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Illegal contracts

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Illegal contracts Powered By Docstoc
					             Law of Contract

   Unlawful contracts
including illegal contracts, void contracts
           and restraint of trade


              LW1154
            BCL 2005-2006
                                         1
Reading

• Text
  Clark chapters 14-15


• Reference
  McD chapters 15-16     2
Unlawfulness - definition
• If a contract conflicts with the criminal
  law …
• … or with other important legal
  principles …
• … then the court may not give full effect
  to the contract …
• … or may even give it no effect at all
                                         3
Who makes the objection?
• If there is a clear illegality, the court itself
  must raise the point …
    …even if neither party wants this to
     happen
• But usually one party is raising the point
  tactically …
    … as an excuse to escape the
     contract                                   4
A matter of balance
• “Unlawfulness” is an objection based
  on public policy
• But upholding commercial contracts is
  also a goal of policy
• So the court is often engaged in
  balancing different policies …
• … especially where the illegality is
  relatively trivial                      5
Effect of illegality?
•   “Balancing” can be complex
•   Possibilities solutions are:
     • All remedies denied
     • Some are denied, eg severance of
       the illegal part
     • Remedies on the contract are
       denied, but non-contractual
       remedies are allowed
                                      6
Which contracts are illegal?
 • The list is long and disordered
 • Different writers organise it all
   differently
 • Not everyone agrees on how to
   structure the cases
 • Basic distinction: illegality by
   statute and at common law           7
By statute / At common law
• Statutory illegality is very wide-
  spread …
• … and I can only deal with
  general principles
• Common law illegality is more
  manageable …
• … but also more antiquated           8
“Illegal” or “void” ??
• Some writers distinguish “illegal
  contracts” from “void contracts”
• But the distinction is not awfully
  clear …
• … and relates mostly to the finer
  points of the effects of illegality
• I will refer to it briefly later  9
Scheme of the lectures

•   Illegality at common law
    (with specific examples)
•   Illegality by statute
    (mostly general principles)
•   Effect: contractual remedies
•   Effect: non-contractual remedies   10
Common law
  illegality
               11
Types of illegality
•   Commission of wrongs
•   Corruption and tax evasion
•   Trading with the enemy
•   Interference with the administration of
    justice
•   Encouraging sexual immorality
•   Restraint of trade
                                         12
   Common law
     illegality

1. Contracts to commit
        wrongs
                         13
Commission of wrongs
• Contracts to commit crimes or other
  wrongs are illegal
• Contractual rights cannot be acquired by
  unlawful acts
   eg Arsonists cannot claim on their
    insurance (Gray v. Hibernian Insc
    (HC, 27/5/93)                       14
  Common law
    illegality

2. Corruption and tax
       evasion
                        15
Corruption and tax evasion

• Contracts involving fraud or corrupt
  payments are illegal
• eg Procuring election as City Marshall,
  by promising to hand over some of the
  fees a Marshall can collect
  (Mayor of Dublin v. Hayes (1876) 10
  IRCL 226)
                                            16
Corruption: tax evasion
• Many taxes are defined so as to catch
  certain types of contract
    eg Income tax (employment)
    eg VAT (sale of goods)
    eg Stamp duty (sale of land)
• If the parties agree to mislead the tax
  authorities …                             17

• … then the contract is illegal
Example
Lewis v. Squash Ireland [1983] ILRM 363

 • Managing director of company
 • Part of his salary was officially
   recorded as “expenses”
 • He later claimed for unfair
   dismissal from the company
 • But as his employment contract
   was illegal, he had no rights          18
Statutory exception
• Lewis was thought too harsh
• Statute now provides that the
  employment tribunal will itself ignore the
  illegality …
• … but must inform the tax authorities of
  the true facts
  (Unfair Dismissal (Amendment) Act 1993
  s 7)                                   19
    Common law
      illegality

3. Trading with the enemy

                            20
Trading with the enemy

• Where the country is at war …
• … contracts with those voluntarily living
  in enemy territory are illegal
• eg Ross v. Shaw [1917] 2 IR 367
  (contract with nationals of areas overrun
  by the enemy)                          21
   Common law
     illegality

