FEDERAL COURT OF AUSTRALIA

IN THE FEDERAL COURT OF AUSTRALIA
IN ADMIRALTY

QG 82 of 1997

BETWEEN:	GLEN KING MARINE & TRADING SERVICES plaintiff
AND:	THE OWNERS OF THE SHIP "ARMADA TERNAK" defendant
and:		THE OWNERS OF THE SHIP "ARMADA TERNAK" Cross-claimant
AND:		GLEN KING MARINE & TRADING SERVICES cross-respondent

QG 152 of 1997

BETWEEN:	QUALITY LIVESTOCK AUSTRALIA PTY LTD (ACN 005 508 243) Plaintiff
AND:	the owners of the ship "armada ternak" defendant
AND:	THE OWNERS OF THE SHIP "ARMADA TERNAK" Cross-claimant
AND:	GLEN KING MARINE & TRADING SERVICES cross-respondent

JUDGE:	SPENDER J
DATE:	26 JUNE 1998
PLACE:	BRISBANE

REASONS FOR JUDGMENT

In this case there are two proceedings in which I gave judgment partially in Australian dollars and partially in United States dollars. On 16 June 1998, in proceedings QG 82 of 1997, I gave judgment for the plaintiff, Glen King Marine & Trading Services against the defendant, The Owners of the Ship “Armada Ternak”, PT Pelayaran and Nasional Kalla Lines in the sum of A$531,600 and US$37,900. In proceedings QG152 of 1997, on 16 June, I gave judgment for the plaintiff Quality Livestock Australia Proprietary Limited against the defendant, The Owners of the Ship “Armada Ternak”, PT Pelayaran and Nasional Kalla Lines in the sum of US$448,800, and A$54,100.

In respect of each of those judgments as my reasons for judgment showed, there is an interest component which has been allowed on part of the judgment in one case, in any event, and in the other from the 1 July 1997, being a date which, in my judgment, appropriately reflects the time at which the damage, which is the major part of the judgments, was sustained. The judgments were given in the currencies that they were given in, not as the result of any competing submissions by counsel as to in what currency the judgment should be given, but simply because, in my estimation, the amounts in Australian dollars reflected the fact that the damages, when they occurred, were in Australian dollars and when the judgment was given in United States dollars, the damages, when they occurred, were denominated in those amounts.

There were no submissions directed to me as to whether any conversion ought to be exercised in accordance with the breach rule, being the breach date conversion rule which provides that where damages for a breach of contract are to be converted from a foreign currency to the local currency, the process is to be effected at the date of the breach of contract, or whether the date of conversion ought to be the date of judgment or enforcement. It may be that questions associated with the currencies in which judgment was given will be ventilated in another place. I am presently concerned, however, with the disposition of A$1,000,000 which has been paid into court consequent upon a bail bond which the owners of the ship paid for the release of the vessel from arrest. The parties agreed, and I made orders recently by consent, that the moneys paid in court be paid out to the solicitors for Quality Livestock Australia Pty Ltd. Today's application, however, concerns the extent to which those funds should be applied pro tanto in the two proceedings.

As between the two plaintiffs, a draft minute of order which they propound is as follows:

“The moneys paid into court upon presentation of the bail bond filed herein be applied pro tanto in partial satisfaction of each of the judgments, exclusive of costs in these actions, such proportional calculation to be made according to the value in Australian dollars of such judgment calculated at the conversion rate of $A1 equals $US.5868 dollars, that being the conversion rate as at 17 June 1998.”

The defendant in each proceedings submits that the conversion rate in an order of the kind which the defendant asks the court to make should not be the exchange rate as at 17 June 1998, but the exchange rate between Australian dollars and United States dollars at the date of breach, being, in each proceeding, the date on which the loss in fact was incurred.

