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Dear all

I must confess to a certain amount of trepidation in embarking on this topic again.

However,for what it's worth here is my latest offering for your delectation.

Eoin O'Dell tells us that we can ignore the declaratory theory and concentrate on the fact that the contracts after Hazell were void ab initio. Unless I have misunderstood what he is saying, which is possible to say the least, I cannot agree. The fact that the contract is void ab initio rather than de futuro is simply that the local authority was incapax. It did not have capacity to enter into the contract with the bank. Whether it is incapax is surely a matter of law and therefore we cannot ignore the declaratory theory of law. But that's not actually what I wanted to talk about.

My understanding is that some courts in the USA use a technique of prospective overruling that although rejected in the House of Lords in Kleinwort Benson could be of some use. Essentially it removes all the problems that I have with the need for retrospectivity. We need retrospectivity for two reasons. Firstly because the facts that give rise to the litigation happen before the litigation and therefore the judge is necessarily applying the law retrospectively.

In my last missive to this discussion group I gave the example that was somewhat better expressed by Lord Hoffmann, that if the contract were void as the swaps contracts were after Hazell v Hammersmith then it would be hard on potential future claimants to say that because they were not first in the queue they could not recover. The contract was void; it had always been void and yet they had not been mistaken and could not recover. As Eoin points out the new decision while not falsifying history undoubtedly falsifies everybody's assumptions about it.

As I understand it the system of prospective overruling used in the USA would allow those claimants to recover, but would not allow anybody who had already as it were settled or litigated on the basis of the 'old law' to open the settlement and reclaim the money paid over. Previous cases would be safe and only new cases, although the facts giving rise to them had happened before the litigation 'altering the law' would ground recovery.

It may be that the courts ought to say that for the purposes of the law on mistake of law in restitution that all decisions where they overruled a previous one would only operate prospectively for these purposes. However, I am yet to be convinced that it is necessary given that most defendants in cases that are to be reopened will have changed their position.

Duncan Sheehan