Legal Case Summary
Patel v Mirza [2016] UKSC 42
Resulting trusts and illegality; insider dealing and unjust enrichment.
Facts
Patel had given Mirza £620,000 to bet on shares in a company using inside information. The agreement between them amounted to a conspiracy to commit the offence of insider dealing contrary to s53 Criminal Justice Act 1993. The inside information did not materialise and no illegal act was committed. Patel sought to recover the monies claiming breach of contract and unjust enrichment.
Issues
Mirza sought to argue that the monies should not be returned to Patel on resulting trust because Patel would have to rely on his own unlawful conduct to establish his interest in the monies. Tinsley v Milligan [1994] 1 AC 340 was authority for the point that a party could not seek to rely on his illegal conduct to establish an equitable interest in property, as this would be against public policy. Patel argued the illegal act had not been put into effect and there was, therefore, no justification to allow Mirza’s unjust enrichment to persist. Further, he argued, it would be unjust to allow one co-conspirator to keep all the monies. Allowing Mirza to keep the monies would positively encourage the commission of such offences, since he had profited and so deterrence as a policy argument in this context is problematic.
Decision / Outcome
Patel was successful in his claim to recover the monies, despite their having being paid to Mirza pursuant to criminal activities. The reliance rule in Tinsley should no longer be followed. A claimant will not be prevented from enforcing his claim to property because it was paid to perform an illegal act, unless allowing his claim would be contrary to relevant public policy, or it would be disproportionate to allow him to recover.
Updated 20 March 2026
This case summary accurately reflects the decision in Patel v Mirza [2016] UKSC 42. The Supreme Court did overrule the reliance-based approach from Tinsley v Milligan [1994] 1 AC 340, replacing it with a range-of-factors test focused on whether denying the claim would be a proportionate response to the illegality having regard to the relevant public policy considerations.
Since publication, the illegality defence has been further considered by the courts. Notably, the Court of Appeal in Stoffel & Co v Grondona [2018] EWCA Civ 2031 applied the Patel v Mirza approach, and the Supreme Court upheld that decision in [2020] UKSC 42, providing further guidance on applying the range-of-factors test in the context of professional negligence claims. Students should be aware of Stoffel as an important later authority applying and elaborating on the principles established in Patel v Mirza.
The article’s description of the statutory offence under s.52 (not s.53) of the Criminal Justice Act 1993 may be worth noting: s.52 creates the primary offence of insider dealing, while s.53 provides defences. However, this does not affect the legal principles discussed. The broader legal principles described in the article remain good law.
