The claimant advanced funds to the respondent for him to invest in a bank of which the claimant had insider knowledge. In fact the defendant did not invest the funds, the knowledge was incorrect. The defendant however did not return the sums advanced, saying he need not return it because the contract was for an illegal purpose. The defendant now appealed against a decision that he must return it.
Held: His appeal failed. A claimant who satisfies the ordinary requirements of a claim for unjust enrichment, should not be debarred from enforcing his claim by reason only of the fact that the money which he seeks to recover was paid for an unlawful purpose. There may be rare cases where for some particular reason the enforcement of such a claim might be regarded as undermining the integrity of the justice system, but there were no such circumstances in this case. In wanting it back he was seeking to unwind the arrangement, not to profit from it.
Lord Neuberger P said: ‘When faced with a claim based on a contract which involves illegal activity (whether or not the illegal activity has been wholly, partly or not at all undertaken), the court should, when deciding how to take into account the impact of the illegality on the claim, bear in mind the need for integrity and consistency in the justice system, and in particular (a) the policy behind the illegality, (b) any other public policy issues, and (c) the need for proportionality.’
Judges:
Lord Neuberger, President, Lady Hale, Deputy President, Lord Mance, Lord Kerr, Lord Clarke, Lord Wilson, Lord Sumption, Lord Toulson, Lord Hodge
Citations:
[2016] WLR(D) 417, [2016] UKSC 42, [2016] 3 WLR 399, [2016] 2 Lloyd’s Rep 300, [2016] Lloyd’s Rep FC 435, UKSC 2014/0218
Links:
Bailii, Bailii Summary, SC, SC Summary, SC Video Summary, WLRD
Jurisdiction:
England and Wales
Citing:
Cited – Pearce v Brooks 1866
The contract was for the hire of an ornamental brougham to a prostitute which was supplied with knowledge that it would be used ‘as part of her display’. She returned it in a damaged condition, and refused to make any payments under the contract as . .
Cited – Holman v Johnson 5-Jul-1775
ex turpi causa non oritur actio
A claim was made 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.
Held: The defence . .
Cited – Anderson Ltd v Daniel 1924
A claim for the price of goods was held to be unenforceable because the seller had failed to give the buyer an invoice containing details which the seller was required to give him by statute. . .
Cited – Hall v Woolston Hall Leisure Limited CA 23-May-2000
The fact that an employment contract was tainted with illegality of which the employee was aware, did not deprive the employee of the possibility of claiming rights which were due to her under a statute which created rights associated with but not . .
Cited – J M Allan (Merchandising) Limited v Cloke CA 1963
the plaintiff rented to the defendant a roulette table, together with copies of a book of rules, for use in a club. The rules stated that a charge of sixpence was payable on any bet before the croupier spun the wheel. Using a roulette table in a . .
Cited – Gray v Thames Trains and Others HL 17-Jun-2009
The claimant suffered psychiatric injury in a rail crash caused by the defendant’s negligence. Under this condition of Post-Traumatic Stress Disorder, the claimant had later gone on to kill another person, and he had been detained under section 41. . .
Cited – Ashmore, Benson, Pease and Co v A V Dawson Ltd CA 1973
By acquiescing in the unlawful overloading of the hauliers’ lorries, the consignors’ assistant transport manager and his assistant made the haulage contract unenforceable at the instance of the consignors, who were unable to recover when a lorry . .
Cited – Tinsley v Milligan HL 28-Jun-1993
Two women parties used funds generated by a joint business venture to buy a house in which they lived together. It was vested in the sole name of the plaintiff but on the understanding that they were joint beneficial owners. The purpose of the . .
Cited – Hughes v Asset Managers Plc CA 13-May-1994
The appellants had entered into discretionary investment management agreements wth the respondent. The investments made a substantial losss which the appellants sought to recover, saying that the agreements were void under the 1958 Act.
Held: . .
