ILLEGALITY ESSAY

In the cases of transfer of property to another the presumptions of a resulting trust or the
presumption of an advancement based on the relations between the transferor and the
transferee especially in the case of an illegal reason is of utmost importance. Generally in
the realms of common law and equity a claimant cannot rely on the evidence of illegality
and the equitable maxim he who seeks equity must come with clean hands applies. But it
has been observed that the defendants seeking the application of this maxim don’t have
clean hands themselves. So the courts in such a case face the problem of the application
of the maxim as favoring one party would be unfair to the other party when both the
parties don’t have clean hands.
In Tinsley v Milligan a lesbian couple purchased a house together and it was agreed
that the property would be transferred in the name of Tinsley so that Milligan can claim
social welfare benefits fraudulently. After their break up Milligan claimed ownership in the
house and Tinsley claimed that the evidence of her illegal scheme was inadmissible in
court. However the HOL held that she only needs prove her beneficial interest and
confirm the presumption of resulting trust and needs not to rely on the illegal purpose.
The principle established was that whenever there is a voluntary transfer of property to
another there is a presumption of a resulting trust and the transferor doesn’t need to rely
on the illegal purpose. This is called the reliance principle and was applied in Silverwood
v Silverwood [1997].
This case cannot be justified easily and many questions arise. It is understandable that
Millighan admitted her fraud to the Department of Social Services and favouring her
would have been extremely unfair to Tinsley her accomplice in the fraud. The decision
was based on a technical approach. This approach is seriously incompatible and leads to
unjust consequences in cases where a person in order to avoid bankruptcy or to dodge
creditor’s transfers his property to someone else and retrieve the property once the
problems subside or the conditions normalize. Such a fraudulent person can easily fraud
everyone. Tinsley leads towards many confusions as it provided no plausible
justifications for preffering one fraudster over the other. The justification that Millighan
admitted her fraud doesn’t hold the weight to justify the distinction. There is also a
paradox in the presumption of advancement. A husband (fraudster) who transfers his
property to his wife must show the evidence of his intention to create a trust and since his
hands are not clean nust show in evidence that he intended to transfer. This applies if a
person transfers the property to his son. However if a woman (fraudster) does the same
thing she will be able to get back her property. Tinsley was applied in Collier v Collier
(2002). Mance LJ said that the distinction between the two cases in relation to the
presumption of advancements lead to unjust results.
In Chettiar v Chettiar [1962] the father in order to avoid the governmental regulations
bought the property in the name of his son. The Privy Council held that there can be no
rebuttal of the presumption of advancement and there can no longer be reliance on the
fraudulent intentions. The principle established was that when a property has been
transferred into another’s name for an illegal purpose then the presumption of
advancement applies and there can be no rebuttal of the presumption as reliance on the
illegal purpose in evidence is not possible.
In Tribe v Tribe [1995] the father transferred his shares of the family company to his son
in order to avoid his liability to his landlord and avoid bankruptcy. The father however was
not required to pay for the liability and the COA held that the illegal purpose had not been
carried out and the father could give evidence of his dishonest intentions and show that
he intended to retain a beneficial interest in the property. The principle upheld was that a
transferor who has withdrawn from the transaction before the execution of the illegal
purpose can give the evidence of the illegal reason. This is called the withdrawal
principle. However critics argue that even after no exhibition of repentance from the
father’s side the withdrawal principle was applied.
Millet LJ adopted a very unique reasoning in this case. He said that a resulting trust rests
on the presumption of advancement which is rebuttable by evidence and he doesn’t need
to prove the purpose of the transfer. However reliance can be made in equity to show
that a gift wasn’t intended. However a transferee can show that the subsequent conduct
of the transferee shows that he intended no such gift. Lord Millet said that when a
fraudulent person transfers the property to someone to fraud creditors and says that the
property doesn’t belong to him. Later he when he tries to recover the property it wouldn’t
be fair for him to do so. His subsequent conduct makes it sufficiently clear that his
intention wasn’t to retain any interest in the property. If we apply this approach then it is
evident that Tinsley was decided fundamentally wrong. In Tinsley Millighan committed
the fraud and her subsequent conduct shows that she didn’t intend to hold any beneficial
interest in the property. As mentioned earlier the judgement was not based on the fact
that Millighan confessed to the Department of Social Security. Millett LJ has put serious
doubts on the ratio of Tinsley.
In Patel v Mirza [2016] Supreme Court of United Kingdom looked upon the
consequences of illegality on private claims and found that private claims lacked
consideration. Not only this, the court also found that the evidence of illegality had to be
relied upon. However in this case the court granted permission to the claimant so that
they could recover their money. The court basically wanted to prevent unjust enrichment
and so the UKSC effectively overruled the controversial decision of Tinsley v
Milligan [1993] which prevented the claimants from relying on their illegality for the
enforceability of their equitable interest. It is clear that Patel v Mirza wasn’t specifically
for trusts but it equally applies to trusts. From Patel v Mirza it is established that the
concept of resulting trust has been replaced by the ex turpi causa principle. The decision
of Patel v Mirza is not free from criticisms itself. It hasn’t illuminated on the complicacy
arising out of the the presumptions of resulting trusts and advancements. If a party is not
allowed to rely on the evidence of his illegality then grave unjust results are reached.

In family home cases the presumption of advancement no longer applies Jones v

Kernott. If Tinsley v Millighan took place today Millighan would not be able to rely on the
presumption of resulting trust. Similarly she would be able to rely on the evidence of her
illegality and relying on the principle of Patel v Mirza would be able to establish the
existence of a trust