Greenhill International Pty Ltd v Commonwealth Bank of Australia - [2013] SADC 7

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
GREENHILL INTERNATIONAL PTY LTD v COMMONWEALTH BANK OF AUSTRALIA
[2013] SADC 7
Judgment of His Honour Judge Costello
25 January 2013
BANKING AND FINANCE - INSTRUMENTS - LETTERS OF CREDIT
The plaintiff was the beneficiary of a letter of credit issued by a bank in India to secure for the plaintiff payment for a shipment of waste-paper to a customer in India - the defendant agreed to credit the plaintiff's bank account in Australia with the sum nominated in the letter of credit - the plaintiff's Indian customer complained about the quality of the waste-paper and sought to restrain the Indian bank from honouring the letter of credit and thus reimbursing the defendant for the monies it had advanced to the plaintiff - a term of the defendant's agreement to credit the plaintiff's bank account permitted it to debit that account in the event of a dispute arising in relation to the waste-paper contract - the defendant debited the plaintiff's bank acount in purported reliance on its agreement with the plaintiff - plaintiff sued defendant for breach of contract - Held - defendant in breach of its contract with the plaintiff - plaintiff entitled to damages in US$ being the currency which best expressed its loss.
St George Bank Ltd ACN 005 513 070 v Salzberger [2001] NSWCA 67; Lord Mustill in Royal Bank of Scotland plc v Cassa di Risparmio delle Provincie Lombarde (1992) 1 Bank LR 251; R.D. Harbottle (Mercantile) Ltd v National Westminster Bank Ltd [1978] QB 146; Intraco Ltd v Notis Shipping Corporation ("the Bhoja Trader") (1981) 2 Lloyd's Rep 256; Ian Stack Ltd v Baker Bosley Ltd (1958) 2 QB 130; United City Merchants (Investments) Ltd v Royal Bank of Canada (1983) 1 AC 168; Ford Motor Company of Australian Ltd v Arrowcrest Group Pty Ltd [2002] FCA 1156; Modern Buildings Wales Ltd v Limmer and Trinidad Co Ltd (1975) 1 WLR 1281; BP Refinery (Westernport) Pty Ltd v Hastings (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No.4) (2009) 263 ALR 63; Foti and Ors v Banque Nationale de Paris (1984) 54 SASR 354, considered.

GREENHILL INTERNATIONAL PTY LTD v COMMONWEALTH BANK OF AUSTRALIA
[2013] SADC 7
Introduction

This action relates to a letter of credit (“LOC”)[1] granted by the Bank of India (“BOI”) on the application of its customer, Seth Bankatlal Malu Industries Pvt Ltd (“SBM”). The plaintiff was the beneficiary of that LOC. The purpose of the LOC was to facilitate payment for a shipment of waste-paper sold by the plaintiff to SBM.
[1] Letters of Credit are also known as Documentary Credits.
The plaintiff requested its bank, the defendant, to “silently confirm”[2] the LOC which the defendant duly did, on the terms contained in a letter from the defendant to the plaintiff dated 18 April 2008 (“the Agreement”). Thereafter, by two separate deposits, the defendant credited the account of the plaintiff with the sum of US$40, 354.07.
[2] A term, the meaning of which will be considered in detail later in this judgment.
On 18 August 2008 SBM obtained an injunction in Nagpur, India purportedly restraining the plaintiff from “encashing” the LOC.
As a result the defendant sought recourse from the plaintiff in reliance upon the terms of the Agreement and in January 2009 debited the plaintiff’s account with an amount equal to US$41, 939.60 inclusive of interest.
The plaintiff claims that the defendant was not entitled to take such recourse and/or to debit the plaintiff’s account. It seeks payment of the sum of AUD$63, 525.59 being the then Australian equivalent of the amount debited by the defendant.
For the reasons which follow, I am satisfied that, by taking recourse in the manner in which it did, the defendant was in breach of the Agreement and liable to the plaintiff for damages for that breach. I am also satisfied that, as the currency which better reflects the plaintiff’s loss is US dollars, the plaintiff is entitled to damages in the sum of US$41,939.60.
