Also known as: Grondona v Stoffel and Co
Court: U.K. Supreme Court
Judgment Date: 30 October 2020
Where Reported: [2020] UKSC 42; [2021] A.C. 540
Legal Issues in Stoffel v Grondona
The legal issue in Stoffel v Grondona revolves around the application of the illegality principle in a case of professional negligence.
Stoffel v Grondona examined whether a claimant’s involvement in an illegal mortgage fraud precludes recovery against a defendant for professional negligence.
The case tests the boundaries of the principle “ex turpi causa non oritur actio” (from a dishonorable cause, an action does not arise) in the context of a solicitor’s failure to properly execute and register legal documents.
Material Facts in Stoffel v Grondona
Maria Grondona entered into a fraudulent mortgage arrangement with Mr. Mitchell, where she agreed to have mortgage loans in her name for properties managed by Mitchell.
Grondona purchased a leasehold interest in a property from Mitchell, financed by a loan from Birmingham Midshires.
Stoffel & Co, the solicitors, were responsible for handling the legal aspects of this transaction.
However, they failed to register the transfer document (TR1), the legal charge, and the cancellation of entries for lenders form (DS1) with the Land Registry.
This negligence led to Grondona being unable to sell the property to satisfy her mortgage debt. Grondona defaulted on the mortgage payments, leading to legal proceedings against her by Birmingham Midshires.
Grondona then brought a Part 20 claim against Stoffel & Co for negligence and breach of contract.
Judgment in Stoffel v Grondona
The Court of Appeal found in favour of Grondona. It was held that Stoffel & Co’s professional negligence in failing to register the necessary documents resulted in Grondona losing the property as security for the mortgage loan.
The court determined that Grondona’s involvement in the mortgage fraud did not preclude her from recovering damages for the solicitor’s negligence.
The judge calculated the damages based on the value of the unencumbered property as at the time the negligence was apprehended, rather than the total ongoing indebtedness to the Bank of Scotland.
The Reason for the Decision in Stoffel v Grondona
The court’s decision was influenced by the principle that the illegality of a claimant’s actions does not automatically bar recovery in cases of professional negligence.
The key consideration was whether Grondona needed to rely on her illegal conduct to establish her claim. The court found that she did not; her claim was based on the solicitor’s failure to perform their legal duties correctly.
The court applied the test from Patel v Mirza, considering the seriousness of the illegality, the underlying purpose of the prohibition violated, and the impact of denying the claim on public policy.
The court concluded that denying Grondona’s claim would be disproportionate and would not enhance the purpose of the prohibition against mortgage fraud.
It was also noted that the illegal conduct was not central to the contract of retainer between Grondona and Stoffel & Co, and that Grondona did not seek to profit from the fraud but to extricate herself from the transaction.
Legal Principles in Stoffel v Grondona
Stoffel v Grondona reinforces the principle that involvement in illegal activity does not necessarily preclude a party from seeking redress for an independent wrong, such as professional negligence.
The case illustrates the application of the test from Patel v Mirza in determining whether the illegality defence applies.
It emphasises the importance of considering the connection between the illegal conduct and the claim, the seriousness of the illegality, and the impact on public policy of allowing or denying the claim.
This judgment highlights the court’s role in balancing the need to deter illegal conduct against ensuring that professional negligence is appropriately remedied.
