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The Illegality Defence in Tort The Law Commission Consultation Paper No 160 THE ILLEGALITY DEFENCE IN TORT A Consultation Paper London: The Stationery Office The Law Commission was set up by section 1 of the Law Commissions Act 1965 for the purpose of promoting the reform of the law. The Law Commissioners are: The Honourable Mr Justice Carnwath CVO, Chairman Professor Hugh Beale Mr Charles Harpum Professor Martin Partington Judge Alan Wilkie, QC The Secretary of the Law Commission is Mr Michael Sayers and its offices are at Conquest House, 37-38 John Street, Theobalds Road, London WC1N 2BQ. This consultation paper, completed on 17 May 2001, is circulated for comment and criticism only. It does not represent the final views of the Law Commission. The Law Commission would be grateful for comments on this consultation paper before 28 September 2001. Comments may be sent either – (i) Until 31 July 2001: By post to James Robinson Tel: 020-7453-1201 Law Commission Fax: 020-7453-1297 Conquest House 37-38 John Street Theobalds Road London WC1N 2BQ By e-mail to [email protected] (ii) From 1 August 2001: By post to Helen Hall Tel: 020-7453-1220 Law Commission Fax: 020-7453-1297 Conquest House 37-38 John Street Theobalds Road London WC1N 2BQ By e-mail to [email protected] It would be helpful if, where possible, comments sent by post could also be sent on disk, or by e-mail to the above address, in any commonly used format. It may be helpful, either in discussion with others concerned or in any subsequent recommendations, for the Law Commission to be able to refer to and attribute comments submitted in response to this consultation paper. Any request to treat all, or part, of a response in confidence will, of course, be respected, but if no such request is made the Law Commission will assume that the response is not intended to be confidential. The text of this consultation paper is available on the Internet at: http://www.lawcom.gov.uk 30-188-04 THE LAW COMMISSION THE ILLEGALITY DEFENCE IN TORT CONTENTS Paragraph Page TABLE OF CASES vi-viii PART I: INTRODUCTION 1.1-1.26 1 1. THE AIM OF THIS PAPER 1.1-1.10 1 2. STRUCTURE OF THE PAPER 1.11 4 3. THE MEANING OF “ILLEGALITY” 1.12-1.17 5 4. AN OVERVIEW OF OUR PROVISIONAL 1.18-1.19 8 PROPOSALS 5. OUR UNDERLYING THINKING 1.20-1.26 8 PART II: THE EXISTING LAW IN ENGLAND 2.1-2.73 11 AND WALES 1. INTRODUCTION 2.1-2.2 11 2. TYPES OF CASE 2.3-2.10 12 (1) Injury incurred in the course of an illegal joint 2.4 12 venture (2) Injury in the course of the claimant’s illegal 2.5 13 activity (3) Compensation for detention as a result of the 2.6-2.7 13 claimant’s crime (4) Indemnity for liability arising from the 2.8 14 claimant’s crime (5) Compensation for the defendant’s fraud or 2.9 15 other wrongs (6) Conversion 2.10 15 3. HOW CAN THE PRINCIPLES BE SUMMARISED? 2.11-2.67 15 (1) The claimant cannot rely on an illegal act 2.13-2.18 16 (2) No benefit from an illegal act 2.19-2.25 19 iii Paragraph Page (3) The general residual principle 2.26-2.67 22 (i) The general principle 2.26 22 (a) Defence or no duty? 2.27-2.30 22 (b) “Public conscience” 2.31-2.42 23 (ii) Application of the general principle 2.43-2.45 28 (iii) Limiting devices 2.46-2.61 30 (a) The statutory context 2.48-2.52 30 (b) A close connection 2.53-2.55 32 (c) Seriousness of the illegality 2.56-2.58 34 (d) Proportionality of loss to illegality 2.59-2.61 35 (iv) Application of the limiting factors 2.62 36 (v) Non-condonation 2.63-2.67 36 4. OTHER SOURCES OF COMPENSATION 2.68-2.71 38 5. CONCLUSIONS 2.72-2.73 40 PART III: COMPARATIVE LAW 3.1-3.65 43 1. AUSTRALIA 3.2-3.27 43 (1) Is ex turpi causa recognised in tort? 3.2 43 (2) In what situations will illegality prevent the duty 3.3-3.25 43 of care from arising? (3) The rationales for preventing recovery 3.26-3.27 50 2. CANADA 3.28-3.47 51 (1) The Canadian approach 3.28-3.46 51 (2) Summary 3.47 56 3. NEW ZEALAND 3.48-3.52 57 4. CIVIL LAW SYSTEMS 3.53 59 5. SCOTLAND 3.54-3.62 60 (1) The Scottish approach 3.54-3.61 60 (2) Summary 3.62 63 6. CONCLUSION 3.63-3.65 63 PART IV: POLICY RATIONALES UNDERLYING 4.1-4.107 65 THE DOCTRINE OF ILLEGALITY iv Paragraph Page 1. INTRODUCTION 4.1-4.7 65 2. THE POLICY RATIONALES 4.8-4.102 66 (1) Rejection of punishment 4.10-4.24 67 (i) Report No 247, Aggravated, Exemplary 4.10-4.12 67 and Restitutionary Damages (ii) Consultation Paper No 154 4.13-4.14 68 (iii) Our current view 4.15-4.20 68 (iv) The need to avoid “double punishment” 4.21-4.24 70 (2) The need to preserve the dignity and reputation 4.25-4.27 71 of the courts and legal system (3) The need to deter unlawful or immoral conduct 4.28-4.35 72 (4) The need to prevent a claimant profiting from 4.36-4.47 74 his or her own wrongdoing (5) Not condoning the illegal