Further to yesterday’s post in relation to the hand-down of the judgement in Stoffel & Co v Grondona, I publish below a post from Andrew Hogan (Credit Hire Barrister) which addressed the more significant judgment of Henderson v Dorset Healthcare University NHS Foundation Trust  UKSC 43 handed down on the same day as Stoffel.
"Slowly, with the pace of a timorous snail, England approaches Lock Down again. The notion that this will be a 4 week, short, sharp, shock seems unreal. The prospect of a return to substantial numbers of face-to-face trials seems unlikely before the spring of 2021. Not that there will be any shortage of reading material over the winter months as we wait for better days.
On Friday of last week, the Supreme Court handed down judgment in two substantial appeals dealing with the issue of illegality and the extent to which it may be utilised as a defence to a claim. Surprisingly, neither judgment mentions the other one at all, even though the panels in each case overlap in terms of their constitution. The leading judgments in each case was given by a different justice.
Turning to the first and probably more significant judgment of Henderson v Dorset Healthcare University NHS Foundation Trust  UKSC 43 this concerned a desperately sad case, where a woman suffering from psychosis, was convicted of manslaughter of her mother. The defendant NHS trust had negligently failed to return the woman to hospital because of her psychotic state. Had this been done, the killing of her mother would not have occurred.
The woman brought a claim against the defendant alleging various heads of loss, including general damages for loss of liberty, as after the conclusion of her trial for manslaughter, she was made subject to a hospital order under the Mental Health Act 1983.
The judgment includes a detailed consideration of earlier authority established in similar circumstances: particularly the Gray and Clunis cases but for our purposes it is particularly important for its consideration of the case of Patel v Mirza  UKSC 42 which I have written about extensively elsewhere on this blog.
The context of Patel was described thus:
61. In Patel a panel of nine justices sat to consider what was the proper approach to the defence of common law illegality. The background to the decision was that there had been a divergence of views between different constitutions of the court as to whether the appropriate test was the reliance-based approach, applied by the House of Lords in Tinsley v Milligan  1 AC 340, or an approach based on the balancing of public policy considerations. In Hounga v Allen (Anti-Slavery International intervening)  UKSC 47;  1 WLR 2889 the majority of the court, Baroness Hale, Lord Kerr and Lord Wilson, had adopted a policy-based approach, as set out in the judgment of Lord Wilson. In Les Laboratoires Servier v Apotex Inc  UKSC 55;  AC 430 the majority of the court, Lord Sumption, Lord Neuberger and Lord Clarke, had adopted the reliance-based approach, with the leading judgment being given by Lord Sumption.
The facts of Patel were noted to be:
62. Patel involved a claim in restitution for unjust enrichment. The claimant, Mr Patel, had paid Mr Mirza £620,000 for the purpose of investing in Royal Bank of Scotland shares using insider information which Mr Mirza expected to obtain in advance of an anticipated government announcement. In the event, no announcement was made, and so no insider information was provided and the money was not invested. Mr Mirza refused to repay the money. The agreement between them was a conspiracy to commit an offence of insider dealing contrary to section 52 of the Criminal Justice Act 1993. The issue was whether the illegality of the agreement meant that Mr Patel’s claim for restitution for unjust enrichment, based on the total failure of consideration under that unlawful agreement, should fail. All the justices agreed that the defence of illegality failed and that the claim succeeded.
The effect of Patel and how it was to be applied was noted in these terms:
73. An important issue which arises on this appeal concerns the width of the application of Patel and how it applies in relation to existing case law.
74. First, it should be emphasised that Patel concerned common law illegality rather than statutory illegality. Where the effects of the illegality are dealt with by statute then the statute should be applied. As Lord Toulson stated at para 109 of Patel: “The courts must obviously abide by the terms of any statute”.
75. In relation to contractual illegality, this is explained by Underhill LJ in Okedina v Chikale  EWCA Civ 1393;  ICR 1653, para 12, drawing on the formulations set out in Burrows: A Restatement of the English Law of Contract:
“(1) Statutory illegality applies where a legislative provision either (a) prohibits the making of a contract so that it is unenforceable by either party or (b) provides that it, or some particular term, is unenforceable by one or other party. The underlying principle is straightforward: if the legislation itself has provided that the contract is unenforceable, in full or in the relevant respect, the court is bound to respect that provision. That being the rationale, the knowledge or culpability of the party who is prevented from recovering is irrelevant: it is a simple matter of obeying the statute.
