Gujra v Roath & Anor [2018] EWHC 854 (QB)

[2018] EWHC 854 (QB)

Case No QB/2017/0246

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ON APPEAL FROM MASTER DAVISON

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 19/04/2018

Before

MR JUSTICE MARTIN SPENCER

Between

(1) Balbir RoathDefendants and Respondents

(2) Shakti RoathRespondent

MR M HOLMES (instructed by Rustem Guardian LLP) for Appellant

for The Respondents did not appear and were unrepresented

Hearing Hearing date: 1 March 2018

Judgment Approved

Introduction

[1]This matter comes before me upon the Appellant’s application for permission to appeal from the order of Master Davison dated 2 October 2017 and, should permission be granted, upon the hearing of the substantive appeal. This judgment therefore deals with both the application for permission and with the substantive appeal.

[2]By his order dated 2 October 2017, Master Davison struck out the claim pursuant to CPR 3.4 (2) (a) on the basis that the claim, as framed, discloses no reasonable cause of action. Alternatively, he granted summary judgment under CPR 24.2 on the ground that the claim has no real prospect of success. On that basis, judgment was given for the Defendants. The Assumed Facts

[3]The facts out of which the claim arises are as follows (and, for the purposes of both the application before the Master and this appeal, these facts must be taken to be true):(i) In December 2012, the Defendants, who are father and son and live at 650 Bitterne Road East, Southampton, offered to pay the Claimant £500 for him to set fire to two motorcars belonging to the Defendants, namely a Range Rover and a BMW.

(ii) The first Defendant told the Claimant that if he (the Claimant) was arrested he should give a “no comment” interview and the first Defendant would “ensure that any charges were not pursued”;

(iii) This agreement was carried out on 30 December 2012 when the Claimant set fire to the Range Rover and attempted to set fire to the BMW;

(iv) The police were called and, following a chase, arrested the Claimant and two others who were with him: they were taken into custody.

(v) The first Defendant gave a witness statement to the police on 30 December 2012 in which he failed to disclose to the police that they had given permission to the Claimant to cause the damage to the vehicles. Although it is also pleaded that the Second Defendant gave a witness statement to similar effect, it was established in the course of the appeal that this was probably pleaded in error. This does not reflect on Mr Holmes who represented the Claimant before me, but was not involved in pleading the Claimant’s Statement of Case.

(vi) The Claimant was charged and tried on three counts of arson. He was originally remanded in custody but was then released on conditional bail on 27 February 2013, one of the conditions involving electronic tagging.

(vii) Following his trial, the Claimant was acquitted of all charges on 1 December 2013. These Proceedings

[4]On 4 April 2017, the Claimant brought these proceedings seeking damages from the Defendants for malicious prosecution and for breach of a duty of care to the Claimant. It is alleged that the Defendants, by failing to disclose to the police that they had given consent for the damage to the vehicles and had entered into a contractual arrangement with the Claimant for him to cause the damage, they thereby assumed the role of prosecuting authority and knowingly and deliberately instituted the prosecution against the Claimant, knowing it to be false and malicious. In relation to the duty of care, it is alleged that this was breached by the Defendants’ initial and continued concealment of the fact that they had given permission to the Claimant to damage the vehicles.

[5]In their defence, the Defendants deny that the motor cars were set on fire with their consent or agreement but, as stated, for present purposes it must be assumed that they did give their consent. More substantively for the purposes of this appeal, there is a pleading of illegality/ex turpi causa. The Defendants plead:

“16(a) In seeking to found his claim, the Claimant asserts that he had entered into an agreement, for consideration, to set fire to two vehicles of reasonably high value. Had such an agreement ever been made, the Claimant would have known, realised or suspected that the purpose of doing so was the making of a fraudulent insurance claim. The Claimant’s acts of arson and attempted arson were on his own case patently illegal, and he relies on his asserted illegality to found his claim. (b) The essence of the Claimant’s claim is that he had entered into a conspiracy to make fraudulent insurance claims with the Defendants and on being arrested by the police the Defendants had not admitted to their part in the conspiracy. It would be an affront to public conscience and to the integrity of the legal system for the law to afford the Claimant a remedy.”

[6]The Claimant served a Reply on 15 June 2017. In response to the defence of illegality, no further facts were pleaded and, in particular, the Claimant did not plead that, at the time of the agreement, he did not know or suspect that the reason for the Defendants wanting their cars to be set alight was in order to perpetrate an insurance fraud. Nor did the Claimant plead that he entered into the agreement innocently.

