Saunders v Edwards [1987] 1 WLR 1116

The Claimant purchased the lease in a flat from the Defendant. They colluded to undervalue the flat and overvalue various items in the flat in order to reduce the stamp duty payable. Later the Claimant brought an action for misrepresentation in that the Defendant had stated the sale included the lease of a roof garden. The question for the court was whether the fraud on the Inland Revenue barred the Claimant from pursuing the claim.

Held:

The fraud on the Inland Revenue was independent of and unconnected to the action brought by the Claimant.


Bingham LJ:

“the courts are to adopt a pragmatic approach to these problems seeking where possible to see that genuine wrongs are righted so long as the Court does not thereby promote or countenance a nefarious object or bargain which it is bound to condemn....Where issues of illegality are raised, the courts have to steer a middle course between two unacceptable positions. On the one hand it is unacceptable that any court should aid or lend its authority to a party seeking to pursue or enforce an object or agreement which the law prohibits. On the other hand, it is unacceptable that the court should, on the first indication of unlawfulness affecting any aspect of a transaction, draw up its skirts and refuse all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct.”

Back to lecture outline on ex turpi causa