Anwar et al v. Fairfield Greenwich Limited et al

Filing 1048

DECLARATION of Professor Jonathan Harris in Support re: #775 FIRST MOTION to Certify Class.. Document filed by AXA Private Management, Harel Insurance Company Ltd., Harel Insurance Company, Ltd., Pacific West Health Medical Center Inc. Employees Retirement Trust(On behalf of Itself), Pacific West Health Medical Center Inc. Employees Retirement Trust(on Behalf of All Others Similarly Situated), Pacific West Health Medical Center, Inc. Employee's Retirement Trust, Securities & Investment Company Bahrain, St. Stephen's School. (Attachments: #1 Exhibit 1 through 3, #2 Exhibit 4 Part 1, #3 Exhibit 4 Part 2, #4 Exhibit 5, #5 Exhibit 6, #6 Exhibit 7 and 8, #7 Exhibit 9 through 11, #8 Exhibit 12 through 14, #9 Exhibit 15 through 21, #10 Exhibit 22 and 23, #11 Exhibit 24, #12 Exhibit 25 through 27, #13 Exhibit 28 through 32, #14 Exhibit 33, #15 Exhibit 34, #16 Exhibit 35, #17 Exhibit 36, #18 Exhibit 37 through 39, #19 Exhibit 40, #20 Exhibit 41 Part 1, #21 Exhibit 41 Part 2, #22 Exhibit 42 through 51, #23 Exhibit 52 through 65, #24 Exhibit 66 through 70, #25 Exhibit 71 through 74, #26 Exhibit 75 through 77, #27 Exhibit 78 through 81, #28 Exhibit 82, #29 Exhibit 83 Part 1, #30 Exhibit 83 Part 2, #31 Exhibit 84 and 85, #32 Exhibit 86 Part 1, #33 Exhibit 86 Part 2, #34 Exhibit 87 through 90, #35 Exhibit 91 Part 1, #36 Exhibit 91 Part 2, #37 Exhibit 92 through 103, #38 Exhibit 104 through 106, #39 Exhibit 107 and 108, #40 Exhibit 109 through 113)(Barrett, David)

EXHIBIT 24

LLOYD'S

LAW

LIST

REPORTS
Editor:

E. S. MATHERS
of the Middle Temple. Barrister-at-Law

1962

Volume 2

PRINTED

AND
AT

PUBLISHED
LLOYD'S.

LONDON,

1963

BY
RNGI,.O\ND

LLOYD'S

LLOYD'S LIST LAW REPORTS

Q.B. (COM. CT.)]

Campos v. Kentucky & Indiana Terminal
QUEEN'S BENCH DIVISION
(COMMERCIAL COURT)
Tuesday, May 29, 1962

CAMPOS v. KENTUCKY
TERMINAL RAILROAD

& INDIANA
COMPANY

Before Mr. Justice McNAIR
Contract-Bonds-Gold

value clause.

Practice-" Res judicata."
Conflict of laws-Class action-Whether plea
or " res judicata" open V.S.C.A.,
Title 28, Rule 23.
Bonds issued by defendant company in
1911, by which defendants promised to
pay bearer £100
Sterling money of the United Kingdom
. . . on the 1st day of January, 1961,
with interest at 4t Per cent. per annum
payable semi-annually in like gold
coin ••.
Interest coupons (100) on bonds stating
that defendants
WILL PAY TO BEARER TWO POUNDS AND
FIVE SHILLINGS
STERLING MONEY OF THE
UNITED KINGDOM • • •

Claim by plaintiff bearer of 414 bonds
against defendants for £8223 19s. 4d. (gold
value of interest coupons Nos. 97, 98, 99)
and £123,675 8s. lId. (gold value of
principal sums due on Jan. I, 1961)-Plea
by plaintiff that, in view of words "in
like gold coin" appearing in provision as
to payment of interest, and no gold coin
having been referred to earlier in bond,
the words "in gold coin" should be
wirtten into provision as to payment of
capital+Contentions
by defendants (a)
that only face value of interest coupons
and bonds was payable; (b) that, in view
of decision of U.S. Ct. of App., on bonds
in identical form, doctrine of res judicata
applied-Proper law- of contract conceded
by parties to be English law - Evidence
that U.S. action was a class action
commenced before plaintiff became bondholder} and that person who was not a
member of the class when class action was
commenced was not bound by ultimate
decision - Admissibility of terms of
mortgage deed referred to in bond, but
not referred to in interest coupon, and
of stockholders' resolution.
---Held,
(1) (i) that, by the proper
law of the .contract at the time of the
making of the contract (1911), a loan of
£1000 in sterling money of U.K. could be
discharged only by 1000 gold sovereigns

Railroad Co.

459
[1962]

VOL.

2

or Bank of England notes convertible into
gold sovereigns or partly in one and partly
in the other; that the provisioIl in bond
that interest should be "payable in like
gold coin" did no more than reflect
the then existing legal position; that
reconciliation of provisions as to payment
of capital and interest did not require that
words ••in gold coin" should be written
into contract, since, under law at that
time, both obligations were dischargeable
in same way, i.e., by gold sovereigns or
Bank of England notes convertible into
gold sovereigns; (ii) that, by proper law
of contract at date of performance, a
commercial obligation to pay sterling
could not be discharged by tender of gold
coins or Bank of England notes convertible into gold without breach of law; and
that performance of that obligation could
be made only by tender of Bank of
England notes not convertible into gold;
(2) further, in the circumstances, the terms
of the mortgage deed and stockholders'
resolution were not admissible as aids to
construction of bond; (3) (obiter) (i) that
defendants had failed to prove that U.S.
action was a true class action or that,
under U.S. law, that judgment was binding on anyone who was not an original
party or did not intervene; (ii) that,
assuming that U.S. judgment supported
plea of res judicata in U.S. Courts against
an absent member of the class, plaintiff
was not a bondholder when U.S. action
was commenced; was not a party to that
action; and had not been served with
process which led to U.S. Court's
judgment; and that, therefore, plea of
res judicata failed; and (4) that plaintiff
was entitled to face value of bonds and
interest coupons; that, as plaintiff's claim
was for payment on a gold value basis,
plaintiff's claim failed-Special order as
to costs.

The following cases were referred to:
British & French Trust Corporation v. New
Brunswick Railway Company, [1937] 4
All E.R. 516;
Coles v. Hulme, (1828) 8 B. & C. 568;
Feist v. Societe Intercommunale
BeIge
d'Electricite, [1934] A.C. 161;
Lemaire v. Kentucky and Indiana Terminal
Railroad Company, (1956) 140 F. Supp.
82; (1957) 242 F. 2d 884;
Mourmand and Others v. Le Clair, [1903]
2 KB. 216;
New Brunswick
Railway Company
v.
British and French Trust Corporation,
Ltd., [1939] A.C. 1;
Norman v. Baltimore
& Ohio Railroad
Company, (1935) 294 U.S. 240;

460
[1962]

LLOYD'S LIST LAW REPORTS
VOL.

2]

[Q.B. (COM. CT.)

Campos v. Kentucky & Indiana Terminal Railroad Co.

Oppenheimer it at. v. F. J. Young & Co.,
Inc., et al., (1944) 144 F. 2d 387;
Ottoman Bank of Nicosia v. Chakarian,
[1938] A.C. 260;
Perry v. United States, (1935) 294 U.S.
330;
Rex v. International Trustee for the
Protection of Bondholders Aktiengesellschaft, [1937] A.C. 500; (1937) 57
Ll.L.Rep. 145;
Rossano v. Manufacturers Life Insurance
Company, [1962] 1 Lloyd's Rep. 187;
Serbian Loans Case, Permanent Court of
Interna tional Justice;
Syndic in Bankruptcy of Salim Nasrallah
Khoury v. Khayat, [1943] A.C. 507;
System Federation No. 91 v. Reed et al.,
(1950) 180 F. 2d 991;
Treseder-Griffin and Another v, Co-operative Insurance Society, Ltd., [1956] 2
Q.B. 127; [1956J 1 Lloyd's Rep. 377;
United States et al. v. Bankers Trust Company et al., (1935) 294 U.S. 240;
Weeks et al. v. Bareco Oil Company et al.
(1941) 125 F. 2d 84;
York v. Guaranty Trust Company of New
York, (1944) 143 F. 2d 503.
In these two actions, which were
consolidated, Miss Sonia Campos, of Paris,
claimed £131,880 19s. 4d., being the gold
value, principal and interest, alleged to be
due to her in respect of 414 £100 first
mortgage 4t per cent. coupon gold bonds
issued in 1911 by the defendants, Kentucky
& Indiana Terminal Railroad Company, of
Louisville, Kentucky, U.S.A.
The plaintiff claimed that upon the true
construction of the bonds, which fell due
for payment on Jan. I, 1961, payment was
to be made in current legal tender of the
United Kingdom representing the gold value
of the nominal amount of payment.
The defendants contended that the payment should be in current legal tender.
The main issue before the Court was
whether the bonds imported a gold value
clause.
According to the plaintiff's case, by
the terms of each of the bonds the defendants promised to pay to the bearer
£100 sterling money of the United Kingdom
of Great Britain and Ireland, at the office
or agency of the defendants in the City of
London, England, on Jan. 1, 1961, with
interest thereon at the rate of 4t per cent.
per annum from Jan. 1, 1911, payable
semi-annually in like gold coin, at the
agency, on July I and Jan. 1 in each year,

on presentation and surrender of the
annexed coupons. as they severally became
due. By the terms of the bonds, payment
was expressed to be secured by a mortgage
or deed of trust dated Jan. 3, 1911,
executed by the defendants to the Standard
Trust Company of New York, which itself
referred to a resolution of the stockholders
of the defendants authorizing the issue of
the bonds.
The plaintiff alleged that upon the true
construction of the bonds:
(a) the interest payments and/or
(b) the capital sum payable thereunder
on Jan. 1, 1961,
were such sums in current legal tender of
the United Kingdom as represented the
gold value of the nominal amount of each
payment such gold value being determined
in accordance with the weight and fineness
established by the Coinage Act, 1870,
namely, 0.23542 troy ounces of fine gold
to the pound sterling; and that the bonds
were, upon their true construction,
governed by English law.
The plaintiff said that the defendants
wrongfully contended that the sums payable in respect of both (a) interest and (b)
capital under the bonds were the face
amount of the bonds and coupons in
current English legal tender of the same
face amount.
The plaintiff duly presented the bonds
and interest coupons at the agency of the
defendants in London, namely, Morgan
Grenfell & Co., Ltd., of London, in respect
of which the plaintiff alleged that the sums
properly payable to her amounted to
£123,657 5s. lId., and £8223 13s. 5d.,
respectively, but the defendants, in accordance with their contention referred to
above, refused payment.
The plaintiff claimed (1) a declaration
that upon the true construction of the
bonds the amounts payable by the defendants to the plaintiff in respect of (a)
interest and / or (b) capital were such sums
in current legal tender of the United
Kingdom as represented the gold value of
the nominal amount of each payment, such
gold value being determined in accordance
with the weight and fineness established by
the Coinage Act, 1870, namely, 0.23542
troy ounces of fine gold to the pound
sterling; (2) The sums of £123,657 5s. na.
and £8223 13s. 5d.; and (3) Interest thereon
under the Law Reform (Miscellaneous
Provisions) Act, 1934, at such rate and for
such period as the Court should think fit.