[7]The Defence was followedup by an application dated 20 July 2017 seeking to strike out the Particulars of Claim on the grounds that it discloses no reasonable grounds for bringing the claim or for summary judgment on the grounds that the Claimant had no real prospect of succeeding on the claim and there is no other compelling reason why the case or issue should be disposed of at trial (pursuant to CPR 24.2). The application was supported by a witness statement from the Defendants’ solicitor, Hayley Louise Griffin. In that statement, Miss Griffin states that, irrespective of the Claimant’s acquittal at trial, “there is no doubt that the Claimant, on his own case, was engaged in an “illegal enterprise”. That is why he fled the scene and that is why on arrest he offered no innocent explanation. Irrespective of whether the prosecution resulted from an omission of the Defendants, it can plainly properly be said to be caused by the criminal and improper acts of the Claimant.” Thus, she says that the prosecution of the Claimant was instituted by his own improper and illegal acts and in circumstances in which there were reasonable grounds to believe that the Claimant was reckless as to whether he was endangering the lives of others by setting light to two vehicles in a residential area, there were reasonable grounds to believe that there was no “lawful excuse” for the damage caused by the Claimant. There was therefore no absence of “reasonable and probable cause” for the prosecution. She goes on to say that, in any event, the Claimant founds his claim on an improper and unlawful alleged agreement with the Defendants to set fire to two vehicles as part of an insurance fraud. Patently, she says, the claim should fail in accordance of principle of ex turpi causa.

[8]In response, witness statements were served from the Claimant himself and also from his solicitor, Mr Gareth Jones. Mr Jones states that it is the Claimant’s position that the prosecution authorities would never have prosecuted him had the Defendants admitted that they had given him consent to cause damage to their vehicles. He says that, on the balance of probabilities, it is clear that the prosecuting authorities would instead have sought to prosecute the Defendants themselves. He says:

“It is an entirely unrealistic prospect to suggest that the police would have brought charges against the Claimant had the Defendants admitted that they had given consent.”

He says that although there would have been evidence of a potential offence, it is the Defendants rather than the Claimant who would have been the focus of the investigating authorities in relation to the conspiracy which occurred before the damage to the vehicles was caused.

[9]It is unnecessary to deal with the further matters set out in Mr Jones’ statement as these are covered by the submissions that have been made in the various skeleton arguments and in the judgment of the learned Master.

[10]In his witness statement (signed but undated) the Claimant states that he was approached by the Defendants in a public house in Southampton and was offered £500 in cash to destroy the two cars. The Claimant enlisted two others to help him. He says that the first Defendant told him that if they were ever arrested then, “we should definitely not say anything because he would make sure that there was no prosecution. He actually said ‘if anything comes on top, just go no comment and I’ll drop the charges’.” However, the Claimant says nothing in this statement about his own state of mind in relation to the conspiracy. Given that this was an application to strike out his claim for illegality, he would surely have stated that he was innocent of any dishonest conduct and had not appreciated that this was part of an insurance fraud had that been the case. Had he pleaded his innocence on plausible grounds, for example by stating what he actually believed at the time and why, that would clearly have raised a triable issue as to the state of his mind at the relevant time and been sufficient to defeat the application for summary judgment. The Judgment of Master Davison

[11]The starting point was the Master’s finding or assumption that the Claimant, on the facts which he himself was alleging, must have known or believed that the purpose of the agreement was to facilitate an insurance fraud. Although there was a suggestion that this only dawned on the Claimant when he was in custody, this was, the Master said, not capable of belief:

“No judge would accept the Claimant’s assertion or implied assertion that this only occurred to him afterwards when he was in custody. That assertion, if it were to be made, would simply not be worthy of belief.”

The first issue is whether the learned Master was right in that respect, having regard to the absence of any pleading that the Claimant did not realise that this was associated with an insurance fraud and in the absence of any such assertion in the Claimant’s witness statement. See further paragraphs 16 – 20 below.

[12]On that basis, the Master stated that the question of illegality resolved itself into two questions for him to answer:

“first, has the Claimant acted with turpitude; secondly, does that bar his claim.”

Having cited the judgment of Lord Sumption in Les Laboratoires Servier v Apotex

[2014] UKSC 55

, the Master stated:

“On any view, even on a maximally charitable view of the Claimant’s actions on 30 December 2012, he must have known he was ‘up to no good’ and that engages the ex turpi causa principle with equal force. It therefore seems to me that a finding that the Claimant acted with turpitude is inevitable.”

