Vlasons Shipping, Inc v Neuchatel Swiss General Insurance Co Ltd

5. Under the terms of the policy the defendants agreed to insure the plaintiff against loss, damage, liability or expenses in the manner provided in the policy. The vessel was valued in the policy at US$1.2M and this was specified as the sum insured. The vessel was lost on or about 15 August 1991 in circumstances which, as I have found, entitled the plaintiff to recover under the policy.

8. The issues now before me were five in number. First, whether the judgment should be given in United States currency and if so whether it should be converted to Australian currency and on what date. Second, the date from which interest on the sum awarded should be calculated. In the course of argument this was accepted by the parties to be 21 November 1991 and I need say nothing further about this. Third, the rate of interest to be applied. Fourth, the amendment of the defendants to reflect the parties upon whom any liability must fall. Finally, the defendants by summons filed on 15 October 1998 sought a stay of execution pending appeal.

12. In this case the currency of account and of payment is US dollars. Accordingly, there being no rule of law or practice to the contrary, there was no dispute that judgment should be entered in that currency: Miliangos v George Frank (Textiles) Ltd [1976] 1 AC 443. This case, and those English cases springing from it, have been accepted and applied in most jurisdictions in this country: Mitsui OSK Lines Ltd v. The Ship "Mineral Transporter" [1983] 2 NSWLR 564 at 569, per Yeldham J; Maschinenfabrik Augsburg-Nurenburg AG v Altikar Pty Ltd [1984] 3 NSWLR 152, per Rogers J; Australian and New Zealand Banking Group Ltd v Cawood [1987] 1 Qd.R. 131 at 134, per Williams J; Foti v Banque Nationale de Paris (No.1) (1989) 54 SASR 354 at 430-2 per Legoe J; ITC Distribution Ltd v Filmpac Holdings Ltd (SC (Vic), Fullagar J, 6 March 1990) (reported Williams Civil Procedure - Victoria [16.014]. See also Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 387, per Dawson J and the article by Steven Stern, "Judgments in Foreign Currencies: A Comparative Analysis" (1997) JBL 266.

15. In the Miliangos case the House of Lords approved as an appropriate form of judgment for a claim in debt payable in a foreign currency that suggested by Lord Denning MR in Schorsch Meier GmbH v Hennin [1975] QB 416 at 427:

"That the debtor do pay to the plaintiff DM 3756.03 or the sterling equivalent at the time of payment."

19. His Lordship in that case addressed the procedural difficulty of enforcing in the United Kingdom a judgment expressed in Deutschmarks by providing that the plaintiff might apply for leave to enforce it, such application to be supported by an affidavit as to the conversion rate. Leave would then be given to enforce payment of the sterling equivalent so calculated [1975] QB at 425. The subject matter of the appeal to the House of Lords in the Miliangos case was a judgment in those terms. The principal speech was that of Lord Wilberforce who addressed the question of the date of conversion by putting to one side as inappropriate the date upon which the debt became due and positing three alternative dates: the date of the commencement of the action; the date of the judgment; and the date of payment. His Lordship favoured the last on the basis that this was the date on which the court authorised enforcement of the judgment in terms of sterling. Lord Cross at 497-8, Lord Edmund-Davies at 498 and Lord Fraser at 501 agreed. Lord Fraser, in reaching this conclusion, observed that, historically, the date of conversion should be the date of payment but, in a case where payment is to be enforced by court process, practical realities demanded that the conversion take place before enforcement and on the date when the court authorised enforcement. The practical equivalence of these dates is demonstrated by the discussion of Donaldson J in the George Veflings Rederi A/S v President of India; the Bellami [1978] 1 WLR 982, upheld on appeal of [1979] 1 WLR 59 at 63, where a voluntary part payment made before an arbitral award was converted at the date of payment for the purposes of calculating the balance payable.

22. In the present case, the plaintiff in its statement of claim seeks an order that the defendants pay the Australian dollar equivalent US$1.2M at the date of judgment. It may be that this claim was based on the order made by Fullagar J in ITC Distribution Ltd v Filmpac Holdings Ltd to which I have referred. In that case his Honour accepted that it was open to this court to enter judgment in foreign currency where that is sought, or in Australian currency converted at the date of judgment, if the plaintiff so elects. In the present case the plaintiff has so elected. The defendants contend that no such right of election exists; the judgment must be United States currency. The acceptance of such a submission involves a departure from the order made by Fullagar J in the ITC Distribution case, a course I would be reluctant to follow. I say this, not only out of the great respect I give to any judgment of his Honour, but because this is a decision on a matter of practice which has stood now for nearly eight years. I do note, however, that his Honour was careful to record that he had the benefit of no contrary argument and little opportunity for full consideration of the authorities. I am, therefore, emboldened to accede to the defendant's request that I examine afresh the reasoning which led to this decision.

