Stoffel & Co v Grondona

LORD LLOYD-JONES: (with whom Lord Reed, Lord Hodge, Lady Black and Lady Arden agree)

1.                   The decision of the Supreme Court in Patel v Mirza [2016] UKSC 42; [2017] AC 467 is a significant development in the law relating to illegality at common law. It has resolved a period of considerable uncertainty during which conflicting views have been expressed in the Supreme Court as to the appropriate approach and the direction the law on the subject should take (Hounga v Allen (Anti-Slavery International intervening) [2014] UKSC 47; [2014] 1 WLR 2889; Les Laboratoires Servier v Apotex Inc [2014] UKSC 55; [2015] AC 430; Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23; [2016] AC 1). In Patel v Mirza a majority of the Supreme Court rejected the reliance principle as applied in Tinsley v Milligan [1994] 1 AC 340, whereby relief was refused to parties who had to rely on their own illegality to establish their case. In its place, the majority adopted a more flexible approach which openly addresses the underlying policy considerations involved and reaches a balanced judgment in each case, and which also permits account to be taken of the proportionality of the outcome. The present appeal raises issues as to the application of the new policy-based approach outlined in Patel v Mirza in the context of a claim for negligent breach by a solicitor of his retainer, a concurrent claim in breach of contract and in tort.

Factual background

2.                   On or about 1 March 2000, Ms Maria Grondona (“the respondent”) entered into an agreement (“the 2000 agreement”) with Mr C L Mitchell (“Mitchell”), with whom she had a business relationship, relating to four properties: 73b Beulah Road; 362 High Road, “Tottingham” (sic); and 12 and 12A Cator Road. The 2000 agreement provided:

“I Maria Grondona agree to have in my name mortgage loans in the above mentioned properties with the understanding and agreement that Mr CL Mitchell of Flat 2, 2 Silverdale, London SE26 4SZ will carry out the following tasks:

(1)       To pay all monthly mortgages on each of the properties as and when they become due

(2)       Receives from the tenants in these properties the due rents

(3)       Carry out all repair work on the properties

(4)       Deals with all the financial matters on these properties

(5)       Decides when to sell all or any of these properties

(6)       Mr Mitchell to pay to me 50% of the net profit when any of the above properties are sold.

This is a binding agreement enforceable by law between Mr Mitchell and myself.”

3.                   On 27 November 2001 the freehold of 73 Beulah Road, Thornton Heath was purchased by Ms Loretta Hedley for £82,000 with the assistance of finance from BM Samuels Finance Group plc (“BM…