A contractual salary fixed in gold pounds remains a gold-based obligation even if paid in local currency via a conversion formula for convenience. The local currency is the medium of payment, not the unit of account, requiring pensions to be paid at the prevailing exchange rate.

Lord Blanesburgh:-

This is an appeal from a judgment of the Supreme Court of Cyprus affirming the judgment of the District Court of Nicosia at the trial. The appellants, defendants in the action, are the Ottoman Bank of Nicosia, and the respondent, the plaintiff, is a former official of the bank. Prior to his retirement on 31st December 1931 the respondent was serving in the Larnaca branch in Cyprus and the one question which survives for determination upon the present appeal is whether the pension to which, in accordance with the terms of his employment, he then became entitled is, as both Courts in Cyprus have held, a pension payable in Turkish gold pounds translated into Cyprus currency at the exchange of the day, or whether, as the appellant bank contends, it is due only in pounds of Turkish currency or, whether so or not is in Cyprus payable only in the currency of the Island at the fixed rate of exchange of 100 Cyprus for 110 Turkish pounds arid that whether the salary pounds be gold or not. The respondent's pension, in other words, according to the view of the bank, so far from being based upon gold, is really in Cyprus a sum expressed in Cyprus currency fixed and invariable, whatever, either intrinsically or in exchange, the value of that currency may be or become. As the Cyprus pound is no longer on a gold basis, and bears in actual exchange to a Turkish gold pound a very much higher ratio than 100 to 110, the question at issue is even now one of substantial consequence to the respondent. To the bank the issue may also be of general importance as affecting the pension claims of other of its retired officials in a position similar or analogous to that of the respondent. In 1903 the respondent entered the service of the Imperial Ottoman Bank, with which, for all present purposes, the appellant bank may be regarded as identical. In March 1905 he joined the permanent and pensionable staff, and he then signed a declaration by which he bound himself to adhere to the regulations governing the pensions and superannuation fund of the bank, which, adopted by the Direction General in December 1898 had been in force as from 1st January 1899. These regulations, as the respondent then further declared, formed an integral part of the conditions of his engagement with the bank.

The regulations are voluminous. Only a few of the articles constituting them need however here be specifically referred to. By Art. 2, the general management of the bank may at all times of the year discharge an employee, but (Art. 3) he receives an indemnity from the pension fund applicable to his case. Each employee (Art. 9) cedes to the bank prescribed proportions of his fixed salary and increments. These sums are retained by the bank each month, and lodged by it to the account of the fund. The bank, for its part, is to lodge, every mouth, to the same account, 6 per cent of the salaries of the personnel and undertakes to make good the deficiency, if the total of the fund, as so composed, is insufficient to meet pensions then already granted. By Art. 14, the amount of a retired employee's pension is fixed" on the basis of the salary which [he] received on 31st December of the year preceding that in which he is retired." The date applicable to the respondent's case accordingly is 31st December 1930. By Art. 15 the amount of pension is calculated for 10 full years' service at 30 per cent of the employee's annual fixed salary, with 2 per cent for each of the subsequent years. Art. 30 is striking :

"The general management reserve unto themselves the right to modify these regulations every time they think it necessary, and in so far as the rights and interests of the personnel will not be injured by these modifications."

It is complained that the general management have, on occasions, purported to exercise this power without due or any regard to the qualification imposed by the words above italicised. The powers of the bank, in this behalf, are not however in the pre