions defined. The choice is one of social policy; there are arguments |
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for and against each of them. If any one is preferable on purely logical grounds, to me it is the [second], for I am unable to state with any precision a rational (as opposed to a policy) preference for drawing a line at either of the alternative points... Any new direction, and it may be one of many alternatives, must be set by Parliament." |
But, once again here, the general consideration is reinforced by particularities. |
"A plaintiff cannot sue in England for payment of dollars, and he cannot get specific performance of a contract to pay dollars - it would not be right that he should." |
Lord Reid seems to be saying, "He cannot get specific performance, because he cannot sue directly" - not the converse. |
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"The question is whether the [breach date conversion] rule is still to apply when sterling loses the value which it once had. We have seen in recent years how it has depreciated" |
and he answered the question, Yes. I cannot see that it makes any difference that currencies float instead of staggering up and down. |
"[Sterling] 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." |
I confess to knowing myself to be entirely unqualified to judge how permanent a characteristic this is likely to be of the international money |
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market. But certainly the judges I have mentioned were not oblivious of variation in rates of exchange - it was generally the very problem posed to them. In any case, even if sterling veers to every passing breeze, is that any reason why the law should do so? Is it not one of the functions of law in society to give a gyroscopic stability to the ship of state as the weather shifts and the seas mount? |
"So even if this were still an open question, I would have to come to the conclusion that in every case where a plaintiff sues for a debt due in a foreign currency, that debt should be converted into sterling at the rate of exchange current when the debt fell due." |
"'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 damages, and a like claim 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.'" |
Similarly, Lord Radcliffe at pp. 1059-1060. Lord Denning (p. 1069) described the breach date rule as one "of positive law established by decisions of this House and of the Judicial Committee of the Privy Council." |
Viscount Simonds (Lord Radcliffe and Lord Morris of Borth-y-Gest agreeing) summed the matter up, at pp. 1048-1049: |
"We are engaged in settling the law upon a question in which any rule is artificial and to some extent arbitrary. In other systems of law different rules have been adopted, and there is no doubt that one system may benefit one creditor and another another. No rule can do perfect justice in every case. In this country the rule is settled so as to bind all courts that where the claim is in damages for breach of contract, or for a tortious act, the date of conversion is the date of that breach or that act. It would, in my opinion, |
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introduce the sort of refinement into the law, against which I have striven and shall ever strive, if a different rule were adopted in the case of a foreign debt. In the one case a contract for delivery of goods, in another for delivery of foreign currency, in another for payment of a foreign debt, in all alike precisely the same damage suffered by a plaintiff who sues on the failure of the defendant to fulfil his obligation. It would be little credit to our law if a different measure of relief was meted out in these several cases." |
"Where a bill is drawn out of but payable in the United Kingdom and the sum payable is not expressed in the currency of the United Kingdom, the amount shall, in the absence of some express stipulation, be calculated according to the rate of exchange for sight drafts at the place of payment on the day the bill is payable." |
To overrule the Havana decision would seem to create another anomaly here. Similarly, with the Foreign Judgments (Reciprocal Enforcement) Act 1933, section 2 (3). |
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John Mitchell is a newly and greatly enriched dividend-stripper and property speculator in England. He conceives that a notable art collection would be a desirable adjunct and mark of his new position in society. His art agent learns that Count Comnenus has the finest collection in Central Europe, accumulated by his enlightened family over the centuries; and that the estates of the count are so heavily encumbered that he is reluctantly faced with the necessity of selling his family collection. The deal is clinched. John Mitchell agrees to buy the collection for 10 million Ruritanian talers. The taler is gold-backed, and the sum is |
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equivalent to �1 million. The collection is duly shipped to England, but the purchaser fails to pay on the due date. It is not his fault. War has broken out, and strict exchange control has been imposed. Towards the end of the war a revolution takes place in Ruritania. Count Comnenus is glad to escape with his bare life, and arrives penniless in this country. In the meantime, the Ruritanian taler, no longer gold-backed, has become worth only the accumulating paper it is printed on. Count Comnenus remembers his debt from Mr. Mitchell and that his magnificent collection is now the principal ornament of the Mitchell mansions. He claims �1 million. Mr. Mitchell tenders him a lorry filled with 10 million worthless Ruritanian talers. Is it justice that Mr. Mitchell should succeed, the proud possessor of a valuable collection acquired for nothing, and that the count should starve? |
