The Gazette 1978

3AZETTE

MAY 1978

Monetary Judgments in Foreign Currency A. W. KERR, B.A., Ll.M. Lecturer in Law at University College, Dublin. Petrns Simon Antonino Damen v. 0*Shea 1977 No. 414 25/5/77.

There used to be a firm rule of law that the courts had no power to give a money judgment expressed in a currency other than sterling. This coexisted with another firm rule of law where an amount due whether by way of debt on damages was calculated or assessed originally in a currency other than sterling it was to be converted into sterling (a) in cases of debt at the date when the obligation to pay arose, (b) in cases of damages for breach of contract at the date of breach and (c) in cases of damages for tort at - the date when the expenditure or loss concerned was incurred. This was known, collectively, as the breachdate rule. The House of Lords had confirmed this in Tomkinson v. First Pennsylvanian Banking & Trust Co. 11961] AC 1007. Whilst this rule seemed reasonable when sterling was a stable currency "if whose true fixed and resting quality there is no fellow in the firmament", it was highly unsatisfactory when sterling depreciated. The pound might well be of less value when damages were ultimately paid than at the date of breach. Lord Reid in Tomkinson's case felt that this "Was a general risk against which the law cannot protect any of us". The reasons behind the rule against awarding damages in a foreign currency were primarily procedural.- The common law courts gave judgement in these words: "It is adjudged that the plaintiff do recover against the defendant £X", and if the judgment were not in sterling the sheriff would not be able to execute it, since a sheriff acting under a writ of fieri facias cannot by execution raise foreign currency. All he can do is by a forced sale to provide a sum in sterling. As sterling progressively collapsed and lost a great proportion of the value in relation to other currencies, England's position as the leading centre of the settlement of commercial disputes was threatened as foreign business people no longer had any confidence in sterling. The contract currency may have been stable but they faced the danger of coming to England and having to accept payment in sterling at a devalued rate. The Court of Appeal under Lord Denning in Schorsch Meier Gmbl H v. Hennin [1975] QB 416 argued that article 106 of the EEC Treaty required a court to give a judgement in the currency of die creditor if that was the currency of the contract. The facts of this case were very simple. The plaintiffs who were incorporated in Germany supplied and delivered goods to the defendant in England. The currency of the contract was Deutschmarks and by February 1972 he owed 3,756 DM, the sterling equivalent of which was £452. By July 1973 the sterling equivalent had changed to £641 and the plaintifTs claimed the debt in Deutschmarks. The Court of Appeal awarded them judgement in the currency claimed. The decision was unsatisfactory, not in the result which was perfectly fair but in the reasoning adapted by the Court and it was not until the House of Lords decision in Miliangos v. George Frank Textiles Ltd. I 1976] AC 443 the matter was finally settled. Miliangos has been

described as "a profound change . . . a revolution reversing a practice which had been regarded as immutable". "Die plaintiff, a native of Switzerland agreed to sell to the defendants, an English company, a quantity of polyester yarn. The proper Law of the Contract was Swiss, the money of account and payment was Swiss francs. The defendants did not pay any part of the purchase price and the plaintiff issued a writ claiming payment of the sterling equivalent of the contract price at the date when the payment should have been made. Between that date and the date of the hearing sterling fell considerably in value against the Swiss franc with the result that at the date of the hearing the contract price in Swiss francs was equivalent to a much larger sum in sterling than it had been in 1971. The plaintiff therefore tried to amend his statement of claim so as to claim the amount due to him in Swiss francs. The House of Lords held by a 4 to 1 majority that where a plaintiff brought an action for a sum of money due under a contract he was entitled to claim judgment for the amount of the debt expressed in the currency of a foreign country. If it was necessary to enforce the judgment the amount was to be converted into sterling at the date when leave was given to enforce the judgment. Lord Wilberforce said: "Justice demands that a creditor should not suffer from fluctuations in the value of sterling . . . procedure cannot be allowed to affect detrimentally the substance of the creditors rights". The decision was specifically limited to cases where there was a foreign monetary obligation arising under a contract where proper law was that of a foreign country and where the money of account and payment was of that country. Since then, however, judgments expressed in a foreign currency have been given in relation to damages forbreach of contract (Kraut AG v Albany Fabrics [ 1977] 2 AER 116) and for tort )The Despina R [ 1977] 3 AER 874); judgments have been expressed in a foreign currency where the proper law of the contract was English ( Barclays Bank International Ltd. v. Levin Bros. [1976] 2 WLR 852). These decisions were fully considered by McMahon J. in Damen v. O'Shea. Here the claim was for 14,740 Dutch guilders — the price of goods sold and delivered by Dutch sellers to an Irish buyer. He stated that the practice had always been to give judgments in Irish currency but there was no reported Irish decision that judgments could not be given in a foreign currency. In his opinion, the previous practice of sterling judgments was not based on any fundamental legal principle but was derived from procedural considerations. He then said: "In my view the requirements of international commerce are clearly better met by a rule which enables the court to give judgment in whatever currency the plaintiff is entitled to under the terms of the contract and there is nothing to „ prevent this court from adopting a rule which permits justice to be done more effectively". It did not matter if

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