DEFENCE OF ILLEGALITY

Defence of Illegality Tort Law

Defence Of Illegality

The Problem

Where claimants are engaged in some pattern of illegal conduct, how far should this prevent them from enforcing their normal lawful rights? This issue arises in many areas of law. In this Consultative Report, to look at the effect of claimants' illegal conduct on claims e.g., for contractual enforcement - for example where an employee, seeking to enforce an employment contract, is paid cash-in-hand; for the reversal of unjust enrichment - for example where a buyer seeks the return of the money already paid for goods which it turns out may not be sold legally; for the recognition of legal title to property - for example where the claimant asserts that property has been transferred to him or her under a contract which breaches statutory hire purchase regulations; to enforce equitable interests - for example where the claimant asserts that he or she is the beneficial owner of property held under a trust arrangement originally created to evade tax (Sealy, Hooley, 2003).

In tort - for example where the claimant claims compensation for a personal injury sustained while committing a criminal offence.

To answering the question, it is particularly difficult to set out hard and fast rules. This is because the illegality defence may be raised in such a wide variety of contexts. For example: In some cases, the illicit conduct may be somewhat trivial. In others, the claimant's conduct may be seriously reprehensible (Feinman, 2006).

The connection of the illegality to the assertion varies. It may be inextricably linked, for example where the claimant seeks to enforce an interest in a trust set up to “hide” the true ownership of assets for fraudulent purposes. Or the illegality may be merely incidental to the claim, as where a road haulier seeks to enforce payment when the delivery driver has exceeded the speed limit. The relative guilt of the parties varies. Sometimes the illegality defence may benefit an innocent defendant who is unaware of the claimant's illegal conduct. Sometimes it provides an unmerited windfall to a defendant who is equally or more implicated in the illegal conduct than the claimant (Shugart, 2001). In some cases, the effect of denying the claimant's claim may be to benefit a “guilty” defendant at the expense of the claimant's innocent creditors (Hatzis, 2002, 253-263). Sometimes the consequences of denying the claim may appear just-while in others they may seem disproportionate (as where a minor crime deprives the claimant of an interest in his or her home).

The courts have attempted to lay down a series of rules to apply in these many different circumstances. The result is a body of law which is technical, uncertain and sometimes arbitrary. It often lacks transparency. Occasionally it produces results which may appear unduly harsh (Smith, 2003, 1037-1062).

Previous Consultation

In two consultation papers of Feinman, (2006)on this issue,1 it is provisionally proposed legislative reform. It is considered that the enclosures should be granted a statutory discretion to conclude if the claimant's involvement in some ...