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I would therefore allow the appeal. |
Afterword |
There are three more general questions which are raised by this important appeal. |
(2) The type of law reform by the judiciary which is here exemplified, and which has been exemplified in some other recent cases, is a very considerable social responsibility. Of course, no worthwhile judge is afraid of responsibility. But I presume to suggest that consideration should be given to the desirability of the Lords of Appeal sitting in banc in such circumstances - at least where the overruling of a recent decision of your Lordships' House is in question. |
(3) The main ground of my dissent from the opinions of my noble and learned friends is that this type of issue is unsuitable for law reform by the judiciary. It is the sort of case where, in my view, a wide range of advice, official especially but also commercial, is required. The training and experience of a judge is unsuitable for this type of decision-making unaided; his circumspection is too narrow; his very qualities of keen perception of his immediate problem tend to militate against sound judgment of the wider and more general issues involved. But if courts are to undertake legislative responsibilities, something might be done |
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to equip them better for the type of decision-making which is involved. Official advice and a balanced executive view might be made available by a law officer or his counsel acting as amicus curiae. I venture to suggest consideration of some such machinery. |
LORD CROSS OF CHELSEA. My Lords, the facts of this case are set out in the speech of my noble and learned friend, Lord Wilberforce, which I have had the advantage of reading and I agree with him that the appeal should be dismissed. |
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who were a firm of contractors in this country which provided (inter alia) for the payment by them to him by monthly instalments of a commission of one cent in Mexican currency for every cubic metre of certain excavation works carried out by the defendants for the drainage authority of the city of Mexico and for which the defendants should have received payment from such authority. So long as Morison lived the defendants paid him from the time the sums of Mexican dollars due to him under the contract, but he died on June 14, 1894, and no representation to his estate was taken out until May 29, 1896, when the plaintiff obtained a grant of administration. On June 11, 1896, he issued a writ for an account and by judgment given on November 4, 1897, the court declared that he was entitled to have an account taken of what was due to him as Morison's representative under the contract and that in taking this account the defendants were to have credit for certain sums there mentioned. The defendants on November 13, 1897, delivered an account showing that a balance of 19,366 Mexican dollars was due to Morison's estate which they offered to pay in dollars or in English money equal to the value of the dollars on November 13, 1897. |
The plaintiff agreed that the account correctly stated the balance of Mexican dollars due to the estate down to the date when it was delivered. He contended, however, that the conversion into English money should not be made at that date but that the account should have been taken on the principle of charging the defendants with the sums payable monthly turned into English money at the respective dates on which they became payable. As the Mexican dollar had been falling as against the pound sterling during the period since Morison's death this procedure would result in a larger sum of sterling being paid to the estate than if only the ultimate balance was converted at the date of the delivery of the account. After stating the facts Lindley M.R. (with whose conclusions Rigby L.J. agreed) continued as follows, at pp. 586, 587: |
"Before considering the questions raised by this appeal it is necessary to ascertain the grounds on which any judgment or order for payment in English money can be properly made in a case where the plaintiff sues upon a contract to pay in the currency of a foreign country. The terms of the contract confer no right to payment in English money. If the defendants had tendered to their creditor either in Mexico or wherever he demanded payment the amounts due from them in Mexican dollars at the proper times they would have offered to perform their obligations in strict accordance with their contract. The necessity for considering what amount the defendants ought to pay in English money arises simply from the fact that the plaintiff, having the right to sue the defendants in this country for a breach of their contract, has chosen to sue them here instead of Mexico; and, speaking generally, the courts of this country have no jurisdiction to order payment of money except in the currency of this country. Whatever sum is ordered to be paid, whether for principal, interest, or damages, must be expressed in English money, or such order cannot be enforced by the ordinary |
