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Patel v Mirza [2016] UKSC 42

Resulting trusts and illegality; insider dealing and unjust enrichment.

Facts

Patel had given Mirza £620,000 to bet on shares in a company using inside information. The agreement between them amounted to a conspiracy to commit the offence of insider dealing contrary to s53 Criminal Justice Act 1993. The inside information did not materialise and no illegal act was committed. Patel sought to recover the monies claiming breach of contract and unjust enrichment.

Issues

Mirza sought to argue that the monies should not be returned to Patel on resulting trust because Patel would have to rely on his own unlawful conduct to establish his interest in the monies. Tinsley v Milligan [1994] 1 AC 340was authority for the point that a party could not seek to rely on his illegal conduct to establish an equitable interest in property, as this would be against public policy. Patel argued the illegal act had not been put into effect and there was, therefore, no justification to allow Mirza’s unjust enrichment to persist. Further, he argued, it would be unjust to allow one co-conspirator to keep all the monies. Allowing Mirza to keep the monies would positively encourage the commission of such offences, since he had profited and so deterrence as a policy argument in this context is problematic.

Held

Patel was successful in his claim to recover the monies, despite their having being paid to Mirza pursuant to criminal activities. The reliance rule in Tinsley should no longer be followed. A claimant will not be prevented from enforcing his claim to property because it was paid to perform an illegal act, unless allowing his claim would be contrary to relevant public policy, or it would be disproportionate to allow him to recover.


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