Dear All,

The UKSC has today handed down judgment in two cases hear in May of this
year: Stoffel, and Henderson.

The UKSC dismissed both appeals. The result was that the illegality
defence was not allowed in Stoffel but was used in Henderson. Patel v
Mirza was applied, and, at the least, clarified, and perhaps, widened.

1. "Stoffel"

https://www.supremecourt.uk/cases/docs/uksc-2018-0187-judgment.pdf

Heard by 5 justices, where a claim was not barred by illegality in
connection with a fraudulent mortgage transaction.

A property was privately sold for what might have been three times its
value, with money obtained from Birmingham Midshires by fraud to do so.
This was to benefit the seller, Mitchell. However, the negligence of the
appellant solicitors, Stoffel, meant that the lease was not transferred
to the respondent, Grondona. When the respondent stopped paying a few
years later, Birming Midshires sued Grondona for a money judgment.
Grondona claimed against Stoffel. In the end, Mitchell appears to have
died, and the property was sold. Birmingham Midshires sued and settled
against the mortgage company that had, by the error, retained its
charge, and against Stoffel. Birmingham Midshires then also obtained a
£70,000 judgment against Grondona. Grondona won £78,000 from Stoffel at
first instance, and appeals to the CA and UKSC were dismissed.

In short, while the underlying transaction was obtained fraudulently,
using another's name to help to raise capital finance, the negligence of
the solicitors in failing to convey the property to the person whose
name was used was still actionable by her (in tort, or in contract as a
breach of retainer).

2. "Henderson"

https://www.supremecourt.uk/cases/docs/uksc-2018-0200-judgment.pdf

Heard by 7 justices, where a claim for losses flowing from killing the
claimant's own mother while under diminished responsibility, when the
NHS Trust admitted negligence in failing to return the claimant to
psychiatric care, was denied on grounds of illegality. The appeal had
been framed around Gray not applying, Patel's balancing exercise not
permitting Gray's harder line, and if those two failed, that Patel's
test should be amended to prevent Gray. The appeal failed, and the court
restated Gray v Thames Trains somewhat. Small note, list member James
Goudkamp appeared as junior counsel for the respondent NHS.


Both cases saw an application of the approach to illegality in Patel v
Mirza. The key section is here:

At [100], Lord Toulson stated the underlying policy question to be:
“…whether allowing recovery for something which was illegal would
produce inconsistency and disharmony in the law, and so cause damage to
the integrity of the legal system.”

[101] He gave the considerations as: “(a) considering the underlying
purpose of the prohibition which has been transgressed, (b) considering
conversely any other relevant public policies which may be rendered
ineffective or less effective by denial of the claim, and (c) keeping in
mind the possibility of overkill unless the law is applied with a due
sense of proportionality.”

[107] for assessing proportionality he acknowledged the then Professor
Burrows' list of factors as helpful, but did not want to lay down a
definitive list.


It seems likely that the UKSC hopes this will be the last illegality
decision for a while, but who knows? We've had a handful of UKSC cases
in the last decade just on this topic. Henderson is arguably within the
recent trend to row back on or restate limitations to tort liability
somewhat too.

All best wishes,

Matt

--
Associate Professor, Faculty of Law, University of Oxford
matthew.dyson@law.ox.ac.uk