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writs of execution. Whether before the Debtors Act an order in Chancery for the payment of so many Mexican dollars could have been made and could have been enforced by attachment I do not pause to inquire. With this possible exception the above statement is correct and affords the true explanation of the necessity for considering how much money in English currency the defendants ought to pay the plaintiff. If the defendants were within the jurisdiction of any other civilized state and were sued there, as they might be, the courts of that state would have to deal with precisely the same problem, and to express in the currency of that state the amount payable by the defendants instead of expressing it in Mexican dollars. If this be the true explanation of the necessity for expressing in English money what the defendants ought to pay, it follows that such necessity does not arise until the court orders payment. But it does not follow that the sum to be inserted in the order is the equivalent at that time of the moneys payable by the terms of the contract, for the defendants may be liable, not only to pay those sums, but also damages in the shape of interest or otherwise for not having paid them at the proper time. The obligations, if any, of the defendants in this respect must be determined before the amount for which they are liable can be calculated and expressed in any judgments or order for payment." |
Lindley M.R. went on to hold that the plaintiff had failed to make out any case for any award of damages and so was only entitled to the sterling value of 19,366 dollars as at the date of the delivery of the account which he treated as equivalent to an order of the court for payment of that sum on that date. Vaughan Williams L.J. in his dissenting judgment said (1) that it had not been questioned on either side that the total debt ordered to be paid after taking the account must be expressed in English currency; (2) that in an action in the English courts for recovery of a debt payable in foreign currency what the plaintiff is entitled to is damages for the breach of a contract to deliver the commodity bargained for at the appointed time and place so that the date at which the sterling value of the foreign currency must be ascertained is the date of the breach and not of the judgment; and (3) that the same principle was applicable where the action was for an account of sums of foreign currency falling due from time to time under a contract. |
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Lindley M.R. several times I am wholly unable to agree with this view of it. His Lordship stressed the fact that what the plaintiff was entitled to was a payment in Mexican dollars, that the only reason why he could not get a judgment in Mexican dollars was that he had brought his action here where a judgment in Mexican dollars could not be given but that the necessity for a conversion of the Mexican dollars to which he was prima facie entitled into sterling only emerged at the date of judgment. If the action had been for a single instalment Lindley M.R. would, I think, have held that the Mexican dollars should be converted into sterling at the date of judgment - just as he held that, the action being one for an account, the conversion must be effected when the sum of Mexican dollars due under the account was ascertained. |
"Much may be said for the proposition that the debtor's obligation is to pay, say, francs, and so continues until the debt is merged in the judgment which should give him the English equivalent at that date of those francs." |
It will be apparent from what I have said that I do not view the |
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LORD EDMUND-DAVIES. My Lords, I am in respectful agreement with the reasons given by my noble and learned friend, Lord Wilberforce, for holding that this appeal should be dismissed and I desire to add only a few observations. |
"For my part, I have difficulty in seeing how execution can issue for a sum other than a sterling amount. I therefore think that the necessary conversion should be effected and deposed to in an affidavit before the application for leave to enforce is made. Leave can then issue under section 26 [of the Arbitration Act 1950,] to enforce the award in the same manner as a judgment for that sterling equivalent." |
"(1) An English court cannot give judgment for the payment of an amount in foreign currency... (2) For the purpose of litigation in England: (a) a debt expressed in a foreign currency must be |
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converted into sterling with reference to the rate of exchange prevailing on the day when the debt was payable;..." |
Lord Reid found the acceptability of the breach date not without its difficulties and said in the same case, at pp. 1051-1052: |
"If in America one person lends dollars to another and the loan is not duly repaid, the creditor simply sues there for the money and no question can arise about the date at which damages are to be assessed, though interest may be due from the date of breach. But, if the creditor has to come to England to sue, the dollars will be converted into sterling as at the date of breach, although at that time neither party had any connection with England. The original reason for the rule has no application in such a case. When dealing with an English contract it may be right to treat foreign currency as a commodity, but dollars lent in America are not a commodity, and if they are not repaid at the due date there can be no question of an American going into the market and buying dollars to replace those which the debtor failed to deliver. Why, then, should the American creditor, if he has to come to England to sue, have his debt converted into sterling as at the date of the original breach? That seems the more anomalous because, if the creditor had been able to obtain judgment in America for his debt, and had brought the judgment here to enforce it, the debt would have been converted to sterling as at the date of the American judgment." |
