The of Tinsley v Milligan - Case Study Example

Equity and Trust The common law is founded on the principle of ex turpi causa non oritur action. This doctrine s that the parties cannot invokea right of action by relying on a base cause. The traditional legal concept of he who comes to equity must come with clean hands, was diluted by the decision in Tinsley v Milligan. The courts are required to consider the conduct of the applicant who claims affirmation of her rights1. The underlying objective of the legal doctrines is to ensure that the courts establish a balance between the personal rights and property rights of individuals. In Tinsley v Milligan, the plaintiff Tinsley sought ownership of a jointly owned property2. Tinsley was the legal owner of the property. She had been living with the defendant Milligan, and these two females had contributed monetarily to the acquisition of that property3. Milligan’s contention was that Tinsley was a trustee for both of them. As such, these women had committed a fraud on the Department of Social Security. They had purchased the property, but had retained title to the property in only the name of Tinsley. This stratagem enabled Milligan to claim benefits from the Department of Social Security, as a person without any property to her name4. In this case, the plaintiff contended that ‘he who comes to equity must come with clean hands.’ Consequently, as per her contention, Milligan was precluded from claiming an equitable interest in the property. The House of Lords ruled that as Milligan did not rely on her illegality, she could enforce such interest. Moreover, it was Tinsley who would have to rely on the evidence provided by the illegal purpose5. It was held by the House of Lords that Milligan could claim her equitable beneficial interests in the property. The Law Lords opined that a plaintiff could claim proprietary interests, as long as she did not rely on an illegality to establish the interest6. Thus, equitable interest of this type was to be considered as similar to the immediate rights to possession under the common law. As such, in this case, two women, paid for a property, but placed the property in the name of one of them. This was done in order to claim housing benefits. However, the courts did not allow this fraudulent behaviour to affect the proprietary rights of the woman, whose name had not been indicated as the half owner of the property. All the same, if the plaintiff had attempted to assert her personal right to entitlement, on the basis of unjust enrichment, she could not have succeeded in her claim. Under such circumstances, she would have had to identify some feature that would have served to justify her participation in the unlawful act7. The courts adhere to the policy that in cases of claims of personal rights, the claiming party should come with clean hands. If the claim is based on some illegality, then the courts do not assert personal rights, and the applicant stands to lose her claim. The dealings of criminal fraudsters are unlawful, and the law does not encourage their illegal activities. For instance, if a fraudster purchases some goods, and is subsequently apprehended, then he cannot claim ownership in the goods. Moreover, the money paid by him will be withheld. As such, personal rights and property rights are dealt with differently by the courts. The case of Tinsley v Milligan emerged as a landmark ruling in the area of personal and propriety rights. It demonstrated that the law, in general, does not prevent parties to an illegality from claiming personal benefits8. Consequently, the long standing principle that in equal guilt the position of the defendant is stronger, has been rendered irrelevant. The House of Lords referred to various previous cases, before ruling in this case. Their Lordships held that an application of the doctrine of ex turpi causa, in which a defence of illegality had been put forth, was to rely on the public conscience test. Moreover, the courts were under a duty to establish a balance between the granting of relief and denying it9. As such, his Lordship granted the relief duly considering the test of public conscience. Any penalty imposed on a party for fraudulent activity should not be disproportionate to the actual harm caused. Such thinking is logical and equitable. Hence, the fraudulent activities of these parties could not be penalised by depriving one of these women of her half share in the property. In that case, the House of Lords opined that the defendant Milligan could invoke her right to claim equitable ownership in the house. The legal principles state that the party should not rely on illegality. However, in this case, the court held that the equitable presumption of the resulting trust applied. Therefore, the defendant could not rely on an illegality, in order to claim equitable rights. The principle established in this case proved to be difficult to apply to other cases. This intricacy was encountered in the case of Tribe v Tribe10; wherein the issue was the transfer of shares from father to son. This transfer was effected by the debtor, in order to conceal the asset from the trustee in bankruptcy11. The court held this transaction to be illegal. In the case of McDonnell, a couple made payments to purchase a property; which resulted in the emergence of a trust. These payments were made out of a mortgage fraud committed by the couple12. The Court of Appeal decided this case, by employing the reliance test. It held that the parties were not required to show evidence for the source of the funds that had been utilised for establishing a resulting trust. The trial judge distinguished McDonnell from Tinsley; on the grounds that the source of funds was based on illegality. However, Robert Walker L.J. turned down this approach, on the basis of concealing the beneficial interest used for an illegal purpose13. Many scholars have argued that this was an unconvincing conclusion. As such, the reliance test cannot be applied in its entirety to conflicting issues. Moreover, the application of the rule in Tinsley would lead to confusion. The Law Commission is perceived to prefer a return to such legal uncertainty, despite the fact that a discretionary approach would be preferable, in such instances14. The reliance test cannot be applied in all situations. In Bowmakers Ltd v Barnett Instruments Ltd, the dispute related to the hire-purchase of machine tools, under certain agreements that had been