Duty of agents and principals notwith standing collateral The rule is not even confined to causes of action ex contractu. An action in tort cannot be maintained when the cause of action springs from an illegal transaction to which the plaintiff was a party, and that transaction is a necessary part of his case (a). Independently of the special grounds of this rule, a completely executed transfer of property, though originally made upon an unlawful consideration or in pursuance of an unlawful agreement, is afterwards valid and irrevocable both at law and in equity (b). The rule is not applicable in the following classes of cases, most of which however cannot properly be called exceptions. An agent is not discharged from accounting to his printrustees to cipal by reason of past unlawful acts or intentions of the account to principal collateral to the matter of the agency. If A. pays money to B. for the use of C., B. cannot justify a refusal to pay over to C. by showing that it was paid under illegality. an unlawful agreement between A. and C. (c). Again, if A. and B. make bets at a horse-race on a joint account and B. receives the winnings, A. can recover his share of the money or sue on a bill given to him by B. for it: here however there is nothing illegal in any part of the business (d). In like manner the right to an account of partnership profits is not lost by the particular transaction in which they were earned having involved a breach of the law (e). Nor can a trustee of property refuse to account to his cestui que trust on grounds of this kind: a trust was enforced where the persons interested were the (a) Fivaz v. Nicholls, 2 C. B. 501, 513. (b) Ayerst v. Jenkins, 16 Eq. 275. Cp. M'Callan v. Mortimer (Ex. Ch.) 9 M. & W. 636. (c) Tenant v. Elliott, 1 B. & P. 3. (d) Johnson v. Lansley, 12 C. B. 468. And where B. uses moneys of his own and A.'s in betting, on the terms of dividing winnings in certain proportions, A. can sue B. on a cheque given for his share of winnings Beeston v. Beeston, 1 Ex. D. 13. Cp. and dist. Higginson v. Simp son, 2 C. P. D. 76, where the transaction in question was held to be in substance a mere wager. (e) Sharp v. Taylor, 2 Ph. 801. Of course it is not so where the main object of the partnership is unlawful. members of an unincorporated trading association, though it was doubtful whether the association itself was not illegal (a). So, if A. with B.'s consent effects a policy for his own benefit on the life and in the name of B., having himself no insurable interest, the policy and the value of it belong, as between them, to A. (b). If a man entrusts another as his agent with money to be paid for an unlawful purpose, he may recover it at any time before it is actually so paid; or even if the agent does pay it after having been warned not to do so (c); the reason of this, clearly put in one of the earlier cases (d), is that whether the intended payment be lawful or not an authority may always be countermanded as between the principal and agent so long as it is not executed (e). It is the same where the agent is authorized to apply in an unlawful manner any part of the moneys to be received by him on account of the principal; he must account for so much of that part as he has not actually paid over (e). The language of the statute 8 & 9 Vict. c. 109, s. 18, which says that no money can be recovered "which shall have been deposited in the hands of any person to abide the event upon which any wager shall have been made" does. not prevent either party from repudiating the wager at any time either before or after the event and before the money is actually paid over and recovering his own deposit from the stakeholder (ƒ). recover able back, Where money has been paid under an unlawful agree- Money ment, but nothing else done in performance of it, the money may be recovered back. But in the decision which where establishes this exception it is intimated that it probably not exewould not be allowed if the agreement were actually (a) Sheppard v. Oxenford, 1 K. & J. 491. (b) Worthington v. Curtis, 1 Ch. D. 419. (c) Hastelow v. Jackson, 8 B. & C. 221, 226. (d) Taylor v. Lendey, 9 East 49. 29 L. J. Ex. 438. (f) Diggle v. Higgs (C. A.), 2 Ex. D. 422; Hampden v. Walsh, 1 Q. B. D. 189, where former authorities are collected and considered; Trimble v. Hill (J.C.) on a colonial statute in the same terms, 5 App. Ca. 342. agreement cuted. criminal or immoral (a). "If money is paid or goods delivered for an illegal purpose, the person who has so paid the money or delivered the goods may recover them back before the illegal purpose is carried out; but if he waits till the illegal purpose is carried out, or if he seeks to enforce the illegal transaction, in neither case can he maintain an action" (b). And the action cannot be maintained by a party who has not given previous notice that he repudiates the agreement and claims his money back (c). In Taylor v. Bowers (b) A. had delivered goods to B. under a fictitious assignment for the purpose of defrauding A.'s creditors. B. executed a bill of sale of the goods to C., who was privy to the scheme, without A.'s assent. It was held that A. might repudiate the whole transaction and demand the return of the goods from C. In Symes v. Hughes (d), a case somewhat of the same kind, the