The claimant and defendant entered into a conspiracy to commit the offence of insider dealing. When the intended transaction did not take place, the defendant failed to repay the money given to him by the claimant. The defendant raised the defence of illegality/ex turpi causa, ie that the claim could not be brought because it involved reliance on the claimant's own illegality (the so-called "reliance principle").
The Supreme Court has now considered the test for this defence and concluded that the reliance principle should no longer be followed, and instead a more flexible approach adopted. The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if it would be harmful to the integrity of the legal system. As Lord Toulson put it: "In assessing whether the public interest would be harmed in that way, it is necessary a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, b) to consider any other relevant public policy on which the denial of the claim may have an impact and c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts. Within that framework, various factors may be relevant, but it would be a mistake to suggest that the court is free to decide a case in an undisciplined way. The public interest is best served by a principled and transparent assessment of the considerations identified, rather by than the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate".
In reaching this decision, the Supreme Court rejected an argument that this "range of factors" approach would lead to uncertainty. In any event, Lord Toulson countered that considerations of certainty cannot be said to be important to people contemplating unlawful activity.
As a result, it was concluded that a claimant who would otherwise satisfy the requirements for a claim for unjust enrichment should not be debarred from enforcing that claim only because the money which he seeks to recover was paid for an unlawful purpose (and it would be a rare case where such a claim might be regarded as undermining the integrity of the justice system). Accordingly, the claimant was entitled to restitution.