Hazell v. Hammersmith and Fulham London Borough Council and Ors; Hammersmith and Fulham London Borough Council v. Hazell and Ors
 2 AC 1
 1 All ER 545
Between: Hazell - Appellant
And: Hammersmith and Fulham London Borough Council and Ors - Respondents
Between: Hammersmith and Fulham London Borough Council - Appellants
And: Hazell and Ors - Respondents
House of Lords
Lord Keith of Kinkel
Lord Brandon of Oakbrook
Council incorporated by Royal Charter entering into speculative financial transactions
Profitability depending on interest rates falling
Whether transactions within powers of council
Whether council's capital market fund valid
London Government Act 1963 - (c. 33), s. 1
Local Government Act 1972 - (c. 70), s. 111
Local Government Finance Act 1982 - (c. 32), s. 19
Attorney-General v. Great Eastern Railway Co. - (1880) 5 App.Cas. 473, H.L.(E.)
Attorney-General v. Mersey Railway Co. -  A.C. 415, H.L.(E.)
Bonanza Creek Gold Mining Co. Ltd. v. The King -  1 A.C. 566, P.C.
Cotman v. Brougham -  A.C. 514, H.L.(E.)
Holsworthy Urban District Council v. Holsworthy Rural District Council -  2 Ch. 62
Norwich Provident Insurance Society, In re (Bath's Case) - (1878) 8 Ch.D. 334, C.A
Riche v. Ashbury Railway Carriage and Iron Co. Ltd - (1874) L.R. 9 Ex. 224; (1875) L.R. 7 H.L. 653, H.L.(E.)
Rutter v. Chapman - (1841) 8 M. & W. 1
Small v. Smith - (1884) 10 App.Cas. 119, H.L.(Sc.)
Sutton's Hospital Case - (1612) 10 Co.Rep. 1
Wenlock (Baroness) v. River Dee Co. - (1885) 10 App.Cas. 354, H.L.(E.)
Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation -  1 K.B. 223;  2 All E.R. 680, C.A.
Attorney-General v. Fulham Corporation -  1 Ch. 440
Attorney-General v. Leeds Corporation -  2 Ch. 291
Attorney-General v. London County Council -  1 Ch. 781, C.A.;  A.C. 165, H.L.(E.)
Attorney-General v. Manchester Corporation -  1 Ch. 643
Attorney-General v. Newcastle upon Tyne Corporation - (1889) 23 Q.B.D. 492, C.A.;  A.C. 568, H.L.(E.)
Attorney-General v. Smethwick Corporation -  1 Ch. 562, C.A.
Attorney-General for Ceylon v. Silva -  A.C. 461, P.C.
Ayers v. South Australian Banking Co. - (1871) L.R. 3 P.C. 548, P.C.
Bar Hill Developments Ltd. v. South Cambridgeshire District Council - (1979) 252 E.G. 915, D.C.
Beauforte (Jon) (London) Ltd., In re -  Ch. 131;  2 W.L.R. 465;  1 All E.R. 634
Bell Houses Ltd. v. City Wall Properties Ltd. -  2 Q.B. 656;  2 W.L.R. 1323;  2 All E.R. 674, C.A.
City Index Ltd. v. Leslie - The Times, 10 October 1990
Cudgen Rutile (No. 2) Pty. Ltd. v. Chalk -  A.C. 520;  2 W.L.R. 1, P.C.
Cunliffe Brooks & Co. v. Blackburn and District Benefit Building Society - (1884) 9 App.Cas. 857, H.L.(E.)
Deuchar v. Gas Light and Coke Co. -  A.C. 691, H.L.(E.)
Dickson v. Pharmaceutical Society of Great Britain -  A.C. 403;  3 W.L.R. 286;  2 All E.R. 686, H.L.(E.)
Dundee Harbour Trustees v. D. & J. Nicol -  A.C. 550, H.L.(Sc.)
Great Eastern Railway Co. v. Turner - (1872) L.R. 8 Ch.App. 149
Introductions Ltd. v. National Provincial Bank Ltd. -  Ch. 199;  2 W.L.R. 791;  1 All E.R. 887, C.A.
McDowell v. Standard Oil Co. (New Jersey) -  A.C. 632, H.L.(E.)
Manchester City Council v. Greater Manchester Metropolitan County Council - (1979) 78 L.G.R. 71, C.A; (1980) 78 L.G.R. 560, H.L.(E.)
Moffat v. Eden District Council - (unreported), 8 November 1988; Court of Appeal (Civil Division) Transcript No. 919 of 1988, C.A.
National Telephone Co. Ltd. v. Constables of St. Peter Port -  A.C. 317, P.C.
New, In re -  2 Ch. 534, C.A.
Provident Mutual Life Assurance Association v. Derby City Council -  1 W.L.R. 173, H.L.(E.)
Reg. v. Greater London Council, Ex parte Burgess -  I.C.R. 991, D.C.
Reg. v. Greater London Council, Ex parte Westminster City Council - The Times, 27 December 1984
Reg. v. Reed - (1880) 5 Q.B.D. 483, C.A.
Reg. v. Richmond upon Thames London Borough Council, Ex parte McCarthy & Stone (Developments) Ltd -  2 A.C. 48;  2 W.L.R. 1294;  2 All E.R. 852, C.A.
Reg. v. Wirrall Metropolitan Borough Council, Ex parte Milstead - (1989) 87 L.G.R. 601, D.C.
Rolled Steel Products (Holdings) Ltd. v. British Steel Corporation -  Ch. 246;  2 W.L.R. 908;  3 All E.R. 52, C.A.
Seagram v. Knight - (1867) L.R. 2 Ch.App. 628
Sinclair v. Brougham -  A.C. 398, H.L.(E.)
Smith v. Croft -  B.C.L.C. 355
Stockdale v. Haringey London Borough Council - (1989) 88 L.G.R. 7, C.A.
Swain v. The Law Society -  1 A.C. 598;  3 W.L.R. 261;  2 All E.R. 827, H.L.(E.)
Triggs v. Staines Urban District Council -  1 Ch. 10;  2 W.L.R. 1433;  2 All E.R. 1
Turner v. Shearer -  1 W.L.R. 1387;  1 All E.R. 397, D.C.
Wenlock (Baroness) v. River Dee Co. - (1887) 36 Ch.D. 674
Westminster City Council, In re -  A.C. 668;  2 W.L.R. 807;  2 All E.R. 278, H.L.(E.)
Wheeler v. Leicester City Council -  A.C. 1054;  3 W.L.R. 335;  2 All E.R. 1106, H.L.(E.)
