3PLR – BARCLAYS BANK INTERNATIONAL LTD V LEVIN BROS (BRADFORD) LTD
POLICY, PRACTICE AND PUBLISHING, LAW REPORTS 3PLR
[PDF copy of this judgment can be sent to your email for N300 only. Just order through lawnigeria@gmail.com and info@lawnigeria.com or text 07067102097]
BARCLAYS BANK INTERNATIONAL LTD
V
LEVIN BROS (BRADFORD) LTD
QUEEN’S BENCH DIVISION
10, 17 MAY, 12 JULY 1976
[1976] 3 All. E.R. 900
3PLR/1976/31 (QB)
BEFORE
MOCATTA J
REPRESENTATION
Durrant Piesse (for the plaintiffs)
Kaufman, Kramer & Shebson agents for Victor D Zermansky & Co,
Leeds (for the defendants)
H S Narulla ESQ Barrister
MAIN ISSUES
CIVIL PROCEDURE
Judgment – Payment of sum of money – Foreign currency – Jurisdiction to order payment of sum expressed in foreign currency – Proper law of contract English – Currency of account and payment foreign – Whether court having jurisdiction to order payment of sum expressed in foreign currency.
Judgment – Payment of sum of money – Foreign currency – Conversion date – Bill of exchange – Bills payable in foreign currency – Bills accepted but dishonoured on presentment – Appropriate date for conversion – Whether judgment sum to be calculated in accordance with rate of exchange in force on days bills payable or on date of payment or enforcement of judgment – Bills of exchange Act 1882, s 72(4).
In 1975 G Co, a New York corporation, sold cloth to the defendants, who carried on business in Bradford. On 25 April 1975 G Co drew four bills of exchange on the defendants, each for US $23,000, which were payable on 21 June, 5 July, 19 July and 2 August 1975. The bills were accepted payable at Barclays Bank Ltd in Bradford and endorsed by G Co to the plaintiffs for value. On presentment the bills were dishonoured by the defendants on the ground that the cloth was defective. The exchange rates on the maturity dates were $2·2725,$2·1840,$2·1720 and $2·1395 to the pound sterling. In January 1976 the plaintiffs claimed, inter alia,$92,000, ie the value of the four bills. The plaintiffs’ writ contained a statement that the rate of exchange in London at the close of business on 12 January 1976 for the purchase of United States dollars was $2·0305 to the pound. The plaintiffs applied for summary judgment under RSC Ord 14 which the master held should ‘be calculated according to the rate of exchange for sight drafts at the place of payment on the day the bill [was] payable’, under s 72(4)a of the Bills of Exchange Act 1882. He accordingly gave judgment for £45,000, having converted each bill into sterling on its maturity date. On appeal by the plaintiffs, the defendants contended that the plaintiffs were not entitled to judgment in a foreign currency since the proper law of the contract was English law.
MAIN JUDGEMENT
Held –
(i) In order to obtain judgment for payment of a sum of money expressed in a foreign currency it was not necessary to establish that the proper law of the contract giving rise to the obligation was the law of a foreign country. Although the lex loci contractus, the lex loci solutionis and the proper law of the acceptances were English, 900the money of account and the money in which payment might be made by the obligor were American. There was accordingly jurisdiction to give judgment, whether the claim was in debt or for liquidated damages, in United States dollars (see p 904 g, p 905 g and h, p 906 b and f to h, p 908 d to p 909 a and p 912 a and b, post).
(ii) Section 72(4) was limited to cases in which the acceptor wished to exercise his option to pay at the maturity date the appropriate sum in sterling rather than in the foreign currency in which the bill of exchange was expressed. It had no application where the acceptor had failed to pay at the maturity date and had to be sued for payment of the bill. The plaintiffs were therefore entitled to judgment in dollars or the equivalent in sterling at the date of payment or enforcement of the judgment and the appeal would be allowed (see p 904 h and j, p 909 b to d and j to p 901 a and p 912 d and e, post).
Marrache v Ashton [1943] 1 All ER 276, dictum of Somervell LJ in Heisler v Anglo-Dal Ltd [1954] 2 All ER at 773, Jugoslavenska Oceanska Plovidba v Castle Investment Co Inc [1973] 3 All ER 498, Schorsch Meier GmbH v Hennin [1975] 1 All ER 152 and Miliangos v George Frank (Textiles) Ltd [1975] 3 All ER 801 applied.
Celia (Steamship)(Owners) v Owners of Steamship Volturno [1921] All ER Rep 110 and Syndic in Bankruptcy of Nasrallah Khoury v Khayat [1943] 2 All ER 406 distinguished.
Practice Direction [1976] 1 All ER 669 disapproved in part.
Per Mocatta J. It may be possible in certain circumstances to recover as unliquidated damages a currency loss due to a change in exchange rates occurring subsequently to a failure to make payment on the due date (see p 912 b and c, post); Re Gillespie (1886) 18 QBD 286 and dictum of Donaldson J in Aruna Mills Ltd v Dhanrajmal Gobindram [1968] 1 All ER at 120 applied.
Notes
For bills of exchange payable in a foreign currency, see 4 Halsbury’s Laws (4th Edn) paras 322, 489–495.
For damages for dishonour of a bill, see ibid paras 501, 502, and for cases on the subject, see 12 Digest (Repl) 236–240, 1664–1706.
