Restitution Discussion Group Archives
| Sender: |
Eoin O' Dell |
| Date: |
Mon, 9 Nov 1998 09:31:59 |
| Re: |
Kleinwort Benson: Reply to Hedley and Sheehan |
Hello all
In my last message, I argued that if the effects of
Hazell are viewed simply from the perspective of the capacity of the local
authorities to enter into the swaps and the consequent voidness of the
swaps, then since incapacity and voidness are indivisible, the local authorities
always lacked capacity and the contracts were always void. This follows
from the nature of incapacity and voidness, not from the declaratory theory
of judicial decision making. On this view, since the local authorities
always lacked capacity and the contracts were always void, the banks were
mistaken in their belief in the local authorities' capacity and the consequent
validity of the contracts (analogous to my pattern 1 where the climbers
discover that K2 has always been higher than Everest).
If, however, we look at the effects of Hazell simply
from the perspective that it had upset settled law, then, whether this
constitutes a fact which has always existed (analogous to pattern 1) or
whether it constitutes a new fact (analogous to my pattern 2, where a
seismological event has subsequently raised K2 higher than Everest) does
depend upon the declaratory theory of law making. From this perspective,
I entirely agree with everything Steve Hedley wrote in his last message
in reply to mine. In particular:
The argument in the Lords is, it seems to me,
trapped between two excellent points : Lord B-W's point that any attempt
to deny that Hazell changed the law contains a fiction, and Lord G's point
that changes in the law have to involve *some* element of retroactivity.
The issue therefore is, whether *for the purpose of the rule permitting
recovery for mistakes of law*, we admit the truth that the law changed
or we pretend that it did not (and so anyone who acted on what was earlier
understood to be the law was, by fiction, "mistaken"). Now this issue
can be answered either way, using various arguments. But the one way in
which it should *not* be answered is by treating the fiction involved
in the declaratory theory as if it were true. My point was not that we need not look at the declaratory
theory at all, but only that we need not look at it if we focus on the
capacity of the local authorities and the consequent validity of the swaps.
Whether Hazell declared the law to be that the authorities did not have
capacity so that the contracts were consequently invalid, or changed the
law to that effect, once it had been established as a matter of law that
the local authorities did not have capacity and the contracts were consequently
invalid, in my view it follows from the nature of incapacity and voidness
that the local authorities never had that capacity and the contracts were
always void.
On the other hand, Steve Hedley argued
that this is *not* a matter of perspective --
the law *really did* change. Furthermore, Duncan Sheehan, in his reply to my message,
argued that, whether the local authorities lack capacity
is surely a matter of law and therefore we cannot
ignore the declaratory theory of law. I agree with Duncan and Steve that capacity is a matter
of law, but my point is that once that legal fact is established, it carries
certain legal consequences. One of them, as the law currently stands,
is that incapacity is indivisible. If the constituent document never contained
the relevant power, the incapax has always lacked capacity. We might of
course change the way we think about capacity as a consequence of changing
the way we think about the declaratory theory (and see the classic realist
article Cohen "Transcendental Nonsense and the Functionalist Approach"
for how that might happen) but if we do not change the way we think about
it and continue to think of capacity (and voidness) as indivisible, then
it follows that the local authorities always lacked incapacity, and a
belief that they did would fall within my pattern 1.
Finally, I'd like to make a contribution to what Duncan
had to say about prospective overruling. First, we don't have to look
to the US for the technique: the ECJ has also arrogated to itself the
power to declare its decisions would only have prospective effect, the
better to achieve legal certainty (Defrenne; Barber). But, as Henchy J
pointed out in the Irish Supreme Court in Murphy v AG [1982] IR 241, restitution
defences (there: change of position) can often achieve the same effect.
Second, Duncan thought that the technique was necessary to ensure that
"previous cases would be safe" and remain secure in what they had decided.
I don't think we need the theory of prospective overruling for this. Res
judicata will do just fine. [see, in a restitution context, The Bricklayer's
Hall case (Dublin Corpn v BATU
[[1996] 2 IR 468; [1996] 2 ILRM 547 (SC))]. This ensures that previously
litigated cases remain safe, thus meeting Duncan's central case. However,
the doctrine of res judicata does not reach cases where payments were
made otherwise than pursuant to litigation. This surely is the crucial
scenario from the perspective of the technique of prospective overruling.
And the question suggested by Murphy is whether the established restitution
defences can sufficiently fill this gap ? Lord Goff in Kleinwort
Benson seemed prepared to accept so. Steve in his first message thought
not. I'm not sure yet either way. What do others think ?
Best from Dublin
Eoin
EOIN O'DELL
Barrister, Lecturer in Law
Trinity College
Dublin 2
Ireland
ph (+ 353 - 1) 608 1178
fax (+ 353 - 1) 677 0449
Live Long and Prosper !!
(All opinions are personal; no legal responsibility whatsoever is accepted.)
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