Illegality Revisited: When Can A Claim Be Brought Despite A Contract's Unlawful Purpose?

What if you discover your contract requires you to do something illegal?  Or that your counterparty had some illegal purpose in mind when you did the deal?  Sadly this appears to be an increasingly common predicament.  Earlier this year, the Supreme Court clarified the law in this area, steering away from the myriad of different "rules" parties have long been grappling with, towards a more discretionary approach.  Will this produce more just decisions or lead to even more risk and uncertainty where illegality rears it head?

In Patel v. Mirza [2016] UKSC 42, the Supreme Court allowed a claimant to recover sums he had paid to the defendant, despite the illegal purpose of the contract.  The parties had agreed that Mr Mirza would place bets on the price of shares using advance insider information, which he expected to obtain from contacts regarding an upcoming government announcement.  Mr Patel transferred to him £620,000 for these bets.  As it happened, the illegal bets