Peter Carnegie v Charles Giessen & Ors Alan Sutherland Mark Elswood & Ors

This is an appeal against an order dated 9^th July 2004 by Mr Kevin Garnett QC, sitting as a Deputy Judge of the Chancery Division, dismissing the Claimant’s appeals against a number of orders of Master Moncaster. It raises an interesting issue relating to the enforcement of judgments expressed in foreign currency.

The relevant facts can be shortly stated. On 5^th March 2002 the Claimant obtained judgment against the Defendants, who were ordered to pay US$1,431,731.50 by 16^th April 2002. They failed to do so. From 18^th April 2002 the Claimant took a series of steps to enforce the judgment.

Directly relevant for present purposes are three charging orders relating to properties of Mr Giessen and Mr Elswood (the First and Third Defendants respectively). The first applications were made on 18^th April 2002, in respect of two properties, one belonging to each of them. In accordance with the relevant practice forms, the applications included a reference to the sterling equivalent of the judgment in the following terms:

A further application was made in respect of another property of Mr Elswood, which resulted in an interim charging order dated 19^th November 2002, and a final charging order dated 31^st July 2003. The judgment debt was again expressed in dollars, though reduced to take account of a payment of $150,000.

On 2^nd October 2003, an application was made for orders for sale of the properties. The witness statement in support, dated 30^th September, continued to treat the judgment debt as a dollar liability. On 15^th January 2004, the Master made suspended orders for sale.

However, in evidence served two days before the hearing, it had been submitted on behalf of the Claimant, for the first time, that the judgment debt in the charging order should be restated as its sterling equivalent at the date of the original application in April 2002. It was contended that the inclusion of a dollar amount in the charging order had been a mistake which could be corrected under the slip-rule, or an error or procedure which should be corrected under CPR3.10. On 31^st March 2004, Master Moncaster rejected that contention in a detailed judgment reviewing the relevant law and practice statements. In summary he held that there had been neither slip, nor procedural error; as he said:

That decision was upheld by the deputy judge in July 2004, and the Claimant appeals to this court. Lewison J granted permission to appeal the original Charging Orders to the Judge by Order of 21.4.04, and granted an extension of time for so doing, in order to enable the general issues to be fully explored. The subsequent appeals to the Court of Appeal were themselves within time.

We were told that the outstanding dollar amount of the judgment debt was finally paid in January 2005. It was accepted by the Claimant without prejudice to his contention that he is entitled to the balance of the sterling equivalent as it was at rates current when the charging orders were made. The difference is of the order of £269,000.

In this court, Miss Tipples has repeated in substance the submissions which she made before the judge. She relies on both legal principle and established practice. The argument can be summarised in four stages:

A judgment debt expressed in a foreign currency must be converted into sterling for enforcement purposes on the date when the court authorises enforcement of the judgment: Miliangos v George Frank (Textiles) Ltd[1976] AC 443, HL.

Enforcement of a judgment debt by means of a charging order under the Charging Orders Act 1979 is completed when the charging order is made final: Ezekiel v Orakpo [1997] 1 WLR 340, CA.

Accordingly enforcement of a foreign currency judgment by means of a charging order requires the judgment debt to be converted into sterling before enforcement is completed, that is, before the date when the charging order is made final.

This approach is supported by the established practice in the High Court. The relevant practice direction provides that, where the judgment debt is in a foreign currency, the evidence in support of the application for a charging order must give the sterling equivalent, and that the Master will make the order expressed in that amount.

It will be convenient to consider first the effect of Miliangos and its working-out in subsequent practice directions, before considering the effect of the 1979 Act, in the light of Ezekiel v Orakpo.

The starting-point for these submissions is accordingly the decision of the House of Lords in Miliangos. That case established for the first time that, where a monetary obligation was expressed in a foreign currency, an English court had power to make an order for payment in the same currency. The speeches also contain observations as to the appropriate date for conversion. Lord Wilberforce in the leading speech saw the choice as being between the date of action brought, the date of judgment, or the date of payment. He commented:

I cannot accept that submission. The common principle underlying all the speeches is that the conversion should be made as close as practicable to the date of payment, having regard to the realities of enforcement procedures. It is quite clear, both from the speeches and the reported arguments, that the House did not, and was not asked to, make a ruling on the application of that principle to particular enforcement procedures. There is no report of any detailed discussion before the House of different methods of enforcement.

