This Act may be cited as the Illegal Contracts Act 1970.
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Interpretation
In this Act, unless the context otherwise requires,—
Act means any Act of the Parliament of New Zealand; and includes any Act of the Parliament of England, of the Parliament of Great Britain, or of the Parliament of the United Kingdom, which is in force in New Zealand
Act: The words “Parliament of New Zealand” were substituted, as from 1 January 1987, for the words “General Assembly” pursuant to section 29(2) Constitution Act 1986 (1986 No 114).
Court means, in relation to any matter, the court, tribunal, or arbitral tribunal by or before which the matter falls to be determined
Court: this definition was substituted, as from 1 March 1989, by section 77 Disputes Tribunals Act 1988 (1988 No 110).
Court: this definition was substituted, as from 19 December 2002, by section 3 Illegal Contracts Amendment Act 2002 (2002 No 82).
Enactment means any provision of any Act, regulations, rules, bylaws, Order in Council, or Proclamation; and includes any provision of any notice, consent, approval, or direction which is given by any person pursuant to a power conferred by any Act or regulations
Property means land, money, goods, things in action, goodwill, and every valuable thing, whether real or personal, and whether situated in New Zealand or elsewhere; and includes obligations, easements, and every description of estate, interest, and profit, present or future, vested or contingent, arising out of or incident to property.
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Illegal contract defined
Subject to section 5 of this Act, for the purposes of this Act the term illegal contract means any contract governed by New Zealand law that is illegal at law or in equity, whether the illegality arises from the creation or performance of the contract; and includes a contract which contains an illegal provision, whether that provision is severable or not.
Section 3 was amended, as from 19 December 2002, by section 4 Illegal Contracts Amendment Act 2002 (2002 No 82) by inserting the words “governed by New Zealand law” after the words “means any contract”.
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Act to bind Crown
This Act shall bind the Crown.
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Breach of enactment
A contract lawfully entered into shall not become illegal or unenforceable by any party by reason of the fact that its performance is in breach of any enactment, unless the enactment expressly so provides or its object clearly so requires.
Notwithstanding any rule of law or equity to the contrary, but subject to the provisions of this Act and of any other enactment, every illegal contract shall be of no effect and no person shall become entitled to any property under a disposition made by or pursuant to any such contract:
Provided that nothing in this section shall invalidate—
(a)
Any disposition of property by a party to an illegal contract for valuable consideration; or
(b)
Any disposition of property made by or through a person who became entitled to the property under a disposition to which paragraph (a) of this proviso applies—
if the person to whom the disposition was made was not a party to the illegal contract and had not at the time of the disposition notice that the property was the subject of, or the whole or part of the consideration for, an illegal contract and otherwise acts in good faith.
(2)
In this section, disposition means—
(a)
any conveyance, transfer, assignment, settlement, delivery, payment, or other alienation of property, whether at law or in equity:
(b)
the creation of a trust:
(c)
the grant or creation of any lease, mortgage, charge, servitude, licence, power, or other right, estate, or interest in or over any property, whether at law or in equity:
(d)
the release, discharge, surrender, forfeiture, or abandonment, at law or in equity, of any debt, contract, or thing in action, or of any right, power, estate, or interest in or over any property; and for this purpose a debt, or any other right, estate, or interest, shall be deemed to have been released or surrendered when it has become irrecoverable or unenforceable by action through the lapse of time:
(e)
the exercise of a general power of appointment in favour of any person other than the donee of the power:
(f)
any transaction entered into by any person with intent thereby to diminish, directly or indirectly, the value of that person's own estate and to increase the value of the estate of any other person.
Section 6(2): substituted, on 3 December 2007, by section 445 of the Insolvency Act 2006 (2006 No 55).
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Court may grant relief
(1)
Notwithstanding the provisions of section 6 of this Act, but subject to the express provisions of any other enactment, the Court may in the course of any proceedings, or on application made for the purpose, grant to—
(a)
Any party to an illegal contract; or
(b)
Any party to a contract who is disqualified from enforcing it by reason of the commission of an illegal act in the course of its performance; or
(c)
Any person claiming through or under any such party—
such relief by way of restitution, compensation, variation of the contract, validation of the contract in whole or part or for any particular purpose, or otherwise howsoever as the Court in its discretion thinks just.
(2)
An application under subsection (1) of this section may be made by—
(a)
Any person to whom the Court may grant relief pursuant to subsection (1) of this section; or
(b)
Any other person where it is material for that person to know whether relief will be granted under that subsection.
(3)
In considering whether to grant relief under subsection (1) of this section, and the nature and extent of any relief to be granted, the Court shall have regard to—
(a)
The conduct of the parties; and
(b)
In the case of a breach of an enactment, the object of the enactment and the gravity of the penalty expressly provided for any breach thereof; and
(c)
Such other matters as it thinks proper,—
but shall not grant relief if it considers that to do so would not be in the public interest.
