The Supreme Court of Cyprus recently ruled on the applicability of the doctrine ex turpi causa non oritur actio (‘from a dishonourable cause an action does not arise'), confirming the position that no one can benefit from their own illegal act. As long established in the English case Holman v. Johnson  1 Cowp 341, ‘no court will lend its aid to a man who founds his cause of action upon an immoral or illegal act'.
The case referred is Andronikou v Mavropoulou and Louizidou v Mavropoulou, Civil Appeals 14/2014 and 89/2014, judgment dated 30/9/2021 and relates to a claim brought for the recovery of an amount which the claimant paid to the defendant, who in turn represented to the claimant that such amount would be paid to intermediaries for the facilitation of an immovable property purchase transaction.
The first instance Court issued a judgment in favour of the claimant, which was overruled by effect of the Supreme Court's judgment (majority judgment 2-1).
According to the majority decision, it was a common ground and a matter admitted by the claimant that the amount paid, for which the action was pursued, was for an illegal purpose. On this basis, the Supreme Court confirmed that issues of illegal activities can be assessed by the Court on its own initiative if such arise from the facts of the case, irrespective of whether such matter is pleaded by the parties or not. Particular reference is made in the obligations of member states of the European Union to combat illegal activities, the Council Framework Decision 2003/568/JHA of 22 July 2003 on combating corruption in the private sector and the Ratifying Law on the Criminal Law Convention on Corruption of 2000 (Law 23(III)/2000), as amended. The Court further held that the test of proportionality in preventing unjust enrichment could not be applied in this case, given that the claimant knew and willingly participated in illegal activities.
Previous guidance on the matter which is reiterated in Andronikou is found in the reasoning of Christodoulou v. Antonius HMF Vraets (2009) 1 AAD 802, in which the Supreme Court confirmed that the general principle is that the Courts shall not allow the restitution of any benefit that emanates from an illegal contract, a principle that prevails over the need to prevent unjust enrichment as a matter of public policy.
Dissenting, the minority Supreme Court Judge held that no finding of an illegal act can be made in the present case as, on the basis of the evidence adduced at trial, it was never put forward that the suggested influence to complete the transaction aimed at deceiving or misleading the intermediary (developer company), which in any case willingly entered into the agreement nor that the employees or the officers of the intermediary were deemed to be acting or omitting to act in breach of any of their obligations. The judge differentiated the facts of the case from Christodoulou above, in which relevant evidence on illegality (illegal trading of diamonds) was adduced at trial. The judge went on to conclude that the proportionality test should be applied in this case and the defendant should not be allowed to ‘keep the fruits of his fraud', thus dismissing the appeal.
The judgment reiterates the established position of intolerance of illegal activities by the Courts and is a useful guide for cases in which issues of illegality are raised before the Cyprus Courts.