For damages in a foreign currency, see 12 Halsbury’s Laws (4th Edn) paras 1201, 1202, and for cases on the subject, see 17 Digest (Reissue) 201, 202, 725–745.
For the Bills of Exchange Act 1882, s 72, see 3 Halsbury’s Statutes (3rd Edn) 227.
Cases referred to in judgment
Adelaide Electric Supply Co Ltd v Prudential Assurance Co Ltd [1934] AC 122,[1933] All ER Rep 82, 103 LJCh 85, 150 LT 281, 39 Com Cas 119, HL, 35 Digest (Repl) 188, 27.
Anderson v Equitable Assurance Society of United States [1926] All ER Rep 93, 134 LT 557, CA, 35 Digest (Repl) 202, 96.
Aruna Mills Ltd v Dhanrajmal Gobindram [1968] 1 All ER 113,[1968] 1 QB 655,[1968] 2 WLR 101,[1968] 1 Lloyd’s Rep 304, Digest (Cont Vol C) 289, 317a.
Banque Populaire de Bienne v Cavé (1895) 1 Com Cas 67, 6 Digest (Repl) 316, 2306.
Browne v London (1670) 1 Mod Rep 285, 86 ER 889.
Celia (Steamship)(Owners) v Owners of Steamship Volturno [1921] 2 AC 544,[1921] All ER Rep 110, 90 LJP 385, 126 LT 1, 15 Asp MLC 374, HL, 35 Digest (Repl) 196, 61.
Gillespie, Re, ex parte Robarts (1886) 18 QBD 286, 56 LJQB 74, 56 LT 599, CA, 4 Digest (Repl) 313, 2836.
Halcyon the Great, The [1975] 1 All ER 882,[1975] 1 WLR 515,[1975] 1 Lloyd’s Rep 518, Digest (Cont Vol D) 1069, 5463Aa.
Heisler v Anglo-Dal Ltd [1954] 2 All ER 770,[1954] 1 WLR 1273,[1954] 2 Lloyd’s Rep 5, CA, 26 Digest (Repl) 11, 17.
Jugoslavenska Oceanska Plovidba v Castle Investment Co Inc [1973] 3 All ER 498,[1974] QB 292,[1973] 2 WLR 847,[1973] 2 Lloyd’s Rep 1, CA, Digest (Cont Vol D) 46, 2136a.
Marrache v Ashton, Marrache v Onos [1943] 1 All ER 276,[1943] AC 311, 112 LJPC 13, PC, 35 Digest (Repl) 200, 86.
Miliangos v George Frank (Textiles) Ltd [1975] 3 All ER 801,[1976] AC 443,[1975] 3 WLR 758,[1976] 1 Lloyd’s Rep 201, HL, Digest (Cont Vol D) 69, 64c.
Occidental Crude Sales v John S Latsis unreported.
Schorsch Meier GmbH v Hennin [1975] 1 All ER 152,[1975] QB 416,[1974] 3 WLR 823,[1975] 1 Lloyd’s Rep 1, CA, Digest (Cont Vol D) 691, 64b.
Société des Hôtels Le Touquet-Paris-Plage v Cummings [1922] 1 KB 451,[1921] All ER Rep 408, 91 LJKB 288, 126 LT 513, CA, 35 Digest (Repl) 195, 57.
Syndic in Bankruptcy of Nasrallah Khoury v Khayat [1943] 2 All ER 406,[1943] AC 507, PC, 35 Digest (Repl) 195, 58.
United Railways of the Havana and Regla Warehouses Ltd, Re [1960] 2 All ER 332,[1961] AC 1007,[1960] 2 WLR 969, HL, 11 Digest (Reissue) 489, 919.
Appeal
By a writ issued on 13 January 1976 the plaintiffs, Barclays Bank International Ltd, as bearers and holders in due course of four bills of exchange, payable on 21 June, 5 July, 19 July and 2 August 1975 and drawn on 25 April 1975 by Gillespie & Co of New York Inc on the defendants, Levin Bros (Bradford) Ltd, brought an action against the defendants claiming US $92,548·70, notarial expenses of £16 and interest. The writ contained a certificate that the rate current in London for the purchase of United States dollars at the close of business on 12 January 1976 was $2.0305 to the pound. On 31 March 1976 Master Elton awarded the plaintiffs summary judgment under RSC Ord 14, r 3, for £42,249·09 together with interest at nine per cent on the bills from their respective maturity dates, plus notarial expenses. The plaintiffs appealed. The facts are set out in the judgment.
Stewart Boyd for the plaintiffs.
Jeremy Roberts for the defendants.
Cur adv vult
12 July 1976. The following judgment was delivered.
MOCATTA J read the following judgment. This appears to be only the second case to have come up for decision in the courts subsequent to the now famous decision of the House of Lords in Miliangos v George Frank (Textiles) Ltd in which the decision of the House of Lords in Re United Railways of the Havana and Regla Warehouses Ltd, laying down the rule for ascertaining the rate of exchange for converting an unpaid debt in foreign money into sterling for the purpose of obtaining a judgment here, was reversed. In the Miliangos case it was decided that an English court could in the circumstances of that case give judgment in a foreign currency and that no conversion into sterling was necessary until the time came for enforcing the judgment when the rate current at the date of enforcement should be applied.
