In Broome v. Cassell & Co. Ltd,l the House of Lords blocked the Court of Appeal from overriding a House of Lord's position because it was considered by the Court of Appeal to be wrong. And now, in Miliangos v. Geo. Frank (Textiles) Ltd,2 where the Court of Appeal has renewed its attack on the authority of a House of Lords position because its underlying social forces had weakened, the House of Lords has again firmly blocked the way. But it is doubtful that the Court of Appeal has been deterred from challenging the House of Lords when it feels the need. Exhortations by the House of Lords, unsupported by any strength of reason, that the Court of Appeal treat its decisions as "absolutely binding"3 are less than compelling. The history of the issues in Miliangos reinforces the claims that judge-made law should be adjusted to new social conditions and that lower courts should be allowed to join in the process.

Predictably the courts long ago formulated a policy to allocate the risk of exchange loss from delays in compensating wrongs. With the exception of one very early case4 the English courts for almost four centuries would give judgment only in English currency. In the words of Lord Justice Lawton:6

With the exception of the Master of the Rolls, Sir Nathaniel Lindley,J.,6 who argued that a Court of Chancery might make an order for specific performance of a contract to pay foreign currency, no one had questioned the wisdom of the policy.7

In 1960 the House of Lords in the case of In re United Railways of Havana and Regla Warehouses Ltd.8 reviewed the development of the English rule allocating the dispute period exchange risk. They declared the rule to be that judgments must be given in Sterling and that conversion from the damages due in the relevant foreign currency to Sterling was to be effected using the exchange rate on the date of the wrong. The United Railways of Havana Company had financed its purchase of rolling stock in the United States under a plan whereby the lenders were given an interest in a trust which rented the equipment to the borrower at a rate guaranteeing the lenders a return on their loan. The dispute arose when the Cuban government purchased control of the railway company and did not make payment on the equipment trust certificates. Under Cuban law, a novation had arguably occurred such as would have released the borrower's successors front the obligation to make payments on the equipment trust certificates. But the English courts found Pennsylvania law applicable and awarded judgment in favour of the lenders. Since Sterling had depreciated relative to the Dollar, the court had to decide whether judgment could be given in Dollars and, if not, at what date the conversion should be made from Dollars to Sterling. Viscount Simonds, whose reasoning was echoed by Lord Radcliffe, argued:⁹

Lord Reid chose the date of the wrong for making the conversion from foreign to domestic currency by a process of elimination of the alternatives on grounds of procedural impracticality:10

Lord Denning participated both in the House of Lords decision consolidating the Havana Railways position and the Court of Appeal decisions retreating from it. In Havana Railways, Lord Denning acknowledged that:11

But Lord Denning took account of the fact that Sterling had departed from the gold standard and had been devalued:12

In 1969, Lord Denning began the movement away from the Havana Railways rule with his dissent in the case of The Teh Hu.13 A Japanese company had contracted under the terms of a Lloyd's Standard Form to salvage a vessel owned by a Panamanian company and registered in Liberia. A dispute arose and, as provided in the Lloyd's form, arbitration was held in London. The value of Sterling had decreased relative to the Japanese salvers' favoured currencies (the Japanese Yen and the United States Dollar) between the time when the salvage expenses were incurred and the time when the arbitration award was issued. Both the original arbitrator and the appeal arbitrator were prepared to increase the Sterling award payable at the time of the award to account for its loss of value. However, when the shipowners appealed, both the judge of first instance and the majority of the Court of Appeal applied the Havana Railways rule. Lord Denning dissented commenting that:14

By 1973, Lord Denning's minority opinion in The Teh Hu had become the view of the majority of the Court of Appeal in the case of Jugoslavenska Oceanska Plovidba v. Castle Investments Co.15, That case involved a time charter on the standard New York Products Exchange form between Yugoslav shipowners and a company registered in Panama. All payments under the charter were expressed in United States Dollars. A dispute arose over unpaid hire and was referred to two arbitrators in London who, in accordance with the City practice, made an award in favour of the shipowners in United States Dollars. When the charterers did not honour the award, the owners sought leave of the court to enforce the award under the Arbitration Act 1950. The Master refused leave and Kerr J. upheld this decision on the ground that English arbitrators were not entitled to make awards in foreign currencies. The Court of Appeal reversed these rulings declaring that the restriction on the ability of English courts to grant judgments in foreign currencies did not apply to arbitrators. Lord Denning justified this distinction on the grounds that resort to execution is less frequent in arbitrations than court proceedings. Accordingly, the difficulties of effecting execution using a foreign currency of account and payment are supposed to occur less frequently in arbitrations.16 Even in the case of execution of an arbitration award in foreign currency, conversion to local currency could be made on the day of payment of the debt.