4. Interference with the
administration of justice
                            22
 Interference with the
 administration of justice
Essentially two categories:
• Preventing court actions which should
  occur
    eg by corruptly abandoning a
    prosecution
• Encouraging court actions which
  shouldn’t occur
    eg by paying another’s costs
                                          23
Wrongly preventing actions
1. Compromising crime
• Dropping a prosecution in return for
  money is illegal
• Ditto hiding evidence, or agreeing not to
  disclose it
• But the victim of a crime may accept
  “reasonable compensation” (Criminal
  Law Act 1997 s 8(1))                    24
Wrongly preventing actions
2. Ousting the courts’ jurisdiction
• The contract cannot bar access to the
  courts, or establish another tribunal
• Provision for arbitration is valid …
• … but an appeal will lie from the
  arbitrator to the courts (Scott v. Avery
  (1856) 10 ER 1121)
                                             25
Wrongly preventing actions
 3. Unfair advantage in bankruptcy
 • If a trader is bankrupt, their assets are to
   be divided equally between their
   creditors
 • An agreement treating one creditor more
   favourably than the others is illegal
                                            26
Example
Daly v. Daly (1870) IR 5 CL 197
• The debtor concealed assets, and
  obtained a discharge from his debts
• One creditor discovered the truth,
  threatened legal proceedings unless
  paid in full
• The debtor paid him
• This was held to be illegal
                                        27
Wrongly encouraging
actions
Traditionally, two overlapping concepts:
• Maintenance
  = improperly helping another to litigate
• Champerty
  = improperly making a profit from
  another’s litigation
                                             28
Wrongly encouraging
actions
• However, these objections are today
  less urgent
• “No foal no fee” is not seen as
  intrinsically objectionable
• People should be allowed to litigate
  “reasonably stateable claims”
  (O’Keefe v. Scales [1998] 1 IRLM 393)
                                      29
The modern law
4 main areas of concern today:

•   Contingency fees
•   Fee sharing agreements
•   Assignment of rights to litigate
•   Heir-locator agreements
                                       30
1. Contingency fees
• Legislation prohibits lawyers from acting
  in return for a percentage of the
  damages won (Solicitors (Amendment)
  Act 1994 s 68(2))
• An agreement for payment only if the
  action is won makes the contract invalid
  (Attorneys’ and Solicitors’ Act 1870 s
  11)                                    31
1. Contingency fees
• However, an agreement to work
  “no win no fee” does not have
  criminal consequences, it simply
  renders the agreement invalid
• In practice, much legal work
  (especially for personal injury
  litigation) is done that way   32
2. Fee sharing agreements
• An agreement by a solicitor to share
  fees with a non-lawyer is professional
  misconduct …
• … and the agreement cannot be
  enforced
• eg Mohamed v. Alaga
  [1999] EWCA Civ 1716                     33
3. Assignment of a right
to litigate
•   At common law, someone with a right to
    litigate may not transfer that right to
    another

•   2 exceptions are now recognised:
     • If you sell property and include
       connected rights to litigate;
     • If the assignee has a legitimate
       commercial interest in the right
                                              34
4. Heir-locator agreements
• Where one party offers to help
  another to make a claim from a
  deceased person’s estate …
• … and contracts for payment out
  of the proceeds of the claim …
• … then the contract is unlawful
  and unenforceable            35
Survival of the doctrine
• The doctrine is an antique one
• But the Supreme Court have confirmed
  that it still applies today …
• … even if the estate claimed is outside
  Ireland
  (Fraser v. Buckle [1996] 2 IRLM 34,
  discussed by Capper (1997) 60 MLR
  286)                                  36
Example
McElroy v. Flynn [1991] IRLM 294

• Offer to act for particular claimants in
  return for 25% of the proceeds
• Costello J held this to be caught by the
  heir-locator doctrine …
• … as the help went beyond mere sale of
  information relating to the claim
                                       37
  Common law
    illegality

5. Encouraging sexual
      immorality
                        38
Encouraging sexual
immorality
• The case law is antique …
• … and some of it is overtaken by
  modern developments
  (eg the 15th amendment to the
  constitution, 1996)
• How much of it is still good law is very
  speculative                                39
Encouraging sexual
immorality
4 basic areas of concern:-
• Prostitution
• Contracts affecting the
    decision to marry
• Contracts modifying obligations
    deriving from marriage
• Cohabitation and sex outside marriage
                                    40
1. Prostitution
• The older cases invalidate any contract
  concerning or encouraging prostitution
• eg A contract to hire a carriage to a
  prostitute for use in her trade (Pearce v.
  Brooks (1866) LR 1 Ex 213)

