In re claim by Helbert Wagg & Co Ltd, [1956] 1 Ch. 323

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[1956] 1 Ch. 323

[CHANCERY DIVISION]
In re CLAIM BY HELBERT WAGG & CO. LTD

1955 May 25, 26, 27
Oct. 11, 12, 13, 14, 18, 19
Dec. 8

Upjohn J.

Conflict of Laws - Movables - Assignment - Foreign legislation -
Validity - Foreign exchange legislation - Whether confiscatory -
German Moratorium law of 1933 - Debt payable in London made payable to
Konversionskasse in Reichsmarks - German law proper law of contract.

Conflict of Laws - Chose in action or debt - Situs - Debtor's place of
residence - No situs until debt payable.

Conflict of Laws - Contract - Proper law - Contract to be "construed
in accordance with x law" - x proper law.

Trading with the Enemy - Loan before war - Enemy debtor - Whether
contract abrogated.

Trading with the Enemy - Administrator of Enemy Property - Appeal from
decision - Whether decision of Administrator on effect of German law
final - Distribution of German Enemy Property Act, 1949 (12, 13 & 14
Geo. 6, c. 85) - Distribution of German Enemy Property (No. 2) Order,
1951 (S.I. 1951, No. 1899), art. 7 (2).

Contract - Conflict of laws - Debt - No local situation until payable
- Governed by proper law - Moratorium law - Whether confiscatory.

By a loan agreement made on December 19, 1924, between a German
company ("the company") of the one part and an English company ("the
claimant") of the other part, the claimant agreed to create a sterling
loan of £350,000 with interest at 71/2 per cent. Clause 2 of the
agreement provided that the principal and interest should be paid in
sterling in London free from all German taxes, and clause 5 provided
that the loan should be secured by a specific mortgage upon certain
coalfields in Germany belonging to the company.

Clause 12 provided: "This agreement shall be construed in accordance
with German law. An English and German text have been drawn up, but
the parties agree that in the event of any conflict between the
English and German texts, the English text shall prevail …"

The loan was duly made and the company discharged its obligations
thereunder until 1933, when the German Moratorium Law of June 30 was
passed in an honest attempt to solve Germany's economic position. That
law provided that a Konversionskasse for foreign debts would be
created, that debts payable in foreign currencies must be converted
into Reichsmarks and paid into the Konversionskasse, the debtor's
liability to the creditor being discharged thereby.

The company duly paid Reichsmarks into the Konversionskasse at the
appropriate rate of exchange, and continued to do so after the
outbreak of war between Great Britain and Germany in 1939, and by 1945
the company had paid the full equivalent in Reichsmarks of the whole
loan outstanding and interest thereon.

On September 3, 1939, there was outstanding under the loan agreement
£174,142 in respect of capital, and the claimant
[1956] 324
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

claimed, under the provisions of the Distribution of German Enemy
Property Act, 1949,1 and the orders made thereunder, to rank as
creditor in respect of that amount and interest thereon.

1 Distribution of German Enemy Property Act, 1949, s. 1: "(1) His
Majesty may by Order in Council make provision for the collection and
realization of German enemy property and for the distribution of the
proceeds thereof, to such extent as may be prescribed by the Order, to
persons who establish claims in respect of German enemy debts. (2)
Without prejudice to the generality of the preceding subsection, an
Order in Council under this section may make provision as to the
following matters:- (a) the appointment by the Board of Trade of an
administrator for the purposes of the Order, and the conferring and
imposing on that administrator of such powers and duties as may be
prescribed by the Order; … (d) the determination, as respects any such
claim, of the question whether the claim is established for the
purposes of the Order and the amount of the claim. … (3) The
administrator appointed under this section shall be a corporation sole
under the name of the Administrator of German Enemy Property, and is
in this Act referred to as 'the administrator'. …"

S. 8: "(1) In this Act the following expressions have the meanings
hereby respectively assigned to them, that is to say - 'German enemy
debt' means - (a) any sum due at the passing of this Act [December 16,
1949] in respect of an obligation incurred before the third day of
September, nineteen hundred and thirty-nine, which on that day was an
obligation of any of the following persons - … (iii) any body of
persons (whether corporate or unincorporate) which on that day was a
body incorporated or constituted in or under the laws of Germany; to
any of the following persons - … (vi) any body of persons (whether
corporate or unincorporate) which on that day was a body incorporated
or constituted under the laws in force in the United Kingdom; …"

Distribution of German Enemy Property (No. 2) Order, 1951, Art. 3:
"This Order shall not apply - … (b) to any claim in respect of a
German enemy debt falling within section 8 (1) (a) of the Act due at
the relevant time to a company incorporated in the United Kingdom
whose activities in the United Kingdom on the 3rd day of September,
1939, were confined to complying with the requirements of the
Companies Act, 1929 … and to distributing profits earned abroad; …"

Art. 7 (1): "The administrator shall determine whether any claim is
established for the purposes of this Order and the amount for which it
may be admitted for payment, and shall serve written notice of the
determination on the claimant. (2) The determination of the
administrator in relation to any claim shall be final: Provided that
the claimant, if dissatisfied with the determination as being
erroneous in point of law, may by notice in writing given within six
weeks after being served with notice of determination as aforesaid and
setting out the question or questions of law in respect of which it is
alleged that the determination of the administrator was erroneous,
require the administrator to state and sign a case for the opinion
thereon of the High Court and the decision of the High Court shall be
final. (3) The administrator shall be entitled to appear at the
hearing of any case stated by him under this Article. (4) If the
question at issue between a claimant and the administrator falls to be
decided according to the law of Scotland, the reference to the High
Court shall be construed as a reference to the Court of Session. (5)
If the question at issue … falls to be decided according to the law of
Northern Ireland the reference to
[1956] 325
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

The Administrator of German enemy property, in rejecting the claim,
held that the contract was governed by German law and that the
company's payments to the Konversionskasse had the effect under the
municipal law of Germany then in force, namely, the Moratorium Law of
1933, of discharging all liabilities of the company in respect of the
loan both as to capital and interest.

The claimant appealed. At the hearing of the appeal the claimant
sought to question the administrator's decision (a) on the assumption
that he was right in his determination as to the domestic effect of
the Moratorium Law, and (b) in the alternative, on the ground that it
was entitled to adduce further evidence to support its contention as
to the true intent and effect of that law:-

Held (dismissing the appeal), (1) that by virtue of clause 12 of the
agreement German law, as it existed from time to time, was the proper
law of the contract.

Vita Food Products Inc. v. Unus Shipping Co. Ltd. [1939] A.C. 277;
55 T.L.R. 402; [1939] 1 All E.R. 513 applied.

(2) That the question whether the court would recognize the validity
of the Moratorium Law depended on the proper law of the contract and
not the situs of the debt.

Jabbour v. Custodian of Israeli Absentee Property [1954] 1 W.L.R.
139; [1954] 1 All E.R. 145 distinguished.

(3) That in any event the locality of the debt was in Germany, since
that was the only place where the debtor resided, although the debt
was payable under the contract in London.

Deutsche Bank und Disconto Gesellschaft v. Banque des Marchands de
Moscou (unreported, C.A., 1931) followed.

New York life Insurance Co. v. Public Trustee [1924] 2 Ch. 101; 40
T.L.R. 430 considered.

(4) That in general every State has power to legislate in respect of
movables situate within it and contracts governed by its law unless
(inter alia) the legislation aims at confiscating the property of
particular individuals or classes of individuals, but that
confiscation without any adequate compensation is not per se a ground
for refusing recognition to foreign legislation.

Aksionairnoye Obschestvo A. M. Luther v. James Sagor & Co. [1921] 3
K.B. 532; 37 T.L.R. 777 and Princess Paley Olga v. Weisz [1929] 1
K.B. 718; 45 T.L.R. 365 applied.

Anglo-Iranian Oil Co. v. Jaffrate [1953] 1 W.L.R. 246 considered.

(5) That effect must be given to a measure of foreign exchange

the High Court shall be construed as a reference to the High Court of
Justice in Northern Ireland. (6) If the question at issue … falls to
be decided according to the law of Jersey, the reference to the High
Court shall be construed as a reference to the Superior Number of the
Royal Court of Jersey. (7) If the question at issue … falls to be
decided according to the law of the Bailiwick of Guernsey, the
reference to the High Court shall be construed as a reference to the
Royal Court of Guernsey. (8) If the question at issue … falls to be
decided according to the law of the Isle of Man, the reference to the
High Court shall be construed as a reference to His Majesty's High
Court of Justice of the Isle of Man, Chancery Division."
[1956] 326
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

control where the law of the foreign State is the proper law of the
contract or the movable is situate within its territorial
jurisdiction, provided the law was passed with the genuine intention
of protecting its economy in times of national stress, although for
that purpose it regulated (inter alia) the rights of foreign
creditors; and that the Moratorium Law was such foreign exchange
control legislation which must be recognized, since the proper law of
the contract was German.

Kahler v. Midland Bank Ltd. [1950] A.C. 24; 65 T.L.R. 663; [1949] 2
All E.R. 621 applied.

(6) That on the outbreak of war the contract, though suspended, was
not abrogated, as it was wholly executed on the part of the claimants,
and involved no intercourse between subjects and alien enemies or
increase of enemy resources.

