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Testing the limits of illegality as a defence to civil claims: the Supreme Court decisions in Henderson v Dorset Healthcare University NHS Foundation Trust and Stoffel & Co v Grondona

This week the Supreme Court handed down judgments in two cases concerned with the defence of illegality. The factual background to the two cases was strikingly different. Miss Henderson stabbed her mother to death during a psychotic episode when the Defendant NHS Trust negligently delayed following up on her psychiatric condition. She was convicted of manslaughter by reason of diminished responsibility and made the subject of a hospital order.

By contrast Miss Grondona entered into a mortgage fraud under which she was to acquire legal title to a residential property. Her solicitors then negligently failed to register her title with the Land Registry.

Both Claimants sued for negligence (although in Grondona the claim was brought concurrently in contract). Both Defendants raised defences of illegality against these claims contending that they should be dismissed as a result of the Claimant’s criminal behaviour. Yet before almost identical panels of the Supreme Court and in judgments given on Friday of last week Ms Grondona succeeded whilst Miss Henderson failed. What does this tell us about the ambit of illegality as a defence to civil claims?

The elephant in the room was the earlier decision in Patel v Mizra [2017] AC 467 where the Supreme Court divided 6-3 in favour of a broad, policy approach to the scope of the illegality defence. In that case Lord Toulson, writing for the majority, identified a “trio of considerations” – (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 the denial of the claim; and (c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality. This contrasted with the previously understood position that the question for the Court was whether the Claimants’ cause of action was substantially reliant upon the unlawful conduct.

Lord Sumption delivered a trenchant dissenting judgment in which he accused the majority (probably correctly) of ushering in a broad discretion which would allow the Courts to reject illegality defences whenever they saw fit with scant regard for principle.

Unsurprisingly the Claimants in both Henderson and Grondona sought to use the majority’s reasoning in Patel to defeat the illegality defences raised against them. Miss Henderson contended that, sentenced only to a hospital order (rather than a term of imprisonment) she had no significant personal responsibility for killing her mother. She argued that it was absurd to suggest that she might have been deterred from doing so by the thought of being unable to recover compensation in a subsequent civil claim. In addition it was contended that allowing her civil claim would encourage the NHS to care competently for psychiatric patients.

Ms Grondona, arguing along similar lines, contended that mortgage fraudsters would not be deterred by the risk that they would be left without civil remedies if their conveyancers were negligent. She argued that there was a countervailing public policy consideration in favour of ensuring that negligent solicitors are obliged to compensate those whom they causes losses by their errors.

The outcomes of the appeals in both cases appear to be tacit recognition that the majority in Patel may have gone too far and that, on reflection, a reliance or causation test may have some value in this area of the law after all. In Henderson Lord Hamblen was at pains to stress that the first of Lord Toulson’s trio of considerations needed to be applied by reference to general policy considerations, not least the impact on consistency of the law and the integrity of the legal system generally. In this context the closeness of the connection between the claim and the illegal act may well be of relevance. Furthermore he stressed that the third consideration was intended to be a disproportionality check, rather than a positive proportionality requirement.

Circumscribing the Patel approach in this way enabled the Court to achieve the desired results. In Henderson there was an obvious direct link between the killing of the Claimant’s mother, the subsequent hospital order and the damage for which she sought to recover compensation. By contrast in Stoffel the mortgage fraud had already been completed when the solicitor’s negligence occurred and at least equitable title in the property had passed to the Claimant. In the circumstances the illegality was not central to the breach of duty about which the Claimant complained.

Critics of results based jurisprudence will note that in Grondona the Defendant was insured whereas in Henderson the NHS stood to pick up the compensation bill. Even if that is an unfair criticism the elegant manoeuvres to confine Patel and the introduction of the new “centrality” test suggests that, perhaps not for the first time this year, Lord Sumption had the better of the argument.

 

Written by Matthew Boyle.



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