[13]The Master then went on to consider whether the finding that the Claimant had acted with turpitude should result in the claim being barred. In that regard, he referred to the decision of the Court of Appeal in Joyce v O’Brien

[2013] EWCA Civ 546

where Elias LJ stated:

“Where the character of the joint criminal enterprise is such that it is foreseeable that a party or parties may be subject to unusual or increased risks of harm as a consequence of the activities of the parties in pursuance of their criminal objectives, and the risk materialises, the injury can properly be said to be caused by the criminal act of the Claimant even if it results in the negligent or intentional act of another party to the illegal enterprise. I do not suggest that this necessarily exhausts situations where the ex turpi principle applies in joint enterprise cases, but I would expect it to cater for the overwhelming majority of cases.”

The Master considered that the test thus laid down in Joyce v O’Brien was plainly met here. He said:

“The risk here was that the Claimant would be arrested and prosecuted. This was not just foreseeable, it was, in fact, foreseen and discussed between the Claimant and the Defendants. The risk materialised. The injury (i.e. in this case arrest and prosecution) can and can only properly be said to have resulted from the criminal or quasi-criminal acts of the Claimant.”

[14]In addition, the Master referred to the decision of the Supreme Court in Patel v Mirza

[2016] UKSC 42

and the test of illegality laid down in that case. The Master, whilst recognising the more nuanced test set out by the Supreme Court, stated that it cannot make any difference to the outcome in the present case:

“The underlying purpose of the relevant prohibition in this case is to deter or defeat dishonest insurance claims. That purpose would itself be defeated or impaired if a party or accessory to such an enterprise could bring a claim in respect of one of its inherent risks, namely that the enterprise attracted the attention of the police and the prosecuting authorities.”

He concluded that it was proportionate and fair for the Claimant to be denied a remedy for the time he spent in custody on remand and on bail when he was electronically tagged which was simply one of the risks of the enterprise which he engaged in. The Master contrasted the position in Joyce v O’Brien where the Claimant was denied a claim in respect of very serious personal injuries which had had a catastrophic affect on his life. This Appeal

[15]On this appeal, Mr Holmes raises four main arguments which, he says, if any one of them is made good, should result in the appeal being allowed. These arguments are:(i) The Master was not entitled to make the findings of fact that he did in relation to the Claimant’s state of mind and this should have been an issue only decided at trial after the Claimant had given evidence.

(ii) The Master applied the wrong test for illegality;

(iii) The illegality identified, namely the conspiracy to defraud an insurance company, was insufficiently closely connected to the cause of action, malicious prosecution, to cause the claim to fail;

(iv) After the decision of the Supreme Court in Patel v Mirza, the law on illegality is sufficiently in doubt that it should only be dealt with at trial. I shall deal with each of these arguments and submissions in turn. Submission (i) The Master was not entitled to make the findings of fact that he did in relation to the Claimant’s state of mind and this should have been an issue only decided at trial after the Claimant had given evidence

[16]It is submitted by Mr Holmes that the finding of the Master at paragraph 16 of his Judgment was not one he was entitled to reach because “it is settled law that if there are live issues of fact, those must proceed to trial.” In pursuing this submission, Mr Holmes draws comfort from the remarks of Whipple J on 29 January 2018 when she gave directions for the hearing of this appeal, where she said:

“There is one point in particular upon which the court will wish to be addressed. The Master found that the Claimant ‘must have known he was up to no good’ (para. 18) and was involved in illegal conduct, which conduct precluded the claim for damages (ex turpi causa) and led to the application being determined in the Defendants’ favour. That finding goes against the Claimant’s pleaded case that he was not engaged in any illegal conduct (see Reply, para. 6 (ii). But, like the Master, I’ve not been able to find any clear statement by the Claimant to the effect that he did not know that he was involved in an insurance fraud (assuming his version of the core facts). There is, or may be, an issue about whether the court was entitled to conclude that the Claimant was engaged in illegal conduct without first hearing from the Claimant, if that conclusion amounts to a finding that the Claimant has given false evidence to or advanced a false case before the court.”

However, the reference by Whipple J to paragraphs 6 (ii) of the Reply is not quite accurate. What is in fact pleaded is:

“At no time was the Claimant engaged in a criminal act in regard to the offence charged.”

(emphasis added) The words underlined are critical: the Claimant was only denying arson, not involvement in, or knowledge of, a plot to defraud an insurance company.

[17]The matter is further taken up by Mr Holmes in his supplemental skeleton argument of 14 February 2018 where he refers to the recent decision of the Supreme Court in Ivey v Genting Casinos(UK)

[2017] 3WLR1212

. Mr Holmes submits that it is “well-established that the concept of dishonesty is inherently subjective, depending on the actual state of an individual’s knowledge or belief” and he cites from the decision of the Supreme Court:

“When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts.”

