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InSinclair v. Brougham [1914] A.C. 398 the House of Lord held that money lent pursuant to a contract which the borrower lacked capacity to make could not be recovered in "quasi-contract" as money had and received. This was doubted by some of the judges in Westdeutsche Landesbank Girozentrale v. Islington L.B.C. [1996] A.C. 669, but that was in the context of a claim for money paid pursuant to a void interest-rate swap contract rather than a loan. It remained unclear whether there is a policy against allowing restitution of money lent. Such a policy was identified in Sinclair v. Brougham, because restitution was considered only to be available by means of an implied contract, and the implication of a contract would enable the lender to recover indirectly money which could not have been recovered directly by suing on the void contract of loan. But with the rejection of the implied contract theory and the recognition of a law of unjust enrichment, can restitutionary remedies be awarded to recover the value of void loans? The Court of Appeal in Haugesund Kommune v. Depfa ACS Bank [2010] EWCA Civ 579 held that they can.
The dispute related to two Norwegian local authorities, known as "Kommunes", which had put money obtained from an Icelandic bank into investments which proved to be disastrous. The transactions with the bank had been described as "swaps agreements" but were actually borrowing contracts which the Kommunes lacked the authority to make as a result of a Norwegian statute. These contracts were governed by English law and the first question for the Court...