Westdeutsche Landesbank Girozentrale v. London Borough of Islington, (1996) 198 N.R. 241 (HL)

• Case Date: May 22, 1996
• Jurisdiction: Canada (Federal)
• Citations: (1996), 198 N.R. 241 (HL)

Westdeutsche Landesbank v. London (1996), 198 N.R. 241 (HL)

MLB headnote and full text

Westdeutsche Landesbank Girozentrale (respondents) v. Council of the London Borough of Islington

(appellant)

Indexed As: Westdeutsche Landesbank Girozentrale v. London Borough of Islington

House of Lords

Lord Goff of Chieveley, Lord Browne-Wilkinson,

Lord Slynn of Hadley, Lord Woolf,

Lord Lloyd of Berwick

May 22, 1996.

Summary:

A local authority entered into an interest rate swap contract with a bank. Pursuant to the contract, the bank made an upfront pay­ment of £2,500,000 to the local authority and over two years, the authority paid the bank £1,354,474. The House of Lords declared interest rate swap contracts to be ultra vires the powers of local authorities and therefore void (see 125 N.R. 193). The bank thereafter sued the local authority to recover the balance outstanding on the transactions between the parties (£1,145,525). The trial judge allowed the bank's action and ordered the local authority to pay compound interest. The local au­thority appealed, arguing that compound interest should not have been awarded. The Court of Appeal affirmed the award of compound interest, but changed the date from which interest should run. The local authority appealed again, raising only the interest issue.

The House of Lords, Lord Goff of Chieveley and Lord Woolf dissenting, allowed the appeal, and awarded the bank simple interest from the date on the upfront payment. The court declined to expand the equitable rules for awarding compound interest. The dissenting judges opined that even without a finding of a fiduciary or trust situation, the court should exercise its equi­table jurisdiction to order compound interest in aid of the common law right to recover monies paid under an ultra vires contract.

Interest - Topic 811

Equity - Calculation of interest (incl. simple or compound) - A local authority entered into an interest rate swap contract with a bank - The bank paid the authority £2,500,000 upfront and the authority over time paid the bank £1,354,474 - Such contracts were thereafter declared ultra vires local authorities' powers and there­fore void - The bank sued the authority for money had and received to recover the outstanding balance - The lower courts allowed the action and awarded compound interest - The House of Lords noted that the court had no statutory or common law jurisdiction to award compound interest, but in certain limited circumstances (trust or fiduciary situations) courts of equity could award compound interest - The court reviewed the principles respecting resulting trusts and held that the money paid to the authority under the ultra vires contract was not impressed with a trust - Therefore the bank was awarded simple interest only.

Interest - Topic 906

Equity - Unjust enrichment - Interest on money paid under ultra vires contract - [See Interest - Topic 811 ].

Restitution - Topic 74

Unjust enrichment - Where money paid under ultra vires contract - [See Interest - Topic 811 ].

Trusts - Topic 1907

Resulting trusts - Circumstances when not imposed - [See Interest - Topic 811 ].

Cases Noticed:

Hazell v. London Borough of Hammer­smith and Fulham et al., [1992] 2 A.C. 1; 125 N.R. 193 (H.L.), refd to. [paras. 3, 57, 143].

Sinclair v. Brougham, [1914] A.C. 398 (H.L.), overruled in part [paras. 4, 72, 100, 132, 145, 198].

Fibrosa Spolka Akcyjna v. Fairbairn Law­son Combe Barbour, [1943] A.C. 32, refd to. [paras. 11, 103].

National Bank of Greece S.A. v. Pinios Shipping Co. et al., [1990] 1 A.C. 637; 104 N.R. 215 (H.L.), refd to. [paras. 14, 141].

Practice Statement (Judicial Precedent), [1966] 1 W.L.R. 1234 (H.L.), refd to. [para. 28].

Chase Manhattan Bank N.A. v. Israel-British Bank (London) Ltd., [1981] Ch. 105, refd to. [paras. 33, 72, 115].

President of India v. La Pintada Compania Navigacion S.A., [1985] A.C. 104 (H.L.), refd to. [paras. 41, 70, 133, 162, 198].