In the absence of empirical evidence, Lord Denning's assertion that creditors in arbitration proceedings have less recourse to execution than judgment creditors is not convincing. Also, the vital question is not whether judgments and awards may bc denominated in foreign currencies. The vital question is what date is to be selected for converting the amount due in foreign currency into domestic currency. Lord Denning did not attempt to justify the use of different conversion dates in court proceedings and arbitration proceedings. Lord Denning's true intention was manifestly to avoid the effect of the Havana Railways rule. Thus, referring to the Havana Railways rule, he argued:17

In 1974, the Court of Appeal again slipped past the Havana Railways rule. Schorsch Meier v. Hennin involved a debt for the sale and delivery of goods pursuant to a contract which provided for payment in Deutschmarks. Since the date of breach by the English debtor, the value of Sterling had dropped relative to the value of the Deutschmark. The Court of Appeal gave judgment in Deutschmarks and stipulated that if payment were made in Sterling the conversion from Deutschmarks should be made as of the date of payment. AU three members of the Court of Appeal used as one ground for avoiding the Havana Railways rule the Treaty of Rome provision by which:18

A majority of the court of Appeal ruled, as a ground of equal standing for its decision, that the economic and legal conditions supporting the Havana Railways rule no longer existed. Relying on the rule that cessante ratione, cessat ipsa lex, Lord Denning argued:19

The House of Lords in Miliangos opted for a basically different strategy than their predecessors in Havana Railways in allocating the exchange risk during the dispute period. Lord Wilberforce in Miliangos refused to bc confined to "straightjacket solutions based on concepts".20 Lord Wilberforce and Lord Frazer of Tullybelton supported Lord Simon of Glaisdale's otherwise dissenting opinion that the maxim cessante ratione, cessat ipsa lex lent no authority to the Court of Appeal's reformist initiatives since the maxim merely "operates to distinguish an instant from a previous legal decision or to justify an exception from a principal legal rule".21

Nor did the House of Lords choose to treat the decision in Havana Railways as given per incuriam. Lord Wilberforce thought it:22

Lord Cross of Chelsea, while "bluntly" declaring the Havana Railways decision "wrong",23 nevertheless would not have overturned it on that ground alone. Following Lord Reid's comments in another case, he argued that despite

Thus the House of Lords in Miliangos relied on neither of the established reasons for departing from its prior position in Havana Railways. Instead the majority strongly subscribed to the necessity of changing legal rules to accommodate new social conditions. Lord Wilberforce stated:25

Lord Cross of Chelsea referred to the "change which has come over the 'foreign exchange' situation generally and the position of Sterling in particular in the course of the last 15 years"26; as justifying the departure from the Havana Railways position. Lord Edmund-Davies confessed that he was "glad" that the social circumstances had so greatly changed since Havana Railways was decided that the court could "avoid perpetrating the great injustice which would result were the ratio decidendi of that case applied to the present claim.27

Lord Wilberforce alluded to factors other than changes in social conditions in his evaluation of whether to vary the established judge-made law. His Lordship stressed that the Havana Railways rule was judge-made in origin and not a subject of such general political interest as to arouse Parliarnentarians.28 In an enigmatic passage, Lord Wilberforce observed:29

It is tempting to speculate that Lord Wilberforce meant that justice in the individual case would be adequate reason for bending an established rule. Also, Lord Wilberforce's observation perhaps invites judges to enter the minds of judges previously charged with the same issues and to extrapolate and apply a different outcome in the prior case on the basis of the newly acquired information. Rewriting of earlier decisions by extrapolation with new information is only one step from interpolating what would have been the outcome considering the hypothetical decisions of a full bench including the judges who did not hear the prior case. The notion is familiar, though not well regarded, in American jurisprudence.30

The House of Lords in Miliangos looked to precedents with more interest in the force of their argument than their hierarchical status. Lord Wilberforce referred to the different evolution of the allocation rule by arbitrators as a "very important"31 development. Lord Wilberforce cited cases from the Commonwealth and even the United States in support of his position and also referred to juridical writings32 Lord Simon of Glaisdale acknowledged that he lent "great weight" to the views of one particular judge-Lord Radcliffe-because of "his knowledge, unusual in a judge, of public and commercial finance".33 Lord Simon also cited the report of an expert legal committee-the Private International Law Committee-to show that commercial circles, at least as of 1962 when the Committee reported, felt no urgency to amend the Havana Railwavs rule.34 The House of Lords' decisions in Miliangos refer to some of the self-restraints that should be exercised in judicial law reform.

