‘Dexia Crediop’ Swap case on Restitution
The High Court has handed down judgment on restitutionary remedies in a swaps case, Dexia Crediop SpA v Comune di Prato  EWHC 2824 (Comm). The bank had entered into six swaps with an Italian local authority. Swap 6 was subsequently found to be invalid, due to the bank’s failure to comply with a mandatory Italian requirement about cooling-off periods. This breach caused the authority no loss, but had consequences for the validity of swap 6 and some of the other swaps.
The bank claimed that it was entitled to restitution of the net differentials which it had paid to the local authority under swaps 1, 2, 4 and 5, which had been held invalid. The local authority pleaded change of position, in that it regarded swaps 1, 2, 4 and 5 as valid at the time it received interest payments under them. The High Court dismissed this defence on the evidence, as there was no causal connection between the receipt of interest payments and the local authority’s alleged change of position. Nor was it inherently likely that the local authority’s budgeting and planning decisions would have been affected by the presence of the net payments made under the swaps.
Accordingly the bank was granted restitution of its net payments under swaps 1, 2, 4 and 5, to be set off against the local authority’s successful counterclaim for restitution of sums it had paid under swap 6. This left a net sum payable to the authority.
On the issue of limitation, the High Court held obiter that the bank would have been entitled to rely on the ‘mistake’ postponement provisions in section 32 of the Limitation Act 1980. The bank had made payments under swaps in the mistaken belief that it was under a valid, binding and enforceable obligation to do so and it could not, with reasonable diligence, have discovered that mistake within the relevant period.