Hearing date: 10-11, 15-18, 22-23, 25, 29 October 1990, 5-6, 8, 12 November 1990
Judgment date: 24 January 1991
The council was a London borough council which, pursuant to section 1(2) of the London Government Act 1963,
had been incorporated by Royal Charter. During the fiscal years 1987-1988 and 1988-1989 substantial transactions of a speculative nature were conducted through a capital market fund in the name of the council with a view to making a profit. The capital market fund was established without a specific resolution of the council and the council members received no report on the transactions. For the year 1987-88 the council resolved, on the recommendation of its financial and administration committee, to borrow to meet its capital and revenue payments during the year, and authorised the director of finance to arrange and administer the council's borrowing on its behalf.
By January 1988, the finance and administration committee had received a report that the director of finance had continued to arrange transactions in the London Money and Capital Market in order to maximise gains on favourable interest rate movements. No details in writing of the transactions were given. On 24 February 1988 the council resolved to authorise the director of finance to arrange transactions in the London Money and Capital Market in order to take advantage of favourable interest rate movements. By 31 July 1989, the council had entered into a number of transactions of which the majority were ones in which the council would benefit if interest rates fell and lose if interest rates rose. The auditor appointed by the Audit Commission of Local Authorities in England and Wales to audit the accounts of the council questioned the legality of the transactions with the result that the council's director of finance closed all the transactions save those where the council would incur a loss if he did so. From August 1988 to 23 February 1989, the council continued to carry out transactions but as part of an "interim strategy" designed to reduce the extent of the council's exposure to loss which arose from a rise in interest rates.
The council obtained its own legal opinion in which it was advised that if the transactions were undertaken as part of the proper management of the council's funds, they would be intra vires section 111 of the Local Government Act 1972
but if the council was carrying on a business in transactions it would be ultra vires. The council was not advised however as to what action it should take at that stage and at a meeting on 22 February 1989 the auditor advised the director of finance that the council had to desist from further activity unless supported by legal opinion. Later that day, the council was advised by counsel that the scale of the transactions was outside acceptable parameters and was therefore unlawful. After 23 February, the council was involved in only seven transactions consequent upon other parties exercising options. The auditor applied, pursuant to section 19 of the Local Government Finance Act 1982,
for a declaration that the items of account appearing in the capital market fund for the financial years 1987-1988 and 1988-1989 were contrary to law, and an order for rectification of the accounts. A number of banks involved in the transactions were granted leave to intervene in the proceedings in order to oppose the grant of a declaration and to defend their commercial interests. The Divisional Court of the Queen's Bench Division made the declaration and granted the order sought. On appeal by the banks, the Court of Appeal allowed the appeal in part, holding
- that the declaration should stand save in so far as it related to transactions entered into as part of the interim strategy, and
- that there should be no order for rectification.
On appeals by the auditors and the council: -
Held, allowing the appeals,
(1) that there was no express statutory power entitling the council to enter into financial transactions although it had an implied power under section 111 of the Local Government Act 1972 to do anything which was ancillary to the discharge of any of its functions, which included borrowing; but that, having regard to the provisions and limitations of the Act of 1972, in particular Part I of Schedule 13 thereto, regulating that function, it could not be said that the transactions were calculated to facilitate, or were conducive or incidental to the discharge of, the council's function of borrowing within the meaning of section 111, and, therefore, the transactions were ultra vires and unlawful (post, pp. 21G-22A, 29E-30A, 31F, 33H-34A, 37C, 44E, 46F-G, 47E-F).
of the Earl of Selborne L.C. in Small v. Smith (1884) 10 App.Cas. 119, 133, H.L.(Sc.) and dicta of Lord Loreburn L.C. and Lord Macnaghten in Attorney-General v. Mersey Railway Co.  A.C. 415, 417, H.L.(E.) applied.
(2) That any power to carry out the interim strategy activities had to be derived from section 111 of the Act of 1972 and therefore a function had to be identified to which the interim strategy activities were incidental; but that the only underlying function to which the transactions carried out pursuant to the interim strategy were incidental was that relating to the original ultra vires transactions; and that, accordingly, they fell into the same category and were themselves unlawful (post, pp. 21G-22A, 37F, 39B, 44E, 46G-47A, E-F).
Per curiam. It may not follow that, as between the council and the banks, payments made by the council before or after the period of interim strategy can be recovered by the council. Nor does it follow that payments received by the council before or after that period cannot be recovered by the banks. The consequences of any ultra vires transaction may depend on the facts of each case (post, p. 36D-E).
(3) That although the council had been incorporated by Royal Charter, that charter had been granted in accordance with section 1 of the London Government Act 1963, and therefore the council could not rely on its charter as giving it the capacity of a natural person to enter into contracts, but was confined to the powers conferred on it by statute; and that, accordingly, the council had no power to carry out the transactions either in its own name or in the name of the borough (post, pp. 21G-22A, 41B, 42E, 43A, 44E, 47E-F).
Decision of the Court of Appeal  2 Q.B. 697;  2 W.L.R. 1038;  3 All E.R. 33 reversed.
APPEALS from the Court of Appeal.
This was an appeal by the appellant, Anthony John Hazell, from the judgment dated 22 February 1990 of the Court of Appeal (Sir Stephen Brown P., Nicholls and Bingham L.JJ.) allowing in part appeals by Midland Bank Plc., Security Pacific National Bank N.A., Chemical Bank, Barclays Bank Plc. and Mitsubishi Finance International Plc., the second, third, fourth, fifth and sixth respondents respectively, from the judgment dated 1 November 1989 of the Divisional Court of the Queen's Bench Division (Woolf L.J. and French J.). The appellant was the auditor appointed by the Audit Commission of Local Authorities in England and Wales to audit the accounts of the first respondent, Hammersmith and Fulham London Borough Council from 1 April 1983.
The Divisional Court pursuant to its judgment granted the auditor a declaration that the items of account appearing within the capital markets fund account of the first respondent for the financial years beginning on 1 April 1987 and 1 April 1988 were contrary to law and ordered that the accounts of the first respondent for those financial years be rectified with liberty to the parties to apply if what was required to rectify those accounts was not agreed. On appeal by the banks, the Court of Appeal ordered that the declaration made by the Divisional Court should stand save in so far as it related to transactions entered into in, on or after 25 July 1988 and that there should be no order for rectification. It was further ordered that questions relating to the enforceability of the transactions reflected in the accounts should not be decided in those proceedings. There was also an appeal by the council in respect of the variation made by the Court of Appeal to the declarations made by the Divisional Court. The two appeals were conjoined.
The facts are stated in the opinion of Lord Templeman, and more fully in the judgment of the Divisional Court of the Queen's Bench Division  2 Q.B. 697.
