Establishing the Defence
The ‘Overall Fairness’ Test
The Supreme Court in Patel v Mirza  3 WLR 399 held that whether a claim should be rejected due to the claimant’s illegal activities or purpose depends on the ‘overall fairness’ of the case. This is a structured discretion which depends on a ‘trio of considerations’:
- ‘The underlying purpose’ of the law which the claimant transgressed;
- Any other policy or legal considerations which would be made less effective or ineffective if the claim was denied; and
- Whether it would be disproportionate to deny the claim.
Factors relevant to whether denying the claim is proportionate to the illegality include: Patel v Mirza  3 WLR 399
- Whether the claimant knew his actions were illegal;
- The importance of the illegal act or purpose to the overall interactions or transactions between the claimant and defendant;
- The seriousness of the illegality; and
- The relative culpability of the parties.
Special Issues in Contract
Contracts Void for Public Policy reasons
Certain contracts are automatically void under the illegality doctrine. These include:
- Contracts barring any party from submitting questions to the court: Baker v Jones  1 WLR 1005 (except those which make such a right dependent on an arbitration decision: Scott v Avery (1855) 5 HL Cas 811);
- Contracts restraining who a person can marry, contracts for providing ‘marriage brokering’ services and other contracts which undermine the status of marriage: Lowe v Peers (1768) 4 Burr 2225;
- Contracts which involve enemy nations or which harm diplomacy with friendly nations: De Wut v Hendricks (1824) 2 Bing 314;
- Contracts tending to corrupt public life (such as those involving bribery or corruption): Parkinson v College of Ambulance  2 KB 1;
- Contracts to perform illegal acts.
Special Issues in Tort
Does the Patel v Mirza Test Apply?
Patel v Mirza  3 WLR 399 was not a tort claim, and so it is unclear whether it changes the way the defence of illegality in tort. Illegality in tort was previously governed by the House of Lords decision in Gray v Thames Trains Ltd  EWCA Civ 713 (which was not definitively approved or disapproved of in Patel). In that case, Lord Hoffman stated that there were two illegality rules in tort:
The narrow rule: a claimant cannot recover in tort for the consequences of a criminal sanction. This prevents the claimant from recovering any damages which are the consequence of a criminal sentence being imposed on him (such as the cost of a fine).
The wide rule: a person cannot recover for losses which were caused by their own illegal actions in general. This would prevent the claimant from recovering any losses or harm which were not the result of a criminal sentence, such as remorse.
Lord Hoffman argued that the wide rule was not the defence of illegality. Rather, it was the normal application of novus actus interveniens principles in causation. If this is true, then the ruling in Patel v Mirza does not affect tort. Regardless of the overall fairness of the case, a claimant cannot recover any damages which are the consequence of a criminal act. This is because the defendant’s act will not be taken to have caused the relevant loss. Liability will not be established, so defences are irrelevant.
However, Lords Brown and Roger in Gray disagreed that the wide rule was based on causation. They argued that it should instead be based on the same public policy issues relevant to the defence of illegality. If this is true, then the two rules in Gray have been replaced by the approach in Patel v Mirza. This approach might be supported by the fact that not all cases after Gray have adopted a causal approach: some have asked whether the illegal act was ‘inextricably linked’ with the tort: eg Cross v Kirkby  EWCA Civ 426.
In conclusion, it is not clear whether the decision in Gray is based on causation or the defence of illegality. Therefore, it is not clear whether the wide and narrow rules apply in tort, or whether the approach in Patel v Mirza applies.
Particular Issues with the Narrow Rule
Assuming that the wide and narrow rules survive, there is controversy over whether the narrow rule applies in every case. Lord Phillips in Gray v Thames Trains Ltd  EWCA Civ 713 argued that it might not apply where the criminal offence was not relevant to the sentence, such as where the defendant was given a hospital order after a successful plea of insanity. He also speculated that it might be inappropriate where the sentencing judge indicated that the defendant had limited personal responsibility for the crime. For example, this might be the case where mental illness was a strong cause. Lord Hoffman disagreed with these ideas.
Lord Hoffman’s approach was thought to be the correct one by the High Court in Henderson v Dorset Healthcare University NHS Foundation Trust  EWHC 3275 (QB), a case where the defendant had been convicted of manslaughter by diminished responsibility due to severe paranoid schizophrenia.