Money World New Zealand 2000 Ltd v KVB Kunlun New Zealand Ltd

[2006] 1 NZLR 381

High Court Auckland

HEADNOTE:
The plaintiff, Money World New Zealand 2000 Ltd (MWNZ), was a foreign exchange dealer
specialising in exotic currencies, including the Fijian dollar. The defendant, KVB Kunlun New
Zealand Ltd (KVB), was also a foreign exchange dealer. MWNZ and KVB entered into a foreign
exchange transaction whereby KVB agreed to convert FJ$360,000 into nearly NZ$325,000. The
Fijian dollars were in the form of 180,000 $2 commemorative notes.

On the day of the transaction KVB entered into a contract with the National Bank of New Zealand
(the NBNZ) to exchange the FJ$2 notes into the equivalent New Zealand currency to enable it to
carry out the transaction. Before completing the transaction with MWNZ, KVB contacted the third
party, the Reserve Bank of Fiji (the RBF), which advised that it was not bound to, and would not,
accept or honour the Fijian notes. KVB then cancelled the transaction with MWNZ, but retained the
Fijian notes.

MWNZ then issued a proceeding relying on the Sale of Goods Act 1908. MWNZ sought to recover
the New Zealand price of the notes plus general damages of $50,000 for loss of good will and the
opportunity to make future profits. It argued that the Sale of Goods Act applied because the Fijian
notes, not being currency in New Zealand, were a commodity rather than money.

Held:
It was clear that MWNZ had not been seeking to transfer the notes as anything other than Fijian
currency and at their face value. The notes were not being sold as collectors' items. The intention
was clearly to introduce them into currency. It followed that the foreign exchange agreement was
simply an attempted exchange of currencies; it had not been a sale of goods.

LAURENSON J.
The plaintiff, Money World New Zealand 2000 Ltd (MWNZ), is a company carrying on business at
Auckland as a foreign exchange dealer specialising in exotic currencies including the Fijian dollar.

The defendant, KVB Kunlun New Zealand Ltd, is a company also carrying on business at Auckland
as a foreign exchange dealer.

On 9 May 2003 MWNZ and KVB entered into a foreign exchange transaction whereby KVB
agreed to convert FJ$360,000 into NZ$324,971.32, which was to be paid to MWNZ on 13 May
2003. The Fijian dollars were in the form of 180,000 FJ$2 commemorative notes.

On the same day KVB entered into a contract with the National Bank of New Zealand Ltd (the
NBNZ) to exchange the FJ$2 notes into the equivalent New Zealand currency to enable it to carry
out the transaction.

Before completing the transaction with MWNZ, KVB contacted the third party, the Reserve Bank
of Fiji (the RBF), which advised that it was not bound to, and would not, accept or honour the Fijian
notes.

KVB then cancelled the transaction with MWNZ, but retained the Fijian notes.

1
MWNZ then issued proceedings relying on the Sale of Goods Act 1908 to recover the New Zealand
price of the notes plus general damages of $50,000 for loss of good will and opportunity to make
future profits.

KVB denied liability alleging:

(a) MWNZ breached an essential implied term, namely, by impliedly representing that the Fijian
notes would be honoured by the RBF.
(b) If the transaction was governed by the Sale of Goods Act, then it was a sale by description in
which case there had been a breach of the implied condition as to merchantable quality.

KVB also counterclaimed against MWNZ alleging that:

(a) MWNZ was guilty of misleading and deceptive conduct by failing to disclose that the RBF
would not honour the notes; and
(b) it had suffered losses arising from having to reverse the agreement with NBNZ and for the
cost of storing and insuring the notes.

KVB also issued third party proceedings seeking indemnity from the RBF for any liability to
MWNZ.

The RBF denied liability to KVB alleging it made no representation that the Fijian notes were not
legal tender.

Factual background
MWNZ is associated with, but not directly related to, a Singapore company, Money World Asia Pte
Ltd (MWA), which also deals in foreign exchange. Both companies are owned by a Singapore
businessman, Mr Andy Lim.