[18]In my judgment, the critical words in the citation from Ivey’s case are “when dishonesty is in question”. In the course of argument, I raised with Mr Holmes whether it can properly be said that dishonesty is in question in this case where the Claimant has failed to plead in his Reply anything about his state of mind at the time that he entered into the agreement with the Defendants and has further failed to state anything about the matter in his witness statement made for the purposes of this application. Mr Holmes’ response was to refer to Part 16 of the Civil Procedure Rules where it is stated that a matter pleaded in the Defence is to be taken to be disputed without it being necessary to plead to the same in a Reply. Furthermore, Mr Holmes referred me to the decision of a HHJ Gosnell in Rouse v Aviva Insurance Ltd (2016) WL 00589978 where a District Judge had determined an application for a finding of fundamental dishonesty as a basis for disapplying the regime of qualified one-way costs shifting without having heard live evidence. Judge Gosnell said:

“For the court to deal with that issue, which is a very serious issue from the Claimant’s point of view, he is being condemned as being dishonest on paper. In my view this is fundamentally unfair and that the Claimant should be allowed to come to court and say, ‘well it might look as if this is a staged accident or a contrived accident but I have a genuine reason why I made the claim and I have a genuine reason why I discontinued it’. It could be any number of those but I think it will be unfair to expect the court to deal with it without that explanation and, more importantly, fundamentally unfair on the Claimant not to give him the opportunity to look the Judge in the eye and say ‘I’m not a dishonest man and these are the reasons why I made the claim and these are the reasons why I discontinued’. No-one can force him to do so but given that, in the case such as the present one and many other similar cases, there may be a prima facia case of dishonesty, it is only fair to allow the Claimant the opportunity to convince the court that what may appear the case from the paperwork is actually inaccurate.”

[19]Whilst acknowledging the wisdom of this dictum in Judge Gosnell’s decision, it is not clear to me that there, as here, the Claimant had been given at least two opportunities to set out his state of mind at the relevant time but had declined to do so. Furthermore, whilst, as Judge Gosnell said, there may be any number of reasons why, in relation to what I assume was a claim arising out of a road traffic accident, a Claimant could assert that he had not been fundamentally dishonest, the scope is somewhat narrower where, as here, a Claimant has agreed to set fire to two valuable motor cars at night. In my judgment, the Master was right to conclude that the only plausible explanation was that the Defendants were involved in an insurance fraud and that the Claimant must have realised this at the time. This called for an explanation in the Claimant’s Reply/witness statement or, at the very least, a denial of dishonesty and, in the absence thereof, the Master was fully entitled to draw the inference which he did.

[20]Whilst therefore, where dishonesty is in issue, I would accept that it is generally not appropriate for a court or tribunal to make a finding or draw an inference in relation to it on a strike-out application, unless the evidence is so overwhelming that a finding of dishonesty is virtually inevitable, the premise is that either dishonesty must be explicitly in issue (as in Ivey) or the circumstances are such that they allow for a number of innocent explanations to refute what might otherwise be a prima facia appearance of dishonesty on the documents (as in Rouse). But where the facts which are not just admitted but are positively relied upon by the Claimant point so strongly towards an insurance fraud with which the Claimant was complicit, the court is entitled to draw an inference of dishonesty in the absence of a plausible explanation from the Claimant. Even where dishonesty or good faith is put in issue, there may still be grounds for claiming summary judgment. In this regard, I endorse the dictumof Gross J (as he then was) in Antonio Gramsci Shipping Corporation v Recoletos Ltd

[2010] EWHC 1134 (Comm)

where he said:

“3. On the one hand, summary judgment is designed for plain cases – cases which are not fit for trial at all: Three Rivers DC v Bank of England (3) [2001] 2 All ER 513 per Lord Hope at [95]. That consideration weighs all the more heavily when the case involves allegations of serious fraud or dishonesty; generally, conclusions on such issues ought to be reached at trial, so that obvious caution ought to be exercised before giving summary judgment in a case of that nature: Wrexham Associated Football Club Ltd v Crucialmove Ltd [2006] DWCA Civ 237, esp. at (49 – 59). On the other hand, where it can be ascertained without the conduct of a mini-trial that there is no realistic prospect of a successful defence, then summary judgment will or may be appropriate and the Court should not be deterred from granting such relief simply because of the volume – or, in some cases, smokescreen – of documents. Moreover, if in all the circumstances, there is no real prospect of a Defendant successfully defending a claim, then, even though good faith, fraud or integrity are an issue, there is no longer a bar to giving summary judgment: Wrexham Associated Football Club.”