In reversing the decision in Re United Railways of the Havana and Regla Warehouses Ltd and departing from the date of breach rule for the purposes of conversion, the majority in the House of Lords were careful to limit their reasoning to the problem before them in which the defendant had failed to pay a debt expressed in Swiss francs in 1971, managed to stave off judgment until the end of 1974, when the pound had sadly depreciated, and then argued that his liability was only to pay in pounds at the rate of exchange prevailing three years previously when he should have honoured his obligation. The speeches carefully avoided exploring the full consequences of this reversal of authority. Indeed, Lord Wilberforce said ([1975] 3 All 801 at 813,[1976] AC 443 at 467, 468):
‘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, ie to foreign money obligations, sc obligations of a money 902 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 on, 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 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.’
This case is thus the second to be involved in the working out process and, in particular, is concerned with how s 72(4) of the Bills of Exchange Act 1882 is to be applied in view of the decision in Miliangos v George Frank (Textiles) Ltd. That this was likely to be one of the problems arising from the majority decision was specifically mentioned by Lord Simon of Glaisdale ([1975] 3 All ER 801 at 829, 830,[1976] AC 443 at 487, 488) in his dissenting opinion and in a recent noteb Dr F A Mann asked whether it would not be necessary to amend the subsection in order to avoid startling discrepancies.
New York Inc sold a quantity of cloth to the defendants, a company carrying on business in Bradford. The cloth was despatched to and received by the defendants and the sellers on 25 April 1975 drew four bills of exchange on the defendants. Save for a difference of two cents in the amount of one bill, all the bills were for US $23,137·18 and were payable at dates ranging between 21 June and 2 August 1975. Each bill was accepted payable at Barclays Bank Ltd, Westgate, Bradford. The bills were endorsed by the sellers to the plaintiffs who gave value for them, but when presented by the plaintiffs for payment the defendants dishonoured them. Their reasons for so doing were that, so they alleged, the quality of the cloth delivered was defective and as the sellers were insolvent the defendants’ claim for damages against the sellers was likely to be of little value.
On 13 January 1976 the plaintiffs issued their writ claiming the total of the amounts of the four bills, namely US $92,528·70, notarial expenses of £16 and interest. It is interesting to note that pursuant to a practice direction ([1976] 1 All ER 669,[1976] 1 WLR 83) issued by the learned Senior Master on 18 December 1975, the specially indorsed writ bore a certificate by the plaintiffs’ solicitors that the rate current in London for the purchase of US dollars at the close of business on 12 January 1976 was $2·0305 to the pound sterling. This information is material for the proper amount of costs to be indorsed on a writ pursuant to RSC Ord 6, r 2(1)(b). A summons for summary judgment under RSC Ord 14 was taken out by the plaintiffs, an affidavit seeking leave to defend was sworn by the defendants and on 31 March 1976 Master Elton ordered that judgment be entered for the plaintiffs for £44,973·25 and £57·70 costs. He arrived at the sterling figure of £44,973·25 by applying the rate of exchange for sight drafts at Bradford at the four several dates on which the relevant bills were due. The rates of exchange applied by the master were respectively $2·2725,$2·1840,$2·1720 and $2·1395, figures which are stated in the chronological order of the dates of maturity. At the date of writing this judgment the rate is below US $1·80 to the pound. Eheu fugaces! The master allowed interest at nine per cent from the due dates of the bills to the date of judgment.
903
Both parties appealed against this judgment and before the appeals came on application was made to me to transfer the action to the Commercial Court, which I did. As soon as the appeals came on before me in chambers it became apparent that the defendants had no grounds to support their appeal seeking leave to defend. I accordingly dismissed their appeal. As regards the plaintiffs’ appeal against that part of the master’s judgment limiting their claim to the sterling amounts resulting from applying the rates of exchange I have just mentioned, I allowed the appeal against the summary judgment refusing the plaintiffs’ claim in dollars, ordered immediate trial of the issue as to the balance claimed without pleadings and adjourned into open court to hear full argument which was spread over two days. This course was taken with the full agreement of both counsel.
The plaintiffs argued that they were entitled to judgment for US $92,528·70, with interest at nine per cent plus the notarial expenses of £16. If they are entitled to judgment in these terms they will on the authority of Miliangos v George Frank (Textiles) Ltd be able to convert the dollar sum into sterling at the date of enforcement. Without making any allowance for interest and applying, for simplicity, the somewhat sanguine rate of $1·80 to the pound, the resultant sterling sum would be £51,416 as against the master’s order for £44,973·25, which included interest at nine per cent.
The master entered judgment in sterling at the rates I have stated by reason of the provisions of s 72(4) of the Bills of Exchange Act 1882 which reads:
‘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.’
I have already said that Lord Simon referred to this subsection in Miliangos v George Frank (Textiles) Ltd ([1975] 3 All ER 801 at 829, 830,[1976] AC 443 at 487). No other reference was made to it and it was clearly irrelevant to the decision. The action there appears to have been brought on the original consideration for the price of the goods sold, which was expressed in Swiss francs and was payable in Switzerland. The defendant had failed to meet the bills, which he had accepted. These also were in Swiss francs payable in Switzerland, where they were protested on dishonour. Accordingly, the very special wording of the subsection did not apply to the facts of that case; neither the original price nor the bills accepted in part payment were payable in the United Kingdom.
