Lloyd's Maritime and Commercial Law Quarterly
CONTRACT DAMAGES FOR EXCHANGE LOSSES—A NEW ZEALAND DEVELOPMENT
C. E. F. Rickett *
In cases of breaches for late payment of international trade contracts, will the award of damages take account of variations in rates of exchange? Prior to the decision of the House of Lords in 1975 in Miliangos v. George Frank (Textiles) Ltd.,1 it was thought that the statement of Scrutton, L.J., in Di Ferdinando v. Simon Smits & Co.2 expressed the correct law on the matter:
“It occurred to me it might possibly be that subsequent variation in the exchange could be included in the damages, in the nature of interest. I have been unable to find that interest by way of damages has ever been allowed to cover alteration in the exchange, and counsel have also been unable to find any such case. I think the reason is … that these damages are too remote. The variation of exchange is not sufficiently connected with the breach as to be within the contemplation of the parties. That seems to me to be the principle on which the matter should be dealt with, and without going through the authorities, that is the rule which should be followed …”.3
Dr F. A. Mann doubted that Scrutton, L.J., was laying down any clear principle. In his The Legal Aspect of Money, he writes:
“This language makes it clear, however, that in truth a question of fact is involved. It is, therefore, by no means inconceivable that upon proof of the necessary facts damages for delayed payment of a foreign currency debt will be recoverable in England”.4
While one doubts whether Scrutton, L.J., was actually limiting himself to an observation on the particular facts of the case before him, rather than purporting to establish an absolute rule, his remarks were clearly obiter dicta. Furthermore, his restrictive approach was probably a natural development from the then established rules that an English court could not give judgment for payment of an amount in a foreign currency, and that in cases of breach of contract damages were to be assessed at the date of breach, which resulted in a conversion of foreign money obligations into sterling also at the date of breach.
In Miliangos the House of Lords held that a creditor could obtain judgment expressed in a foreign currency in an English court where the obligation was one of
* M.A., LL.B., Senior Lecturer in Law, Victoria University of Wellington, New Zealand.
1 [1976] A.C. 443.
2 [1920] 3 K.B. 409.
3 ibid., at p. 416. Cf. Aruna Mills Ltd. v. Dhanrajmal Gobindram [1968] 1 Q.B. 655, at pp. 668–669, per Donaldson, J., for a different view. For a post-Miliangos dictum on this issue see Barclays Bank Ltd. v. Levin Brothers Ltd. [1976] 3 All E.R. 900, at p. 912, per Mocatta, J. See also McGregor on Damages (14th edn., 1980), especially Chapters 15 and 24.
4 F. A. Mann, The Legal Aspect of Money (3rd edn., 1971), at p. 291. See also pp. 100 el seq., and pp. 289 et seq. I have been unable to consult the fourth edition of Mann’s work.
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