Schering Ltd. v. Stockholms Enskilda Bank [1946] A.C. 219; 62 T.L.R.
122; [1946] 1 All E.R. 36 applied.

(7) That under the terms of the Distribution of German Enemy Property
(No. 2) Order, 1951, the decision of the administrator as to the
effect of German law on the provisions of the contract was a question
of fact and was final, so that the claimants could not adduce evidence
to controvert it.

CASE STATED by the Administrator of Germany Enemy Property under the
provisions of the Distribution of Germany Enemy Property Act, 1949.

The facts are taken substantially from the judgment.

By a loan agreement made on December 19, 1924, between a German
company under its then name of Rombacher Hüttenwerke ("the company")
of the one part, and Helbert Wagg & Co. Ltd. ("the claimant") of the
other part, the claimant agreed to create a sterling loan of £350,000,
carrying interest at 71/2 per cent. payable half-yearly. The claimant
agreed to make the said loan at a discount of 31/2 per cent., and by
clause 2 it was provided that the principal and interest should be
paid in sterling free from all German taxes in London. It was further
provided by clause 3 that the principal should be redeemed by an
annual cumulative sinking fund beginning in 1925, and calculated to
redeem the whole loan by January, 1945, the payments being made in
accordance with schedule I to the loan agreement.

Clause 5 provided that the loan should be secured by a specific
mortgage on certain coalfields in Germany belonging to the company. In
addition, by clause 6, the company agreed to pay to the claimants a
royalty for each ton of coal produced by the company's coalfields
during the currency of the loan.

By clause 8 the company undertook, when called on to do so by the
claimants, to issue bearer bonds for the loan, the claimants
undertaking to pay any German stamp duty on such bonds. The
[1956] 327
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

bonds were to be secured by a trust deed and they were to conform to
the usual text and practice ruling in the City of London.

By clause 3 it was contemplated that the loan might become a public
loan with quotations in London, New York, Berlin and Amsterdam Stock
Exchange, and clause 12 was in these terms: "This agreement shall be
construed in accordance with German law. An English and German text
have been drawn up, but the parties agree that in the event of any
conflict between the English and German texts, the English text shall
prevail with the exception of clause 10, paragraph 2."

The loan was duly made and the company discharged its obligations
thereunder until 1933, when the matter was complicated by the passing
of a German moratorium law on June 30 of that year.

The relative part of the moratorium law was in these terms: "1. (1)
Interests, dividends and regular redemptions, rent and similar
regularly recurring satisfaction of obligations resulting from
credits, loans, mortgages, etc., must be paid into the
Konversionskasse if the amount is due and payable in Reichsmark. If
the debtor has to pay in foreign currency the amount must be converted
into Reichsmark according to the official middle price of the Berlin
Stock Exchange, valid on the working day preceding the day of payment.
… (2) As far as the debtor has paid into the Konversionskasse he is
discharged from his liability. The relationship between the Kasse and
the creditor is defined by section 3. (3) The provisions of
subparagraph (1) do not apply if the property, credit, loan, mortgage,
land mortgage, participation and any other type of property originates
from funds which have been coming into the country after July 15,
1931, in foreign currency or in free Reichsmark.

"2. A Konversionskasse for foreign debts will be created. The Kasse is
a corporation publici juris supervised by the board of the Reichsbank
and has its accounts with the Reichsbank. The board of the Reichsbank
shall instal the responsible officers. A statute to be drafted by the
Ministry of Economy and the board of the Reichsbank shall regulate the
legal relations of the Konversionskasse. …

"3. The amounts paid into the Kasse (section 1 (1)) are to be credited
to the accounts of the foreign creditors. These claims of the foreign
creditors on the amounts so credited will be

[1956] 328
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

regulated by the aforesaid statute. The Reichsbank shall fix the date
at which such a credit balance can be paid out."

The statute regulating the Konversionskasse was passed on July 3,
1933, and entitled the Konversionskasse to issue non-interest bearing
promissory notes for money received in Reichsmarks, and also to issue
interest bearing bonds so far as Reichsmark payments had not been made
to satisfy a capital liability, but it was not suggested that any such
promissory notes or bonds were issued to the claimants.

Following on the passing of the Moratorium Law the company duly made
payment of Reichsmarks into the Konversionskasse at the appropriate
rates of exchange until the outbreak of war, and some limited payments
of special marks, expendable only in Germany and then only for certain
purposes, were made thereout to the claimants. It was not suggested
that the de facto acceptance of the position during the pre-war years
by the claimants affected their legal rights.

On September 3, 1939, there was outstanding under the terms of the
loan agreement £174,142 in respect of capital, and the claimants
claimed to be entitled to rank as creditors in respect of that amount
and to interest thereon. No claim was made in respect of any sums
falling due before September 3, 1939, all of which had been paid into
the Konversionskasse.

After the outbreak of war the company continued to make payments in
Reichsmarks into the Konversionskasse in accordance with the agreement
as varied by the Moratorium Law, with the result that by January 13,
1945, the company had paid at the appropriate rates of exchange the
full equivalent in Reichsmarks of the whole of the loan outstanding at
the passing of the law and interest thereon.

The administrator held that such payments had the effect under the
municipal law of Germany then in force, that is to say, the Moratorium
Law of 1933, of wholly discharging all liabilities of the company in
respect of the loan both as to principal and interest. He held that as
the payments of such sums into the Konversionskasse gave the company a
complete discharge under German law, there was no sum due to the
claimant at December 15, 1949, and he accordingly refused to allow the
claimant's claim.

The claimant appealed.

[NOTE: It was not argued that the claimant's claim was excluded by
virtue of the provisions of paragraph 3 (b) of the Order of 1951.]
[1956] 329
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

E. Milner Holland Q.C. and Michael Wheeler for the appellant. The
appellant seeks to question the administrator's decision (a) on the
assumption that he was right in his determination as to the domestic
effect of the Moratorium Law, and (b) in the alternative, on the
ground that it is entitled to adduce further evidence to support its
contention as to the true intent and effect of that law.

On the first limb of the argument reliance is placed on the following
propositions: (1) The debt is by the express provisions of the
contract made payable in London, and, accordingly, the situs of the
debt is London. (2) The Moratorium Law will not be recognized as
having any extraterritorial effect, so that if the debt is situate in
London there was on September 3, 1939, and remains, a debt due from
the company in sterling to the appellants. (3) If, however, the situs
of the debt be German, it is submitted that the Moratorium Law was
confiscatory in character and would not be held in an English court to
be effective to destroy or vary the property rights of any person
other than a German national. (4) Finally, if the above contentions be
rejected, it is submitted that further performance of the loan
agreement as varied by the terms of the Moratorium Law became illegal
on the outbreak of war with the result that the contract was abrogated
but the debt remained.

As to the situation of the debt, see Dicey's Conflict of Laws, 6th
ed., pp. 303 to 307. The primary rule is that a chose in action is
locally situate where the debtor resides. But if the place of payment
of a debt be stipulated it will be there situate, the general rule
notwithstanding. The decision of Eve J. in In re Russo-Asiatic Bank 2
is quoted as authority for this latter proposition at p. 304 of Dicey.
In Deutsche Bank und Disconto Gesellschaft v. Banque des Marchands de
Moscou 3 (cited in In re Banque des Marchands de Moscou
(Koupetschesky) (No. 2) 4a Russian bank owed £100,000 to a German bank
at a certain date. On non-payment of the debt the German bank, without
objection by the Russian bank, debited the latter's account with the
amount in question at the English branch of the German bank, and that
appeared to be the reason why the Court of Appeal held that the debt
was payable in London. It is difficult to see why a contract, which
expressly provides that a debt shall arise in sterling in London,
should be deemed to be situate in Germany

2 [1934] Ch. 720, 737, 738.

3 Unreported, C.A., 1931.

4 [1954] 1 W.L.R. 1108.
[1956] 330
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

because one of the two parties to the contract is a German national.

If proposition (1) above be accepted, then (2) the decision of Devlin
J. and the Court of Appeal in Bank voor Handel en Scheepvaart N.V. v.
Slatford 5 covers the present case and the appellants are entitled to
succeed, for the Moratorium Law, which purported to discharge the
debt, could not destroy a debt situate in England, for an English
court would not recognize a foreign law purporting to have
extraterritorial effect. It is submitted that the Bank voor Handel
case6 cannot be validly distinguished on the grounds that the subject-
matter in that case was a movable and not a chose in action.

As to proposition (3) (supra), it is submitted that the Moratorium Law
is a confiscatory decree. For a statement of the law and a review of
the authorities in respect of the English law as to confiscatory
decrees, see Frankfurther v. W. L. Exner Ltd. 7It is submitted that
the view of Campbell J. sitting in the Supreme Court of Aden in Anglo-
Iranian Oil Co. v. Jaffrate (The Rose Mary) 8 that all legislation
that expropriates without compensation is contrary to international
law was correct, and the court is invited to apply that decision in
the present case. Reported cases in which English courts have upheld
confiscatory legislation of foreign nations have all been cases where
the legislation affected a national of the country in question, with
the exception of the decision of Vaisey J. in In re Banque des
Marchands de Moscou (Koupetschesky), Royal Exchange Assurance v. The
Liquidator. 9 But it is to be observed that Vaisey J. had not the
advantage of seeing the judgment in the Rose Mary case.10 The
observations of Scrutton L.J. in Luther v. Sagor 11on the question of
the refusal of an English court to recognize foreign legislation on
the grounds that it is confiscatory and unjust were unnecessary to his
decision, and, indeed, do not represent the law. The courts of this
country have frequently disregarded the legislation of foreign nations
and they have not been deterred from taking such a course by fear of
the fact that their decision might make a casus belli.