Michael Barnes Q.C. and John Howell for the auditor. All the transactions with which the appeals are concerned are outside the powers of any borough in England and Wales.
It is pertinent to point out at the outset that the principle propounded in Rolled Steel Products (Holdings) Ltd. v. British Steel Corporation  Ch. 246, even if it be correct as a matter of private law, has no application in public law. For the powers of the auditor for present purposes: see sections 11(1), 12(1) (2), 13(1), 15(1) (2) (3), 19(1) (2) (3) (4) (5) of the Local Government Finance Act 1982.
There are two basic propositions regarding the powers of local authorities.
- A corporation has only the powers, express or implied, which are granted by statute.
- Where an express power is applicable under the statute there is by implication a power to do that which is incidental to that express power: section 111 of the Local Government Act 1972.
The present case comes within the ambit of these two general powers: see Attorney-General v. Great Eastern Railway Co. (1880) 5 App.Cas. 473, 478, 481. It is common ground that there is no express power to enter into the swap transactions and therefore the question is whether they come within the ambit of section 111.
As to the powers of borrowing of the local authorities at the relevant time see the Local Government Act 1972, Schedule 13, paragraphs 1 to 3, 7, 10 and 20. For the power of local authorities to enter into fixed or variable rate borrowing transactions see the Local Authority (Mortgages) Regulations 1974 (S.I. 1974 No. 518), regulations 2 to 8, 10 and 20.
Section 111 provides for incidental powers, i.e. powers incidental to a function. Therefore to ascertain whether a particular activity falls within the section it is necessary, first, to identify the function, and then, to ask whether the activity in question is incidental to it. Borrowing itself is not a function. Similarly, expenditure of money is not: see In re Westminster City Council  A.C. 668, 714C. Borrowing only has meaning when it takes place as the exercise of a power in order to assist the discharge of some function which the authority has. Section 111 accordingly has no application in the present case.
Swap transactions are not different from any other commercial transaction which gives rise to profit. The question therefore is not whether it is prudent for a local authority to enter into them but whether the authority has express power to do so or whether to do so is incidental to some power that the local authority has. The judgment of the Divisional Court  2 Q.B. 697, 723C-G is a correct statement of the law.
In approaching the question whether swap transactions are incidental to a function of borrowing it is of assistance to consider the strict regulation of borrowing under Schedule 13 to the Local Government Act 1972, because the stricter the regulation under the express power the less likely it is that some activity, such as a swap transaction, can be brought in as an activity which can be carried out on the ground that it is incidental or ancillary to that power: see Reg. v. Reed (1880) 5 Q.B.D. 483. In the present case there is a limited power of borrowing and it follows that there is no implied power to enter into the present swap transactions. Reg. v. Greater London Council, Ex parte Westminster
City Council, The Times, 27 December 1984 and Moffat v. Eden District Council (unreported), 8 November 1988; Court of Appeal (Civil Division) Transcript No. 919 of 1988, which were referred to by the Court of Appeal, do not assist on the meaning of "functions" in section 111 of the Local Government Act 1972 because there was there no argument that the language of section 111 does not lead to the conclusion that all duties and powers which are found in the legislation constitute a function of the local authority.
The generation of an income or the making of a profit to augment the coffers of a local authority is not a function vested in it for it to discharge. Section 111 does not (and powers which might otherwise be implied would not) authorise the doing of something to obtain a profit even if there is an intention to apply it in reducing the authority's costs and expenses in a particular way. Were it otherwise a local authority could do anything for the purpose of obtaining a profit provided only that the proceeds were applied in the discharge of its functions: see Dundee Harbour Trustees v. D. & J. Nicol  A.C. 550, 561, 570-571; Deuchar v. Gas Light and Coke Co.  A.C. 691 and Attorney-General v. Smethwick Corporation  1 Ch. 562.
A local authority has no implied functions: functions must be specifically vested in an authority. Moreover, not every power or duty is a function of a local authority. Thus a local authority has no function comprising
- a duty to take reasonable care to arrange its borrowing or investments prudently in the best interests of the ratepayers and those for whom the authority provides services or
- a power in certain circumstances to limit or reduce loss to its ratepayers or community charge payers,
although as part of the requirement to act reasonably to which it is subject in exercising its powers it is required to have regard to the interests of such persons.
The Court of Appeal erred in defining any lawful activity of a local authority as being a function of it: see In re Westminster City Council  A.C. 668, 714C. A function is not an activity but something which, as the statutory language makes plain, is "vested" in an authority for it to "discharge." It is therefore an object or task set for the authority. Further, it was wrong for the Court of Appeal to hold that all the powers and duties of an authority might each be a function of it. In the field of local government "functions" are defined either to include powers and duties or to mean powers and duties where Parliament intends each power or duty to be treated as a function: see, for example, section 134 of the Local Government Act 1929; section 66(1) of the Local Government Act 1958; section 57(1) of the Town and Country Planning Act 1959 and section 44(1) of the Local Government (Miscellaneous Provisions) Act 1976. The Act of 1972 contains no such definition. If the Court of Appeal was correct, section 111 would itself constitute a function which, given the terms of the section, cannot be the case, as Parliament recognised in section 101(12) of the Act.
The Court of Appeal erred in seeking to imply functions which a local authority might have. The principle in Attorney-General v. Great Eastern Railway Co., 5 App.Cas. 473 is irrelevant for that purpose. At common law the rule was that the objects that a statutory body could lawfully pursue had to be ascertained from the Act itself. Only powers to achieve those express objects could be implied. Thus there were no implied objects or functions at common law: see Riche v. Ashbury Railway Carriage and Iron Co. Ltd. (1875) L.R. 7 H.L. 653, 693-694 and Baroness Wenlock v. River Dee Co. (1887) 36 Ch.D. 674, 682; (1885) 10 App.Cas. 354, 363. The implication of a power (and
the implication of a function or object) would be inconsistent with the existence and terms of section 111: the principle in Attorney-General v. Great Eastern Railway Co., 5 App.Cas. 473 is now expressed in that section and that section only provides, as the Divisional Court held  2 Q.B. 697, 722, "a subsidiary power which authorises an activity where some other statutory provision has vested a specific function or functions in the council." Moreover, Parliament assumed that to be the case in other provisions of the Act: see, for example, section 179 of the Act of 1972.
