Patel v Mirza
Illegality is decided by weighing the purpose of the rule broken, other public policies and proportionality, not by a reliance test.
Facts
Mr Patel paid Mr Mirza £620,000 for the purpose of betting on the price of shares in the Royal Bank of Scotland. Mr Mirza claimed that he expected to obtain inside information from contacts at the bank about an announcement by the government that would affect the share price. Using that information to deal in the shares would have been the criminal offence of insider dealing under section 52 of the Criminal Justice Act 1993, which made the agreement a conspiracy to commit that offence. The expected information was never received, so no bets were placed. Mr Mirza failed to return the money, and Mr Patel sued to recover it.
Legal principle
The Supreme Court held that Mr Patel could recover the £620,000. The court, by a majority, replaced the reliance test in Tinsley v Milligan with a more flexible approach. Lord Toulson said that the essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if doing so would harm the integrity of the legal system. To decide this, the court should consider the underlying purpose of the prohibition that has been transgressed and whether that purpose would be enhanced by denying the claim, any other relevant public policy on which denial of the claim may have an impact, and whether denying the claim would be a proportionate response to the illegality. Here, returning the money would restore the parties to their positions before the illegal agreement and would not undermine the law against insider dealing.
Related cases on illegality and restraint of trade
- Archbolds (Freightage) Ltd v S Spanglett Ltd [1961] 1 QB 374
- Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269
- Fitch v Dewes [1921] 2 AC 158
- Herbert Morris Ltd v Saxelby [1916] 1 AC 688
- Holman v Johnson (1775) 1 Cowp 341
- Les Laboratoires Servier v Apotex Inc [2014] UKSC 55, [2015] AC 430
- Re Mahmoud and Ispahani [1921] 2 KB 716
- Mason v Provident Clothing and Supply Co Ltd [1913] AC 724
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