Most of the defences to restitutionary claims focus on the relationship between the claimant and the defendant, and are normatively related to the principle of corrective justice.[1] That is not the case with the defence of illegality, which is influenced by external considerations of public policy[2] rather than securing justice between the parties. It is for this reason that the illegality defence has such a bad reputation, being perceived as complex, capricious and unjust.[3] It is difficult even to identify an acceptable definition of illegality; to determine whether it should defeat restitutionary claims in all, some or any cases, and, if it applies, what might be the basis for determining its application. Further, where the defendant has obtained a benefit in circumstances where its transfer has been tainted by illegality, there is no a priori reason either why restitution should necessarily follow or be denied. As Wade[4] recognized:

on one side the view that a court should not help a man who has engaged in an illegal transaction out of the predicament in which he has placed himself, and on the other the view that a court should not permit unjust enrichment of one person at the expense of another. Of these two arguments, each of which seems most nearly determinative upon its side of the question, neither takes precedence upon logical analysis.

Confusion about the role of the illegality defence runs throughout the law of obligations.[5] That confusion has been compounded by two decisions of the Supreme Court which, although not concerned with the law of restitution, betray a significant difference of approach about the role of illegality generally in private law which is of relevance to the analysis of the defence in unjust enrichment.

In Les Laboratoires Servier v Apotex,[6] in a case concerning a statutory tort, the Court of Appeal had approached the illegality defence on the basis that ‘it required in each case... an intense analysis of the particular facts and of the proper application of the various policy considerations underlying the illegality principle so as to produce a just and proportionate response to the illegality’.[7] This approach was specifically rejected by a majority of the Supreme Court. Lord Sumption emphasized that the defence was grounded on general rules of law and was not a mere discretionary power, involving fact-based evaluations of the effect of the rules in individual cases.[8] He considered the key issues to be only whether the relevant conduct involved sufficient turpitude and whether this was sufficiently related to the claim.[9] This strict approach to illegality can be contrasted with that of Lord Toulson, who refused to criticize the approach of the Court of Appeal and who considered that, when determining whether the illegality defence should apply, ‘it is right to proceed carefully on a case by case basis, considering the policies which underlie the broad principle’.[10] [11] This approach was also adopted by a differently constituted Supreme Court in the earlier decision of Hounga v Allen,11 which concerned the tort of race discrimination following wrongful dismissal from employment. Lord Wilson[12] recognized that it was necessary ‘first, to ask “What is the aspect of public policy which founds the defence?” and, second, to ask “But is there another aspect of public policy to which application of the defence would run counter?”’.

To the extent that there is division amongst the Justices of the Supreme Court, the strict approach of Lord Sumption would appear to prevail, being a judgment in the more recent case which had the explicit support of two Justices and the implicit support of another. But a larger number of Justices support the more flexible and fact-sensitive approach of Lord Toulson, with all the Justices in Hounga having adopted it. It follows that a fundamental difference of approach to dealing with illegality has emerged and it is necessary to consider carefully, in the light of this, how illegality should function in the law of restitution.

  • [1] RB Grantham and CEF Rickett, ‘A Normative Account of Defences to Restitutionary Liability’ (2008) CLJ 92.
  • [2] Hounga v Allen [2014] UKSC 47, [2014] 1 WLR 2889, [42] (Lord Wilson), [55] (Lord Hughes); LesLaboratoires Servier v Apotex [2014] UKSC 55, [2015] AC 430, [13] (Lord Sumption).
  • [3] Lord Sumption, ‘Reflections on the Law of Illegality’ [2012] RLR 1, 12.
  • [4] JW Wade, ‘Benefits Obtained Under Illegal Transactions—Reasons For and Against Allowing Restitution’(1946) Texas Law Review 31, 60.
  • [5] For tort see GJ Virgo, ‘Illegality’s Role in the Law of Tort’ in M Dyson (ed), Unravelling Tort and Crime(Cambridge: Cambridge University Press, 2014), ch 7.
  • [6] [2014] UKSC 55, [2015] AC 430.
  • [7] Les Laboratoires Servier v Apotex [2012] EWCA Civ 593, [2013] Bus LR 80, [75] (Etherton LJ).
  • [8] Les Laboratoires Servier v Apotex [2014] UKSC 55, [2014] 3 WLR 1257, [2015] AC 430, [13] and [22].
  • [9] Ibid, [22].
  • [10] Ibid, [57]. See also Gray v Thames Trains Ltd [2009] UKHL 33, [2009] 1 AC 1339, 1370, [30] (LordHoffmann); Stone and Rolls Ltd v Moore Stephens [2009] AC 1391, [25] (Lord Phillips).
  • [11] [2014] UKSC 47, [2014] 1 WLR 2889. See also Parkingeye Ltd v Somerfield Stores Ltd [2012] EWCA Civ1338, [2013] QB 840, [40] (Sir Robin Jacob).
  • [12] Hounga v Allen [2014] UKSC 47, [2014] 1 WLR 2889, [42], with whom Baroness Hale and Lord Kerragreed.
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