Q.B. (COM. CT.)]

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana

By their defence, the defendants did not
admit that the plaintiff was the bearer
of the bonds.
They admitted that
the bonds were part of a series of
l3510 First Mortgage 4t% Fifty-Year
Guaranteed Sterling Bonds which were
issued by the defendants under a first
mortgage of Jan. 3, 1911, and which were
offered to the public (pursuant to a
prospectus to which was annexed a letter of
Jan. 3, 1911, from the then President of
the defendants to J. P. Morgan & Co.,
of New York) by Morgan Grenfell & Co.,
Ltd., of London, between Jan. 18 and 20,
1911, pursuant to a resolution of the
board of directors of Dec. 30, 1910,
acting under powers conferred on the
board by a resolution of the stockholders
of the defendants of Dec. 30, 1910, and
further admitted that the bonds were 414
out of 859 bonds which had not been
presented for payment since maturing on
Jan. I, 1961.
The defendants admitted the promise set
out in the statement of claim and admitted
that the bonds were, upon their true
construction, governed by English law.
The defendants denied that, upon the true
construction of the bonds, either the
interest payments payable thereunder on
presentation and surrender of coupons
maturing from time to time or the capital
sums payable 'thereunder on presentation
and surrender of the bonds on or after
Jan. 1, 1961, were such sums in current
legal tender of the United Kingdom as
represented the gold value of the nominal
amount of each payment, such gold values
being determined in accordance with the
weight and fineness established by the
Coinage Act, 1870, namely, 0.23542 troy
ounces of fine gold to the pound sterling
and denied that, upon that construction,
any of the payments of interest or principal
were any sums calculated by reference to
gold of any weight and fineness or any gold
value.
The defendants alleged that, upon the
true construction of the bonds, the interest
payments and the capital sums payable
thereunder on presentation and surrender
of the respective coupons and bonds were
the face amount of the coupons, namely,
£2 5s. each, and the face amount of the
bonds, namely,. £100 each in current
English legal tender.
The defendants denied that their agents
in the City of London had refused to pay
the proper sum due in respect of any
interest coupons against presentation and

i

Terminal

Railroad Co.

461
[1962]

VOL.

;.",

,
,

2

surrender of the relevant interest coupons,
and contended that if, which was not
admitted, the plaintiff presented any
mterest coupons and was not paid, that
was due to her refusal to surrender her
coupons unless paid more than the sums
properly due.
The defendants alleged further, and in
the alternative, that the United States
District Court for the Southern District of
Ne~ York, (1956) 140 F. Supp. 82, in an
action brought by Sylvan Lemaire on behalf
of himself and all other bondholders of the
defendants similarly situated against the
defendants and others, by a judgment
determined, adjudged and decreed that:
(a) The defendants intended to have the
?bligation .with respect to principal and
interest dischargeable by payment in
London, England, in sterling in such
currency as should be legal tender at the
respective times of payment without
~iminution or enlargement of the obligation by reason of any future fluctuation in
the gold content of the English sovereign.
(b) The bonds and interest coupons were
dischargeable in the specified number of
units of account (pounds sterling) in such
currency as was or would be legal tender at
the respective times of payment, regardless of any change which might have
occurred after 1911 in the gold convertibility or the purchasing power of that
currency.
(c) The bond and interest coupons did
not contain a gold value clause and did not
call for a value in money fixed by a
determined quantity of gold.
(d) T~e defendants' obligation to pay all
future mterest coupons attached to the
bonds, as they should become due and
payable and the defendants' obligation to
pay the principal of the bonds due on
Jan. 1, 1961, would be fully discharged by
the defendants paying the specified number
of units of account, i.e., pounds sterling,
in currency which would be legal tender
at the respective times of payment and
without regard to gold and gold value.
Sylvan Lemaire's bonds were identical
save as to their serial numbers to the
bonds in this case.
Sylvan Lemaire and
t~e bearers of such bonds were similarly
situated as regards their respective bonds.
The judgment referred to above was
unanimously affirmed by the United States
Court of Appeals for the Second Circuit,
on Apr. 2, 1957, (1957) 242 F. 2d 884,

I..

462
[1962]

LLOYD'S LIST LAW REPORTS
VOL.

2]

Campos v. Kentucky & Indiana Terminal Railroad Co.

and, by the law of the United States of
America, that judgment was a final and
conclusive judgment.
The defendants said that, by the laws of
the United States of America, they could
rely upon that judgment as a complete
defence to any action brought in the
United States of America whether in a
Federal or State Court by any holder of
any bond similar to Sylvan Lemaire's bonds
or holder of any interest coupon similar
to Sylvan Lemaire's coupons in respect of
any such bond or in respect of any such
interest coupon even if such subsequent
proceedings in America were to enforce a
judgment of an English Court to the effect
that payment of principal and interest
against surrender respectively of such bond
and coupon should be made with regard
to gold value including a judgment of the
Queen's Bench Division obtained in this
action by the plaintiff giving her all the
relief claimed by her in her writ of
.summons and statement of claim. Accordingly, the defendants relied upon the
doctrine of res judicata.
By the terms of the mortgage deed
pursuant to which the bonds, the subjectmatter of this action were issued, the
property of the defendants set out in the
deed was transferred to the Standard Trust
Company of New York, its successor or
successors and assigns (hereinafter called
the trustee) in trust for the equal pro rata
benefit and security of all and every holder
of the bonds and coupons issued under and
secured by the deed and by the terms of the
deed no holder of any bond or coupon
should have the right to institute any suit,
action or proceeding in equity or at law for
any remedy, without first giving notice to
the trustee of the fact that default had
occurred nor unless such holder should
have made request to the trustee and
afforded the trustee a reasonable opportunity to institute such action, suit or
proceeding in the name of the trustee and
offered adequate security and indemnity to
the trustee against the cost, expenses and
liabilities to be incurred "and such notification request and offer of indemnity were
declared conditions precedent to any action
or cause of action for any remedy, it being
the express and declared intention that no
holder of any bonds or coupons should
have any rights other than as set out in
the deed and that all proceedings at law,
or in equity, should be instituted, had and
maintained in the manner provided in the
/

[Q.B. (COM. CT.)
[McNAIR, J.

deed, and for the equal benefit of all
holders of the bonds and coupons
outstanding.
At the date of the commencement of
these proceedings, the trustee was Morgan
Guaranty Trust Company of New York of
140 Broadway, New York, the successor
of the Standard Trust Company.
The defendants alleged that the plaintiff
failed to notify, request, afford opportunity to, offer security to and offer
indemnity to the trustee as set out above
and that this action was not instituted and
was not being maintained in the manner
provided in the deed and was not for the
equal benefit of all holders of the bonds
and coupons which were outstanding.
Mr. John Foster, Q.C., Mr. Mark Littman,
Q.C., and Mr. A. L. V. Lincoln (instructed
by Messrs. Payne, Hicks Beach & Co.)
appeared for the plaintiff; Sir Milner
Holland, Q.C., and Mr. Owen Stable.
(instructed by Messrs. Slaughter & May)
represented the defendants .
JUDGMENT
Mr. Justice McNAIR: The plaintiff in these

two consolidated actions is Miss Sonia
Campos, an Egyptian national, resident in
Paris.
She is the bearer of 414 coupon
bonds issued by the defendant company,
Kentucky & Indiana Terminal Railroad
Company, in 1911, entitled "£100 First
Mortgage 41 % Coupon Gold Bonds".
These bonds were purchased for Miss
Campos's account between Dec. 19, 1955,
and Feb. 23, 1956. She claims against the
defendant company, in the first action, the
sum of £8223 13s. 5d., being, as she claims,
the gold value of the interest payments due
under the coupons of the series denoted by
the numbers 97, 98 and 99, and, in the
second action, the sum of £123,675 5s. lld.,
being the gold value of the principal
under the bonds which fell due for :
ment on Jan. 1, 1961. The basis
claim in each case is that upon the
construction of the bonds the interest
ments and the capital sums payable on
due dates were such sums in current
tender of the United Kingdom as represents
the gold value of the nominal amount
each payment, such gold value
determined in accordance with the weizhf
and fineness established by the Coinage
1870, namely, 0.23542 troy ounces of
gold to the £ sterling.
The defendants, by their defence, denyi~
that the basis contended for by the plaintiff
is correct and assert that upon the true

<.: •.:•.
: :

Q.B. (COM. CT.)]

McNAIR, J.]

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana

construction of the said bonds the interest
payments and the capital sums payable
thereunder are for the face amount of the
coupons, namely, £2 5s., and the face
amount of the bonds, namely, £100 each in
current English legal tender. The issue so
joined may be stated simply: Do the
coupons or the bonds on their true
construction import a true "gold value
clause ", Le., a clause which prescribes a
measure for fixing the amount of the debt
to be discharged and not merely the method
by which adebt of fixed unvarying amount
is to be discharged? See Feist v. Societe
Intercomrnunale Belge d'Electricite, [1934]
A.C. 161. By way of additional defence
the defendants rely upon a decision of the
United States District Court for the
Southern District of New York, in an action
brought by one Sylvan Lemaire allegedly on
behalf of himself and other bondholders of
the defendants similarly situated against the
defendants in which the Court in effect
upheld the contention now made by the
defendants in the present action, namely,
that the bonds and interest coupons did not
contain a gold value clause. This decision,
affirmed by the United States Court of
Appeals for the Second Circuit, is relied
upon by the defendants as justifying a plea
of res judicata against the present plaintiff.
In the further alternative, the defendants
rely upon the plaintiff's failure to notify the
trustees of the mortgage securing due payment of the bonds of her intention to take
proceedings against the defendants in
accordance with a provision in the mortgage
deed under which the bonds were secured.
The main issue to which I now turn is
the question of the true construction of
the bonds. Each of the bonds sued upon
except for its serial number is in identical
terms and provides as follows:
KENTUCKY & INDIANA TERMINAL
RAILROAD COMPANY,
No. 1831.
First Mortgage 41% Coupon Gold Bond.
Payable January 1, 1961.

For value received, the Kentucky &
Indiana Terminal Railroad Company, a
corporation existing under the laws of
the State of Kentucky (hereinafter called
"the Company"), promises to pay to
bearer, or if this bond be registered as
hereinafter provided, to the registered
owner, ONE HUNDRED POUNDS Sterling
money of the United Kingdom of Great
Britain and Ireland, at the office or
agency of the Company in the City of

Terminal

Railroad Co.

