A law firm has failed to have a negligence claim overturned in the Supreme Court, despite the client having been involved in mortgage fraud. The case provides further guidance on when the ‘illegality defence’ can be used in negligence claims; known as ‘ex turpi causa’, it is intended to prevent wrongdoers from benefiting from their own illegal acts.
The solicitor admitted that it had negligently failed to register a property transfer for its client Ms Grondona, but argued that it was not liable to pay damages as its client had obtained a mortgage to buy the property fraudulently (see Brunel News November 2018).
Ms Grondona had conspired with her associate, Mr Mitchell, to gain him access to finance. She arranged a mortgage with Birmingham Midshires, which she had obtained after making a number of fraudulent misrepresentations to the lender.
Later Ms Grondona defaulted on her mortgage payments. When Birmingham Midshires pursued her for payment, she accused the solicitor of negligence for their failure to register the transfer of the property into her name.
The High Court and Court of Appeal both found in favour of Mrs Grondona and the case was sent to the Supreme Court to rule on the application of the ex turpi causa defence.
In making the decision, the Supreme Court needed to consider whether ruling in favour of Ms Grondona would be contrary to public policy because her claim was ‘tainted with illegality’ and whether denying the victim of a professional’s negligence could damage the coherence of the legal system. The Court unanimously agreed that that there was no direct link between the negligence of the solicitor and the fraudulent act of the client, so the ex turpi causa defence could not be used.
James Burgoyne, Director – Claims & Technical, Brunel Professions said: “This decision does not prevent professionals and their insurers using ex turpi causa to defend negligence claims, but it has become harder to successfully deploy the defence. The underlying issue is that the courts are not sympathetic to professionals avoiding responsibility for real errors, regardless of wider issues.”
Brunel Professions is a leading provider of professional indemnity insurance broking to the legal profession. To find out more call Mark Sommariva on 0203 475 3275.