Illegal agreements and public policy

The maxim ex turpi causa non oritur actio (an action does not arise from a base cause) is premised on the notion that the courts will not assist a claimant who founds his claim on an immoral or illegal act. The principle, however, which seeks to discourage fraud, has had a notable exception when the claimant voluntarily withdraws from an illegal transaction before the illegal purpose has been wholly or partly carried into effect. In Patel v Mirza [2014] EWCA Civ 1047, the Court of Appeal held that the exception could apply equally to cases where the withdrawal takes place because the illegal agreement can no longer be performed because of events outside the control of the parties. The illegality doctrine has, however, since been more fully explored by the Supreme Court in Mirza v Patel [2016] UKSC 42 (on appeal from the Court of Appeal) which has effectively abandoned the so-called “reliance test” adopted by the House of Lords in Tinsley v Milligan [1994] 1 AC 340 in favour of a policy-driven approach requiring the court to consider a range of relevant factors in deciding whether the claimant should be allowed to recover his money despite the illegal transaction. This article considers the Supreme Court's ruling and its implications