Hungerfords v. Walker (1988), 171 C.L.R. 125 (Aust. H.C.), refd to. [paras. 42, 204].

Attorney General v. Alford (1855), 4 De G.M. & G. 843, refd to. [para. 43].

Burdick v. Garrick (1876), L.R. 5 Ch. App. 233, refd to. [paras. 44, 68, 156].

Wallersteiner v. Moir (No. 2), [1975] Q.B. 373 (C.A.), refd to. [paras. 44, 69, 161].

Diplock's Estate, Re; Diplock v. Wintle, [1948] Ch. 465, refd to. [paras. 46, 74, 92, 163].

Gittins v. Steele (1818), 1 Swan. 199 (L.C.), refd to. [para. 46].

Kleinwort Benson Ltd. v. South Tyneside Metropolitan Borough Council, [1994] 4 All E.R. 972, refd to. [paras. 47, 163, 198].

Hallett's Estate, Re; Knatchbull v. Hallett (1880), 13 Ch. D. 696, refd to. [para. 50].

Johnson v. R., [1904] A.C. 817, refd to. [paras. 51, 160].

Lipkin Gorman v. Karpnale Ltd., [1991] A.C. 548; 127 N.R. 380 (H.L.), refd to. [paras. 53, 103].

Moses v. Macferlan (1760), 2 Burr. 1005, refd to. [para. 53].

Barnes v. Addy (1874), L.R. 9 Ch. App. 244, refd to. [para. 83].

Scandinavian Trading Tanker Co. AB v. Flota Petrolera Ecuatoriana, Ship Scaptrade, [1983] 2 A.C. 694 (H.L.), refd to. [paras. 83, 209].

Birch v. Blagrave (1755), Amb. 264, refd to. [para. 84].

Childers v. Childers (1875), 1 De G. & J. 482, refd to. [para. 84].

Vinogradoff, In Re, [1935] W.N. 68, refd to. [para. 84].

Muller, Re, [1953] N.Z.L.R. 879, refd to. [para. 84].

Cook, Re; Beck v. Grant, [1948] Ch. 212, refd to. [para. 89].

Vandervell v. Inland Revenue Commis­sioners, [1967] 2 A.C. 291 (H.L.), refd to. [paras. 89, 94].

Commissioner of Stamp Duties (Queens­land) v. Livingston, [1965] A.C. 694 (P.C.), refd to. [para. 89].

Napier (Lord) and Ettrick v. Hunter, [1993] A.C. 713, refd to. [para. 91].

Montagu's Settlements; Duke of Manchester v. National Westminster Bank, [1987] Ch. 264, refd to. [para. 92].

Goldcorp Exchange Ltd., Re, [1995] 1 A.C. 74, refd to. [para. 93].

Vandervell (No. 2), Re; White v. Vander­vell Trustees, [1974] Ch. 269 (C.A.), refd to. [para. 94].

Barclays Bank v. Quistclose Investments Ltd., [1970] A.C. 567 (H.L.), refd to. [para. 94].

West Sussex Constabulary's Widows, Children and Benevolent (1930), Fund Trusts, Re, [1971] Ch. 1, refd to. [para. 94].

Pavey & Matthews Proprietary Ltd. v. Paul, [1987] 69 A.L.R. 579 (Aust.), refd to. [para. 103].

Woolwich Equitable Building Society v. Commissioners of Inland Revenue, [1993] A.C. 70; 145 N.R. 163 (H.L.), refd to. [para. 103].

Metall und Rohstoff AG v. Donaldson Lufkin & Jenette Inc., [1990] 1 Q.B. 391 (C.A.), refd to. [para. 117].

Ames' Settlement, Re; Dinwiddy v. Ames, [1946] Ch. 217, refd to. [para. 119].

Stocks v. Wilson, [1913] 2 K.B. 235, refd to. [para. 122].

Leslie (R.) Ltd. v. Shiell, [1914] 3 K.B. 607 (C.A.), refd to. [para. 122].

Bankers Trust Co. v. Shapira, [1980] 1 W.L.R. 1274 (C.A.), refd to. [para. 122].

McCormick v. Grogan (1869), L.R. 4 H.L. 82 (H.L.), refd to. [para. 122].

