Lloyd's Maritime and Commercial Law Quarterly
JURISDICTION OVER RESTITUTIONARY CLAIMS
Kleinwort Benson v. Glasgow D.C.
Some readers will know that during the last decade certain local councils in England and Scotland entered into transactions known as “interest rate swaps”. The intention with which they entered into these alarmingly speculative1 agreements was to make money, and to use the profit generated to support their spending programmes, which were then under severe financial constraint. The first day of reckoning came, however, when the House of Lords held, in Hazell v. Hammersmith & Fulham London Borough Council,2 that the contracts concerned were illegal and unenforceable as being beyond the legal powers of the councils. The banks which had advanced money under these purported contracts were now faced with the question of whether an action could be brought tor reimbursement.3 As to whether they can, litigation in London is now underway, and no forecast of its eventual outcome is made here.
Kleinwort Benson Ltd. and Barclays Bank Plc had advanced money to Glasgow City Council. Taking the view that they would prefer to seek to recover in the English, rather than the Scottish, courts, they commenced proceedings in London. The Council objected that, as a body domiciled in Scotland, it was entitled to be sued in Scotland, and was not liable to be sued in England against its will. The decision of Hirst, J., in Kleinwort Benson Ltd. v. City of Glasgow District Council
4 was that the Council was indeed not liable to be sued in England. The decision is plainly important and, equally, plainly wrong.
The relevant jurisdictional rule is a statutory one. Schedule 4 to the Civil Jurisdiction and Judgments Act 1982 provides, in the context of a case where the defendant is domiciled in the United Kingdom, that a modified version of the Brussels Convention5 operates to allocate jurisdiction as between the courts of England, or Scotland, or Northern Ireland. Whereas the Brussels Convention6 provides that a defendant shall be sued in the Contracting State in which he is domiciled (which in the present case was the United Kingdom), the domestic legislation of the U.K.
1. It involved the hope that the councils could predict better than the banks the fluctuation of interest
2. [1991] 2 W.L.R. 372.
3. The money actually paid over had long since been lost from view, so there appeared to be no prospect of being able to trace it. An obligation to refund the money is all that could realistically be alleged.
4. (1992) The Times, 18 March.
5. Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters. For the amended text of the Convention, see the Civil Jurisdiction and Judgments Act 1982, Sched. 1. This Convention allocates jurisdiction as between the nine (in 1987) Member States of the EEC, plus Greece. The San Sebastián Convention (appearing in S.I. 1990 No. 2591) will, when fully in force, incorporate Spain and Portugal into the scheme. See Young [1992] LMCLQ 109.
6. The oustanding characteristic of which is that its main definitional terms are to be construed, not according to the concepts of national law, but under an “autonomous” definition which will apply in all countries equally, in the interests of legal certainty.
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