In re Banque des Marchands de Moscou (Koupetschesky), Royal Exchange
Assurance v. The Liquidator 12 should not be followed. In that case
Vaisey J. seems to have considered that

5 [1953] 1 Q.B. 248.

6 Ibid.

7 [1947] Ch. 629.

8 [1953] 1 W.L.R. 246.

9 [1952] 1 T.L.R. 739.

10 [1953] 1 W.L.R. 246.

11 [1921] 3 K.B. 532, 557-559.

12 [1952] 1 T.L.R. 739.
[1956] 331
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

Maugham J. in In re Russian Bank for Foreign Trade 13 held that
Russian confiscatory legislation was effective for all purposes. That
is not a correct view of Maugham J.'s decision, which was that Russian
confiscatory legislation was effective vis-à-vis its own nationals,
and that decision is not contested. It is further submitted that since
this court is the final court of appeal in relation to questions
arising under the Distribution of German Enemy Property Act, 1949, it
has a wider discretion in regard to not following decisions of courts
of co-ordinate jurisdiction than would be the case if the court were
sitting in its usual capacity as a court of the Chancery Division of
the High Court of Justice.

Neither Wolff v. Oxholm 14 nor In re Fried Krupp Actien-Gesellschaft
15appear to have been cited to Vaisey J. in In re Banque des Marchands
de Moscou (Koupetschesky), Royal Exchange Assurance v. The Liquidator.
16 As to Wolff v. Oxholm, 17 (a) it supports the decision of Campbell
J. in the Rose Mary case,18 and (b) the question of the plaintiff's
nationality - whether he was a Dane or a British subject - was argued
and the court considered it a matter of importance. In re Fried Krupp
Actien-Gesellschaft 19 was a strong case, because the contract
provided that it was to be governed by German law. Nevertheless, it
was held that a British subject was entitled to disregard a
confiscatory German provision prohibiting the payment of interest.

There remain for consideration under this head of the argument Luther
v. sagor 20 and Princess Paley Olga v. Weisz, 21 but those cases are
distinguishable for they concerned confiscation by a State of the
property of its own nationals. As to the effect of the Moratorium Law,
any law which takes away property rights and makes no provision in
express terms for compensation is a confiscatory law. The fact that
something is given in exchange does not prevent the law from being
termed confiscatory. "Confiscatory" means taking away property to
which a person is entitled and substituting for it nothing or
something in exchange which is manifestly not its equivalent in value.

As to proposition (4) (supra), on the outbreak of war the contract was
abrogated, but on the authority of Arab Bank Ltd. v. Barclays Bank 22
what is left is the debt with its characteristics

13 [1933] Ch. 745.

14 (1817) 6 M. & S. 92.

15 [1917] 2 Ch. 188.

16 [1952] 1 T.L.R. 739.

17 6 M. & S. 92.

18 [1953] 1 W.L.R. 246.

19 [1917] 2 Ch. 188.

20 [1921] 3 K.B. 532.

21 [1929] 1 K.B. 718, 728, 736.

22 [1954] A.C. 495.
[1956] 332
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

and not a claim for money had and received. But the characteristics of
the debt do not include the Moratorium provisions, because no English
court would hold that a debt survives with a characteristic which is
illegal; the debt survives along with all its legal characteristics.
There appears to be no authority in support of the above proposition.

The second limb of the argument depends on the true construction of
article 7 (2) of the Distribution of German Enemy Property (No. 2)
Order, 1951. It is conceded that, prima facie, a question of German
law is by English law deemed to be a question of fact. Accordingly, it
would seem that the decision of the administrator as to the true
intent and effect of the Moratorium Law is final and cannot be the
subject of an appeal to this court. It is submitted, however, that
upon the true construction of article 7 of the Order all questions of
foreign law which may arise are to be treated as questions of law.
This view is supported by sub-clauses (4) to (8) of article 7.

Denys Buckley and N. C. Browne-Wilkinson for the administrator. (1)
The general rule as to the situs of a debt is that a simple contract
debt is deemed to be situate at the place where the debtor resides:
see per Romer L.J. in Deutsche Bank und Disconto Gesellschaft v.
Banque des Marchands de Moscou, 23quoted by Roxburgh J. in In re
Banque des Marchands de Moscou (Koupetschesky) (No. 2). 24 But since a
corporation may have a dual residence it is necessary sometimes to see
whether the contract provides for payment at any particular place:
see New York Life Insurance Co. v. Public Trustee. 25 In In re Russo-
Asiatic Bank 26 Eve J. applied the latter test and held that the debt
was payable in London. The New York Life Insurance Co. case27 was
cited in argument and Eve J. must have had the decision in mind. It is
submitted that In re Russo-Asiatic Bank 28 does not conflict with the
decision of the Court of Appeal in New York Life Insurance Co. v.
Public Trustee. 29 On the authority of the above decisions the debt in
question in the present case was locally situate in Germany at all
material times.

(2) If it be held that the debt is situate in London, then although it
is conceded that the Bank voor Handel case30 establishes that
country A cannot legislate in respect of the transfer of property
situate in country B, certainly as regards physical

23 reported, 1931, C.A.

24 [1954] 1 W.L.R. 1108, 1115.

25 [1924] 2 Ch. 101 (C.A.).

26 [1934] Ch. 720.

27 [1924] 2 Ch. 101.

28 [1934] Ch. 720.

29 [1924] 2 Ch. 101.

30 [1953] 1 Q.B. 248.
[1956] 333
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

chattels, probably also as regards accrued choses in action, that
doctrine has no application to contractual rights which are still
executory. Where, for example, there subsists a contract made between
X in Germany and Y in Great Britain which is still executory, it
cannot be said that the contract has a local situation until the
rights under it have accrued. Contractual rights are not governed by
the lex situs but by the proper law of the contract. The place where
the contract is entered into may be one element in assisting in the
determination of the proper law; but a contract while still executory
cannot have a situs.

The proper law of the contract means that law as altered from time to
time. Accordingly, it is impossible to postulate what the rights under
the contract will be until the date of maturity arrives. The validity
and effect and the method of the discharge of the contract while still
executory are governed solely by the proper law. The lex situs has no
application in those circumstances and no question of
extraterritoriality arises. If, therefore, the proper law of the
contract in question is German, and German law altered this contract
in respect of the mode of payment of the debt, that is a modification
of the contract made by the proper law. F. K. Jabbour v. Custodian of
Israeli Absentee Property 31draws a distinction between contractual
rights which have not yet become accrued rights, and are thus governed
by the proper law, and such rights which, when accrued, are governed
by the lex situs and, accordingly, cannot be subsequently altered by a
change in the proper law. [Reference was also made to Kahler v.
Midland Bank Ltd. 32; Rex v. International Trustee for the Protection
of Bondholders Aktiengesellschaft 33; Perry v. Equitable Life
Assurance Society of United States of America. 34]

The determination of the proper law is thus stated in Dicey's Conflict
of Laws, 6th ed., pp. 579 and 584: "Rule 136. … the term 'proper law
of a contract' means the law, or laws, by which the parties intended,
or may fairly be presumed to have intended, the contract to be
governed; or (in other words) the law or laws to which the parties
intended, or may fairly be presumed to have intended, to submit
themselves. Sub-rule 1. When the intention of the parties to a
contract, as to the law governing the contract, is expressed in words,
this expressed intention determines the proper law of the contract,
and, in general, overrides every presumption." In the present case
there are three terms of the contract which point to German law

31 [1954] 1 W.L.R. 139.

32 [1950] A.C. 24, 45, 52.

33 [1937] A.C. 500.

34 (1929) 45 T.L.R. 468.
[1956] 334
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

being the proper law. Clause 5 provides that the loan shall be secured
by a specific mortgage upon certain German coalfields. Clause 10 makes
provision for enforcement of the contract by execution in Germany.
Thirdly, and most significantly, clause 12 provides that the agreement
is to be "construed in accordance with German law." If that is so, it
follows that, without strong indications to the contrary, the parties
intended all the incidents of the contract to be governed by German
law: see the observations of Lord Wright delivering the judgment of
the Privy Council in vita Food Products Inc. v. Unus Shipping Co.
Ltd. 35The contract in question must be governed by German law. The
circumstance that payment of the debt is to be made in London in
sterling is not a cogent consideration in this respect. It is a mere
detail arising in the performance of the contract.

(3) On the question whether the Moratorium Law is a confiscatory law
it is to be observed that if it is confiscatory in its nature, it must
always have been a confiscatory law, and, therefore, it may be
material to consider the policy of the German Government relating to
the passing of the law in 1933. German policy in 1933 shows plainly
that the Moratorium Law was passed with the sole object of protecting
German currency. At that time Germany was faced with a financial
crisis similar to those experienced by other European countries in the
early "thirties." An examination of the provisions of the Moratorium
Law shows that it was not a confiscatory law; it substituted (a)
payment in Berlin for payment (in this case) in London; (b) payment in
Reichsmarks for payment in sterling; (c) payment to the
Konversionskasse instead of payment to the creditor. Its object was to
give to the foreign creditor rights against the Konversionskasse in
respect of sums paid in to his credit. It also appointed a custodian
to look after such property until such time as the German Government
felt able to allow foreign creditors to be paid their debts.