463
[1962] VOL. 2

London, England, on the 1st day of
January, 1961, with interest thereon at
the rate of four and a half per cent. per
annum from the 1st day of January, 1911,
payable semi-annually in like gold coin,
at said agency, on the 1st day of July
and January in each year, on presentation and surrender of the annexed
coupons as they severally become due.
Both the principal and the interest of this
bond are payable without deduction for
any tax or taxes which the Company or
the Trustee may be required to payor
to retain therefrom, under any present
or future law of the United States, or
of any State or County or Municipality
therein. This Bond is one of an issue
of coupon and registered bonds of the
Company to an amount. not exceeding
in the aggregate the equivalent of Two
Million pounds Sterling known as its
First Mortgage 4t %
Gold Bonds,
secured by its mortgage or deed of trust
dated the 3rd day of January, 1911,
executed by the Company· to The
Standard Trust Company of New York,
Trustee, conveying all the proper.ty of
the Company upon terms and conditions
therein set forth, to which mortgage or
deed of trust reference is now made. In
case default shall be made in the payment of any instalment of interest on
this bond, the principal sum may be
declared due and payable in the manner
and with the effect provided in said
indenture. . . . This bond shall pass by
delivery, but the ownership of this bond
may at any time, and from time to time,
be registered at the office or agency of
the Company in the City of London,
England, the registration to be certified
hereon; and thereafter no transfer shall
be valid unless made upon the books of
the Company and certified hereon by its
transfer agent, until registration has been
made to bearer, after which this bond
shall pass by delivery until the ownership be again registered.
The registry
of this bond shall not restrain the
negotiability of the coupons by delivery
merely. The holder, also, at his option,
may surrender for cancellation this bond
with the coupons for .future interest
thereon, in exchange for a registered
bond without coupons, as provided in
said mortgage. This bond shall not be
valid or become obligatory for any
purpose until the certificate endorsed
hereon shall have been signed by the
Trustee under the said mortgage or deed
of trust; and such signing shall be

(,.,

464
[1962] VOL. 2]

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana Terminal Railroad Co.

conclusive evidence that the bond so
signed has been duly executed in accordance with its terms and the terms of the
said mortgage or deed of trust.
IN WITNESS WHEREOFthe Kentucky &
Indiana Terminal Railroad Company has
caused its corporate seal to be hereto
affixed and attested by its Secretary or
Assistant Secretary, and this bond to be
signed by its President or Vice-President,
and has hereto attached coupons with the
name of its Treasurer engraved thereon,
as of the 3rd day of January, 1911.
Kentucky & Indiana Terminal Railroad
Company,
By
(sd) . ..
Arnold.
SECRETARY.
(sd) J. W. H. Campbell,
PRESIDENT.
On the face of each of the bonds there
was superimposed a decorative device of
which the word GOLD forms a prominent
feature.
To each bond on issue there were
attached 100 detachable coupons serially
numbered from 1 to 100 to cover the halfyearly interest payments over the 50 years'
life of the bonds.
These coupons were in the following
form:
KENTUCKY & INDIANA
TERMINAL
RAILROAD COMPANY ON THE 1ST DAY

OF JAN. 1961.
£2. 5s.

WILL PAY TO BEARER
TWO POUNDSAND
FIVE SHILLINGS,STERLING
MONEY THE
OF
UNITEDKINGDOM GREATBRITAINAND
OF
IRELAND, T THE AGENCY THE COMPANY
A
OF
IN THE CITY OF LONDON,ENGLAND, REE
F
OF ALLTAXESAS MENTIONED THE BOND,
IN
BEINGSIX MONTHS' NTEREST
I
ONITS FIRST
MORTGAGE OLDBONDNO. 1043.
G
[Signed]
TREASURER
A perusal of these two documents
reveals (1) that as regards the bond the
obligation with relation to the payment of
the capital moneys contains no express
reference to gold or gold coins, but is
expressed to be an obligation to pay £100
sterling money of the United Kingdom of
Great Britain and Ireland whereas the
obligation as to payment of interest as set
out in the bond is stated to be to pay

[Q.B. (COM.CT.)
[McNAIR, J.

"interest thereon at the rate of four and a
half per cent. per annum ... semi-annually
in like gold coin" [*] no gold coin having
previously been expressly mentioned, and
(2) that the coupon expresses the interest
obligation as an obligation "to pay to
bearer two pounds and five shillings sterling
money of the United Kingdom of Great
Britain and Ireland", without any reference
to "gold coin".
It is common ground (1) that the bonds
and coupons are governed by English law;
and (2) that both the bonds and the
coupons when detached from the bonds are
negotiable instruments passing by delivery.
Before considering
the question
of
construction more closely it is probably
convenient to refer briefly to the mortgage
deed and the documents therein referred to
while postponing for further consideration
the question whether any of this material
is relevant or admissible on the question of
construction.
The mortgage deed dated Jan. 3, 1911,
is a complicated document running to
72 pages; but in essence it provides for a
mortgage by the defendant company to the
Standard Trust Company of New York of
property of the defendant company in
trust
. .. for the equal pro rata benefit and
security of all and every holder of the
bonds and interest coupons issued under
and secured by this indenture . . .
Nowhere in the operative provisions of the
deed is any mention made of· gold or gold
coin;
but,
throughout
the
operative
provisions, the issue of bonds secured by
the mortgage is referred to in terms of
sterling money of the United Kingdom of
Great Britain and Ireland; the bonds to be
issued are not to exceed the equivalent of
£2,000,000 sterling money; the coupons
are each to be for the principal sum of
£100 (see Art. I); provision is also made
in Art. II for the contingency that the
defendants may wish to issue bonds payable
both as to principal and interest in money
of other governments (i.e., not in sterling)
subject to the limitation that
... the aggregate principal sum of all the
bonds to be issued under and secured
by this .indenture . . . shall not exceed
£2,000,000 sterling,the bonds payable in
money other than sterling money being
reckoned at the par of exchange thereof
with sterling money. . . .
• Emphasis supplied by Mr. Justice McNair.

-

Q.B. (COM. CT.]
McNAIR,

J.]

---.-.'"---~-,~--------

.- •..

...----.-----

--~.-'----.-~-.----.~---,--.-.

..

--"

The recitals to the deed set out the
resolution of the stockholders of Dec. 30,
1910, which (omitting immaterial words)
. directed and empowered [the
directors] to cause to be executed under
the corporate seal . . . a mortgage or
deed of trust of this company . . . to
secure an issue of bonds for the aggregate
principal sum of Two Million pounds
sterling, the principal thereof payable in
gold coin of the United Kingdom of
Great Britain and Ireland . . . with
interest thereon ... at the rate of 41-per
centum per annum, payable semi-annually
in like _gold coin . . .
By the same resolution the stockholders
approved the printed form of mortgage then
submitted as sufficient compliance with
their resolution.
There follows a recital of a resolution
of the board of directors authorizing the
execution under the company's corporate
seal of the mortgage
. . . to secure the payment of the bonds
of this company to the amount of Two
Million pounds sterling . . . the principal
of such bonds to be payable on the
1st day of January, 1961, with interest
from January 1, 1911, payable semiannually . . . at the rate of four and a
half per centum per annum; said bonds
and coupons to be payable ... in the City
of London, England, in Sterling money
of the United Kingdom of Great Britain
and Ireland, or elsewhere, and in money
of any other government as from time to
time hereafter may be authorized by the
board of directors.
There follows a further resolution of the
board of directors that the said bonds payable in sterling money shall be in substantially the following form. There are then
set out -the forms of bonds and coupons
above referred to.
Assuming, for the moment, that these
documents are relevant and admissible the
comment may at least be made that they
are not models of consistent draftsmanship.
I now approach more closely the
problem of the true construction of the
bonds and the coupons. These particular
bonds and coupons have not been
considered by the English Courts beforeand I therefore bear in mind that any
decisions of the English Courts upon other
bonds are not authoritative upon the
construction of these bonds unless (1) the
variation between the bonds previously

Terminal

Railroad Co.

----.- ---~.-.---

465

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana

-.. --

[1962]

VOL.

2

considered and the present bonds is so
slight as to be immaterial, or (2) they
contain certain principles of construction
which are relevant to the instant bonds
notwithstanding the variation.
As it seems to me, the first fundamental
rule of construction must be that the
Court's task is to determine what intention
must be imputed to the parties from the
actual words used and that in discharging
that task the Court is entitled to look at
the surrounding circumstances existing at
the time of the execution of the document,
but not (except where there is a plea of
rectification, as there is not here) at
preliminary documents of a negotiating
nature. Further, there has been established
by a decision of the House of Lords
binding upon me that the gold value obligation should not be imposed unless by the
terms of the documents it is imposed in
clear or precise terms.
(See
New
Brunswick Railway Company v. British and
French Trust Corporation, Ltd., [1939]
A.C. 1, per Lord Maugham, L.C., at p. 18,
and per Lord Wright, at p. 35.)
One other preliminary observation. It
being conceded that the proper law of the
bonds and coupons is English law, the
nature of the obligation imposed by the
bonds and coupons must be determined in
the light of English law at the date of the
contract whereas the nature of the required
performance must be determined in the
light of English law at the due date of
performance.
In 1911, the City of London was the
most important market in the world for
raising capital. By virtue of the Coinage
Act, 1870, sterling money of the United
Kingdom consisted (1) of gold coins of a
prescribed weight and fineness which were
legal tender for any amount; (2) silver coins
which were legal tender for amounts not
exceeding 40s.; and (3) bronze coins which
were legal tender for an amount not
exceeding Is.
The Bank of England
Charter, 1833, Sect. 6, which was in force
in 1911, provided so far as is material that
. . . a tender of a note or notes of the
Bank of England expressed to be payable
to bearer on demand, shall be a legal
tender. to the amount expressed in such
note or notes, and shall be taken to be
valid as a tender to such amount, for
all sums above five-pounds . . . so long as the Bank of England shall continue
to pay on demand their said notes in
legal coin....

466
[1962] VOL. 2]

LLOYD'S LIST LAW REPORTS

[Q.B. (COM. CT.)

Campos v. Kentncky & Indiana Terminal Railroad Co.

[MeNAm,

Accordingly, as at 1911, a loan of £1000
in sterling money of the United Kingdom
could be discharged only by the tender of
1000 gold sovereigns or Bank of England
notes convertible into gold sovereigns or
partly in one and partly in the other. It
would seem to me, therefore, unless the
matter is concluded to the contrary by
authority binding upon me, that the
provision in the bond, that the interest
shall be "payable in like gold coin" does
no more than to reflect the existing legal
position that an obligation in sterling
money shall be discharged only in the
manner required by law, namely, gold coins
or sovereigns or Bank of England notes
convertible into legal gold coins. To use
Sir Milner Holland's words, it was, in
1911, a correct description of the obligation involved in the payment of debt
expressed in sterling.
On this view, the
reconciliation between the obligation as to
the payment of the capital in sterling and
the obligation as to payment of interest in
gold coin does not require that the words
"in gold coin" should be written into the
provision as to capital since properly
construed in the light of existing legislation both obligations are dischargeable in
the same way. Subject to the reservation
made above as to binding authorities to the
contrary, in my judgment neither the bonds
nor the coupons imposed in 1911 any
obligation other than to pay the amount
of the capital and interest expressed in
sterling by the means of· current legal
tender, i.e., gold sovereigns or Bank of
England notes convertible into gold
sovereigns. So much for the content of
the obligation in 1911.
When one turns to the proper law of the
contract as at the date of performance one
finds of course that material changes have
taken place.
In effect, the position at all material
times since the plaintiff' became the owner
of the bonds was that sterling was off the
gold standard; Bank of England notes
which were substituted for the Treasury
notes issued under the Currency and Bank
Notes Act, 1914, were legal tender for the
payment of a debt of any amount expressed
in sterling and were not convertible into
gold; gold coins though still legal tender
were for all practical purposes no longer
in circulation since under the Exchange
Control Act, 1947, any holder of gold,
which by Sect. 42 includes gold coin, is
obliged t6 offer it for sale to an authorized
dealer as defined in Sect. 42. In the result,

J.

