This chapter discusses the case of Hazell v Hammersmith and Fulham London Borough Council, which had a profound effect on how the City of London perceived the dangers posed by legal risk. It involved a House of Lords decision on an ultra vires point — specifically, the power of the council in question to enter into ‘swap’ transactions. The case arose because this power was challenged by the auditor appointed by the Audit Commission. The surrounding circumstances and the unprecedented manner in which the City of London responded to the case provide both the classic case study and a historical explanation of why legal risk is seen to be so important and how seriously it is taken by those concerned with orderly financial markets.
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