On the subject generally of penal laws and confiscatory legislation,
see Dicey's Conflict of Laws, 6th ed., pp. 152 to 160. It is submitted
that a perusal of the cases shows that the doctrine that English law
will not take cognizance of confiscatory legislation is confined to
what may be termed discriminatory confiscatory legislation, that is,
legislation directed at harming a particular person or a particular
class or classes of persons. Wolff v. Oxholm 36 was plainly concerned
with discriminatory legislation,

35 [1939] A.C. 277, 298.

36 6 M. & S. 92.
[1956] 335
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

for it was legislation enacted in time of war and directed against the
nationals of the other party to the dispute. In re Fried Krupp Actien-
Gesellschaft 37 is a comparable case, for it concerned German
legislation passed during the 1914-1918 war with the object of
cancelling the right of British creditors to interest on German debts.
In the Rose Mary case38 Campbell J. found as a fact that the Persian
decree was discriminatory legislation directed solely against Anglo-
Iranian Oil Co. Ltd. Luther v. Sagor 39 did not turn on the question
of the nationality of the parties to the suit or on the question of
confiscation, but it is a decision which recognizes the right of a
sovereign Power to legislate in respect of land and movables situate
within its own territory. Princess Paley Olga v. Weisz 40 is to the
same effect. The decision did not turn on the nationality of the
plaintiff but upon an application of the general principles enunciated
in Luther v. Sagor 41: see also In re Russian Bank for Foreign
Trade. 42 Ricaud v. American Metal Co. 43 is authority for the
proposition that nationality does not affect the question. It is
submitted that Campbell J. in the Rose Mary case44 wrongly described
the grounds on which Luther v. Sagor 45 and Princess Paley Olga v.
Weisz 46 were decided. In In re Banque des Marchands de Moscou
(Koupetschesky), Royal Exchange Assurance v. The Liquidator 47 Vaisey
J. held, and it was necessary to his decision, that the ambit of the
rules of English law concerning confiscatory legislation does not vary
according to whether the property confiscated is owned by nationals or
non-nationals.

The following rules of law can be deduced from the authorities:
English law will recognize the validity of the legislation of a
sovereign State in respect of movables or immovables situate within
its jurisdiction, and no distinction is to be drawn between such
property owned by nationals and that owned by non-nationals: Luther v.
Sagor 48; In ra Banque des Marchands de Moscou (Koupetschesky), Royal
Exchange Assurance v. The Liquidator 49; In re Francke & Rasche 50;
Perry v. Equitable Life Assurance Society of United States of America
51; Rex v. International Trustee for the Protection of Bondholders.
52 The

37 [1917] 2 Ch. 188.

38 [1953] 1 W.L.R. 246, 251, 252.

39 [1921] 3 K.B. 532, 548.

40 [1929] 1 K.B. 718, 724, 728, 736.

41 [1921] 3 K.B. 532.

42 [1933] Ch. 745, 766.

43 (1918) 246 U.S. 304.

44 [1953] 1 W.L.R. 246, 258.

45 [1921] 3 K.B. 532.

46 [1929] 1 K.B. 718.

47 [1952] 1 T.L.R. 739.

48 [1921] 3 K.B. 532.

49 [1952] 1 T.L.R. 739.

50 [1918] 1 Ch. 470.

51 45 T.L.R. 468.

52 [1937] A.C. 500.
[1956] 336
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

complement of the above rule is that a sovereign State cannot
legislate in respect of property situate outside the State's
jurisdiction whether such property is owned by nationals or non-
nationals: In re Russian Bank for Foreign Trade. 53 The sole exception
to the first of the above rules is that English law will not recognize
the validity of legislation concerning property within the
jurisdiction of the legislating sovereign State which is contrary to
the usage of the law of nations.

It is submitted (a) that the Moratorium Law was not confiscatory
legislation; (b) in the alternative, even if it be held to be
confiscatory in character, it was not discriminatory confiscatory
legislation, nor was it legislation contrary to the usage of the law
of nations.

(4) If the question of the liability of the debtor is to be governed
by English private international law, then the true principle is that
as from the outbreak of war further performanceof the contract was
forbidden except the payment of a liquidated sum. The rule is not that
the whole contract is abrogated but that further performance under the
contract is forbidden: Schering Ltd. v. Stockholms Enskilda Bank
Aktiebolag 54; Arab Bank Ltd. v. Barclays Bank. 55 Under the contract
in question everything which had to be done pursuant to its terms by
the appellant company, viz., making the loan, was done before
September 3, 1939. And all that was required by the German debtor was
to pay the instalments on the loan. But, on the facts of the present
case, the above-quoted rule of English private international law does
not affect the transaction, for this was a German debt locally situate
in Germany and governed by German law. The appellant's argument
involves the proposition that upon the outbreak of war on September 3,
1939, a new contract came into existence.

Further, it is submitted that the provisions of the Moratorium Law did
not benefit the German Reich, for on the maturity of the debt the law
required the debtor to pay the money to the Konversionskasse, which
held the sum to the account of the foreign creditor.

As to the second limb of the appellant's argument, a question of
German law is a question of fact for the administrator: Dicey's
Conflict of Laws, 6th ed., rule 194, p. 866. Where there is to be
found in an English statute or statutory instrument a reference

53 [1933] Ch. 745.

54 [1946] A.C. 219, 240, 241, 248, 258.

55 [1954] A.C. 495, 525-527, 530, 535, 540, 541.
[1956] 337
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

to a "point of law," such reference is to a point of English law. The
references to the "law" to be found in sub-clauses (4) to (8) of
article 7 of the Order of 1951 are plainly references to the law
normally administered by the courts there referred to and are not
references to foreign law. If the administrator makes an error on a
point of foreign law, that is not an error of law within the meaning,
of article 7. [Reference was made to Lowenthal v. Attorney-General.
56]

Browne-Wilkinson following. The question whether the appellant's debt
has been discharged depends upon the proper law of the contract
(Dicey's Conflict of Laws, 6th ed., rule 143, pp. 651-653), and for
this purpose it matters not where the debtor resides or at what place
the debt is payable. Even if the debt is situate in England but German
law governs the contract under which the debt arises and a German
statute discharges the debt by means of a non-discriminatory but
confiscatory provision, an English court would nevertheless be
entitled to hold that the debt is discharged. [Reference was made to
Mount Albert Borough Council v. Australasian Temperance and General
Mutual Life Assurance Society Ltd. 57; Merwin Pastoral Co.
Proprietary Ltd. v. Moolpa Pastoral Co. Proprietary Ltd. 58]

Milner Holland Q.C. in reply. The passing of the Moratorium Law had
the effect of adding a clause to the contract to the intent that in so
far as the debtor paid into the Konversionskasse the debt was
discharged. Accordingly, in considering whether the contract was
affected by the outbreak of war it is vital to ascertain the precise
terms of the contract. The terms of this contract were plainly
contrary to English public policy because the import of the additional
clause was to increase the resources of the enemy, since it provided
for the conversion of a debt payable in sterling in London into a debt
payable in Reichsmarks in Germany.

It is submitted that rule 143 at p. 651 of Dicey's Conflict of Laws
6th ed., has no application in the present case. It has been urged
that the proper law of this contract is German law and German law as
altered from time to time. It would be extraordinary if that were held
to be the intention of the parties to the contract in view of the
terms of clause 2, which provide for repayment of the loan in sterling
free from all German taxes,

56 [1948] W.N. 66; [1948] 1 All E.R. 295, 299.

57 [1938] A.C. 224, 228, 236-238, 241.

58 (1933) 48 C.L.R. 565, 572, 576, 577, 579, 581, 587.
[1956] 338
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY.

since it is well known that the provisions of fiscal statutes are
frequently subject to alteration. As to clause 12 of the contract, it
is submitted that the word "construed" is there used in the narrow
sense of construing a particular text of the contract. Further, the
observations of Lord Wright in the Vita Food case59are obiter and
should not be followed. Where parties have expressly provided that a
debt is payable at a particular place, the law of that place governs
the debt. Finally, even if the argument for the administrator be
correct and that an English court will only refuse to recognize the
validity of confiscatory legislation if it is also discriminatory, the
Moratorium Law is discriminatory because it discriminates against all
foreign creditors. [Reference was also made to New York Life
Insurance Co. v. Public Trustee 60 and Deutsche Bank und Disconto
Gesellschaft v. Banque des Marchands de Moscou. 61]

Cur. adv. vult.

December 8, 1955. UPJOHN J. read the following judgment: This case
comes before me as a case stated by the Administrator of German Enemy
Property under the provisions of the Distribution of German Enemy
Property Act, 1949 (which I shall refer to as "the Act").

The Act provides that Orders in Council may be made for the collection
and realization of German enemy property, and for the distribution
thereof to persons who establish claims in respect of German enemy
debts. By section 8 of the Act a German enemy debt is defined as being
a sum due at the passing of the Act, namely, December 16, 1949, in
respect of an obligation incurred before September 3, 1939. By the
Distribution of Enemy Property (No. 2) Order, 1951, made in pursuance
of the Act, it is provided that the Administrator of German Enemy
Property is to determine whether any claim is established for the
purposes of the Order but that, if the claimant is dissatisfied with
the determination as being erroneous in point of law, the
administrator is to state and sign a case for the opinion of the High
Court. He has decided against the claim.