Lord Reid was clearly unhappy about this anomalous situation. But he comforted himself by saying (p. 1052) that: |
"The reason for the existing rule is, I think, primarily procedural. A plaintiff cannot sue in England for payment of dollars, and he cannot get specific performance of a contract to pay dollars - it would not be right that he should. So at best he could only have the dollars converted to sterling at the date of judgment. Owing to appeals or difficulties of enforcement a long time may elapse between judgment and getting his money, and the rate of exchange may have altered substantially during that time." |
Lord Reid went on to deal with, as he considered, other practical difficulties ("which I need not specify") and concluded (pp. 1052-1053) that: |
"Really the only practicable choice would seem to be between converting at the date of breach and converting at the date of raising the action in England.... But the rate at the date of raising the action might be very different from the rate at the date of payment.... So even if this were still an open question, I would have come to the conclusion that in every case where a plaintiff sues for a debt due in a foreign currency, that debt should be converted into sterling at the rate of exchange current when the debt fell due. That rule may in some cases be artificial, it may even be unjust, but it has been accepted for a long time, it is clear and certain, |
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and no other rule could be relied on to produce a more just result: indeed, no other rule is really practicable." |
To my way of thinking, the respondents succeeded in demonstrating that the procedural and practical difficulties of side-stepping the rule which Lord Reid 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." |
Nor am I prepared to accept that any basic distinction can be drawn for present purposes between judgments and awards, although in Jugoslavenska [1974] Q.B. 292, 299 Lord Denning M.R. said: |
"The reason why some people have thought that an award by English arbitrators must be in sterling is because they have regarded it as equivalent to a judgment by an English judge which must be in sterling. But there is this difference. When commercial men are in dispute and go to arbitration, they... want a decision one way or the other. Once given, they abide by it. The losing party pays up. There is rarely any need to call in the sheriff or his officer to enforce the award. So it is perfectly fair, as between them, for the arbitrator to make his award in the currency which is appropriate to their dealings. But when a plaintiff goes to a court of law, it is, as often as not, because the defendant cannot pay or will not pay. The plaintiff wants to get judgment against him, and, if need be, levy execution upon his effects. This is so much in the mind of the courts that they have rules that they will give judgment only in sterling. That is the one currency which is known to the court and to the sheriffs and their officers. I venture to suggest that this view of the courts should be open for reconsideration. If the money payable under a contract is payable in a foreign currency, it ought to be possible for an English court to order specific performance of it in that foreign currency: and |
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then let the exchange be made into sterling when it comes to be enforced...." |
"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." |
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"... undoubtedly the Court of Session should have done that in this case, which it is the habit of this country to do when an action is brought for a sum of money recovered in foreign money, - they |
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should have ascertained what is to be paid in this country; and therefore, undoubtedly, this House must remit the case back, in order that the sum may be ascertained in British money which is due from the one party to the other." |
The case should I think be treated as one decided in accordance with a practice that existed in circumstances which were very different from those existing today, and therefore as one not necessarily to be followed now. |
I would add that I am not entirely satisfied that difficulty, and even injustice, may not occur if the rule continues to be that damages are converted at the breach date while foreign debts are converted at the date of payment. In the instant case, if the defendants' counterclaim had been successfully maintained, this question might have had to be decided. As things are, it does not arise, and I would agree that it is not necessary or appropriate to consider cases other than foreign debts. |
I agree with the observations of my noble and learned friend, Lord Simon of Glaisdale, on the subject of cessante ratione. |
I would dismiss the appeal. |
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Solicitors: Bower, Cotton & Bower; Gosling & Lewis Barnes. |
F. C. |