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Claims based on illegal actions

It has long been a rule of law that a person cannot benefit from their own legal act.  In the Civil Courts that has often been used by Defendants to argue that a claim for damages cannot succeed if the facts upon which the claim is based involve such an act.  Two recent cases show the defence is not absolute.

In McCracken –v- Smith and Others Mr Smith, who knew that he was joy riding as a passenger on a motor bike being ridden illegally by McCracken, still succeeded in a claim for damages against the negligent driver of a minibus which collided with the motor bike (although the damages were reduced for contributory negligence due to not wearing a helmet and participating in an illegal venture).

In Tesco Stores –v- Mastercard. Tesco claimed damages for breaches of competition law.   Mastercard applied for Summary Judgment on the claim (i.e. to dismiss it) on the grounds that Tesco and other Group Companies had actively participated in the allegedly illegal arrangements and had benefited financially from them.  The court refused to grant Judgment and allowed the case to proceed towards trial on the basis that it was arguable Tesco did not have to rely on such alleged illegality by itself and other Group Companies in order to succeed. 

The principle which emerges is that even if a Claimant was involved in illegal activity it may still succeed in its claim provided it does not have to rely on such activity as a central plank of the claim.  In other words, if the illegality is incidental to the claim and simply sets the factual background an otherwise valid claim can succeed.  However, as show in the McCracken case, the illegality may have an impact on the level of damages recovered in some cases.

The above principles can, as the Tesco case shows, be relevant in commercial disputes in a range of situations including:-

  • A trespass or nuisance claim in respect of a building which does not have planning permission.
  • A claim for breach of contract where the Claimant paid bribes to get the contract.
  • A claim for loss of income where tax or VAT has not been paid to HMRC.
  • A claim in respect of building works where approval was not obtained under the Building Regulations.

However, it should be noted that some statutes expressly state that illegality is fatal to a claim (for example the Consumer Credit Act) and in any event even if the illegality does not defeat the claim it may still give rise to separate criminal proceedings. Speak to Richard Stockdale on  0113 246 2575 for further details.

About the Author

Richard Stockdale

Consultant

Richard has over 30 years experience of general commercial litigation including breach of contract,…

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