Cited – Bakewell Management Limited v Brandwood and others HL 1-Apr-2004
Houses were built next to a common. Over many years the owners had driven over the common. The landowners appealed a decision that they could not acquire a right of way by prescription over the common because such use had been unlawful as a criminal . .
Cited – Wilson v Secretary of State for Trade and Industry; Wilson v First County Trust Ltd (No 2) HL 10-Jul-2003
The respondent appealed against a finding that the provision which made a loan agreement completely invalid for lack of compliance with the 1974 Act was itself invalid under the Human Rights Act since it deprived the respondent lender of its . .
Cited – Courage Ltd and Crehan v Crehan and Courage Ltd and Others ECJ 20-Sep-2001
The company had leased a public house to the respondent. The lease was subject to a tie, under which the respondent had to purchase supplies from the company. The company came to sue for the price of beer supplied. The respondent asserted that the . .
Cited – Gibbs Mew Plc v Gemmell and Gibbs Mew Plc and Centric Pub Company Ltd v Gemmell CA 22-Jul-1998
The brewery sought possession of a public house, tied by type. The lessee claimed damages for breach of Art. 81 and a declaration that the Block Exemption was inapplicable to his lease. His appeal from the judge’s order in favour of the brewery was . .
Cited – Mohammed v Alaga and Co (A Firm) CA 30-Jun-1999
A party appealed against a finding that an agreement as to fee sharing with a solicitors’ firm, being in breach of the Solicitors Practice Rules, was unenforceable and void.
Held: The appeal failed as to illegality, but succeeded on a quantum . .
Cited – Les Laboratoires Servier and Another v Apotex Inc and Others CA 3-May-2012
The court was asked as to ‘the availability of the defence of illegality to a claim on a cross-undertaking in damages where (1) the holder of a patent enforceable in this jurisdiction has obtained an interim injunction against the defendant from . .
Cited – Nelson v Nelson 9-Nov-1995
High Court of Australia McHugh J spoke of the so called ‘reliance rule’: ‘The [reliance] rule has no regard to the legal and equitable rights of the parties, the merits of the case, the effect of the transaction in undermining the policy of the . .
Cited – Mohammed v Alaga and Co (A Firm) ChD 2-Apr-1998
A party to an agreement to share in solicitors’ fees contrary to professional rules was unable to enforce it in any way. . .
Cited – Fitzgerald v F J Leonhardt Pty Ltd 13-May-1997
High Court of Australia – Contract – Illegality – Contract to drill bores – Claim by driller against landowner for money due under contract – Drilling without statutory permit – Whether obligation to obtain permit cast on landowner or driller – . .
Cited – Still v Minister of National Revenue 1997
An American citizen lawfully entered Canada and applied for permanent residence status. Pending consideration of her application, acting in good faith, she accepted employment but did so without obtaining a work permit as required by the Immigration . .
Cited – Parkingeye Ltd v Somerfield Stores Ltd CA 17-Oct-2012
The claimant company operated parking management for the defendant, charging customers for overparking. The defendant came to believe that the claimant’s behaviour was over-aggressive, and the use of falsehoods, and terminated the contract. The . .
Cited – Hounga v Allen and Another SC 30-Jul-2014
The appellant, of Nigerian origin had been brought here at the age of 14 with false identity papers, and was put to work caring for the respondent’s children. In 2008 she was dismissed and ejected from the house. She brought proceedings alleging . .
Cited – Maxim Nordenfelt Guns and Ammunition Co v Nordenfelt CA 1893
Bowen LJ said: ‘Rules which rest upon the foundation of public policy, not being rules which belong to the fixed or customary law, are capable, on proper occasion, of expansion or modification’ . .
Cited – Smith v Bromley 1760
Lord Mansfield granted recovery to the plaintiff of money paid by the plaintiff to procure her brother’s discharge from bankruptcy, which was an illegal consideration. As he explained, Lord Mansfield, at p 698, regarded it as in the public interest . .
