Law Report: Illegality no bar to property claim: Tinsley v Milligan - House of Lords (Lord Keith of Kinkel, Lord Goff of Chieveley, Lord Jauncey of Tullichettle, Lord Lowry and Lord Browne-Wilkinson), 24 June 1993

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A person claiming ownership of real property was entitled to recover even if the title on which he relied was used to facilitate an illegal transaction, provided he did not rely on the illegality. This was so whether the title he relied on was legal or equitable.

Where a claimant relied on the presumption of a resulting trust, ie, that two persons had jointly bought property registered in only one name, so that the named party held it in trust for them both, the claimant need only prove a contributory payment and a common intention upon which both of them acted, and was not forced to rely on an illegal plan thereby to defraud the Department of Social Security, and so could recover a share in the property's value.

The House of Lords by a majority dismissed an appeal by Stella Tinsley against the Court of Appeal decision ((1992) Ch 310) which, also by a majority, had (i) upheld the dismissal, by Judge Hywel ap Robert in Caerphilly County Court, of her claim for possession of 141 Thomas Street, Abertridwr, Mid-Glamorgan, and (ii) ruled that she held it on trust for the respondent, Kathleen Milligan, and herself in equal shares.

The house had been registered in the sole name of Miss Tinsley, but had been bought by the women jointly and run as a lodging house. They had agreed the legal title should be in Miss Tinsley's name to facilitate the making by Miss Milligan of false claims on the Department of Social Security (on the basis, inter alia, that she did not own her own home but was a lodger).

The parties later fell out and wished to sell the house. Miss Tinsley then asserted sole ownership, arguing that the court should not give effect to an equitable interest arising from a transaction which was unlawful by reason of a claimant's unlawful purpose; and that accordingly Miss Milligan was unable to establish any interest in the house or defeat Miss Tinsley's claim to possession.

James Munby QC and Alexander Hill-Smith (Blake Lapthorn, for Philip G Rees, Risca) for Miss Tinsley; Vernon Pugh QC and Philip Davies (Belmont & Lowe, for Hugh James Jones & Jenkins, Cardiff) for Miss Milligan.

LORD BROWNE-WILKINSON said it was clearly established that at law, as opposed to equity, property in goods or land could pass under or pursuant to an illegal contract. But Miss Tinsley contended that different principles applied in equity, and that equity would not aid Miss Milligan to enforce an equitable, as opposed to a legal, proprietary interest since, as a party to the fraud on the DSS, she did not come to equity with clean hands.

But to draw such distinctions between property rights enforceable at law and those requiring the intervention of equity was surprising more than 100 years after law and equity had become fused. In reality, English law in 1993 had one single law of property made up of legal and equitable interests. If a person could enforce a property right acquired under an illegal transaction, the same rule should apply to any property right so acquired, whether such right was legal or equitable.

Here, Miss Milligan claimed an interest in the house under a resulting trust, based not on contractual obligation but on a common intention, acted upon by the parties to their detriment. Where two parties bought a property conveyed into the name of only one of them, that party was presumed to hold the property on a resulting trust for both, in shares proportionate to their contributions.

If this presumption applied, the plaintiff did not have to rely on the illegality. If he proved the property was vested in the defendant alone but that he provided part of the purchase price, or voluntarily transferred money to the defendant, the plaintiff established his claim under a resulting trust unless the contrary was shown.

Here, Miss Milligan simply pleaded the common intention that the property should belong to them both and that she contributed to the purchase price. She was not forced to rely on the illegality to prove her equitable interest. It was Miss Tinsley who had to rely on the illegality.

Lord Jauncey and Lord Lowry concurred. Lord Goff and Lord Keith dissented.