The Recovery of Property Transferred for Illegal Purposes
For many years it was thought to be a principle of public policy that, in a property dispute between two parties in pari delicto, equity must let the loss lie where it falls ('the non-recovery principle').' In Tinsley v Milligan,2 the House of Lords substantially qualified this principle, ruling that it does not prevent persons from reclaiming property transferred for an illegal purpose where they can establish their legal or equitable interest without relying on the illegality ('the non-reliance rule'). In particular, a person who could demonstrate an interest in the transferred property by way of a resulting trust could recover that interest because there was no need to rely on the illegal purpose underlying the transaction. Since then, the Court of Appeal, in Tribe v Tribe,3 has confirmed a further limit on the non-recovery principle, namely an exception where the transferor makes a timely withdrawal from the illegal scheme. More recently, the High Court of Australia has eroded the scope of the principle even further in its decision in Nelson v Nelson.4 In his concurring judgment in that case, Dawson J applied a significantly wider interpretation of the non-reliance rule than that adopted in both Tinsley and Tribe. More importantly, the majority of the court mounted a sustained attack on both the non-recovery principle and its refinement in Tinsley, and introduced a new approach which is likely to reduce even further the significance of illegality as a defence to a proprietary claim.