Illegality and restraint of trade

Chapter twenty-two concerns illegality. And there are lots of different ways that illegality might taint a contract, and there are lots of different types of illegal contracts. So, it's very difficult to be sure how to structure this whole topic. The cases are difficult and difficult to fit together. They are difficult to reconcile. And it's often said that this is a mindbogglingly difficult and messy area of the law. So, don't worry if you find that the law is inconsistent in places, it probably is. And it probably isn't you who's misunderstanding anything. But there's been an important shift in the approach taken to illegality recently, which won't necessarily lead to different results, but might sometimes do. There's been a shift in approach. So since 1994, at least, the approach being based upon the House of Lords decision in Tinsley v Milligan, which is based upon a reliance principle. So, I can't rely upon my own illegality succeeds in a claim. So, if I need to introduce evidence of an illegality and the court will prevent me from doing that. So, if I can't succeed without introducing evidence of the illegality then I won't succeed. That quite rigid formalistic approach has recently being replaced by the decision of the Supreme Court in Patel v Mirza. Which favours instead an approach where the court takes into account a range of factors, or what we might call perhaps a structured discretion. So, the court will want to consider the underlying purpose of the prohibition. The court will also want to consider any other relevant public policies, which may be rendered less effective by denying the claim. And the court will also want to keep in mind a sense of proportionality, and the possibility of overkill. So that's what the majority view in Patel v Mirza was, led by Lord Toulson. And Lord Toulson before becoming a Supreme Court judge, was the Chair of the Law Commission, and the approach that he adopts in Patel v Mirza is very similar to that which the Law Commission proposed after a very, very long period on which it looked at illegality. But of course, it's a bit controversial for the Supreme Court to adopt the Law Commission’s proposals in this way when the Law Commission suggested statue form originally to parliament and that never happened. The report was not adopted by parliament, by government. And Patel v Mirza is a difficult decision, it's surprising in some important ways. So, Patel v Mirza is a surprising decision in some ways, because in Tinsley, the House of Lords thought it wasn't possible for judges to allocate to themselves such a lot of powers, such an important, and wide-ranging discretion. Thought that if the law in this area  shouldn’t be based upon judges having quite a broad discretion, then that needed to be underpinned and supported by legislation. Now it's true that in Patel v Mirza that Lord Neuberger and others say that this isn't really a discretionary approach, but it looks very much like giving judges quite a broad discretion to me, and it does not look like it's a very easy test to apply. And also, Patel v Mirza is a very long case, a very difficult case, but it doesn't look like the Supreme Court are sort of quasi legislating. That they go well beyond what they need to do to decide the particular case in front of it. Patel v Mirzaitself was an unjust enrichment claim. And it's not even clear from Patel v Mirza how the Supreme Court's new approach applies to the facts of the case in front of it. And so, you get the Supreme Court who are trying to say, well, this is the approach for legality in all these other areas of law as well. So, at the moment, we assume that Patel v Mirza does apply to contract claims, and will affect the law of contract, but that isn't crystal clear. That's not yet crystal clear. And so, I think it is still important to know that traditional approach to illegality in contract law, and in this chapter those old cases are analysed alongside Patel v Mirza.