(emphasis added) Submission (ii): The Master applied the wrong test for illegality

[21]In a skeleton argument prepared on behalf of the Defendants for the hearing before Master Davison (the Defendants did not appear on this appeal), it was submitted that there were two questions for the Master to answer:(1) has the Claimant acted with “turpitude”; and

(2) does the Claimant’s turpitude bar his claim? The Defendants relied principally on the decision of the Supreme Court in Les Laboratoires Servier v Appotex Inc & others

[2015] AC 4530

. In his skeleton argument on behalf of the Claimant in the court below, in relation to the test for determining the illegality defence, Mr Holmes relied solely upon the decision of the Supreme Court in Patel v Mirza

[2016] UKSC 42

. Clearly, in his judgment, the Master followed the lead from the Defendants’ counsel when, at paragraph 15 of his judgment he said:

“I turn to the question of illegality. This resolves itself into two questions. Firstly, has the Claimant acted with turpitude? And secondly, if so, does that bar his claim?”

These questions he answered in the affirmative.

[22]For the Claimant, Mr Holmes submits that, following Patel v Mirza, the test for establishing a Defence based on illegality is broadly three-fold:(1) Has there been illegal conduct or a “prohibition which has been transgressed”;

(2) Having regard to the policy factors involved and as to the nature and circumstances of the illegal conduct, is it in the public interest to deny the relief claimed;

(3) Is denial of the relief a proportionate response to the illegality, bearing in mind that punishment is generally a matter for the criminal courts? In support of this new test, replacing the old, rules-based test, Mr Holmes refers me to the decision of Rose J in Singularis Holdings Ltd v Daiwa Markets Europe Ltd

[2017] EWHC 257 (Ch)

as illustrating the new approach to be taken following the decision of the Supreme Court in Patel v Mirza.

[23]Master Davison was, however, not unaware of the significance of the decision in Patel v Mirza because he dealt with that at paragraphs 22-24 of his judgment. Having quoted from the head-note the Master stated as follows:

“23 This is plainly a more nuanced test of illegality. But it cannot make any difference to the outcome in this case. The underlying purpose of the relevant prohibition in this case is to deter or defeat dishonest insurance claims. That purpose would itself be defeated or impaired if a party or accessory to such an enterprise could bring a claim in respect of one of its inherent risks namely that the enterprise attracted the attention of the police and the prosecuting authorities. 24 Conversely, no other relevant public policy would be rendered ineffective or less effective by denial of the claim and Mr Holmes did not so argue. Indeed, the public would be surprised (affronted even) and would certainly think the less of lawyers and judges if a claim in those circumstances were to be allowed.”

Thus, it cannot be said that the Master ignored the wider test approved in Patel v Mirza. The question is whether the Master applied that test correctly.

[24]In support of his argument Mr Holmes reminded the court that it is an extreme measure to bar a party from bringing a claim which he would otherwise be entitled to bring on the grounds of illegality: this was described as one of the “nuclear weapons” of the law.

[25]The leading judgment in Patel v Mirza was given by Lord Toulson who contrasted two possible approaches to the doctrine of illegality: a “rule-based approach” exemplified by Tinsley v Milligan

[1994] 1 AC 340

and the Les Laboratoires Servier case; and a “range of factors approach” advocated by Professor Andrew Burrowsin his book ‘A Restatement of the English Law of Contract’ (2016) formulated as follows:

“If the formation, purpose or performance of a contract involves conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade), the contract is unenforceable by one or either party if to deny enforcement would be appropriate response to that conduct, taking into account where relevant – (a) how seriously illegal or contrary to public policy the conduct was; (b) whether the party seeking enforcement knew of, or intended, the conduct; (c) how central to the contract or its performance the conduct was; (d) how serious a sanction the denial of enforcement is to the party seeking enforcement; (e) whether denying enforcement will further the purpose of the rule which the conduct has infringed; (f) whether it denying enforcement will act as a deterrent to conduct that is illegal or contrary to public policy; (g) whether denying enforcement will ensure that the parties seeking enforcement does not profit (h) whether denying enforcement will avoid inconsistency in the law thereby maintaining the integrity of the legal system.”

It is to be noted that this formulation is very much framed in the context of the law of contract and, indeed, Patel v Mirza was a claim both in restitution and in contract. However, it seems to me that Lord Toulson was, in Patel, laying down a test that was intended to cover all cases where the common law doctrine of illegality is pleaded as a defence to a civil claim. Thus, at paragraph 99 he said:

“99 Looking behind the maxims, there are two broad discernable policy reasons for the common law doctrine of illegality as a defence to a civil claim. One is that a person should not be allowed to profit from his own wrongdoing. The other, linked, consideration is the that the law should be coherent not self-defeating condoning illegality by giving with the left hand what it takes with the right hand.”

