Patel v Mirza

Facts

Mr Patel claimed £620,000 from Mr Mirza, after he had transferred him the money to illegally bet on the price of Royal Bank of Scotland shares, but the contract was not carried through. Under section 52 of the Criminal Justice Act 1993, using advance insider information to profit from trading in securities is an offence (so as to prevent some people unfairly profiting from market changes before the public). Mr Patel and Mr Mirza were planning to do insider dealing, but an announcement by the government that they had anticipated was mistaken. After this, Mr Mirza refused to repay Mr Patel the £620,000. Mr Mirza brought a claim based on contract and unjust enrichment, but Mr Patel argued that no such obligation could be enforced because the whole contract was illegal, and any claim precluded by the principle that ex turpi causa non oritur actio (no claim may arise from an illegal act).

Judgment

The UK Supreme Court held unanimously that Mr Patel could recover the money. A majority of the Court, agreeing with Lord Toulson's judgment, thought that the principle should be based on the purpose of the illegality rule in question, and that no reasons of policy precluded the restitution of money even though the contract would be illegal. A minority of Lord Mance, Lord Clarke and Lord Sumption thought that a range of different rules should apply. The formal test in Tinsley v Milligan was held to no longer represent the law.

Lord Toulson (with whom Lady Hale, Lord Kerr, Lord Wilson and Lord Hodge agreed) said the following.

Lord Kerr gave a judgment concurring with Lord Toulson.

Lord Neuberger gave a further opinion, endorsing Lord Toulson.

Lord Mance gave his opinion, suggesting that the range of factors test might not increase certainty. Lord Clarke gave his opinion.

Lord Sumption gave his opinion, with which Lord Clarke agreed.