25. I have mentioned that the line of English authority favours as the date of conversion, not the date of judgment but the date of payment or the date on which leave is given to execute. This preference reflects the thinking underlying this form of judgment in a debt case, that creditors are entitled to receive what they bargained for, namely, a sum in the agreed foreign currency. A judgment in that currency may be satisfied by payment in that currency in the same way as a tender in that currency is good tender: Jolley v Mainka [1933] HCA 43; (1933) 49 CLR 242 at 260, per Dixon J. It may be supposed that, in a case such as the present, it will not be likely that the plaintiff as judgment creditor will be obliged to resort to execution. The probabilities are that the defendants as insurers will accept the judgment of the court: compare Jugoslavenska Oceanska Plovidba v Castle Investment Co Incorporated [1974] QB 292 at 299, per Lord Denning MR. The plaintiff will then receive from each defendant on the date of payment the sum of US dollars which is payable by that defendant, or its local equivalent, as at that date. The date of such a payment will be selected by the defendant, subject, of course, to the power of the plaintiff to issue execution. Where, however, a defendant neglects to satisfy the judgment it is open to the plaintiff to select the date of conversion itself by applying for leave to execute.

28. It is important, too, in a case such as this that the rule in question should, as far as possible, be uniform in comparable jurisdictions. Inevitably, claims involving foreign currency will concern parties from other countries. In those jurisdictions which permit the giving of judgments in foreign currency the rule of conversion should be consistent. Indeed, the fact that the curial procedures in the United Kingdom had departed from their arbitral equivalents was a powerful factor in the decision of the House of Lords in the Miliangos case to depart from a precedent established by it only 15 years previously.

31. Counsel for the defendants, having demonstrated to my satisfaction that this was a case where judgment might be given in a foreign currency in the Miliangos form, then submitted that judgment must be given in that form. In Federal Commerce and Navigation Co Ltd v Tradax Export SA; the Maratha Envoy [1977] QB 324 at 342, Lord Denning MR said this:

"Once it is recognised that judgment can be given in a foreign currency, justice requires that it should be given in every case where the currency of the contract is a foreign currency; otherwise one side or the other will suffer unfairly by the fluctuation of the exchange."

(Emphasis in the original.)

35. The case was a claim for demurrage calculated under the charterparty in United States dollars. That judgment in such case might be given in US currency, might represent an extension of the Miliangos rule which had been carefully limited by the Lords to foreign debts as defined by Lord Wilberforce. A requirement of this definition was that the proper law of the contract be that of the foreign country. The law of the charterparty in the Maratha Envoy was that of England. The plaintiff's alternative claim for damages in United States currency for breach of an implied term of the charterparty, was certainly an extension of the Miliangos rule for it was not even a debt claim. Lord Denning, relying again on the practice of arbitrators in the City of London, was concerned to extend the Miliangos rule to the claims before the court. Once the fundamental objection to the giving of judgment in a foreign currency had been overcome in certain cases, as had been achieved by the Miliangos decision, his Lordship was of opinion that a judgment of that kind should be available to all cases involving foreign currency. I do not read his Lordship as imposing an obligation on a court to give such a judgment in every case. Nor do I understand his Lordship as gainsaying the right of the plaintiff to put its claim in terms of domestic currency. Lord Wilberforce in the Miliangos case at 468 stated it to be a precondition to the giving of a judgment in foreign currency that the plaintiff had made specific claims for such relief. The decision in the Miliangos case arguably reversed a procedural tradition of the common law which had prevailed for nearly four hundred years to the effect that a judgment might only be given in the domestic currency. It did not at the same time provide that a litigant in a British court suing on a foreign currency contract was precluded from recovering judgment in that currency. See also Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (1989) 15 NSWLR 448 at 463-4, per Kirby P.

38. The matter may be further tested by assuming that judgment must be given in United States currency without conversion as the defendant contends. Subject to any stay order, it would then be open to the plaintiff forthwith to seek leave to enforce that judgment with the consequence that the conversion would occur from that date. I would be loath to interpret the authorities in a way which would produce a result which required the plaintiff to adopt this course in order to receive what it sought from the outset and which the common law had entitled it to receive for a very long time.

41. I agree, therefore, with Fullagar J in the ITC Distribution case that it is open to the court to give judgment in the foreign currency converted to Australian dollars as at the date of judgment where the plaintiff so elects. And since the plaintiff in this case seeks such a judgment I shall give it.