The Court of Appeal was also wrong in confusing rationality with legality. A statutory body must exercise its powers reasonably, but it does not follow that it has a power (or a function) to do whatever may be reasonable. Thus it is a limitation on the manner in which a local authority exercises its powers (such as borrowing or investment) that it should act prudently, having regard to the interests of those who pay for its services and of those who may require the services it is obliged or empowered to provide. The requirement to have regard to the interests of the local taxpayers is referred to as the authority's "fiduciary duty" and is a part of the requirement to act reasonably. Such requirements are implied limitations on the manner in which an authority discharges its functions. They are not themselves functions which provide a source of power to do that which an authority otherwise has no power to do. The possession of a right or asset does not confer a power to protect or enhance its value even if that was a reasonable way for a statutory body to manage its affairs: see Small v. Smith (1884) 10 App.Cas. 119. Nor does the existence of a need to meet liabilities confer a power of "cash flow management" on a statutory body authorising temporary borrowing even if that be a reasonable method of managing its affairs: see Reg. v. Reed, 5 Q.B.D. 483.
On "interest rate risk management," the Court of Appeal found that it was fairly to be regarded as incidental to or consequential upon a local authority's powers of borrowing and investment and the attendant duty resting upon it to manage its borrowings and investments prudently in the best interests of the ratepayers and those for whom the authority provided services. Entering into interest rate swap transactions was said to be an ancillary power to that duty (not of borrowing or investment themselves). The duty was said to arise out of, and in connection with, an authority's borrowing and investment functions. These conclusions are disputed for the following reasons.
- Borrowing and investment are merely powers of a local authority. They are not themselves objects or functions of the authority: cf. Introductions Ltd. v. National Provincial Bank Ltd.  Ch. 199, 209-210. An authority may have certain tasks or functions with respect to borrowing, for example, determining the amount to be borrowed and the methods to be employed to raise the money. But if its powers to borrow were of themselves functions of the authority section 101(4) and (6) and paragraph 12 of Schedule 13 to the Act of 1972 would be in conflict.
- Even if borrowing and investment were functions of an authority, the transactions are not calculated to facilitate or incidental or conducive to borrowing or investment so as to be authorised by section 111 of the Act of 1972. In the case of "interest rate risk management," borrowing or investment is assumed to have occurred before the transaction is entered into. Nor are the transactions incidental to (or consequential upon) the discharge of a power of borrowing or investment.
- In this context "incidental" merely means involved in doing that which is authorised and it does not extend to a transaction independent of, and separate from, that which is authorised: see, for example, Small v. Smith, 10 App.Cas. 119 and Reg. v. Wirrall Metropolitan Borough Council, Ex parte Milstead (1989) 87 L.G.R. 611. If the Court of Appeal was correct that the discharge of the duty to take reasonable care to manage borrowings and investments prudently by entering into such transactions by way of "interest rate risk management" was not the discharge of a function with respect to borrowing, then "interest rate risk management" cannot be incidental to or consequential upon borrowing.
- The transactions, in any event, do not manage any borrowing or investment; they leave each untouched. Nor do they manage any risk associated with the movement in the market rate of interest in relation to an increased cost of borrowing or a lesser rate of return on an investment: such risk remains unaltered.
- The existence of a power under section 111 is dependent on the objective effect of what is done, not on the purpose for which it is done. Moreover, the Court of Appeal has failed to distinguish the subjective motivation for, and possible financial results of, a transaction from its legal nature and effect.
On the question whether local authorities have power to sell certain transactions, interest rate swap options, caps, floors and collars, gilt options and cash options are written for the purpose of deriving a profit from the premium received. The sale of such instruments is ultra vires a local authority.
It does not follow that if a particular instrument may be bought, a local authority has power to sell such instruments. Further, the sale of a "mirror" or "reciprocal" instrument (that is an instrument enabling the purchaser to require the authority to do that which the authority is entitled under another instrument to require another party to do) does not involve the sale of what an authority has previously acquired. Such a "mirror" or "reciprocal" instrument is sold to enable the seller to derive a profit from writing it. The only significance of a pre-existing instrument which the seller may have purchased and which is otherwise identical is that, if the instrument he has sold is exercised or relied upon against him, he may exercise or rely upon the instrument he has purchased. In other words, the exposure he has incurred by writing the instrument (in order to obtain the premium) is already covered. The risk is not eliminated as the counter party to the instrument the vendor has purchased may default.
The sale of an option by an authority which enables the purchaser to require the authority to do something at a later date is an unlawful fetter on the exercise of any discretion to do that which the exercise of the option requires the authority to do. For the authority is bound to do that which, when the option is exercised, it may have chosen not to do had it then had the choice: it cannot therefore exercise its discretion in the public interest as it conceives it to be when the option is exercised against it: see Cudgen Rutile (No. 2) Pty. Ltd. v. Chalk  A.C. 520, 532H-534C. [Reference was also made to Reg. v. Richmond upon Thames London Borough Council, Ex parte McCarthy & Stone (Developments) Ltd.  2 A.C. 48; Riche v. Ashbury Railway Carriage and Iron Co. Ltd. (1874) L.R. 9 Ex. 224; Stockdale v. Haringey London Borough Council (1989) 88 L.G.R. 7 and Wheeler v. Leicester City Council  A.C. 1054.]
Howell, following, referred to Attorney-General v. Great Eastern Railway Co., 5 App.Cas. 473 and Cunliffe Brooks & Co. v. Blackburn and District Benefit Building Society (1884) 9 App.Cas. 857, 864, 868, 869.
Peter Scott Q.C., Catherine Newman and Nigel Giffin for the council. The main question is based on the assumption that there is a distinction in the law relating to local government between capacity and power. This is not so: see Wade, Administrative Law, 6th ed. (1988), pp. 39, 40, 41. The matters there referred to are not confined merely to the application of the principles of judicial review. Further, Attorney-General for Ceylon v. Silva  A.C. 461, 479 shows that consideration of the powers conferred on local authorities by Parliament must necessarily be based on the precise wording of the statute and, also, on the functions of the local authority. The fundamental distinction between local authorities and banks is that the local authority does not exist for the purpose of trade but to provide local services as stipulated by Parliament. Local authorities only have such powers or capacities as are conferred by statute. Any relevant power (that is, capacity) must be found in section 111 of the Local Government Act 1972. There is none to be found elsewhere. No power to enter into the transactions has ever been expressly conferred either before or since the transactions.
Section 111 is merely a subordinate provision fulfilling an interstitial role. Further, local authority borrowing is closely controlled by statutory provisions of an extremely detailed and precise character. Section 101 of the Act of 1972 requires the local authority's functions with respect to borrowing to be discharged by the local authority itself. Borrowing includes activities incidental to borrowing.
The Court of Appeal was wrong to assume that, if Parliament had considered it, it would have made provision to enable the local authority to participate in the swap market. Participation in the swap market is not an activity necessarily or even ordinarily carried out in conjunction with borrowing. It is a distinct activity from borrowing and accordingly it is out with section 111.
