It will be appreciated by the commercial community at large that whenever a transaction involves payment in a currency other than that of the payee there is always a risk that, when received, the benefit to the payee of the receipt of the foreign currency amount will vary with the appropriate rate of exchange ruling on the date of payment. It will be greater or less or possibly, at a time of stable rates, the same as that which the payee thought he would get. That is a normal commercial risk which a payee shoulders whenever he undertakes such a transaction.

If the payer defaults, then the payee may sue and, after Miliangos, [Miliangos v. George Frank (Textiles) Ltd. [1976] 1 Lloyd’s Rep. 201] he may claim the foreign currency amount agreed to be paid. But there are circumstances when it may suit the payee to claim a sum in his own currency, because the exchange rate has moved against that currency. Is it possible to mount a claim on this footing? The answer appears to be in the affirmative. An English company has recently succeeded in recovering in the Commercial Court such an exchange loss. The decision is the more important because the defaulting payer, rather than refusing to pay at all, paid late and in the foreign currency and asserted that by virtue of this no claim against him could succeed.

The material facts are as follows:— A Ltd., an English company subject to the United Kingdom Exchange Control regulations, carries on export business and receives for its goods payment in (inter alia) foreign currencies. In common with many exporters it often requires payment to be secured by irrevocable Letters of Credit drawn upon a U.K. bank. B Ltd., a foreign bank having a branch in the City of London, at the request of its customer, raised a United States dollar Letter of Credit for the benefit of A Ltd. Payment was to be against documents at sight. For reasons which need not concern us, payment was made late. It was common ground that payment should have been made on Oct. 5, 1977, whereas it was made on Dec. 12, some nine weeks later. During that period, the dollar rate against sterling fell sharply and when the dollar sum was received and converted in accordance with normal Exchange Control procedure, it was short of the amount which A Ltd. would have received if payment in U.S. dollars had been made on the due date. In addition, A Ltd. had incurred expenses with its bank and its solicitors in attempting and eventually succeeding in obtaining payment, as well as a loss of interest on the unpaid money during the period of default. Could it recover all or any of these losses? Were all or any reasonably foreseeable? Was the claim maintainable at all after payment of the principal amount?

Donaldson, J., considered that each of the claims could succeed and awarded A Ltd. the full amounts claimed in the proceedings. His reasoning took account not only of the speeches of the Law Lords in Miliangos, and the more recent cases of The Folias and the Despina R., [1979] 1 Lloyd’s Rep. 1, but also, in the best tradition of the Commercial Court, of the realities of commercial life.

The learned Judge was satisfied on the evidence before him that the defendant bank