Document Type
Article
Abstract
The traditional English jurisprudence granting restitution of benefits conferred under agreements rendered unenforceable because of illegality was unsatisfactory. As a general principle, it held that there was a presumption against restitutionary relief for benefits conferred under such agreements (the Holman principle). This principle was subject to a series of exceptions granting relief to parties who were innocent of fault with respect to the illegal conduct or, at least, less at fault than the defendant. The main difficulty with this approach was that it denied relief in cases where, though the plaintiff was implicated to some extent in the illegality as a perpetrator or, at least, a participant in the illegal conduct, restitution appeared appropriate. The traditional Holman exceptions were stretched to accommodate such cases and collateral forms of relief developed. The resulting doctrine was both complex and unpredictable in its application. A modern approach emerged in American and, more recently, in Canadian and Australian law, of simply granting recovery to a guilty party who could establish that, in the particular circumstances, restitutionary relief was appropriate. A different approach to modernization of the doctrine has been recently adopted in English law. In its 2016 decision in Patel v Mirza, the Supreme Court of the United Kingdom appears to have adopted a reform scheme proposed by Professor Peter Birks. In essence, the Birksian scheme reverses the Holman principle and presumes that all plaintiffs are entitled to recover such benefits. The defendant, however, is entitled to raise a defence of illegality which will not invariably be available against perpetrators of the illegal conduct. This paper argues that the new English model is deeply flawed and ought not be adopted elsewhere. The modern American, Australian, and Canadian approach offers a more direct and sound solution to the problem.
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Citation Information
McCamus, John D..
"Is Illegality a Defence to Restitutionary Claims?."
Osgoode Hall Law Journal
62.2 (2026)
: 529-568.
DOI: https://doi.org/10.60082/2817-5069.3936
https://digitalcommons.osgoode.yorku.ca/ohlj/vol62/iss2/5
References
1. FRSC, University Professor, Osgoode Hall Law School, York University; Davies Ward Phillips and Vineberg LLP. An earlier version of this article was presented at the Obligations X Conference in Banff, Alberta on 13 July 2023. The author is grateful for the comments on this article made by participants in that event and for suggestions made by this Journal’s anonymous reviewers.
2. (American Law Institute Publishers, 1937) [1937 Restatement].
3. Ibid, s 1.
4. See George E Palmer, The Law of Restitution (Little, Brown & Co, 1978).
5. See Robert Goff & Gareth Jones, The Law of Restitution (Sweet & Maxwell, 1966). This work has appeared in numerous subsequent editions, most recently under new editorship. See e.g. Charles Mitchell, Paul Mitchell & Stephen Watterson, Goff & Jones on Unjust Enrichment, 10th ed (Sweet & Maxwell, 2023).
6. See e.g. Andrew Burrows, The Law of Restitution, 3rd ed (Oxford University Press, 2011) [Burrows, Restitution]; Graham Virgo, The Principles of the Law of Restitution, 3rd ed (Oxford University Press, 2015), DOI: .
7. See e.g. Keith Mason, John W Carter & Gregory J Tolhurst, Mason & Carter’s Restitution Law in Australia, 4th ed (LexisNexis, 2021); James Edelman & Elise Bant, Unjust Enrichment, 2nd ed (Hart, 2016), DOI: .
8. See e.g. Ross Grantham & Charles Rickett, Enrichment and Restitution in New Zealand (Hart, 2000).
9. See e.g. Peter D Maddaugh & John D McCamus, The Law of Restitution, looseleaf ed (Thomson Reuters, 2026) [Maddaugh & McCamus, Restitution]; Mitchell McInnes, The Canadian Law of Unjust Enrichment and Restitution (LexisNexis Canada, 2014); John D McCamus, An Introduction to the Canadian Law of Restitution and Unjust Enrichment (Thomson Reuters, 2020).
10. Maddaugh & McCamus, Restitution, supra note 9 at ch 10:8.
11. Ibid at chs 10-11.
12. In England, though not elsewhere, the well-established idea that agreements may be voidable for mistake on equitable grounds has been abandoned. See Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd, [2002] EWCA Civ 1407 [Great Peace Shipping Ltd]. See also Maddaugh & McCamus, Restitution, supra note 9 at ch 17:2; John D McCamus, The Law of Contracts, 3rd ed (Irwin Law, 2020) at 628-36 [McCamus, Contracts].
