Jamaica Carpet Mills Ltd v First Valley Bank
| Jurisdiction | Jamaica |
| Judge | Rowe, P.,Carey, J.A.,White, J.A. |
| Judgment Date | 22 September 1986 |
| Neutral Citation | JM 1986 CA 68 |
| Court | Court of Appeal (Jamaica) |
| Date | 22 September 1986 |
Court of Appeal
Rowe, P.; Carey, J.A.; White, J.A.
W.K. Chin See Q.C. and John Vassell for defendant/appellant.
Allan Wood for plaintiff/respondent.
Contract - Breach of Contract — Consent Judgment — Debt in foreign currency — Rate of exchange — Proper date of conversion — Whether date of breach or date of payment.
By specially endorsed writ issuing of the Supreme Court the respondent claimed against the appellant as debt due by the appellant the sum of $210,166.60 United States Currency with interest thereon at 10% from January 1079 to August 31, 1983 amounting to (U.S.) $93,877.74 making total claim U.S. $295,044.34. Then the U.S. currency was converted to the Jamaican currency at the parallel market rate then existing at J$2.60 to U.S. $1.00, and the resulting sum was $767,115.28.
Vicart Inc. of Pennsylvania, U.S.A. was in the 1970's an associated trading partner of the appellant. Attempts at unscrambling the several business relationships between these two parties floundered and led to a suit being tiled by Vicars Inc. against the appellant in the Supreme Court which proceeded as far as defence and was not further prosecuted. Vicart Inc. had previously obtained judgment against the appellant in Pennsylvania, U.S.A. in the sum of U.S.$201,166.00 and it appears that this judgment was the basis of the Jamaican action. April 13, 1993, Vicart Inc. assigned to the First Valley Bank, the respondent, “all the rights, interest and privileges, (a) which Assignor and may have in the accounts (as term is defined in the Pennsylvania Uniform commercial Code (U.C.A.) now existing of hereafter made, arising out of goods sold or services performed to, or for the benefit of Jamaica Carpet Mills of Spanish Town, Jamaica…” On the basis of this assignment the present action was brought.
In an affidavit of February 29, 1984, the Managing Director of the appellant company admitted its readiness and willingness to pay the Jamaican dollar equivalent of U.S. $100,000.00. Summons for Summary Judgment came on before the Master on March 21, 1984, when the defendant admitted a debt of U.S.$100,000.00, for which sum judgment was entered against it. When the matter came on before Alexander, J., on November 15, 1984, the following note was made by him at the commencement of the proceedings:– “Judgment entered — converting that to Jamaican dollars at the rate of $1.75 Ja. to $1 U.S. but preserving the right to argue whether greater amount sue owing to fluctuating rate of Jamaican dollar against U.S. dollar. By agreement between the parties — only issue is rate of exchange.”
At the end of the hearing Alexander, J., made two orders.
The second gave liberty to the defendant/appellant to file a defence in relation to the respondent's claim in excess of U.S. $100,000.00 and from that order there is no appeal. The first order was that the sum of U.S. $100,000.00 was to be converted into Jamaican dollars at the rate of exchange in force at the date of payment and not at the rate of $1.78 to U.S. $1.00 referred to in the consent order before the Master on March 21, 1984. The short point taken on appeal was that the trial judge erred in law in determining that the relevant date for conversion into Jamaican dollars was the date of payment rather than the date on which the debt became due. We listened carefully to extensive arguments presented on both sides and were persuaded by the respondent's attorney that there was no error in the order made by Alexander, J., Consequently we dismissed the appeal with costs to the respondent to be agreed or taxed and promised to give written reasons for that decision. My reasons are contained herein.
The endorsement to the writ stated that the debt fell due in January 1979. If the breach date rule for conversion is applicable then the relationship between the Jamaican and the U.S. dollar is fixed as at that date. In June 1978, according to the appellant it did all that it could within the law of Jamaican governing exchange control to pay its debts, that is to say, it deposited with Citibank a sum equivalent to U.S. 145,000.00 at the then rate of U.S. $1.00 to J$0.9125, and the appellant in proof thereof exhibited Bank of Jamaica Exchange Control Act, Deposit Advice Nos. 1/07489 and 1/07491. Foreign Exchange was not then available and the sum deposited was returned to the appellant.
