MORGAN GRENFELL & CO LTD V WELWYN HATFIELD DISTRICT COUNCIL (ISLINGTON LONDON BOROUGH COUNCIL, THIRD PARTY)

Publication Date01 Feb 1995
DOIhttps://doi.org/10.1108/eb024841
Pages185-190
AuthorJ HOBHOUSE
SubjectAccounting & finance
MORGAN
GRENFELL & CO LTD V WELWYN HATFIELD
DISTRICT
COUNCIL (ISLINGTON LONDON BOROUGH
COUNCIL,
THIRD PARTY)
QUEEN'S
BENCH DIVISION
(COMMERCIAL
COURT)
HOBHOUSE
J
Date of
Hearing:
April 1993
Reported at: 1995 All England Law
Reports
1
Date of Judgment: 30th April, 1993
THE FACTS
Morgan Grenfell & Co Ltd (Morgan
Grenfell) entered into a ten-year
interest rate swap contract with
Welwyn Hatfield District Council
(Welwyn) on the basis that Morgan
Grenfell would be the fixed rate
payer and Welwyn, the floating rate
payer.
At the same time Welwyn entered
into a parallel contract, this time as
the fixed rate payer, with Islington
London Borough Council as the
floating rate payer. The terms were
substantially the same save for a var-
iation as to the premium to ensure
an element of profit for Welwyn.
Each contract commenced on
23rd June, 1987, and was based on a
notional principal sum of £25m.
Under each contract, payments were
to be made semi-annually and pro-
vided for netting off so that where
both parties were obliged to make a
payment on the same day, only the
balance would be paid.
The last payment made under
each contract was on 23rd June,
1989.
In November 1989 the Queen's
Bench Division of the High Court
held, in Hazell v
Hammersmith
and Ful-
ham London BC [1990] 3 All ER 33,
that contracts such as these were
ultra vires
and void.
At that point the net sum paid by
Morgan Grenfell to Welwyn was
£1,918,458.90 and by Welwyn to
Islington was £1,708,458.90.
THE ACTION
Morgan Grenfell brought an action
against Welwyn claiming restitution
of money paid under an ultra vires
interest rate swap contract. Welwyn
issued third party proceedings
against Islington claiming the same.
The parties conceded that, following
the decision in
Westdeutsche
Landes-
185

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