Services Europe Atlantique Sud (SEAS) v Stockholms Rederiaktiebolag Svea (Folias)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE ORMROD |
| Judgment Date | 22 February 1978 |
| Judgment citation (vLex) | [1978] EWCA Civ J0222-1 |
| Date | 22 February 1978 |
| Court | Court of Appeal (Civil Division) |
In the Matter of the Arbitration Act 1950
And
In the Matter of an Arbitration
[1978] EWCA Civ J0222-1
The Master of the Rolls
(Lord Denning)
Lord Justice Ormrod and
Lord Justice Geoffrey Lane
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the High Court of Justice
Queen's Bench Division
(Mr. Justice Robert Goff)
MR. A. POLLOCK (instructed by Messrs. Holman, Fenwick & Willan, Solicitors, London) appeared on behalf of the Appellants/Defendants.
M. J. MOORB-BICK (instructed by Messrs. William A, Crump & Eon, Solicitors, London) appeared on behalf of the Respondents/Plaintiffs.
In July 1971 the Swedish owners of the "Folias" let her on a time-charter to French charterers. The hire was payable in "U.S. dollars". In any general average adjustment, "disbursements in foreign currencies were to be exchanged in a European convertible currency or in pounds sterling or in "U.S. dollars". In case of any dispute between the owners and the charterers, the matter in dispute was to be referred to three commercial-men at London, their decision, or that of any two of them, to be final. The proper law was English law.
On 19th July, 1971, at Valencia in Spain, the vessel loaded a cargo of onions in bags. They were to be carried to Santos in Brazil. The charterers issued their own bills of lading for the carriage. During the voyage the refrigerating machinery failed, with the result that some of the onions rotted. The cargo was discharged in Santos on 22nd September, 1971. The cargo-receivers claimed damages on account of the perished onions. They calculated their damages in Brazilian currency, i.e. cruzeiros, at the value of onions in Santos at that time. Their claim was against the French charterers for breach of contract, because they had issued the bills of lading. The French charterers in turn claimed against the Swedish owners for breach of the express warranty of seaworthiness in the charter. Eventually the claim was settled by the French charterers. It was settled on 11th August, 1972. The French charterers agreed to pay the cargo receivers the sum of cruzeiros 456,250. In addition, the French charterers had to pay legal fees to their lawers in Santos of cruzeiros 12,870.25. The total was cruzeiros 469,120.25. The French charterers had no cruzeiros with which to pay those suras in cruzeiros. Their place of business was in Paris and they conduct all their dealings in French francs. So they used theirown French francs to buy cruzeiros so as to pay the sums in Santos. They used French francs 418,012,17 in order to buy the 469,120.25 cruzeiros needed in Santos, The charterers used those francs and then claimed the amount from the Swedish owners. The Swedish owners agreed that the settlement with the cargo receivers was reasonable. But they disputed the French currency. They said that the award should not be given in French francs, but in Brazilian cruzeiros. No doubt because they could buy cruzeiros very cheaply. The arbitrators held that the French charterers were right. They gave their award on 24th July, 1975. They awarded that the ship owners were to pay the French charterers French francs 418,012.17 (the sum the French charterers had used on 11th August, 1972), plus interest at 10 per cent, from 11th August, 1972 to the date of the Award, 24th July, 1975. But they stated a Case for the opinion of the court. Mr. Justice Robert Goff held that the arbitrators should have made their award in Brazilian cruzeiros 469,120.25 (the amount paid to the cargo receivers on 11th August, 1972), plus interest at 10 per cent, to 24th July, 1975. But by that time, July 1975, the Brazilian currency had weakened greatly against the French franc The Brazilian cruzeiro was then, after three years, only worth half it former value in French francs. If the French charterers? got an award for 469,120.25 cruzeiros in July 1975, they would only be worth 230,000 French francs. So the French charterers would have suffered a disastrous loss in their own currency. They would have used French francs 418,012,17 to settle the claim of the cargo-receivers in August 1972, but would only have received 230,000 French francs in July 1975. The Swedish owners would, by the same token, have received a fortuitous benefit. With their Swedish kroners they could buy Brazilian cruzeiros very cheaply in July 1975: much more cheaply than in August 1972. The Frenchcharterers appeal to this court, asking us to restore the decision of the arbitrators.
