The issue before the courts was whether, in the absence of any express power authorising the Council to do so, the Council was within its power under s 111(1) of the Local Government Act 1972 to enter into certain swap transactions;
‘The fact that subsection (1) is expressly made subject to ‘the provisions of this Act’ make it clear that it is important to construe section 111(1) in its context. The reference to expenditure, borrowing or lending, etc., within the brackets in the subsection do not themselves confer any power to expend, borrow or lend money, etc., but only make it clear that the fact that those activities are involved does not prevent the activities being within the power of the authority which are authorised by this subsection.
The critical part of the subsection are the words ‘calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.’ Before the subsection can authorise an activity which is not otherwise authorised there must be some other underlying function which is authorised, to the discharge of which, the activity will facilitate or be conducive or incidental.
What is a function for the purposes of the subsection is not expressly defined but in our view there can be little doubt that in this context ‘functions’ refers to the multiplicity of specific statutory activities the council is expressly or impliedly under a duty to perform or has power to perform under the other provisions of the Act of 1972 or other relevant legislation. The subsection does not of itself, independently of any other provision, authorise the performance of any activity. It only confers, as the sidenote to the section indicates, a subsidiary power. A subsidiary power which authorises an activity where some other statutory provision has vested a specific function or functions in the council and the performance of the activity will assist in some way in the discharge of that function or those functions.’
Woolf LJ and French J
[1990] 2 QB 697, [1990] 2 WLR 1038, [1990] 3 All ER 33
Local Government Act 1972 111(1)
England and Wales
Cited by:
Appeal from – Hazell v Hammersmith and Fulham London Borough Council CA 2-Jan-1990
The authority entered into interest rate swap agreements, whose validity was challenged. The court considered what were the functions of a local authority within the Act. ‘We agree with the Divisional Court that in [section 111(1)] the word . .
Cited – Kleinwort Benson Ltd v Lincoln City Council etc HL 29-Jul-1998
Right of Recovery of Money Paid under Mistake
Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable when made. Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap . .
At first instance – Hazell v Hammersmith and Fulham London Borough Council HL 1991
Swap deals outwith Council powers
The authority entered into interest rate swap deals to protect itself against adverse money market movements. They began to lose substantial amounts when interest rates rose, and the district auditor sought a declaration that the contracts were . .
Lists of cited by and citing cases may be incomplete.
Local Government
Updated: 18 January 2022; Ref: scu.236532