The illegality of a transaction, either because of public policy under the common law, or because of legislation, potentially means no action directly concerning the deal will be heard by the courts.
The primary problem arising when courts refuse to enforce an agreement is the extent to which an innocent party may recover any property already conveyed through the transaction.
If, from the plaintiff's own standing or otherwise, the cause of action appears to arise ex turpi causa ["from an immoral cause"], or the transgression of a positive law of this country, there the court says he has no right to be assisted.
In National Coal Board v England[4] Lord Asquith said, If two burglars, Alice and Bob, agree to open a safe by means of explosives, and Alice so negligently handles the explosive charge as to injure Bob, Bob might find some difficulty in maintaining an action against Alice.In Hewison v Meridian Shipping Services Pte Ltd,[5] an employee who had obtained his position by concealing his epilepsy was held not to be entitled to claim compensation for future loss of earnings as a result of his employer's negligence, since his deception (resulting in a pecuniary advantage contrary to the Theft Act 1968) would prevent him from obtaining similar employment in future.
Similarly, in Pitts v Hunt,[8] Balcombe LJ of the Court of Appeal rationalised this approach, saying that it was impossible to decide the appropriate standard of care in cases where the parties were involved in illegality.
Dillon LJ meanwhile provided little practical guidance in his approach where the defence of illegality is successful when a claimant's cause of action arises "directly ex turpi causa".
The effect of illegality under English law was most recently considered by the United Kingdom Supreme Court in Jetivia SA v Bilta (UK) Limited (in liquidation).