What counts as ‘illegality’?

What sort of conduct on the claimant's part is sufficient to bring the ex turpi causa principle into play? Does it have to be criminal conduct? What about regulatory breaches, are they ever sufficient? Is it sufficient if the claimant's claim against the professional is a breach of a contractual or other duty to a third party? The starting point is to identify what counts as ‘illegality’ for the purposes of the illegality defence.

The recent case of Les Laboratoires Servier and another v Apotex Inc and others 17 tells us that the ex turpi causa principle is engaged by claims founded on acts which are contrary to the public law of the state and which engage the public interest. Some specific categories are considered below:

• (a) The paradigm case of an act of sufficient ‘turpitude’ to engage the ex turpi causa principle is a criminal offence. 18 Thus, in Gray v Thames Trains Ltd, 19 the claimant Mr Gray could not (in an action for negligence against train companies responsible for a crash causing Mr Gray to develop post-traumatic stress disorder (PTSD)) recover for the consequences of his having committed manslaughter while suffering from his illness.
• (b) Cases of dishonesty (though arising in purely civil disputes) will similarly engage the principle. In Stone & Rolls Ltd v Moore Stephens, 20 a ‘one man’ company committed large-scale frauds. For the benefit of the company's creditors (including those who had suffered losses as a result of the fraud), the company's liquidators sued the company's previous auditors for negligently failing to spot the fraud. The House of Lords found that the company's claim was barred by the principle of ex turpi causa. The case hinged on issues of attribution, but it was plain that had the claimant been an individual fraudster (rather than having operated through a company), and had his auditors been sued by his trustee in bankruptcy for failing to spot the fraud, those auditors would have had a strong illegality defence. 21
• (c) Similarly, cases of corruption have sufficient turpitude to raise the possibility of an illegality defence. In Nayyar v Denton Wilde Sapte, 22 the claimants sued an individual solicitor and her firm in relation to a bribe paid by the claimants in an attempt to secure a contract, in relation to which they were allegedly being advised by the defendants. The bribe monies were lost and the contract not secured, and the claimants sought to recover the same as damages for breach of duty. Their claim was barred on illegality grounds. Hamblen J found that a payment which was intended to be a civil bribe was sufficient to engage the ex turpi causa principle. As the judge found, 23 ‘bribery involves serious moral turpitude’, and an attempted bribe was sufficient to engage the principle. 24
• (d) Statutory rules enacted for the protection of the public interest and attracting civil sanctions of a penal character will also engage the principle. 25 Thus, the defence could arise in relation to cartel-fixing activities in breach of competition law, as in Safeway Stores Ltd v Twigger. 26

On the other hand, in terms of behaviour unlikely to engage the principle:

• (a) Not every act of criminality will necessarily do, for example strict liability offencesare unlikely to engage the defence. 27
• (b) The illegality defence will not be engaged by simply tortious acts by the claimant where there is no dishonesty involved. Lord Sumption 28 put it as follows:

‘Torts (other than those of which dishonesty is an essential element), breaches of contract, statutory and other civil wrongs, offend against interests which are essentially private, not public. There is no reason in such a case for the law to withhold its ordinary remedies. The public interest is sufficiently served by the availability of a system of corrective justice to regulate their consequences as between the parties affected…’

Thus in Apotex itself, mere breach of a Canadian patent was not sufficient to disentitle a claim under a cross-undertaking in damages. The breach of patent only affected the patentee's private law rights, in a similar manner to a breach of contract or a tort.

Against this background, it is clear that some regulatory breaches by claimants might be sufficient to enable a professional defendant to rely on the principle of ex turpi causa, if the other elements of that defence are made out. It will depend on the nature of the infraction. Where the regulations are aimed at protecting the public, and breach of those regulations results in fines or even imprisonment in extreme cases, that ought to bring the claimant's conduct within the scope of the defence. Thus, if the claimant is found to have held himself out as a duly regulated financial adviser or a lawyer, it appears that would be behaviour of sufficient turpitude to engage the ex turpi causa principle. Where the regulatory rules protect essentially private interests, however, the defence is unlikely to be available.

Thus, in Stone & Rolls, 29 Lord Walker considered the position of a trader guilty of having failed to prepare his financial statements in full compliance with the law. Could the trader successfully sue his accountant in professional negligence, or would the claim be barred by ex turpi causa? Lord Walker's answer was essentially: it depends. If the trader honestly provided information he believed to be correct and complete, ‘it seems unlikely that such a regulatory breach, not involving dishonesty, would bring the ex turpi causa principle into play’. On the other hand, if the trader was guilty of deliberate and dishonest tax evasion, the application of the principle appears more likely.

The type of illegality in which the claimant was involved is no more than a threshold requirement; it determines whether or not one is in the realm of a potential illegality defence. Once within the ex turpi causa realm, the severity of the illegality will once again have a role to play in determining whether the illegality defence will bar the claimant’s claim, as we shall now consider.