There are two aspects to the operations conducted by Mr Lim through his companies. First, a
numismatic business, which he described as a ''hobby business'' personal to him, and secondly, a
foreign exchange business which deals with foreign exchange matters for clients who wish to
transfer funds from one country to another. The numismatic business is concerned with encouraging
and profiting from the dealings in exotic currencies which attract the attention of collectors and
dealers in this area.

In 1999 the RBF decided to issue FJ$2,000 and FJ$2 notes to commemorate the 2000 millennium.

On 28 June 1999, the RBF entered into an agreement with MWA to supply and market:
(a) 2,000 FJ$2,000 notes to be supplied by 1 December 1999.
(b) 1,000,000 FJ$2 notes to be supplied in three tranches:
- 300,000 (face value FJ$600,000) by 29 October 1999.
- 300,000 (face value FJ$600,000) by 30 November 1999.
- 400,000 (face value FJ$800,000) by 30 March 2000.
The purchase prices were supported by a guarantee from a Singapore bank.

The notes issued were to be legal tender for their face value. However, in the case of the FJ$2 notes,
MWA was required to pay a premium above face value of 10 per cent for the first tranche, 7.5 per
cent for the second and 5 per cent for the third. The same notes were then onsold to wholesale
dealers for prices ranging between 25 per cent and 50 per cent above face value. The wholesalers in
turn onsold for prices up to $10 per note.

MWA took delivery of the FJ$2,000 notes and the first two tranches totalling 600,000 of the FJ$2
notes.

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The commemorative issue was not a success, with the result that MWA sought to return some notes
to RBF, which refused. RBF then called up the bank guarantee. MWA then obtained an injunction in
the High Court of Singapore on 2 February 2000 to prevent this.

The position for MWA worsened after the Speight coup in Fiji, which caused a lack of confidence in
the numismatic value of the commemorative issue. The position was reached where MWA, having
only been able to sell 100 of the FJ$2,000 notes, and less than 50,000 of the FJ$2 notes, was
required to repurchase substantial quantities from dealers to whom MWA had onsold notes. The
repurchases were done at either face value, or FJ$2.20 being the original cost to MWA.

In August 2000 MWA commenced negotiations with the RBF. On 5 October 2000 agreement was
reached whereby the RBF accepted the return of the remaining 1,900 FJ$2,000 notes and all the
300,000 FJ$2 notes which had comprised the second tranche.

Clause 13 of the settlement agreement provided:

''MWA shall not whether by its servant or agents or in any way whatsoever whether
directly or indirectly seek redemption from RBF of any $2,000 note or $2 note over
which it retains any control after the execution of this deed.''

This meant that MWA was left with all the unsold or repurchased FJ$2 notes which it had received
and paid for as part of the first tranche.

In September 2002 MWNZ sought to redeem some of these notes, but the RBF refused.
Proceedings were issued by MWNZ in the High Court of Fiji. These proceedings have not been
resolved. Subsequently, MWA decided to resell the notes to dealers in the United States of America
or Europe and to put them into circulation through the Australian and New Zealand banking
systems. Apparently, there was no market for Fijian or other Pacific currencies in Singapore.

Between 4 and 30 April 2003, MWNZ made nine separate deposits of Fijian dollars totalling
FJ$102,000 with the NBNZ.

On 29 or 30 April 2003, an employee of MWA, Ms Goh, who was working with MWNZ in New
Zealand, rang the NBNZ to inquire if the bank would take FJ$380,000 which had come from a
customer. She was asked to give warning beforehand. The bank was concerned about this
transaction and made inquiries from its own financial crime and securities department.

On 7 May 2003, Ms Goh rang the NBNZ to advise that the money would be arriving the next day.

On 8 May 2003, the NBNZ advised MWNZ it would not accept the deposit. Despite this, at about
1.30 pm, MWNZ attempted to deposit some four or five bags of FJ$2 notes. At 1.45 pm a further
seven bags were received, six of which contained FJ$2 notes. The NBNZ held these bags but did
not process the transactions.

