Foreign Currency: Claims, Judgments and Damages

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The change in English law introduced by Miliangos and its forebears

The impact of Miliangos

Miliangos and the doctrine of precedent

5.1 One of the most abrupt reversals of the common law occurred when the House of Lords held in 1976 in Miliangos v George Frank (Textiles) Ltd 1 that claims for debts incurred in a foreign currency could be made in a foreign currency rather than in sterling. Previously, it had always been accepted as inevitable that foreign currency debts had to be converted into sterling because sterling was the currency of the forum. Miliangos was decided less than 15 years after the House had decided In re United Railways of Havana and Regla Warehouses Ltd,2 which appeared to have set up a rampart protecting sterling judgments. 5.2 The way in which the change came about is interesting because not only did it revolutionise the treatment of claims with a foreign currency element, but it also graphically reflects the transformation of English judicial attitudes in the post-war period and (not quite the same point) provides an illustration of the doctrine of precedent in operation in modern conditions. In less than two years, a series of forensic accidents were combined with a number of unorthodox judicial techniques to turn the law upside down. Despite forebodings about the ability of judges to introduce so fundamental a change in the law, the rule of substantive law introduced by the House of Lords in Miliangos is generally regarded as being satisfactory, although it is worth considering, as is done in this book, whether there are still some unanswered questions.

The state of English law before Miliangos

Manners v Pearson: the perceived need for conversion into sterling

5.3 summarised the history of sterling and referred to some 19th-century and earlier cases which dealt with claims originating in foreign currencies, showing the way in which the courts approached the task of awarding compensation by converting foreign currency liabilities into sterling. One of those cases,

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Manners v Pearson,3 heard by the Court of Appeal in 1898, was described by Lord Wilberforce in Miliangos as ‘rhe fans et origo of the modern self-imposed limitation’ on giving judgment in a foreign currency.4 5.4 Manners v Pearson involved a dispute arising out of a contract made in relation to the improvement of the drainage system of the City of Mexico, The action had been brought by the personal representative of Arthur Duff Morrison, deceased, for an account of commission due under the contract. Both the money of account5 and the money in which sums should have been paid were the Mexican dollar, and the place where payment was to be made, and where Morrison resided at the time of the contract, was Mexico. The defendants’ place of business was London. The case was concerned not with the question of whether sums due under the contract should be converted into sterling for the purpose of a judgment, as such conversion was then considered to be obligatory: the Court of Appeal made a very clear statement to that effect. Rather, it was concerned with determining the date as at which conversion should occur. This turned out to be a crucial factor, having a significant bearing on the real value of the judgment. 5.5 An account that had been ordered showed that a balance of 19,366 Mexican dollars had become due up to August 1896. The amount in Mexican dollars was agreed but, owing to a fall in the exchange rate between the dollar and sterling, there was a dispute over how to calculate the sterling equivalent. In August 1896 the value of the Mexican dollar in sterling was 2s 6d (in nominal terms, now 12.5p), but by November 1897, when the account was prepared, it had fallen by more than 25 per cent to 1s 10¼d (just over 9p). The difference between the sterling equivalents before and after that level of depreciation was just over ££625 (which, after allowing for inflation, would have been equivalent in 2014 to more than ££74,0006). 5.6 In the Court of Appeal, Lindley MR said that the need to consider what was the sterling equivalent arose because

Speaking generally, the courts of this country have no jurisdiction to order the 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 writs of execution.7

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