[26]Asking the question “How is the court to determine the matter if not by some mechanistic process?”, Lord Toulson said:

“101 … in answer to that question, one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest because it would be harmful to the integrity of the legal system, without (a) considering the underlying purpose of the prohibition which has been transgressed, (b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, (c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality. We are, after all, in the area of public policy. That trio of necessary considerations can be found in the case law.”

[27]Lord Toulson went on to consider a number of previous decisions and two in particular deserve consideration. Firstly, in St John Shipping Corporation v Joseph Rank Ltd

[1957] 1QB267

at 288-289, Devlin J (as he then was) questioned “whether public policy is well-served by driving from the seat of judgment everyone who has been guilty of a minor transgression”. This foreshadowed an approach which was not simply mechanistic so as to disallow any claim which was “tainted” with illegality. Secondly, in Saunders v Edwards

[1987] 1WLR1116

, Bingham LJ said at p1134:

“Where issues of illegality are raised, the courts have (as it seems to me) to steer a middle course between two unacceptable positions. On the one hand it is unacceptable that any court of law should aid or lend its authority to a party seeking to pursue or enforce an object or agreement which the law prohibits. On the other hand, it is unacceptable that the court should, on the first indication of unlawfulness affecting any aspect of a transaction draw up its skirts and refuse all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct.”

Endorsing these powerful dicta from two highly respected judges, Lord Toulson went on to say:

“107 in considering whether it would be disproportionate to refuse relief to which the Claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant. Professor Burrows’ list is helpful but I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases. Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties’ respective culpability.”

[28]Although, as stated, Patel was specifically concerned with a claim between two parties where one party had given the other party a substantial sum of money for the purpose of illegal “insider dealing” so that the lisbetween them concerned a sum of money which, if illegality was not to intervene, would be left to lie withthe party to whom the money had been paid, the decision in relation to restitution, whereby illegality did not prevent recovery of the sum by the Claimant, was based upon restoration of the parties’ position to the position before the illegal contract was entered into. That is to be contrasted with the claim in contract which was indeed disallowed on the basis of illegality. Thus, Mr Holmes submits, the courts should be less inclined to disallow claims in tort for illegality than, for example, claims in contract because a claim in tort is to restore the claimant to the position in which he or she would have been had the tort not been committed as opposed to claiming in contract where it is necessary for the party to rely upon the illegal contract in order to seek redress. He submits that the restitutionary claim in Patel v Mirza, which was allowed, is much more akin to the claim here, being a claim in tort, and it is of significance that illegality did not prevent the restitutionary claim but did prevent the claim in contract.

[29]Attractive as his submissions were, in my judgment Mr Holmes’ submissions must fail. The starting point, it seems to me, is that the Claimant’s actions in setting fire to the motor cars and the consequences, namely his arrest and detention and bail conditions all stem from an agreement which was fundamentally illegal because it formed part of a conspiracy to defraud an insurance company. In argument, I put to Mr Holmes whether, if the Defendants had failed to pay the Claimant the £500 consideration for setting fire to the motor cars, the Claimant would have been entitled to sue for the £500 in contract. Mr Holmes responded that such a claim might be more likely to engage the illegality doctrine than the Claimant’s actual claim in tort, although he submitted that in either case on the facts of these proceedings the issue would have been unsuitable for summary determination. I then put to Mr Holmes whether the Claimant would succeed had he sued the Defendants for breach of contract, namely breach of the agreement that, should the Claimant be arrested, the Defendants would “drop the charges” (see paragraph 7 of the Claimant’s witness statement) or an implied term of the contract that, in the event that the Claimant was arrested, the Defendants would tell the police/CPS that he had set fire to the cars with their consent. Mr Holmes again responded that a claim based on breach of contract might be more likely to engage the illegality doctrine that the Claimant’s actual claim in tort, whilst maintaining that in either case on the facts of these proceedings the issue would have been unsuitable for summary determination.