13. [2016] UKSC 42 [Patel].
14. (Clarendon Press, 1985) [Birks, Introduction].
15. (Oxford University Press, 2003) at XIV. Birks’ recantation was colourful: “Almost everything of mine now needs calling back for burning.” A slightly revised second edition appeared posthumously in 2005. See Unjust Enrichment, 2nd ed (Oxford University Press, 2005), DOI: [Birks, Unjust Enrichment].
16. Birks, Unjust Enrichment, supra note 15 at ch 10, s 3B.
17. See UK, Law Commission, Illegal Transactions: The Effect of Illegality on Contracts and Trusts (Consultation Paper No 154) (The Stationery Office, 1999) [Law Commission, Paper No 154]; UK, Law Commission, The Illegality Defence (Consultation Paper No 189) (The Stationery Office, 2009) [Law Commission, Paper No 189]; UK, Law Commission, The Illegality Defence (Report No 320) (The Stationery Office, 2010) [Law Commission, Report No 320].
18. Supra note 13.
19. [1957] 1 QB 267 [St John Shipping]. See generally McCamus, Contracts, supra note 12 at ch 12.
20. (1775) 1 Cowp 341.
21. Ibid at 1121.
22. Ibid.
23. See generally Maddaugh & McCamus, Restitution, supra note 9 at chs 15:3-15:8.
24. (1810) 12 East 225.
25. [1959] UKPC 27 [Kiriri Cotton].
26. See generally Maddaugh & McCamus, Restitution, supra note 9 at ch 15:16.
27. See John W Wade, “Restitution of Benefits Acquired Through Illegal Transactions” (1947) 95 U Pa L Rev 261, DOI: . American experience is to the same effect, as the discretion to depart from the strict requirements of these doctrines “has made this the broadest exception to the general rule, a sort of catch-all or final resort when other exceptions fail” (ibid at 281).
28. [1999] EWCA Civ 3037 [Alaga].
29. See Maddaugh & McCamus, Restitution, supra note 9 at ch 15:17.
30. See e.g. Tribe v Tribe, [1995] 4 All ER 236 (CA Civ England and Wales) (“restitution should not be confined to the penitent” at 260) [Tribe].
31. Goff and Jones included a discussion of these authorities in their first edition under the heading “Special Exceptions in Equity.” See supra note 5 at 302.
32. See Wade, supra note 27 at 297-99.
33. Supra note 20 at 1121.
34. Tribe, supra note 30 at 257-60.
35. See Maddaugh & McCamus, Restitution, supra note 9 at ch 15:9.
36. See e.g. Bowmakers Ltd v Barnet Instruments Ltd, [1945] 1 KB 65 at 71 (CA).
37. See Tinsley (AP) v Milligan (AP), [1993] UKHL 3 at 28 [Tinsley].
38. See e.g. Saunders v Edwards, [1987] 1 WLR 1116 (CA).
39. See e.g. Strongman (1945) LD v Sincock, [1955] 2 QB 525 (CA).
40. See Archbolds (Freightage) Ltd v S Spanglett Ltd, [1961] 1 QB 374 (CA).
41. Supra note 37 at 14.
42. Supra note 27.
43. American Law Institute, Restatement of the Law of Contracts, Vol II (American Law Institute Publishers, 1932), s 600.
44. Wade, supra note 27 at 301.
45. Supra note 43, s 600.
46. Supra note 27 at 301.
47. American Law Institute, Restatement of the Law: Contracts, Vol 2 (American Law Institute Publishers, 1981).
48. Ibid at 71.
49. Ibid.
50. Ibid.
51. Ibid at 71-72
52. Ibid at 73.
53. Supra note 2.
54. (American Law Institute Publishers, 2011) [2011 Restatement].
55. Ibid at 505.
56. Ibid at 505-506.
57. Ibid at 509-10.
58. Ibid at 510.
59. Ibid.
60. Ibid.
61. [1995] HCA 25.
62. [2012] HCA 7.