On 9 May 2003, Mr Lim sent an email at 8.15 am (Singapore time), followed by a phone call to the
NBNZ. He apologised for the deposit of the FJ$2 notes along with the other currencies, and then
said:
''As for the Fijian dollars they are from Ghim Lee Holdings a major garment
manufacturer in Fiji with 5,000 workers and it is intended to be TT over to Fiji next
week to meet their weekly payroll requirements.''

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The NBNZ confirmed that it would not handle the transaction. It did not wish to be drawn further as
to why, beyond indicating that costs were an issue and the bank was still reviewing its position. The
refusal was confirmed on 13 May 2003. On 21 May 2003 the bank terminated MWNZ's account.

After the NBNZ had rejected the deposit on 9 May 2003, MWNZ then endeavoured to effect the
same transaction through KVB. The following events took place:
(a) Ms Goh telephoned Mr Wong, who was the senior manager for KVB's Asian division.
(b) They agreed that KVB would purchase FJ$360,000 for NZ$324,971.32. Of this amount,
NZ$270,537.26 was to be paid via bank transfer into MWNZ's account with the NBNZ, so that
MWNZ could convert the New Zealand currency into Fijian dollars for transmission to a client of
MWA in Fiji. The remaining NZ$54,434.06 was to be paid in cash. The transaction was to be
completed on Tuesday 13 May 2003.

[I digress at this point to note that, in the normal course, the following would have occurred:
(a) The Fijian notes would be sent to American Express (Amex) in Sydney for verification of the
amount received. They would then be distributed by Amex to markets throughout the world.
(b) Once the amount had been verified physically by Amex, the following electronic transactions
would have occurred:
(i) Amex would credit the Fijian dollars to KVB's account with NBNZ as Fijian dollars.
(ii) Credit from there to KVB's NBNZ account in New Zealand dollars.
(iii) Credit from there to MWNZ's NBNZ account in New Zealand dollars.
(iv) Credit from there to MWA's account in Fiji in Fijian dollars.
(v) Credit from there to MWA's Fijian client, Ghim Li.]

(c) The FJ$360,000 was in FJ$2 notes. These were brought to MWNZ's offices in ten boxes at
about 2 pm, where they were counted. Counting was completed by 5 pm. The boxes were repacked
and sealed for repatriation to Sydney. Armourguard personnel arrived to collect the boxes.
(d) During the course of the counting exercise, Mr Crowle, KVB's chief operating officer, learned
of the transaction. He thought it was unusual that KVB was being involved in a transaction relating
to a large quantity of low face value notes in a currency that KVB did not usually deal in and had no
facilities to exchange. Furthermore, the notes had been presented late on a Friday afternoon, which
meant that they could not be transferred to Amex in Sydney until the following Friday. This would
have been after the transaction was to be settled. Furthermore, the transaction was with a party with
whom KVB had had no previous dealings.
(e) Mr Crowle's first impression was that the notes may have been either counterfeit or stolen. The
fact that they had been shipped from Singapore for exchange suggested to him the notes were not
able to be exchanged in Singapore or Fiji.
(f) Because of these concerns he rang Mr Whiteside, the RBF's chief manager of financial
institutions to explain the situation and for confirmation that the notes were legal tender.
(g) On learning that the notes had been presented by MWNZ, Mr Whiteside said he could not
confirm anything on the phone, because there was a dispute over the notes. He requested Mr Crowle
to send him an email to which he would respond.
(h) Mr Crowle then instructed Mr Wong to arrange for Armourguard to collect and hold the notes
while he made further inquiries and not to tell MWNZ.
(i) That evening Mr Crowle sent an email to RBF informing it that the notes had been received in
the course of a currency transaction and that before performing the contract with KVB he needed to
know if the notes were legal tender. He sought guidance about what to do.

On Monday 12 May 2003 the following occurred:

(a) Mr Lim rang Mr Crowle and later sent an email with a copy of a Fijian Government Gazette
Notice No 1593 dated 13 August 1999, which referred to the notes as forming ''part of the legal
currency of Fiji and shall be in addition to the notes and coins currently in circulation''.

