Tinsley v Milligan

Factual and Procedural Background

The Appellant and the Respondent were in a personal relationship and operated a lodging-house business together. They purchased a residential property using joint funds and a bank mortgage, but—by joint agreement—registered the legal title solely in the Appellant’s name. The registration arrangement was intended to assist the Respondent in making fraudulent benefit claims on The Department.

After their relationship ended, the Appellant sought possession of the property, contending sole ownership. The Respondent counter-claimed, asserting that the Appellant held the house on trust for them both in equal shares. A county court judge found for the Respondent. The Court of Appeal, by majority, affirmed that decision. The Appellant obtained leave to appeal to the House of Lords, where five Law Lords heard the matter on 25, 26, 30 November 1992 and delivered judgment on 24 June 1993.

Legal Issues Presented

1. Whether an equitable interest arising under a resulting trust is defeated when the property was placed in one party’s name to facilitate a fraud.
2. Whether a claimant who can prove a beneficial interest without relying on the underlying illegality is nevertheless barred from relief by the maxim that one must come to equity with clean hands.

Arguments of the Parties

Appellant's Arguments

• The Respondent’s claim is barred because the property was put in the Appellant’s sole name to perpetrate a fraud; equity will not assist a claimant with “unclean hands.”
• Authorities such as Gascoigne v. Gascoigne and Tinker v. Tinker establish a rigid rule that equitable relief is unavailable where the claimant’s interest derives from an unlawful purpose.
• The Court of Appeal erred in adopting a “public conscience” or discretionary approach inconsistent with long-standing precedent.

Respondent's Arguments

• The Respondent can prove a resulting trust through contribution to the purchase price; doing so does not require reliance on the illegality.
• Modern authority recognises that property “lies where it falls” once an illegal transaction is executed; therefore the equitable interest remains intact.
• The Appellant, not the Respondent, invoked the illegality; under the Bowmakers principle a defendant cannot rely on illegality merely as a shield when the claimant’s case can be proved independently of it.

Table of Precedents Cited

Court's Reasoning and Analysis

The Law Lords divided sharply.

Majority (Judge Jauncey, Judge Lowry, Judge Browne-Wilkinson)

• A resulting trust arose when both parties contributed to the purchase price; that equitable interest vested immediately.
• The Respondent could establish her interest without pleading the unlawful purpose; she relied solely on financial contribution and common intention.
• Where a claimant need not invoke the illegality, equity will enforce the proprietary right—mirroring the common-law position illustrated by Bowmakers.
• Lord Eldon’s 19th-century rule (that equity never aids a party to an illegal purpose) has been overtaken by the modern, unified approach to legal and equitable property rights.
• Permitting the Appellant to rely on the fraud would unjustly confer full ownership on an equally culpable party.

Dissent (Judge Keith, Judge Goff)

• Maintained that a two-century line of authority bars equitable relief where the claimant’s title is tainted by fraud, regardless of evidential reliance.
• Warned that discretionary or flexible approaches (“public conscience” or Bowmakers rationale) undermine certainty and invite courts to condone illegality.
• Considered any reform of the strict rule a matter for legislation, not judicial innovation.

Holding and Implications

APPEAL DISMISSED. The House of Lords, by a 3–2 majority, affirmed the Court of Appeal’s order. The Respondent was declared a beneficiary of the property in equal shares with the Appellant, and both parties’ costs were ordered to be taxed under the Legal Aid Act 1988.

Implications: The decision confirms that a claimant who can establish a proprietary interest without relying on an underlying illegal purpose is entitled to equitable relief. It narrows the reach of older authorities that imposed an absolute bar and aligns equitable principles with the common-law rule that “property lies where it falls.” While not abolishing the clean-hands doctrine, the ruling limits its application to cases where the claimant must affirmatively invoke the illegality.