63. Supra note 54.
64. 2005 CanLII 28417 (ONCA). See also Maddaugh & McCamus, Restitution, supra note 9 at ch 15:12.
65. Ibid at para 40.
66. See Tsoi v Lai, 2012 BCSC 1082.
67. See Idle-O Apartments Inc v Charlyn Investments Ltd, 2013 BCSC 2158 at para 288, reversed in part on other grounds in 2014 BCCA 45 at paras 84-86.
68. Birch v GWR Resources Inc, 2016 BCSC 117 at paras 1, 9, 43, 80. The court’s conclusion was later affirmed in 2017 BCCA 184 at para 34.
69. 2020 BCCA 98 at paras 4, 16.
70. Ibid at para 63.
71. Supra note 13.
72. Birks, Introduction, supra note 14.
73. Ibid at 299-303.
74. Ibid at 299.
75. Ibid at 300.
76. Ibid at 300-301.
77. Ibid at 301.
78. Ibid at 303.
79. Ibid at 424.
80. Ibid at 424-26.
81. See Kiriri Cotton, supra note 25 at 4.
82. Birks, Introduction, supra note 14 at 427.
83. Ibid at 428-29.
84. See St John Shipping, supra note 19.
85. Birks, Introduction, supra note 14 at 429. See also John D McCamus, “Restitutionary Recovery of Benefits Conferred under Contracts in Conflict with Statutory Policy – The New Golden Rule” (1987) 25 Osgoode Hall LJ 787, DOI: .
86. See Peter Birks, “Restitution and Unjust Enrichment: Recovering Value Transferred Under an Illegal Contract” (2000) 1 Theor Inq L 155, DOI: . See also Birks, Unjust Enrichment, supra note 15 at 247-53.
87. Birks, Introduction, supra note 14 at 301.
88. Ibid at 301-302.
89. Supra note 24.
90. Ibid.
91. Great Peace Shipping Ltd, supra note 12. For further discussion, see McCamus, Contracts, supra note 12 at 628-36.
92. Bell v Lever Bros, (1932) AC 161. For further discussion, see McCamus, Contracts, supra note 12 at 612-17.
93. (1817), 105 ER 1203. See e.g. Goff & Jones, supra note 5 at 296.
94. Supra note 28.
95. Supra note 25.
96. See Birks, Introduction, supra note 14 at 301.
97. See Andrew Kull, “Consideration Which Happens to Fail” (2014) 51 Osgoode Hall LJ 783, DOI: . Kull’s analysis of American law is equally applicable to Canadian common law.
98. See Roxborough v Rothmans of Pall Mall Australia Ltd, [2001] HCA 68 at paras 101-102. See also SJ Stoljar, “The Doctrine of Failure of Consideration” (1959) 75 Law Q Rev 53 at 53 (on which Justice Gummow relies).
99. See Burrows, Restitution, supra note 6 at ch 15.
100. Supra note 25.
101. See Kleinwort Benson Ltd v Lincoln City Council, [1999] 2 AC 349 at 387. Per Lord Goff, in a fully performed ultra vires interest rate swap transaction, the party that paid more was allowed to recover the difference on the basis that the result of refusing relief would be “that effect would be given to a contract which public policy has declared to be void.”
102. See Danyluk v Ainsworth Technologies Inc, 2001 SCC 44 at para 54.
103. See Lionel Smith, “Defences and the Disunity of Unjust Enrichment” in Andrew Dyson, James Goudkamp & Frederick Wilmot-Smith, eds, Defences in Unjust Enrichment (Hart, 2016) 27 at 29-33, DOI: [Dyson, Defences in Unjust Enrichment].
104. For discussion of this distinction in the tort context, see Andrew Dyson, James Goudkamp & Frederick Wilmot-Smith, “Central Issues in the Law of Tort Defences” in Andrew Dyson, James Goudkamp & Frederick Wilmot-Smith, eds, Defences in Tort (Hart, 2015) at ch 1, DOI: . See also Helen Scott, “Defence, Denial of Cause of Action? ‘Enrichment Owed’ and the Absence of a Legal Ground” in Dyson, Defences in Unjust Enrichment, supra note 103.