The transactions are not calculated to facilitate or conducive or incidental to borrowing. The performance of the transactions will not assist the council to borrow. Like any other profit-making activity it will (merely) assist the council to pay interest. Nor are swaps "incidents" of borrowing in the sense of normally and naturally forming part of that function.
There is no "interest rate risk management" function for the purposes of section 111. "Functions" means the sum of the express powers and duties conferred and imposed on a local authority. There must be a connection between such powers and duties and the transaction in question: see the judgment of the Divisional Court  2 Q.B. 697, 724E.
The doctrine propounded in Great Eastern Railway Co. v. Turner (1872) L.R. 8 Ch.App. 149 is concerned only with such capacity as is necessarily to be implied from that which is expressed. Speculation as to what Parliament might have provided is fallacious and unhelpful and ignores special considerations applicable to local government.
Section 111(3) exhaustively lists for the purposes of section 111 how local authorities may raise money (rates, precepts or borrowing). The Court of Appeal was wrong to state that these transactions did not constitute raising money.
The banks' case is that the transactions are authorised by section 111(1). That can only be correct if
- borrowing or the management of interest risk arising from borrowing is a "function" for the purposes of section 111 and
- to enter into the transactions is incidental or conducive to or calculated to facilitate the discharge of that function.
But if that is the case, then the power to enter into the transactions could only be exercised by the council itself (see section 101 of the Act) and could not validly be delegated to an officer or committee.
There is no suggestion that the council itself ever took a decision to enter into any of the present transactions. It follows that all the transactions were unlawfully entered into and were in breach of the express terms of section 101(6). The Court of Appeal  2 Q.B. 697, 784H-787C rejected this conclusion. It is only on the assumption that the council might have been (though in fact it was not) acting with respect to its borrowing in entering capital market transactions that the banks' argument can get off the ground at all. The Court of Appeal referred to Bar Hill Developments Ltd. v. South Cambridgeshire District Council (1979) 252 E.G. 915 and Provident Mutual Life Assurance Association v. Derby City Council  1 W.L.R. 173 but on analysis it would seem that those cases do not really assist on the present question.
The solution to the problem is to read the Act of 1972 as a whole, and in particular section 101 with section 151. By section 151 an authority is authorised (and required) to make arrangements for the proper administration of its financial affairs. That necessarily entails delegation of authority to perform acts which are matters of financial administration. So long as the acts concerned are matters of mere administration, and thus properly within the scope of section 151, that ability to delegate their performance is not overridden by section 101(6) even when they relate to levying a rate, precepting or borrowing.
The position, therefore, is that, when dealing with matters relating to borrowing, it is necessary to distinguish between acts which are matters of policy, and thus non-delegable because caught by section 101(6) and not within section 151, and acts which are matters of mere administration and therefore ones which the authority can arrange to have performed pursuant to section 151. This entails the drawing of the same distinction as is made in cases where there is no express power of delegation but there is held to be an implied power to delegate matters of mere administration. It is also a sensible result which accords with the apparent statutory policy that important financial decisions should be made by members themselves. The question is: is the act one whose character is apt for a resolution of the council? If capital market transactions are incidental to borrowing and if decisions about the shape of the capital market transaction portfolio can be made by officers, then the borrowing policy set by the local authority itself can be subverted.
Protection is given to third parties by paragraph 20 of Schedule 13 to the Act of 1972 as part of the statutory code relating to borrowing. Thus, given, inter alia, the control over borrowing in Schedule 13 and the requirements in section 101(6), Parliament considered it appropriate to provide paragraph 20 protection for those who lend money to the local authority. The fundamental argument of the banks is that they are entitled, if unaware that the local authority was acting unlawfully, not to be prejudiced by that illegality. Yet it is common ground that the transactions are not borrowing. Paragraph 20 is solely concerned with the consequences of a borrowing: it gives no protection to a third party who claims to have entered into a transaction which is incidental to borrowing. In fact, it indicates the reverse. Yet if the banks are right, why should paragraph 20 be so limited? If the transactions are truly incidental, etc., to borrowing why should they not be treated as part of borrowing? The answer is not merely that the banks' argument does not accord with the statutory language, but that Parliament cannot have contemplated giving a local authority the capacity to enter into such transactions or anything like them when enacting section 101, section 111, section 151 or Schedule 13.
There is no difference between helping a local authority to borrow and doing something calculated to facilitate, etc., under section 111(1). The Divisional Court  2 Q.B. 697, 723D was therefore right both in its conclusions and reasoning. In a sense, any profitable activity helps to reduce the cost of borrowing, but it does not follow that local authorities have the authority to engage in any activity which may be profitable. Nor is it sufficient that in deciding to engage in a particular transaction, local authorities hope to limit the risks which would otherwise attend the performance of one or more of their functions.
All that the banks contend for (and more) can be justified on the basis that the council is merely managing its loan and investment portfolio and its other activities prudently. That construction is literally within the words in brackets in section 111 concerning acquiring or disposing of property and rights, but it is simply not consistent with the history, structure or language of the legislation. What is contemplated by section 111(1) is something much narrower than the banks contend
It is absurd to suggest that legislation containing a comprehensive code such as the Act of 1972 and limiting risks of borrowing must be taken to authorise an activity not existing at the time but subsequently developed which enlarges the risks of borrowing, unless an inconsistency subsequently arises from what Parliament has stated. It is for the banks to show that the legislation permits transactions of this nature: see Riche v. Ashbury Railway Carriage and Iron Co. Ltd., L.R. 7 H.L. 653, 694, per Lord Selborne. These provisions are designed to protect the ratepayer from what otherwise flow from a general power of borrowing coupled with section 111.
As to the fact that some companies do choose to engage in capital market transactions, that does not assist in construing section 111. The powers of a local authority to borrow are conferred by statute. In the case of a company the power to borrow is contained in the memorandum and articles of association of the company.
Gordon Pollock Q.C., Elizabeth Gloster Q.C. and Rhodri Davies for Midland Bank Plc., Security Pacific National Bank N.A., Chemical Bank and Mitsubishi Finance International Plc. The following propositions can be deduced from the auditor's argument.
- The implication of powers under section 111 should be, as a matter of general rule, approached restrictively.
- At common law a power is only to be implied where it can be shown to be incidental to an object (an object being a duty or purpose) and not where it is shown to be incidental to a power, even an express power; in other words, the argument which the auditor puts forward on the meaning of "functions" in section 111 is paralleled by the position at common law prior to the enactment of that section.
- The word "functions" in section 111(1) was therefore intended to be restricted to objects or tasks and did not embrace powers.
