An insight into illegal contracts after Patel v Mirza

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Introduction

It is trite that when the subject matter of a contract is illegal, it is void for illegality. But what if the contract had already been performed or partially performed? This article examines the case of Patel v Mirza [2016] UKSC 42 and the Malaysian courts’ approach in light of this case.

The case of Patel v Mirza

Using advance insider information, which Mirza expected to obtain from Royal Bank of Scotland (“RBS”) contacts regarding an anticipated government announcement that would affect the price of RBS shares, Patel paid Mirza £620,000 in an agreement to bet on the price of the RBS shares. Such betting amounts to a conspiracy to commit insider dealing, an offence under section 52 of the Criminal Justice Act 1993. The scheme ultimately fell through and as a result, the intended betting did not take place. Mirza subsequently made promises to repay the money to Patel, but failed to do so. Consequently, Patel brought a claim against Mirza for recovery of the sums paid.

The crucial issue in this case is…

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