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Kleinwort Benson V. Glasgow City Council Notes

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This is an extract of our Kleinwort Benson V. Glasgow City Council document, which we sell as part of our Conflict of Laws BCL Notes collection written by the top tier of Oxford students.

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KLEINWORT BENSON V. GLASGOW CITY COUNCIL (1997) FACTS In the wake of the decision of your Lordships' House in Hazell v. Hammersmith and Fulham London Borough Council [1992] 2 A.C.

1. In that case, the House held that an interest rate swap agreement to which a local authority was a party was ultra vires the local authority and so void ab initio. Between 7 and 15 September 1982 the appellant defendants, the City of Glasgow Council, then the City of Glasgow District Council, entered into seven interest rate swap agreements with the respondent plaintiffs, Kleinwort Benson Ltd. ("Kleinwort"). Pursuant to the agreements, on various dates between 9 March 1983 and 10 September 1987 Kleinwort made payments to Glasgow totalling PS807,230.31, and Glasgow made payments to Kleinwort totalling PS79,152.41. Following the Hazell case, Kleinwort on 6 September 1991 commenced proceedings in the English High Court claiming restitution of the sums so paid by it to Glasgow. On 16 October 1991 Glasgow issued a summons claiming a declaration that the English High Court had no jurisdiction over the claim, over which the Scottish courts alone had jurisdiction. HOLDING LORD GOFF (MAJORITY) That question is whether the claim of Kleinwort to restitution of the sums paid by it to Glasgow under a contract accepted to be void ab initio falls within article 5(1). I have to confess that I find it very difficult to see how such a claim can fall within article 5(1). It can only do so if it can properly be said to be based upon a particular contractual obligation, the place of performance of which is within the jurisdiction of the court. Where however, as here, the claim is for the recovery of money paid under a supposed contract which in law never existed, it seems impossible to say that the claim for the recovery of the money is based upon a particular contractual obligation. We know from the de Bloos case that the reference in article 5(1) to the "obligation in question" is to "the contractual obligation forming the basis of the legal proceedings" (p. 1508, para. 11), and is that obligation "which corresponds to the contractual right on which the plaintiff's action is based...." in no case cited to the Appellate Committee, either from the European Court of Justice or from the courts of this country, has the "obligation in question" been construed to mean anything other than the particular contractual obligation upon which the plaintiff's claim is based, the performance or non-performance of which is relied upon to support the plaintiff's claim. It is in my opinion plain that this principle

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