[His Lordship stated the facts and continued:] I have been told that
there was no formal hearing before the administrator, and that he
determined the matter solely upon the question as to the effect of the
Moratorium Law by the municipal law of

59 [1939] A.C. 277, 298.

60 [1924] 2 Ch. 101, 109, 112, 115, 129.

61 Unreported, C.A., 1931.
[1956] 339
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

Germany. He did not consider, because they were not put to him, any of
the many interesting questions which have been argued before me, and
which I must now mention.

I will assume, though it is not conceded, that the administrator was
right in his determination as to the domestic effect of the Moratorium
Law. On that footing Mr. Milner Holland, for the claimant, submits
four main points. (1) That as the debt is by the terms of the contract
made payable in London, the debt of the company to the claimants is
situate in London. (2) The Moratorium Law will not be recognized as
having any extraterritorial effect so that if the debt is situate in
London there was on September 3, 1939, and remains, a debt due from
the company in sterling to the claimants. (3) If, however, the situs
of the debt be German, he submits that the Moratorium Law is
confiscatory and would not be held in an English court to be effective
to destroy or vary the rights of any person other than a German
national. (4) Finally, he says, that if he is wrong on all the
foregoing points, further performance of the loan agreement as varied
by the terms of the Moratorium Law became illegal on the outbreak of
war, with the result that the contract is abrogated but the debt
remains.

Mr. Buckley, for the administrator, submits: (1) That the effect of
the Moratorium Law depends not upon the local situation of the debt
but upon the proper law of the contract, which he submits is German.
(2) On that footing the English courts must give effect to all German
laws unless they are discriminatory against some particular person or
class of persons and the Moratorium Law, he contends, is not such a
law. (3) That the outbreak of war suspended but did not abrogate the
contract, for all that remained to be done thereunder was payment of a
liquidated sum of money.

The first question that I must determine is whether the applicability
of the Moratorium Law is to be tested by reference to the local
situation of the debt or by the proper law of the contract. I am
concerned with the effect of a law passed in 1933 upon a series of
debts which, although accrued, only became payable on or after
September 3, 1939.

In my judgment, the question whether a liability to pay a debt payable
on a future date has become modified or annulled by legislation must
depend upon the question whether such legislation affects the
contractual obligation, for the matter still rests in contract.
Indeed, it does not seem appropriate to speak of debt having a local
situation until it is payable and can be
[1956] 340
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

recovered by suit, for its situs primarily depends upon the residence
of the debtor when it is recoverable. I think that distinction was
recognized by Pearson J. in Jabbour v. Custodian of Israeli Absentee
Property, 1 where he was concerned with debts or choses in action such
as a claim for unliquidated damages which could be sued for at the
date of the modifying legislation. The power of legislation to affect
a contract by modifying or annulling some term thereof is a question
of discharge of the contract which, in general, is governed by the
proper law (see Kahler v. Midland Bank, 2 a case to which I return
later).

It is clear that the proper law of the contract depends on the
intention of the parties to be ascertained in each case on a
consideration of the terms of the contract, the situation of the
parties and generally on all the surrounding facts; the parties may
have actually expressed their intention upon the matter, and in such a
case, prima facie, their intention will be effectuated by the court:
Mount Albert Borough Council v. Australasian Temperance and General
Mutual Life Assurance Society Ltd. 3

In favour of the view that English law is intended to govern the
contract, the following indications are to be found in the loan
agreement. First, the debt is payable in London in sterling without
deduction for any German taxes. Secondly, the English translation is
the governing translation, and it would appear that the form of the
agreement is one which is appropriate to English law. There was no
evidence before me as to whether it is appropriate to German law.
Thirdly, it contemplates that bonds may be issued, and such bonds are
to be in accordance with the text and practice ruling in the City of
London.

In favour of German law there are the following indications: First,
that there are to be mortgages on German immovable property; such
mortgages are to be inscribed in a German register. The loan agreement
also provides that if the company makes any default, it would submit
to immediate seizure in execution after formal authorization by a
notary public. Those considerations are not conclusive upon the
question, for the parties may well contemplate that different parts of
their contract shall be governed by different law.

Secondly, it is provided that the loan agreement is to be construed in
accordance with German law. That is very

1 [1954] 1 W.L.R. 139; [1954] 1 All E.R. 145.

2 [1950] A.C. 24; 65 T.L.R. 663; [1949] 2 All E.R. 621.

3 [1938] A.C. 224, 240; 54 T.L.R. 5; [1937] 4 All E.R. 206.
[1956] 341
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

important, for if an agreement is to be construed in accordance with
German law it can scarcely be doubted that the parties contemplate
that their rights will be governed by German law - it would be strange
indeed to construe an agreement by German law (although the English
text is to prevail), and then to apply to the construction so reached
rules of English law. Lord Wright made some observations on this in
the Privy Council case of Vita Food Products Inc. v. Unus Shipping
Co. Ltd. 4He had mentioned the case of The Torni, 5 where the Court
of Appeal had held that a clause providing that certain bills of
lading were to be construed in accordance with English law did not
mean that the whole contract was to be governed by English law. Lord
Wright said6: "There were certain differences between that case and
the present. One was that the bills of lading had a clause providing
that they were 'to be construed in accordance with English law' not as
in the present case 'shall be governed by English law.' In their
Lordships' judgment that distinction is merely verbal and is too
narrow to make a substantial difference. The construction of a
contract by English law involves the application to its terms of the
relevant English statutes, whatever they may be, and the rules and
implications of the English common law for its construction, including
the rules of the conflict of laws. In this sense the construing of the
contract has the effect that the contract is to be governed by English
law."

The Torni 7 was rather a special case, and is an illustration of the
principle that the parties' expression of intention is only prima
facie evidence as to the proper law. This court will not necessarily
regard that as being the governing consideration where a system of law
is chosen which has no real or substantial connexion with the contract
looked upon as a whole. No such considerations arise in the present
case. Mr. Milner Holland argued in the alternative that even if German
law was the appropriate law, the parties intended that only German law
as it stood in 1924 should govern their relationship. He pointed to
the provision for payment free of all German tax as showing that the
parties could not have contemplated that subsequent German legislation
was to govern their rights. I cannot so interpret the intentions of
the parties as evinced in the language they have used.

4 [1939] A.C. 277; 55 T.L.R. 402; [1939] 1 All E.R. 513.

5 [1932] P. 78; 48 T.L.R. 471.

6 [1939] A.C. 277, 298.

7 [1932] P. 78.
[1956] 342
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

I regard clause 12 as decisive of the matter and, in my judgment, the
parties intended that German law was to govern their relationship,
that is, German law as it exists from time to time, and that is the
proper law of the loan agreement. For the reasons I have already
given, I do not think that the situs of the debt is the relevant
consideration, but as the matter has been very fully argued before me
and I have been referred to an unreported decision of the Court of
Appeal of over 20 years' standing, which is much in point, I think I
ought to express my views thereon.

The general rule is clear that the debt is locally situate where the
debtor resides, in this case Germany. Mr. Milner Holland, however,
submits that that rule is altered by the terms of the contract between
the parties, and he relies upon the statement to be found in the sixth
edition of Dicey's Conflict of Laws, p. 304: "If the place of payment
of a debt be stipulated it will be there situate, the general rule
notwithstanding." He also relies on a statement of the law by Eve J.
in In re Russo-Asiatic Bank, 8 where he said this: "although as a
general rule the location of simple contract debts is the place in
which the debtor is to be found, that rule, in my opinion, does not
apply here, where the obligation is in terms to pay in sterling in
London." It is to be noted that in that case the debtor resided both
in Russia and in England, and in those circumstances it was a perfectl
not urate statement of the law, whatever interpretation is to be
placed on the judgments in the Court of Appeal in New York Life
Insurance Co. v. Public Trustee, 9 to which I now turn.

In that case all the three members of the court pointed out that,
strictl , a debt can only be sued upon in the place where it is
payable, and although no doubt in a proper case the creditor may have
a right to sue the debtor in another place, such right is to sue not
for debt but for breach of contract for the failure to pay the debt in
the due place of payment; the conclusion would seem to follow that the
debt is situate where the debt is payable.

On the other hand, Mr. Buckley submits that when properly understood,
the Court of Appeal decided that the place of payment becomes relevant
to the question of situs only when it is established that the debtor
has two or more residences, and certainly some passages in the
judgments of the judges who formed the court support that view. In my
judgment, in this court the matter is concluded by the unreported case

8 [1934] Ch. 720, 738.

9 [1924] 2 Ch. 101; 40 T.L.R. 430.
[1956] 343
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

in the Court of Appeal already referred to, namely, Deutsche Bank und
Disconto Gesellschaft v. Banque des Marchands de Moscou. 10 A
transcript of the judgments has been made available to me. I have sent
for the pleadings in that case, and it is clear that the plaintiffs
were assignees of a bank (the Deutsche Bank), whose principal office
was in Berlin, but who had a branch in England. The defendant, a
Russian bank with no branch in England, was indebted to the London
branch of the Deutsche Bank on current account and, therefore, in
accordance with the general rule of banking law the debt was payable
in London. It is clear that there was no express term of any contract
making the debt payable in London. The point now under discussion was
not dealt with by Scrutton L.J., but Greer L.J. formulated a number of
propositions, among them these: "(4) On January 10, 1920, the Treaty
of Peace Order in Council came into operation whereby enemy choses in
action having a situs in this country became vested in the Custodian,
afterwards called the Administrator, of German property. (5) At this
time the bank had no residence in this country, but the debt was
payable in this country. (6) The debt in question, therefore, did not
pass to the administrator, residence of the debtor being an essential
element in deciding the situs of the debt."