The main heads of the argument advanced by counsel for the plaintiffs were as follows. First, judgment can since the decision of the House of Lords in Miliangos v George Frank (Textiles) Ltd be given in this country in a foreign currency. Whilst it was common ground that the lex loci contractus and the lex loci solutionis and the proper law of the acceptances were all English, but the money of account and the money in which payment might be made by the obligor in the exercise of his option (if he had one) were American, nevertheless these matters did not prevent judgment in the present action being entered in United States dollars. Secondly, as regards s 72(4) of the Bills of Exchange Act 1882, on which the learned master based his decision, the very restrictive wording of the subsection merely provided a formula to ascertain the amount of sterling which an acceptor should pay on the date of maturity in order to discharge his obligation under a bill of exchange, if he chose to pay that bill of exchange in sterling and not in the currency in which it was drawn. Accordingly, the function of the subsection ended with the day of payment and it had no statutory effect on the sum recoverable by the endorsee when no payment had been made on the date of maturity and the endorsee subsequently sued the acceptor.
Counsel for the plaintiffs advanced two further submissions which only arose if his 904 first two submissions were unsuccessful. These were, thirdly, that there might be a different measure of damages applicable to the case where the holder sues in this country the drawer of a bill of exchange expressed in a foreign currency from that applicable where the holder similarly sues a drawee in this country. This submission was concerned with s 57 of the 1882 Act dealing with cases where the claim in relation to the dishonour of a bill of exchange is, in the language of the section,‘deemed to be liquidated damages’. Counsel for the plaintiffs’ submission was that in the present case the plaintiffs’ action was in debt under s 54(1) of the 1882 Act, although the claim for interest was one in damages. The last alternative submission should counsel for the plaintiffs’ argument on s 72(4) fail, was, fourthly, that s 57 of the 1882 Act only in terms covers liquidated damages, whereas it was submitted that the plaintiffs were entitled to recover as unliquidated damages the currency loss suffered by them owing to the failure on the part of the acceptor to pay his obligations on the maturity dates of the four bills. Counsel for the plaintiffs recognised that there were some difficulties in the way of this argument in the light of authority.
For the defendants it was submitted that the decision in Miliangos v George Frank (Textiles) Ltd had a very limited application. Its ratio was that the foreign currency in question must be both the currency of account and the currency of the payment. In such circumstances the plaintiffs had no option but to sue for the foreign currency and they could in such limited circumstances obtain here a judgment in such foreign currency. Secondly, s 72(4) of the 1882 Act clearly applied to the facts in the present case. If the wording of the subsection was so construed as to limit it to payments made on the date of maturity, the plaintiffs’ argument would produce a just result only if sterling fell in value in comparison with the foreign currency between the date of maturity and the date that the drawer or the endorsee obtained judgment against the acceptor. The limited construction would produce an unjust result if sterling were to rise between those two dates. Thirdly, s 72(4) defines the amount of a bill drawn in a foreign currency and payable in this country, whilst s 57(1) states what can be recovered on the dishonour of such bill. The latter subsection again uses the word ‘amount’ which in counsel for the defendants’ submission must have the same meaning as the same word occurring in s 72(4). Fourthly, if the date of the levying of execution on the judgment were the right date at which to convert a judgment in a foreign currency into sterling, that would be inconsistent with the re-exchange provisions contained in s 57(2) of the 1882 Act.
I have set out at the outset of this judgment two crucial passages from the opinion of Lord Wilberforce in Miliangos v George Frank (Textiles) Ltd ([1975] 3 All ER 801 at 813,[1976] AC 443 at 467, 468). Whilst the decision in that case reversing the earlier decision of the House of Lords in Re United Railways of the Havana and Regla Warehouses Ltd is very restricted in relation to the circumstances in which an English court is entitled to give judgment in a foreign currency, Lord Wilberforce said nothing to prevent a subsequent court, in performing the working out process he mentioned, from ruling that judgment might be given in a foreign currency in circumstances in which, in the case of a plaintiff suing for a debt or other foreign currency obligation, the money of account and money of payment were not the same and the proper law of the contract was English and not that of a foreign country. He further expressly stated ([1975] 3 All ER 801 at 814, 815,[1976] AC 443 at 469, 470) that it should be left open for future discussion whether the rule applying to money obligations should apply as regards claims for damages for breach of contract.
It is not unnatural that in reversing the well-known rule affirmed by the House of Lords in Re United Railways of the Havana and Regla Warehouses Ltd, the House in Miliangos v George Frank Textiles Ltd were content to restrict the reasoning by which they arrived at their decision in that case to what was necessary, without making obiter pronouncements as to how their decision should be applied in other circumstances. In deciding, as I must in the present case, whether to apply here the facility now available to an English court to enter judgment on foreign currency, it is clearly of the greatest importance to examine the reasoning on which the House of Lords acted in the Miliangos case. I do not propose to quote further in extenso from the opinions of the majority in that case. I think, however, that counsel for the plaintiffs was well-founded in his summary of their reasons under five main heads as follows.
(i) There were no procedural difficulties in the way of an English court giving judgment in a foreign currency. This had been established in Schorsch Meier GmbH v Hennin.
