Judges should be given powers to use their discretion when tackling the illegality defence where property ownership is concealed for criminal purposes.
The Law Commission has recommended reform to trust law in a report published this week, The Illegality Defence.
The defence can be used by a defendant in a civil action to argue a claimant has forfeited their normal rights because they behaved illegally in a way that is connected to their claim. This defence stands even if both people knew about the illegal behaviour.
The commissioners recommend that courts should have discretionary powers to enforce a trust or confiscate property where a trust has been created to conceal a beneficiary’s interest. This would overcome the arbitrary consequences of the illegality defence.
David Hertzell, the Law Commissioner leading the project, says: “The intricacies of trust law can lead to arbitrary outcomes.
“Our recommended reforms would make the law clear and proportionate, and ensure that the consequences of a case would be related to its merits.”
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