                                          41
1. Prostitution
• The Oireachtas has specified in
  legislation which aspects of prostitution
  are illegal
  (Criminal Law (Sexual Offences) Act
  1993)
• Arguably, the courts should go no further
  than the statute                      42
2. Decisions to marry
• At common law, any contract intended to
  influence or restrict choice of marriage
  was invalid
    eg A contract not to marry anyone
     but the other party
    eg A contract to find the other party a
     husband                             43
2. Decisions to marry
Exception at common law:
• An agreement by two parties to marry
  one another was valid …
• … provided both were at that point free
  to marry
• However, this action was abolished by
  statute (Family Law Act 1981 s 2)
                                        44
3. Contracts modifying
the marriage obligations
• Contracts encouraging separation in the
  future are invalid
• So a contract by a married couple
  providing for a possible future separation
  is invalid …
• … but an agreement reached on an
  actual separation is valid             45
3. Contracts modifying
the marriage obligations

• It has been held that a contract to secure
  a (foreign) divorce is unlawful (Dalton v.
  Dalton [1982] ILRM 418) …

• … but it is an open question what the
  courts would do today
                                          46
4. Cohabitation and sex
    outside marriage
• Traditionally, a contract was invalid if it
  encouraged sex outside marriage …
• … though not if it merely followed a
  period of cohabitation
  (eg man making provision for his
  illegitimate children, Reade v. Adams
  (1855) 2 Ir Jur NS 197)
                                                47
Example
Ennis v. Butterly [1997] 1 ILRM 28

• Cohabitation agreement
• Kelly J held this unenforceable
• He could not square legal enforcement
  with the status granted to marriage
  under the constitution
• For discussion see: Mee (1997) 19
  DULJ 149
                                      48
 Common law
   illegality

6. Restraint of trade

                        49
Restraint of trade
• Again, the common law rules are antique
• Nonetheless, the common law rules
  remain in full force …
• … though there is also statutory
  provision against anti-competitive
  contracts
  (see Competition Act 1991)
                                      50
What is the doctrine?
• The doctrine invalidates contracts not to
  engage in trade
• Exceptions are allowed when a
  particular contract can be shown to be
  reasonable both from the parties’ point
  of view …
• … and from the public point of view
                                         51
When does the doctrine
apply?
• The usual case is of an express contract
  not to trade
    eg A contract by an apprentice not to
    compete with his/her master
• But some contracts only indirectly
  restrict trade
• Does the doctrine apply to them?
                                        52
Kerry Co-Op v. An Bord Bainne [1991]
IRLM 851
• An Bord Bainne was a trade association for
  farming co-ops
• There was no effective sanction to force co-
  ops to remain part of An Bord
• A proposed rule change would penalise any
  co-ops who left it
• Was this change subject to the doctrine of
  restraint of trade?
                                             53
Kerry Co-Op v. An Bord Bainne [1991]
IRLM 851
The Supreme Court disagreed whether the
  doctrine applied: -
• McCarthy J said it did, but that the
  proposed rule change was reasonable
• O’Flaherty J said that the doctrine did
  not apply
• Finlay CJ expressed no opinion
                                      54
So the law is unclear
But it seems that the doctrine will not be
  applied to:-
• Minor exclusive dealing arrangements
  (Murphy v. O’Donovan [1939] IR 455)
• Promises by buyers of land not to trade
  on that land (Sibra Building v. Ladgrove
  [1998] 2 IR 589)
                                         55
What does the doctrine
require?
All restraints within the doctrine are invalid
  unless it can be shown that:-
• The restraint is reasonable as between
  the parties, and
• The restraint was reasonable from the
  point of view of the public
                                            56
Example
Macken v. O’Reilly [1979] IRLM 79
• The Equestrian Federation of Ireland
  changed its rules …
• … so that all their Irish members who
  competed abroad had to do so on Irish-bred
  horses
• The plaintiff, a show-jumper, complained that
  this was an unreasonable restriction
• But was there restraint of trade?
                                             57
Example
Macken v. O’Reilly [1979] IRLM 79
The Supreme Court thought this was
  reasonable:-
• As to the public interest, the Federation were
  legitimately seeking to protect the position of
  Irish horse breeders
• As to the position between the parties, the
  plaintiff's sacrifice was considered relatively
  minor
                                               58
Burden of proof
• Reasonableness as between the parties
  must be affirmatively proved
  (John Orr Ltd v. Orr [1987] IRLM 702)
• But (probably) the burden is reversed as
  to the public’s interest


                                        59
Restraint of trade - examples

 3 major examples of the doctrine at work:

