Bigos v Bousted [1951] 1 All ER 92

Illegality and withdrawal.

Facts:

The defendant, Bousted, wanted to support his wife while she stayed in Italy for her health. He agreed with the defendant that in return for a loan of £150 in Italian currency for this purpose he would deposit a share certificate in a company with the plaintiff as security for the loan. Both parties knew that this agreement was illegal under the Exchange Control Act 1947 s.1(1) and signed documents to disguise this as a loan. The plaintiff later failed to supply the money and refused to return the share certificate. The defendant claimed for the return of his share certificate.

Issues:

The plaintiff argued that the contract for the loan was void because it was illegal. Therefore, the defendant could not enforce any of his rights under the agreement.  The general rule is that if the parties are in pari delicto, meaning they are equally at fault, the law favours the person resisting the claim.  However, the defendant argued that an exception to this rule applied, as he had withdrawn from the agreement before the illegal purpose is carried out.

Held:

The court found for the plaintiff. The contract was illegal and, therefore, void. At the time the contract was formed both parties were in pari delicto. However, Pritchard J said that there was a difference between withdrawing due to repentance and withdrawing simply because the contract was frustrated before it was carried out. Here, Bousted had not repented and withdrawn. The contract had simply been frustrated by the plaintiff’s refusal to carry it out. Consequently, Bousted could not recover his share certificate under the contract.