Lord Wilberforce’s reference to “the date when the court authorises enforcement” cannot be taken as of general application. It was, as he said, based on the Court of Appeal’s decision in Schorsch Meier GMBH v Hennin [1975] QB 416 (see p 424H per Lord Denning MR, referring in turn to Jugoslavenska [1974] QB 292, 300B, a case on enforcement of an arbitration award). It takes no account, for example, of forms of enforcement for which no specific authorisation is required, most notably the ordinary writ of fieri facias (for which permission of the court is only required in specified circumstances - see RSC Order 46).

A similar view of the limits of the speeches in Miliangos was taken by Oliver J in Re Dynamics Corporation[1976] 1 WLR 757 in the context of a company liquidation. Although some comments had been made in the speeches in Miliangos about the position of a company in liquidation, Oliver J (rightly in my view) declined to treat those as binding. As he said:

This is indeed what happened. A Practice Direction was issued in 1976, covering all three divisions of the High Court, making specific provision for different forms of enforcement procedure (Practice Direction (Judgments: Foreign Currency) [1976] 1 WLR 83). For example, paragraph 11 dealt with enforcement of a judgment debt in foreign currency by writ of fieri facias. It provided (paragraph 11(a)) that the praecipe for the issue of the writ should be endorsed and signed by the solicitor certifying the sterling equivalent of the judgment debt at the close of business on the day “nearest or most nearly preceding” the date of the issue of the writ. Paragraph 13 dealt with enforcement foreign currency judgment debts by other modes of enforcement, including charging orders. It provided:-

In 1983, the Law Commission issued a report “Private International Law Foreign Money Liabilities” (Law Com No. 124) in which it reviewed in detail a number of issues arising out of the Miliangos decision. By this time the Charging Orders Act 1979 had been passed. The Commission recommended a change to the present practice. They said:-

This recommendation was not put into effect. However, a new Practice Direction was issued in 1992, which came into effect on 20^th April 1993 “superseding the previous Practice Direction”. (According to the researches of counsel, the most up-to-date version of the text is in the 1999 edition of the Supreme Court Practice.) In relation to charging orders the substance of the Direction followed that of its 1976 predecessor, including both the requirement for an affidavit stating the sterling equivalent of the judgment debt, and the statement that the Master “will then make” an order for the sterling equivalent as verified by the affidavit. This Direction, like its predecessor, was stated to be applicable in all three divisions.

That appears to the most recent formal Direction on the subject. The current Civil Procedure Rules and Practice Directions contain no express reference to the enforcement of judgments in foreign currency. This may be attributable to the fact that the subject of enforcement generally is the subject of continuing review. CPR 70 contains general rules about enforcement of judgments and orders. The Practice Direction contains a list of methods of enforcing money judgments (70 PD.1), some of which continue to be governed by the old procedure rules.

The only relevant statement of practice, following the new CPR, appears to be in the current edition of the Queen’s Bench Guide. That contains a reference to charging orders (para 11.6.2.) with the following statement:-

There was some discussion before us as to whether the 1993 Practice Direction has been supplanted in some way by the current Queen’s Bench Guide. In my view, this discussion was misdirected. The purpose of the Queen’s Bench Guide, and other similar publications, is simply guidance. It cannot be taken as supplanting or contradicting the formal Practice Directions. I can see no reason why we should not treat the 1993 Practice Direction as remaining effective. We were shown nothing in the CPR, or in the accompanying Practice Directions, which can be taken as expressly or impliedly revoking or superseding it. It was made clear, at the time of the introduction of the new CPR in April 1999, that they were not comprehensive, and that aspects of the existing rules and directions would remain in force pending their progressive review.

I would add this. It seems unfortunate that there is no mention of the 1993 Direction in the present Practice Directions, or elsewhere in the White Book. That omission cannot by itself be taken as implying revocation. However, I hope that consideration can be given to the inclusion of an appropriate reference in future editions. There may also be a need for this subject to be re-considered, as part of the current review of enforcement, taking account both of the recommendations of the Law Commission, and of modern financial conditions. However, this is not an exercise which it would be appropriate for the court to attempt in the context of an individual case.

In any event, this seems to me wholly consistent with the view I have expressed of Miliangos. The House of Lords was not laying down binding rules, applicable regardless of the enforcement procedure. It was stating a general principle the detail of which would have to be worked out in procedural rules. I would therefore reject Miss Tipples’ primary submission that the charging orders made by the Master in this case offended some mandatory rule derived from Miliangos.