4
 (b) Mr Crowle was not satisfied. He spoke to the Police Fraud Investigation Unit (FRI) because
the transaction was reportable under the Financial Transactions Reporting Act 1996 (FTRA). He
was instructed to hold the notes until further investigations were completed by the unit.
(c) The contract to sell the Fiji notes to NBNZ was reversed by a contract to repurchase those
notes at a cost of $2636.20.

On Tuesday 13 May 2003:

(a) The FRI advised that the notes were the subject of a commercial dispute and it had no further
interest in the transaction.
(b) Mr Whiteside advised in an email that there was litigation between the RBF and MWNZ
regarding the notes, and the RBF did not regard itself bound to accept them.
(c) Mr Crowle concluded the response was equivocal, there was a possibility the notes were not
legal tender and that, at any rate, KVB could expect to have problems in redeeming them.
(d) Mr Li, managing director of MWNZ, wrote demanding that KVB complete the transaction. Mr
Crowle advised him by telephone that KVB was cancelling the agreement because the RBF had
failed to confirm the notes were legal tender and had said it would not honour them.

On Wednesday 14 May 2003:

(a) KVB confirmed in writing that the agreement was cancelled.
(b) KVB's solicitors received a facsimile from MWNZ's solicitors advising that MWA treated
KVB's cancellation as a repudiation and requesting that the notes be returned to MWA.

On Thursday 15 May 2003:

(a) KVB's solicitors advised MWNZ's solicitors that KVB intended holding the notes pending
resolution of the dispute.
(b) MWNZ commenced the present proceeding.

On Friday 16 May 2003:

(a) The RBF was asked by KVB to explain why it would not accept the notes and why MWNZ
would have had them shipped to New Zealand.
(b) Mr Whiteside replied that he could not elaborate further and that the matter was in the hands
of the RBF's legal counsel.

On Thursday 22 May 2003 the FRI sent an email to all major banks in New Zealand including KVB
advising them not to accept or convert the notes.

On 25 June 2003 KVB was advised by the ANZ Bank in Fiji that it would exchange the notes. KVB
would, however, have to pay the airfreight and insurance costs and a 0.9 per cent fee on the face
value of the notes. KVB did not accept this proposal because, at that stage, it still considered that
the disposal of the notes should be determined by the outcome of the Court proceeding.

Later in the course of settlement discussions, KVB learned that the RBF had no objection to the
notes being returned to MWNZ and, that if KVB did so, it would not be in breach of an undertaking
given earlier to the Court to ensure the safekeeping of the notes. KVB therefore decided that it
would return the notes to MWNZ to save storage and insurance costs. Armourguard were instructed
to deliver the notes to MWNZ.

Shortly afterwards, MWNZ's solicitors advised that MWNZ no longer wanted the notes back. When
they were in fact delivered to MWNZ the staff there refused to accept the notes.

The next day, 15 December 2003, the notes were delivered by members of KVB to MWNZ and left
in its foyer. Later the same day, the notes were returned to KVB and left in its reception area. At that

5
point MWNZ arranged to have the notes collected and stored by Chubb Protective Service. It has
incurred costs as a result.

First cause of action

MWNZ pleaded as a first cause of action that the agreement reached on 9 May 2003 was governed
by the Sale of Goods Act because the Fijian notes, not being currency in New Zealand, were a
commodity rather than money. KVB had breached the agreement because it had not completed the
transaction by paying over NZ$324,971.32. Therefore, MWNZ was entitled pursuant to s.50 of the
Sale of Goods Act to recover that amount, this being the price for the FJ$360,000.

MWNZ further alleged that, by reason of KVB's failure to deliver the New Zealand dollars, it had
been unable to use those moneys to meet an obligation to a Fijian customer, Ghim Li. It therefore
sought damages against KVB pursuant to s.51 of the Sale of Goods Act for $50,000, …

MWNZ submitted that, given the transaction was governed by the Sale of Goods Act, the issue to
be determined was whether the transaction amounted to a sale by description pursuant to s.15 and, if
so, had there been a breach by MWNZ of the condition implied by s.16(b) of the Act as to
merchantable quality. In this regard it submitted that there had been no such breach.