(4)
The Court may make an order under subsection (1) of this section notwithstanding that the person granted relief entered into the contract or committed an unlawful act or unlawfully omitted to do an act with knowledge of the facts or law giving rise to the illegality, but the Court shall take such knowledge into account in exercising its discretion under that subsection.
(5)
The Court may by any order made under subsection (1) of this section vest any property that was the subject of, or the whole or part of the consideration for, an illegal contract in any party to the proceedings or may direct any such party to transfer or assign any such property to any other party to the proceedings.
(6)
Any order made under subsection (1) of this section, or any provision of any such order, may be made upon and subject to such terms and conditions as the Court thinks fit.
(7)
Subject to the express provisions of any other enactment, no Court shall, in respect of any illegal contract, grant relief to any person otherwise than in accordance with the provisions of this Act.
Subsection (3) was amended, as from 19 December 2002, by section 5 Illegal Contracts Amendment Act 2002 (2002 No 82) by inserting the words “, and the nature and extent of any relief to be granted,” after the words “under subsection (1) of this section”.
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Restraints of trade
(1)
Where any provision of any contract constitutes an unreasonable restraint of trade, the Court may—
(a)
Delete the provision and give effect to the contract as so amended; or
(b)
So modify the provision that at the time the contract was entered into the provision as modified would have been reasonable, and give effect to the contract as so modified; or
(c)
Where the deletion or modification of the provision would so alter the bargain between the parties that it would be unreasonable to allow the contract to stand, decline to enforce the contract.
(2)
The Court may modify a provision under paragraph (b) of subsection (1) of this section, notwithstanding that the modification cannot be effected by the deletion of words from the provision.
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Jurisdiction of District Courts
[Repealed]
The words “District Court” were substituted, as from 1 April 1980, for the words “Magistrate's Court” pursuant to section 18(2) District Courts Amendment Act 1979 (1979 No 125).
Subsection (1)(b) was amended, as from 1 April 1980, by section 16(1) District Courts Amendment Act 1979 (1979 No 125) by substituting the expression “$12,000” for the expression “$2,000”.
Subsection (1)(b) was amended, as from 13 November 1989, by section 10(1) District Courts Amendment Act 1989 (1989 No 107) by substituting the expression “$50,000” for the expression “$12,000”.
Subsection (1)(b) was amended, as from 1 July 1992, by section 19(1) District Courts Amendment Act 1991 (1991 No 61) by substituting the expression “$200,000” for the expression “$50,000”.
In subsections (1)(c) and (2) the references to the District Courts Act 1947 were amended, as from 1 April 1980, by substituting the word “District” for the word “Magistrates'” pursuant to section 2(3) District Courts Amendment Act 1979 (1979 No 125).
Sections 9 and 9A were repealed, as from 19 December 2002, by section 6 Illegal Contracts Amendment Act 2002 (2002 No 82).
9A
Jurisdiction of Disputes Tribunals
[Repealed]
Section 9A was inserted, as from 1 November 1976, by section 45 Small Claims Tribunals Act 1976 (1976 No 35).
The original subsections (1)(b), (2)(a) and (2)(c) were amended, as from 8 March 1985, by section 2 Illegal Contracts Amendment Act 1985 (1985 No 24) by substituting the expression “$1,000” for the expression “$500”.
Section 9A was substituted, as from 1 March 1989, by section 78 Disputes Tribunals Act 1988 (1988 No 110).
Section 9A was amended, as from 3 July 1998, by section 10 Disputes Tribunals Amendment Act 1998 (1998 No 84) by substituting the expression “$7,500” for the expression “$3,000”. Subsection (3) was amended by section 10 of that Act by substituting the expression “$12,000” for the expression “$5,000”.
Sections 9 and 9A were repealed, as from 19 December 2002, by section 6 Illegal Contracts Amendment Act 2002 (2002 No 82).
This Act shall apply to contracts whether made before or after the commencement of this Act:
Provided that nothing in section 6 of this Act shall apply to contracts made before the commencement of this Act.
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Savings
(1)
Except as provided in section 8 of this Act, nothing in this Act shall affect the law relating to:
(a)
Contracts, or provisions of contracts, which are in restraint of trade; or
(b)
Contracts, or provisions of contracts, which purport to oust the jurisdiction of any Court, whether that Court is a court within the meaning of this Act or not.
(2)
[Repealed]
(3)
Nothing in this Act shall affect the rights of the parties under any judgment given in any Court before the commencement of this Act, or under any judgment given on appeal from any such judgment, whether the appeal is commenced before or after the commencement of this Act.
Subsection (2) was repealed, as from 3 October 1975, by section 6(7) Domestic Actions Act 1975 (1975 No 53).