(ii) Currencies were in these days less stable than they used to be. Sterling and various other currencies had no fixed exchange value from day to day but ‘floated’.
(iii) Commercial arbitrators in the City of London, who frequently have to deal with disputes arising under charter parties and other contracts having no connection with this country whatever save that disputes arising under them are determined by arbitration in London in accordance with English law, have for some time past freely expressed their awards in the appropriate foreign currency. The validity of this practice and the possibility of being able to enforce such an award were discussed in the Court of Appeal in Jugoslavenska Oceanska Plovidba v Castle Investment Co Inc. Lord Wilberforce ([1975] All ER 801 at 810 [1976] AC 443 at 464) considered this development in relation to arbitral awards in a foreign currency as of great importance. In the first place it went a long way towards removing the practical objections as regards enforcement which weighed so heavily in Re United Railways of the Havana and Regla Warehouses Ltd. Secondly, it would be an intolerable situation if a different rule were to prevail as regards arbitrations on debts expressed in foreign currency on the one hand and actions on similar debts on the other.
(iv) There had recently been a change in Admiralty practice as exemplified in The Halcyon the Great, where an order was made in Admiralty for the sale of a ship for a sum in United States dollars and for the lodgment of the price achieved by such sale in a separate dollar account.
(v) Finally justice required that the creditor should not suffer by reason of the depreciation in sterling between the due date on which the debtor should have met his obligations and the date when the creditor was eventually able to obtain judgment.
I agree with counsel for the plaintiffs’ submissions that these five reasons, culled from Lord Wilberforce’s judgment, apply with equal force to the plaintiffs’ claim in the present action. Unless the wording of s 72(4) of the 1882 Act forces the court to a different conclusion, in my judgment the reasoning in the House of Lords in Miliangos v George Frank (Textiles) Ltd is equally as applicable to the claim in this action as to the claim in the litigation with which the House was dealing. I do not think that the arguments of counsel for the defendants as to the inapplicability of the reasoning in the Miliangos case to the present have any validity. I think it is clear that when someone is under an obligation to pay another a sum of money expressed in a foreign currency but to pay it in this country, the person under the obligation has an option, if he is to fulfil his obligation at the date when the money is payable, either to produce the appropriate amount in the foreign currency in question or to pay the equivalent in sterling at the rate of exchange prevailing at the due date. This proposition seems to me to be elementary and a matter of common sense. It is stated in Dicey and Morris on the Conflict of Lawsc as follows:
‘If a sum of money expressed in a foreign currency is payable in England, it may be paid either in units of the money of account or in sterling at the rate of exchange at which units of the foreign legal tender can, on the day when the money is payable, be bought in London in a recognised and accessible market, irrespective of any official rate of exchange between that currency and sterling.’
The authority cited for this proposition is, in the first place, a remark made in the judgment of the Privy Council in Marrache v Ashton. There the appellant had under mortgages granted in Gilbraltar agreed to pay various sums expressed in pesetas to the respondent Ashton on certain specified dates. The judgment of the Privy Council, given by Lord Macmillan, was expressed in the following terms ([1943] 1 All ER 276 at 278, 279,[1943] AC 311 at 317), so far as relevant to this case:
‘It was common ground before their Lordships that while Bank of Spain peseta notes were legal tender in Spain they were not currency in Gibraltar, though they circulated there in considerable numbers. Consequently these notes must be regarded in Gibraltar as commodities. It was also agreed that the appellant would have specifically performed his covenants if he had tendered to the respondents the appropriate amounts of Bank of Spain peseta notes.’
Dicey and Morrisd further cite in support of the proposition I have read two other cases, namely Anderson v Equitable Life Assurance Society of United States ([1926] All ER Rep 93 at 95, 134 LT 157 at 562) and Adelaide Electric Supply Co Ltd v Prudential Assurance Co Ltd ([1934] AC 122 at 145,[1933] All ER Rep 82 at 89). For myself I am unable to find in either of those two decisions at the pages stated any support for the proposition in the text. The passage in Marrache v Ashton ([1943] 1 All ER 276 at 278, 279,[1943] AC 311 at 317) I have cited is paralleled in the judgment of Somervell LJ in Heisler v Anglo-Dal Ltd ([1954] 2 All ER 770 at 773,[1954] 1 WLR 1273 at 1278), though curiously enough the authority for the statement of principle enunciated by Somervell LJ is the statement by Bankes LJ in Anderson v Equitable Life Assurance Society of United States ([1926] All ER Rep 93 at 95, 134 LT 557 at 562) to which I have already referred and which I am unable, despite repeated reading, to find as in any way bearing out the deduction drawn from it by Somervell LJ ([1954] 2 All ER 770 at 773,[1954] 1 WLR 1273 at 1278) or in Dicey and Morrise. Nevertheless, I think that the principle stated in the latter mentioned textbook is clearly right and if authority for it is required, sufficient is to be found in the judgment of the Privy Council in Marrache v Ashton and in the dicta of Somervell LJ in Heisler v Anglo-Dal Ltd ([1954] 2 All ER 770 at 773,[1954] 1 WLR 1273 at 1278). See also Dr F A Mann on the Legal Aspect of Money [3rd Edn (1971), pp 321–325].