London, Chatham and Dover Railway Co. v. South Eastern Railway Co., [1893] A.C. 429, refd to. [paras. 160, 205].

Gittens v. Steele (1818), 1 Swan. 25; 36 E.R. 283, refd to. [para. 173].

Page v. Newman (1829), 9 B. & C. 378, refd to. [paras. 178, 209].

Eddowes v. Hopkins (1780), 1 Doug. K.B. 376, refd to. [para. 178].

De Havilland v. Bowerbank (1807), 1 Camp. 50 (N.P.), refd to. [para. 178].

Wadsworth v. Lydall, [1981] 1 W.L.R. 598 (C.A.), refd to. [para. 183].

Hadley v. Baxendale (1854), 9 Exch. 341, refd to. [para. 183].

Arnott v. Redfern (1826), 3 Bing. 353, refd to. [para. 209].

Afovos Shipping Co. S.A. v. R. Pagnan & Fratelli, [1980] 2 Lloyd's Rep. 469, refd to. [para. 209].

Statutes Noticed:

Administration of Justice Act (U.K.), 1982, sect. 15 [para. 54].

Law Reform (Miscellaneous Provisions) Act (U.K.), 1934, sect. 3(1) [paras. 54, 128, 134, 180].

Supreme Court Act (U.K.), 1981, sect. 35(A) [paras. 54, 67, 128, 134, 180, 198].

Authors and Works Noticed:

Birks, Article (1993), 23 W.A.L.R. 195, generally [para. 11].

Birks, Introduction to the Law of Restitu­tion, pp. 313 et seq. [para. 45]; 356 to 359 [para. 97]; 360 [para. 96]; 361, 362 [para. 97]; 368 [para. 96]; 374, 396 [para. 28].

Birks, Restitution and Resulting Trusts, in Equity: Contemporary Legal Develop­ments, Goldstein (ed.) (1992), generally [para. 31]; p. 335 [para. 73].

Burrows, Law of Restitution, p. 403 et seq. [para. 45].

Burrows, Swaps and the Friction between Common Law and Equity, [1995] R.L.R. 15, generally [paras. 11, 31, 75]; p. 27 [para. 32].

Goff and Jones, Law of Restitution (4th Ed.), p. 632 et seq. [para. 45].

Halsbury's Laws of England (4th Ed. 1976), vol. 32, para. 109 [para. 156].

Mann, F.A., Article (1985), 101 L.Q.R. 30, pp. 34 [para. 192]; 47 [para. 193].

Pettit, Philip H., Equity and the Law of Trusts (7th Ed. 1993), p. 168 [para. 118].

Snell, Principles of Equity (29th Ed. 1990), pp. 26 [para. 149]; 28 [para. 49]; 193 [para. 118].

Swadling, William, Article, [1994] R.L.R. 73, generally [para. 11].

Swadling, William, J., A New Role for Resulting Trusts (1996), 16 Legal Studies 133, generally [paras. 31, 73].

Underhill and Hayton, Law of Trusts and Trustees (15th Ed. 1995), pp. 317 et seq. [para. 94]; 369, 370 [para. 92]; 866 [para. 89].

United Kingdom, Law Commission, Law of Contract, Report on Interest (1978) Cmnd. 7229, generally [para. 54]; paras. 10, 21 [para. 158].

Counsel:

Trevor Phillipson, Q.C., and Brian Doctor, for the appellants;

Jonathan Sumption, Q.C., and G. Leggatt, for the respondents.

Agents:

Nabarro Nathanson, for the appellants;

Travers Smith Braithwaite, for the agents.

This appeal was heard on July 10-13, 1995, before Lord Goff of Chieveley, Lord Browne-Wilkinson, Lord Slynn of Hadley, Lord Woolf and Lord Lloyd of Berwick of the House of Lords. The decision of the court was given on May 22, 1996, including the following opinions:

Lord Goff of Chieveley, dissenting - see paragraphs 1 to 56;

Lord Browne-Wilkinson - see para­graphs 57 to 131;

Lord Slynn of Hadley - see paragraphs 132 to 137;

Lord Woolf, dissenting - see paragraphs 138 to 197;

Lord Lloyd of Berwick - see paragraphs 198 to 209.