“…the law on illegality is not entirely clear in this jurisdiction.” This was the position expressed by BVI Commercial Court Judge, Justice Adrian Jack in his judgments.
On 18th August 2021, in Pakistan International Airline Corporation v Times Travel (UK) Ltd, the Supreme Court unanimously held that economic (or lawful act) duress is a valid concept under English law. It also confirmed the key elements of the doctrine and provided clear guidance on how it should be applied by the courts.
The general doctrine of ‘illegality’, in commercial litigation, is based on two related principles:
Firstly, that no person should benefit from his or her own illegal act or wrong; and
Secondly, that the law (and the Court) should not condone, reward, or enforce, illegal behaviour.
In jurisdictions such as Bermuda, the British Virgin Islands, and the Cayman Islands, the alleged ‘illegality’ of one party or another is often relied upon, in practice, as a defence to a claim, whether the claim is asserted in contract, tort, equity, or restitution.
It is quite often asserted, for example, that a claim should be dismissed because the claimants (or, in the case of a company in insolvent liquidation, the company’s former directors and officers) have allegedly been guilty of some fraud, dishonesty, breach of statute (such as an immigration or tax law), or regulatory non-compliance (such as a breach of Anti-Money Laundering, Beneficial Ownership, or Sanctions regulations).
30 October 2020
Contract – Illegality – Unlawful purpose
The present appeal raised issues as to the application of the new policy-based approach outlined in Patel v Mirza[2017] 1 All ER 191 (Patel) in the context of a claim for negligent breach by a solicitor of his retainer, a concurrent claim in breach of contract and in tort. In Patel, a majority of the Supreme Court had rejected the reliance principle whereby relief was refused to parties who had to rely on their own illegality to establish their case. In its place, the majority adopted a more flexible approach which openly addressed the underlying policy considerations involved and reached balanced judgment in each case, and which also permitted account to be taken of the proportionality of the outcome.