The next question therefore is whether there is something in the Charging Orders Act 1979 itself, or in the interpretation put upon it by the Court of Appeal in Ezekiel v Orakpo [1997] 1 WLR 340, which assists Miss Tipples’ argument.

The 1979 Act was a modern statement of principles largely reproduced from earlier enactments. Section 1(1) provides:-

There is nothing in those provisions which assist the argument that a charging order may not be expressed in a foreign currency. Section 1 indicates that the charge is to be for securing the payment of “any money due…under the judgment or order”. If anything this might be thought to indicate that, where the judgment is expressed in a foreign currency, the charging order should be expressed in the same way. Mr Mawrey, for the defendants, did not go as far as to submit that this obliges the Master to make an order in the same currency as the judgment debt. However, he is clearly right to submit that it does not exclude that possibility. Similarly, Miss Tipples accepts that an equitable charge over property in this country can be expressed in foreign currency, so that an order in similar form will not offend section 3(4).

Ezekiel v Orakpo was an unusual case because of the long time intervals involved. A charging order absolute on the defendant’s property to secure a sum of some £20,000 had been obtained in 1982 following a judgment in 1979. The plaintiff did not seek to enforce it until 1993, by which time the total sum due, if interest were included, was over £75,000. The issue, which the court decided in favour of the plaintiff, was whether interest was impliedly included in the order even though not expressly mentioned. The case therefore has no direct relevance to the enforcement of a judgment in foreign currency.

Miss Tipples relies on Millett LJ’s statement as to the characteristics of a charging order. He said:-

So, says Miss Tipples, the obtaining of a charging order is a form of enforcement, which is complete when the charging order is made, not when payment is subsequently made following and order for sale. If, as she submits, Miliangos establishes that the relevant date is the date of enforcement, then by analogy the relevant date in the case of a charging order is the date when the charging order is made. However, that submission depends on the proposition, which I have rejected, that Miliangos contains a binding rule applicable to all forms of enforcement. Without of course questioning the authority of Millett LJ’s words, in the context in which they were expressed, they do not assist the argument in this case. It is notable also that Law Commission saw no inconsistency between Miliangos and their own recommendation that, where payment takes place after the making of a charging order, conversion should be at the date of payment.

Miss Tipples also claims support from a decision of Walton J in A and M Records Inc v Darakdjian[1975] 1 WLR 1610, in which the issue had been whether a charging order could be made to secure litigation costs ordered by the court before the amount had been ascertained by taxation. Walton J considered that it was not possible to impose a charge before there is “an ascertained sum”. He thought that if the power were not restricted to ascertained sums –

That case, with respect, again provides no assistance in the present circumstances. The judgment debt here is “ascertained”, albeit in a foreign currency, which also happens to be the currency in which the parties chose to deal. The fact that the sterling equivalent of that debt may fluctuate according to current exchange rates seems to me no more relevant to the underlying principles, than is the fluctuation of the value of the land on which it is charged.

It is unnecessary and inappropriate to debate these issues on the unusual facts of this case, particularly at a time when the law in this area is under review. For present purposes, it is enough in my view to hold that the Master clearly had jurisdiction to make a charging order in the form he did. At the most it can be said that in doing so he departed from the practice as stated in the 1993 Practice Direction, which would have led to the order being expressed in the terms of the sterling equivalent given in the application.

However, that is a matter of practice rather than law. The 1993 Direction was expressly stated to be “subject to any order or direction which the court may make or give in a particular case”. It was not in terms mandatory. Assuming that the Master had a discretion to revise his order retrospectively, he made clear that he would have refused it. He did so, as I understand his judgment, on the grounds that the claimant had given no indication at any time that he was seeking an order specifically in sterling, and, in particular, that when applying to make the interim order final he took no objection to the dollar form in which it had been expressed. He only sought to go back on this position when it became clear some months later that currency fluctuations had worked substantially to his disadvantage. In my view the Master was fully entitled to refuse to exercise his discretion to amend in these circumstances, and the judge was correct to uphold that refusal. I see no grounds on which this court could properly interfere.

For these reasons, which substantially follow those of the judge, I would dismiss this appeal. Finally, I would urge those responsible for the Civil Procedure rules to review this issue generally in light of modern conditions, and in any event to give consideration to the inclusion of substance of the 1993 Practice Direction (or an updated version) in the relevant part of the current CPR Practice Directions.

I agree.

I also agree.