a commercial obligation to pay sterling
could not be discharged" by the tender of
gold coins or Bank of England notes
convertible into gold without breach of the
law. If I am right in my construction of
the obligation as it existed in 1911, it
follows that the only legal tender for the
.performance of that obligation which could
be made at the date of performance in
accordance with the proper law of the
contract without breach of the law was by
Bank of England notes not convertible into
gold.
The legislative changes which
produced this result are conveniently set
out in the judgment of Lord Justice Morris
in
Treseder-Griffin
and Another
v.
Co-operative
Insurance
Society,
Ltd.,
[1956] 2 Q.B. 127, at pp. 151 to 152;
[1956] 1 Lloyd's Rep. 377, at p. 384.
Performance in accordance with the
.proper law of the contract as existing at
the date of the contract would be due
performance of the original obligation.
As stated above, I have reached this
preliminary conclusion as to the true effect
of the bonds without considering the terms
of the mortgage deed or the documents
referred to in its recitals.
But it is
probably convenient that I should express
my views as to the admissibility of these
documents and, if so admissible, as to the
effect. Sir Milner Holland,' on behalf of
the defendants,
submitted that the
mortgage deed was relevant and admissible,
but not the resolutions recited in the deed.
Mr. Foster, for the plaintiff, on the other
hand, submitted that the resolutions of the
stockholders were admissible, but neither
the resolutions of the directors nor the
mortgage were relevant.
I was referred
to Norton on Deeds, 2nd ed., at pp. 86 to
87, for the proposition that
.
If the transaction between the parties.
is contained in more than one deed, all
the deeds must be construed together,
and one may be read to explain the
others.
, and to the notes at p. 87 to the effect
this rule applies whether the deeds
executed simultaneously or at
times.
Assuming, but not deciding, that this
rule applies to instruments such as bOl1.d~
or interest coupons, it seems to me th<l,t
the rule can have no application where tli~
parties to the bond or coupons are not tlie
same as the parties to the mortgage deed.
Furthermore, it seems to me to be very
difficult to accept that the holder of a

Q.B. (COM. CT.)]

McNAIR, J.]

467

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indlana Terminal Railroad Co.

negotiable instrument can be affected in his
primary rights against the obligee by the
terms of a mortgage deed to which he is
not a party, even though this mortgage deed
is referred to in the bond; a fortiori in the
case of a holder of an interest coupon
which has no, reference to the mortgage.
Nor do I consider that the terms of the
stockholders' resolution is relevant or
admissible. If the bonds conformed with
the authority, cadit quaestio; if they did
not, the holder would not be affected by
any lack of authority in the directors or
be entitled to say against the company that
the directors ought to have issued bonds
in a different. form. I would, accordingly,
reject the whole of this material as an aid
to the construction: but would also say
that if admitted it gives no clear guidance
as to the true construction.
As I have
observed above, the only reasonable
comment that can be made is that there
was considerable confusion in the draftsmanship.
Before dealing with the English decisions
on gold value clauses I should deal with
one further point on construction.
On behalf of the plaintiff it was
submitted that by reason of the use of the
words "in like gold coin" in the interest
provision there must be written into the
provision as to payment of principal the
words "in gold coin" after the words
"Sterling money of the United Kingdom
of Great Britain and Ireland".
It is not
sufficient for the purpose of the argument
advanced on the plaintiff's behalf that the
words "sterling money" mean gold coin:
for as will appear later when I come to
examine the authorities it is the express use
of the word" gold" which will in the conditions specified in these authorities import
the gold value clause.
Assuming for the
moment that a plea of rectification could
be raised by the holder of a negotiable
instrument, I would accept that if there
had been such a plea and an examination
of the preliminary documents showed that
the bond did not, without the addition of
those words, accurately represent the prior
agreement, it would be legitimate to insert
the words as indicated. But, in the absence
of any such plea, the power of the Court is
limited. In this connection I was referred
to the cases of Coles v. Hulme, (1828) 8
B. & C. 568; and Mourmand and Others v.
Le Clair, [1903] 2 K.B. 216, in which the
word" pounds" without a plea of rectification was written in the first case into the

[1962]

VOL.

2

condition of a bond for the payment of
" 7700" simpliciter and in the second case
into a bill of sale for £70 in which there
was a stipulation that the principal and
interest should be repaid by monthly instalments of ••seven" simpliciter.
These cases, however, seem to me merely
to indicate corrections of drafting slips in
conditions which otherwise would be
meaningless.
I would not as at present
advised be disposed to hold that apart from
rectification it would be permissible to
write in the words "in gold coin" in the
provision as to the payment of the principal
moneys if the effect would be to give to
that provision a meaning other than that
which the provision bears without the addition of those words. It is to be observed
that in New Brunswick Railway Company
v. British and French Trust Corporation,
Ltd., [1939] A.C. 1, the House of Lords,
while applying the Feist" construction to
the provision as to payments of principal
expressed in the form of " to pay . . . 'the
sum of one hundred pounds sterling gold
coin of Great Britain of the present
standard of weight''', declined to apply
that construction to the interest provision
expressed as follows:
" . . . with interest at the rate of five
pounds
sterling
per
centum
per
annum ... "
I now turn more closely to the English
authorities relied upon by the plaintiff.
Mr. Foster, on her behalf, submitted that
the decision of the House of Lords in
Feist's case, sup., was an authority for the
broad proposition that whenever the word
" gold " or "gold coin" or gold qualifying
a unit of currency is used in a bond of this
nature it connotes a true "gold value
clause". In Feist's case, sup., the bond
provided for payment of
. . . £100 in sterling gold coin of the
United Kingdom of or equal to the
standard of weight and fineness existing
on September 1, 1928.
and to pay interest thereon
. . . at the rate of 51 per cent. per
annum in sterling in gold coin of the
United Kingdom of or equal to the
standard of weight and fineness existing
on September 1, 1928, by equal halfyearly payments . . .
• Feist v. Societe
[1934] A.C. 161.

Intercommunale BeIge 4'Eleqtriqite,
-

468
[1962]

LLOYD'S LIST LAW REPORTS
VOL.

2]

Campos v. Kentucky & Indiana Terminal Railroad Co.

Condition 4 of the bond provided that
This Bond is one of an authorized issue
of Bonds of the Company of an aggregate
principal amount not exceeding £500,000
in sterling in gold coin of the United
Kingdom at anyone time outstanding.
Lord Russell of Killowen, in whose
opinion Lord Atkin, Lord Warrington and
Lord Wright' concurred, stated (ibid., at
p. 168) that the decision of the Courts
below that the company were entitled to
satisfy the principal moneys and interest
secured by the bond by tendering whatever
might be at the due date of payment the
nominal amount of the bond or coupon
· .. deprives of all effect the words which
occur in clauses 1 and 2 of the bond,
viz.: "in gold coin of the United
Kingdom of or equal to the standard
of weight and fineness existing on
September 1, 1928." These words (which
merely for convenience I will call the
gold clause) need in this view never have
been inserted at all.
Lord Russell of Killowen refers to the
fact that at the date of issue of the bonds
(ibid., at p. 171)
· .. The country was on the gold standard
but the notes were inconvertible and
gold coin was substantially no longer in
circulation.
· . . it is not, I think, improper or
hazardous to make two surmises, (1.)
that the gold clause was inserted in
clauses 1 and 2 of the bond in
contemplation of the contingency of
this country going (as it did in 1931) off
the gold standard at some future date;
and (2.) that neither party to the bond
can have contemplated payment under
the bond being actually made in gold
coins.
After examining Clauses 1, 2 and 4 and
coming to the conclusion that they could
not "have been intended by the parties to
carry their literal interpretation",
Lord
Russell of Killowen posed the following
question (ibid., at p. 172):
· . . If the words of the gold clause
cannot have been used by the parties in
the sense which they literally bear, ought
I to ignore them altogether and attribute
no meaning to them, or ought I, if I can
discover it from the document, to
attribute some other meaning to them?
Clearly the latter course should be
adopted if possible, for the parties must
have inserted these special words for

[Q.B. (COM. CT.)

Q

[McNAIR,J.

M

some special purpose, and if that purpose
can be discerned by legitimate means
effect should be given to it.
'
After examining Clauses 4 and 6 in which
reference was made to "gold coin", Lord
Russell of Killowen stated his conclusion
as follows (ibid., at p. 172):
. . . I would construe clause 1 not as
meaning that £100 is to be paid in a
certain way, but as meaning that the
obligation is to pay a sum which would
represent the equivalent of £100 if paid
in a particular way, in other words I
would construe the clause as though it
ran thus (omitting immaterial words)
"pay . . . in sterling a sum equal to the
value of £100 if paid in gold coin of
the United Kingdom of or equal to the
standard of weight and fineness existing
on the 1st day of September, 1928."
In my judgment, the whole tenor of
Lord Russell of Killowen's speech up to
this stage points to the conclusion that in
Lord Russell's view it was the existence
of the words "in gold coin ~ . . of . . .
standard of weight and fineness existing on
the 1st day of September, 1928" which was
of critical importance as indicating a
measure of indebtedness. It is true that at
the end of his opinion Lord Russell of
Killowen refers to the judgment of the
Permanent Court of International Justice in
the Serbian Loans case (Permanent Court of
International Justice Series A, Nos. 13 to
24. Collection of Judgments. Judgment
No. 14, p. 32) as stating happily and
succinctly the considerations and principles
which had influenced him in reaching his
conclusion. In that case, the loan issued
by the Serbian Government was for
"95,000,000 gold francs [*]".
If the
judgment is referred to, it becomes quite
plain that in the Court's view (at p. 33)
The "gold franc" thus constituted a
well-known standard [*] of value to
which reference could appropriately be
made in loan contracts when it was
desired to establish a sound and stable
basis for repayment.
The " gold franc" was not used as denoting
a particular. gold coin circulating in any
of the three countries, France, Belgium or
Switzerland, in which a payment could be
made.
I do not regard this decision as authority
for the broad proposition for which it was
cited. In my judgment, the critical element
in the case was the specification of the
* Emphasis supplied by Mr. Justice McNair.

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]

Q.B. (COM.CT.)]
McNAIR,

J.]

469

LLOYD'S LIST LAW REPORTS
Campos v, Kentucky & Indiana Terminal

weight and fineness of the gold which was
held to import a standard or measure of
value. In this view, I am fortified, if not
strictly bound, by the decision of the Court
of Appeal in Treseder-Griffin v. Co-operative Insurance Society, Ltd., [1956] 2 Q.B.
127; [1956] 1 Lloyd's Rep. 377. See per
Lord Justice Denning (ibid., at pp. 148 and
379 of the respective reports) and Lord
Justice Morris (ibid., at pp. 152 and 383 of
the respective reports). Both these learned
Lords Justices seem to me to distinguish
Feist's case, sup., from the case before
them which concerned the payment of rent
"in gold sterling" on the ground that in
Feist's case, sup., there was a specification
of gold of a particular weight and fineness.
I next turn to the case of The King v.
International Trustee for the Protection of
Bondholders Aktiengesellschait,
[1937] A.C.
500; (1937) 57 Ll.L.Rep. 145. The bonds
in question in this case obliged the British
Government to pay 1000 dols. in gold coin
of the United States of the standard weight
and fineness existing in February, 1917, or
in London in sterling money at the fixed
rate of 4.86! dols. to the pound.
The
House of Lords, agreeing with the Court of
Appeal, applied the Feist construction to
the bonds, but, differing from the Court
of Appeal, held that as the proper law of
the bonds was American law and, as by the
due date of performance the law had been
changed by the Joint Resolution of
Congress having the effect of law so as to
require the bond to be discharged upon
payment of dollar for dollar of the nominal
amount, the bondholder could only require
payment of that amount.
The importance, however, of this decision from the
point of view of the plaintiff's case lies in
the observation of Lord Maugham, L.C.,
which was as follows (ibid., at pp. 562 and
166 of the respective reports):
... Ever since the year 1870, or thereabouts, nearly all important obligations
of the nature of bonds and mortgages in
the United States have contained a gold
clause, the result of which, according to
the legal tender decisions (so called), was
that although paper money, commonly
called greenbacks, were legal tender in
payment of ordinary debts, that did not
apply to obligations containing a gold
clause. Such clauses, according to the
decision of the Supreme Court of the
United States in Norman v. Baltimore &
Ohio Railroad Company, (1935) 294 U.S.
240, "were intended to afford a definite

Railroad Co.

