Kleinwort Benson Ltd v Lincoln City Council [1999] 2A.C. 349

Facts: The appellant in each of the four consolidated appeals is Kleinwort Benson Ltd, a bank which was an early participant in the market for interest rate swaps. Each of the respondents is a local authority. They may be described in brief as Birmingham City Council, Southwark London Borough Council, Kensington and Chelsea London Borough Council and Lincoln City Council. Kleinwort Benson entered into interest rate swap transactions with each of the respondents. Following the decision of this House in Hazell, Kleinwort Benson commenced proceedings against each of the respondents claiming restitution of the sums it had paid to them under these transactions. The total of the net payments made under them by Kleinwort Benson was £811,208.90. There are two features of these transactions which are of particular relevance to the present appeals, no doubt flowing from the fact that Kleinwort Benson participated in interest rate swaps at an early stage. The first is that, at the time when proceedings were commenced by Kleinwort Benson, each of the transactions was fully performed by both parties according to its terms across the whole of the agreed period. The second is that not all of the sums paid by Kleinwort Benson to the respondents were paid within the six year limitation period expiring with the date of the issue of the writ. Of the net sum of £811,208.90 paid by Kleinwort Benson, £388,114.72 was paid within the six year period, and £423,094.18 represented earlier payments. The former sum has been paid by the relevant local authorities to Kleinwort Benson. The latter sum is in issue, and is the subject of the cases now under appeal. The claim of Kleinwort Benson in each of these cases is that the money in question was paid by it under a mistake, viz a mistaken belief that it was paid pursuant to a binding contract between it and the relevant local authority.