plaintiff had assigned certain leasehold property to a trustee with the intention of defeating his creditors; afterwards under an arrangement with his creditors he sued for the recovery of the property, having undertaken to pay them a composition in case of success. The Court held that, as the illegal purpose had not been executed, he was entitled to a reconveyance. It will be observed however that the plaintiff was in effect suing as a trustee for his creditors, so that the real question was whether the fraud upon the creditors should be continued against the better mind of the debtor himself. The cases above mentioned as to recovering money from agents or stakeholders are also put partly on this ground, which however does not seem necessary to them (e). (a) Tappenden v. Randall, 2 B. & P. 467. (b) Per Mellish, I. J. Taylor v. Bowers, 1 Q. B. D. 291, 300. (c) Palyart v. Leckie, 6 M. & S. 290. (d) 9 Eq. 475. (e) Hastelow v. Jackson, 8 B. & C. 221. Mearing v. Hellings, 14 M. & W.711, where that case was doubted, decides only this: A man cannot sue a stakeholder for the whole of the sweepstakes he has won in a lottery, and then reply to the objection of illegality that if the whole thing is illegal he must at all events recover his own stake. Allegans contraria non est audiendus. of credi sition. In certain cases the parties are said not to be in pari Parties not in pari delicto, namely where the unlawful agreement and the delicto. payment take place under circumstances practically Purchase amounting to coercion. The chief instances of this kind tor's assent in courts of law have been payments made by a debtor to compoby way of fraudulent preference to purchase a particular creditor's assent to his discharge in bankruptcy or to a composition. The leading case is now Atkinson v. Denby (a). There the defendant, one of the plaintiff's creditors, refused to accept the composition unless he had something more, and the plaintiff paid him 50l. before he executed the composition deed. It was held that this money could be recovered back. "It is true" said the Court of Exchequer Chamber "that both are in delicto, because the act is a fraud upon the other creditors, but it is not par delictum, because the one has the power to dictate, the other no alternative but to submit." On the same ground money paid for compounding a penal action contrary to the statute of Elizabeth may be recovered back (b). But where a bill is given by way of fraudulent preference to purchase a creditor's assent to a composition, and after the composition the debtor chooses to pay the amount of the bill, this is a voluntary payment which cannot be recovered (c). doctrine In equity the application of this doctrine has been the Like same in substance, though more varied in its circum- of equity. stances. The rule followed by courts of equity was thus described by Knight Bruce, L. J.: "Where the parties to a contract against public policy or illegal are not in pari delicto (and they are not always so) and where public policy is considered as advanced by allowing either, or at least the more excusable of the two, to sue for relief against the transaction, relief is given to him, as we know from (a) 6 H. & N. 778, 30 L. J. Ex. 361, in Ex. Ch. 7 H. & N. 934, 31 L. J. Ex. 362: the chief earlier ones are Smith v. Bromley, 2 Doug. 695, Smith v. Cuff, 6 M. & S. 160. Special grounds of relief. Statement of the rule as qualified. various authorities, of which Osborne v. Williams [see below] is one" (a). On this principle relief was given and an account decreed in Osborne v. Williams (b), where the unlawful sale of the profits of an office was made by a son to his father after the son had obtained the office in succession to his father and upon his recommendation, so that he was wholly under his father's control in the matter. In Reynell v. Sprye (c) an agreement bad for champerty was set aside. at the suit of the party who had been induced to enter into it by the other's false representations that it was a usual and proper course among men of business to advance costs and manage litigation on the terms of taking all the risk and sharing the property recovered. And in a later case a mortgage to secure a loan of money which in fact was lent upon an immoral consideration was set aside at the suit of the borrower on the ground that the interest of others besides parties to the corrupt bargain was involved (d). A wider exception is made, as we have seen above, in the case of agreements of which the consideration is future illicit cohabitation between the parties. The treatment of this kind of agreements is altogether somewhat anomalous and ill-defined, and may be considered open to review by a Court of Appeal should occasion arise. Apart from this particular question, there seems to be no reason (at all events since the Judicature Acts) why the analogy of the cases in equity where agreements have been set aside should not apply to the legal right of recovering back money paid. If this be correct, the rule and its qualifications will be to this effect: 7. Money paid or property delivered under an unlawful agreement cannot be recovered back, nor the agreement set aside at the suit of either party (a) Reynell v. Sprye, 1 D. M. G. 660, 679. (b) 18 Ves. 379. (c) 1 D. M. G. 660, 679. |