(1) WESTDEUTSCHE LANDESBANK GIROZENTRALE v ISLINGTON LONDON BOROUGH COUNCIL

Published date01 January 1995
Pages92-95
DOIhttps://doi.org/10.1108/eb024831
Date01 January 1995
AuthorDillon LJ,Leggatt LJ,Kennedy LJ
Subject MatterAccounting & finance
(1) WESTDEUTSCHE LANDESBANK GIROZENTRALE v
ISLINGTON LONDON BOROUGH COUNCIL
(Court of Appeal) Dillon LJ, Leggatt LJ and Kennedy LJ
Date of
Hearing:
December 1993
Reported at: 1994
1 Weekly Law Reports
938
Leave to Appeal to House of Lords granted: May 1994
THE FACTS
Westdeutsche Landesbank Giro-
zentrale (hereinafter referred to as
'the Bank') entered into a ten-year
interest rate swap agreement with
Islington London Borough Council
(hereinafter referred to as 'the
Council').
The swap agreement commenced
on 18th June, 1987 and was based on
a notional principal sum of £25m.
Under the terms of the agreement,
the Bank, as the fixed rate payer,
paid the Council, as the floating rate
payer, a lump sum of £2.5m.
At the same time as the swap
agreement with the Council was
concluded the Bank also entered, as
the floating rate payer, into a paral-
lel agreement with Morgan Grenfell
as the fixed rate payer under which
£2.5m was payable to the Bank.
Under the Bank/Council swap
agreement the Council made three
'interest' payments to the Bank
totalling £1,354,474.07 the last one
of these being in June 1989.
Then, in November 1989, the
Hammersmith
& Fulham decision was
handed down at first instance
interest rate swap transactions
entered into by local authorities
were done so outside their legal
capacity or ultra vires. This decision
had the effect that such agreements
were void and so in this case the
Council made no further payments
to the Bank under the Bank/Council
swap agreement.
THE ACTION
The Bank brought an action against
the Council claiming £1,145,525.93
(representing repayment of the
balance of the £2.5m) plus interest
to run from 18 June, 1987 (the date
of the agreement).
Mr Justice Hobhouse gave judg-
ment for the Bank for the principal
sum sought but awarded compound
interest dating only from 1st April,
1990.
The Council appealed to the
Court of Appeal and the Bank cross-
appealed against the judge's rejec-
tion of 18th June, 1987 for the
92

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