The effect of illegality in contracts/trusts/tort
On 23 January 2009 the (English) Law Commission published its Consultative Report on the Illegality Defence (available on www.lawcom.gov.uk/illegal.htm). This report has been long awaited, the original consultation papers being published in 1999 (Illegal transactions: the effect of illegality on contract and trusts Consultation Paper 154) and 2001 (The illegality defence in tort Consultation Paper 160). According to the Law Commission Press Release (www.lawcom.gov.uk/docs/illegality_press_release_plus_summary.pdf) the Commission has departed from its original recommendation which envisaged the introduction of a structured discretion for the courts. Clearly, this was not attractive to all those who responded. Rather, the Commission now appears to advocate a more ad hoc approach. Quoting from the press release:
"Kenneth Parker QC, the Commissioner leading the project, said:
“The diversity in circumstances where this issue comes into play makes this a
very difficult area to navigate. In some cases, the claimant’s offence may be
trivial and have nothing to do with the claim. In others it may be very serious
indeed and be inextricably linked. In most cases the courts weigh policy
arguments to provide a fair result. However, their task is made more difficult
by the perceived need to abide by detailed and ostensibly rigid rules.
We believe that judges should base their decisions directly on the policies
that underlie the illegality defence and explain their reasoning accordingly.
We have made proposals on what those policies should be and welcome
views on our suggestions. The most important thing is that the law is fair,
should deter illegal conduct and should prevent a claimant from profiting from
his or her wrongdoing. An illegality doctrine should maintain public confidence
in the integrity of the legal system. ”
The consultation period closes on 20 April 2009.
This consultation does not, of course, embrace Scots law. The effect of illegality in Scots law is woefully under-researched. The possibilty of legislation in England should lead us to reconsider this topic in this juridiction, remembering that the Scottish Parliament has competence to legislate in this area. The legal foundations in the two countries are different, particularly when it comes to enrichment remedies which apply when a contract is found to be affected by illegality, and the effect of this finding on the transfer of title to property. Perhaps the Scottish Law Commission could be persuaded to include this subject in its Eighth Programme of Reform.