Background
Grosvenor Property Developers Limited raised money to acquire and convert a Bristol hotel into student accommodation, but entered liquidation after its de jure and de facto directors fraudulently misappropriated approximately £7 million. Funds totaling £2.399 million beneficially belonging to GPDL, or their traceable proceeds, passed through Portner Law Limited’s client account and were used in three property-related transactions.
GPDL, acting through its joint liquidators, alleged that Portner Law was vicariously liable for dishonest assistance by its partner, Daniel Broughton. The High Court agreed, relying on his failures to conduct required checks, distinguish among members of the Varma family and their companies, verify sources of funds, and provide accurate information to lenders. Portner Law appealed, arguing that the judge had applied the wrong legal test for dishonesty.
The Court’s Holding
The Court of Appeal unanimously allowed the appeal. It held that the High Court had wrongly compressed the required two-stage test into a single question—whether an honest solicitor with Mr Broughton’s experience would have acted as he did. The proper approach first determines the defendant’s actual knowledge and beliefs and then assesses the conduct objectively against the standards of ordinary decent people.
Because GPDL advanced a case of blind-eye knowledge, it had to establish that Mr Broughton held a firmly grounded suspicion targeted at specific facts and consciously chose not to investigate for fear of confirming them. The trial judge made neither finding. Her findings instead showed that he believed the Varmas were legitimately wealthy, did not suspect that the funds came from outside the family, and was knowingly cutting corners with clients generally.
The factual findings supported negligence, potentially even gross negligence, but not dishonesty. The court declined to order a retrial because GPDL had failed to secure the necessary findings on the case it presented. It set aside the judgment and substituted an order dismissing GPDL’s claim.
Key Takeaways
- Dishonesty requires separate findings about the defendant’s actual knowledge or beliefs and whether the resulting conduct was dishonest by ordinary standards.
- Blind-eye knowledge requires a targeted, firmly grounded suspicion and a deliberate decision not to investigate because the person does not want confirmation.
- Ignoring professional duties, breaching internal policies, knowingly cutting corners, or acting with gross negligence does not by itself establish dishonest assistance.
Why It Matters
The decision reinforces the boundary between serious professional failings and accessory liability for dishonesty. Courts cannot infer dishonest assistance merely by comparing a professional’s conduct with what an honest and diligent practitioner should have done.
For claims based on blind-eye knowledge, claimants must plead and prove the defendant’s specific suspicion and the reason inquiries were deliberately avoided. General awareness of risk, lax compliance practices, or failure to make inquiries that professional standards required will not suffice.