Background Facts
The background facts to the plaintiff’s claim are uncontroversial and my recitation of these facts where appropriate also constitutes my findings in relation to the factual issues in dispute.
In March 2008 the plaintiff received an order from SBM for a quantity of waster paper. SBM then applied, on 18 April 2008, to the BOI, as the issuing
bank,[3] for the issue of an irrevocable LOC[4] nominating the plaintiff as beneficiary. The LOC identified the defendant as the “advising bank”.[5] The defendant, in its role as advising bank, informed the plaintiff that the LOC had been issued.
[3]    Transcript pp 59-60.
[4]    Exhibit P1 - Book of Agreed Documents ("BOD") pp 2-4.
[5]    Transcript p 60.
The terms of the LOC permitted any bank in Australia, including the defendant to “negotiate the credit” i.e. to advance the funds to the plaintiff, based upon there being in existence documents complying with the documents identified in the LOC.
On 18 April 2008 the plaintiff and the defendant then entered into the Agreement. The defendant agreed to “silently confirm” the LOC. The terms of the Agreement, which terms lie at the heart of much of this dispute, were as follows:[6]
[6] Exhibit P1 - BOD pp 5-6.
At your request and subject to acceptance of this offer, the Commonwealth Bank of Australia will silently confirm the above Documentary Credit.
The Bank undertakes to honour drawings on presentation of the documents required under Documentary Credit to the Commonwealth Bank of Australia in accordance with the terms and conditions of the Credit and subject to the provisions of the Uniform Customs and Practice for Documentary Credits, International Commerce Publication No. 600 (2007 Revision).
This offer has been made based on the format of the Documentary Credit as it was initially advised by the Issuing Bank. Any Amendment/s will require the separate approval of the Bank in writing.
By accepting this offer, the company agrees to:
·Assist the Bank and take all steps necessary to achieve payment as the bank may require in the event of default, including the initial proceedings to enforce recovery.
·Assign and subrogate all rights and proceeds to which you are entitled or will become entitled under the relevant Documentary Credit to Commonwealth Bank of Australia, including (but not limited to) your rights against the Issuing Bank, all title and interest in the documents under the Credit and goods to which the documents relate and all proceeds of sale of the goods.
This offer is personal to you and is not transferable.
The Bank retains the right to withdraw this offer prior to your acceptance, should we perceive any change in circumstances warrant so (sic).
Our silent confirmation is conditional upon receipt by the Bank of the Original Credit and all amendments any payment of our fee (sic).
Any alteration to this document renders our offer null and void.
The Bank retains the right to effect recourse to the beneficiary where any delay/default/loss occurs resulting from a dispute in relation to the commercial contract.
Please sign below indicating your acceptance/rejection and return all pages by fax.
It is important to note that, inter alia:
·The defendant undertook to “silently confirm” the Credit;
·The defendant undertook to “honour the drawings” subject to the Provisions of the Uniform Customs and Practice for Documentary Credits, International Commerce Publication No 600 (UCP600”); [7]
·The plaintiff agreed to assist the defendant to take all steps necessary to achieve payment including proceedings to enforce recovery from the BOI;
·The plaintiff assigned and subrogated its rights under the LOC against the BOI to the defendant;
·The defendant charged a fee for agreeing to “silently confirm” the Credit; and
·The defendant retained the right to “effect recourse” to the plaintiff in the event of any delay, default or loss occurring as a result of a dispute in relation to the plaintiff’s contract of sale of the waste-paper.
[7] In St George Bank Ltd ACN 005 513 070 v Salzberger [2001] NSWCA 67 para 13 Stein JA said "To facilitate the operation of documentary credits the International Chamber of Commerce first published the UCP in 1933. The subject transaction concerns the 1993 revision. The Code has almost universal acceptance by banks in over 160 countries and is observed in countless transactions every day, having become part of the rubric of international trade, (Jack 1.21). The UCP is not intended to be a legally enforceable code but to operate as a guide and code of behaviour. However, it is often incorporated into credit contracts by reference, see Lord Mustill in Royal Bank of Scotland plc v Cassa di Risparmio delle Provincie Lombarde (1992) 1 Bank LR 251".