- No functions, in any sense, were capable of being implied in local authority legislation but only duties or tasks which could be equated with functions as express duties or tasks.
There is no support in the authorities for the view that the common law rule did not allow an implication of a power where what was incidental related to an existing, express power rather than to a duty. It is plain also from the consistent body of authority that the word "functions" in section 111 of the Act of 1972 was intended to have a similarly wide meaning. Further, there is no logical or rational reason why there should not be implied functions, whether in relation to local authorities or any other statutory body.
The first two propositions are supported by Riche v. Ashbury Railway Carriage and Iron Co. Ltd., L.R. 7 H.L. 653 and Attorney-General v. Great Eastern Railway Co., 5 App.Cas. 473, 479-487. Ever since 1879 Parliament has been taken to have legislated with the rule propounded in the Great Eastern Railway case as a background, and the rule was put into section 111 in order to avoid any possible doubt. In Attorney-General v. London County Council  1 Ch. 781;  A.C. 165 it was held that merely because two businesses, which were independent and separate, could conveniently be run together did not mean that one was incidental to the other within the meaning of the rule.
The following authorities establish the proposition that there is no rigid distinction between a function and a power and that a power can be exercised if it is incidental to a local authority's general functions: Attorney-General v. Mersey Railway Co.  A.C. 415; Dundee Harbour Trustees v. D. & J. Nicol  A.C. 550; Attorney-General v. Fulham Corporation  1 Ch. 440 and Manchester City Council v. Greater Manchester Metropolitan County Council (1979) 78 L.G.R. 71; (1980) 78 L.G.R. 560. Whether a particular activity or contract is to be regarded as incidental may well require consideration of the purpose for which the activity is undertaken or the contract made: see Deuchar v. Gas Light and Coke Co.  A.C. 691 and Attorney-General v. Smethwick Corporation  1 Ch. 562. The Smethwick Corporation case is strong authority for the proposition that the question whether a certain function is incidental to the powers granted is to be considered in relation to the time when the activity in question is adopted. In none of the foregoing cases is it suggested that there is a different approach depending upon whether it is a local authority or any other form of statutory corporation.
As to the third and fourth propositions, section 111(1) was intended merely to reflect the common law. Thus, it would seem unlikely that Parliament intended to limit the scope and approach to implied powers in connection with local authorities. Functions are not defined in the Act of 1972 but there are definitions to be found in other legislation: see the Local Government Act 1929, section 134; the Local Government Act 1958, section 66; the Town and Country Planning Act 1959, section 57 and the Local Government (Miscellaneous Provisions) Act 1976, section 44. Nowhere is there to be found a statutory definition where the word "functions" in the context of local authorities is limited to anything less than powers and duties. There is nothing to suggest that section 111 of the Act of 1972 was intended to have the limited concept of function put forward by the auditor and the council. [Reference was made to the Local Government Act 1972, sections 2, 112(2) and 136 and Schedule 2, paragraph 2.] In Moffat v. Eden District Council (unreported), 8 November 1988; Court of Appeal (Civil Division) Transcript No. 919 of 1988 Nourse L.J. and Sir Denys Buckley were both of the view that functions in the present context meant everything that a local authority did.
Section 101(3) of the Act of 1972 simply specifies that an authority has to comply with whatever codes there are relating to the manner or means by which money may be raised for rates, precepts or borrowing or, indeed, may be lent, but this does not mean that money so raised or lent cannot be used for a purpose incidental to an activity that comes within section 111(1).
As to swap transactions, they are incidental if they are designed to hedge or produce a certainty of cost or reduce the cost of borrowing. For the meaning of "hedge" in relation to financial matters: see the Oxford English Dictionary, definitions 6 and 7. In recent years interest rate swaps have become an accepted form of debt management: see the article entitled Recent Developments in the Swap Market by Miss G. M. S. Hammond in Bank of England Quarterly Review (1987), at pp. 1188 et seq. It is pertinent to point out that prior to 1986 it was the general view that building societies were entitled to use interest rate swaps as incidental to their borrowing powers: see circular dated 5 March 1986, "Agreements for Interest Rate Swaps and Currency Swaps," issued by the Registry of Friendly Societies.
As to the validity of swap transactions, the banks' approach is first to ask whether or not the use of swaps as a tool of interest rate risk management can be regarded as fairly incidental to borrowing. It is a perfectly general question relating to all forms of organisation. If the answer is in the negative, that is an end of the issue. If the answer is in the affirmative, then two further issues arise. The first issue is whether local authorities are to be treated in some way differently, so that which would be regarded as incidental by the application of the general test in relation to local authorities produces a different answer. The second issue is whether or not that which has already been decided as normally incidental to the power of borrowing is excluded in that particular case because of some countervailing statutory prohibition.
As to the first issue, in general, local authorities are in no different position from any other statutory body. None of the authorities cited in any way suggest that the approach to the question of incidental powers in the case of a local authority is in any way different to the approach to that question in respect of other bodies. Since 1907 nearly every case dealing with incidental powers in relation to the application of the principle in Attorney-General v. Great Eastern Railway Co., 5 App.Cas. 473 has been a local authority case. Accordingly, it cannot possibly be right to adopt a more restrictive approach in this field because the organisation in question is a local authority.
Reliance is placed by the auditor on Reg. v. Reed, 5 Q.B.D. 483 and Baroness Wenlock v. River Dee Co., 10 App.Cas. 354 for the proposition that where there is an express power to borrow there is no room for implying an additional power in respect thereof. That is to mis-state the principle deducible from those cases which is that if there is an express power to borrow conferred by statute there is no incidental or additional power to borrow. The implied power doctrine laid down in Attorney-General v. Great Eastern Railway Co., 5 App.Cas. 473 is that if a statutory body is given an express power it will be presumed that Parliament intended it to have those additional powers which are incidental or ancillary to that express power.
In relation to contrary intention, reliance has been placed on Schedule 13 to, and section 111(3) of, the Act of 1972. But Schedule 13 is only relevant if it can be said that in the absence of that Schedule the courts would already have come to the conclusion that interest rate swaps used in the limited ways for which the banks contend could fairly and reasonably be regarded as incidental to the exercise of the power to borrow. It is important to start with that assumption. The question then arises: is there anything in Schedule 13 which therefore indicates that Parliament wished to exclude that which would otherwise be regarded as incidental? A perusal of the Schedule shows that the answer is in the negative.
Section 111(3) is intended to control the method of raising money empowered by section 111(1), and interest rate swaps are not the raising of money. The scope of section 111(3) as regards raising money is confined to rates, precepts or borrowing.