Their Lordships expressed reluctance to become embroiled in shifting positions that are pervasively integrated into the legal system or whose reform would bc beyond the limit of judicial competence. Both Lord Wilberforce and Lord Simon of Glaisdale were conscious that the judge-made rule allocating the loss from currency fluctuations during the dispute period involves subjects as remote from judicial competence as international monetary theory and public finance. Largely for this reason, Lord Simon of Glaisdale would have preferred that the rule be left to Parliament to change, perhaps with the guidance of an expert committee. "Law is too serious a matter to bc left exclusively to judges"."35 But Lord Wilberforce sounded the majority opinion::36

Lord Simon of Glaisdale also explained his reluctance to participate in law reform from the bench observing that 37

This argument actually only tests the court's ability to live with anomalies. The majority expressly confined their rule to foreign debt claims and refused to extend its application te, cases involving damages in torts or contracts other than cases of foreign debts.38 Indeed, anomalies seem inevitable in all law, not only judge-made law. In allocating the exchange risk during the dispute period, the Carriage of Goods by Air Act of 1961 (based on the Hague Convention of 1956) provides that conversion from the foreign currency amount owing to Sterling should bc made as of the date of the award.39 The Carriage of Goods by Road Act provides for conversion as of the date of payment.40 The Bills of Exchange Act 1882 provides for conversion as of the date of the wrong.41

Lord Simon of Glaisdale, while shying away from participating in judge-made law reform, nevertheless proposed some measures which might overcome his reluctance to do so in the future. Specifically, His Lordship proposed the use of prospective overruling and the participation as amicus curiae of representatives of the executive branch.42 Certainly the use of prospective overruling is desirable. In fact, the House of Lords has already applied the technique in the Practice Statement of 1966 which announced that the House of Lords would no longer consider itself absolutely bound by its prior decisions.43 But judge-made law by prospective overruling need not and should not bc the only technique available to the courts for reforming outmoded rules of law. What justice after ail is there in enforcing one last time a rule now considered so unjust that it will not bc enforced in subsequent cases? Surely such a margin of certainty cannot outweigh the merits of doing justice in the case immediately at hand.

The idea of obtaining executive guidance in matters of public policy which fall to judges to decide is appealing, but what specifically is to bc the evidentiary value of such executive testimony? If the executive viewpoint is purely or primarily political and this view conflicts with the demands of justice in the case, how are these objectives to bc reconciled? Is it to be up to the court to invite the executive to participate or is the executive expected to act on its own initiative? How is silence from the executive quarters then to be treated? These are issues that have been well canvassed in the United States where the executive has played a special role in court actions involving the act of state doctrine. The American struggle for a solution to these questions has been a long and vexing experience.44

In Schorsch Meier, the Court of Appeal buttressed its application of the maxim cessante ratione, cessat ipsa lex, by pushing forward where the procedural barriers to the grant of a judgment in foreign currency had been swept aside. Lord Denning argued that since Beswick v. Beswick1 45 English courts could give specific performance of debt agreements:46 Furthermore the rules of court had been changed to provide a form for the issue of judgments in amounts of foreign currencies.47

The House of Lords exploded both these arguments. Lord Wilberforce indicated that the actual significance of the Beswick case was that an award for specific performance could be given where damages were an inadequate remedy. But it was the change in the foreign exchange markets which had caused the award of damages to become an inadequate remedy for breaches of international agreements.48 Also the problem is not with the form of order for judgment but with the difficulty of effecting execution in a currency other than the local currency. But execution need not be levied in foreign currencies provided the amount of the judgment in foreign currency is converted to local currency using the exchange rate prevailing on the date of payment. Lord Cross of Chelsea (Lord Simon of Glaisdale concurring) succinctly assessed the force of the Court of Appeal's reliance on changes in the form of order for judgment as a basis for challenging the authority of a House of Lords decision :49

which had led to such a higher court's formulation of the rule of law was no longer relevant. A rule rooted in the history could be reversed because history is the bunk of the past.50