Cited – Best, Regina (on The Application of) v The Secretary of State for Justice CA 21-Jan-2015
The court was asked whether an application for a person to be registered under the 2002 Act as the proprietor of a registered estate in land by reason of a period of adverse possession is valid, where part of the relevant period of possession . .
Cited – Collier v Collier CA 30-Jul-2002
Fraudulent Intent Negated Trust
The daughter claimant sought possession of business premises from her father who held them under leases. He claimed an order that the property was held in trust for him. The judge that at the time the properties were conveyed, the father had been . .
Cited – Attorney-General v Guardian Newspapers Ltd (No 2) (‘Spycatcher’) HL 13-Oct-1988
Loss of Confidentiality Protection – public domain
A retired secret service employee sought to publish his memoirs from Australia. The British government sought to restrain publication there, and the defendants sought to report those proceedings, which would involve publication of the allegations . .
Cited – Walker v Chapman 1790
The defendant, who was a page to the King, offered to take a bribe of pounds 50 from the plaintiff in return for securing him a place in the Customs. The bribe was paid but the plaintiff did not obtain the appointment and so he sued for the return . .
Cited – Vallejo v Wheeler 1774
Lord Mansfield said: ‘In all mercantile transactions the great object should be certainty: and therefore, it is of more consequence that a rule should be certain, than whether the rule is established one way or the other. Because speculators in . .
Cited – Knauer v Ministry of Justice SC 24-Feb-2016
The court was asked: ‘whether the current approach to assessing the financial losses suffered by the dependant of a person who is wrongfully killed properly reflects the fundamental principle of full compensation, and if it does not whether we . .
Cited – Jogee and Ruddock (Jamaica) v The Queen SC 18-Feb-2016
Joint Enterprise Murder
(and in Privy Council) The two defendants appealed against their convictions (one in Jamaica) for murder, under the law of joint enterprise. Each had been an accessory when their accomplice killed a victim with a knife. The judge in Jogee had . .
Cited – Sharma and Another v Simposh Ltd CA 23-Nov-2011
The parties created an oral (and therefore void) contract for a development, the claimants paid a deposit, expressed to be non-refundable, and the defendant builders completed the building work. The buyers backed out. The developer now appealed . .
Cited – Vita Food Products Inc v Unus Shipping Co Ltd PC 30-Jan-1939
(Nova Scotia) Goods were shipped from Newfoundland under a bill of lading which contained an exemption for loss caused by the servants of the carrier. This exemption was void by the law of Newfoundland, whose legislature had enacted the Hague Rules, . .
Cited – Bowmakers Ltd v Barnet Instruments Ltd CA 1945
An action was brought for the wrongful conversion of machine tools delivered under hire purchase agreements which contravened wartime statutory orders. The plaintiff established its legal title to the goods at issue without relying upon the illegal . .
Cited – St John Shipping Corporation v Joseph Rank Limited 1956
The defendants held a bill of lading for part of the cargo carried on the plaintiffs’ vessel from Mobile, Alabama, to Birkenhead. The vessel was over laden and the plaintiffs were guilty of an offence under the 1932 Act. The defendants relied on the . .
Cited – Sajan Singh v Sandra Ali PC 16-Dec-1959
(Malaysia) Unless a statute provides otherwise (expressly or by necessary implication), property can pass under a transaction which is illegal as a contract. . .
Cited – Hardy v Motor Insurers’ Bureau CA 1964
The court was asked whether insurance pursuant to the Road Traffic Act 1960 would provide valid cover for the benefit of a third party injured by deliberately criminal conduct on the part of the driver.
Held: Diplock LJ said: ‘The rule of law . .
Cited – Clayton v Regina 13-Dec-2006
Kirby J said that waiting for a modern Parliament to grapple with issues of law reform is like ‘waiting for the Greek Kalends. It will not happen’ and that ‘Eventually courts must accept this and shoulder their own responsibility for the state of . .