Later on he said: "With regard to the propositions numbered (4) (5)
and (6). At the date when the Treaty of Peace Order in Council came
into operation, namely, January 10, 1920, the defendants had no place
of business in, and were therefore not resident in, the United
Kingdom, and I think it is established by the decision in this court
in New York Life Insurance Co. v. Public Trustee 11 that the debt had
no situs in this country. I regard that case as establishing that it
is an essential element in determining the situs of a debt due to a
foreign corporation that at the material date the corporation should
have a residence within the jurisdiction in which the debt is
payable."

Romer L.J., after discussing the New York Life Insurance Company's
case, said this: "As the debt in question was, in terms of the
contract creating it, payable in this country, and in addition was
recoverable here, its locality was held to be English. In the present
case the debt is payable in this country, but the defendant bank was
not residing here on

10 Cited in [1954] 1 W.L.R. 1108; reported on a point of practice
(1931-1932) 107 L.J.K.B. 386.

11 [1924] 2 Ch. 101.
[1956] 344
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

January 10, 1920. It was in May of the same year, but that will not
help the plaintiffs. The debt was also recoverable here on January 10,
1920, had the plaintiffs been successful in obtaining leave to serve
the defendant bank out of the jurisdiction. But I know of no authority
for the proposition that a simple contract debt is situate in this
country at a time when the debtor is not resident here, namely,
because he can be sued by putting into operation the provisions of
Order XI."

It is true that in that case the decision of the court was ultimately
of no effect upon this point for it was found upon further evidence
that the defendant bank had no existence at the relevant time, but it
is clear that the majority of the court intended to lay down finally
their views upon the law "de bene esse" in the words of Greer L.J. in
case upon further inquiry the bank was found to be in existence.
Therefore I do not think I can treat the observations of Greer L.J.
and Romer L.J. as obiter dicta, and the case is binding upon me if
applicable to the present circumstances. It seems to me that the only
distinction that can be drawn between that case and this is that in
this case the debt is payable in London by the terms of the contract
and not by virtue of the general law applicable thereto and that
circumstance is indeed strongly relied upon by the claimants. In my
judgment, however, that forms no proper ground of distinction, for the
law must be the same whether the debt is payable in a particular place
by virtue of the express terms of the contract or by general law
applicable thereto. Nor can I accept the argument that, as on one
construction of section 8 of the Act there is no appeal from my
decision, I am at liberty to disregard a well-settled canon of
procedural law, that decisions of the Court of Appeal are binding on
this court. Accordingly, in my opinion, the locality of the debt in
this case is Germany, the only place where the debtor resides.

Mr. Milner Holland's second point does not arise on the view I have
formed, and I turn to his third main point, namely, that the 1933
Moratorium Law is confiscatory and will not be recognized as affecting
the contractual rights of the parties even where the debt is situate
in Germany and the proper law is German, save only in cases where
German nationals are concerned.

I start with the elementary proposition that it is part of the law of
England, and of most nations, that in general every civilized State
must be recognized as having power to legislate in respect of movables
situate within that State and in respect
[1956] 345
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

of contracts governed by the law of that State, and that such
legislation must be recognized by other States as valid and effectual
to alter title to such movables and to sustain, modify or dissolve
such contracts. The substantial question I have to determine is what
limit is to be imposed upon that proposition when the effect of such
legislation comes to be debated in the courts of other States. I may
note in passing that the modern tendency is to deny extraterritorial
validity to legislation, for example, upon movables situate outside
the state at the time of the legislation: Bank voor Handel en
Scheepvaart N.V. v. Slatford. 12

To this general principle of recognition in foreign courts of
territorial validity of legislation there are undoubted limitations or
exceptions as the following examples show: (1) No State will enforce
the fiscal laws, however proper, of another State, nor penal statutes,
using that phrase in the strict sense of meaning statutes imposing
penalties recoverable by the State for infringement of some law. "The
penal laws of foreign countries are strictl local and affect nothing
more than they can reach and can seize by virtue of their
authority,"per Lord Loughborough in Folliott v. Ogden. 13 (2) English
law will not recognize the validity of foreign legislation intended to
discriminate against nationals of this country in time of war by
legislation which purports to confiscate wholly or in part movable
property situated in the foreign State. As long ago as 1817 such
confiscation was described by Lord Ellenborough C.J., in Wolff v.
Oxholm, 14 as "not conformable to the usage of nations." That case
also shows that legislation tending to preserve enemy property by the
appointment of a custodian will be recognized. Another case
illustrative of the principle is In re Fried Krupp Actien-
Gesellschaft, 15 where Younger J., while recognizing the validity of
German legislation which prohibited payment to enemy nationals in time
of war, held that a German law passed shortl nofter the outbreak of
war which purported to cancel and not merely to suspend liability for
payment of interest by a German to a British firm would not be
recognized in these courts although the proper law of the contract was
German. Younger J. said: "And this ordinance, as well as similar
German ordinances enacted at the same time and made applicable to
France and Russia, have this feature common to

12 [1953] 1 Q.B. 248; [1951] 2 T.L.R. 775; [1951] 2 All E.R. 779.

13 (1789) 1 H.Bl. 123, 135.

14 (1817) 6 M. & S. 92.

15 [1917] 2 Ch. 188, 192.
[1956] 346
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

all, that their intention plainly is to penalize particular classes of
persons, and incidentally to injure the enemy countries to which these
persons belong."

(3) English courts will not recognize the validity of foreign
legislation aimed at confiscating the property of particular
individuals or classes of individuals; Banco de Vizcaya v. Don
Alfonso de Borbon y Austria, 16 which treated the Spanish laws
purporting to expropriate the ex-King of Spain's property as examples
of penal legislation; and see Anglo-Iranian Oil Co. v. Jaffrate (The
Rose Mary), 17 where Campbell J., sitting in the Supreme Court of
Aden, held certain laws of the State of Persia which he found to be
passed to nationalize the plaintiff company only without compensation
were confiscatory and ineffectual to pass title.

Another example suggested by Professor Lauterpacht in the 8th edition
of Oppenheim's International Law, at p. 268, is a law passed by a
foreign State expropriating the property in such State of British
Protestants.

I do not challenge the correctness of the decision in the Rose Mary
case18 upon the facts of that case, but Campbell J. came to the
conclusion that the authorities both of this and other countries
justified the formulation of a more general principle, namely: (1) all
legislation that expropriates without compensation is contrary to
international law; and (2) that such law is incorporated in the
domestic law of Aden and accordingly such legislation will not be
recognized as valid in the courts of Aden. Unless the law of England
takes a different view of international law from the law of Aden, the
judge's conclusions can only be correct if his interpretation of
Aksionairnoye Obschestvo A.M. Luther Co. v. James Sagor & Co. 19 and
Princess Paley Olga v. Weisz 20 is correct. Those cases, both in the
Court of Appeal, were concerned with the effect of Russian legislation
introduced shortl nofter the Russian Revolution of 1917 which in fact
expropriated certain types of private property situate in Russia
without any compensation. They established the principle that this
court will not inquire into the legality of acts done by a foreign
government in respect of property situate in its own territory.
Campbell J. considered that principle to be valid only where the
property confiscated belongs (as in both those cases) to

16 [1935] 1 K.B. 140; 50 T.L.R. 284.

17 [1953] 1 W.L.R. 246.

18 Ibid.

19 [1921] 3 K.B. 532; 37 T.L.R. 777.

20 [1929] 1 K.B. 718; 45 T.L.R. 365.
[1956] 347
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

subjects of the confiscating State. However, all three judgments in
Luther v. Sagor 21 laid down the principle in perfectl ngeneral terms
and it was in no way limited, at any rate in express terms, to a
recognition of the validity of such legislation in relation only to
nationals of the confiscating State.

Bankes L.J. said this22: "Even if it was open to the courts of this
country to consider the morality or justice of the decree of June,
1918, I do not see how the courts could treat this particular decree
otherwise than as the expression by the de facto government of a
civilized country of a policy which it considered to be in the best
interest of that country. It must be quite immaterial for present
purposes that the same views are not entertained by the Government of
this country, are repudiated by the vast majority of its citizens, and
are not recognized by our laws. Taking the view I do of the point I do
not consider it necessary to discuss the authorities to which our
attention has been called." The authorities he did not think it
necessary to discuss included Folliott v. Ogden 23und Wolff v.
Oxholm. 24 I do not understand the Lord Justice to be purporting to
overrule those cases without examination, but to be treating them as
irrelevant because they were exceptions to the general rule as
examples of penal legislation (in the strict sense) and of
discriminatory legislation respectively which in his view had no
application to the case before him.

