JUDGMENT

Taylor J:

[1] This case concerns another "Occupation debt".

[2] The plaintiff is the manager of a dispensary; the first defendant is a miner and the second is his wife, who joined in the transaction but as she has the same interest I will treat them for the purposes of this judgment as one person.

[3] The background of the suit is this. For nearly four years Malaya struggled with an inconvertible or "printing press" currency, depending entirely on the credit of the Japanese Government which necessarily fluctuated with their fortune in the war. They had a financial policy which might be described as "controlled inflation". It worked for a time but as the war progressed and their spectacular early successes were seen not to be leading to ultimate victory they gradually lost control and the inflation became fantastic - a situation comparable to that of Germany in 1919.

[4] The position just before the Japanese surrendered was this; their credit had gone and their currency was almost valueless but it was still legal tender.

[5] A shopkeeper who had obtained an advance from his back in July 1942 when the inflation was slight, and thereby acquired a stock of goods on which he had traded for three years, could sell the remnants in July 1945 and pay off his overdraft. In terms of goods it meant this - a man who had bought a suit of clothes on credit in 1942, and worn them out, could sell a set of secondhand buttons in 1945 for sufficient cash to settle the tailor's bill.

[6] On liberation the Malayan Governments were faced with the problem of adjusting the results of that period of progressive inflation. They took the three obvious steps of re-establishing a currency based on sterling, proclaiming a moratorium on all occupation dealings and devising a statutory scale of rates, analogous to rates of exchange, fixing the value in post-war money, with the Japanese currency is deemed to have had at various dates.

[7] The Debtor and Creditor (Occupation Period) Ordinance is designed primarily to proved a means of adjusting two types of transaction namely, those in which a pre-war debt was paid or partly paid during the occupation, and those in which an occupation debt was wholly or partly outstanding at the date of Liberation. It deals with those cases where the parties had been compelled by force of circumstances to make and receive payments in depreciating currency. It expressly excludes from its scope two types of dealings namely, those where the parties had expressly agreed that the deal was not to be completed in Japanese currency (s 6) and those where, after Liberation, the parties had agreed on a settlement (s 13). The principle is clear; the Ordinance provides a means of re-valuing those payments which could not be re-valued otherwise, but where the parties have made their own re-valuation, their agreement stands.

[8] The facts of the case are these. Late in August 1945, when the Japanese surrender was imminent and they had completely lost control of the inflation, the defendant wanted to borrow some Japanese money, partly for a transaction with a Japanese official with a view to recovering possession of the defendant's house, and partly for other purposes. At that time exchange dealings in Japanese currency were not uncommon. There was still some prewar Malayan money in the hands of the public, though not in active circulation. In view of the ever-increasing inflation most people wanted to convert their Japanese notes into any other form of security, but some few thought that the Allies would eventually compel the Japanese to redeem their notes, if only as a form of reparation, and were therefore actually buying Japanese notes, speculatively, at very low rates. The operating Banks could not undertake any such business and consequently there could be no open or commercial rate of exchange; all such transactions had to be arranged "on the street", each one being a matter of individual bargaining.

[9] The defendant approached the Secr