Lady Hale, Deputy President Lord Mance Lord Kerr Lord Clarke Lord Wilson Lord Sumption Lord Toulson Lord Hodge
JUDGMENT GIVEN ON
20 July 2016
Heard on 16 and 17 February 2016
Appellant
Respondent
Matthew Collings QC
Philip Shepherd QC
Professor Graham Virgo
(Instructed by Mischon de
(Instructed by K A Arnold
Reya)
& Co)
LORD TOULSON: (with whom Lady Hale, Lord Kerr, Lord Wilson and
Lord Hodge agree)
Introduction
“No court will lend its aid to a man who founds his cause of action upon an
immoral or an illegal act.” So spoke Lord Mansfield in Holman v Johnson (1775) 1
Cowp 341, 343, ushering in two centuries and more of case law about the extent and effect of this maxim. He stated that the reason was one of public policy:
“If, from the plaintiff’s own stating or otherwise, the cause of
action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for
where both are equally in fault, potior est conditio defendentis.”
2. Illegality has the potential to provide a defence to civil claims of all sorts,
whether relating to contract, property, tort or unjust enrichment, and in a wide variety of circumstances.
3. Take the law of contract. A contract may be prohibited by a statute; or it may be entered into for an illegal or immoral purpose, which may be that of one or both parties; or performance according to its terms may involve the commission of an offence; or it may be intended by one or both parties to be performed in a way which will involve the commission of an offence; or an unlawful act may be committed in the course of its performance. The application of the doctrine of illegality to each of these different situations has caused a good deal of uncertainty, complexity and sometimes inconsistency.
Holman v Johnson involved a claim for the price of goods which the plaintiff
sold to the defendant in Dunkirk, knowing that the defendant’s purpose was to
smuggle the goods into England. The plaintiff was met with a defence of illegality. The defence failed. Lord Mansfield held that knowledge on the part of the plaintiff
that the defendant intended to smuggle the goods did not affect the plaintiff’s
entitlement to recover the price of the goods, since he was not himself involved in the smuggling. By contrast, in Pearce v Brooks (1866) LR 1 Ex 213 a claim by a…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Patel v Mirza [2016] UKSC 42
Case
[2016] UKSC 42
Decision Date
CaseChat Overview and Summary
In Patel v Mirza, the Supreme Court was asked to determine the appropriate scope of the illegality defence in relation to claims for unjust enrichment. The case involved a claim by Mr Patel for the return of £620,000 paid to Mr Mirza for betting on the price of RBS shares using insider information. The illegality defence had been applied by the lower courts to deny Mr Patel's claim under contract law, but he sought to recover the money under the law of unjust enrichment. The Supreme Court held that the illegality principle should apply in a principled way that focuses on the policy reasons underlying the doctrine, rather than allowing a wide-ranging evaluation of factors on a case-by-case basis. While the agreement between the parties was illegal, Mr Patel could still recover the money under the law of unjust enrichment because it would not give effect to the illegal act or any right derived from it. The Court rejected the idea that a judge's assessment of the proportionality and seriousness of the illegality should determine the application of the illegality principle. The Court also held that the illegality principle should not depend on a discretionary evaluation of the policy factors and circumstances of the illegal conduct. In the specific circumstances of this case, the Court upheld the lower courts' decision to grant Mr Patel's claim for restitution of the £620,000.