Legal Indemnities Newsletter: Illegality as a defence

“Illegality has the potential to provide a defence to civil claims of all sorts, whether relating to contract, property, tort or unjust enrichment, and in a wide variety of circumstances.” (Lord Toulson in Patel v Mirza [2016] UKSC 42).

Naturally, a contract will be incapable of being enforced if the fundamental basis of the contract involves the carrying out of an illegal activity. In the law of tort, the Latin phrase “ex turpi causa non oritur action” is used, meaning that no cause of action can arise from an illegal act. If the acts of a claimant are illegal, they cannot be relied upon to form the basis of an action in tort. Equally, they will provide a defendant with a defence. In general, the courts will not assist a party whose case is based upon an immoral or illegal act. In property law, interfering with an easement is a form of tort. A claim for the wrongful interference with an easement, such as a right of way, or a right of drainage, is a claim in the tort of private nuisance. But what if the activity authorised by the easement is illegal?

The Privy Council decision in Energizer Supermarket Ltd v Holiday Snacks Ltd [2022] UKPC 16 (an appeal from Trinidad and Tobago) explores whether the grant of an easement to carry out a function that would be illegal means that the easement is void. The case relates to a 1986 agreement to lay a two-inch gas pipeline, with a length of about 400 feet, under the land of the servient owner. The agreement resulted in the grant of an equitable easement rather than a legal easement but the distinction is not important here. Under local legislation, a licence was required to be obtained from the relevant minister for the laying of the gas pipeline, but none was obtained. This was an offence under the legislation and was punishable on summary conviction by way of a fine. The current owner of the land affected by the easement sought a mandatory injunction for the removal of the gas pipeline on the basis that the dominant owner had no right to use it. It was alleged that the 1986 agreement creating the easement was void for illegality because it contravened legislation. The Privy Council held that a failure to obtain a necessary licence did not render void or unenforceable the 1986 agreement and therefore did not affect the validity of it. While in the law of tort, there is a defence of illegality - either statutory illegality or common law illegality – neither gave the servient owner a defence in this case against the enforcement of the easement by the dominant owner.

Statutory illegality involves applying what is laid down by the statute, either expressly or impliedly, regarding the consequences of the illegal activity. Is the grant of a right to carry out the prohibited activity itself expressly or impliedly prohibited by the statute or by regulations? The Privy Council was able to separate out the contractual and proprietary rights that were agreed in 1986, as to the laying of a gas pipeline, from the licensing regime applicable to the laying of the pipeline. The two matters were independent and, although it did not do so, it was perfectly possible for the dominant owner to seek the necessary licence at a later date once it had acquired the easement. Common law illegality can apply where the effects of the illegality have not been expressly or impliedly laid down in the statute. With common law illegality, the court is concerned to determine the effects of the illegality and will apply the “policy-based” approach established in Patel v Mirza requiring the court to look at the underlying policies of the legislation and to take account of the proportionality of denying enforcement because of the illegality. In Patel v Mirza, Lord Toulson said: “The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system.” In the current case, the Privy Council said that, while denying the enforcement of the easement might be said to offer general support to the applicable licensing regime in Trinidad and Tobago, a more significant policy favoured upholding the easement, because this would recognise the merits of the certainty that is given by applying normal property law principles. It did not think that denying the enforcement of the easement would serve to deter others from not obtaining the necessary licence. The sanctions in the regulations were sufficient. Accordingly, the grant of the easement was not void on the basis of an illegality.
Where else might activities authorised by an easement lead to a suggestion of illegality? A comparable analysis might be applied to the grant of an easement to enable the owner of land to drain foul water in a manner that is either prohibited by regulations or requires an environmental permit where no such permit has been obtained. Where a discharge causes pollution, the dominant owner may be committing an offence, leading to enforcement action by the Environment Agency. However, on the basis of this case, it would appear that the easement itself would most likely remain valid.

This content was provided by Alan Riley, Property Law Consultant.