[30]If, despite the fact that Mr Holmes did not concede the point, it is right that a claim in contract would properly have been met with the defence of illegality, as I think it is, the question arises whether it makes a critical difference that the claim is pleaded in tort as a malicious prosecution rather than in contract. Mr Holmes submits that this makes all the difference: it causes the claim to cross the line into one where public policy does not require the Claimant to fail but where it is fair, just and proportionate that the Claimant should be able to recover, just as it was similarly fair, just and proportionate in Patel v Mirza. However, in my judgment the situation was critically different in Patel’s case: there, there was a sum of money which, if the illegality defence succeeded, would remain with the defendant who would thereby unjustly enriched and the balance lay with the claimant in having restored to him the sum which had been transferred. Restoring the parties to the position which they were in before the unlawful agreement fulfilled the legal policy considerations lying behind the doctrine of illegality in that case. Here, however, the situation is different. In entering into this agreement, the Claimant must have realised that he ran the risk of being arrested and prosecuted for arson and, furthermore, that the Defendants might renege on their agreement and allow the prosecution to proceed. I do not know the value of the two motor cars in question but given their marques, I would be surprised if the insurance claim was not in the tens of thousands of pounds. Upon the Claimant’s arrest, the Defendants found themselves in the position of either telling the police the true position (as it is assumed to be for present purposes) and being the losers of not only the £500 paid to the Claimant but also the value of the vehicles, or reneging on the agreement, allowing the prosecution to proceed and, in the hope that it succeeded, thereby potentially recovering the insurance monies. As the Master correctly identified, the underlying purpose of the relevant prohibition in this case is to deter or defeat dishonest insurance claims. He said:

“That purpose would itself be defeated or impaired if a party or accessory to such an enterprise could bring a claim in respect of one of its inherent risks namely that the enterprise attracted the attention of the police and the prosecuting authorities”

. I would add a further inherent risk: that the Defendants, ex hypothesidishonest, compound that dishonesty by sacrificing the Claimant in pursuit of their original aim, namely to defraud the insurance company. Whilst I wholly accept Devlin J’s questioning of “whether public policy is well served by driving from the seat of judgement everyone who has been guilty of a minor transgression”, it cannot be said in any way that the illegal nature of the agreement between the Claimant and the Defendants being a conspiracy to defraud an insurance company was no more than a “minor transgression”. Again, adopting the words of Bingham LJ in Saunders v Edwards, this is not a case of the court “drawing up its skirts” and refusing all assistance to the Claimant on the first indication of unlawfulness affecting any aspects of the transaction, no matter how serious his loss or how disproportionate his loss to the unlawfulness of his conduct. On the contrary, the unlawfulness here goes fundamentally to the transaction and the relationship between these parties and I do not consider that the loss of the damages claimed, namely for being remanded in custody for a few weeks and then being electronically tagged for a few months, is in any way disproportionate to the unlawfulness of the Claimant’s conduct in associating himself with a serious attempted fraud upon an insurance company in relation to the value of two valuable motor cars. As Master Davison said, “The public would be surprised (affronted even) and would certainly think the less of lawyers and judges if a claim in those circumstances were to be allowed” I wholly agree and this judicial instinct is a good barometer for judging on which side of the line a claim such as this falls in relation to the new law of illegality. Submission (iii) The nexus between the illegal conduct in question and the Claimant’s cause of action is insufficiently close for illegality to run.

[31]This argument has effectively already been considered and dealt with in considering the second submission. Mr Holmes submits that the agreement is not a necessary step in the tort of malicious prosecution: all the Claimant needs to plead is that he had the Defendants’ permission or consent to act in the way he did, namely set fire to the vehicles. In essence, Mr Holmes submits that the agreement being part of a conspiracy to defraud an insurance company is no more than the motivation lying behind the Claimant’s acts in setting fire to the vehicles but the claim in malicious prosecution goes to a wholly different aspect of the offences with which the Claimant was charged. Thus, the particulars of each count, alleging arson, include the words “without lawful excuse” and it was the Claimant’s defence at his trial that he had a lawful excuse in that he had the consent of the owner to damage the vehicles in question. At the trial, the jury will have been directed that, in order to convict the Claimant, they would have to be sure that the Claimant did not have the consent of the Defendants to cause the damage in question. Clearly, by virtue of their verdict the jury indicated that they had “reasonable doubt” in relation to this issue.

[32]Although, I can see the force of this argument, again it must be rejected. For the reasons explained earlier in this judgment, the court is entitled to, and must, take account of the wider picture and ask itself whether the illegal aspect was merely a “minor transgression,” an incidental part of the picture, or whether it goes to the heart of the claim. In this regard, the Master rightly referred to the decision of the Court of Appeal in Joyce v O’Brien

[2013] EWCA Civ 546

where the facts were as follows:

