Given that Canada, and BC in particular, has an economy driven largely by international trade, it will come as no surprise that many of those transactions are conducted in currencies other than the Canadian dollar. What happens when you need to sue in Canada over a contract that deals in, for example, US dollars or Japanese Yen? How and when do the courts address the conversion of foreign currencies?
In BC, this issue is addressed by the Foreign Money Claims Act (FMCA). It provides the courts with authority to order that a judgment be stated in the amount of Canadian currency necessary to purchase the appropriate amount of “the other currency” based on the exchange rate of “a chartered bank located in British Columbia at the close of business on the conversion date.” The test applied by the courts to invoke the FMCA is whether a judgment creditor will be “most truly and exactly compensated if all or part of the money payable” ought to be in a “currency other than the currency of Canada.” Measuring damages by using a foreign currency can apply in both contract and tort claims.
Section 1(2) of the FMCA provides that the conversion date is to be the last day before the judgment debtor makes a payment on the judgment. However, where currencies have or may fluctuate wildly, this may result in a windfall to a judgment debtor. A recent case, Naturex Inc. v. United Naturals provides an example. United Naturals contracted to have Naturex deliver “plant extract products.” The shipments were payable in US dollars but, for reasons the court ultimately rejected, United Naturals stopped paying Naturex. Naturex sued to recover $248,000 US. Between the date the claim was commenced and the date of judgment, the value of the Canadian dollar fell against the US dollar. Unless adjusted, on the date of judgment, United Naturals would have received a “windfall” as it would require far fewer US dollars to pay the judgment in Canadian dollars. As a result, the court held that the most appropriate date upon which to order the conversion calculation was the date the claim was originally commenced, not the future date on which it may be paid.
As one appellate court reasoned:
The Court’s task is to select the most fair and equitable of the two possible conversion dates. It cannot be expected that either of these will allow perfect justice to be rendered. Given this, if any equities must fall unequally on the parties, they should fall more heavily on the wrongdoer than on the victim.
If your claim involves a foreign currency element or your damages may be better measured in a currency other than Canadian dollars, be mindful of the FMCA and be prepared to address the court on whether it ought to apply or not.