The Provisions of UCP600[8] which were incorporated into the Agreement make it clear, inter alia, that:
·An issuing bank (the BOI) is irrevocably bound to honour [a credit] as of the time it issues the credit;[9]
·An issuing bank (the BOI) undertakes to reimburse a nominated bank (the defendant) that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank; and
·An issuing bank’s (the BOI’s) undertaking to reimburse a nominated bank (the defendant) is independent of the issuing bank’s undertaking to the beneficiary (the plaintiff).
[8] Exhibit P1 - BOD pp 110-130.
[9] Exhibit P1 - BOD p 113 - Article 7b.
On the 5^th and 23^rdof May 2008 the defendant credited the plaintiff’s account with amounts of US$34,210.00 and US$6,472.30 respectively.[10] In May 2008 the BOI also informed the defendant that it had received the documents required under its LOC and that as a consequence, in 180 days (being the period stipulated in the LOC) it would remit to the defendant the sums which the defendant had paid to the plaintiff.[11]
[10] Exhibit P1 - BOD pp 19 and 34.
[11] Exhibit P1 - BOD pp 32-33.
After the waste-paper was delivered to SBM, in May 2008, SBM raised concerns as to its quality. On 19 August 2008 SBM sought and obtained a “temporary injunction”[12] from an Indian Court in Nagpur purporting to restrain an entity identified as “Valley View International” from “encashing” the LOC.[13]
[12] Exhibit P1 - BOD p 82.
[13] At this time the plaintiff owned a business which traded in Australia under the name "Valley View International Trading and Recycling". It did not then trade, nor had it ever traded, under that name or the name Valley View International, in India.
There then followed a series of SWIFT messages[14] from the defendant to the BOI and vice versa wherein the defendant sought information from the BOI as to the status of the Court proceedings and as to when payment might be expected. The BOI continued to advise the defendant on the status of the Indian proceedings which were regularly adjourned due to the “want of representation by the beneficiary” (i.e. the plaintiff).[15]
[14] Exhibit P1 - BOD pp 37 - Swift Messages are secure communications between banks often between banks in different countries; Exhibit P3 - Report of Brooks 6 March 2012 p 3.
[15] Exhibit P1 - BOD p 55.
By letter dated 23 January 2009 the defendant advised the plaintiff of its intention to effect recourse in the following terms:[16]
As you are aware and as advised by this office, payment for the above two negotiations has been withheld by the issuing bank. They have been unable to effect payment due to an Indian court injunction against the release of payment to this office. This injunction is based on the court’s pending verdict of a suit filed by the applicant against yourselves due to the quality of the goods supplied.
With reference to the attached correspondence from the issuing bank the case has been postponed numerous times due to non representation by yourselves.
As previously advised in our meeting and stated in our offer of silent confirmation dated 18^TH April 2008 the Bank retains the right to effect recourse to the beneficiary where any delay/default/loss occurs resulting from a dispute in relation to the commercial contract.
We note your advice to us in our meeting of 19^th November 2008 that you will not be providing any representation to the civil suit filed against yourselves. As the respective payments are now three months overdue, we are writing to advise that we will be effecting recourse on these two transactions with value 29^th January 2009 for the principal amount plus interest owed.
Recourse will be taken on the 29^th January 2009 for the amount of USD41,939.60. Recourse amount is calculated as follows:-
OCC/INDIA/7000377 PRINCIPAL AMOUNT USD34,210.00 PLUS INTEREST 05/05/2008 TO 29/01/2008 USD1,065.96
OCC/INDIA/7000390 PRINCIPAL AMOUNT USD6,472.30 PLUS INTEREST 23/05/2008 TO 29/01/2008 USD191.34
Should you wish to discuss this matter further please contact myself on ------
[16] Exhibit P1 - BOD pp 69-70.
