What is “Ex Turpi Causa Non Oritur Actio” in Professional Negligence?
“Ex turpi causa non oritur actio” is a Latin maxim which has developed in the UK legal system which translates to English as “no action arises from a dishonourable cause.” It is a legal doctrine applied across many cases, including professional negligence claims, to ensure that the law does not provide relief to individuals seeking to benefit from their wrongful or illegal acts.
In professional negligence, this principle is particularly pertinent as it provides a potential defence to claims for professional negligence to prevent claimants from benefiting from their illegal actions. It also acts as a safeguard ensuring that if an individual or company engages in an illegal or unethical act, they cannot subsequently bring a professional negligence claim for any losses or damages arising directly from those illegal actions. This doctrine upholds the integrity of legal and professional standards by preventing individuals from profiting from or mitigating the consequences of their misconduct.
An example of “ex turpi causa” in professional negligence might involve a client who knowingly participates in a fraudulent scheme and then attempts to claim damages from the solicitor for losses incurred due to the scheme’s failure. The principle would typically bar such a claim, reflecting the legal system’s disapproval of profiting from one’s wrongdoing.
However, the doctrine does not originate from legislation but rather through common law. Its application has developed through case law. For instance, while not directly a case of professional negligence, Patel v Mirza is often discussed for its examination of the principles surrounding “ex turpi causa” (see further below). It reflects the nuanced approach Courts might take, considering broader public interests and the specifics of the case rather than applying a blanket rule to prevent claimants from pursuing claims for professional negligence.
Importance of Illegality in Professional Negligence Claims
The principle of illegality, emphasised by “ex turpi causa non oritur actio,” is central in professional negligence claims for several reasons.
Firstly, the principle acts as a deterrent against unethical behaviour. Claimants are less likely to engage in unlawful or immoral activities if they know that such actions preclude them from seeking legal remedies. This deterrent effect is vital in maintaining high standards of professional conduct and trust in various sectors, including law, healthcare, and finance.
Secondly, it preserves the integrity of the legal system. Allowing individuals to profit or recover losses from their illegal actions would undermine the justice system. The principle ensures that Courts are not seen as facilitating or endorsing immoral or illegal activities, maintaining public confidence in legal processes.
However, the application of the doctrine is not always straightforward and can vary depending on the specifics of each case. Courts often must balance the need to deter illegality and the desire to ensure that claimants have access to justice. They may consider factors such as the proximity of the claimant’s illegal action to their professional negligence claim, the seriousness of the illegal conduct, and whether denying the claim would be a proportional response to the illegality involved.
How Does Ex Turpi Causa Affect Professional Negligence Claims?
“Ex turpi causa non oritur actio” directly impacts claims of professional negligence by allowing professionals to raise a defence to a professional negligence claim.
When a professional is accused of negligence, the typical recourse is for the affected party to claim compensation for any loss or damage caused by the professional’s failure to meet the standard of care expected of them. However, if the claimant’s loss or damage arises from their own illegal or unethical conduct, the doctrine of ex turpi causa may be used as a defence to the professional negligence claim.
Illustrative Example of “Ex Turpi Causa Non Oritur Actio” in Professional Negligence Against Solicitors
Imagine a client is involved in a fraudulent business transaction and seeks the services of a solicitor for legal advice on completing the transaction. Despite being aware that the deal involves some element of tax evasion or fraudulent misrepresentation, the client proceeds with the transaction. Subsequently, the deal resulted in substantial financial loss for the client due to some negligence on the part of the solicitor in preparing the necessary documents.
The client decides to sue the solicitor for professional negligence, seeking compensation for the financial losses incurred. However, the solicitor raises the defence of “ex turpi causa non oritur actio,” arguing that the client cannot claim relief for damages arising from their own illegal or immoral conduct. In this case, the Court would need to consider the direct relationship between the client’s illegal activities and the negligence claim. If the Court finds that the client’s losses are primarily due to their involvement in illegal activity, the doctrine may prevent the client from recovering damages, even if the solicitor was negligent.
It is important to remember that the defence of ex turpi causa is nuanced and fact-specific. The Court will consider the conduct in question, the relationship between the illegal act and the professional’s negligence, and the underlying public policy considerations. The doctrine is not applied automatically but rather weighed against the need to provide justice and deter wrongful acts.
