![]() ![]() The Court must look at this "trio of necessary considerations": The Patel v Mirza case has been explored in a previous Ogier article in more detail, but in summary, in his judgment on behalf of the majority Lord Toulson set out a three part test to determine whether enforcing a claim would be harmful to the integrity of the legal system. In this new approach, the court undertakes a balancing exercise of the relevant policy considerations, as well as taking account of the proportionality of the outcome in each case. This was to deal with the uncertainty that had been caused by the inconsistent body of case law and to address the unfairness of the results that the "reliance approach" sometimes produced. The illegality defence was radically reconsidered and restated by the UK Supreme Court in Patel v Mirza, where there was a rejection of the reliance principle, and the adoption of a more flexible policy-based approach that openly addresses the underlying public policy factors. However, this broad approach meant that, according to Lord Mance, "by the end of the twentieth century it had become encrusted with an incoherent mass of inconsistent authority". Under the reliance principle, relief would be refused to parties who had to rely on their own illegality to establish their claim. The historic position was the reliance principle as expounded in the English cases of Tinsley v Milligan and Stone & Rolls, and applied in the Cayman Islands in TCB Creditor Recoveries Ltd v Arthur Andersen. Until 2016, there had been a period of considerable uncertainty on the appropriate approach to the illegality defence, with Chitty on Contracts calling this a "problematic topic". The classic example is where negligent auditors, in circumstances where a director has perpetrated a fraud, successfully rely on the defence to defeat a professional negligence claim against them notwithstanding that there has been negligent conduct by the auditor. The examples in the cases are not always so obvious and the application of the defence can sometimes lead to arguably unfair consequences. For example, in a situation where someone has hired an assassin and then tried to sue them for breach of contract when the intended target was not assassinated: given the nature of the illegal activity involved, it would undermine the integrity of the legal system if the hiring party was then able to obtain damages for breach of contract. This means the courts will not assist a litigant (or anyone claiming through them) to benefit from their own wrongdoing, if to do so would undermine the integrity of the legal system. The essence of the illegality defence was reconfirmed by Lord Lloyd-Jones in the Stoffel decision as follows: "The true rationale of the illegality defence… is that recovery should not be permitted where to do so would result in an incoherent contradiction damaging to the integrity of the legal system". This is highly relevant to fraud and asset recovery practitioners in the Cayman Islands, as well as defendants in commonwealth proceedings generally where there is some illegality in the fact pattern. This article considers what can be learned from the latest analysis from the English Supreme Court and the Grand Court of the Cayman Islands. ![]() Property law - buying, selling, financingĪ UK Supreme Court decision from the end of 2020 ( Stoffel & Co v Grondona UKSC 42) has provided further helpful guidance to common law jurisdictions on the availability of the recently overhauled illegality defence.Real Estate Structuring, Aquisitions and Disposals.Regulatory and Compliance Services - Ogier Global.Cayman Islands AML/CFT training - Ogier Global. ![]() Accounting and Financial Reporting Services - Ogier Global.Private Wealth and Jersey Private Funds.Make your Jersey lasting power of attorney online.Real Estate, Infrastructure and Energy Funds.Section 238 Shareholder Appraisal Rights. ![]() Corporate and Financial Services Disputes.Real Estate Structuring, Acquisitions and Disposals. ![]()
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