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NEGLIGENCE AND THE 'ILLEGALITY' DEFENCE: STOFFEL & Co v GRONDONA [2020] (B2)

The Supreme Court of the United Kingdom has recently [30th October 2020] given another judgment in a case where a defendant in a negligence claim raised the defence of ‘illegality’.


The basic facts of the case are these. The Claimant, Ms Grondona, bought a ground-floor flat (apartment) in October 2002. She borrowed £76,000 by way of a mortgage from Birmingham Midshires (a mortgage lender) to do buy the flat. However, Ms Grondona had procured the mortgage by fraud.


A firm of solicitors – Stoffel & Co (Stoffel) - had acted for Ms Grondona in her purchase of the flat. However, Stoffel negligently failed to file a form at the Land Registry for the transfer of the property.


Ms Grondona later defaulted on her repayments under the mortgage. Birmingham Midshires brought legal proceedings against her. Ms Grondona then brought legal proceedings in negligence against Stoffel (for failing to file the form).


Stoffel’s defence was that they were entitled to rely on the defence of ‘illegality’; namely, that because Ms Grondona had procured the mortgage by fraud (which was illegal), then her claim against them was barred.


However, the Supreme Court held that Ms Grondona’s claim against Stoffel was not barred by illegality. In reaching that decision, the Supreme Court relied on the earlier legal authority of Patel v Mirza [2016] UKSC 42. This case set out a new policy approach to the defence of illegality. This policy was that in deciding whether a claim was ‘tainted by fraud’, the court must ask itself whether enforcing the claim would lead to an inconsistency which damages the integrity of the legal system.


The court had to consider:

1. The purpose of the illegality (here, the fraud) and whether the claim enhances the illegality;

2. Any other relevant public policy;

3. Whether denying the claim would be a ‘proportionate response’ to the illegality.


In this case, the Supreme Court held that enforcing the claim would not help Ms Grondona to profit from her fraud. However, in any case, that was no longer the only consideration for courts when deciding whether a claim was barred by a claimant’s illegal acts or behaviour.

Exercise

Match the following words from the text (1-10) with their meanings (a)-(j)

1. mortgage

2. procure

3. fraud

4. default

5. negligence

6. barred

7. tainted

8. integrity

9. enhance

10. proportionate

(a) to increase or further improve the quality of something.

(b) to fail to do something you should do (for example, pay for something), at the time you should do it.

(c) failure to exercise, in law, the right amount of care when doing (or possibly saying) something.

(d) something which is balanced and reasonable.

(e) to obtain or get something

(f) the state of being whole, undivided, and respected (because it has a valuable reputation)

(g) a wrongful act which is designed to deceive someone else, usually for financial gain

(h) a bad or undesirable quality (for example, because something is contaminated or polluted, or otherwise made imperfect.

(i) prevented or stopped from doing something by someone who has authority

(j) a legal agreement by which a bank or financial institution agrees to lend money to a borrower in order to buy a property (land or buildings.

ANSWER KEY

1(j)

2(e)

3(g)

4(b)

5(c)

6(i)

7(h)

8(f)

9(a)

10(d)

This article is intended for the purposes of education and study only. It is not intended to be a statement of law. If you need legal advice, you must always seek the advice of a lawyer.

© Cambridge Legal English Academy 2020

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