Five law Lords gave reasoned judgments in the case of In re United Railways of Havana and Regla Warehouses Ltd. [1961] A.C. 1007 in which one of the questions for the determination was framed by Viscount Simonds at p.1043, thus:
“The question, summary stated, is what sum in sterling is recoverable by a plaintiff suing in the Courts of this country, for a sum of money payable in foreign currency in a foreign country under an instrument of which the proper law is a foreign law.”
The instant case proceeded on the basis that the proper law of this debt is the law of Pennsylvania. Therefore Viscount Simmond's answer of his question is relevant when he continued:
Admittedly, the claim must be for a sterling sum and the judgment must be in sterling. It is established by authority binding on this House that a claim for damages for breach of contract or for tort in terms of a foreign currency must be converted into sterling at the rate prevailing at the date of breach or tortious act.”
Viscount Simonds concluded this part his speech on p.1046 by saying:
“I am content to accept as a correct statement of law, whichever was the conclusion is reached, the propositions in rule 177 at p.914 of the seventh edition of Dicey's Conflict of Law as follows:
(1) An English Court cannot give judgment for the payment of an amount in foreign currency…
(2) For the purpose of litigation in England (a) s debt expressed in a foreign currency must be converted into sterling with reference to the rate of exchange prevailing on the day when the debt was payable.”
Lord Reid considered alternative and competing dates for the time of converting the foreign currency into sterling and came down firmly on the view that only one date was practicable. At p.1053 he said;
“So even if this were still an open question, I would have to come to the conclusion that in every case where a plaintiff sues for a debt due in a foreign currency, that debt should be converted into sterling at the rate of exchange currency when the debt fell due. That rule may in some cases be artificial, it may even be unjust, but it has been accepted for a long time, it is clear and certain, and no other rule could be railed on to produce a more just result: indeed, no other rule is really practicable.”
Lord Denning found the law clear that judgment could only be given in England in sterling. He considered the convenient date for conversion and in an instructive passage at 1068–70 of the judgment he said:
“Now the trust company comes to the Courts in England to recover the sums in arrear and unpaid. And if there is one thing clear in our law, it is that the claim must be made sterling. We do not give judgments in dollars any more than the United States Court give judgments in sterling. But the question is, at what date is the rate of exchange to be taken? is it to be the date when the rentals fell due, or the date of the winding up?
If the trust company had sought to recover judgment in the United States, it would, I presume, have been able to sue there for a debt in dollars. But it cannot sue here in debt. There is no sterling debt. Its claim must be in damages. It must claim damages for breach of contract because of non-payment of dollars in the United States. As such, the claim is indistinguishable in principle from any claim for breach of contract. The rate of exchange is to be taken at the time when the breach took place. This is, I think, a rule of positive law established by decisions of this House and of the Judicial Committee of the Privy Council; but as it has been subject to some criticism, I would like to attempt some explanation of it.
The origin of the rule, as I understand it, lies in the fact that for long years sterling was regarded as a stable currency of whose true-fixed and resting quality there is no fellow in the firmament. Sterling is the constant unit of value by which, in the eye of the law, everything else is measured. So long as sterling is regarded as stable.
“Whilst other currencies go up and down, it would seem that justice is best done by taking the rate of exchange at the date of the breach. The creditor is entitled to be put into as good a position as if the debtor and done his duty and paid the debt on the due date; and he is only truly put into such a position if the debt is converted into sterling at that date; rather then at a later date when the foreign currency has depreciated or appreciated.
The question is whether the rule is still to apply when sterling loses the value which it once had. We have seen in recent years how it has depreciated. It has departed from the gold standard: the pound has been devalued; and there has been much inflation. It may be said that in these conditions the rule is apt to produce an injustice to a creditor in the United States who is owed money in dollars; because, if he comes to our Courts after devaluation, he does not recover sufficient sterling to compensate him for his loss. But I am afraid that, if he chooses to sue in our Courts instead of his own, he must put up with the consequences. Our Court here must still treat sterling as if it were of the same value as before: for it is the basis on which all our monetary transactions are founded. Thus, within this country itself, a man who stipulates for a pound must take a pound when payment is made, whatever the pound is worth at that time. Just as an English creditor in this country suffers from...
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