On 29 January 2009 the plaintiff disputed the defendant’s right to effect recourse. In its letter the plaintiff stated that inter alia:[17]
·The entity named in the injunction proceedings was not the plaintiff;
·As the Indian Court had no jurisdiction over the plaintiff, the defendant should be pursuing all avenues to force the BOI to honour the LOC;
·The injunction did not by its terms restrain the BOI;
·The defendant has acted inappropriately by not demanding payment from the BOI;
·The LOC is a guarantee between the BOI and the defendant that payment will be made on acceptance by BOI (which acceptance was given) of the requisite documents under the LOC; and
·The plaintiff has not breached the Agreement in a way which would permit recourse.
[17] Exhibit P1 - BOD pp 69-70.
On 29 January 2009 the defendant debited the sum of US$41,939.60, including interest, from the plaintiff’s account. Thereafter the defendant made requests of the BOI, via the Swift system, for updates on the Court proceedings including on occasions demanding payment of the sums owing under the LOC.[18]
[18] Exhibit P1 - BOD pp 61-68.
On 24 December 2010 the Court in Nagpur made an order restraining the BOI from making payment under the LOC to either the defendant or the plaintiff. On 15 March 2011 the BOI informed the defendant of the terms of the Nagpur Court’s Order.
Against this background I now turn to consider the following issues falling for determination, namely:
(i)the nature and effect of Letters of Credit generally and of this particular LOC;
(ii)the meaning and effect of the term “silently confirm”;
(iii)the proper interpretation to be given to the Agreement contained in the letter of 18 April 2008;
(iv)whether it is necessary to imply terms into the Agreement and if so what are the implied terms;
(v)whether the defendant breached the Agreement by taking recourse in the manner in which it did; and
(vi)if the defendant breached the Agreement, what is the plaintiff’s loss and which currency (AUD$ or US$) better reflects that loss?
The Nature and Effect of Letters of Credit (LOC)
Letters of Credit have been described as “the crankshaft of modern trade” or the “life blood of international commerce.[19] It has been said that thrombosis will occur if, unless fraud is involved, the Courts intervene and thereby disturb the mercantile practice of treating rights thereunder as being the equivalent of cash in hand.[20] When referring to the particular kind of LOC, under consideration here, Diplock J (as he then was) said that it “is more than a method of payment” and that it “creates a direct liability upon the banker independent of the contract of sale, and is an undertaking by the banker that if the seller presents the required documents in the required time he will receive payment of the contract price”.[21]
[19] R.D. Harbottle (Mercantile) Ltd v National Westminster Bank Ltd [1978] QB 146 p 155.
[20] Intraco Ltd v Notis Shipping Corporation ("the Bhoja Trader") (1981) 2 Lloyd's Rep 256 p 257.
[21] Ian Stack Ltd v Baker Bosley Ltd (1958) 2 QB 130 p 139.
Some decades later the then Lord Diplock said:[22]
… The whole commercial purpose for which the system of confirmed irrevocable documentary credits has been developed in international trade is to give to the seller an assured right, to be paid before he parts with control of the goods, that does not permit of any dispute with the buyer as to the performance of the contract of sale being used as a ground for non-payment or reduction or deferment of payment.
[22] United City Merchants (Investments) Ltd v Royal Bank of Canada (1983) 1 AC 168 p 183.
The Nature and Effect of this LOC
As applied to the LOC under consideration here, when the plaintiff provided the required documents to the BOI it was entitled to expect that, regardless of any dispute related to its contract of sale (save for fraud), it would receive payment.
As I noted earlier, on 16 May 2008 and 23 May 2008, the BOI indicated that it had received the requisite documents, and being satisfied with them, that it would remit payment on the agreed dates, namely in October 2008.[23]
[23] Exhibit P1 - BOD pp 33-34.
In short, the requisite documents in the appropriate form having been received, the LOC was to be “honoured”. In the meantime the plaintiff and defendant had entered into the Agreement whereby the defendant was to “silently confirm” the LOC.
“Silently Confirm”
In international transactions such as this one, a bank may assume a number of differing roles under a LOC or Documentary Credit.[24]
[24] Butterworths Banking Law Guide 2006 - 6.25.
On the one hand, there is the issuing bank (in this situation the BOI) which is normally approached by a party such as SBM and asked to issue a LOC to the seller.[25]
[25] Transcript pp 59-60.