The submissions by Mr Kimmins on behalf of Quality Livestock Australia Pty Ltd really depend on the fact that the judgment was substantially expressed in American dollars, and that one should then, on considering questions of extinguishment by part payment, adopt a conversion rate at the time of the application of the funds in satisfaction of the judgment amount.

I acknowledge the force of those submissions but it seems to me that, conscious of the fact that the Court's first obligation is to do justice as best it can between the parties, that at least so far as the funds presently in Court are concerned, I ought to apply the breach date conversion rule as reflecting the justice of the situation and so I propose to order that the conversion rate in the orders that I make be at the United States rate of US.7500 cents to one Australian dollar.

Ordinarily, the breach date conversion rule applies and provides that in converting damages for a breach of contract from a foreign currency to the local currency the process is to be effected at the date of the breach of contract and there are a number of relatively old cases now which reflect that rule, Di Fernando v Simon Smits and Company [1920] 3 KB 409, Lebeaupin v Crispin [1920] 2 KB 714, The Volturno [1921] 2 AC 544 and British American Continental Bank Limited re Golzieher and Penso's claim [1922] 2 Ch 575 at 587.

It has to be acknowledged that historically judgments were given only in the currency of the Court and it has only been subsequent to the decision of the House of Lords, Miliangos v Frank (Textiles) Limited [1976] AC 443 that judgments in courts have been given in foreign currencies. That case was concerned with again what was the rule that best effected the role of the courts in giving fair compensation. Miliangos approved the giving of a judgment for a debt or money obligation in a foreign currency. The question, however, concerning the conversion of damages for breach of contract or tort were not the subject of express comment. In relation to damages claims Lord Wilberforce said at 468:

“It is for the courts or for arbitrators, 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.”

It is important to note that Miliangos was concerned with a case where a person claimed to be entitled for the sum of 415,522.45 Swiss Francs. The bargain was for that amount in Swiss Francs and Lord Wilberforce said at 466:

“The creditor has no concern with pounds sterling: for him what matters is that a Swiss franc for good or ill should remain a Swiss franc...Another argument is that the ‘breach date’ makes for certainty whereas to choose a later date makes the claim depend on currency fluctuations. But this is only a partial truth. The only certainty achieved is certainty in the sterling amount - but that is not in point since sterling does not enter into the bargain. The relevant certainty which the rule ought to achieve is that which gives the creditor neither more nor less than he bargained for. He bargained for $415,522.45 Swiss francs; whatever this means in (unstipulated) foreign currencies, whichever way the exchange into those currencies may go, he should get $415,522.45 Swiss francs or as nearly as can be brought about. That such a solution, if practicable, is just, and adherence to the ‘breach date’ in such a case unjust in the circumstances of today, adds greatly to the strength of the argument for revising the rule or, putting it more technically, it adds strength to the case for awarding delivery in specie rather than giving damages.”

That last sentence highlights that what the Court did in that case was give delivery in specie of what had been bargained for as opposed to making provision for the payment of damages. It seems to me that that circumstance is an important, indeed crucial difference in the present case. The observation of Lord Wilberforce at 467 is important also. His Lordship said:

“I would make it clear that, for myself, I would confine my approval at the present time of a change in the breach date rule to claims such as those with which we are here concerned, ie, to foreign money obligations, sc obligations of a money character to pay foreign currency arising under a contract whose proper law is that of a foreign country and where the money of account and payment is that of that country, or possibly of some other country but not of the United Kingdom.”

There is a further reference which again harks back to doing what is just. At 501, Lord Edmund Davies said:

“But for that fact, the most just rate would be that prevailing when the award was being enforced, for the plaintiff had been kept out of his money until then, and I see no reason why this latter rate should not be the one adopted when judgments expressed in a foreign currency are to be enforced.”

And similarly Lord Fraser of Tellebelton at 501 said:

“Theoretically, it should, in my opinion, be the date of actual payment of the debt...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.”