In equally general terms were the judgments of two members of the
court in Princess Paley Olga v. Weisz. 25 It seems clear that
Scrutton L.J. drew no distinction between the operation of legislation
upon the property of a national of the confiscating State and a
foreigner who had movables in that State, for he said this26: "The
United States, situate in the neighbourhood of South and Central
American Republics, where the life of any Government is precarious and
its death rarely by natural causes, frequently found in its territory
property seized by a revolutionary force which ultimately succeeded in
establishing itself in power and there sold the goods it had seized to
persons who exported them to the United States, where they were
claimed by their original owners. In Oetjen v. Central Leather Co. 27
these facts occurred with reference to a seizure in Mexico of property
of a Mexican citizen which when sold came into

21 [1921] 3 K.B. 532.

22 Ibid. 546.

23 1 H.Bl. 123.

24 6 M. & S. 92.

25 [1929] 1 K.B. 718.

26 Ibid. 724.

27 (1918) 246 U.S. 297.
[1956] 348
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

the United States, and in Ricaud v. American Metal Co. 28they
occurred again with respect to the property of a citizen of the United
States." He then went on to state the general principle, which I need
not restate.

It is true that Russell L.J., in that case, said29: "This court will
not inquire into the legality of acts done by a foreign government
against its own subjects in respect of property situate in its own
territory," but it was sufficient for the decision of the case before
him, and he dealt with the point very briefly.

Maugham J., in In re Russian Bank for Foreign Trade, 30also stated
the principle in the same limited way but his remarks were obiter.

On the other hand, in Perry v. Equitable Life Assurance Society of
United States of America 31 the plaintiff, a British subject residing
in Russia, took out a policy of life assurance with the defendants,
the proper law of the contract being Russian. It was held that certain
confiscatory decrees of the Russian Government were effective to annul
the contract, though it is true that no point was taken that such
decrees could be valid only against Russian nationals. This case was
quoted without disapproval by Lord Radcliffe in Kahler's case.32

In In re Banque des Marchands de Moscou (Koupetschesky), Royal
Exchange Assurance v. The Liquidator 33 (which does not appear to have
been cited to Campbell J.) Vaisey J. expressed the view that the
general principle was not limited to nationals of the confiscating
State. I respectfully agree with him, for it seems to me that on this
question nationality must be irrelevant. If the principle be true in
respect of a State in relation to its own nationals, it must surely be
conceded in relation to those persons who, though not subjects of the
State, nevertheless bring their movables within its jurisdiction for
business or private reasons or for the like reasons enter into
contracts governed by the law of the State, and in general enjoy the
same benefits and protection and are subject to the same disadvantages
and disabilities as subjects of the State.

With all respect to Campbell J., I think that Luther v. Sagor 34and
Princess Paley Olga v. Weisz 35 laid down principles of

28 (1918) 246 U.S. 304.

29 [1929] 1 K.B. 718, 736.

30 [1933] Ch. 745; 49 T.L.R. 253.

31 (1929) 45 T.L.R. 468.

32 [1950] A.C. 24, 56.

33 [1952] 1 T.L.R. 739; [1952] 1 All E.R. 1269.

34 [1921] 3 K.B. 532.

35 [1929] 1 K.B. 718.
[1956] 349
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

general application not limited to nationals of the confiscating
State.

In my judgment the true limits of the principle that the courts of
this country will afford recognition to legislation of foreign States
in so far as it affects title to movables in that State at the time of
the legislation or contracts governed by the law of that State rests
in considerations of international law, or in the scarcely less
difficult considerations of public policy as understood in these
courts. Ultimately I believe the latter is the governing
consideration. But, whatever be the true view, the authorities I have
reviewed do show that these courts have not on either ground
recognized any principle that confiscation without adequate
compensation is per se a ground for refusing recognition to foreign
legislation. That view is further supported by the authorities on
exchange control legislation which I must now consider.

It cannot be doubted that legislation intended to protect the economy
of the nation and the general welfare of its inhabitants regardless of
their nationality by various measures of foreign exchange control or
by altering the value of its currency, is recognized by foreign courts
although its effect is usually partially confiscatory. Probably there
is no civilized country in the world which has not at some stage in
its history altered its currency or restricted the rights of its
inhabitants to purchase the currency of another country. Most
countries, including the United Kingdom, are restricting those rights
at this very moment. In individual cases the result of such
legislation is in fact to confiscate in some degree private rights of
property but the right of the State to do so has never been
challenged.

A few examples may be cited. In Rex v. International Trustee for the
Protection of Bondholders Aktiengesellschaft 36His Majesty's
Government in a contract made in 1917, whose proper law was that of
the U.S.A., contracted to pay a debt by instalments at the option of
the holder in New York in gold coin of the U.S. of a certain weight
and fineness or in London at a certain rate. A resolution of Congress
in 1933, which had the force of law of the U.S.A., held that such a
provision was against public policy, as it obstructed the power of
Congress to regulate the value of money of the United States and that
such an obligation was discharged by payment dollar for dollar of coin
which at the time of payment was legal tender. As in the meantime the
U.S.A. had devalued the dollar, the direct result of that

36 [1937] A.C. 500; 53 T.L.R. 507; [1937] 2 All E.R. 164.
[1956] 350
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

legislation was to reduce the value of the debt sued upon and pro
tanto to confiscate without compensation the property rights of the
holder, but it was never suggested that such a resolution was not
thereby applicable as part of the proper law of the contract.

Another case is Kahler v. Midland Bank Ltd., 37 already mentioned. In
that case certain exchange regulations of Czechoslovakia which had in
effect been in force since 1934 made unlawful without the permission
of the Czechoslovakian National Bank transfers of foreign securities
from (among other cases) currency "inlanders" to currency
"foreigners." Lord Simonds said38: "It is necessary only to say that
the relevant law relating to foreign exchange, under which the
delivery without a consent that was in fact withheld would be illegal,
is not in my opinion a law of such a penal or confiscatory nature that
it should be disregarded by the courts of this country."

Lord Reid said39: "I have already stated that in my opinion an
exchange control regulation of the kind here in question is not within
the kind of foreign law which an English court cannot recognize." And
Lord Radcliffe said40: "There is nothing in the contract that would
prevent him from calling for the shares at any time; but the law of
Czechoslovakia to which the contract is subject has so far modified
his right so to recover possession of the shares as to make the
consent of the National Bank a condition precedent. If, then, the
courts of this country are to recognize that modification, Mr. Kahler
lacks a present right to possession. It seems to me that we should
ignore an established rule of our private international law if we were
not to give effect to the currency regulation in question. If the
proper law of the contract is the law of Czechoslovakia, that law not
merely sustains but, because it sustains, may also modify or dissolve
the contractual bond. The currency law is not part of the contract,
but the rights and obligations under the contract are part of the
legal system to which the currency law belongs. So to decide is to
give effect to the same principle as was upheld by our courts when the
United Kingdom Government's obligations under its American loan of
1917 were treated as modified by American legislation (see Rex v.
International Trustee for the Protection of Bondholders A/G. 41, or
when Mr. Perry's life assurance

37 [1950] A.C. 24.

38 Ibid. 27.

39 Ibid. 47.

40 Ibid. 56.

41 [1937] A.C. 500.
[1956] 351
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

policy was annulled by supervening legislation in the U.S.S.R. (see
Perry v. Equitable Life Assurance Society of the United States of
America 42."

The case of Merwin Pastoral Co. Proprietary Ltd. v. Moolpa Pastoral
Company Proprietary Ltd., 43 a decision of the High Court of
Australia, also affords a useful illustration. The State of New South
Wales passed a law providing, inter alia, that all personal rights to
payment under mortgages of or agreements for sale of land in New South
Wales should be void, leaving the parties to their remedies against
the land. The parties litigated in the State of Victoria. On appeal to
the High Court, Evatt J. said44: "I therefore think that the governing
law of the contract was that of New South Wales. But Macfarlan J. was
also, I gather, prepared to decide against the present appellant upon
the separate ground that the ex post facto New South Wales legislation
was very unmeritorious and its application would probably 'work
manifest injustice to or, in effect, a fraud on one of the parties.'
It is true that, very occasionally, upon grounds of public policy,
English courts have refused to accord recognition to some part of the
law of a foreign country, which might otherwise be treated as
governing or underlying a transaction. It is, in my view, not
permissible for a Victorian court to adopt such an attitude here. All
that the legislature of New South Wales did was, in a period of
unexampled economic crisis, to revise, alter, suspend or discharge
certain contractual obligations over which it could exert its
constitutional power. The legislature of Victoria, too, enacted a law
which differed in degree only from that of New South Wales."

In my judgment these courts must recognize the right of every foreign
State to protect its economy by measures of foreign exchange control
and by altering the value of its currency. Effect must be given to
those measures where the law of the foreign State is the proper law of
the contract or where the movable is situate within the territorial
jurisdiction of the State. That, however, is subject to the
qualifications that this court is entitled to be satisfied that the
foreign law is a genuine foreign exchange law, that is, a law passed
with the genuine intention of protecting its economy in times of
national stress and for that purpose regulating (inter alia) the
rights of foreign creditors, and is not a law passed ostensibly with
that object, but in reality

42 45 T.L.R. 468.

43 (1933) 48 C.L.R. 565.