Meier decision and barely touched on the substantive issues of the appeal.51 In Miliangos, the House of Lords took up the Court of Appeal's position in Schorsch Meier on the substantive issues but rapped the Court of Appeal for their artificial reasoning and breach of precedent. While abandoning its position in Havana Railways for the Court of Appeal's position in Schorsch Meier, the House of Lords unanimously declared that the only judicial means by which its decisions could be reviewed was by the House of Lords itself under the Practice Statement of 1966.

Binding lower courts by upper court decisions does not increase predictability where the court of ultimate appeal can change the rule by which all other courts are bound. Assuming that two parties to a dispute both believe their arguments are sustainable and that each will carry the debate to the next level if it loses until the parties reach the final level of decision-making, then it makes no difference whether the lower courts follow the established rule or set off in a new direction. And it makes no difference in principle whether there are five levels of review (as may occur in arbitrations) or only one (under the "Leap-Frog" procedures).52 The point is that once the House of Lords can change its rules, then there are no gains in expediency by holding lower courts to the old rule because close cases will probably be appealed anyway.

But while the efficiency gains of binding precedent are few, the potential gains from its abolition are considerable. In Schorsch Meier, the Court of Appeal departed from the House of Lords rule and there was no appeal. It is of course difficult to read the intentions of the parties from the case reports but one cannot but suspect that counsel were convinced that the change in the rule accomplished by the Court of Appeal was good law and would have been upheld by the House of Lords.53 Had the Court of Appeal applied the Havana Railways rule, either the case would have been appealed involving wasted expense or, if the case had gone no further, both the law and the defeated party would have suffered from the Court of Appeal's inability to break new ground.

If situations recur where the Court of Appeal departs from House of Lords decisions, there arises the problem whether courts subsequently charged with the same issues should direct themselves in accordance with the law as stated by the House of Lords or as stated by the Court of Appeal. As long as this problem is analysed in terms of binding precedent and chains of authority no satisfactory answer will be reached. In Miliangos, the House of Lords had to evaluate a Court of Appeal decision whose ratio decidendi was that, as between a House of Lords decision and a subsequent decision of the Court of Appeal departing from that of the House of Lords, the Court of Appeal is bound to follow its own decision. In Young v. Bristol Aeroplane, Lord Greene had detailed the application of the rule of precedent in the Court of Appeal. He indicated that the Court of Appeal:54

Lord Greene's approach was endorsed in Miliangos by the House of Lords. Nevertheless, the House of Lords split on whether the Court of Appeal should have followed its own prior decision contrary to the earlier Lords decision or instead should have followed their Lordships' earlier decision. Lord Simon of Glaisdale argued that the Court of Appeal's decision in Schorsch Meier was not given per incuriam within Lord Greene's definition since the Court of Appeal was not ignorant of the Havana Railways decision. Accordingly, the Court of Appeal in Miliangos acted correctly in holding itself bound by the Schorsch Meier decision.55 On the other hand, Lord Cross of Chelsea argued.56

What emerges is that, if the court of ultimate appeal can change its earlier rules, little marginal certainty is gained by compelling lower courts to follow the earlier decisions of the highest level. Also, there is little point in restricting the grounds on which lower courts can reconsider the law as previously stated by a higher level in the hierarchy. If the House of Lords can now change the law to account for new social conditions, why restrict a lower court in its ability to hear evidence of change in circumstances and to pass judgment on that evidence? What is accomplished by a decision such as Lord Justice Lawton's in Schorsch Meier in which the rule established by the higher court is described as "founded on archaic legalistic nonsense" but applied nevertheless because the judge is "timorous" and stands in "awe of the House of Lords"?57 Such a decision is a clear-cut invitation to appeal and, short of impecuniosity, the defeated party would appeal. If the defeated party cannot afford to appeal, what sort of justice is this? If he does appeal, what was accomplished by the token heeding of the superior court's earlier decision? And if the lower court does vary the higher court's rule, the defeated party can accept that the change in the law is for the better or he can rely on the higher court's decision to found his appeal.