Grosvenor Property Developers Limited (In Liquidation) v Portner Law Limited

Dishonest assistance requires more than negligence, even gross negligence. The court must first determine the defendant’s actual knowledge or belief as to the facts, then apply the objective standards of ordinary decent people. In the professional context, the relevant comparison is an ordinarily honest solicitor with the defendant’s skill and experience.

Blind-eye dishonesty does not require suspicion of a particular fraud or wrongdoing. It is sufficient that the defendant knows facts which would cause an honest person to make further inquiries and deliberately fails to do so without a credible reason. Persistent failure by an experienced solicitor to carry out basic source-of-funds and client-account checks may therefore amount to dishonesty.

The claimant company, acting through its liquidators, claimed that a solicitors’ firm dishonestly assisted its former directors’ misappropriation of approximately £7 million by permitting £2,399,000 of the claimant’s money or traceable proceeds to pass through the firm’s client account.

The alleged assistance concerned three property-related transactions. The firm accepted that the relevant solicitor’s conduct would constitute assistance if he had acted dishonestly, but denied dishonesty and disputed the amount recoverable because of sums already recovered elsewhere.

The issues were whether the solicitor had acted dishonestly by repeatedly failing to investigate apparent source-of-funds and client-identity concerns, and how any previous recoveries should be credited.

1. Dishonesty. The claim succeeded on liability. The applicable approach, derived from Royal Brunei Airlines v Tan [1995] 2 AC 378 and Ivey v Genting Casinos [2017] UKSC 67, required the court first to ascertain the solicitor’s actual knowledge or belief as to the facts and then to apply the objective standards of ordinary decent people.
2. The relevant standard was that of an ordinarily honest solicitor with the same skill and experience as the solicitor concerned. The professional framework, including the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, the precursor regulations and professional guidance, was relevant to that assessment, although the claim was not one in professional negligence.
3. Blind-eye dishonesty did not require proof of suspicion of a specific wrongdoing. It was enough that the solicitor knew facts which would have caused an honest solicitor to make further inquiries and failed to do so without a credible explanation. This was consistent with Gruppo Torras v Al-Sabah [2001] CLC 22.
4. Negligence, including gross negligence, was insufficient. Reckless disregard of another’s possible rights was strong evidence of dishonesty but was not itself identical to dishonesty, as recognised in Clydesdale Bank Plc v Workman [2016] EWCA Civ 73.
5. The solicitor repeatedly accepted payments from parties unconnected with the ostensible client, failed to obtain adequate source-of-funds evidence, treated separate persons and companies as a single family interest, breached lender certifications and knowingly made at least one false representation. Taken cumulatively, that conduct showed deliberate disregard of professional obligations and dishonest assistance.
6. Double recovery was impermissible. Earlier recoveries reduced the claimant’s loss, but the precise credit did not have to be determined in the liability judgment. The parties were directed to make further submissions at a consequentials hearing if the amount could not be agreed, applying the approach in Otkritie International Investment Management & Ors v Urumov & Ors [2014] EWHC 755 (Comm).

First-instance decision. No appellate history was stated in the judgment.