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Hazell v Hammersmith and Fulham LBC: Difference between revisions
Hazell v Hammersmith and Fulham LBC (view source)
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{{a| | {{a|casenote|{{image|Dramatic Chipmunk|png|Did someone say “[[ultra vires|ULTRA FREAKING VIRES]]”??!}}}}Cue lightning, a peal of thunder, a blood-curdling scream and pallid faces at the very mention of its name. {{cite|Hazell|Hammersmith and Fulham LBC|1992|2AC|1}} declared that, under the Local Authorities Act 1972, [[local authority|local authorities]] had no power to engage in interest rate swap agreements because they were beyond the Council’s borrowing powers, and that all the contracts were [[void]]. | ||
Under the Local Authorities Act 1972, the local authorities had power to borrow and certain local authorities entered [[swap]] transactions to [[hedge]] their exposure to fluctuations in interest rates on these loans. A leading commercial silk had advised that a rate swap undertaken as part of the proper management of the council’s fund would be [[intra vires]]. | Under the Local Authorities Act 1972, the local authorities had power to borrow and certain local authorities entered [[swap]] transactions to [[hedge]] their exposure to fluctuations in interest rates on these loans. A leading commercial silk had advised that a rate swap undertaken as part of the proper management of the council’s fund would be [[intra vires]]. | ||
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*'''Purely speculative'''. These banks conceded that these were unlawful. | *'''Purely speculative'''. These banks conceded that these were unlawful. | ||
*“'''Parallel contracts'''”: Those relating to existing loan designed to capitalise upon changes in interest rates. These were also speculative in nature, but did relate to an existing loan exposure of the local authority, which Lord Templeman called | *“'''Parallel contracts'''”: Those relating to existing loan designed to capitalise upon changes in interest rates. These were also speculative in nature, but did relate to an existing loan exposure of the local authority, which Lord Templeman called “parallel contracts” or “replacing” interest rates. Here “the swap transaction is a speculation no different in quality although different in magnitude from a swap contract which is not entered into by reference to any existing borrowing”. | ||
*“'''Re-profiling'''”: Swaps relating to an existing loan, intended to alter the proportion of the interest which was paid on either a fixed or variable basis. Lord Templeman thought these were largely indistinguishable from parallel contracts. | *“'''Re-profiling'''”: Swaps relating to an existing loan, intended to alter the proportion of the interest which was paid on either a fixed or variable basis. Lord Templeman thought these were largely indistinguishable from parallel contracts. | ||