In the case of Stoffel & Co. v Maria Grondona (2020) the Supreme Court once again considered if a defendant can rely on the defence of ex turpi causa (the illegality defence that a claimant should not be able to pursue a cause of action which is based on their own immoral or illegal act). This time, the Court considered the defence in the context of a professional negligence claim against a firm of solicitors.
Stoffel & Co. acted for Ms Grondona and her lender in relation to the purchase of a property in circumstances where the mortgage was obtained by fraud. Ms Grondona sued her solicitors because they negligently failed to clear the existing charge against the property, and register Ms Grondona’s purchase and her lender’s charge.
The Supreme Court dismissed Stoffel & Co.’s appeal. The Court noted that the fraud had taken place before the negligence complained of and that Ms Grondona was not seeking to profit from bringing her claim, but instead attempting to recover losses suffered as a result of her solicitors’ negligence. By permitting Ms Grondona’s claim, the Court did not consider that the deterrence of mortgage fraud would be significantly undermined. Furthermore, Ms Grondona had an interest in the property and permitting conveyancers to escape liability for negligence ran contrary to public policy. By allowing Ms Grondona’s claim, the Court did not consider it would result in an inherent contradiction that would harm the integrity of the legal system.
Some takeaway thoughts
The Supreme Court’s decision is unlikely to pave the way for fraudsters to make successful claims against their solicitors – the Court merely adopted the approach that they set out and applied in their earlier decision of Patel v Mirza (2016). One can envisage possible circumstances where a fraud occurs during the course of a law firm’s (or other professional’s) retainer and is operative upon them, or where the fraud is more obviously linked to the alleged negligence. In such circumstances, the illegality defence could well succeed. It is therefore still a defence that law firms and other professionals and their insurers should keep in mind.