THE PARTIES ARE NOT PAR DELICTUM
It is a fundamental principle of the law of restitution that restitutionary claims will fail where the claimant has participated in an illegal transaction.239 This was recognized by [1] [2] [3] [4] [5] [6] [7] [8]
Lord Mansfield in Holman v Johnson240 in the form of the illegality defence, whereby if the parties are equally at fault in participating in the illegal transaction the loss will lie where it falls. But, if a defence to restitutionary claims is founded on the principle of equal fault, it should follow that if the claimant is less at fault than the defendant the restitutionary claim should not be defeated by the taint of illegality. That this is implicit within the illegality defence was recognized by Lord Mansfield in Smith v Bromley.241
There are three recognized categories where the defendant will be considered to be more responsible than the claimant for the illegality by operation of law and so restitution will be available despite the illegality. These categories exist for the protection of the claimant. They were recognized by Lord Mansfield in Smith v Bromley,242 who said: ‘But there are other laws, which are calculated for the protection of the subject against oppression, extortion, deceit etc. If such laws are violated and the defendant takes advantage of the claimant’s condition or situation, then the plaintiff shall recover... ’
Of these, the fact that the claimant was induced to transfer a benefit to the defendant as a result of the defendant’s deceit is properly treated as involving restitution for an induced mistake.243 The other two categories, however, of oppression and extortion, should be analysed as falling under the principle of exploitation, whether actual or potential, by the defendant of the claimant. That these cases are properly analysed as a ground of restitution in its own right was recognized by Lord Denning in Kiriri Cotton Co Ltd v Dewani,244 where he treated it on a par with restitution for mistake or failure of basis.
- [1] Cain v Clarica Life Insurance Co (2005) 263 DLR (4th) 368.
- [2] The Bell Group Ltd v Westpac Banking Corporation (No 9) [2008] WASC 239, [89] (Owen J).
- [3] Australian Competition and Consumer Commission vSamton Holdings Pty Ltd [2002] 117 FCR 301, [64].
- [4] [2003] HCA 18 . 232 Cain v Clarica Life Insurance Co (2005) 263 DLR (4th) 368, [32].
- [5] 233 [2001] EWCA Civ 995, [40]. 234 See also Liddle v Cree [2011] EWHC 3294 (Ch).
- [6] 235 UNIDROIT Principles of International Commercial Contracts (2010), art 3.2.7.(1)(a).
- [7] 236 Consumer Credit Act 1974, s 140A, inserted by the Consumer Credit Act 2006.
- [8] 237 Ibid, s 140B(1)(a). 238 Ibid, s 140(b)(2)(9). 239 See Chapter 27.