presumed to be unlawful. The defendants paid a few of the instalments to the plaintiffs, and thereafter refused to make any further payments. It was held by the Court of Appeal that as the plaintiffs had not relied upon illegal contracts of the defendants, they could succeed in conversion15. The courts do not hear claims that are based on illegal contracts, and no court would enforce such claims. Nevertheless, a person’s rights to property will be protected against an individual who unlawfully detains such property. This holds good, even if the property, in question, had been gained by the defendant, by means of an illegal contract, between him and the plaintiff. This tenet is inapplicable to goods that are unlawful to deal in, per se16. However, the plaintiff cannot plead illegality to support his claim. In this case, the House of Lords set aside the application of the public conscience test applied by the Court of Appeal. Thereafter, their Lordships examined the relationship between common law and equity. The majority of the Law Lords insisted upon the strict application of the ex turpi causa doctrine and the Bow marker rule17. Under this rule, an illegal transaction is enforceable, provided the plaintiff proves his title without relying upon any illegality. In the context of the Bowmaker rule, Lord Browne-Wilkinson opined that the only issue of importance was to prove that sufficient contributions towards the property had been made, for initiating an equitable action that was founded on resulting trust. This contravention is peculiar to this specific area of equity, while not being tolerated in the other areas of equity18. The Bakewell Management Ltd v Brandwood and Others case dealt with the grievance of property owners, who had been driving from the highway to their residence, over common land19. The Court of Appeal held that these land owners had infringed the statute20, by driving over common land. In the year 1927, the Sixth Earl of Carnarvon, the owner of the common had proclaimed by deed that section 193 of the Law of Property Act 1925 was to apply to this land. Accordingly, the public were to be given access to it. In the year 1986, the claimant had purchased this land, and it had been the regular practice for the defendants to traverse the common, in their motorised vehicles21. Thus, the defendants had continually been in breach of section 193(4) of the Law of Property Act 1925. Subsequently, the claimant decided to benefit monetarily from the situation obtaining, and he stipulated that the defendants would have to pay a fees for passing through the common22. The outcome of this undesirable situation was that Parliament enacted section 68 of the Countryside and Rights of Way Act 2000, in order to resolve the predicament that property owners, abutting common land were placed in. This was buttressed by the Vehicular Access across Common and Other Land (England) Regulations 200223. The contention of the defendants was that they had been freely travelling across the common, in their motorised vehicles, for two decades. Consequently, they were entitled to exercise a right of way over the common, with their motorised contraptions. In addition, they had enjoyed such passage over the common, openly and without the necessity for any licence or the assent of the owner. Consequently, they staked a counterclaim, in respect of a declaration of their entitlement, as per the provisions of section 2 of the Prescription Act 183224. They also made a claim under the doctrine of lost modern grant. However, the appellate court had ruled in Hanning v Top Deck Travel Group Ltd, that conduct precluded by public statute, could not ensure the acquisition of prescriptive rights over land25. To this the defendants contended that as the decision in Hanning v Top Deck Travel Group Ltd had been delivered per incuriam, it should not be applied to their case26. The court declined to uphold this contention. The court categorically declared that it could not rule, in a manner that was contrary to the decision in Hanning v Top Deck Travel Group Ltd. Moreover, even if the court had departed from this decision, the defendants would have failed in their argument, as they had been utilising the common, in the absence of lawful authority. Consequently, their contention was based upon activity that transgressed the law27. The criminal can make a restitutory claim for her right, as long as there is no reliance on illegality. In Tinsley v Milligan, the parties had acted illegally, with the intention of defrauding the social security system. It was held that the defendant could establish a trust, without relying on the unlawful act involved; and it was up to the other party to plead illegality.Although Milligan had participated in the illegal act, she did not rely on the illegality; consequently, the court upheld her personal rights in the property. Discretion should not be unjustly restricted, as this could have a negative impact on the existing law. The aspect of illegality has to be dealt with via a novel approach and a more balanced and principled decision – making process. In Tinsley, the reliance principle had been given considerable importance, and it was applied to invoke property rights. Bibliography Bakewell Management Limited (Respondents) v Brandwood and others (Appellants), (2004) UKHL 14 Bowmakers Ltd v Barnet Instruments Ltd (1945) KB 65 (CA) Countryside and Rights of Way Act 2000 Graham Moffat, Gerry Bean and John Dewar, Trusts law: text and materials, Cambridge University Press, 2005 Hanning v Top Deck Travel Group Ltd (1993) 68 P & CR 14 Law of Property Act 1925 Macdonald v Myerson (2001) EWCA Civ 66 ‘Maxims of law and equity flexible’, The Times, August 22, 1991 Peter Birks, ‘Recovering value transfer under an illegal contract’, Theoretical Inquiries in Law, January 2000 Paul S. Davies, ‘The Illegality defence – two steps forward, one step back?’ Conveyancer and Property Lawyer, 2009, volume 3 Prescription Act 1832 ‘Rights of access cannot be acquired by illegal acts.’ The Times (London), 5 February 2003 Samantha J. Hepburn, ‘Principles of equity and trusts’, Australian and South Pacific Series, Cavendish principles series, Routledge, 2001 Section 193(4), Law of Property Act 1925 Tinsley v Milligan (1994) 1 AC 340 Tribe v Tribe (1996) Ch 107 Vehicular Access across Common and Other Land (England) Regulations 2002 William Swadling, The Quistclose trust: critical essays, Hart Publishing, 2004 Read More