I think first it has to be recognised that there is a difference between essentially awarding delivery in specie of that for which a party had bargained and giving just compensation in damages. In this particular case, there is much to be said for the view which I accept that the plaintiff in the Quality Livestock matter suffered loss by paying the higher amount of freight at the time when that higher amount was paid. Certainly that higher freight was denominated in United States dollars but Quality Livestock is an Australian company and the source of those United States dollars, I infer, would have been the Australian then equivalent of the United States dollar higher freight.

That circumstance suggests that the relevant date of conversion in respect of the damages which Quality Livestock in fact suffered is really the date of breach rather than the date of enforcement of the judgment. I think that is so notwithstanding that I have, in fact, perhaps led into error by the absence of submissions by the parties, pronounced judgment in both Australian and United States currencies. It has to be understood that the guiding principle in the assessment of damages is fair compensation. The object is to award the plaintiff an amount in money that will put it in the same position as if the contract had been performed. If authority be needed for these fundamental propositions, I referred in the course of my judgment to Robinson v Harman (1848) 154 ER 363; and see also Commonwealth v Amann Aviation Proprietary Limited (1991) 174 C LR 64.

The touchstone, of course, is fair compensation and the corollary that an award of damages or ancillary orders ought not result in over compensation. I acknowledge that these observations focus on the award of damages rather than the enforcement of a judgment which has been expressed in a particular currency, but to limit the plaintiffs to convert those portions of their judgment denominated in US dollars at the exchange rate applying at the date of judgment would, as a matter of fact, result in my opinion in over compensation. I think the reality is properly expressed in the submission by Mr Logan on behalf of the owners of the ship that:

“The loss suffered by Quality Livestock Proprietary Limited crystallised when it had to pay Australian dollars to acquire US dollars in mid 1997, March to September to pay the higher freight rate in US dollars demanded by the substitute carriers. Accordingly, the plaintiff's loss is measured by the price of those US dollars at the time they had to be found by the plaintiff, mid 1997, to pay the substitute carriers.”

It is not irrelevant to note that clause 3 of the second charter party which was the source of most of the judgment in the Quality Livestock matter and a part of the judgment in the Glen King Marine matter makes the Northern Territory law the proper law of the contract. It seems to me that I ought then, at least insofar as concerns the directions concerning the application of the funds in Court, make orders based on a conversion rate of AUD$1.00 equals USD$.7500.

On one method of approach reflected in Mr Kennedy's affidavit of 25 June, a figure of .7550 might be adopted. That, however, involves questions of weightings. In para 14 of his affidavit there is expressed the evidence that as at 24 June 1997 the conversion rate was .7508 and at 8 July the conversion rate was .7470. Against the background of those figures, it seems to me that the appropriate rate to adopt is a conversion of .7500, and I did not understand the parties to cavil with that actual figure if that be the basis on which I determine that I should make these orders.

I order that the moneys that have paid from court to the solicitors for Quality Livestock Pty Ltd, being the proceeds of the bail bond lodged by National Australia Bank on behalf of the owners of the “Armada Ternak”, be applied pro tanto in partial satisfaction of each of the judgments (exclusive of costs) in each proceeding; such proportional calculations to be made according to the value of Australian dollars of such judgment calculated at the conversion rate of AUD$1.00 equals USD$.7500.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.

Associate:

Dated: 26 June 1998

QG 82 of 1997

Solicitor for the Plaintiff and Cross-Respondent	Redchip Lawyers

Counsel for the Defendant and Cross-Claimant:	Mr D M Logan

Solicitor for the Defendant and Cross-Claimant:	Cridlands
QG 152 of 1997
Counsel for the Plaintiff	Mr J Kimmins

Solicitor for the Plaintiff	Thynne & Macartney

Counsel for the Defendant and Cross-Claimant	Mr D M Logan

Solicitor for the Defendant and Cross-Claimant	Cridlands

Solicitor for the Cross-Respondent	Redchip Lawyers

Date of Hearing:	26 June 1998

Date of Judgment:	26 June 1998