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Equity and Clean Hands

Kim v Choi 2019 BCSC 437 involved a plaintiff seeking the equitable remedy of restitution against unscrupulous immigration consultants and discussed the necessity of coming to court with “clean hands” based on the legal doctrine of “ex turpi causa”.

Closely related to ”clean hands”, the doctrine of “ ex turpi causa non oritur action” which means no cause of action will arise from a base cause. The law presumptively will not lend its assistance to a person who is tainted by illegality.

Traditionally, the doctrine has been applied rigidly, but that approach in recent years has been relaxed and the public policy analysis now requires a balancing test. That is not to say that the court will likely provide relief for an aggrieved party to an illegal agreement.

In JTL v RGL 2010 BCSC 1233 at paragraphs 113 – 116 the court reviewed the rationale for “ex turpi causa” and stated that the doctrine rested on the need to preserve the integrity of the judicial system.

The court pose the practical question as whether it would be manifestly unacceptable to fair-minded or right-thinking people that a court should lend assistance to a plaintiff who has defied the law

The court continued that the doctrine was justified were allowing the plaintiff’s claim would introduce inconsistency into the fabric of the law either by permitting the plaintiff to permit from a legal or wrongful act or evade the penalty prescribed by criminal law . Hall v Hebert (1933) 2 SCR 159.

In Daemore v Von Windheim 2011 BCSC 1523, the court refused to grant restitution where one party has secured an unjust windfall acquired through illegal activity.

The facts in that case are interesting. The parties were married and had for years engaged in criminal activities. The wife and specialized in credit card fraud, mortgage fraud and money laundering, whereas the husband preferred to involve himself in prostitution and drug trafficking.

The court held that even if there was a windfall or unjust enrichment, those considerations did not outweigh the parties unlawful conduct.

The Daemore comments are helpful, and confirming the modern approach of providing some discretion as to whether the doctrine of ex turpi caqusa should be invoked. That discretion depends on the particular circumstances.

The balancing exercise to Maine statutory policy against the desire to prevent a windfall or unjust enrichment claim was illustrated in Tsoi v Lai 2012 BCSC 1082 where the court held that the concerns of a windfall or unjust enrichment overrode his concern about illegality.

In Tsoi the plaintiff sought to recover monies that he had advanced to the defendant, who operated a gambling business, and legally loaned money to his gamblers at exorbitant interest rates. That type of business was illegal under the criminal code.

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