[1962] VOL. 2

standard or measure of value, and thus
to protect against a depreciation of the
currency and against the discharge of the
obligation by a payment of lesser value
than that prescribed."
In Norman v. Baltimore, sup., as in the
case then before the House the bond
provided for the payment in gold coin of
the United States of the standard weight
and fineness as also did the mortgage in
St. Louis Iron Mountain & Southern Railway Cornpanu" which was heard at the same
time.
As to these clauses, Chief Justice
Hughes, in the paragraph from which Lord
Maugham (sup., at pp. 562 and 166 of the
respective reports) cited, says ((1935) 294
U.S., at p. 302):
We are of the opinion that the gold
clauses now before us were not contracts
for payment in gold coin as a commodity,
or in bullion, but were contracts for the
payment of money....
We also think
that, fairly construed, these clauses were
intended to afford a definite standard or
measure of value, and thus to protect
against a depreciation of the currency
and against the discharge of the obligation by payment of lesser value than that
prescribed ....
For my part, I do not consider that Lord
Maugham, L.c., having before him a clause
containing a reference to a particular
standard of weight and fineness, was intending to lay down any principle relating to
gold coin clauses which did not contain
any such reference, or that the passage from
Chief Justice Hughes's judgment which he
cites was on a fair reading intended to
refer to clauses without a specification of
weight and fineness.
See, too, Perry v.
United States, (1935) 294 U.S. 330, which
was argued at the same time, where Chief
Justice Hughes in relation to a bond for
the payment" in United States gold coin
of the present standard of value" says
(ibid., at p. 348):
This obligation
must be fairly
construed.
The" present standard of
value" stood in contradistinction to a
lower standard of value.
The promise
obviously was intended to afford protection against loss. That protection was
sought to be secured by setting up a
standard or measure of the Government's
obligation ....
See also Lord Russell of Killowen (sup.,
at pp. 556 and 163 of the respective
reports).
* United States et al. v. Bankers
et al., (1935) 294 U.S. 240.

Trust

Company

i:

470
[1962] VOL. 2]

LLOYD'S LIST LAW REPORTS

[Q.B. (COM.CT.)

Campos v. Kentucky & Indiana Terminal Railroad Co.

[McNAIR,

J.

French Trust Corporation
v. New
Brunswick Railway Company, [1937] 4 All
E.R. 516, at p. 535.
The remaining English case to which I
need- refer is the case of Treseder-Griffin
and Another
v. Co-operative Insurance
Society, Ltd., [1956] 2 Q.B. 127; [1956] 1
Lloyd's Rep. 377. This is a very special
case and there are many grounds of distinction stated in the majority judgments
between that case and the decision in Feist's
case, sup. It is sufficient to say that it is
the only case in which an obligation to pay
" in gold sterling" without any specification
of weight and fineness has been before the
Courts as a matter for decision and the
conclusion reached was that this formula
without a specification· of weight and
fineness did not import a gold value clause.
See, too, the judgment of Lord Justice
Morris (ibid., at pp. 152 and 383 of the
respective reports) as to the uncertainty
as to the weight and fineness of gold coins
if they came into circulation again in the
future. .
Before referring to the decisions of the
American Courts upon these particular
bonds it is right that for completeness I
should refer to the decision of the Privy
Council in Syndic in Bankruptcy of Salim
Nasrallah Khoury v. Khayat, [1943] A.C.
507. The document there under consideration was in the following form:
On May 23, 1930, I shall pay at Haifa
to the order of Mrs. Mary Khayat of
Jezzin [Syria] the sum specified above,
i.e., two
thousand
gold Turkish
pounds ..••
Two questions were involved» (1)
whether the document was a promissory
note within the meaning of the Palestine
Bills of Exchange Ordinance, 1929; (2) as
to the proper rate of exchange (the latter
point is not material for present purposes).
As to (1), the Board held that it was a,
promissory note as being a promise to pay
in currency, i.e., the currency of Turkey and
Syria albeit not the currency of Palestine
where the note was drawn.
Lord Wright says (ibid., at' p. 511):
Nor were the notes any the less
negotiable .instruments because of the
word" gold." That word does not here
import an obligation to deliver gold or
pay in gold. What it does is to import
a special standard or measure of
value. . . . It is equivalent to a gold
clause....

&

O.B.

(COM. CT.]

McNAm,

J.]

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana Terminal Railroad Co.

It appears, however, from the case of
Ottoman Bank of Nicosia v. Chakarian,
[1938] A.C. 260, at p. 270, to which Lord
Wright refers (sup., at p. 512), that by
virtue of currency changes in the law of
Turkey
. . . At all material times since the
commencement of the war [-i.e., August
1914-] the paper notes have been legal
tender and although the gold £ is still
legal tender, the paper currency has, in
accordance with Gresham's Law driven
out from circulation the gold currency,
so that in practice gold has ceased to
circulate as legal tender. The Turkish
gold coins are now, for all practical
purposes, only dealt with as a commodity
or bullion.
In these circumstances, it is easy to
understand that in construing a document
coming into existence in 1930, Turkish
gold pounds simpliciter can be construed
as importing " a special standard or
measure of value."
I now turn to the decision in the case
of Sylvan Lemaire v. Kentucky and Indiana
Terminal Railroad Company, (1956) 140
F. Supp. 82, decided in the United States
District Court for the Southern District of
New York upon bonds in the identical form
of the bonds now in issue. The judgment
was given by District Judge Cashin on
Mar. 12, 1956. After a review of the cases
referred to above (other than Khauat's case,
sup.), the learned Judge held (ibid., at
p. 86):
. . . that the English cases . . . do not
support the proposition that whenever
the words "gold coin" are used a gold
value clause must inevitably be inferred.
Rather, it is our view that English law,
as evidenced by these cases, requires
that a reference to gold in a payment
clause be not ignored but be given full
effect if it clearly expresses the intention
to fix a money value .equivalent to a
certain quantity of gold.
[3] The plaintiff seeks a construction
which would require us not only to imply
the standard of weight and fineness of
the gold but also the language of
equation. The language of equation, we
feel, is the essence of a gold value clause
unless there exist extrinsic circumstances
such as supply' the defect. . . .
[4] It is our opinion, therefore, that
even reading in the words "gold coin"
with respect to the principal, that this

471
[1962] VOL. 2

bond does not contain a gold clause
under the law of England.
We think
after examining the bond, the interest
coupons attached, the mortgage to which
the bond refers, the stockholders' resolution contained in the mortgage, the
directors' resolution also contained
therein, the prospectus and the monetary
laws of England as they existed in 1911,
that no gold value clause was expressed
or intended.
. . . The plaintiff would have this Court
construe from the words "like gold
coin" their prior use as to the principal,
then that the quality of gold referred to
was that contained in the sovereign and,
lastly, that the value of the principal and
interest to be paid was equated to it. In
our opinion neither justice nor English
law (we presume they are synonymous)
permits such extensive redrafting of a
contract by a court.
This judgment was affirmed by the United
States Court of Appeals for the Second
Circuit, whose judgment is reported in
(1957) 242 F. 2d 884. I need not set out
here the detailed reasoning which led the
Court to the conclusion that the bond in
question did not contain a true gold value
clause. Though some of the steps .in the
reasoning of these two Courts might not
commend themselves to English lawyers
brought up in and applying a different code
of procedure, these decisions seem to me
to be a clear determination by a competent
Court of jurisdiction as to the proper
construction of these bonds.
Had my own consideration of the
problem led me to a different conclusion
I should have hesitated to give effect to it
in view of the desirability of uniformity
in decisions by the Courts of different
countries, especially in the case of bonds
whose obligations cross international
frontiers.
But, as I have myself reached
the same ultimate conclusion, I welcome
the reinforcement of my judgment which I
receive from their judgments.
In view of the conclusion in favour of
the defendants which I have reached it is
not necessary for me as a matter of decision
to state my views on the alternative defence
of res judicata raised by pars. 7 to 11 of
the defences in the two actions. But, as
much time was spent in considering the
American decisions relevant on this point,
it is probably convenient that I should

LLOYD'S LIST LAW REPORTS

472
[1962]

VOL.

2]

Campos v. Kentucky & Indiana Terminal

Railroad Co.

[Q.B. (COM. CT.)
[McNAIR,

J.

nomenclature used in many of the American
decisions, a "spurious class action" the
judgment in which did not give rise to a
plea of res judicata against absent parties.
I was referred to a number of decisions
of Federal Courts in different Districts in
which the distinction is drawn between true
class actions falling within sub-rule (1) and
giving rise to res judicata and spurious class
actions, namely, actions brought under
sub-rule (3) from which no plea of res
judicata arises. Thus, in the judgment of
the Court in Oppenheimer et al. v. F. J.
Young & Co., Inc., et al., (1944) 144 F.2d
387, at p. 390, the following passage
occurs:
[3, 4] We see no reason for going
farther than to hold that on the face of
the complaint the plaintiffs have brought
Rule 23. Class Actions
themselves within the provisions of
(a) Representation.
If persons conRule 23 (a) (3). Inasmuch as persons
stituting a class are so numerous as to
who 'do not become parties cannot be
make it impracticable to bring them all
affected by the decision, we need not go
before the court, such of them, one, or
further as to the adequacy of plainmore, as will fairly insure the adequate
tiffs' representation of others in the class.
representation of all may, on behalf of
A stricter rule as to the adequacy of
all, sue or be sued, when the character
representation ought to obtain where the
of the right sought to be enforced for
judgment is held binding on members of
or against the class is
a class who do not intervene. . . .
(1) joint, or common, or secondary in
Citing Weeks et al. v. Bareco Oil Comthe sense that the owner of a primary
pany et al., (1941) 125 F. 2d 84, in York
right refuses to enforce that right and a
v. Guaranty Trust Company of New York,
member of the class thereby becomes
(1944) l43 F. 2d 503, atp. 529, the judgment
entitled to enforce it;
of the Court uses these words:
(2) several, and the object of the action .
. .. Since, in a class suit under clause (3),
is the adjudication of claims which do or
a judgment will not be res judicata for
may affect specific property involved in
or against those of the class who do not
the action; or
intervene, we suggest that if, after trial,
(3) several, and there is a common
the court finds against the defendant,
question of law or fact affecting the
appropriate steps be taken to notify all
several rights and a common relief is
such noteholders to intervene (if they
have not theretofore done so), judgment
sought.
to be entered in favor only of those
(iii) A true class action properly brought
who do so within a reasonable time. . ..
under this rule is binding', upon and gives
rise to a plea of res judicata against all
Mr. ,Carson, while asserting that the
members of the class whether or not they
material passage was obiter, agreed that the
took part in the action and whether or not
general language used had not been
they were served with notice of the action
dissented from by any Court of co-ordinate
or whether or not they had knowledge of
or superior jurisdiction.
Mr. Carson's
the proceedings.
main argument against the view of the
Court expressed in these two decisions was
Subject to the reservation of the question
based (i) upon his reading of the case of
of the position of a person who was not
System Federation No. 91 v. Reed et al.,
a member of the class at the date of the
(1950) 180 F. 2d 991, which Mr. Carson
initiation of the proceedings or at the date
stated to be his only authority for the
of the judgment, Mr. Ten Eyck agreed with
proposition that a judgment in a class action
this formulation of the law; but in this
under sub-rule (3) gave rise to res judicata.
respect differing from Mr. Carson he
He also maintained secondly that the
maintained that the Lemaire action was
Lemaire action involved the enforcement of
not a true class action but was, to use the