(2) Common law illegality arises where the formation, purpose or performance of the contract involves conduct that is illegal or contrary to public policy and where to deny enforcement to one or other party is an appropriate response to that conduct …”
Paragraph 76 is very important, as there has been some suggestion by some commentators, that Patel would not apply to a claim in tort:
76. Secondly, Patel concerned a claim in unjust enrichment, but there can be little doubt that it was intended to provide guidance as to the proper approach to the common law illegality defence across civil law more generally. The cases it discusses include tort cases, such as Gray and Hounga v Allen, as well as a number of Commonwealth tort law authorities. The case of Hall v Hebert, on which particular reliance was placed, was a tort case. Tinsley v Milligan, which was not followed, concerned trusts and property rights. At para 99, Lord Toulson identifies the policy reasons for the doctrine of illegality “as a defence to a civil claim”. The approach set out in paras 101 and 120 is expressed in general and unqualified terms.
But the judgment in Henderson is clear that Patel is not the starting and the finishing point of authority when considering whether an illegality defence can be relied upon. This is an unfortunate position to be adopted, because it leaves open the application of older, more historical case law to particular factual cases: which does not in my view, so much promote certainty, as rather to encourage ever finer shades of refinement of the test when considering individual cases and their particular factual contexts.
77. Thirdly, that does not mean that Patel represents “year zero” and that in all future illegality cases it is Patel and only Patel that is to be considered and applied. That would be to disregard the value of precedent built up in various areas of the law to address particular factual situations giving rise to the illegality defence. Those decisions remain of precedential value unless it can be shown that they are not compatible with the approach set out in Patel in the sense that they cannot stand with the reasoning in Patel or were wrongly decided in the light of that reasoning. Lord Toulson made it clear in Patel that the principles he identified were to be found in the existing case law - see, for example, paras 42, 99 and 102-106.
78. This is well illustrated by the decision of the Court of Appeal in Okedina v Chikale. In employment law the touchstone for the availability of the defence of common law illegality to employee claims has long been recognised as being whether the employee has knowingly participated in the illegal performance of the contract, as stated in the Court of Appeal decision in Hall v Woolston Hall Leisure Ltd  1 WLR 225, paras 31-32 per Peter Gibson LJ. In Okedina v Chikale that approach had been followed by the Employment Tribunal and the Employment Appeal Tribunal. It was submitted on appeal that this was inadequate and that the matter should have been addressed by going through the Patel trio of considerations. The Court of Appeal rejected the submission that it was “necessary for the tribunal on the facts of this case to carry out an elaborate analysis by reference to the particular factors enumerated”. As Underhill LJ explained at para 62:
“In his judgment in Patel v Mirza  AC 467 Lord Toulson was attempting to identify the broad principles underlying the illegality rule. His judgment does not require a reconsideration of how the rule has been applied in the previous case law except where such an application is inconsistent with those principles. In the case of a contract of employment which has been illegally performed, there is nothing in Patel v Mirza inconsistent with the well-established approach in Hall v Woolston Hall Leisure Ltd  ICR 99 as regards [common law illegality] cases. As Mr Reade put it, Hall is how Patel v Mirza plays out in that particular type of case.”
The related case of Stoffel & Co v Grondona  UKSC 42 is of interest primarily for its consideration and application of the Patel approach in the context of mortgage fraud, complicated by the professional negligence of solicitors.
The question that immediately falls to be asked, and answered, is to what extent will this affect credit hire? Will driving a car without MOT, or insurance or parking illegally defeat a claim for credit hire? In particular, has that judgment, so beloved of insurance companies that it appears singled out, in pleaded defences, that Ahgeampong, finally had its day?
The answer is: probably not. Instead there is enough in Henderson, with its emphasis on the doctrine of precedent and the historical case law, to indicate that Patel will not necessarily trump all, that if support can be found in earlier caselaw, illegality arguments will not yet have had their day, and insurance companies can continue to diligently obtain the insurance policies and MOT certificates of claimants, to see what forensic riches they may reveal."