On the other hand, there is the correspondent bank (the defendant) which may assume a number of different roles including providing advice to a seller or acting as a nominated bank. In the latter situation it will both advise the seller and make payment to the seller as agent for the issuing bank.
A third role is that of confirming bank where, at the request of the issuing bank, it will add its confirmation to the issuing bank’s promise to pay. There has been a reluctance on the part of the issuing banks in some countries to request confirmation from the bank of a foreign country for various reasons, including inter alia local regulations, exchange control and poor standing of the foreign bank.[26]
[26] Exhibit P3 - Report of Brooks 8 August 2011 p 2.
In situations such as this one, where the issuing bank does not request a bank in the position of the defendant to add its confirmation,[27] a practice has arisen whereby that bank still provides its “silent confirmation” to the seller. Where this is done it has been suggested that “the beneficiary would have the same rights against the confirming bank as if the credit had been confirmed pursuant to the instructions of the issuing bank.”[28] As a statement of the law it is, in my view, arguably too wide. As the facts of this case amply demonstrate, a confirming bank may provide its confirmation but subject to stipulations which seek to limit its liability.
[27] Exhibit P1 - BOD p 3.
[28] Law of Bank Payments - Brindle and Cox 4th Edition; also see The Legality of Silent Confirmation of Letters of Credit - Documentary Credits Insight, Vol 7, No 1 Winter 2001 - Fung King-tak.

There does not however appear to be any universal understanding or acceptance as to the precise meaning of the term “silent confirmation”. Indeed counsel were unable to cite any decision where the term had been considered, let alone authoritatively determined.
In the context in which the expression was used in the Agreement, I take it to mean that, in addition to any obligation on the BOI to pay arising out of the LOC, the defendant was (without the knowledge of the BOI) agreeing to add its undertaking to pay.
However, I do not regard its undertaking to have been “on all fours” with that of the BOI because it sought to introduce conditions on its undertaking over and above the mere satisfactory presentation, in appropriate form, of the documents stipulated in the LOC.
The issue then arises as to what was the true nature and extent of the Agreement entered into between the parties consequent upon the letter of 18 April 2008 from the defendant to the plaintiff.
The Agreement
In my view the essential terms of the Agreement were the following:
·the defendant agreed to credit the plaintiff’s account with an amount of US$38,100.00 on presentation to it of the documents set out in and required by the LOC;
·the defendant’s undertaking to credit the plaintiff with this amount was given in accordance with the terms and conditions of the LOC and subject to the provisions of the UCP 600;
·the defendant’s undertaking to pay was subject to payment of a fee by the plaintiff;
·the defendant retained the right to “effect recourse” (which both parties seemed to accept meant debit the plaintiff’s account) against the plaintiff where delay/default or loss occurred resulting from a dispute in relation to its contract with the buyer;
·the plaintiff agreed to assist the Bank and take all steps necessary to achieve payment in the event of default including taking proceedings to enforce recovery; and
·the plaintiff assigned and subrogated its rights under the LOC to the defendant as well as to any proceeds to which it was entitled under the Credit.
Properly construed, the defendant, by undertaking to “honour drawings on presentation of the documents required”, effectively agreed to take on the obligations of an issuing bank. This is reinforced by the fact that the Agreement had incorporated, into its terms, the provisions of the UCP.
Without more, the plaintiff was entitled to expect that the defendant would honour its obligations regardless of any “dispute” arising in relation to its supply contract, i.e. as provided for by UCP 600.
However, the Agreement also expressly provided that the defendant reserved the right to have recourse against the plaintiff in the event of a “dispute” involving the sale contract. Such a term stands in stark contrast to the unconditional undertaking inherent in a confirmation, silent or otherwise, particularly when it is done subject to the provisions of the UCP 600.
On the face of the Agreement there would therefore appear to be an inconsistency between the “recourse clause” and the provisions of the UCP which are incorporated into it.