The option, which in my judgment the obligor has, is of importance to the plaintiffs’ argument in relation to s 72(4) of the 1882 Act. I am unable to accept the submission of counsel for the defendants that the ability, if counsel for the plaintiffs is right, of the plaintiffs to obtain a judgment in United States dollars in this case and to enforce such judgment in the sterling equivalent of the dollar sum at the date of execution, would cause any injustice were sterling not to have depreciated between the date of maturity and the date of judgment (as, alas, is so often the case with it), but on the other hand to have appreciated. In either case the obligee will receive the equivalent in sterling of the amount of dollars to which he was entitled under the contract. The old rule that judgment cannot be entered in a currency other than sterling and the application of s 72(4) of the 1882 Act to a case where the obligor does not meet his obligation at the date of maturity lead, when sterling falls, to the creditor receiving most unfairly a sum in sterling when he comes to enforce his judgment far less in value than the dollars due at the date of maturity whereas if sterling should have appreciated after the date of maturity, the creditor would under the old rule and the application of it under s 72(4) receive an uncovenanted bonus.
Whilst counsel for the defendants did not himself place any reliance, so far as I understood his argument, on the limitation by Lord Wilberforce ([1975] 3 All ER 801 at 806, 807,[1976] AC 443 at 459, 460) of his approval at the present time of a change in the breach-date rule to cases arising under contracts whose proper law was that of a foreign country, it is right that I should refer to a practice direction ([1976] 1 All ER 669,[1976] 1 WLR 83 at 84) issued by the learned Senior Master dated 18 December 1975. In this practice direction in para 3 it is stated:
‘The writ or statement of claim in which a claim is made for payment of a debt or liquated demand in foreign currency must contain the following statements, namely:
(i) that the contract under which the debt is claimed in the foreign currency is governed by the law of some country outside the United Kingdom; and
(ii) that under that contract the money of account in which the debt was payable was the currency of that country or of some other foreign country.’
This paragraph is plainly lifted almost word for word from the guarded remarks made by Lord Wilberforce in Miliangos v George Frank (Textiles) Ltd ([1975] 3 All ER 801 at 813,[1976] AC 443 at 467). I do not think that this very guarded statement of opinion, which was all that was necessary for the decision in the Miliangos case, justifies the restriction contained in para 3 of the practice direction ([1976] 1 All ER 669,[1976] 1 WLR 83 at 84). Nor do I read the opinions of the other members of the majority in the House of Lords as approving the limitations of the new rule by such restrictions as are mentioned by Lord Wilberforce ([1975] 3 All ER 801 at 813,[1976] AC 443 at 467) in the passage I have just referred to. Apart from the fact that Lord Wilberforce continued in that part of his opinion to say that he was not proposing to review the whole field of the law regarding foreign currency obligations, the very great weight attached in the majority opinions of the House of Lords to the decision in Jugoslavenska Oceanska Plovidba v Castle Investment Co Inc indicates clearly in my opinion that it cannot be a sine qua non to a judgment being entered in a foreign currency that the proper law of the contract giving rise to the obligation must be other than the law of England. My reason for saying this is that, as already pointed out, in the cases where commercial arbitrators in the City of London and elsewhere in this country give awards in foreign currencies, the proper law of the contracts under which such awards are made is almost invariably English, since the fact that the contract containing the arbitration clause provides that arbitration shall take place in this country will by itself, unless there are other indications to the contrary, be sufficient in most cases to determine the proper law of the contract. The view I have expressed of the practice direction ([1976] 1 All ER 669,[1976] 1 WLR 83) is in line with the indications given by Kerr J in his judgment in Occidental Crude Sales Inc v John S Latsis. I would not in any event be bound to follow this practice direction ([1976] 1 All ER 669,[1976] 1 WLR 83), but its provisions are subject expressly to what is said in para 1, namely that they are ‘Subject to any order or directions which the court may make or give in any particular case’. It is right that I should add that in a note to RSC Ord 6 in the Supreme Court Practicef the editor, himself the learned Senior Master, queries the logical principle of the suggested necessity for the contract under which a debt is owed to be governed by a proper law other than English before our courts can enter judgment in a foreign currency.
I therefore think that counsel for the plaintiffs has established his first submission and that unless the provisions of s 72(4) of the 1882 Act drive one to the conclusion as a matter of construction that it would be wrong in the present case to enter judgment in American dollars, the five heads of the reasons inducing Lord Wilberforce and the other members of the majority to reach their decision in Miliangos v George Frank (Textiles) Ltd ([1975] 3 All ER 801 at 808–810,[1976] AC 443 at 462–465) are equally applicable to the plaintiffs’ claim in the present action. Section 72(4) is somewhat strangely worded, whatever its true construction. I say this because it is limited to the case where a bill is drawn out of but payable in the United Kingdom. It does not deal with a case, which may well occur, of a bill being both drawn and payable within the United Kingdom, but being drawn in a foreign currency. Counsel for the plaintiffs submits that the subsection can be given perfectly adequate effect if its application were limited to those cases in which the acceptor of a bill wished to exercise his option to pay at the maturity date the appropriate sum in sterling and not in the foreign currency in which the relevant bill of exchange was expressed. Counsel for the plaintiffs argued that this gave a sensible and adequate meaning to the subsection, ruling out the dates of the bill or of acceptance as relevant, and that there was no justification for applying its terms to the case where the acceptor failed to pay at the maturity date, had to be sued by the drawer or endorsee, and when judgment was given, if given in sterling, such judgment would be for money of substantially less value than the United States dollars that should have been paid at the maturity date or their equivalent in sterling at the rate of exchange ruling at that date.
