Ashmore, Benson, Pease & Co. Ltd. V A.V. Dawson Ltd.
Ratio:
Illegality in the performance of a contract may void it if both parties are aware even though the contract was not illegal ab initio
In equal fault, better is the condition of the defendant "In pari delicto, potior est conditio defendantis"
Facts:
A big piece of engineering equipment was been transported from Stockton-on-Tees to Hull
It was very heavy (25 tons) and it tipped on the way (the max weight was 10 tons)
It cost 2,225 to repair.
Manufacturers claim damages from the hauliers
Hauliers plead that the load was too heavy for the vehicle
That performance of the contract of carriage was illegal
Evidence shows the cause of the tip was the weight of the load
Evidence shows that the transport manager for the manufacturer knew that the load was overweight but was content to transport it on those particular vehicles because it had worked in the past and was cheap
Issue:
Is the contract nullified because the performance of the contract was illegal?
Decision:
For Defendants, contract is voided because it was illegal
It acknowledges that there was nothing illegal with the contract itself it could have been performed legally
Quoting Atkin L.J in Anderson Ltd. V Daniel:
I think that it is equally unenforceable by the offending party where the illegality arises from the fact that the mode of performance adopted by the party performing it is in violation of some statute
Illegality in the performance of a contract may void it although the contract was not illegal ab initio
While the defendants were party to the illegality it is better to be the defendant in this situation
5. Mitigating the Consequences of Illegality
Because there are so many ways in which a contract may be or be performed illegally there have been exceptions made to mitigate
These exceptions are criticized as overly technical, lacking in logic and consistency
5.a. When the Claim is Founded on an Independent Right
Mistry Amar Singh v Serwano Wofunira Kulubya
J.C.P.C (?) on appeal from the court of Appeal for Eastern Africa
Ratio:
If a party has a right that predates (better word?) the illegal contract it will be respected and override the principle that the defendant is in the better condition.
Hypothetical rule: there is certain land that can only be sold to the government or certain parties
Statute says you can’t give title to non-aboriginal
Singh (non-aboriginal) says the contract is illegal and so an action can’t be brough to enforce rent
Kaluya brings eviction notice instead
When you bring eviction they say you’re in breach of agreement. But if there is no agreement what right does Singh have to be on the land?
What right does Kalubya have to evict?
His property right. This right is outside of the lease agreement
5.b. Restitution
General principle of restitution:
Where benefits have been conferred by one party on the other to an agreement that is unenforceable by reason of a doctrine of common law or equity, restitutionary relief will be available to the conferring party to enable recovery of the value of the benefit conferred
Complicated in cases with illegal transactions
"no court will lend its aid to a man who founds his cause upon an immoral or illegal act"
There are some exceptions
Exceptions:
Restitutionary relief is made out in circumstances where the party conferring the benefit was unaware of the facts that render the transaction illegal
Circumstances where the defendant has induced the plaintiff to enter the agreement by oppressive conduct such as fraud or undue influence
Kiriri Cotton Co. Ltd. V Rachhoddas Keshavji Dewani
Ratio:
In cases where one party is trying to recover money paid or property transferred under an illegal contract:
If two parties enter into an illegal contract, and money is paid upon it by one to the other, money may be recovered back from the execution of the contract, but not afterwards, the court will not lend aid if the contract has been executed unless it appears that the parties were not in pari delicto (equal fault)
If the contract is fully executed (determining if the parties are not pari delicto):
If there is something in the defendant's conduct which shows that, of the two of them, he is the one primarily responsible for the mistake, then it can be shown that the parties are not in pari delicto and the plaintiff can recover
Facts:
Plaintiff was looking for a place to live but was having trouble
He eventually got a flat but had to pay a 10,000 schilling premium
He argues that the premium was illegal because it was in contravention of the Rent Restriction Ordinance
Statute is worded confusingly so neither party knew it was illegal
Issue:
The premium paid was illegal, and has been paid to the defendant, can the court aid the plaintiff in recovering the premium when there is not ordinance in Ugandan legislation for the recovery of illegal premiums
Or, Can the plaintiff recover
Decision:
For Plaintiff
Reasons:
The Rent Restriction Ordinance does not allow for premiums like the one the plaintiff paid
The court acknowledges though that neither party knew that it was illegal because the legislation was poorly worded
There was no evidence to show that the premium was extortionate
Can the plaintiff recover?
The courts have stated that "what is done in contravention of an Act of Parliament, cannot be made the subject matter of an action"
This case is about a party seeking to recover money paid or property transferred under an illegal transactions
This principle applies:
If two parties enter into an illegal contract, and money is paid upon it by one to the other, that may be recovered back from the execution of the contract, but not afterwards, the court will not lend aid if the contract has been executed unless it appears that the parties were not in pari delicto (equal fault)
If the contract wasn't fully executed he could recover
Since the contract was fully executed the plaintiff must show the parties were not in pari delicto
Denning presents this principle
If there is something in the defendant's conduct which shows that, of the two of them, he is the one primarily responsible for the mistake, then it can be shown that the parties are not in pari delicto and the plaintiff can recover
Since the defendant had a stronger duty of observing the law the responsibility is his
The duty is placed on the defendant strictly for the purposes of defending the plaintiff
Outson v Zurowski
Ratio:
Two exceptions to the rule that there can be no recovery under an illegal contract
The parties are not in pari delicto
Where the plaintiff repents before the contract has been performed
The contract is still executory
Must repent in time (unclear how much)
Policy: It would incentivize performance of illegal contracts if it was impossible to recover money once contract is agreed to.
Facts:
Defendants recruited plaintiffs into pyramid scheme
Illegal under s.189(1)(e) of criminal code
The plaintiffs paid the defendants $2,200
The defendants promised to compensate the plaintiffs if the scheme didn't work