state my conclusions as to the effect of this
evidence and as to its applicability to the
plea of res judicata raised in these actions.
Mr. Carson, an experienced American
lawyer who' had acted for the defendants
in the Lemaire action, was called before
me on behalf of the defendants. Mr. Ten
Eyck, an experienced lawyer now engaged
in the practice of American law in London,
was called on behalf of the plaintiff.
Mr. Carson's thesis may be summarized
as follows:
(i) The Lemaire action was properly
brought as a class action under Rule 23
of the Federal Rules of Procedure (U.S.C.A.
Titie 28),
(ii) Rule 23 provides as follows:

Q.B. (COM. CT.)]
McNAIR,J.]

473

LLOYD'S LIST LAW REPORTS
Campos v, Kentucky & Indiana Terminal Railroad Co.

a "common right" within the meaning of
sub-rule (1) inasmuch as the bond was
secured by the mortgage and therefore was
a true class action within sub-rule (1).
As to (i), it appears on an examination
of the System Federation case, sup., that the
Court in fact held that it was a true class
action under sub-rule (1) and accordingly
res judicata applied.
Mr. Carson's view
however was that, if the proceedings were
properly analysed, the Court should have
held it to be a class (3) action but nevertheless that res judicata applied.
As to this, it seems to me to be illogical
to argue that because the Court held
(wrongly in Mr. Carson's view) that it was
a class (1) action and therefore the res
judicata applied, the Court, if it had held,
(as Mr. Carson says it should have held)
that it was a class (3) action, would have
held that res judicata applied.
I prefer
Mr. Ten Eyck's view that the System
Federation case, sup., is no authority for the
proposition that a judgment in a class (3)
action involves res judicata against absent
members and I conclude that I should
follow the earlier statements of principle
to which I have referred.
As to Mr. Carson's second line of
reasoning I find difficulty in following how
it can be said that the Lemaire action was
a true class (1) action because the judgment
involved or might involve the enforcement
of the mortgage or create preferential
rights between different bondholders, since
it seems to me that though the equity
jurisdiction was involved in order to justify
the claim for a declaration the claim was
in substance a common-law claim for the
enforcement of the several rights of the
bondholders involving a common question
of law and so within class (3), and
involving no question arising under the
mortgage.
I prefer on this point the
evidence of Mr. Ten Eyck that the Lemaire
action was a class (3) action. But it is
. sufficient for me to say that the burden
of proof of the relevant law being upon the
defendants, they have not satisfied me that
the Lemaire action was a true class action
or that in accordance with American law
the judgment in that case bound anyone
who was not an original party or did not
intervene.
But even on the assumption that the
effect of the judgment in the Lemaire
action was to give valid support for a plea
of res judicata in an American Court

[1962]

VOL.

2

against an absent member of the class,
there are still difficulties in the defendants'
way.
First, it must be recalled that Miss
Campos was not a bondholder at the date
of the initiation of the Lemaire proceedings.
I refer in this connection to three
questions and answers at the end of Mr.
Carson's cross-examination:
Mr. Justice McNAIR: Before Sir
Milner re-examines, may I just raise. this
question: Have you any authority which
says that a person who was not a member
of the class at the time when the suit
was initiated is bound by the ultimate
decision? A.: No, my Lord; by definition, as I understand it, there could not
be such decision.
Q.: That seems to be the crux of this
matter, because, according to the
evidence I have had, this lady, Miss
Campos, was not a holder of the bond
when the suit was initiated.
A.:
I
suspect that is primarily for Counsel to
observe upon, unless your Lordship wants
to ask me that question?
Q.: You have no authority? A.: I
have no authority on the proposition as
your Lordship put it. There undoubtedly
is authority that the taker of a bearer
bond is bound by prior transactions in
respect thereto, but I cannot put my
hand on it.
I might address your
Lordship's attention to the fact that the
Judge in the New York Court thought
it important, in paragraph 1 of his order,
to terminate-Mr. Justice McNAIR: I think you are
going on to another point.
To be quite certain that there was no
misunderstanding I caused the first two
questions and answers to be read back by
the shorthandwriter.
The result of this
evidence seems to me to be fatal to the
defendants' plea.·
Furthermore, I think there is great force
in Mr. Foster's contention that in accordance with English private international
law a foreign judgment could not give rise
to a plea of res judicata in the English
Courts unless the party alleged to be bound
had been served with the process which
led to the foreign judgment.
I had
recently to rule on a somewhat similar
point in the case of Rossano v. Manufacturers Life Insurance Company, [1962]
1 Lloyd's Rep. 187.

474
[1962] VOL. 2]

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana Terminal

Finally, though the point was not fully
argued before me, as at present advised it
seems to me to be contrary to the whole
conception of negotiability that the holder
of a negotiable bond should be prejudicially
affected by a judgment on a similar bond
in an action in which he was neither
plaintiff nor a party who had been duly
served.
I can deal shortly with the defences
raised in pars. 12 and 13 of the defence
(which were not seriously argued before me)
by saying that in my judgment the provision as to giving notice to the trustee is not
a condition precedent to the enforcement
of the bond.
As a result of those conclusions there
will be judgment for the defendants.
Sir MILNERHOLLAND:I ought formally
to ask, I think, for judgment for the defendants, with costs.
Mr. LITTMAN:My Lord, there are two
matters upon which I would address your
Lordship and I may have to take a few
minutes over it, because they are both
directed primarily to the question of costs,
which is a pretty substantial issue in this
case. The first is the question of the
judgment which your Lordship ought to
give in this case.
Mr. Justice McNAIR: That is the form
of the judgment?
Mr. LITTMAN:The form, my Lord, yes.
In my submission, the plaintiff is entitled
to judgment for the sterling amount of the
bonds and the certificates, and closely
linked up with that, of course, is the
question of what would be a proper order
for costs. I imagine your Lordship would
normally deal with these issues separately,
but as they are so closely linked perhaps
your Lordship would allow me to address
you upon both at the same time.
Mr. Justice McNAIR: Certainly.
Mr. LITTMAN: ay I remind your LordM
ship of the course this matter has taken.
Before the writ was issued in this action
the bonds and the coupons were tendered
and the payment on the gold basis was
refused-I am summarizing the correspondence, but I will refer your Lordship to it
if necessary.
But before the writ was
issued those presenting the bonds on
behalf of my client asked that in any event
they should be paid the sterling amount of
the bonds and the coupons, stating that
they were making it quite clear that they
were prepared to tender and hand over the

Railroad Co.

[Q.B. (COM. T.)
C

Q.

[McNAIR,J.

M

bonds and the coupons although, of course,
without prejudice to their right to claim
in the Court the balance.
The attitude
which was taken up on behalf of the defendants was that they would only pay the
sterling value if it was accepted in complete
satisfaction, a condition which, in my submission, the defendants were not entitled
to impose.
The plaintiffs thereupon stated, before
issuing the writ, that if this attitude
was persisted in it would be necessary to
claim the full amount. It was persisted in
and the writ was issued, initially the writ
for the interest and subsequently the writ
for the capital sum, and the two actions
were consolidated.· The defendants put
in a defence, and it was a defence to the
whole claim. The claim, of course, was for
the whole amount and pleaded that there
had been presentation of the bonds and
coupons and complained that neither the
sum nor any part of it had been paid. The
defence did not take the course, as it might
have done, of admitting the sterling debt
and raising a defence as to the balance. If
that had been done, of course, the plaintiffs could have signed judgment for the
sterling amount, but the defendants did
not take that course, for reasons which no
doubt seemed good to them, they put in. a
defence to the whole claim raising, firstly,
a denial that the plaintiff was the bearer
of these coupons and bonds, a matter which
they had refused to admit right up to the
hearing of this Case although they were
pressed to do so on a number of occasions,
and refusing even to allow the plaintiff's.
evidence to be given by affidavit to prove it,
it thus becoming necessary for the plaintiff
to come over especially to do that.But,
in any event, it was a defence to the whole
claim.
The second defence to the whole claim
was a denial that the coupons and bonds
had been presented.
There was raised
what, in my submission, was a plea wholly
disproved by the correspondence that she
had only tendered them upon the basis
that she was willing to surrender them if
she got the full value. The correspondence
shows that she was quite willing to
surrender them and to get the lesser sum
provided it was without prejudice to her
claim to recover the balance.
The third defence to the whole claim was,
of course, the defence that the action was
brought without the consent of the
mortgage trustees, and again it was a
defence to the whole action.

at
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it
st
w

Ie
jc
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p
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Sl

Sl

s:
a
a
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t

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Q.B. (COM. T.)]
C
McNAIR,J.]

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana Terminal Railroad Co.