One point taken by counsel for the defendants in answer to this argument is that where the obligation in the contract is expressed in terms entitling the creditor to a sum expressed in a foreign currency, judgment must, I repeat ‘must’, be given in that currency. This submission is based on the remark by Lord Wilberforce ([1975] 3 All ER 801 at 813,[1976] AC 443 at 468) that acceptance of the argument with which he had already dealt and accepted required that the claim must be specifically for foreign currency to which might be added the alternative ‘or the sterling equivalent at the date of payment or enforcement of the judgment’. I cannot read this passage in the opinion of Lord Wilberforce as expressing an obligation on the foreign plaintiff to claim only in the foreign currency in question. All I think that Lord Wilberforce meant was that if judgment was to be entered in a currency other than sterling, then the claim must be made in such currency.
I have already expressed the view that I do not think there is substance in counsel for the defendants’ submission that the plaintiffs’ claim here, if successful, would result in injustice were the pound to appreciate in terms of United States dollars between the maturity date and the date of judgment. It is true that in such a case, if the plaintiff claimed in United States dollars he would get less sterling for his dollars than if on the maturity date the obligor chose to exercise the option given him under s 72(4) of the 1882 Act and to pay the sterling equivalent at that date of the dollars payable under the bills of exchange. On the other hand, the plaintiff on either view gets the same number of dollars for which he has contracted. As stated by Lord Wilberforce ([1975] 3 All ER 801 at 811,[1976] AC 443 at 465, 466), the creditor—
‘has bargained for his own currency and only his own currency … 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.’
Sometimes this is very much for ill: see Société des Hôtels Le Touquet-Paris-Plage v Cummings. Whatever rule be adopted there is bound to be some consequential anomaly even when exchange rates only vary slightly over substantial periods of time. Such anomalies are in my judgment unavoidable unless a court is free in each case to do ‘palm-tree justice’. I am satisfied that the interpretation of s 72(4) of the 1882 Act contended for by counsel for the plaintiffs would do substantially less injustice than the contrary construction for which counsel for the defendants contends. Apart from the points already made, it would avoid the anomaly that the innocent party would do better if he could sue on the original consideration, as in Miliangos v George Frank (Textiles) Ltd, than on the dishonoured bills.
Before leaving the arguments on s 72(4) of the 1882 Act I should refer to Syndic in Bankruptcy of Nasrallah Khoury v Khayat. In that case promissory notes were made by a Syrian at various dates, one of which was 11 October 1929, promising that on 23 May 1930 the maker would pay at Haifa to the orders of Mrs Khayat 2,000 gold Turkish pounds. The Turkish pound was not the currency of Palestine at the relevant date, though no doubt it had been before the conquest of that country by General Allenby at the end of the 1914–18 war and the subsequent establishment of the mandate over Palestine in favour of the United Kingdom. Payment was not made at the date of maturity when the rate of exchange between the Turkish gold pound and the Palestine pound was that the Turkish pound was worth 0·875 of a Palestine pound. The maker of the bill made payment many years after the maturity dates when the Palestine pound had depreciated in relation to the Turkish gold pound so that one of the latter was worth something in the region of 1 1/2 of the former. The payments were made in the currency of Palestine. The Supreme Court in Palestine had held that the correct rate of exchange to take was that prevailing at the dates of payment of the notes and not the rates prevailing at the dates when they should have been paid. The Palestine Bills of Exchange Ordinance 1929 contained provisions which were in almost identical language to s 72(4) of the 1882 Act. Lord Wright ([1943] 2 All ER 406 at 409,[1943] AC 507 at 514), in giving the judgment of the Privy Council, stated that the essence of the rule contained in s 72(4) applied in a case where the sum was not expressed in United Kingdom or Palestine currency, but was payable in the United Kingdom or Palestine. Both the 1882 Act and the comparable Palestine ordinance were declaratory of the common law. Dealing with the problem of the appropriate rates of exchange, Lord Wright said ([1943] 2 All ER 406 at 409,[1943] AC 507 at 512, 513):
‘There remains the more serious question which is: At what date must the rate of exchange be calculated? There can, their Lordships apprehend, be now no doubt as to the English law on this point. It is true that different views have been taken at different times and by different systems of law. Indeed, there are at least four different alternative rules which might be adopted. The rate of exchange might be determined as at the date at which payment was due, or at the date of actual payment, or at the date of the commencement of proceedings to enforce payment, or at the date of judgment. English law has adopted the first rule, not only in regard to obligations to pay a sum certain at a particular date, but also in regard to obligations the breach of which sounds in damages, as for an ordinary breach of contract, and also in regard to the satisfaction of damages for a wrongful act or tort.’
A little later on in his opinion Lord Wright ([1943] 2 All ER 406 at 409,[1943] AC 507 at 514) cited the views of Lord Buckmaster in the well-known case of Owners of Steamship Celia v Owners of Steamship Volturno ([1921] 2 AC 544 at 549,[1921] All ER Rep 110 at 112), where Lord Buckmaster said that in regard to damages which have been—
‘assessed in a foreign currency the judgment here, which must be expressed in sterling, must be based on the amount required to convert this currency into sterling at the date when the measure was properly made, and the subsequent fluctuation of exchange, one way or the other, ought not to be taken into account.’