Requirements for Ex Turpi Causa as a Defence to Professional Negligence Claims
The application of “ex turpi causa non oritur actio” as a defence to professional negligence claims has developed through case law (see further below), and whilst each claim will be fact specific there are some key elements that the Court will carefully consider in assessing whether the Defence can apply including:
- The significance and intent behind the law the claimant has violated
- How closely the claimant’s wrongdoing is related to the negligence they are claiming.
- How closely linked the professional negligence is to the claimant’s illegal act
- The broader implications and public policy factors in allowing or denying the claim
- Ensuring the response to illegality is fair and not excessively punitive
- Whether the illegal conduct is a fundamental part of the professional service issue
Case Law on Ex Turpi Causa in Professional Negligence Claims
As explained the legal doctrine of “ex turpi causa non oritur actio” and its application has been developed over the years through case law. Several key cases have shaped the legal landscape regarding ex turpi causa in professional negligence, each highlighting different aspects of the doctrine’s application and boundaries.
Patel v Mirza [2016] UKSC 42 (agreement to commit insider trading)
Background
Although this was not a case of professional negligence, it provides useful insight into the Court’s application of “ex turpi causa non oritu actio”, and has become the leading case.
Mr Patel transferred a total of £620,000 to Mr Mirza to bet on the price of RBS shares (now NatWest Group) using insider information that Mr Mirza expected to obtain from his contacts at RBS. The transaction between them amounted to an agreement to commit the offence of insider dealing, which is illegal under section 52 of the Criminal Justice Act 1993. The insider information was never received, and the betting did not take place. Mr Patel sought to recover the money he had paid to Mr Mirza.
Issues
The Court had to consider whether “ex turpi causa non oritur actio” precluded Mr Patel from recovering the money paid under the contract from Mr Mirza under the law of unjust enrichment. The key issue was the legality of the underlying transaction and the ability of a Court to provide relief for an agreement tainted by illegality.
Decision
The Supreme Court, by a majority, allowed Mr Patel to recover the money. The Court deviated from the traditional “reliance test” used in cases involving illegality, which focused on whether the claimant had to rely on their illegal actions to establish their claim. Instead, the Court adopted a more flexible approach, considering the public policy implications of denying relief and whether allowing the claim would harm the integrity of the legal system.
The Court held that the law should allow restitution in such cases where the illegal purpose failed and did not materialise, emphasising that the purpose of the law of restitution is to restore parties to their original position and not to punish the claimant for their illegal intentions.
Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39 (auditor professional negligence)
Background
In Stone & Rolls Ltd v Moore Stephens, the claimant company, Stone & Rolls (S&R), was used by its sole director and shareholder, Mr Stojevic, to perpetrate fraud against banks which led to losses exceeding $94 million. The primary victim was Komercni Bank SA. Moore Stephens, the defendant in a professional negligence claim brought by S&R, were the auditors of S&R and were accused of professional negligence in failing to detect the fraud early enough.
Issues
The core issue, in this case, was whether the defence of “ex turpi causa non oritur actio” prevents S&R from claiming losses against its auditors, Moore Stephens. Specifically, the question was whether a company that has engaged in fraudulent activities through its directing mind can claim damages from its auditors for failing to detect such fraud, given that the fraud itself is the foundation of the claim. This led to a broader discussion on the application of the “ex turpi causa” principle, particularly in the context of a “one-man” company where the sole director and shareholder was involved in the wrongdoing.
Decision
The House of Lords held that “ex turpi causa” does provide a defence to the professional negligence claim in favour of the auditors. It was decided that in the circumstances of the case, where the company was used by its sole director and shareholder for fraud, the defence of “ex turpi causa” was applicable and thus prevented S&R from recovering losses from its auditors, Moore Stephens. The Court emphasised that “No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.” The reasoning was that the fraud was essentially the business of S&R carried on to benefit itself (even if eventually it led to its downfall), and therefore, the company could not escape liability or seek recovery for its fraudulent actions from the negligent auditors.
Gray v Thames Trains Ltd [2009] UKHL 33
Background
Mr Gray, a victim of the Ladbroke Grove rail crash caused by the negligence of Thames Trains and Railtrack plc. Mr Gray suffered minor physical injuries and significant psychological trauma, leading to PTSD. Under the influence of this disorder, he fatally stabbed a pedestrian and was consequently detained in a psychiatric hospital after pleading guilty to manslaughter on grounds of diminished responsibility.