Cited – Hall v Hebert 29-Apr-1993
(Canadian Supreme Court) After they had been drinking heavily together, Mr Hebert, who owned a muscle car, allowed Mr Hall to drive it, including initially to give it a rolling start down a road on one side of which there was a steep slope. The car . .
Cited – Neville v Wilkinson 19-Dec-1782
Lord Thurlow LC ‘declared his opinion’ that: ‘In all cases where money was paid for an unlawful purpose, the party, though particeps criminis, might recover at law; and that the reason was, that if courts of justice mean to prevent the perpetration . .
Cited – Jetivia Sa and Another v Bilta (UK) Ltd and Others SC 22-Apr-2015
The liquidators of Bilta had brought proceedings against former directors and the appellant alleging that they were party to an unlawful means conspiracy which had damaged the company by engaging in a carousel fraud with carbon credits. On the . .
Cited – Tappenden And Others, Assignees of Bray v Randall 19-Jun-1801
This was a successful claim for the repayment of money paid for an unenforceable consideration which failed, Heath J said obiter that there might be ‘cases where the contract may be of a nature too grossly immoral for the court to enter into any . .
Cited – Cross v Kirkby CA 18-Feb-2000
The claimant was a hunt saboteur and the defendant a local farmer. The claimant shouted to the defendant ‘You’re fucking dead’ and jabbed him in the chest and throat with a broken baseball bat. In order to ward off further blows, the defendant . .
Cited – Taylor v Bowers CA 15-Feb-1876
The plaintiff, being in embarrassed circumstances, in pursuance of an agreement between him and A, made over all his stock-in-trade to A, and fictitious bills of exchange were given by A in plaintiff’s favour. Possession of the goods was given to A, . .
Cited – Burrows v Rhodes 22-Mar-1899
The plaintiff was induced to enlist in the Jameson Raid of 1895, contrary to section 11 of the Foreign Enlistment Act 1870, by the defendants’ fraudulent representation that it had the sanction of the Crown (which would have made it lawful). Kennedy . .
Cited – Parkinson v College of Ambulance Ltd and Harrison 1925
the plaintiff made a donation to a charity to secure a knighthood. When the honour failed to materialise he sued for the return of his money. The claim was rejected. Lush J said that ‘no Court could try such an action and allow such damages to be . .
Cited – Tribe v Tribe CA 26-Jul-1995
Illegal intent alone rebutted presumption
The plaintiff held 499 of the 500 issued shares of a company. In 1986 he wished to retire and transferred 30 shares to his son, one of four children, who was to take over the business. In 1988 he was worried about a bill for dilapidations, and, to . .
Cited – Palaniappa Chettiar v Arunasalam Chettiar PC 31-Jan-1962
Malaya . .
Cited – Saunders v Edwards CA 24-Mar-1986
The parties had agreed for the sale and purchase of land and chattels, but had deliberately misdescribed the apportionment so as to reduce tax liability. The purchasers then brought an action for misrepresentation. The vendor replied that the action . .
Cited by:
Cited – Henderson v Dorset Healthcare University NHS Foundation Trust CA 3-Aug-2018
Upon the allegedly negligent release of the claimant from mental health care, she had, while in the midst of a serious psychotic episode, derived from the schizophrenia, killed her mother and been convicted of manslaughter. She now sought damages in . .
Cited – Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd SC 30-Oct-2019
The Court was asked whether a claim against a bank for breach of the Quincecare duty is defeated if the customer is a company, and the fraudulent payment instructions are given by the company’s Chairman and sole shareholder who is the dominating . .
Cited – Whittington Hospital NHS Trust v XX SC 1-Apr-2020
A negligent delay in the diagnosis of her cancer left the clamant dependent on paid for surrogacy arrangements. Three issues were raised; could damages to fund surrogacy arrangements using the claimant’s own eggs be recovered? Second, if so, could . .
Lists of cited by and citing cases may be incomplete.
Contract, Equity
Updated: 11 October 2022; Ref: scu.567275