KVB and the RBF both submitted that the Sale of Goods Act did not apply, because:
(a) the agreement was an exchange and not a sale; and
(b) the definition of goods in s.2(1) of the Act does not include money. Section 2(1) states that
goods includes ''all chattels personal other than money''.

MWNZ submitted that the notes were not money, because:

(a) Relying on Marrache v Ashton [1943] the notes were not legal tender or currency in New
Zealand because, being foreign currency, they were a commodity which could be bought and sold.
(b) Unlike money, the price, or rate of exchange of the notes was a matter of negotiation.
(c) Relying on Moss v Hancock [1899] and, Morris v Ritchie [1934], the notes were collectors'
items having a greater value than their face denomination.

The issue as to whether reference to the word ''money'' in s.2(1) of the Sale of Goods Act does, or
does not, include foreign currency exchange transactions has not been previously decided. In order
to address this I consider there are two basic issues for a start:
(a) What is money?
(b) Why is money excluded from the definition of goods in s.2(1)?

What is money?
In Moss v Hancock the plaintiff's servant was convicted of stealing his £5 gold piece, which had
been presented to the plaintiff by the Goldsmiths' Company in the Jubilee Year 1887, the year of the
coin's date. It had been kept in a cabinet and had never been in circulation. The thief took the coin to
the defendant, a second-hand dealer, who exchanged it for five sovereigns, the equivalent value of
the coin. The coin was located in the defendant's possession. The plaintiff was successful in
obtaining an order for the restitution of the particular coin. That order was upheld on appeal.

The issue was whether the particular coin could be recovered by the plaintiff as the true owner even
though it had been exchanged for five different coins which, in total, were of equivalent value.
Darling J held at pp115 - 116:
'''It has been quaintly said that ''the reason why money cannot be followed is because it
has no ear-mark''; but this is not true. The true reason is upon account of the currency
of it; it cannot be recovered after it has passed in currency. So, in the case of money
stolen the true owner cannot recover it, after it has been paid away fairly and honestly

6
 upon a valuable and bona fide consideration; but before money has passed in currency,
an action may be brought for the money itself.' Now, here it is plain that the mere fact
that the stolen gold piece was money would not render it unfit for the application to it
of an order for restitution. The true question seems to me to be whether by the manner
of dealing with it which the thief adopted the gold piece passed in currency. The
exchanging of a coin for other coins is not conclusive proof that the exchanging was
that of dealing with current coin on both sides. Many coins, which yet have not been
formally withdrawn from currency, have a price far beyond their denominated value,
by reason of their antiquity or rarity, or for their beauty of design or execution (though
this last is perhaps merely to say again by reason of the coins being struck in another
age and mint than ours). Money as currency, and not as medals, seems to me to have
been well defined by Mr Walker in 'Money, Trade, and Industry' as 'that which passes
freely from hand to hand throughout the community in final discharge of debts and full
payment for commodities, being accepted equally without reference to the character or
credit of the person who offers it and without the intention of the person who receives
it to consume it or apply it to any other use than in turn to tender it to others in
discharge of debts or payment for commodities .' Bearing in mind all the foregoing
considerations, and applying them to the facts stated for us by the magistrates, I ask
myself was this gold piece passed on in its character as coin of currency, or was it
rather the subject of a sale as an article of virtue. We are permitted to draw inferences
from the facts stated to us; and besides it was stated in the course of the argument that
this piece was of somewhat greater value than that of its denomination, and so was
worth more than the five pieces given in exchange for it, though each of those was a
fifth of the nominal value of this gold piece. Upon the facts stated I come to the
conclusion that this gold piece never passed in currency, though it was the subject of a
sale (as a medal might have been) to a dealer in old or curious things; and that,
therefore, the magistrates acted within their powers in making an order for its
restitution.'' (Emphasis added.)

This decision makes it clear that one of the essential features of money is that it cannot be recovered
in specie by a true owner if the particular money has passed into currency, that is to say, into general
circulation or use. In Moss v Hancock it was recoverable because the only transaction in which the
coin had been used did not amount to it being used in currency. It was purchased as an object by the
second-hand dealer in its own right, rather than simply being exchanged for its equivalent face
value.