 • Employment
 • Sale of business
 • Exclusive dealing contracts
                                         60
1. Employment
• Any substantial interference with freedom to
  work or freedom to trade may be within the
  doctrine
• In these cases, most of the attention is on
  reasonableness as between the parties
  themselves
• Appeals to the public interest are rarely
  successful                                 61
Example
Johnston v. Cliftonville FC [1984] NI 9

 • A part-time professional footballer sought
   higher pay than was permitted under Irish
   League rules
 • Murray J held that restrictions on pay were
   an interference with a basic liberty …
 • … without any plausible justification being
   advanced
                                                 62
Music cases
• A string of cases on pop stars illustrate the
  concentration on reasonableness as between
  the parties
• The public interest is largely irrelevant …
• … and the emphasis is on the legitimate
  interests of both parties

                                            63
Example 1
Silverstone Records v. Mountfield [1993]
EMLR 152
• Contract which absolutely restrained the
  group from performing for any other
  employer for 7 years
• Various other clauses were unusually harsh
• Neither the group nor their manager had
  much experience with contracts
• Restraint of trade found                 64
Example 2
Panayiotou v. Sony [1994] EMLR 229

• The singer was obliged to produce 8 albums
  over a 15-year period
• But the court emphasised that the length of
  the contract was a function of success
• The singer was well advised throughout, and
  had negotiated actively
• No restraint found                       65
 Music cases
• All the cases emphasise that
  inexperienced performers are
  entitled to protection of their
  interests …
• … but also that, from the record
  company's point of view, the rare
  success has to pay for the many 66

  failures
Ordinary employment cases

• Again, in more ordinary cases,
  the court tries to identity the
  legitimate interests of employer
  and employee …

• … in order to balance the parties’
  interests against each other       67
Knowledge gained from
employment
• So a contract clause cannot forbid ex-
  employees from using knowledge gained
  during employment ...

• ... unless the clause protects legitimate
  employer interests
    eg trade secrets
    eg customer lists                        68
2. Sale of a business
• Again, the court must balance the interests of
  the parties against each another
• Some restrictions on the seller’s business
  activities will be necessary
    (eg prohibitions on approaching former
     customers)
• … but the issue will often be how broad such
  clauses can be                             69
Example
John Orr Ltd v. Orr [1987] IRLM 702

• Sale of a fabrics business
• Clause forbidding the seller from competing
  anywhere in the world
• This was held by Costello J to be
  unjustifiably broad …
• … but he restrained the seller from dealing
  with anyone who was already a customer of
  the buyer                                 70
3. Exclusive dealing contracts

• Under these contracts, one party agrees to
  buy all their requirements for certain types of
  products from the other party (or to sell only
  to them)
• The courts have never been very ready to
  strike such agreements down …
• … and today tend to defer to competition law
  in the matter                               71
Length of the tie
• The main consideration today is the length of
  the tie
• So an obligation on a petrol station to buy
  petrol only from one firm is valid if for 5 years
  (Continental Oil v. Moyhihan (1977) 111 ILTR
  5) …
• … but not if for 21 years (Esso v. Harpers
  Garage [1968] AC 269)
                                                72
Foreign illegality
What if there is illegality under foreign law but
   not Irish law?
• Much depends on whether the contract was
   to be performed here or abroad
• Another question is whether the foreign law
   can be seen as analogous to Irish laws

                                              73
Example 1
Lemenda Trading v. African Petroleum
[1988] QB 448
• Contract to pay commissions to certain
  intermediaries involved in an oil supply
  contract
• The commissions were not illegal by English
  law …
• … but were forbidden by Qatar in an attempt
  to curb corruption
• The right to the commissions was not     74

  enforceable in England
Example 2
Stanhope v. Hospitals Trust (1936) Ir Jur
Rep 25
• Sale of lottery tickets
• Tickets were sold in Natal and sent on to
  Dublin
• However, when the organisers were told that
  lotteries were illegal in Natal, they refused to
  include the Natal tickets in the draw
• A ticket-seller from Durban sued              75
Example 2
Stanhope v. Hospitals Trust (1936) Ir Jur
Rep 25
Fitzgibbon J held that:-
• The non-inclusion was wrong, as the lottery
  was to be held in Dublin, and was legal by
  Irish law
• However, the damages could not include
  damages for injury to the ticket-seller’s
  business, as that business was illegal
                                            76
Illegality by statute

                        77
Express prohibition
• Some types of transaction are specifically
  stated by statute to be illegal
    eg legislation on shop hours
• Contracts in contravention of such laws are
  always illegal …
• … unless the legislation states that they
  should not be so treated
                                            78
Implied prohibition