While Thames Trains and others accepted liability for his initial injuries, contention arose over the extent of their liability, especially in relation to damages claimed post the manslaughter.
Issue
The pivotal issue was whether the principle of “ex turpi causa non oritur actio” prevented Mr Gray from claiming damages for losses incurred after his criminal act. Key to this was whether as a matter of public policy should a claimant from recovering damages that result directly from his own criminal actions, even when those actions were influenced by a defendant’s prior negligence.
Court of Appeal Decision
The Court of Appeal had a split decision on this matter. They agreed with the principle that public policy prevented Mr Gray from claiming general damages related to the consequences of his criminal act (the killing). However, they allowed the claim for loss of earnings during his detention, differentiating this from the act of manslaughter itself. Their rationale was that Mr Gray’s earning capacity had been destroyed by the defendant’s negligence before the manslaughter occurred, thus making the appellants liable for loss of earnings, as it was seen as a direct result of the initial negligence and not the criminal act.
House of Lords Decision
However, the House of Lords (as it was then known) disagreed with the Court of Appeal, particularly on the loss of earnings claim. They emphasised that the criminal act of manslaughter was a voluntary and deliberate act by Mr Gray, and while PTSD might have diminished his responsibility, it did not extinguish it.
The Lords held that the principle of “ex turpi causa” indeed precludes recovery for both loss of earnings and general damages after and consequent to the killing. They reasoned that the entire sequence of events leading to the damages claimed were interrupted by the criminal act, which was a significant and independent factor. Therefore, Mr Gray could not recover damages for losses that were a consequence of his own criminal act, maintaining the stance that the law does not assist an individual to benefit from their wrongful deeds.
Stoffel & Co v Maria Grondona [2018] EWCA Civ 2031 (mortgage fraud conveyancing negligence)
Background
In Stoffel & Co v Grondona, the dispute concerned a leasehold property located at 73b Beulah Road, Thornton Heath, Surrey CR7 8JG. In October 2002, Ms Maria Grondona sought to purchase the leasehold interest in the property from Mr Mitchell for £90,000. This transaction was financed by an advance of £76,500 from Birmingham Midshires, intended to be secured by a charge over the property.
Stoffel & Co solicitors were engaged to manage the conveyance of this transaction for all parties involved. However, due to their failure to register the Land Registry transfer document form (TR1), legal charge, and a Land Registry cancellation of entries for lenders form (DS1), the property remained in Mr Mitchell’s name with the existing charge. This error led to complications when Ms Grondona defaulted on the mortgage payments, and Birmingham Midshires sought recovery.
Issues
There were two main issues that the Court had to consider:
- Illegality in Transaction: It emerged during the proceedings that Ms Grondona was a participant in an illegal mortgage fraud designed to obtain monies for Mr Mitchell. The key issue was whether her involvement in this fraud precluded her from recovering damages against Stoffel & Co based on the principle of “ex turpi causa non oritur actio”.
- Quantum of Damages: The secondary issue concerned the method of calculating the quantum of damage: whether it should be based on the loss in the property’s value due to negligence or the claimant’s ongoing debt obligation to Birmingham Midshires.
Decisions
There were several decisions and appeals concerning this professional negligence claim:
- First Instance Decision: The judge at the first instance found in favour of the claimant, awarding her damages of £78,000 plus interest. The court rejected the application of “ex turpi causa” raised by the law firm and allowed Ms Grondona to claim damages for the negligence and breach of duty by Stoffel & Co, despite her involvement in the illegal mortgage fraud. The damages were calculated based on the loss in the property’s value at the time of the negligent act.
- Appeal and Cross-Appeal: Stoffel & Co however appealed the decision, arguing that the claim should be barred due to the illegal conduct of Ms Grondona. Ms Grondona also cross-appealed contending that her damages should be calculated based on her ongoing indebtedness to Birmingham Midshires, not just the property’s diminished value.
- Appeal Court Decision: The Court of Appeal dismissed both the appeal and the cross-appeal. The court upheld the decision to award damages to Ms Grondona of £78,000, reinforcing that the negligence and breach of duty by Stoffel & Co were separable from the illegal mortgage agreement. The court agreed with the initial judgment that the damages should be based on the loss in the property’s value, not the total ongoing liabilities or losses incurred by Ms Grondona.
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