The proposition that money can, in some circumstances, have a value different from its face value is
well illustrated in Morris v Ritchie. In that case the appellant had appealed against his conviction for
unlawfully carrying on the business of a gold coin dealer without a licence. The first ground of
appeal was that, as sovereigns were still legal tender in New Zealand, and were therefore part of the
currency, they could not be purchased or sold but could only be exchanged for currency in a
different form. This ground of appeal failed because, as stated by Ostler J.:
''In view of these facts, in my opinion, the giving of thirty shillings in exchange for a
gold sovereign is a purchase of that sovereign. It is taken by the purchaser not as a
current coin of the realm, but as a piece of gold of standard fineness, and it is bought as
gold for the purpose of making a profit on the gold.''

Why is money excluded by s.2(1) of the Sale of Goods Act 1908?

Section 3(1) of the Sale of Goods Act defines sale and agreement to sell as:
“3. Sale and agreement to sell

7
 (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to
transfer the property in goods to the buyer for a money consideration, called ‘the
price’.”

If money was regarded as being goods for the purposes of the Act, then this would require a transfer
of property in money for a money consideration. There are two possibilities:
(a) if the transaction was simply an exchange of equivalent value there would be no consideration
for it and hence, there would be no contract; or
(b) if the money received was to be repaid later with or without interest, then any such transaction
could be encompassed within, for example, a mortgage. However, s.60(3) of the Act says:
“(3) The provisions of this Act relating to contracts of sale do not apply to any
transaction in the form of a contract of sale which is intended to operate by way of
mortgage, pledge, charge, or other security.”

On either basis there is a clear reason why money should be excluded from the definition of goods.
The learned author of Atiyah, Sale of Goods (9th ed, 1995), sums up the position very succinctly as
follows:
''Sale and Exchange
The fact that the consideration must be in money, and that the term 'goods' is defined
by s.61 so as to exclude money, serves to distinguish a sale from a contract of barter or
exchange in the ordinary case.''

A further reason can be gleaned by reference to s.26(1) of the Sale of Goods Act, which states:
“26. Revesting of property in stolen goods on conviction of offender
(1) Where goods have been stolen and the offender is prosecuted to conviction, the
property in the goods so stolen revests in the person who was the owner of the goods,
or his personal representative, notwithstanding any intermediate dealing with them,
whether by sale in market overt or otherwise.”

In my view it follows that, if money was goods for the purposes of the Sale of Goods Act, and if
money supplied as goods was stolen, then the owner of that money could have it revested in him or
her despite the intermediate dealing which would necessarily involve the money (the goods) having
been introduced into currency, that is, the intermediate sale. This is quite contrary to the basic rule
that, once introduced into currency, money cannot be recovered by the owner. This would therefore
create a direct conflict with the provisions of s.26(1).

Finally, if one considers the remedies provided under the Sale of Goods Act it becomes apparent
that the application of these in some cases would be entirely inappropriate if one was to accept that
money was goods. For example, if an unpaid seller of the money (the goods) was not paid, then it
would be quite unrealistic to accept that, if he had retained the goods, pending receipt of the price,
that his right to hold those moneys was dependent on an unpaid seller's lien (s.42).

I therefore consider there is a rational basis for money being excluded from the definition of goods
for the purposes of the Sale of Goods Act. It also follows that it is clear that a transfer of separate
amounts of money of equivalent value between two persons in New Zealand cannot be governed by
the Sale of Goods Act. Such a transaction can only be an exchange.

The question remains as to whether the position is any different if one of the separate amounts of
money involved in the exchange is in a foreign currency. In Marrache v Ashton the parties, who
were both resident in Gibraltar, had entered into a mortgage in Gibraltar on a property situated
there. The mortgage required repayment in pesetas which, although this currency was legal tender

8
in Spain, was not currency in Gibraltar, though it circulated there in considerable numbers. Lord
Macmillan held: ''Consequently, these notes must be regarded in Gibraltar as commodities''.

