Critically assess the contribution made by the House of Lords in Tinsley v. Milligan to the relationship between law and equity and to the "unclean hands" maxim in equity.

The point in question at the appeal was whether M’s claim was automatically defeated by the fraud against the DSS even though she had admitted and “made her peace with them soon after the action began, so there was no continuing illegality.” Argyll v. Argyll shows that the conduct in question must be directly

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related to the current dispute and therefore one would assume that this inequitable conduct needed to be ongoing to be relevant.

Lord Jauncey identified the ‘ultimate question’ in the appeal to be “whether the respondent in claiming the existence of a resulting trust in her favour is seeking to enforce unperformed provisions of an unlawful transaction or whether she is simply relying on an equitable proprietary interest that she has already acquired under such a transaction.” The court accepted that it was unlawful to uphold M’s interest if she were relying solely on the illegal nature of the initial agreement but since that illegality had ceased to exist T had become trustee of the property for M and M was therefore able to claim her equitable share of the property as a beneficiary. The Lords themselves make several references to the ‘unclean hands’ maxim and while accepting that equity will not entertain claims based on some illegality they justify their decision in this case on the grounds that M had no need to rely on the illegality which led to the trusts creation to show that she had an equitable proprietary interest in the property. Although the situation had been created for the purposes of fraud, the court upheld her interest as the deception had discontinued and she had contributed half of the purchase price. One could argue that they have indeed applied much flexibility to this maxim as it could be said that the initial fraud should have been sufficient to dismiss the presence of ‘clean hands’ to successfully bring an action in equity. Indeed Lord Lowry states;

        

“someone in the position of Miss Milligan, who has only to show a trust, resulting from the fact (which he must prove or which may be admitted) that the property was acquired wholly or partly by the use of his money, is said to be defeated by the maxim that he who comes into equity must come with clean hands, on the ground that the original transaction was undertaken for a fraudulent purpose.”

However, he concluded in his judgement that this should not mean that a party cannot recover if his illegality is proved as a defence to his claim provided he has not relied on his own illegality in order to prove his equitable right. M had succeeding in proving her equitable right by showing that she had jointly purchased the property with T and that that had been their intention.

Lord Browne-Wilkinson made particular distinction as well to rights created by illegal transactions and equitable property rights acquired as a result of an illegal transaction. He recognised that neither law nor equity would enforce an illegal contract but stated that a legal title (as opposed to equity) will be enforced “provided that the plaintiff can establish such title without pleading or leading evidence of the illegality.” T had sought to rely on the principles of equity being quite the opposite of the common law. Unfortunately the House of

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Lords disagreed. Lord Browne-Wilkinson felt it inappropriate to draw such distinctions. He stated that;

“English law has one single law of property made up of legal and equitable interests… If the law is that a party is entitled to enforce a property right acquired under an illegal transaction, in my judgement the same rule ought to apply to any property right so acquired, whether such right is legal or equitable.”

Lord Browne-Wilkinson based his departure from the traditional view of these situations on the fusion of the administration of law and equity by the Judicature Acts 1873 to 1875 which he believed has led the courts to adopt this single rule.

Other cases may also be cited that demonstrate the similarities between the common law and equity and the common law reliance on ex turpi causa non oritur actio and public policy. In Saunders v. Edwards the plaintiff sued the defendant for fraudulent misrepresentation. The defendant sought to rely on the fact that the plaintiff was bringing his claim on the reliance of an illegal contract but the court held in favour of the plaintiff because his action was in tort. As he was not suing on the contract the defendant could not rely on the ex turpi causa defence. “The ex turpi causa defence rests on a principle of public policy. It applies if in all the circumstances it would be an affront to the public conscience to grant the plaintiff relief because the court would thereby appear to assist or encourage the plaintiff in his illegal conduct.” These issues of public policy were also discussed by their Lordships in Tinsley v. Milligan. It could be said that due to the fact that M had admitted her fraud and settled the issue with the DSS, by upholding her counterclaim they were not assisting in any illegal conduct as it had ceased already. The Australian case Nelson v. Nelson extended the courts flexibility even further. They considered the maxim that he who seeks equity must do equity. They upheld in Mrs Nelsons favour but also stated that she must then do equity by reimbursing the Commonwealth the benefits she had received by making a false declaration.

It would seem that the case of  Tinsley v. Milligan has continued the fusion of the principles of the common law and equity, indeed the Lords themselves

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believe it to have done so. Whether their development of the flexibility of the application of the ‘unclean hands’ maxim has been a welcome one is subject to debate. Currently under review by the Law Commission, the decisions in the case of  Tinsley v. Milligan are considered by some to be arbitrary, i.e lacking in meaning. There has been calls for a ‘statutory discretion’ and proposals that illegality should only be used as a defence. 

In conclusion, the decision in the case does seem to have been a fair one. It could be argued that as Miss Milligan had admitted and put right her fraud she was certainly entitled to the share of the property that she had jointly purchased, however one could say that the principles of equity had to be stretched rather to far to accommodate their Lordships decision.  

 

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Bibliography

Jill E. Martin, Modern Equity, Sweet and Maxwell Ltd London (2001) 16th ed

Philip H. Pettit, Equity and the Law of Trusts, Butterworths (1997) 8th ed

Paul Jackson, The Maxims of Equity revisited

Paul Todd, Cases and Materials on Equity and Trusts, Blackstone Press Ltd,  (1996) 2nd ed

 

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