• Where a contract necessarily involves an
  act which statute has declared illegal …
• … then the contract is itself illegal
• However, the courts are reluctant to apply
  this where no illegal intent is proved

                                               79
Example 1
Namlooze Venootschap v. Dorset
Manufacturing [1949] IR 203
• Action for the price of goods sold and
  delivered
• The price was payable in guilders …
• … but no official permission from the
  Minister for Finance had been sought, as
  statute then required
• The contract was held illegal and
  unenforceable
                                             80
Example 2
Gavin Low Ltd v. Field [1942] IR 86

• Contract for sale of a cow carcass
• After delivery, the seller claimed the price
• But the carcass had already been condemned
  as unfit for human consumption
• It is illegal to offer such goods for sale
• But the contract was still enforceable
                                           81
Examples of statutory illegality

• Wagering, gaming and lotteries
  (see especially Gaming and Lotteries
  Acts 1956-1986)

• Unfair Competition
  (see especially Treaty of Rome article
  81)                                      82
The effect of illegality on
        contracts
                              83
Effect of illegality - general
• A contract illegal on its face is completely
  unenforceable
• If one party has an illegal intent, they may be
  refused remedies
• An illegal provision may be cut out of an
  otherwise lawful contract
• We also need to ask whether other heads of
  the law (eg property, tort) can be relevant
                                               84
Illegality on the face of
the contract
• A contract which is expressly for a
  purpose which is illegal cannot be
  enforced by either party

• Knowledge of the relevant law is not
  required
  (‘ignorance of the law is no excuse’)
                                          85
Example
Gray v. Cathcart (1899) 33 ILTR 35

• A landlord leased a house in poor condition
• When the rent was not paid, the landlord
  sued
• But letting unsanitary premises was contrary
  to statute ...
• … so the contract was illegal on its face, and
  the rent not recoverable
                                             86
Illegal intent or performance

•   If a contract is legal on its face, but
      one or both sides intends to perform in
        an illegal way,
      or does in fact perform in an illegal way
•   then any party who acted or intended
    illegally is barred from remedies
                                              87
Example 1
Ashmore v. Dawson [1973] 1 WLR 828

 • An engineering firm contracts with hauliers to
   move some heavy equipment
 • As the hauliers know, the law requires the
   use of a more powerful lorry than they have
   available
 • The hauliers cannot enforce
 • Whether the engineers can enforce depends
   on their knowledge                         88
Example 2
Kavanagh v. Caulfield [2002] IEHC 67

 • P agreed to buy premises from D
 • As part of the price, P was to pay £7,500 to
   “The Marion Work of Atonement”, said to be
   a charity
 • In fact, this additional payment was a tax
   dodge
 • But it could not be shown that P knew of any
   illegality                                89

 • Therefore P could enforce against D
Example 3
Whitecross Potatoes v. Coyle [1978] IRLM
31
• A farmer in Meath contracts to sell potatoes
  to an English firm
• They suspect that the UK government may
  soon introduce import restrictions
• They agree that if this happens, a higher
  price will be payable
• The new restrictions are indeed introduced
                                             90
Example 3
Whitecross Potatoes v. Coyle [1978] IRLM
31
• What was intended by the parties?
    The buyer intended that the seller would
    supply from NI (lawful)
    The seller intended to smuggle his own
    potatoes into NI and supply them
    (unlawful)
• Therefore the buyer could enforce but the
  seller could not                          91
Separation of legal from illegal parts
of the agreement

• A possible response to illegality is not to
  declare the entire arrangement illegal …
• … but simply to strike out the part which is
  illegal and leave the rest
• The law is confused and controversial

                                                 92
Separation – two distinct ideas

•   Two distinct notions seem to be
    involved:
•   If an agreement naturally falls into two
    or more parts, only one of which is
    illegal, there is no reason why the rest
    should not be enforceable
                                          93
Separation – two distinct ideas

•   Some types of illegality are inherently
    trivial, and so should not result in the
    illegality of the entire contract …
•   … so the contract is valid, but the
    objectionable term is “void”
      eg terms ousting the courts’
        jurisdiction
      eg terms in restraint of trade          94
Example 1
Murphy v. Crean [1915] 1 IR 111

• Lease of pub premises
• Illegal term (that the tenant would transfer the
  licence as directed by the landlord)
• The landlord tried to enforce other clauses of
  the lease
• But the entire contract was held
  unenforceable
                                               95
Example 2
McIlvenna v. Ferris [1955] IR 318