The issue became whether the repayment which was sought in Gibraltar currency should be
assessed on the basis of the price for pesetas on the Gibraltar market, or at the lower value
obtainable at the Spanish Custom House on the border. As counsel for the defendant submitted in
this case, this decision does not assist in determining whether a current exchange contract is a sale
of goods or, a contract of exchange (which is analogous to barter).

In my view, it is necessary to reconsider what is involved in an exchange of money. In the case of a

foreign exchange transaction there is once again the transfer of separate amounts of money of
equivalent value between two persons. I can see no reason why the factors, which I have identified
to explain why s.2(1) does not include money in the definition of goods, are not applicable when the
transaction happens to involve a foreign currency.

In a foreign exchange transaction there is, however, one additional factor which I consider to be
finally determinative of the position. It relates back to the definition of a contract of sale, namely
(s.3(1)):
“A contract whereby the seller transfers or agrees to transfer the property and goods to
the buyer for a money consideration, called ‘the price’.”

In the case of a foreign exchange transaction there is a money consideration involved namely, the
fee or rate charged by the dealer supplying the currency which is sought by the other. This being the
case, the transaction is a contract for exchange of two monetary amounts of equivalent value, albeit
in different currencies. The money consideration for that contract is not one or other of the two
separate amounts of currency, but the fee charged by the dealer who is asked to provide the
particular currency. The fee charged is for the service provided, not the currency which is
exchanged.

Counsel for the plaintiff in this case argued that there was a further factor to be taken into account
namely, that unlike money, the price or rate of exchange of the notes was a matter for negotiation.
The position is, as I understand it, is that rates of exchange will differ between dealers and that
those rates can be the subject of negotiation. Once settled, however, that is the agreed rate of
exchange. It becomes the best equivalent value of one currency to be exchanged for a specified
amount of another currency. My conclusion is therefore, that this factor does not affect the
fundamental nature of the transaction namely, an exchange as opposed to a sale of goods.

I therefore find that, in the present case, the mere fact that the foreign exchange agreement made on
9 May 2003 involved an exchange of Fijian dollars for New Zealand dollars, does not bring that
agreement within the Sale of Goods Act.

That is, however, not the final answer as to whether the Sale of Goods Act may or may not govern
the transaction. MWNZ has contended that the Fijian commemorative notes in this case were akin
to the £5 gold coin in Moss v Hancock , or the gold sovereigns referred to in Morris v Ritchie. In
other words, they were items which had a collector's value which exceeded their face value.
Accordingly, they were objects or commodities in their own right and not merely money. This being
the case, Fijian dollars could be regarded as commodities or goods, and hence, not excluded by
s.2(1) of the Sale of Goods Act.

This contention can, in my view, be disposed of very briefly as follows:

(a) It was originally intended by both MWA and the RBF that the commemorative notes would
have a value beyond their denominated value. It was for this reason that the FJ$2 notes were sold by

9
the RBF to MWA at a premium above face value, and also why the latter was able to onsell some of
these at an even greater premium. Both these sets of transactions therefore involved the sale of the
notes at a value above face value because it was hoped they would have a particular intrinsic value
to collectors. This being the case, it could not be said that the notes were simply passed into
currency, rather, they were sold as objects having an added value to collectors.
(b) It became clear, however, that despite the best hopes of the RBF and MWA, the notes were not
capable of obtaining that enhanced value.
(c) The RBF agreed to take back the second tranche of 300,000 FJ$2 notes.
(d) The evidence was that there was simply no market for the commemorative notes at an
enhanced price. It was for this reason that MWNZ on behalf of MWA sold $102,000 worth of FJ$2
notes to the NBNZ at face value on 8 April 2003, and then endeavoured to exchange a further
$360,000 worth at face value to KVB on 9 May 2003.

It is clear that on 9 May 2003 MWNZ was not seeking to transfer the notes in question as anything
other than Fijian currency and at their face value. It follows that there can be no question that the
notes were being sold as collectors' items. The intention was quite clearly in each case to introduce
them into currency. It follows from this finding that the agreement was simply an attempted
exchange of currencies; it was not a sale of goods.

I therefore find that the agreement is not governed by the Sale of Goods Act and accordingly, the
plaintiff's first cause of action fails.

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