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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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