There was continued correspondence at
an early stage in which requests for payment of the sterling sum were made and
it was only a year after the action was
started that the defendants said that they
would pay to my client the sterling sum
less a sum of £10,000 to be paid into a
joint account, which they desired to be
retained as security for costs. My client
protested against that and said that there
could not really be any doubt that the
sterling sum was due, and that, as regards
security for costs, that was a matter which
should be left to the decision of the Court
as to what would be the appropriate sum,
and she asked that the matter should be
dealt with in that way. The defendants
would not agree to that and said that was
the only thing they were prepared to do.
We had to submit to that, but we pointed
out in a letter of Jan. 15, 1962:
As we pointed out to you in our last
telephone conversation, we would have
thought that the proper way of dealing
with the question of security for costs
would have been for you to take out a
summons, and leave it to the Court to
decide what amount should be paid,
rather than to ask for the retention on
deposit of the sum of £10,000-which in
our view is quite excessive. Since
however you refused to consider this
proposition and maintained the contention you had adopted throughout, namely
that your clients are not under any legal
obligation to pay to our client any part
of the amounts claimed in the action, we
must reserve our client's right to ask the
Court in any event that the whole of the
costs of the action be paid by your
clients.
Then the amounts of the bonds and
coupons are set out at the end and I do
not think there is any dispute about that.
The answer to that is:
We do not accept the third paragraph
of your letter as accurate and reiterate
that the contention which the Defendants
have . adopted is that payment at the
sterling face value could only be made
against the delivery up for cancellation
of the Bonds and Coupons.
Then they go on to refer to the £10,000.
Your Lordship has been referred to the
letters in which we have made it clear'
time and time again that we are quite
prepared that the bonds should be
surrendered to them. We suggested that
they should not be destroyed before the

475
[1962] VOL. 2

action was heard, but that was a matter
for the defendants.
The only thing we
did refuse to do was to agree that payment
should be accepted in full satisfaction.
That arrangement having been made,
.there' was no amendment to the defence.
All these pleas were maintained; indeed,
one of them has been maintained right up
to the judgment in this action, namely,
the defence about the consent of the
trustees-Mr. Justice McNAIR: It was not'taken
very forcefully.
Mr. LITTMAN: o, but it was there. The
N
reason for it, the advantage which the
defendants got by raising this, of course,
was that they secured for themselves the
advantage that for a year they did not pay
any part of the sum, and, equally, they got
the advantage that they were able to decide
for themselves rather than leaving it to the
Court how much should be retained by
them as security.
That is the position.
The defence was not amended and, in my
submission, so far as the sterling sum is
concerned the defence has not succeeded
and my client is entitled to judgment for
the total of those two sums, which is'
£44,194 lOs.
Of course, I quite accept
that, having had part of that, we could not
execute for the whole amount although, in
my submission, we are entitled to judgment
for it, and I would ask that on that sum
we should have interest under the Law
Reform (Miscellaneous Provisions) Act,
1934, at any rate your Lordship thinks
appropriate.
Your Lordship might think
,the rate in the bond was the appropriate
rate; 4! per cent.-Mr. Justice McNAIR: I had written down
a better figure than that.
Mr. LITTMAN:I do not know whether
your Lordship thought six per cent?
Mr. Justice McNAIR: No, five per cent.
Mr. LITTMAN:I would. ask for interest
on the whole of that sum for one yearand I say " one year ", because that was the
period before we got any money.
The
whole of that was due at least a year before
any part of it was paid; in fact, I am being
slightly ungenerous to my client because
in fact the interest was due a little earlier,
but to simplify it I say one year. On the
balance of the £10,000-Mr. Justice McNAIR: Is your £10,000
included in the £44,194 lOs.?

::':;Ti

476
[1962] VOL. 2]

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana Terminal Railroad Co.

Mr. LITTMAN Yes, my Lord, it is part
:
of it. As I have had the rest I cannot ask
for it after that date, but I ask for interest
on the £10,000 at the same rate from
Feb. 9, 1962 (which is the time payment
was made), until judgment.
Mr. Justice McNAIR: I suppose you have
had your deposit interest.
Mr. LITTMAN:In fact it is on a joint
account.
Mr. Justice McNAIR: I hope it is on
deposit.
Mr. LITTMAN: suppose that is right, my
I
Lord, assuming we get it.
It depends
rather what is going to happen to the
money.
May I now turn to the question of costs.
There are three factors here: In the first
place I entirely accept that the defendants
have succeeded here upon an important
issue; they have succeeded upon the issue
as to whether this is a gold value
clause-Mr. Justice McNAIR: They have really
succeeded on the main point which you
were arguing.
Mr. LITTMAN:That is correct, my Lord,
but it is not necessarily the point which has
involved all, or substantially all, the costs;
that is one matter.
The second point to be taken into
account is this: In my submission, my
client is the successful plaintiff in this
action. She is entitled to the judgment
for which I have asked and so she is a
successful plaintiff and, prima facie, entitled
to her costs.
I am not disputing that
the defendants should have the costs of and
occasioned by the issue of the gold clause,
but, in my submission, the plaintiff is
entitled to the general costs of the action.
The third factor is this: The defendants
failed here upon the defence of res judicata.
Now, I quite agree that where a successful
defendant sues upon a number of points
one does not necessarily apportion costs
between the issues, but different considerations apply, and have been held to apply,
where quite a separate issue is raised by the
defendants and persisted in and where that
has failed.
Mr. Justice McNAIR: Unless I am
persuaded to the contrary, I should have
thought you were clearly entitled to the
costs of and occasioned by the plea of
res judicata.

[Q.B. (COM.CT.)
[McNAIR, J.

Mr. LITTMAN: our Lordship appreciates
Y
that is quite substantial, because it was
substantially the whole of the oral evidence.
Mr. Justice McNAIR: It took a long
time, yes.
Mr. LITTMAN:We estimate that something like three days of the hearing was
devoted to evidence and argument upon
this point, and that is something between
one-third and one-half of the hearing.
The order which I would submit to your
Lordship is the appropriate order in this
case is that the plaintiff should have the
costs of the action including the costs of
and occasioned by the issue of res judicata.
The defendants to have the costs of and
occasioned by the claim for a declaration
of a gold value clause apart from the plea
of res judicata. In my submission that is
the fair and proper order to make.
Sir MILNERHOLLAND:Quite plainly I
have a certain way to go on the question
of the issue as to res judicata, but may I
set that on one side for one moment. I
heard what your Lordship said, and it did
not surprise me, but may I just draw your
Lordship's attention to the pleadings.
Setting aside the res judicata issue for
the moment and treating the action as
though it was not there, I am asking your
Lordship to consider whether, as a matter
of common sense, if it had not been for
the claim that these. bonds were gold value
bonds, persisted in throughout and which
failed, we would have been here.
It is instructive to see what the claim is
for.
On the first writ (that is action
No. 4370) what is claimed is a declaration
that, on the true construction of the bonds,
gold value is the right measure and,
secondly, £8223 Us. 5d. for interest, of
cour.se on that basis. The second writ
(action No. 2523) claims principal moneys
due on Jan. 1 on the mortgage bonds,
interest and a declaration, but the actual
claim in the statement of claim is, of course,
a sum of money based wholly on the gold
value of the bonds, namely, £123,657
5s. lld.

The defence in the first action-and I
think there is no distinction between the
two defences-by par. 5, is:
Upon the true construction of the
said Bonds the interest payments and the
capital sums payabls : thereunder on
presentation
and surrender of the
respective Coupons and Bonds are the
face amount of the coupons namely

Q.B. (COM.CT.)]
McNAIR, J.]

LLOYD'S LIST LAW REPORTS
Campos v. Kentucky & Indiana Terminal

£2 5s. Od. each and the face amount of
the Bonds namely £100 each in current
English Legal Tender.
There is no issue at all that the amount
due on the bonds is the face value of
principal and interest.
Mr. Justice McNAIR: And there is no
claim for payment of the sterling face value.
Sir MILNERHOLLAND:That is the next
point I wanted to make.
Where is the
claim for payment on the sterling basis?
The whole action was on the footing of
payment on a gold value basis. What is
complained of is the fact that we were not
willing to pay the sterling value to someone
who was persisting throughout in claiming
something quite different, but I submit that,
remembering of course that the plaintiff
was not in this country, I was right at the
time to say: "Your bonds are sterling
bonds. If you surrender them, that is the
end of the matter and we pay you; but so
long as you go on claiming something
different we will not". In the end, the line
taken was: "Very well, we will pay you,
but we say that something ought to be
retained and we say £ 10,000 "-and
my
friend says that is unreasonable, but I do
not know-" as security for costs".
In
our submission there is no foundation for
the first part of my friend's submission that
this is an action in which he is entitled to
succeed in something he never asked for.
On the second question, of course, it is
undoubtedly true that one of the defences
raised your Lordship has indicated is not
a good defence.
In that respect the
position is somewhat different from the
position where the Court has to consider
a case in which the plaintiff has lost and
the defendants won. It is often said, and
I will not say with complete accuracy, that
if an action is brought against a defendant
and wholly fails, the fact the defendant
gave several grounds for resisting the action
and only succeeded on one should not alter
the prima facie position that the plaintiff
has brought an action which has wholly
failed.
The matter is entirely in your
Lordship's discretion. Of course I cannot
challenge it if your Lordship thought the
costs had been quite wrongly increased by
taking a particular defence-Mr. Justice McNAIR: I do not know in
what sense you mean "wrongly".
Sir MILNERHOLLAND:Wrongly in law.
Mr. Justice MeN AIR: In law you are
entitled to raise any defence you like. You
may fail or succeed, but it is a defence on

Railroad Co.

477
[1962] VOL. 2

which you have wholly failed and it seems
to be quite a separate issue, and I should
have thought the ordinary rule must apply
that the plaintiff gets those costs.
Sir MILNERHOLLAND:If your Lordship
was looking for the proposition that costs
are entirely in the discretion of the Judge,
my friend has been good enough to assist
me to find p. 1839 in the 1962 Annual
Practice.
There your Lordship will see,
half-way down the page (Supreme Court
Costs Rules, 1959, Rule 2 (5)):
The powers and discretion of the Court
as to costs under section 50 of the
Supreme Court of Judicature (Consolidation) Act, 1925 (which provides that the
costs of and incidental to proceedings
in the Supreme Court shall be in the
discretion of the Court and that the
Court shall have full power to determine
by whom and to what extent the costs
are to be paid), and under the enactments
relating to the costs of criminal proceedings to which these rules apply, shall be
exercised subject to and in accordance
with these rules ...
Then your Lordship will see the heading
"Discretion as to Costs" , and in the
second paragraph:
... "the Court or Judge shall have full
power to determine by whom and to
what extent the costs are to be paid," ...
Then
Discretion to be Exercised Judicialty.~

Wide though the discretion. is, it is a
judicial discretion, and must be exercised
on fixed principles, that is according to
rules of reason and justice, not accord ...
ing to private opinion
(Sharpe v.
Wakefield, [1891] A.C. 173); or even
benevolence
(Kierson
v. Joseph L.
Thompson & Sons, Ltd., [19l3] 1 K.B.
587), or sympathy (Bevington v. Perks,
[1925] 2 KB., p. 231), and the exercise
of discretion even by a Judge sitting
alone must be justifiable (Ritter v.
Godfrey, [1920] 2 KB. 47); for instance,
where a party successfully enforces a
legal right, and in no way misconducts
himself, then he is entitled to costs as of
right (Cooper v. Whittingham (1880), 15
Ch. D. 501; Jones v. Curling (1884), 13
Q.B.D., p. 265; Upmann v. Forester
(1883), 24 Ch. D. 231; Civil Service
Co-operative Society v. General Steam
Navigation Co., [1903] 2 KB. 756, C.A.,
explained and distinguished in Donald
Campbell & Co., Ltd. v. Pollak, [1927]
A.C. 732 ...