45. The Supreme Court Act 1986 s. 59(2) obliges the court to award damages in the nature of interest over and above the money receivable under the policy unless good cause is shown to the contrary. No rate of interest is prescribed. Compare ss. 57(2), 58 and 60. In Australian Guarantee Corporation Ltd v Commissioners of the State Bank of Victoria [1989] VicRp 57; [1989] VR 617 at 639-4), Ormiston J, as a matter of discretion, fixed a date similar to but not identical with the rates prescribed by the Penalty Interest Rates Act 1983.

48. Counsel for the plaintiff submitted that I should calculate interest at those statutory rates since the policy was issued in Australia by underwriters which, in general, were Australian businesses and the policy was subject to Australian law. Against this, it was put that I should award interest at a rate which was appropriate for the foreign currency in which the judgment was given. Counsel for the defendants referred to a good deal of authority in support of this approach. In Miliangos v. George Frank Textiles Ltd (No2) [1977] QB 489 at 497 Bristow J held that the plaintiff, having obtained a judgment in Swiss francs, was entitled to interest at a rate at which someone could reasonably have borrowed Swiss francs in Switzerland at simple interest. This was the approach taken by Rogers J in Maschinenfabrik Augsburg-Nurenburg AG v Altikar Pty Ltd [1984] 3 NSWLR 152, and by Giles J in Swiss Bank Corporation v The State of New South Wales (1993) 33 NSWLR 63, upheld on appeal on this point: State Bank of New South Wales Ltd v Swiss Bank Corporation (1995) 39 NSWLR 350. I am persuaded that this is the correct approach in this case.

51. Evidence was placed before me of the Reserve Bank of Australia of interest rates payable by borrowers of United States dollars and this country and from J.B. Were Melbourne of the US prime borrowing rates. In determining the appropriate rates, I am concerned to protect the interests of the plaintiff which has been standing out of its money for some seven years. The plaintiff is a Philippines company but there was no evidence of the cost of borrowing United States dollars in the Philippines. Like Giles J in the Swiss Bank Corporation case, I prefer to adopt as a basis United States interest rates as the appropriate measure to compensate the plaintiff for its having been deprived of United States dollars which the policy entitled it to receive on 21 November 1991. I accept that the appropriate rates of interest, therefore, should be those contained in the J.B. Were schedule (Ex.C) from time to time plus one percent. I will leave it to counsel to calculate and agree the appropriate figure to be inserted in the award of damages by way of interest on the sum of US$1.2M, calculated from that date at those rates up to the date of judgment.

55. Since the proceeding was commenced, some of the defendants have changed their names or merged with or been taken over by other companies. The consequence of this has been that the liability under the policy of the firstnamed defendant, Neuchatel Swiss General Insurance Co Ltd, and of the eighth defendant, C.E. Heath (Casualty and General) Insurance Co Ltd, has passed to HIH Casualty and General Insurance Ltd, that of the third defendant, Sphere Drake Insurance Plc has passed to Odyssey R.H. (London), and that of Sun Corp Insurance AMB has passed to Sun Corp General Insurance Ltd.

58. All parties consent to the amendment of the proceeding to give effect to these changes and I will, with the consent of the substituted parties, make orders pursuant to R.9.06 as requested. I will accept as establishing that consent, an assurance in writing from the solicitor acting for each of these substituted parties.

62. I have been told that the defendants wish to appeal. Accordingly, they seek a stay of execution until the hearing and disposition of the appeal. In accordance with accepted practice I will order a stay sufficient only for them to bring their appeal and to apply to the Court of Appeal for a stay. Once the appeal is on foot the matter is pending before the Court of Appeal and it is that court which should determine any question of stay.

I will, therefore, in due course, make orders as follows:

1. Substitute HIH Casualty and General Insurance Ltd for the first defendant and eighth defendants, Odyssey R.E. (London) Ltd for the thirdnamed defendant and Sun Corp General Insurance Ltd for the fourthnamed defendant and direct that the schedule of parties to the proceeding be amended accordingly.

2. Judgment for the plaintiff against each of the defendants for its proportion as set out below of the sum of US$1.2M plus US$[X] damages in the nature of interest, the aggregate sum to be converted to Australian currency at the rate applicable at the close of business in Melbourne on [the date of judgment].

3. Stay of execution of the judgments for 14 days after the date of judgment.

4. Liberty to each party to apply with respect to any question concerning the conversion to Australian currency of the sums adjudged to be paid.