Illegality defence

The Law Commission published a final report and draft Bill to reform the illegality defence in trusts law last month. The reforms aim to make the law clearer and less arbitrary. The draft Trusts (Concealment of Interests) Bill applies where a trust has been created to conceal the ownership of property for a criminal purpose, such as where someone “parks” property in someone else’s name to defraud creditors. The Bill provides that in most cases, a claimant beneficiary would be able to rely on their normal right to enforce the trust. However, in exceptional circumstances the courts would have a discretion to give the property to the trustee.

The problem

Calls for law reform arose out of the House of Lords’ decision in Tinsley v Milligan [1994] 1 AC 340. Here a couple bought a house together but registered it in Ms Tinsley’s name only, so that Ms Milligan could unlawfully claim social security