As to the council's submission in relation to section 111, that section has no impact at all on the question whether swaps are incidental to borrowing. [Reference was made to Attorney-General v. Manchester Corporation  1 Ch. 643.]
Jonathan Sumption Q.C. and Catharine Otton-Goulder for Barclays Bank Plc. There are three questions which at some stage of these proceedings have to be decided between the parties. The first is whether the transactions are within the capacity of a local authority. It is common ground that if the answer to that question is in the negative then no further questions arise and the transactions are nullities. The second question is: if the transactions are within the capacity of a local authority so that an authority is in principle empowered to do them, did this local authority abuse that power? The third question is: if the transactions are within the capacity of the local authority, but are an abuse of its powers, are they enforceable by a counter party and, if so, in what circumstances?
The first and second questions are distinct reasons why the transactions must be unlawful: want of capacity and abuse of power. The reason why it is essential to distinguish between those two grounds of unlawfulness is that the extent of the statutory body's capacity to do certain acts is inherently a question of construction. On the other hand, the question of an abuse of power is not necessarily a question of statutory construction at all. It is concerned primarily with the propriety of the statutory body's subjective motives and, on occasion, its internal procedures. The third question will depend on which kind of unlawfulness affected the expenditure in issue here.
It is no part of the bank's case to contend that the local authority is allowed to speculate or to engage in transactions for which it may be wholly ill-equipped. The question to be answered, certainly in the period before the interim strategy period, is: on what particular ground are the transactions unlawful? It is important to remember that in the swap market the rates are determined by the market cost of borrowing money and not by a process of haggling for speculative advantage. The reason for an authority entering the swap market is, having examined its underlying debts to determine their term and the rate of interest, whether fixed or floating, to consider in the light of those factors whether those underlying debts present unacceptable risks to the authority in the current economic conditions and to ascertain whether swap contracts could mitigate those risks.
It is unreal to consider swaps as being the purchase of an income in return for the assumption of a risk. The object is to bring about a state of affairs in which the combined effect of the swap and the underlying debt will involve a risk which is less than one of them would produce on its own.
To the question, therefore, whether the risk of losing money in the swap market affects the analysis of a local authority's powers the answer is that it does not, for three reasons. First, and most importantly, the risk is no different either in nature or extent from the risks which are inherent in borrowing. Parliament has expressly contemplated that local authorities will borrow and has left them the discretion whether they borrow at fixed or variable rates. Secondly, the fact that a judgment made in relation to borrowing may prove to be wrong in retrospect does not mean that it was not the appropriate judgment to make at the time, and certainly does not mean that there was no power to make such a judgment at all. Thirdly, in applying section 111(1) of the Act of 1972 it is necessary to consider the object of a transaction of the present nature; the fact that in certain cases that object may by ill luck or ill judgment not be achieved does not assist to identify what the object was.
As to whether a transaction falls within the ancillary powers conferred by section 111(1) of the Act of 1972, the test to be adopted is an objective test for two reasons. First, the words of the subsection themselves envisage the application of such a test. Secondly, in principle, questions relating to the capacities of a body should be decided in such a manner that a third party having dealings with it can discover its capacities solely from the terms of the Act or other incidental document.
Of the relevant expressions in section 111(1), the first is "calculated to facilitate." "Calculated" is a term of legal art which imports an objective test. The legal meaning of the word is contained in definition 2 in the Shorter Oxford Dictionary: "Fitted, suited, apt; proper or likely to." See also McDowell v. Standard Oil Co. (New Jersey)  A.C. 632, 637 and Turner v. Shearer  1 W.L.R. 1387, 1389. Similarly, the expression "conducive or incidental to" must in this context likewise bear an objective meaning partly because of the association with the phrase "calculated to facilitate" and partly because the whole of the subsection is concerned with the characteristic that the "thing" in the third line of the subsection must have in order to be within the powers of a local authority.
The approach adopted in Rolled Steel Products (Holdings) Ltd. v. British Steel Corporation  Ch. 246 that it is necessary to ascertain whether the transaction in question is capable of having the purpose which is expressed or implied in the clause which confers the power applies equally to a statutory body with limited powers or, as in that case, to a limited company. A similar approach to that in the Rolled Steel case was adopted by the Divisional Court in relation to a local authority in Reg. v. Greater London Council, Ex parte Burgess  I.C.R. 991.
In applying the objective test it is pertinent to ask the question: for what purpose can this transaction with these characteristics be reasonably expected by an objective observer to serve on the assumption that there is propriety of motive?
As to what constitutes a function, Barclays Bank Plc. adopts Mr. Pollock's submissions. As to the phrases ("calculated to facilitate" and "conducive or incidental to") in section 111(1), they are used disjunctively and it is obvious that some may be more appropriate in some cases than others. Swaps fall within section 111(1) for two distinct reasons.
- A swap is calculated to facilitate borrowing if it makes it easier for the council to borrow or easier to borrow on particular terms. They render the risks of borrowing more acceptable than they otherwise would be. This is the main answer to the appellants' case.
- Swaps are incidental to borrowing because they are part of what has been called debt management.
On behalf of the auditor it has been contended that swaps could never come within section 111 for two reasons. First, that there is no legal connection between the swap and the underlying borrowing or debt; the swap does not affect the legal nature of the underlying borrowing or debt. Secondly, in the absence of the legal connection the only connection arises from the intention, directly or indirectly, to apply the profits of one in discharge of the liabilities under the other. Those two points lie at the heart of the auditor's submissions. The first of them is irrelevant and the second false.
The appellants have taken such cases as Dundee Harbour Trustees v. D. & J. Nicol  A.C. 550 and Attorney-General v. Smethwick Corporation  1 Ch. 562 as the foundation of the relatively uncontroversial proposition that a local authority cannot engage in a wholly distinct and autonomous trade and have restated as a rule of law that a local authority needs specific statutory authority to do anything whatsoever that involves the receipt of money.
On the analogy between swap contracts and contracts of insurance, the council contended that it had the power to enter into insurance because such a power was part of the ownership of property. If there is a power to insure a property, it can only exist upon the basis that it is incidental to the ownership of the property and, therefore, justified by the terms of section 111(1); yet if the appellants are right on the principle for which they contend insurance is impermissible because it has the same vices as swaps; in other words, it is a transaction which is a legally autonomous transaction, and its effect is to produce a sum of money which goes into the general funds of the council by way of compensation for an event causing the council loss. It follows, therefore, on the principle for which the appellants contend that there is no intellectually respectable ground on which local authorities can be regarded as being empowered to insure at all.
It is necessary to add footnotes on three matters raised in Mr. Pollock's argument, which in other respects is adopted by Barclays Bank Plc. in its entirety.