2. THE MEASURE OF DAMAGES
There was some discussion as to the measure of the damages to which the French charterers were entitled. It was suggested that they were only entitled to the difference between the market value the onions would have had if they were delivered undamaged, as against their value in their damaged condition. That would undoubtedly have been the measure as between the cargo receivers and the charterers - see Scrutton on Charter-parties, Article 192: and was presumably the basis of the settlement between those parties. But, as between the charterers and the ship owners, the measure was the sum expended by the French charterers in settling the claim on reasonable terms, together with their costs - see Hammond v. Bussey (1887) 20 Queen's Bench Division 79: Biggin v. Permanite (1951) 2 King's Bench 314.
3. THE OLD LAW
In former times when judgments and awards had to be expressed in sterling, the charterers would have recovered the amount in Brazilian cruzeiros converted into sterling at the date of the breach when the goods were delivered damaged on 22nd September,1971, see Di Ferdinando v. Simon. Smits & Co. Ltd. (1920) 3 King's Bench 409. At that time the rate was 13.50 cruzeiros for £1 sterling. So the award would be for £34,750 sterling, with interest to the date of the Award. The French charterers would not then suffer greatly by the weakening of the cruzeiros between September 1971 and July 1975. They would have an award in sterling which remained reasonably steady over that time. At any rate, the French charterers would not suffer such a disastrous loss as they would do under the decision of Mr. Justice Robert Goff; norwould the Swedish owners have received such a fortuitous benefit.
I do not think that any of our former cases have any application today when arbitrators are allowed to, and do, make their awards in foreign currency. In our present case none of the parties, and none of the transactions, had anything to do with sterling at all. In commercial practice, it would be a mistake for the arbitrators to make an award in sterling. Those former cases can and should be put to one side as being of no relevance today.
4. THE PRESENT LAW
In former times the judges approached their cases on currency with two fixed beliefs. The first was that sterling was a stable currency. It was the one unit of currency which remained of constant value. Other currencies might fluctuate in value, but sterling remained the same. The second was that judgments of the courts could only be expressed in pounds sterling. So the courts had to convert any foreign currency into sterling at some time or other. The only question was: At what date? They answered it by saying at the date of the breach or of the wrong done.
Those two beliefs have been shattered in modern times. As to the first, sterling is no longer a stable currency. Nor are U.S. dollars. Nor French francs. No currency is stable. They all swing about with every gust that blows. As to the second, judgments need no longer be expressed in sterling. They can be expressed in whatever currency seems fair and just in the circumstances of the case.
In this situation I think we should start afresh and build up a body of case law on the subject. This was suggested by Lord Wilberforce in Miliangos v. George Frank (Textiles) Ltd. (1976) Appeal Cases at page 465: "It is for the Courts, or forarbitrators, to work out a solution in each case best adapted to giving the injured plaintiff that amount in damages which will most fairly compensate him for the wrong which he has suffered".
5. SIMPLE DEBTS
One thing is already clear: In the case of a simple debt for hire of a ship or the price of goods sold and delivered, - when the contract prescribes the currency in which the debt is to be paid - the award is for the amount due in the currency of the contract, together with interest - see The Kozara (1974) 1 Queen's Bench 296: Schorsch Meier v. Hennin (1975) 1 Queen's Bench 417: Miliangos v. Frank (1976) Appeal Cases 443. Even though the currency may have diminished in value by inflation, the named sum must be awarded.
6. EXPENDITURE
We have today to consider a familiar kind of damage, namely, expense incurred by a plaintiff in consequence of the Defendant's breach of contract or his tort. In English law, both in tort and in contract, a plaintiff is often entitled to be compensated for his actual expenditure on repairs, or his actual loss of wages or of hire. In such cases when dealing in sterling, the award in his favour gives him the very sums he has expended: together with interest from the date of payment or of loss, up to the date of judgment. See, for instance, in Admiralty cases The Napier Star (1933) Probate at pages 138/141: and in other cases Jefford v. gee (1970) 2 Queen's Bench at page 146G-H. When the sums are thus expended in sterling, there is no difficulty. If there is inflation, so that the sums expended are less in value by the time of the trial, nevertheless the plaintiff gets the named sums, and no more. That is the nominalistic principle which I stated in Treseder-Griffin v. Co-operative Insurance Society (1956) 2 Queen'sBench page 144: "Sterling is...
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