The House dealt with the issue of the proper currency for the award of damages. There had been a collision at sea. In The Folias, damages in contract were claimed by charterers of a ship against the owners to be recouped compensation that they had paid to cargo receivers in respect of cargo which had arrived damaged. In The Despina R the damage was the cost of repair of a ship which had been paid in various currencies.
Held: The appeal failed. Since United States Dollars was the currency in which the claimant conducted its business, and that with which it acquired the currency of expenditure in repairing the ship, judgment should be in United States Dollars. In the Folias the House held that since the charterers were a French company that was conducting its business in Francs with which it had acquired Brazilian Cruzeiros to compensate the cargo receivers, Francs best expressed the charterers’ loss and judgment should be in that currency. Lord Wilberforce asked if plaintiffs could recover damages other than in Sterling. He discussed the alternatives: ‘The first is to take the currency in which the expense or loss was immediately sustained. This I shall call ‘the expenditure currency.’ The second is to take the currency in which the loss was effectively felt or borne by the plaintiff having regard to the currency in which he generally operates or with which he has the closest connection. This I shall call ‘the plaintiffs currency’. ‘I return to consider the alternatives. . . this question can be solved by applying the normal principles which govern the assessment of damages in cases of tort (I shall deal with contract cases in the second appeal) these are the principles of restitutio in integrum and that of the reasonable foreseeability of the damage sustained. It appears to me that a plaintiff who normally conducts his business through a particular currency, and who, when other currencies are immediately involved, uses his own currency to obtain those currencies, can reasonably say that the loss he sustains is to be measured not by the immediate currencies in which the loss first emerges but by the amount of his own currency, which in the normal course of operation, he uses to obtain those currencies. This is the currency in which his loss is felt, and is the currency which it is reasonably foreseeable he will have to spend.’ and ‘The plaintiff has to prove his loss: if he wishes to present his claim in his own currency, the burden is on him to show to the satisfaction of the tribunal that his operations are conducted in that currency and that in fact it was his currency that was used in a normal manner to meet the expenditure for which he claims or that his loss can only be appropriately measured in that currency (this would apply in the total loss of a vessel which cannot be dealt with by the ‘expenditure’ method). The same answer can be given to the objection that some companies, particularly large multi national companies, maintain accounts and operate in several currencies. Here again it is for the plaintiff to satisfy the court or arbitrators that the use of the particular currency was in the course of normal operation of that company and was reasonably foreseeable . . I wish to make it clear that I would not approve of a hard and fast rule that in all cases where a plaintiff suffers a loss or damage in a foreign currency the right currency to take for the purpose of his claim is ‘the plaintiffs currency’. I should refer to the definition I have used of this expression and emphasise that it does not suggest the use of a personal currency attached, like nationality, to a plaintiff, but a currency which he is able to show is that in which he normally conducts trading operations. Use of this currency for assessment of damage may and probably will be appropriate in cases of international commerce. But even in that field and still more outside it, cases may arise in which a plaintiff will not be able to show that in the normal course of events he would use, and be expected to use, the currency, or one of several currencies, in which he normally conducts his operations (the burden being on him to show this) and consequently the conclusion will be that the loss is felt in the currency in which it immediately arose.’ As to The Folias, in respect of a contract case the test was the same as in a tort case namely ‘restitutio in integrum, regard being had to what was in the reasonable contemplation of the parties.’ He adopted the test of Lord Denning in the Court of Appeal that ‘the plaintiff should be compensated for the expense or loss in the currency which most truly expresses his loss.’ He continued:- ‘If then the contract fails to provide a decisive interpretation, the damage should be calculated in the currency in which the loss was felt by the plaintiff or ‘most truly expresses his loss’. This is not limited to that in which it first and immediately arose. In ascertaining which this currency is, the court must ask what is the currency payment of which will as nearly as possible compensate the plaintiff in accordance with the principle of restitution, and whether the parties must be taken reasonably to have had this in contemplation.’
Judges:
Lord Wilberforce
Citations:
[1979] AC 685
Jurisdiction:
England and Wales
Cited by:
Cited – Barings Plc (In Liquidation) and Another, Barings Futures (Singapore) Pte Ltd (In Liquidation) v Coopers and Lybrand (A Firm) and Others, Mattar and 36 Others ChD 17-Oct-2003
BFS was a company incorporated in Singapore which conducted its internal affairs in Singapore Dollars. It was by statute required to render its accounts in that currency. It paid its staff in Singapore Dollars. It sought damages in Singapore . .
Cited – Sports Network Ltd v Calzaghe QBD 16-Mar-2009
The claimant boxing promoter sought to enforce an obligation on the defendant champion boxer to fight under one further promotion by the claimant. During negotiations about that fight a further oral agreement was reached about subsequent fights . .
Lists of cited by and citing cases may be incomplete.
Damages
Updated: 06 May 2022; Ref: scu.186847