20 July 1977
At advising on 20th July 1977, the opinion of the Court was delivered by the Lord President.
The obligation upon which the pursuers sue is an obligation of a money character to pay a sum in foreign currency arising under a contract whose proper law is that of the foreign country, and the money of account of which is that of the same foreign country. The question in these circumstances is whether by the law of Scotland the foreign creditor may claim payment of the amount of the debt owing to him expressed in the foreign currency, and if so, is it competent for the foreign pursuer to seek a decree in terms such as those of the amended conclusion in this action? That question has not been the subject of authoritative answer in Scotland and the Lord Ordinary has reported to us. He has done so having regard to the importance of the question in the present climate of fluctuating exchange rates, the uncertainty as to the relevant law and practice in Scotland, and the recent developments in this field in England.
We have now had an opportunity of considering the full and excellent report of the Lord Ordinary in which he sets out and examines all the law which is relevant to a proper consideration of the question, and we have had the further advantage of listening to a thorough and helpful submission by counsel for the pursuers. In the result we have no hesitation in holding that the amended conclusion in this action is competent in our law. This was the course recommended to us by the Lord Ordinary. As his report discloses, the only decision which might be thought to preclude us from taking this course is Hyslops v. Gordon (1824) 2 Shaw's Appeals 451. This was an action raised in respect of a sum due on a transaction the money of account of which was American dollars. The sum sued for was expressed in sterling but the Court of Session, for a reason which is not obvious, pronounced decree for a sum expressed in dollars. When the case came before the House of Lords on appeal Lord Gifford said that the judgment ought to have been for the sterling equivalent converted at the date of raising the action. The arguments are not reported and no other conversion date appears to have been considered. In Miliangos v. George Frank (Textiles) Ltd.  A.C. 443 Lord Fraser of Tullybelton at p. 502 had this to say about Hyslops—"the reason for that part of the decision was the difficulty of ascertaining the rate of exchange at the date when the action was raised, but that reason is not applicable today, at least where dollars or other important currencies are concerned … The case should, I think, be treated as one decided in accordance with a practice that existed in circumstances which were very different from those existing today and therefore as one not necessarily to be followed now." We agree with these observations and in our opinion the case of Hyslops, decided as it was in the context of conditions which no longer apply, does not now bind this Court. We are accordingly free to consider, in the context of the age of floating currencies and rapidly fluctuating exchange rates, the true objectives of our law. These objectives were expressed in Craig's Jus Feudale 1.16.22 and 23 as early as the end of the 16th century, in these terms—" … In the case, firstly, of a transaction between the subjects of different sovereigns, the creditor is not bound to accept payment in the money of his debtor's country if any prejudice would be caused to him thereby (D 46.3.99). … The sound rule, however, in these matters is that strict regard should be paid to the terms of the bargain between the parties. Thus, if the agreement is that payment should be made in the usual coin of the realm current for the time being—which is a common form of agreement—then it should receive effect, and the nominal value of the public coin will become the measure of the private debt. But sometimes it is specially provided that the loan shall be made in gold, in ‘ecus’ as is sometimes provided, or in angels, or testers; and in that case repayment must be made in the stipulated coin, or in the like quantity and quality of the precious metal. A creditor thus avoids the risk of being the loser by accommodating his debtor which he may have done without stipulating for interest …  If the parties have made no special agreement on the subject, and the value of the currency has become depreciated since the debt was incurred, it becomes important to ascertain whether (on the one hand) the debtor has been late in making payment, or whether (on the other hand) the creditor has been at fault in not accepting it. In the former case, the loss arising from a fall in the value of the currency, occurring subsequent to the date fixed for payment, falls on the debtor. In the latter case, the loss arising from a similar cause falls on the creditor, provided he has refused to accept payment when tendered to him."
These appear to us to be the same as the objectives of the law of England recently declared by the House of Lords in Miliangos. In that case Lord Wilberforce at p. 465 said this:
"First, I do not myself think it doubtful that, in a case such as the present, justice demands that the creditor should not suffer from fluctuations in the value of sterling. His contract has nothing to do with sterling: he has bargained for his own currency and only his own currency. The substance of the debtor's obligation depends upon the proper law of the contract (here Swiss law): and though English law (lex fori) prevails as regards procedural matters, it must surely be wrong in principle to allow procedure to affect, detrimentally, the substance of the creditor's rights. Courts are bound by their own procedural law and must obey it, if imperative, though to do so may seem unjust. But if means exist for giving effect to the substance of a foreign obligation, conformably with the rules of private international law, procedure should not unnecessarily stand in the way."
Lord Fraser of Tullybelton expressed himself thus:
"I think that a party suing for recovery of a debt due in a foreign currency should be entitled to claim payment of, and to get judgment for, the amount of the debt expressed in the foreign currency.
But there must be some provision for converting the foreign currency into sterling so that it can be enforced in this country. The question is what the conversion date should be. Theoretically, it should, in my opinion, be the date of actual payment of the debt. That would give exactly the cost in sterling of buying the foreign currency. But theory must yield to practical necessity to this extent that, if the judgment has to be enforced in this country, it must be converted before enforcement. Accordingly, I agree with my noble and learned friend that conversion should be at the date when the court authorises enforcement of the judgment in sterling …"
In our opinion justice requires that a foreign creditor who is entitled to payment of a debt due in the currency of his own country or the currency of a particular foreign country should not be bound to accept payment of the debt in the money of his debtor's country if any prejudice would be caused to him thereby. For this reason it is clearly competent for such a creditor suing in Scotland to conclude, primo loco, for payment in the currency of account in his contract with the debtor. This is unobjectionable in principle, and there is no authority to the contrary. Because of exchange control legislation and for the purposes of enforcement in Scotland it is, however, necessary to provide in any decree for the conversion of the foreign currency into sterling and ideally the conversion date should be the date when the debt is actually paid. If, of course, the debt is not paid voluntarily when decree is taken, the search must be for the latest practicable date for conversion in order to reduce to a minimum the risk that the foreign creditor who has to enforce his decree will suffer by reason of an adverse fluctuation of the value of sterling as against the currency of account. For the purposes of this case the pursuers have deliberately chosen to fix the conversion date as the date of payment or at the date when the decree is extracted whichever is the earlier, and we can see no procedural obstacle in the way of pronouncing the decree now sought, or in enforcing payment under the decree if the defender does not voluntarily satisfy the judgment either in the currency of account or in the sterling equivalent at the time of payment. The option must always be his. It will, however, be necessary to supersede extract until the solicitors for the pursuers have provided to the Extractor a certified statement of the rate of exchange prevailing at the date of the extract sought and of the sterling equivalent, at that rate, of the principal sum and interest. The Extractor will then endorse on the extract a docquet to the effect that in terms of this certificate the sterling equivalent of the principal sum and interest is at the date of the extract £x.
We wish to emphasise that no argument was addressed to us in favour of a later date of conversion, for enforcement purposes, than the date of extract. Conversion at such a date may well be the latest date to which conversion can be left for reasons of practical necessity but it may be for consideration in subsequent cases, after full discussion, whether any later date would be procedurally acceptable. In practical terms it may at least be said that the solution which we have approved in this case is a reasonably close equivalent of the solution found by the law of England in Miliangos. We have only to add that in expressing our opinion in this case we have had regard only to the propriety of the form of the amended conclusion in an action for payment having the characteristics of this one.
Further and different questions may well arise in future with regard to other forms of action, or to similar forms of action in different circumstances. Upon all such questions we reserve our opinion.
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