As Finkelstein J noted in Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd:[29]
Finding an inconsistency is not a novel situation when standard terms are incorporated into an agreement. The proper approach is to disregard those incorporated terms that conflict with the expressly agreed terms. In Modern Buildings Wales Ltd v Limmer and Trinidad Co Ltd [1975] 1 WLR 1281 (at 1289) Buckley LJ said:
“If any of the imported terms in any way conflict with the expressly agreed terms, the latter must prevail over what would otherwise be imported”.
[29] [2002] FCA 1156 para 8.
The express terms of the “recourse clause” must, in my view, prevail over the incorporated provisions and to the extent of the inconsistency I will disregard them.
The Agreement, so construed, provides that the defendant will confirm an undertaking to pay the plaintiff. In consideration for the defendant’s undertaking to pay, the plaintiff acknowledges that the defendant can have recourse arising out of a dispute concerning the supply contract. Importantly, the plaintiff also agreed to not only assist the defendant to take whatever steps were necessary to recover the monies but also to subrogate any rights it has against the BOI under the LOC.
In other words, prior to the Agreement the plaintiff had an entitlement on presentation of the requisite documentation to demand payment from the BOI. After the defendant provided its “silent confirmation”, the plaintiff received the monies but only on the basis that it would surrender its rights to proceed against the BOI and acknowledge that the defendant could take recourse against the plaintiff in the event of a dispute arising under the supply contract.
The question then arises as to whether the defendant’s right to take recourse is, in the event of a dispute arising, effectively unqualified. The plaintiff says no and submits that this Court should find that the Agreement contained implied terms qualifying the defendant’s right to effect recourse and that by effecting recourse in these circumstances the defendant breached those terms.
Implied Terms in the Agreement
The terms, that the plaintiff contends were implied, are:
·that the defendant would take all steps necessary to achieve payment in the event of a default by the BOI; and
·that the defendant would use its best (or reasonable) endeavours to seek the assistance of the International Chamber of Commerce (“ICC”) to persuade the BOI to “honour its obligations”.
The breach was said to be constituted by the defendant’s failure to take steps to require the BOI to honour its obligations or to call upon the ICC to require the BOI to meet its obligations.
The law relating to the implication of specific terms in commercial agreements is well settled. The principles were stated by the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings:[30]
For a term to be implied the following conditions must be satisfied:
1it must be reasonable and equitable;
2it must be necessary to give business efficacy to the contract so that no term is implied if the contract is effective without it;
3it must be so obvious that “it goes without saying”; and
4it must not contradict any express term of the contract.
[30] (1977) 180 CLR 266 at 283; Approved and applied by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.
Dealing with the second term sought to be implied, I do not consider that such a term is obvious, nor in my view is it necessary to give the contract business efficacy. I would reject any suggestion that the term should be implied.
I am however satisfied that the first term should be implied because of all the conditions identified in BP Refinery (Westernport) Pty Ltd are satisfied.
It is clearly reasonable and equitable for the defendant to take reasonable steps to require the BOI to honour its obligations.
It is also necessary in order to give business efficacy to the Agreement because, in the absence of such a term the plaintiff has bargained away its rights to require the BOI to pay whilst at the same time agreeing that the defendant can have recourse without effectively doing anything on the plaintiff’s behalf. In short, it would be agreeing to place itself in a worse situation than that which would have applied if the defendant had simply negotiated the credit on behalf of the BOI.
It is in my view “so obvious” because another term of the Agreement requires the defendant to “take all steps necessary” to achieve payment. It seems to me to be implicit in that covenant that the defendant will act reasonably (where it becomes necessary) in seeking to recover the monies.
The term is also capable of clear expression and does not contradict any express term.
Did the Defendant breach the implied term?
As I indicated earlier, the defendant became engaged in a protracted series of Swift Messages with the BOI wherein it requested and received information as to when it could expect to receive the monies from the BOI.
What this series of Messages reveals is that the defendant did not, prior to debiting the plaintiff’s account;
·bring to the attention of the BOI that it had already negotiated the LOC;
·state to the BOI that it was bound to honour the LOC;
·forward any letter of demand to the BOI regarding payment;
·take any other steps to persuade the BOI to make payment;
·threaten the institution of proceedings against the BOI;
·institute proceedings seeking the recovery of the monies; and/or
·communicate with the Indian Court or seek to participate in that Court’s proceedings.
