Tinsley v Milligan
|England & Wales
|LORD JUSTICE NICHOLLS,LORD JUSTICE RALPH GIBSON,LORD JUSTICE LLOYD
|30 July 1991
|Judgment citation (vLex)
| EWCA Civ J0730-8
|Court of Appeal (Civil Division)
|30 July 1991
 EWCA Civ J0730-8
Lord Justice Lloyd
Lord Justice Ralph Gibson
Lord Justice Nicholls
IN THE SUPREME COURT OF JUDICATURE COURT
OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CAERPHILLY COUNTY COURT
(HIS HONOUR JUDGE HYWEL AP ROBERT)
Royal Courts of Justice
MR ALEXANDER HILL-SMITH, instructed by Messrs Blake Lapthorn, London agents for Philip G. Rees Esq. (Risca), appeared for the Appellant (Plaintiff).
MR PHILIP DAVIES, instructed by Messrs Hugh James Jones & Jenkins with Martin Evans (Cardiff), appeared for the Respondent (Defendant).
On several occasions over the last four years this court has had to consider the impact of unlawful conduct on claims for breach of contract or in tort. This is another case concerning illegality. This time we are concerned with the beneficial ownership of a house. Two people own a house in equal shares. They agree to put the property in the name of one of them alone so as to facilitate fraudulent claims by the other for payment of housing benefit by the Department of Social Security. After a short while they fall out and separate. Will the court assist the legal owner to obtain possession, and permit her to keep the whole of the house, on the footing that the other party cannot be heard to assert the existence of an arrangement which had an unlawful purpose? The plaintiff contends that the court is bound to answer "yes" to this question. She relies on a line of authorities which includes such well-known cases as and .
First, the material facts. The house in question is 141 Thomas Street, Abertridwr, Mid-Glamorgan. It is registered in the name of the plaintiff Miss Stella Tinsley. She is the sole legal owner. She and the defendant Miss Kathleen Milligan were, to use the judge's expression, lovers for about four years, from 1984 to 1988. In the discussions they had during the course of their relationship, both the plaintiff and the defendant expressly recognised they were running a lodging house first at 9 Fizhammon Embankment, Cardiff, and subsequently at Thomas Street, as a joint business venture and that the ownership of the respective houses was also on a joint basis.
The parties are intelligent and articulate. They met in 1984. The plaintiff was then 19, and the defendant 38. The defendant was the dominant character, but not such as to be able to impose her will on the plaintiff. The defendant was living at 9 Fitzhammon Embankment, which belonged to a Mr Slater. She was running a bed-and-breakfast business. In 1983 a Miss Llewellyn began living in the house, and after a while she was treated as being the housekeeper in place of the defendant. The housekeeper was the person to whom the Department of Social Security turned for verification that those to whom it was paying benefits were indeed resident there. In December 1984 the plaintiff moved in and Miss Llewellyn moved out. After a month or two the plaintiff took her place as the nominal housekeeper, although most of the physical work and much of the managerial work were done by the defendant.
The bank and building society accounts used by the parties were put in the plaintiff's sole name, but they were regarded as joint property. Through these accounts the parties conducted most of their financial affairs: nearly all their money went into them, and nearly everything they spent was paid from them. In July 1986 9 Fitzhammon Embankment was purchased in the plaintiff's name. The price was £29,000. A bank provided £24,000 by way of a mortgage loan to the plaintiff alone. The balance was provided principally from the sale proceeds of a car which belonged to them jointly.
Two years later this house was sold for £33,000, and the mortgage repaid. 141 Thomas Street was bought for £19,000, again in the sole name of the plaintiff. That was in August 1988. £12,000 was provided by a bank loan to the plaintiff alone, and the balance came from the proceeds of sale of 9 Fitzhammon Embankment. In this way all the money provided by the parties for 141 Thomas Street came ultimately from their joint business. Shortly thereafter, the parties quarrelled. The plaintiff moved out, and the defendant remained in occupation. The plaintiff divided the money in her building society account between them in roughly equal shares. In February 1989 she gave the defendant notice to quit. Six months later she brought this action, claiming possession and asserting ownership of the whole of the house. The defendant was willing that the house should be sold. Indeed she counterclaimed for an order for sale. She also sought a declaration that the property was held by the plaintiff upon trust for the two of them in equal shares.
I can now turn to the illegality. Over a period of years the defendant, with the knowledge and assent of the plaintiff, made false claims to the Department of Social Security for benefits of one kind or another. The money paid by the Department in response to those claims was paid into the bank or building society accounts I have mentioned. The defendant was not alone in perpetrating frauds upon the Department. The plaintiff also did so. She was prosecuted, convicted and fined, and had to make some repayments to the Department. As to 141 Thomas Street, the judge shied away from holding that the reason why the transfer of this house was in the plaintiff's sole name was to assist in a fraud on the Department of Social Security. Having the property in the plaintiff's sole name assisted with the fraud in the sense that it assisted in the concealment of the defendant's fraud. On the claim forms the defendant answered "no" to the question, "do you own your own home?" and she named the plaintiff as her landlady, to whom she said she was paying rent. If the Department, having received such claims, had made further inquiries, the falsity of the defendant's answers would be more likely to remain concealed with the title deeds in the plaintiff's sole name. The judge considered it was a great over-simplification to regard fraud as the sole or even main objective of the defendant in rendering herself invisible not only as to the legal title to the house but also as to the bank account and the accounts for electricity, gas, rates and so forth. He seems to have regarded this as a "psychological quirk".
I do not think this conclusion can stand. At the outset of her cross-examination the defendant frankly accepted that the reason why the business and 9 Fitzhammon Embankment and 141 Thomas Street were in the plaintiff's sole name was so that she, the defendant, could misrepresent to the Department of Social Security that she had no stake in the business or the properties and that she was simply a lodger. The defendant did not suggest any other reason for either property being put in the plaintiff's sole name. The case was fought on that footing. It should be decided on the same footing.
Two further features are to be noted. First, the money obtained from the Department of Social Security helped the two of them meet their bills, but it was not a substantial part of their income. Their income consisted mostly of rent from their lodgers. The fraud perpetrated by them both on the Department played only a small financial part in the acquisition of the equity in the house which is now in dispute. Secondly, there is no continuing illegality. Late in 1988 the defendant made her peace with the Department of Social Security. She told the Department what she had done. Thereafter she continued to draw benefit, but on a lawful basis. Apparently the Department did not regard the situation with any alarm. The judge observed that no doubt this was because it had become enured by daily experience of much worse forms of fraud being practised upon it than any which could be laid at the door of these two women.
A flexible approach
I turn to the recent decisions. The first is . That case concerned a claim for damages for a fraudulent misrepresentation made by the seller of a flat. On the assessment of the amount of the buyers' loss, the seller relied on the value attributed to the flat on the agreed apportionment of the price between the flat and fixtures and fittings. The buyers sought to discount the evidential value of that apportionment by asserting that the apportionment was not genuine. The amount attributed to the flat had been kept artificially low in order to save stamp duty. The seller contended that the buyers could not be heard to assert such an unlawful purpose. In deciding this issue, the members of the court used different language but they all spoke with much the same voice. They emphasised the flexible nature of the principles applicable in this field, and also the need for the court to strike a balance in each case between two conflicting considerations. Kerr L.J. (at p. 1127) observed that:
"there are no rigid rules for or against the application of the ex turpi causa defence. This is not surprising, since it involves issues of public policy. To some extent these must depend on the circumstances of each case."
Bingham L.J. (at p. 1134) referred to the courts having
"…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,...
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