44 Ibid. 587.
[1956] 352
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

with some object not in accordance with the usage of nations. The
title and expressed purpose of such legislation are not conclusive
upon the point. For example, in Frankfurther v. W. L. Exner Ltd. 45 a
law was passed under the Hitler regime in Austria with the apparently
innocent object of providing for receivers in certain cases, but with
the real object of confiscating the property of Jews and others. Romer
J. expressed the view that this court is entitled to inquire what
manner of legislation it really was, and for that purpose to see what
was done under it. Again, if it had not been for the difficulties
which arose on the pleadings in that case, I do not think the House of
Lords in Kahler's case46 would have hesitated to investigate the
question whether an exchange control statute passed in 1934 with the
genuine object of protecting the State's economy had not by 1946
become an instrument of oppression and discrimination.

Further, while every State is in the best position to know what
measures of control are best suited to its particular needs, and must
be allowed much latitude in its choice of control weapons, there are
limits in the recognition to be afforded to such legislation; and this
court must be entitled to consider whether, looking at all the
circumstances, the law is so far-reaching in its scope and effect as
really to offend against considerations of public policy of this
country.

I turn to a more detailed consideration of the Moratorium Law. As the
point was never taken before the administrator, there is unfortunately
no statement in the case stated of the circumstances in which the
Moratorium Law came to be passed. I am told it was passed in the
earliest days of the Hitler régime, but Mr. Milner Holland has
conceded that there is nothing sinister in that, and that the law was
passed in an honest attempt to solve Germany's economic position.

Now the Moratorium Law did three things: (1) It permitted the debtor
to pay in marks instead of sterling. That is not only a usual, but
almost essential part of currency control. (2) It altered the place of
payment from London to Berlin, not in time of peace and free
communication between nations in itself a very serious matter. (3) It
altered the method of discharge, for instead of being compelled to pay
the creditor in sterling in London, it enabled the debtor to pay a
government agency in make in Berlin.

45 [1947] Ch. 629.

46 [1950] A.C. 24.
[1956] 353
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

So far as the creditor was concerned, he could not complain so long as
such payments were made, but it did not cancel the balance of the
debt, either principal or interest, for it appears that the original
obligation was only discharged pro tanto upon payment of marks into
the Konversionskasse. On the other hand, upon such payments being made
the creditor could no longer sue his debtor for payment in sterling in
respect of the instalments discharged by such payment, and I assume
that on the last due payment being made into the Konversionskasse (as
it was) the creditor could no longer proceed to enforce his rights as
mortgagee. Briefly, in such case his rights were extinguished as
against the debtor.

Mr. Milner Holland submitted that the wording of the relevant laws and
the obligations thereby cast upon the Konversionskasse were so vague
and indefinite that it could not properly be said that, in exchange
for such extinction the creditor received any rights against the
Konversionskasse; and that, he said, amounted to pure confiscation
which was also discriminatory against a class consisting of Germany's
foreign creditors. There is much force in that argument. On the other
hand, accepting the view that this was a genuine attempt to protect
Germany's economy and not, for example, an attempt to build up a
secret war fund for use against this and other countries, some years
later the legislation appears to create a state of affairs with which
we in this country are not wholly unfamiliar.

The general scheme of the legislation was this. The debtor was to make
payments into a government agency on behalf of the creditor. Such
payments were to be credited to each creditor and payment out was to
be made at such date as the Reichsbank should fix. That is not unlike
a blocked account. There was an economic blizzard blowing in the early
1930's; even the United States felt its force, as we are reminded by
the International Trustee case.47 It had led this country to suspend
the gold standard in September, 1931. I must assume that the genuine
object and purpose of this Moratorium Law was to prevent a scramble
for payment among Germany's foreign creditors, which might have
resulted in another collapse of the mark; I must assume that the
intention of the German law was to ensure so far as possible that when
the storm had passed trading and debtor and creditor relationships
might be resumed in an orderly manner. In my judgment, this was
foreign exchange control legislation

47 [1937] A.C. 500.
[1956] 354
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

which must be recognized by this country as effective to modify
contractual obligations where the proper law is German.

The next question is as to the effect of the outbreak of war on
September 3, 1939, upon the rights of the contracting parties. At that
date the position was that the claimants had long since performed all
their obligations under the contract, and all that remained to be done
by the company was payment of a liquidated sum of money by instalments
of principal and interest as set out in great detail in the schedule
to the loan agreement. By the Moratorium Law this obligation could be
discharged by payment in Reichsmarks to the Konversionskasse. It is
argued that upon the outbreak of war the provision for payment to the
Konversionskasse became illegal, as it tended to increase the
resources of the enemy, for it was said the German Government would no
doubt have the use of the money paid into the Konversionskasse. Upon
that footing it was said that the provision permitting the discharge
of the contract by payment to the Konversionskasse became illegal but,
as it was admitted that you cannot abrogate a particular term of a
contract, whether expressed or implied by the general law governing
the contract, the result must be that the whole contract was abrogated
in the sense that no part of it could legally be performed thereofter,
but the original debt with all its characteristics remained: see Arab
Bank Ltd. v. Barclays Bank Ltd. 48

The principles of law to be applied are well settled by the highest
authority. In Ertel Bieber & Co. v. Rio Tinto Co. Ltd. 49Lord Dunedin
said: "From these cases I draw the conclusion that upon the ground of
public policy the continued existence of contractual relation between
subjects and alien enemies or persons voluntarily residing in the
enemy country which (1) gives opportunities for the conveyance of
information which may hurt the conduct of the war, or (2) may tend to
increase the resources of the enemy or cripple the resources of the
King's subjects, is obnoxious and prohibited by our law."

It is clear, however, that, in the words of Lord Russell in Schering
Ltd. v. Stockholms Enskilda Bank Aktiebolag, 50 "a contract which is
completely executed on one side and under which nothing remains to be
performed except payment to be made by the other of a liquidated sum
whether already due, or

48 [1954] A.C. 495; [1954] 2 All E.R. 226.

49 [1918] A.C. 260, 274; 34 T.L.R. 208.

50 [1946] A.C. 219, 248-249; 62 T.L.R. 122; [1946] 1 All E.R. 36.
[1956] 355
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

debitum in praesenti solvendum in futuro, is unaffected by the
outbreak of war." Lord Morton of Henryton quoted that passage with
approval in the Arab Bank case.51 If, therefore, the claimants had
been under an obligation to the company to pay a liquidated sum by
instalments, that obligation would have been suspended, not abrogated.

This is the converse case but, in my judgment, the same principles
apply. The contract is wholly executed on one side, no question of any
continued intercourse between subjects and alien enemies arises. Had
the original obligation to pay in sterling in London remained, that
obligation, in my judgment, would not have been abrogated but
suspended; the German Government under legislation passed for that
purpose could have directed payment to a German Custodian of Enemy
Property without offending any principle of public policy of this
country or of international law. In fact, the proper law permits
payment in Germany to a German agency. I cannot see that transfer of
German marks from one person to another in Germany increases the
resources of the enemy unless such transfer is the result of some
seizure of enemy funds by the German Government for use against its
enemies. Whether such a seizure would in itself be illegal I do not
pause to consider (see In re Ferdinand, Ex-Tsar of Bulgaria 52, as no
such seizure is suggested here. I must assume that payments made by
the company into the Konversionskasse remained at all material times
to the credit of the claimant in some blocked account.

In my judgment this point also fails.

I have so far assumed the correctness of the administrator's decision
that the Moratorium Law did in the events which have happened operate,
by the municipal law of Germany, to extinguish the debt. The claimants
challenge that decision, and desire to tender evidence of German law
to prove the contrary. Whether they are entitled to do so depends on
the construction of article 7 (2) of the Distribution of German Enemy
Property (No. 2) Order, 1951.

[His Lordship read the article and continued:] Mr. Milner Holland
concedes that prima facie a question of German law is by the law of
this country a question of fact upon which, therefore, the
administrator's decision would be final, but he submits that upon the
true construction of article 7 all questions of foreign

51 [1954] A.C. 495, 526.

52 [1921] 1 Ch. 107.
[1956] 356
1 Ch. HELBERT WAGG & CO. LTD., In re CLAIM BY. Upjohn J.

law that may arise are to be treated as questions of law. He submits
that this is shown by sub-clauses (4) to (8) inclusive.

The Act is an Act passed for the benefit of Her Majesty's Government,
British subjects or British protected persons resident or carrying on
business in the United Kingdom, and any body of persons corporate or
unincorporate, incorporated or constituted under the laws in force in
the United Kingdom, for they alone are creditors as defined in section
8 of the Act. Such persons or bodies may be resident in any part of
the United Kingdom, and if they desire to challenge the correctness of
the administrator's decision in law they must do so, so it seems to
me, by reference to some system of law operating within the United
Kingdom. It would be highly inconvenient if, for example, a Jersey man
made a claim in this court claiming that Jersey law ought to be
applied; the Act therefore refers the matter to the Jersey court. It
may then be found that the parties intended that the law of some
foreign State (probably, though not essentially, Germany) should
govern their relations. If so, that law must be then ascertained and
applied by the Jersey courts to such extent and in such manner as
Jersey law provides.

I do not think that the clause was intended to have any greater
operation than that, or inferentially to alter a well settled rule of
English municipal law. If the draftsman of the order had intended that
German law was to be treated as a question of law, even in those parts
of the United Kingdom where the municipal law treats it as a question
of fact, surely he would have said so in clear and unmistakable terms.

This point also fails.

I dismiss the claimants' appeal with costs.

Appeal dismissed.

Solicitors: Slaughter & May; Solicitor, Board of Trade.

J. A. G.

[1956] Ch. 323