Lord Wright continued ([1943] 2 All ER 406 at 409,[1943] AC 507 at 514):
‘In the case of bills of exchange (which include promissory notes) the English Bills of Exchange Act, 1882, s. 72(4) enacts that the amount of the foreign currency is to be translated into United Kingdom currency according to the rate of exchange for sight drafts at the place of payment on the day the bill is payable.’
This is a decision of the Privy Council and is, strictly speaking, not binding on me. On the other hand, were it not for the decision of the House of Lords in Miliangos v George Frank (Textiles) Ltd the decision would be of such persuasive authority that I would not for one moment venture to depart from it in giving judgment in the present action. In my view, however, the decision in the Miliangos case has revolutionised the position and has disposed of the once common assumption that foreign currency must be treated by our courts as if a commodity, eg a foreign cow: see per Lord Wilberforce in the Miliangos case ([1975] 3 All ER 801 at 813,[1976] AC 443 at 468). It is now clear that there is no difficulty from the technical point of view as a matter of machinery or procedure in an English court giving judgment in a foreign currency, contrary to what was thought to be the case in Owners of Steamship Celia v Owners of Steamship Volturno and in many other leading authorities on this subject. I accept the argument of counsel for the plaintiffs that this Privy Council decision is, since the decision in the Miliangos case, of no continuing authority on the issue as to the enforcement by action in this country of bills of exchange expressed in a currency other than sterling.
Having reached this conclusion, it is not strictly speaking necessary for me to deal with the last two submissions advanced by counsel for the plaintiffs. I do not think it necessarily follows that the words ‘the amount’ of the bill in s 57(1)(a) of the 1882 Act refer to the same ‘amount’ as is referred to in s 72(4). On the other hand, I think there is force in the argument that the claim made in this action by the plaintiffs is not, strictly speaking, a claim in debt. Counsel for the plaintiffs submits that it is on the basis of s 54, the opening of which provides ‘The acceptor of a bill, by accepting it—(1) Engages that he will pay it according to the tenor of his acceptance …’ This does not seem to me necessarily to indicate that a claim against a defaulting acceptor is a claim in debt. Indeed, when one comes to the provisions of s 57 it is difficult to uphold counsel for the plaintiffs’ contention that the claim, strictly speaking, is one in debt. That section reads as follows, so far as the relevant parts of the opening and the first subsection are concerned:
‘Where a bill is dishonoured, the measure of damages, which shall be deemed to be liquidated damages, shall be as follows:
‘(1) The holder may recover from any party liable on the bill, and the drawer who has been compelled to pay the bill may recover from the acceptor, and an indorser who has been compelled to pay the bill may recover from the acceptor or from the drawer, or from a prior indorser—(a) the amount of the bill …’
These accords with an old case, Browne v London, decided in the reign of Charles II. In that case where the plaintiff sued the defaulting acceptor on a bill of exchange in indebitatus assumpsit, instead of bringing an action on the case, it was decided that the plaintiff had chosen the wrong remedy. That the claim of the plaintiffs against the defaulting acceptor here is a claim to which s 57(1) of the 1882 Act applies seems to me to derive support not only from that section, but also from the decision of the Court of Appeal in Re Gillespie, ex parte Robarts. That case, however, further decided that s 57 was not exclusive of certain common law rights arising in relation to re-exchange.
In Banque Populaire de Bienne v Cavé Mathew J stated that s 57 declared what the damages were which should be recovered where a bill was dishonoured. So far as his judgment was concerned—he was not concerned with problems of re-exchange—the section was exclusive. In my judgment, no distinction is to be drawn in the result whether the plaintiffs’ claim here is to be classified as one in debt or, as I think it is, for liquidated damages.
I say no more about counsel for the plaintiffs’ third point. As regards his final point, with which he dealt very shortly, I need only say that in certain circumstances it is possible to recover as unliquidated damages a currency loss due to the change in the relevant rates of exchange occurring subsequently to a failure to make payment on the due date. For this proposition counsel for the plaintiffs relied on what was said by Donaldson J in Aruna Mills Ltd v Dhanrajmal Gobindram ([1968] 1 All ER 113 at 120,[1968] 1 QB 655 at 669) and on paras 792 and 793 in McGregor on Damagesg. The submission might seem to be contrary to what was said in Banque Populaire de Bienne v Cave, but the preservation of the common law right to unliquidated damages held in Re Gillespie, ex parte Robarts to continue to exist under s 97 of the 1882 Act notwithstanding the language of s 57, might perhaps enable something to be made of counsel for the plaintiffs’ fourth point were it necessary to give a decision on it.
In my judgment, therefore, for the reasons given, the plaintiffs are entitled to judgment on each of the four bills of exchange expressed in the dollar amounts of each such bill totaling in all $92,548·70. If the plaintiffs so desire, the judgment can add ‘or the equivalent thereof in sterling at the date of payment of this judgment or of its enforcement’.
Appeal allowed. Judgment for the plaintiffs for US $92,548·70 or the equivalent in sterling at the date of payment or enforcement of the judgment,£16 notarial expenses and interest agreed at eight per cent.