- The dictionary definitions of "functions" do not appear to import any notion of duty. A function is an activity proper to some person having regard to what he is doing and what he is meant to be doing. The natural meaning of the word does not import any limitation to duty or purpose. Nor does the fact that the verb used in section 111(1) is "discharge" indicate that what is intended is a duty or purpose rather than a power. Thus in section 101(6) use of the word "functions" in that context necessarily connotes a power. It would be extraordinary if a word had wider meaning in some parts of the Act of 1972 than in others: compare section 101(3) and (6) of, and Schedule 2, Part I, paragraph 1(2) to, the Act. There is nothing in section 111(1) that compels a construction of the word "functions" as used in a sense that is narrower than the ordinary meaning and that is narrower than the meaning that is to be found in every other part of the Act. Accordingly "functions" in section 111(1) should be read as including both powers and duties.
- The purpose of section 111(3) is not to limit the scope of section 111(1) by excluding from it activities involving borrowing, levying rates and precepts. The purpose is simply to ensure that, so far as section 111(1) authorises that which involves borrowing, rates or precepts, those three activities are carried out in accordance with the enactments relating to those specific matters. It follows that the argument for the appellants has to be, and indeed is, that the inclusion of the word "whether" in subsection (3) has brought about the accidental result, in a section which is directed to an entirely different problem, that nothing is allowed which involves the receipt of money apart from those three specific activities. That would be a most extraordinary result, not least because an examination of subsection (1) shows that it expressly contemplates that that which is authorised by the subsection may involve the disposal of any property or rights. Unless subsection (1) is regarded as being confined to a power of disposal of property or rights, it must follow that the subsection expressly permits doing that which is incidental and involves the disposal of property or rights notwithstanding subsection (3). Raising money, as that term is used in subsection (3), is a term which is used to describe the foregoing three particular methods of obtaining money but it is not intended to suggest that no other method of obtaining money is permitted.
- There are no policy considerations which should require the House of Lords to hold that the particular ground on which the council acted unlawfully was abuse of its powers. On the contrary, policy considerations, so far as they entered into this matter, militate very strongly in favour of a principle of law which distinguishes between the use and abuse of the market and against a rule of law which would operate indiscriminately. If the basis of the policy is that there is potential for abuse then the rule of law that would best reflect that policy is one that restrains the abuse and not one that avoids all the contracts without exception.
Barnes Q.C., in reply, referred to the Act of 1972, sections 101(6) and (12), 111, 174 and Schedule 13, paragraphs 7, 12 and 19(1); the Local Government (Miscellaneous Provisions) Act 1976, section 19; the Building Societies Act 1986, section 23; the Financial Services Act 1986, section 63; the Companies Act 1989, section 110; the Local Government and Housing Act 1989, section 45(1) to (5); the Local Authority (Stocks and Bonds) Regulations 1974 (S.I. 1974 No. 519), regulations 2 and 3; the Local Authority (Stocks and Bonds) (Amendment) Regulations 1983 (S.I. 1983 No. 529), regulation 3; Riche v. Ashbury Railway Carriage and Iron Co. Ltd., L.R. 7 H.L. 653; Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation  1 K.B. 223; Attorney-General v. Great Eastern Railway Co., 5 App.Cas. 473; Reg. v. Reed, 5 Q.B.D. 483; Small v. Smith, 10 App.Cas. 119; Deuchar v. Gas Light and Coke Co.  A.C. 691; Reg. v. Greater London Council, Ex parte Burgess  I.C.R. 991; Rolled Steel Products (Holdings) Ltd. v. British Steel Corporation  Ch.246 and Reg. v. Wirrall Metropolitan Borough Council, Ex parte Milstead, 87 L.G.R. 611.
Scott Q.C., in reply, referred to the General Rate Act 1967, section 2(1); the Act of 1972, sections 101, 111(1), (2) and (3), Schedule 13, paragraphs 1(b), 3, 4, 7, 15 and 20; the Building Societies Act 1986, sections 23, 118(2), Schedule 2, Part I, paragraph 4, Part III, paragraph 27; the Local Government and Housing Act 1989, section 43(3); Attorney-General v. Great Eastern Railway Co., 5 App.Cas. 473; Small v. Smith, 10 App.Cas. 119; Baroness Wenlock v. River Dee Co., 10 App.Cas. 354; McDowell v. Standard Oil Co. (New Jersey)  A.C. 632; Attorney-General v. Smethwick Corporation  1 Ch. 562; Reg. v. Greater London Council, Ex parte Burgess  I.C.R. 991; Rolled Steel Products (Holdings) Ltd. v. British Steel Corporation  Ch. 246; In re Westminster City Council  A.C. 668 and City Index Ltd. v. Leslie, The Times, 10 October 1990.
The submissions relating to the interim period strategy and the municipal corporation issue sufficiently appear in the opinions of Lord Templeman and Lord Ackner. [Reference was made, in relation to the interim period strategy, to Ayers v. South Australian Banking Co. (1871) L.R. 3 P.C. 548; In re Jon Beauforte (London) Ltd.  Ch. 131; Bell Houses Ltd. v. City Wall Properties Ltd.  2 Q.B. 656; Great Eastern Railway Co. v. Turner (1872) L.R. 8 Ch.App. 149; Great North-West Central Railway Co. v. Charlebois  A.C. 114; Holsworthy Urban District Council v. Holsworthy Rural District Council  2 Ch. 62; National Telephone Co. Ltd. v. Constables of St. Peter Port  A.C. 317; In re New  2 Ch. 534; Seagram v. Knight (1867) L.R. 2 Ch.App. 628; Sinclair v. Brougham  A.C. 398; Smith v. Croft  B.C.L.C. 355 and Triggs v. Staines Urban District Council  1 Ch. 10. Reference was also made, in relation to the municipal corporation issue, to Attorney-General v. Leeds Corporation  2 Ch. 291; Attorney-General v. London County Council  1 Ch. 781; Attorney-General v. Manchester Corporation  1 Ch. 643; Attorney-General v. Newcastle upon Tyne Corporation (1889) 23 Q.B.D. 492; Attorney-General v. Smethwick Corporation  1 Ch. 562; Bonanza Creek Gold Mining Co. Ltd. v. The King  1 A.C. 566; Dickson v. Pharmaceutical Society of Great Britain  A.C. 403; In re Norwich Provident Insurance Society (Bath's Case) (1878) 8 Ch.D. 334; Rutter v. Chapman (1841) 8 Sm. & W. 1; Swain v. The Law Society  1 A.C. 598 and Baroness Wenlock v. River Dee Co. (1885) 10 App.Cas. 354.]
Their Lordships took time for consideration.
24 January 1991.