• Contract for building work
• Under Emergency Powers legislation, such
  work could not be done without a licence
• The contract was accordingly held illegal …
• … except for part of the work done after the
  legislation was revoked
                                            96
 The effect of illegality on
contracts – other heads of
          the law
                               97
Other principles of law
• Where a claim on an illegal contract is not
  permitted …
• … the plaintiff may consider invoking some
  other head of the law
• But the court will need to ask whether the
  illegality equally bars action under that other
  head of the law
                                               98
Other principles: 1. Property

• Plaintiff are entitled to claim
  property belonging to them, even
  if there is evidence of illegality
  connected with it
• Perhaps surprisingly, an illegal
  contract may still pass ownership
  just as if it were valid        99
Example
Bowmakers v. Barnet Instruments [1945]
KB 65
• Sale of machine tools on H-P terms
• The contracts infringed anti-inflation
  legislation, and so could not be enforced
• When buyers defaulted, sellers claimed the
  tools back
• Ownership was determined by reference to
  the illegal contracts
                                           100
An exception?
• Bowmakers involved a rather technical type
  of illegality
• Perhaps a different attitude will be taken to
  more flagrant illegality
    eg ownership of goods it is illegal for
     anyone to own
    eg ownership of bribe money (Brady v.
     Flood (1841) 6 Ct Rep Ir 309)           101
Other principles: 2. Fraud

• Where one party to the contract has
  committed fraud on the other, an action may
  lie in deceit …
• … even if the contract is illegal
• This approach will only succeed if the
  illegality seems relatively trivial (eg Saunders
  v. Edwards [1987] 2 AER 651)                102
Other principles: 3. Restitution

• Suppose one side transfers money or other
  property to the other under the contract …
• … but later seeks to recover it
• This would involve the court helping a party
  to an illegal contract …
• … but helping them to unravel the contract,
  not to perform it
                                            103
Other principles: 3. Restitution

The basic principle is:-
• “In pari delicto, potior est conditio
  defendentis”
• =“When both sides are equally guilty, the
  defendant’s case is the stronger of the two”
But when are both parties “equally guilty”?
                                            104
The guiltless plaintiff
• A plaintiff is not caught by this rule if s/he is
  entirely innocent of any illegality …
• … or has repented of any illegality …
• … or was the victim of fraud or oppression
  by the other party …
• … or was one of a class that the legislation
  was meant to protect
                                                 105
The innocent plaintiff
• A plaintiff who does not know the facts
  rendering the transaction illegal may be able
  to recover money paid
• eg Insuring an enemy cargo in ignorance of
  the declaration of war (Oom v. Bruce (1810)
  12 East 225)
• The other party’s guilt or innocence appears
  to be irrelevant                          106
The repentant plaintiff

• Where the plaintiff transfers money or
  property with unlawful intent …
• … but the plaintiff thinks better of the
  scheme before anything illegal is done …
• … then the plaintiff may recover back the
  money or property
                                              107
The repentant plaintiff
• At one time, the courts required genuine
  penitence …
• … and would refuse a remedy if no remorse
  was shown
• Today, the approach is more pragmatic
• Recovery is permitted so that there is an
  incentive to withdraw before any crime is
  actually committed                     108
Example
Tribe v. Tribe [1995] 4 AER 236
• A father transferred shares to his son,
  apparently on sale
• In fact, the purpose was to prevent the
  shares falling into the hands of the father’s
  creditors
• The father made a satisfactory arrangement
  with his creditors …
• … and successfully claimed the shares back109
Fraud or oppression
• Where money or property was obtained by
  fraud …
• … the defrauded party may recover it back
  despite any illegality
• eg where P is tricked into entering an illegal
  insurance contract
  (Hughes v. Liverpool Victoria [1916] 2 KB
  482)                                       110
Protected class

• Where the object of legislation is to protect
  people in P’s position …
• … then the courts will be slow to say that
  breach of the legislation bars P from a
  remedy
• The statute is to be read in the light of its
  objects                                         111
Example
Kiriri Cotton v. Dewani [1960] AC 192

• Legislation made it illegal for a landlord to
  demand “key money” from tenants
• A tenant nonetheless paid this money on
  taking a lease
• Because the object of the legislation was to
  protect tenants …
• … the tenant was able to claim the money
  back from the landlord                      112
That’s all
    on
illegality   113

				
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