Foreign Currency: Claims, Judgments and Damages

Michael Howard; John Knott and John Kimbell

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CHAPTER 14 Procedure and evidence

General

Introductory

14.1 The fact that judgments may be given in a foreign currency at all depends on a proposition of procedural law. The effect of Miliangos 1 is that there is a general rule of English law that judgments may be given in a foreign currency, reversing the previous rule that they could not. There are substantive rules relating to the identification of the appropriate currency, dates of payment and so on, but they all rest on the fundamental procedural proposition that makes such rules meaningful.2 14.2 This procedural rule is fundamental, simple and clear. It is far from the only aspect of litigation involving foreign currencies where procedural questions arise. These are considered in this chapter, as are certain evidential questions which arise in this context. 14.3 Those who have written on the impact of currency changes in English law have usually viewed the topic from a theoretical perspective. It is therefore not particularly surprising that the indexes of neither Mann 3 nor Black 4 contain any entries for ‘pleadings’, ‘procedure’ or ‘evidence’. Yet these are matters of potentially great practical significance. When the prohibition on recovery in a foreign currency reached

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its zenith in the Havana Railways case,5 Lord Denning6 said that ‘the reason for the existing rule is … primarily procedural’;7 and the decisions that introduced the new law were all concerned to a greater or lesser extent with the procedural implications of the change.8 Moreover, now that foreign currency judgments are commonplace, there are important procedural and evidential questions that potentially arise in almost every case involving a foreign money obligation. In practice these do not seem to have been seized on by litigators or to have puzzled the courts. Although it would be a pity to awaken a sleeping tiger, there are a number of questions that need to be answered even if litigants have so far shied away from asking them. 14.4 This chapter is concerned with English procedural rules. In general, the English courts will apply English procedural law, even where the substantive question before the court is governed by foreign law. That general principle still holds good and is preserved in both Rome I9 (dealing with contracts) and Rome II10 (dealing with non-contractual obligations). At the same time, the line dividing substance from procedure is not always clear,11 and it does not always stay in the same place.12

Neutrality of currency principles

14.5 It is fundamental that the law is neutral as to the party who is entitled to rely on the principles relating to foreign currencies. The changes in the rules were not intended to bring about an advantage to claimants or defendants, rather to correct imbalances brought about by currency fluctuations. Although the law is for the most part discussed in this chapter in terms of a claimant trying to establish that a particular currency is the relevant one for the judgment he is seeking, it may be a defendant or third party who wishes to assert that a foreign currency (or a different foreign currency or, indeed, sterling) should be chosen. When foreign currency judgments were first being permitted, it was generally claimants who benefited. There was initially a suggestion that such a judgment was available only to claimants, and even that they had the option whether or not to invoke that form of remedy.13 The second proposition was not logically dependent on the first, although it originated in the same mind-set, one which was understandable in the context of the financial conditions that made the change in the law necessary.14 It has been clear, at least since

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the judgment of Lord Denning MR in The Maratha Envoy 15 that every judgment has its own and appropriate currency (or currencies) in which the monetary judgment must be expressed ‘for good or ill’. This was confirmed in Services Europe Atlantique Sud v Stockholms Rederiaktiebolag SVEA (The Folias) in the Court of Appeal16 where Lord Denning MR, however, laid down a new and broad principle, which he said applied to claims for damages for tort as well as breach of contract: ‘As a general rule, the plaintiff should be compensated for the expense or loss in the currency which most truly expresses his loss.’ The other members of the court and the House of Lords, where Lord Wilberforce again delivered the leading speech, agreed.17 14.6 It is therefore open to a defendant or third party to make a positive case that the currency or currencies in which any judgment is given should not be the one in which the claim is expressed, whether he asserts that sterling or some third currency is to be preferred. Where a defendant advances a case of this nature, the obligations discussed below rest on him mutatis mutandis. It follows that where the currency issue is raised by either the claimant or the defendant, the court has to resolve it by decision. It is not correct to talk of the court having a ‘discretion’, whether residual or otherwise, to allow the claimant to ‘elect’ to have a judgment expressed in sterling or foreign currency.18

Procedure and evidence

14.7 There is no hard and fast line between questions of evidence and questions of procedure.19 In this chapter we deal with:

(i) pre-action conduct;
(ii) pleadings;
(iii) burden of proof;
(iv) disclosure;
(v) elucidation of a party’s case on currency;
(vi) evidence;
(vii) offers of settlement;
(viii) payment into court;
(ix) interpleader/stakeholder proceedings;
(x) judgments;
(xi) arbitration awards;
(xii) enforcement of English judgments and awards;
(xiii) enforcement of foreign judgments and arbitration awards;
(xiv) fact and law.

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Set-off falls within the purview of this chapter; but that topic is so large and important that it has been accorded a chapter of its own ().

(i) Pre-action conduct

14.8 In relation to most disputes that come before an English court, the standard of conduct expected of the parties before proceedings are started is set out in the Practice Direction governing Pre-action Conduct for general cases.20 There are 12 specific classes of case where special ‘pre-action protocols’ are in force.21 When those special protocols do not apply or are excluded (they cover cases that often will not give rise to foreign currency questions), there are general obligations set out in the Practice Direction.22 The key features of the Practice Directions in all cases are that the parties should (i) exchange sufficient information to allow them to understand each other’s position and make informed decisions about settlement and how to proceed; and (ii) make appropriate attempts to resolve the matter without starting proceedings, and in particular consider the use of an appropriate form of Alternative Dispute Resolution (‘ADR’) in order to do so. Additionally, a claimant should set out the details of his claim in a letter before action, to which the proposed defendant should respond within a reasonable time. So, even before proceedings are started, the parties should have had an opportunity to learn what aspects of a claim will be in dispute. Annex A §2.1(5)23 requires an explanation of how any amount claimed by way of pecuniary relief is calculated in the case where there is no special protocol; and there are parallel provisions in the cases where there is one. Although these provisions do not expressly state that the currency in which the claim is made should be identified, compliance with them must have that result. The identity of the currency of the claim should be part of the information disclosed, and the other party will therefore at that stage have an opportunity to indicate whether there may be an issue as to the correct currency.

(ii) Pleadings

14.9 It might seem obvious that in every case where financial recovery is sought, the claimant is bound to identify the currency in which he wishes his judgment to be paid, if only because that will appear incidentally from his statement of the damages to which he claims to be entitled. Generally, this is true, although there are some cases where the claimant may simply put forward a claim for damages generally, without specifying a figure.

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(a) The claim form

14.10 In ordinary civil cases, there is a requirement that the claim form contains a ‘statement of value’. In practice, many cases where a claim is put forward in a foreign currency are likely to be unaffected by this requirement, because it seems reasonable to suppose that a large proportion of such cases will be instituted in the Commercial and Admiralty Courts; and by CPR 58.5(2) a statement of value is not required in claims forms in the Commercial Court, which rule applies to proceedings in the Admiralty Court by virtue of CPR 61(3). That will not be universally true, however. In particular, there does not appear to be a comparable exemption for Mercantile Courts in CPR Part 59.4, the equivalent provision relating to them. 14.11 The Civil Procedure Rules (CPR) therefore cover all cases not brought in those two courts. The relevant provision is as follows:

Rule 16.3 Statement of value to be included in the claim form 16.3

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