105. See generally Dennis Klimchuk, “What Kind of Defence is Change of Position?” in Dyson, Defences in Unjust Enrichment, supra note 103.
106. Supra note 30 at 248.
107. See Robert Stevens, The Laws of Restitution (Oxford University Press, 2023), DOI: . In a recent work, Professor Stevens has offered a further reason for suggesting that illegality “is not properly speaking, a defence or at least not just a defence” in a restitution claim (ibid at 392). His explanation for this proposition is that the justification for the rule rests on public policy rather than doing justice between the parties and indeed, as is well known, a court can raise illegality of its own motion even if not pleaded by the defendant (ibid at 391-93). In my view, however, this is not relevant to the thesis advanced herein and rests on an adoption of the Birksian “failure of consideration” (or some similar concept) analysis of the nature of the cause of action in a restitutionary illegality claim. It is on this basis that Birks asserts that the plaintiff in a restitution claim generally need not plead or rely on the illegality of the transaction. It is true that in an attempt to enforce an illegal agreement, the claim may be met with the court raising the illegality defence of its own motion. In a restitution claim context, however, properly understood, the plaintiff is obliged to explain why the contract apparently requiring the transfer of value is unenforceable. In the context of restitutionary illegality, then, a properly pleaded claim will reveal the illegality and explain why, notwithstanding the illegality, the plaintiff should be entitled to restitution. The e proprio motu point made by Professor Stevens, therefore, should be irrelevant in the restitutionary context. The illegality of the agreement is an essential first step to the restitution claim and must be pleaded. If, however, one assumes that the restitution claim in an illegality context is simply a claim for “failure of consideration” and does not require the plaintiff to mention illegality as a reason why the agreement requiring the transfer is unenforceable, the court could presumably raise the illegality on its own motion. In short, the proposition that illegality is not a defence to a restitutionary claim because of the e proprio motu rule is only helpful if one has assumed the unhelpful Birksian proposition that the restitution claim in the illegality context is “failure of consideration” and that the plaintiff has no obligation to plead the illegality and explain why, notwithstanding the illegality, restitution should be made available. Moreover, it is not perfectly obvious that the fact that the court can raise the matter on its own motion (at least in contract enforcement claims) precludes the possibility that the defendant can raise illegality as a defence. Perhaps that is why Stevens adds the qualification “or at least not just a defence” in the passage quoted above. In short, I do not find the Stevens e proprio motu argument relevant to a determination of whether illegality is or is not properly considered a defence in the restitutionary illegality context.
108. See e.g. Contracts (General Part) Law, 5733–1973 27 LSI 117 (1972-73), ss 30-31 (Israel). Section 30 provides that contracts that are illegal, immoral, or contrary to public policy are void. Section 31 provides, however, that such agreements are subject to other provisions of the act, including section 20 which establishes a general right to restitution of benefits conferred under unenforceable agreements. Section 31 further provides that a court may, “if it deems it just to do so and on such conditions as it sees fit,” relieve a party of the obligation to make restitution. Although the provision, by conferring such a discretion, does not unambiguously settle the burden of proof point, the provisions are certainly open to an interpretation creating a general right to restitution subject to a defence of illegality. See generally Nili Cohen, “Illegality: The Case for Discretion” in William Swadling, ed, The Limits of Restitutionary Claims: A Comparative Analysis (United Kingdom National Committee of Comparative Law, 1997) at 186.
109. 1993 CanLII 141 (SCC).
110. See Law Commission, Paper No 154, supra note 17; Law Commission, Paper No 189, supra note 17; Law Commission, Report No 320, supra note 17.
111. Supra note 13. See also Sarah Green & Alan Bogg, eds, Illegality After Patel v Mirza (Hart, 2018), DOI: .
112. See Law Commission, Paper No 154, supra note 17; Law Commission, Paper No 189, supra note 17; Law Commission, Report No 320, supra note 17.
113. This is not to suggest that Birks himself or his 1985 work was the direct or exclusive source of this concept for the Commission. Indeed, another prominent English restitution scholar and Oxford colleague of Birks, Andrew Burrows, adopted this approach, plainly influenced by Birks, in his own writing. See Burrows, Restitution, supra note 6 at 489. See also Andrew Burrows, A Restatement of the English Law of Unjust Enrichment (Oxford University Press, 2012) at 107-10, 136-41. Professor Burrows, as he then was, was a member of the Law Commission from 1994-99. It is not unreasonable to assume that his views may have played a role in the formulation of the consultation paper released in 1999.