activity or 4.48-4.55 77 encouraging others (6) “Consistency” 4.56-4.74 79 (i) Furthering the purpose of the rule 4.56-4.59 79 (ii) Consistency 4.60-4.74 80 (7) “Responsibility” 4.75-4.81 85 (8) Particular cases 4.82-4.102 87 (i) Injuries suffered in the course of illegal 4.82-4.98 87 activity (ii) “No reliance” cases 4.99-4.102 91 3. CONCLUSION 4.103-4.107 92 PART V: THE CASE FOR REFORM 5.1-5.37 93 1. IS AN ILLEGALITY DEFENCE NEEDED IN 5.2-5.7 93 TORT? 2. REASONS FOR REFORM 5.8-5.35 95 (1) The need to avoid different regimes for 5.9-5.14 95 overlapping or closely related claims (2) Lack of clarity 5.15-5.23 97 (i) The duty of care approach 5.16-5.18 97 (ii) The “public conscience” test 5.19 97 (iii) Causation or ‘direct connection’ 5.20 98 (iv) Seriousness of illegality 5.21 98 v Paragraph Page (v) Vagueness of reasoning 5.22-5.23 99 (3) Potential for inappropriate development 5.24-5.35 99 (i) Personal injury cases 5.24-5.34 99 (ii) “No reliance” cases 5.35 102 3. CONCLUSION 5.36-5.37 102 PART VI: OPTIONS FOR REFORM 6.1-6.59 104 1. JUDICIAL REFORM 6.2-6.4 104 2. REFORM BY LEGISLATION 6.5-6.45 105 (1) Why a discretion? 6.6-6.8 105 (2) The nature of the discretion 6.9-6.22 106 (3) Factors to be taken into account in exercising 6.23-6.30 110 the discretion (i) The seriousness of the illegality 6.25 111 (ii) The knowledge and intention of the 6.26 111 claimant (iii) Whether denying relief would act as a 6.27 112 deterrent (iv) Whether denying relief would further the 6.28 112 purpose of the rule which renders the claimant's conduct illegal (v) Whether denying relief would be 6.29 112 proportionate to the illegality involved (4) Other factors? 6.31-6.45 113 (i) Closeness of connection 6.31-6.33 113 (ii) Knowledge of the defendant 6.34-6.35 114 (iii) Proportionality as between claimant and 6.36-6.38 114 defendant (iv) Consistency 6.39-6.45 115 3. AN ALTERNATIVE APPROACH - A REDUCTION 6.46-6.47 116 IN DAMAGES 4. WHAT SHOULD BE THE STARTING POINT OF 6.48-6.50 117 THE PROVISIONALLY PROPOSED DISCRETION? 5. THE RELATIONSHIP OF OUR PROPOSALS FOR 6.51-6.54 118 TORT WITH THOSE RELATING TO CONTRACT AND TRUSTS vi Paragraph Page 6. THE EFFECT OF OUR PROVISIONAL 6.55-6.59 119 PROPOSALS PART VII: SUMMARY OF PROVISIONAL 7.1-7.28 121 PROPOSALS AND CONSULTATION ISSUES APPENDIX A: SUMMARY OF PROVISIONAL A.1-A.44 125 RECOMMENDATIONS AND CONSULTATION ISSUES FROM CONSULTATION PAPER NO 154 APPENDIX B: SELECT BIBLIOGRAPHY 134 vii TABLE OF CASES Al-Kishtaini v Shanshal, The Times 8 March 2001...........................................................................3, 4, 105 Accident Compensation Corporation v Curtis [1994] 2 NZLR 519 ................................................................57 Ashcroft’s Curator Bonis v Stewart 1998 SLT 163................................................................................ 60, 61 Ashton v Turner [1981] 1 QB 137...............................................................................13, 22, 42, 60, 88, 89 Askey v Golden Wine Co Ltd [1948] 2 All ER 35.......................................................... 20, 42, 74, 80, 81, 94 Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223....................................106 Ballett v Mingay [1943] KB 281 ............................................................................................................80 Barr v Koldesk 17 October 1996, SKQB QB96436...................................................................................56 Beresford v Royal Insurance Co Ltd [1938] AC 586.........................................................................19, 20, 74 Betts v Sanderson Estate (1988) 31 BCLR (2d) 1......................................................................................51 Birkett v Acorn Business Machines Ltd [1999] 2 All ER (Comm) 429..........................................................12 Bowmakers Ltd v Barnet Instruments Ltd [1945] KB 65........................................................16, 19, 18, 83, 94 BP Exploration Co (Libya) Ltd v Hunt (No 2) [1981] 1 WLR 232...........................................................106 Briody formerly Moore v St Helen’s and Knowsley Health Authority, (unreported) 21 January 2000...................40 Brown v Dunsmuir [1994] 3 NZLR 485 ..................................................................................................56 Burnard v Haggs (1863) 14 CBNS 45.....................................................................................................80 Cakebread v Hopping Brothers (Whetstone) Ltd [1947] 1 KB 641................................................................30 Canada Cement LaFarge Ltd v BC Lightweight Aggregate Ltd [1983] 1 SCR 452...................................
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