“The claimant and the first defendant stole some ladders and placed them in a van in which they fled the scene of the crime. The claimant fell out of the back of the van whilst the first defendant was driving quickly away from the crime scene and was very seriously injured. The first defendant subsequently pleaded guilty to dangerous driving. The claimant brought a claim in negligence against the first defendant and the second defendant’s insurers seeking damages for personal injury. The judge dismissed the claim, accepting the submissions of the insurers who had contended that the principle of ex turpi causa non oritur actio afforded the first defendant a defence on the basis that no duty of care was owed by one participant in crime to another participant in the same crime in relation to an act done in connection with the commission of that crime; and (2) the claimant could not recover compensation for loss suffered as a consequence of his own criminal act.” 33. That case is distinguished by Mr Holmes on the basis that the compensation claimed here is not in direct consequence of the Claimant’s criminal acts: on the contrary, he was committing no criminal act at all when he set fire to the cars because he had the consent of the owners to do so, as exemplified by the jury’s verdicts. However, the Master referred to the formulation of the principle by Elias LJ, giving the judgment of the court where he said: “Where the character of the joint criminal enterprise is such that it is foreseeable that a party or parties may be subject to unusual or increased risks of harm of a consequence of the activities of the parties in pursuance of their criminal objectives, and the risk materialises, the injury can properly be said to be caused by the criminal act of the claimant even if it results from the negligent or intentional act of another party to the illegal enterprise. I do not suggest that this necessarily exhausts situations where the ex turpi principle applies in joint enterprise cases, but I would expect it to cater for the overwhelming majority of cases.”

The Master then said:

“21 That test is quite plainly met in this case. The risk here was that the Claimant would be arrested and prosecuted. This was not just foreseeable it was, in fact, foreseen and discussed between the Claimant and Defendants. The risk materialised. The injury (i.e. arrest and prosecution) can and can properly be said to have resulted from the criminal or quasi-criminal acts of the Claimant.”

The Master then said: In my judgment, this part of the Master’s judgment is not affected in any way by the decision in Patel v Mirza and correctly identifies the test for deciding whether or not the tort and the illegality in the case of joint enterprise is met. In my judgment, the Master was right to apply that same test to the circumstances of the present case. Submission (iv): The law on illegality is sufficiently in doubt that it should only be dealt with at trial.

[33]Mr Holmes submitted that, following Patel v Mirza, the law will now develop incrementally, with cases being decided as falling on one side of the line or the other depending upon the assessment of the circumstances and the public policy considerations and that this makes any particular case unsuitable for summary judgment. In this regard, he relies upon the comment of Norris J in Ronelp Marine Ltd v FTX Offshore and Shipbuilding Co Ltd

[2016] All ER 77

where the learned

judge said:

“Counsel for FTX argued that … the English law on illegality was ‘clear and well known’. This struck me as a bold submission in the light of the changes in the law even since the point was pleaded in the commercial court action. One only has to read the judgments in Patel v Mirza to appreciate how accurate was the description by Professor Andrews Burrows in his ‘Restatement of the English Law of Contract’ of the law of illegality as being ‘in state of flux’ and the observation of Lord Neuberger that the different approaches adopted by members of the Supreme Court in recent cases had ‘left the law on the topic in some disarray’. That state has not been brought to an end by the decision that in the application in the doctrine of illegality regard must be had for the policy factors involved and to the nature and circumstances of the illegal conduct in determining whether the public interest in preserving the integrity of the judicial system should result in the denial (on the grounds of illegality) of the relief claimed (see the Judgment of Lord Toulson – with whom Baroness Hale, Lord Kerr, Lord Wilson and Lord Hodge agreed). Of course Patel v Mirza does render relatively clear and certain the law on illegality where a claimant has paid money to a defendant to carry out an illegal activity and the illegal activity is not proceeded with. But that is not relevant to this dispute.”

[34]Mr Holmes submits that the Master ought to have recognised that the illegality defence raised by the Defendants in this case “concerned issues of developing jurisprudence that ought to be determined on the basis of facts established at trial (for example as to the Claimant’s state of knowledge as to any intended illegal conduct by the Defendants, and as to the nature and circumstances of any such conduct).”

[35]Generally, where there is uncertainty in relation to the facts, Mr Holmes would be right that the nuanced and “range of factors approach” endorsed by the Supreme Court in Patel v Mirza means that an adjudication in relation to a defence of illegality can only properly be made once all the facts and circumstances are determined at trial. However, here the facts arise within an extremely small compass and are essentially undisputed given that the basis of the claim as put forward by the Claimant is accepted for the purposes of this application. In my judgment, everything is known that needs to be known for the purposes of adjudicating upon this defence and the question that arises is essentially a question of law which is suitable for determination by the court on an application to strike out. In the circumstances I reject this final ground of the application. Conclusion

[36]Out of deference to the arguments of Mr Holmes, it seems to me right to grant permission to appeal in this matter. However, on the substantive issues raised, for the reasons set out in this judgment, the appeal is dismissed. Martin Spencer J