## Facts

- The case concerned a property transaction in which Ms. Grondona, a solicitor, acted for both the buyer and the lender.
- The transaction involved a fraudulent misrepresentation of the purchase price, with both the buyer and the solicitor colluding to secure a mortgage greater than the property's true value.
- Stoffel & Co, the claimant, provided legal services to Ms. Grondona and sought payment for services under a retainer agreement.
- At trial, it was found that Stoffel & Co had knowledge of the fraudulent arrangement but did not directly participate in the fraud’s execution.
- The Court of Appeal held the retainer agreement unenforceable due to Stoffel & Co’s involvement in the fraud.
- The Supreme Court applied the public interest factors approach established in Patel v Mirza to determine whether the agreement should be enforced despite the tainted circumstances.

## Issues

1. Whether the existence of fraudulent conduct (mortgage fraud) should render the retainer agreement unenforceable under the doctrine of illegality.
2. Whether Stoffel & Co’s knowledge of, but peripheral involvement in, the fraud was sufficient to bar a contractual claim.
3. How the public interest factors approach in Patel v Mirza should be applied in cases involving professionals with indirect involvement in illegal activity.

## Decision

- The Supreme Court found that denying enforcement of the retainer agreement would not substantially advance the policy purpose of preventing mortgage fraud, as Stoffel & Co’s involvement was peripheral.
- The Court determined that refusing the claim would be a disproportionate response to the claimant’s wrongdoing, as Stoffel & Co had not actively participated in the fraudulent scheme.
- It was held that to deny enforcement would result in a windfall for Ms. Grondona, who had benefited from the legal services.
- The Court concluded that enforcing the agreement would not create inconsistency or undermine the integrity of the legal system in this context.
- The public interest factors weighed in favour of allowing Stoffel & Co’s claim, and the contract was enforceable.

## Legal Principles

- The public interest factors approach, set out in Patel v Mirza, requires assessment of the prohibition’s purpose, proportionality of denying the claim, and potential inconsistency with legal system integrity.
- Mere knowledge, without active participation in illegality, may not be enough to bar a claim based on a tainted contract.
- The principle of proportionality must be considered when balancing deterrence of illegality against fairness in contractual enforcement.
- The flexible, policy-based analysis is favoured over rigid application of illegality to contract enforcement disputes.

## Conclusion

The Supreme Court reaffirmed that a flexible, policy-based public interest approach governs illegality in contract enforcement. Peripheral involvement in fraud, without active participation, does not automatically bar a claim; proportionality and the specific context are central to the analysis.


Stoffel & Co v Grondona [2020] UKSC 42