Supreme Court rewrites test for illegality defence

Patel v Mirza [2016] 2 Lloyd’s Rep 130, [2016] UKSC 42, 20 July 2016

The Supreme Court rewrote the test for the illegality defence (ex turpi causa) in this important decision. Mr Patel transferred £620,000 to Mr Mirza for the purpose of betting on the price of RBS shares, using advance insider information which Mr Mirza expected to obtain. Mr Mirza’s expectation proved to be mistaken, and Mr Patel sought to recover the sums paid to Mr Mirza on the grounds of contract and unjust enrichment. The High Court rejected the claim on the basis that the transaction amounted to the offence of insider dealing and was tainted by illegality. The Court of Appeal, however, reversed the trial judge’s decision.