LECTURE 14 - ILLEGALITY - CONTRACT Introduction - The law in this area can be quite complicated. - The crux of the principle is that illegal conduct can operate as a defence to a claim for breach of contract. - Illegality could arise in a wide range of scenarios. Tinsley v Milligan [1994] - The House of Lords insisted that a claim should succeed if the claimant does not need to rely upon any illegality, and the claim should fail if the claimant needs to rely on illegality. - DECIDED TO CONTRIBUTE MONEY TO BUY PROPERTY, WHEN THEY BOUGH HOUSE, MILLIGAN AGREED THE HOUSE SHOULD BE PUT ONLY IN TINSLEYS NAME, BECAUSE SHE WANTED TO MAKE FALSE SOCIAL SCURITY CLAIMS. THEY FELL OUT. ARGUED TINSLEY SHOULDN'T BE ALLOWED TO CLAIM FOR UNLAWFUL BEHAVIOUR. COURTS AGREED THAT TINSLEY SHOULD BE ALLOWED TO RECOVER SHARES OF PROPERTY. - Milligan was arguing an entitlement to contribution/money to house. - Milligan should claim without reliance on illegality. - If claim is brought with an issue of illegality, if there is no reliance on illegality then there is an issue of trust, and claim should succeed. If vice versa, claim should not succeed. o Reliance principle Patel v Mirza (2016) - Mr Patel brought a claim for breach of contract and unjust enrichment. - Mr Mirza resisted the claim on the basis of illegality, arguing that the agreement between the parties amounted to a conspiracy to commit an offence of insider dealing under sec 52 of the Criminal Justice Act 1993. - The Supreme Court held that Mr Mirza should repay the sums totalling £620,000 which Mr Patel transferred to him. - Lord Toulson said that there are 2 broad policy factors which underpin the illegality defence: o A person should not profit from his illegal conduct. o The law should be coherent and not self-defeating. - “I would say that one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest, because it would be harmful to the integrity of the legal system, without (a) considering the underlying purpose of the prohibition which has been transgressed, (b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and (c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality. We are, after all, in the area of public policy."
Patel v Mirza Principles - So now whether illegality should bar a claim seems to depend three factors: o The underlying purpose of the prohibition which has been transgressed; and whether the purpose would be enhanced by the denial of the claim. o Any other relevant public policies which may be rendered ineffective or less effective by denial of the claim; o A due sense of proportionality. Patel v Mirza - Patel v Mirza has now overruled the 'reliance principle' in Tinsley v Milligan. - In