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The Illegality Defence in the Supreme Court again

04.11.20

by Grahame Anderson

 

The common law defence of illegality was considered by the Supreme Court in Patel v Mirza [2016] UKSC 42. The Court rejected the reliance principle as applied in Tinsley v Milligan [1994] 1 AC 340, according to which relief was refused to parties who had to rely on their own illegality to establish their case. In its place, the majority adopted a more flexible approach which openly addressed the underlying policy considerations involved and invited Courts to reach a balanced judgment in each case, permitting account to be taken of the proportionality of the outcome.

 

Okedina

In 2019, David Reade QC and I appeared in the Okedina v Chikale [2019] EWCA Civ 1393 in the Court of Appeal. That was an important case on statutory illegality in the context of immigration control and employment rights. The case looks at the issue of the impact of illegality, through lack of immigration status, on the claims of a domestic worker who claimed to be the victim of trafficking.

The main issues in the appeal were

• whether or not ss. 15 and 21 of the Immigration Asylum and Nationality Act 2006 prohibited C’s contract of employment such that it was unenforceable by her. To paraphrase, the Act provides for civil and criminal penalties on an employer who continues to employ an adult subject to immigration control if their leave to remain has expired. R’s case before the Court of Appeal was that it was a necessary implication of the Act that C’s employment contract was prohibited and thus unenforceable (ie, a question of statutory illegality);
• whether or not the contract was unenforceable at common law, applying the reasoning of the Supreme Court’s judgment in Patel v Mirza [2016] UKSC 42 (common law illegality).

On the first (statutory) question, and noting that an overstayer can be genuinely mistaken about their immigration status (as well as misled), the Court held that it was not Parliament’s clear intention to render unenforceable the employment contract in these circumstances.

It also rejected the Patel v Mirza-based (common law) argument that, since performance of the contract required the parties to act illegally, it was unenforceable at common law as a matter of public policy. The Court of Appeal accepted our submission that the law requires an Employment Tribunal to take a broad analysis of the individual facts of a case and that, in any event, the facts of the case made the outcome obvious.

An application for permission to appeal to the Supreme Court was defeated earlier this year. Nonetheless, the Supreme Court has had the opportunity to consider the illegality defence in two recent appeals.

 

Grondona

In Stoffel and Co v Grondona [2020] UKSC 42, the Patel v Mirza principles were reaffirmed. Solicitors had negligently failed properly to register their client’s transfer. They argued, however, that they could not be liable because the client’s mortgage had been obtained fraudulently. The solicitors’ appeal was dismissed: claims would not be permitted where they would result in an “incoherent contradiction damaging to the integrity of the legal system”. The Court found that there would be incoherence if the client could not recover her loss: she had an equitable interest in the property and, moreover, denying her claim due would disincentivise solicitors from acting competently.

 

Henderson

Judgment in Ecila Henderson (A Protected Party, by her litigation friend, The Official Solicitor v Dorset Healthcare University NHS Foundation Trust [2020] UKSC 43 was handed down on the same day as that in Grondona. The claimant, during a serious psychotic episode, killed her mother; she would not have committed that crime but for the defendant’s negligence. The question was whether or not she could recover damages for the consequences of having committed the offence, including her subsequent loss of liberty. The Supreme Court rejected her appeal, with Lord Hamblen given the lead judgment. Again, the Court affirmed and further elucidated the Patel approach, with express reference to Okedina.

With regard to the main Patel considerations, the Court said that

• they should usually be capable of being addressed as a matter of argument and at a level of generality that does not make evidence necessary;
• they involve, first, a balancing between competing policy considerations arising and then a proportionality analysis;
• the factors to be analysed are factors specific to the case rather than general policy considerations;
• where they arise, it is appropriate to give great weight to the policy considerations that a person should not be allowed to profit from his own wrongdoing and that the law should be coherent;
• where the policy considerations come down firmly against denial of the claim it will not be necessary to consider proportionality;
• relation to proportionality, centrality and the closeness of the causal link between the illegality and the claim will often be factors of particular importance.

These are important developments because they give Courts and Tribunals specific guidance on how to apply the Patel factors; employment lawyers would do well to take note because employment law, as Okedina shows, is an area in which illegality issues will often arise.