(1) Harlequin Property (SVG) Limited (2) Harlequin Hotels and Resorts Limited v Wilkins Kennedy (a firm) (2016) EWHC 3233 (TCC)
The owners of Harlequin Property (SVG) Limited and Harlequin Hotels and Resorts (the "Claimants") were developers of a holiday resort. They had issued a professional negligence claim against Wilkins Kennedy (the "Defendant"), their former accountants and business advisors. In 2008, and in reliance upon the Defendant's advice, the Claimants had entered into an unwritten agreement with a third party contractor who was to build the holiday resort. After the third party contractor failed to complete the works, which had only been loosely agreed, and as the Claimants had overpaid the contractor by $26,000,370, the arrangement was terminated. The Claimants sued the Defendant for failing to advise the Claimants about entering into a formal contract with the contractor which formalised the scope and valuation of the works and eventualities should works not be completed. Finding that there had been professional negligence on the Defendant's part, and that the Claimants were therefore entitled to recover damages, the judge awarded judgment in the sum of $11,630,970.50.
However, there remained issues which were put to the court over payment, namely what currency the judgment sum was to be paid in and, inter alia, interest rates, the Defendant's costs liability (given that the Claimants had only succeeded in one aspect of the claim), and how payment of the judgment sum was to be arranged.
The claim had been expressed in dollars. A dispute arose as to whether the judgment debt should be paid in pound sterling or dollars and whether it was to be calculated in accordance with the exchange rate stipulated in Claimants' evidence at trial or current exchange rates. The Defendant argued that if the judgment debt was to be paid at the exchange rate currently in place, the Claimants' sum would have been significantly larger.
Relying on the provisions contained in paragraph 40.2.2 of the Civil Procedure Rules' White Book, the judge used his discretion to express the judgment sum in sterling but subject to the exchange rates as per the Claimants' evidence.
In his reasoning, and citing Lord Wilberforce in The Canadian Transport (1979) AC 684, the judge said that the damages could be calculated in the currency "in which the loss was felt" by the claimant to the action or "which most truly expresses his loss".
He went on to explain that all investments in the matter had been paid in sterling and dollars had only been used for accounting purposes: the Claimants' bookkeeper explained to the court when giving evidence that payments were made in sterling then had the relevant conversion rate applied. In addition, the majority of the sums paid to the third party contractor had been in pound sterling. As a result, and since there had been a considerable overpayment to the contractor, the loss was 'felt' by the Claimants in sterling. The Defendant's submissions that some earlier sums had been paid to the contractor in dollars, and that the contractor paid its employees in dollars, did little to persuade the judge: he held that what was important had been the currency in which the Claimants had made payments to the contractor, not what happened to the money afterwards.
To reflect the judge's reasoning, the judgment sum awarded was converted to £7,443,821.12.
Judgments can be given in pound sterling or in a foreign currency, the latter even in circumstances where the currency is payable under a contract and the proper law of which is English law. While currency of judgments and differing exchange rates have been an issue for some time (see, for example, Eleftherotria v Owners of the Despina R (1979) A.C. 685), following the vote for Brexit, the continued depreciation of the pound has resulted in significant exchange rate fluctuations which may cause further issues for the court as well as claimants and defendants alike. A judge will take into account all the circumstances of the case and has discretion to determine whether a judgment should be expressed in sterling or in a foreign currency. It will be interesting to watch, as Article 50 is triggered this year, how judges may be required to use their discretion to balance the plummeting pound and fluctuations in exchange rates with the value of contractual disputes involving foreign currencies.