The Unrelated Illegality: Saunders v Edwards (1987)
Case Essentials
Citation: Saunders v Edwards [1987] 1 WLR 1116
Court: Court of Appeal (England)
Plaintiff: Mr. Saunders (The buyer of the flat)
Defendant: Mr. Edwards (The seller of the flat)
The Story Behind the Case
Mr. Saunders bought a flat from Mr. Edwards. During the sale, Edwards lied and guaranteed that the flat came with an exclusive roof terrace. When Saunders moved in and discovered the terrace did not belong to him, he sued Edwards for fraud (deceit). However, there was a catch: when signing the contract, both men had agreed to illegally inflate the price of the furniture and lower the official price of the flat to dodge paying the full stamp duty tax. Edwards tried to use this against Saunders, arguing that because Saunders was involved in tax fraud during the transaction, the court should throw out his lawsuit entirely.
Facts
The plaintiff sued the defendant for fraudulently misrepresenting a property. The contract of sale contained an illegal arrangement to evade stamp duty tax, which both parties had actively agreed to do.
Issue
Can a defendant use the plaintiff’s involvement in an illegal act (tax evasion) to block a lawsuit, even if the illegality has nothing to do with the actual civil wrong being claimed?
Rule
The defence of Ex turpi causa non oritur actio (no action arises from an illegal act) does not apply if the plaintiff’s illegal conduct is merely collateral to, or completely separate from, the civil wrong they are suing for.
Analysis
The court ruled that Saunders did not need to rely on the illegal tax-dodging scheme to prove that Edwards lied to him about the roof terrace. The tax evasion was an entirely separate issue from the fraudulent misrepresentation. While the tax authorities could certainly penalize them both for the stamp duty fraud, the civil court decided it would be unjust to let Edwards get away with blatant deceit just because an unrelated illegal act occurred in the background of the deal. Public policy did not require stripping the plaintiff of his right to sue for fraud.
Case Outcome: The defence of Ex turpi causa FAILED. The court ruled in favor of the plaintiff, establishing that an illegal act does not bar a civil claim if the illegality is wholly collateral to the lawsuit.