BLACK EXCHANGE

Otago Daily Times, Issue 24417, 1 October 1940, Page 8

BLACK EXCHANGE

CLAIM AGAINST BANK CONTRACT HELD INVALID SUPERVENING FRUSTRATION (Special to Daily Times) WELLINGTON, Sept, 30. In a reserved judgment delivered in the Supreme Court to-day, Mr Justice Smith found in favour of the Bank of New South Wales, Wellington, in a claim brought against it by Alistair Scott, of Wellington, company manager for £325. “The facts show that various persons were concerned in a transaction iri what is called the ’ black exchange market, but the claim before the court concerns only the claim by the plaintiff against the defendant bank,” said his Honor. “It raises only questions which may be raised between those two parties to the transaction and, not those which might.be raised between other parties. The claim constitutes an affirmation of a transaction alleged to produce £325 for the plaintiff. It is not a claim for damages for failing to carry through that transaction to the. ppiht of making available the money to the plaintiff.; Statement of Facts “ The facts are not easy to interpret,” his Honor said. “ I propose, therefore, to find them and state their legal consequences. On April 10, 1940, the plaintiff gave the defendant bank certain instructions. They referred to arrangements. which, if lawfully carried out, would have enabled—(a) Mac Duffs, Ltd., to have obtained in London £20,000 sterling in return for £28,325 (New Zealand) paid by Mac Duffs, Ltd., in New Zealand; (b) W. and R. Fletcher, Ltd., the New Zealand representatives of the Union Cold Storage Company, which was providing the £20,000 sterling in London, to have obtained in New Zealand £28,000 (New Zealand); and (c) the plaintiff to have obtained in New Zealand £325 less bank charges. “As the regulations were made on April 10 and gazetted on April 11 they must at the very least have been in force before the Bank of New South Wales received its finstructions The instructions, .therefore, became frustrated, by reason of a supervening, illegality whjchVwas not 'due to the .act of , either party;-. Supervening frustration of this kind does hot bring about rescission of a contract, ab initio but determines the contract as from the date of frustration. When, therefore, the bank received advice on the 12th that the transaction in England was •complete there was not a contract in existence on which the advice could operate, and the plaintiff could never become entitled to the £325. Further-; more, the plaintiff could not recover any compensation for part performance on his part. On these grounds the plaintiff must fail. Frustration of Contract "The foregoing view,” his Honor said, “is based on my .findings on the facts —that on the assumption made in favour of the plaintiff the'transaction was lawful on the 10th. and even for the purposes of argument, on the 11th. If, however, the true legal position is that the Emergency Regulations. 1940, came into force on April 30, then, on any view of the facts, the plaintiff could not succeed. If the contracts were made before the regulations came into force the effect of the regulations was to bring those contracts to an end from the time the regulations took effect. Thereafter, the contracts had no legal existence.” After giving his reasons for concluding that the regulations did come into force on April 10, his Honor said that knowledge of the parties was not material to the question whether their contracts were, illegal or not. The plaintiff acquired no rights under any, contract, all acts being illegal. The plaintiff could acquire no right by estoppel which he could enforce. Judgment would be entered for the defendant, with costs according to scale.