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Tinsley v Milligan [1993] 3 WLR 126 House of Lords

The Claimant and Defendant were lovers. Together they purchased a property from which they jointly ran a business by letting out the rooms in the house. It was agreed that the house was to be registered in the name of the Claimant alone. This was so that the Defendant would be able to fraudulently claim social security benefits which would go into their joint bank account. The relationship broke down and the Claimant sought possession of the house asserting full ownership. The Defendant sought a declaration that the property was held on trust for both of them in equal shares. The Court of Appeal applied the public conscience test and held that it would be an affront to the public conscience to allow the Claimant to keep the whole interest in the house. The Claimant appealed to the Lords.

Held:

The House of Lords rejected the public conscience test as it was inconsistent with previous authorities and gave too much discretion to the court. They applied the reliance principle; the Defendant did not have to plead the illegality to succeed, it was sufficient that she had contributed to the purchase price and there was a common understanding that they would own the house equally.

Lord Brown Wilkinson:

"the consequences of being a party to an illegal transaction cannot depend...on such an imponderable factor as the extent to which the public conscience would be affronted by recognising rights created by illegal transactions."

Lord Goff:

"There is no trace of any such principle forming part of the decisions in any of the cases in question. It follows that in my opinion, on the authorities, it was not open to the majority of the Court of Appeal to dismiss the appellant's claim on the basis of the public conscience test invoked by Nicholls LJ"
 
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