114. Law Commission, Paper No 154, supra note 17 at paras 2.33, 7.58.
115. Ibid at paras 7.27-7.43.
116. Law Commission, Report No 320, supra note 17.
117. Ibid at para 1.11.
118. Supra note 13. For more extended discussion of this decision by the present author, see John D McCamus, “The New Illegality Defence in English Restitutionary Law: A Critical Appraisal” in Russell L Weaver & Duncan Fairgrieve, eds, Damages, Injunctive Relief and Other Remedies in Tort and Free Speech Cases (Cambridge Scholars, 2023) 56 at 83-88.
119. Patel v Mirza, [2014] EWCA Civ 1047.
120. The Commission studied the illegality defence from 2002-2009.
121. See e.g. Patel, supra note 13 at paras 23, 43, 44, 48, 111.
122. Ibid at para 120.
123. Ibid at para 101.
124. Ibid at paras 72-79.
125. [2014] UKSC 47 [Hounga]. Lord Toulson refers to several cases as illustrating the phenomenon of countervailing public interests favouring relief. See ibid at paras 58-61,73-79; R (Best) v Chief Land Registrar, [2015] EWCA Civ 17 (CA) (a claim for registry of land acquired by adverse possession); Still v MNR, 1997 CanLII 6379 (FCA) (a claim for unemployment insurance by an immigrant who was employed without the required immigration status).
126. Hounga, supra note 125 at paras 52-54.
127. Patel, supra note 13 at para 77. Lord Toulson here paraphrases Lord Wilson’s remarks in Hounga, supra note 125.
128. Patel, supra note 13 at para 119.
129. Ibid at para 113.
130. Ibid.
131. Ibid.
132. Ibid.
133. Ibid at para 107.
134. Ibid.
135. Ibid.
136. See Andrew Burrows, Restatement of the English Law of Contract (Oxford University Press, 2016) at 229-30. These factors might be paraphrased as (1) the gravity of the illegality, (2) whether the plaintiff intended the conduct, (3) the centrality of the illegality to performance, (4) the gravity of the sanction of denying relief, (5) whether denial will further the policy of the prohibition infringed, (6) whether denial is a useful deterrent to the misconduct, (7) whether denial of recovery will prevent the plaintiff from profiting from wrongdoing, and (8) whether denial of relief will avoid inconsistency in the law. These factors were offered by Burrows as factors to consider when deciding to enforce (or not) an illegal transaction. Lord Toulson appears to assume that these factors are relevant to a determination as to whether the defence of illegality should be available to a restitution claim. This is a different question, of course, but a similar range of factors would, no doubt, be relevant to a decision to grant or deny restitution.
137. Patel, supra note 13 at para 115.
138. Ibid.
139. Supra note 119 at para 76.
140. Patel, supra note 13 at para 115.
141. See the text accompanying note 41.
142. Tinsley, supra note 37.
143. Patel, supra note 13 at para 114.
144. Ibid.
145. Ibid.
146. The disappointment relates quite specifically to restitution claims. In subsequent cases, the Supreme Court of the United Kingdom applied the Patel policy-based approach to illegality in the context of tort claims in which the illegality defence was raised. This is perfectly appropriate and not inconsistent with the thesis advanced herein as it is well understood and quite appropriate that, in the context of tort claims, illegality is raised as a defence. See Stoffel & Co v Grondona, [2020] UKSC 42; Henderson v Dorset Healthcare University NHS Foundation Trust, [2020] UKSC 43.
147. Patel, supra note 13 at paras 13, 116.
148. Thus, in the otherwise admirable reasoning of the Court of Appeal for British Columbia in Kim v Choi, supra note 69, the court referred in passing to the modern rule as a defence to the claim. The weight of modern Canadian authority discussed in the text, supra notes 64-69, however, places the burden of proof on all plaintiffs, including the guilty party, to demonstrate a basis for recovery.