Alexander v Rayson

Alexander v Rayson [1936] 1 KB 169

Illegality includes lawful contracts made for unlawful purposes.

Facts

The plaintiff, Alexander, agreed to rent a flat in Piccadilly to the defendant, Mrs. Rayson, at a rent of £1200 a year. This included the provision of certain services by the plaintiff. However, in order to reduce the rateable value in the eyes of the local council, the agreement was effected by two documents. The first was a lease of the flat for a rent of £450 a year. The second was an agreement to render services which were virtually the same as under the lease for £750 a year. When Rayson refused to pay some of the rent the plaintiff sued her. At first instance, the trial judged held that the contract was lawful and there was no intention to perform it in an unlawful manner. The defendant appealed. 

Issues

The defendant argued that the agreement should be void for illegality because it had an illegal object. By splitting the agreement into two parts the plaintiff hoped to defraud the local council by convincing them that the rateable value of the premises was lower than it actually was. Therefore, the agreement should be void as it was contrary to public policy.

Decision/Outcome

The Court of Appeal allowed the appeal and found for the defendant. It was obvious that the plaintiff intended to commit fraud against the council. The attempt only failed because the defendant disclosed the matter. The court held that where a contract was intended to be used for an unlawful purpose courts will not enforce it.