;"'i

IX
i'

478

LLOYD'S LIST LAW REPORTS

[1962] Vot. 2]

Campos v. Kentncky & Indiana Terminal

Mr. LITTMAN: If it assists my friend
there is a passage which deals with th~
question on p. 1889, under Rule 9.
Mr. Justice McNAIR: I think this is the
principle * :
. . . This discretion must be exercised
judicially, and the Judge ought not to
exercise his discretion against a successful
party on grounds wholly unconnected
with the cause of action. . . . But when
the Judge, intending to exercise his
discretion, has acted on facts connected
with or leading up to the litigation, the
Court of Appeal is prohibited by statute
from entertaining an appeal from his
decision ...
Sir MILNER HOLLAND: The passage to
which my friend referred is at the top of
p. 1889:
Where defendant succeeds generally, he
is entitled to general costs of the action,
even in respect of some defences in which
he has failed, but not to the costs of a
distinct issue raised by him unsuccessfully ...
Subject to anything my friend wants to
say, what we submit to your Lordship is
that this is a case where your Lordship
should give the defendant the general costs
of the action, but it is a matter for your
Lordship's discretion whether your Lordship feels that we should have the costs,
following exactly those words, of a separate
defence unsuccessfully raised. The plaintiff says we ought to pay the general costs
of the action and your Lordship has my
submission on that; that, in my submission,
is wrong. If your Lordship is with me on
that, then my friend may wish to say that
he should pay my costs in relation to the
issue on which I have succeeded and I
should pay his costs in relation to the issue
on which we have not succeeded, but in my
submission that would be wrong.
The
wording of the passage I have just read to
your Lordship leads to this conclusion, that
a wholly successful defendant (which we
.are) should in no circumstances pay any
costs. It may well be that he should not
get-and
it is a matter which I shall have
to leave to your Lordship-the
costs
occasioned by a defence in respect of which
he failed, but to order him to pay the costs
of an unsuccessful plaintiff in respect of a
defence which was unsuccessful would, in
my submission, be wrong.
Mr. Justice McNAIR: Do you say it
would be wrong if I were to order that the
• 1962 Annual Practice,

at

p. 1841.

Railroad Co.

[Q.. (C OM.CT.)
B

[McNAIR, J.

defendants should have the general costs of
the action, the plaintiff to have the costs
of and occasioned by the plea of res
judicata, such costs to be set off one
against the other?
Sir MILNER'HOLLAND: I think it would
be difficult for me to say it would be
~rong in la~,. but it would be contrary,
In our submission, to the general practice
that a defendant against whom a plaintiff
is wholly unsuccessful should pay any costs
in respect of an unsuccessful defence.
Mr. Justice McNAIR: If my judgment is
right, I do not see why you should not pav
for Mr. Ten Eyck's attendance.
I am not
saying there was anything wrong in raising
the plea of res judicata at all, it is a
perfectly proper plea to raise, but in point
of fact it failed.
Sir MILNER HOLLAND: I would like to
carry that particular thought a little further
my Lord, though this mayor may not affect
your Lordship'S mind at all.
This is a
case into which the plaintiff went with her
eyes open, knowing of the American
decision; the letter before action says" We
are well aware of the Lemaire decision:"
She took the risk that the defendants, who
are an American corporation, would rely
on the American judgment, as of course
they did in two senses-Mr. Justice McNAIR: I did not require
Mr. Carson's attendance
to prove the
American law as a matter merely of
persuasive authority.
Sir MILNER HOLLAND: No, my Lord.
There is also this, perhaps from your
Lordship's
point
of view not
very
important, consideration which moves the
defendants:
Had there been judgment
against them which could only have been
enforced in America, then it would have
been vital, I should have thought, to plead
that the American judgment is res judicata
in case the American COurt, in considering
whether to enforce the English judgment,
might have said: "Well, you never pleaded
that
the American
judgment
is r¢s
judicata ".
.
Mr. Justice McNAIR: Could not the
judgment
have. been enforced
against
Morgan Grenfell & Co., Ltd., in London,
the paying agent in London?
Sir MILNER HOLLAND: I should have
thought not, my Lord: they are not personally bound by the bonds.
.
Mr. LITTMAN: It depends whether they
had any money. If they had money there
could have been a garnishee, possibly.

--

Q.B. (COM.CT.)]
McNAIR,

T.]

~--

LLOYD'S LIST LAW REPORTS
Campos v. Kentocky & Indiana Terminal Railroad Co.

--,-

~

-

479
[1962] VOL. 2

Sir MILNERHOLLAND: Lastly, may I put
Sir MILNERHOLLAND:It is very difficult
this approach to your Lordship: Separate
to be sure about that.
As I recall, my
friend Mr. Foster opened the case for two
costs of separate issues is never a very
and a half days and my argument to your
satisfactory matter from the point of view
Lordship on the substantial issue was one
of taxation.
The common practice to-day
arid a half days; that is four days, and the
is to adopt a rough and ready approach
rest of the case took four days, so one can
arid where defendants have raised a defence
see there might be an argument for saying
which involved a lot of costs, to deprive
that the plaintiff should pay half the defenthem of some of their costs; in other words,
to order the defendants to pay only a dants' costs. Of course a great deal of the
rest of the matter in the presentation of
proportion
of the plaintiff's costs.
It
the case, the pleadings and so forth, would
saves a great deal of trouble arid expense
be the same whether tbe defendants raised
in segregating out the material before the
this issue or not. It is never easy to make
Taxing Master. On p. 1859 in the 1962
submissions where a matter is something
Annual
Practice,
under
the
heading
entirely in your Lordship's discretion, but
Issue ", your Lordship will see:
we do press your Lordship, if you are
The practice of awarding
costs of
minded not to give the defendants the
issues" is now discouraged ... Although
whole of their costs, to make an order
giving them a proportion of their costs
there is no apportionment of costs in
rather than having segregated issues with
issue cases it is the duty of the Taxing
the very complicated business that involves.
Master to consider whether there should
be a division of items common to each
Mr. LITTMAN: My Lord, the first
issue but which related in part to one
question I apprehend is whether the plainissue and in part toanother ...
tiff is entitled to judgment in this action.
On that I understand the point troubling'
showing obviously how difficult it is to
your Lordship is that there is no claim for
do it.
. the sterling sum. lit my submission, there
Mr. Justice McNAIR: I know it is always
is a claim. I entirely accept there is not
very unsatisfactory.
a separate claim, but there is a claim for
the total amount and, in my submission,
Sir MILNER HOLLAND:
the greater sum includes theIesser.
Your
Instead of awarding costs of issues,
Lordship sees, if you look at the claim for
the Judge will sometimes make a plainprincipal, there is a plea that the defendants
tiff who is only partially successful bear . have not paid the sum of £123,000 or any
some of his own costs.
So where
part thereof. Then when we come to the
defence, the claim is treated as a claim for
judgment is given for part of a claim the
the whole sum and there is a defence to
defendant can be ordered to pay half or
the whole sum. Any doubt there may have
some other portion of the plaintiff's
been about that, in my submission, must
costs as agreed or taxed.
have been removed by the correspondence,
I merely say that if your Lordship takes
in .which we made it clear beyond all
the view that' a substantial amount of costs
possible doubt that if we did not succeed
Was involved in the issue on which the
. on the gold clause point we would ask for
defendants have not been successful, it may'
judgment for the sterling amount, and in
well be the right order would be to order
my submission it was not essential to put
the plaintiff to pay a proportion (whatever
in the words "Alternatively
we claim the
proportion your Lordship thinks right) of
sterling sum".
We claim for a certain
the defendants'
costs.
Then all that
sum of money and if some lesser sum is
happens is that the costs are taxed and the
due, then in my submission the plaintiff's
defendants will not get them all, they will
claim covers that. I would submit to your
only get a proportion.
Lordship that this claim does raise a claim
for the whole of the moneys and that the
Mr. Justice McNAIR: Just following that
plaintiff is, therefore, entitled to judgment
line of thought, with regard to the time
for that sum; and if that is right then the
occupied by the Court, I should have
order for costs which I suggested to your
thought the time actually occupied both in
Lordship would, in my submission, follow
hearing the evidence of the American law
subject to this, that the defendants should
and the submissions on American law
have the costs of the issue relating to the
might easily be two-thirds of the time the
gold clause.
case has taken.
U

U

LLOYD'S LIST LAW REPORTS

480
[1962]

VOL.

2]

Campos v. Kentucky & Indiana Terminal Railroad Co.

If your Lordship is against me on that,
then the assumption is that there will be
judgment for the defendants in the action.
Mr. Justice McNAIR: Yes.
Mr. LITTMAN:I think my friend was
inclined to concede, subject to your Lordship's discretion in the matter, that it might
be right that I should not be ordered to
pay the costs occasioned by the issue of
res judicata.
With regard to the suggestion that there
should be a proportion taken: There cannot
in principle be an objection to this, but of
course the difficult thing to know is what
the proper and just proportion should be.
Mr. Justice McNAIR: I am not sure it
would be more difficult for me than for the
Taxing Master.
The Taxing Master is
quite at sea, experienced as he is, in
determining how much time has been spent
on a particular issue.
Mr. LITTMAN:I apprehend the way the
Taxing Master would proceed would be
this: He would say: The defendants do
not get the costs of Mr. Carson, but the
plaintiff gets her costs of Mr. Ten Eyck.
Then I think the practice is for the trial
Judge to give him some indication of the
rough proportion of the general costs which
are attributable to that issue, and the
Taxing Master would then have to form a
view as to what might be the common costs
and relate those to that issue. That is one
way to proceed. The other way to proceed
is to follow my learned friend's suggestion
and direct an overall proportion.
The
difficulty there is that one does not know
to what extent the equation is going to be
weighted by the costs of Mr. Carson,
because if an overall proportion of costs
is to be taken, of course, Mr. Carson's fees
would be much greater-Mr. Justice McNAIR: I should have
thought it highly likely that Mr. Carson
would be here anyhow.
..
Mr. LITTMAN:The defendants may say
that Mr. Carson came from America and
Mr. Ten Eyck did not, and they might seek
to say that Mr. Carson's presence put them
to great expense for this case and that
might weigh the equation against my
client.
My learned friend suggested that perhaps
it could be dealt with upon the basis that,
say, 50 per cent. of the time was spent on
this issue, but that does not mean that
justice would be done by directing that
we should pay 50 per cent. of the defendants' costs, because if 50 per cent. of the

[Q.B. (COM.CT.)
[McNAIR, J.

costs have been incurred on that issue, not
only ought the defendants not to have
them, but they ought to pay our costs. So
the right order as to costs, if one was dealing with it by proportions, would be that
there should be no order as to costs,
because if 50 per cent. of the costs were
incurred on an issue on which the defendants have failed, it means that 50 per
cent. of the costs are due to them and
50 per cent. to us.
Therefore, I would
submit that if that is the appropriate way
the right order is perfectly simply "No
order as to costs". Failing that, I would
ask your Lordship to say that if the defendants are to have judgment they should
have the costs subject to this, that the
costs of the issue of res judicata should be
paid by the defendants to the plaintiff and
set off, and that your Lordship should give
some direction or some indication of
approximately what, in your Lordship's
view, was the pro.portion of the general
costs as distinct from those specifically
allocatable to that issue which were to be
treated as going to that issue. That is a
matter entirely for your Lordship.
Mr. Justice McNAIR: Having heard this
discussion on the form of the judgment and
costs, I have come to the conclusion that
inasmuch as in the action itself the only
claim by the plaintiff is a claim for payment on a gold value basis and as she has
failed, according to my judgment, on that
issue, there should be judgment for the
defendants in the action.
As regards costs, here again the main
issue litigated between the parties has been
the gold value clause. There has been a
secondary issue raised by the defendants
on the plea of res judicata which occupied
a great deal of time and certainly, no doubt,
Involved the employment of expensive
witnesses, and on that issue the defendants
have failed. I am rather tempted by the
suggestion that, while giving the defendants
the general costs of the action, I should
limit their recovery to a certain proportion,
but I am afraid I have not got the material
before me on which I could base the proper
proportion.
Accordingly, my judgment
will be that the plaintiff is to receive the
costs of and occasioned by the plea of
res judicata. These two sets of costs to be
set off one against the other and the balance
paid in whoever's favour the ultimate figure
works out.