On the contrary it expressly indicated to the plaintiff that it was “not a matter for the [defendant] to enter into any debate with the [BOI] in relation to the effects of the Order of the Indian Court”.[31]
[31] Exhibit P1 - BOD p 77.
In my view, far from taking all reasonable steps to require the BOI to honour its obligations before effecting recourse (as it was required to do), it effectively took no steps. As such in my opinion it had no entitlement to effect recourse against the plaintiff when it did and, in so doing, it was in breach of the Agreement.
Damages
The plaintiff claims the sum of $63,525.59 being the Australian equivalent of the sum in US$ deducted by the defendant in 2008. The defendant, whilst denying liability, asserts that its liability, if any, should be in US$.
The first question which arises is whether a judgment can be entered in a foreign currency. If it can be so entered, the next question is whether the true nature of the plaintiff’s loss is to be measured in US or Australian currency.
Can a Court enter a Judgment in a foreign currency?
The District Court Rules do not expressly provide for the making of a judgment in a foreign currency.
In BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No.4)[32] Finkelstein J considered this question and said:
At one time it was clear that an Australian court could only enter judgment in Australian currency: In re United Railways of Havana and Regla Warehouses Ltd [1961] AC 1007 at 1068-1069. That is no longer the law. In some cases at least, a judgment can be given in a foreign currency. In Miliangos v George Frank (Textiles) Ltd [1976] AC 443 the House of Lords held that where a contract provides for a monetary obligation to be paid in foreign currency, the judgment ought be given in that currency. It is now also established that judgment can be given in foreign currency for damages in tort (The Despina R [1979] AC 685) and for breach of contract (Jean Kraut A.G v Albany Fabrics [1977] QB 182; The Folias [1979] AC 685, 699). Miliangos has been followed in Australia: see eg Mitsui OSK Lines Ltd v The Ship Mineral Transporter [1983] 2 NSWLR 564 in New South Wales; ANZ Banking Group Ltd v Cawood [1987] 1 Qd R 131 in Queensland; Vlasons Shipping Inc v Neuchatel Swiss General Insurance Co Ltd (No 2) [1998] VSC 135 in Victoria; and Westpac Banking Corp v MV ‘Stone Gemini’ [1999] FCA 917 in the Federal Court.
[32] (2009) 263 ALR 63 para 3; also see Foti and Ors v Banque Nationale de Paris (1989) 54 SASR 354.
I am therefore satisfied that there is no impediment to the entry of a judgment (if appropriate) in US dollars.
Finkelstein J then continued:[33]
In breach of contract cases, the question is whether, expressly or by implication, the contract specifies in what currency payment for all obligations under the contract should be made: The Folias at 699 and 700. That the contract requires some payments to be made in a particular currency does not lead to the conclusion that damages must be paid in the same currency. If the contract is silent the plaintiff should be compensated for losses in the currency which most truly expresses his loss: The Folias at 699 and 701.
[33] (2009) 263 ALR 63 para 4.
The following factors appear to me to be relevant in determining which of the two currencies more truly expresses the plaintiff’s loss:
·the underlying transaction was in US dollars;
·the LOC used US dollars;
·the Agreement referred to a US dollar amount;
·most of the individual documents required by the BOI were expressed to be in US dollars; and
·the account held by the plaintiff with the defendant which was used for this “transaction” was in US dollars.
As against that, I accept that the plaintiff is an Australian company and that its business is solely based in Australia; its staff is in Australia and that it incurs its expenses in this country.
However in my view, on balance, the currency which more truly expresses the plaintiff’s losses is US dollars. Accordingly, the plaintiff should have judgment in US dollars. Prior to its amendment to convert its claim to US dollars the plaintiff claimed damages in the sum of US$41,939.60. For the reasons expressed the plaintiff is entitled to damages in that amount.
There will be an Order that the plaintiff have judgment in the sum of US$41,939.60. I will hear the parties on the question of interest and costs.