Court of Appeal Overturns High Court Ruling That Solicitor Dishonestly Assisted in £7m Company Fraud, Setting Aside 'Blind Eye' Finding
The Court of Appeal on 4 October 2026 overturned a High Court decision that a solicitor had 'dishonestly assisted' in the misappropriation of a company's funds, in a ruling with significant implications for the professional liability of lawyers handling client money. Lady Justice Falk held that Deputy High Court Judge Saira Salimi had applied the wrong legal test when finding that Daniel Broughton, a partner at London firm Portner & Co (now part of Judge & Priestley), had turned a 'blind eye' to money laundering concerns. The claim was brought by the liquidators of Grosvenor Property Developments Ltd (GPDL), a company established to acquire and convert a former hotel in Bristol into student accommodation. GPDL raised funds from investors but went into liquidation after £7m was fraudulently misappropriated by its sole director Jonathan England and its de facto director Sanjiv Varma. Portner & Co accepted that £2.4m of monies beneficially belonging to GPDL passed through its client account and were used in three property transactions. However, Falk LJ found that the High Court judge had wrongly compressed the mandatory two-stage test for dishonesty into a single assessment. The correct approach requires courts first to ascertain the individual's actual state of mind (a subjective test) and then to determine whether, given that state of mind, the conduct was dishonest by the standards of ordinary decent people (an objective test). Falk LJ also held that the judge had incorrectly applied the legal test for 'blind eye' knowledge, which requires both a suspicion that certain facts may exist and a deliberate decision to avoid confirming them. The Court dismissed the claim rather than remitting it for rehearing, finding that the evidence pointed to negligence rather than dishonesty.
Why this matters
This Court of Appeal ruling clarifies and reinforces the two-stage test for dishonesty in the context of professional liability claims against solicitors, which had become a live area of legal uncertainty following earlier case law. The distinction between negligence and dishonesty is commercially critical: a finding of dishonesty would expose a solicitor to personal liability and disqualification, while a negligence finding routes the claim through professional indemnity insurance. By insisting on the strict separation of subjective knowledge and objective dishonesty assessment, Falk LJ's ruling makes it harder for claimants (including insolvency practitioners bringing claims on behalf of defrauded companies) to succeed on dishonest assistance claims where actual knowledge of fraud cannot be proved. This directly affects the risk calculus for law firms handling complex property transactions with multiple principals.
On the Ground
This ruling is immediately relevant to professional liability and financial crime practices at firms advising solicitors, law firm insurers, and insolvency practitioners. Law firms handling property investment transactions or acting for high-net-worth clients with complex funding structures will need to review their client due diligence and money laundering procedures in light of where the line between negligence and dishonest assistance now sits. Insolvency practitioners conducting asset recovery claims on behalf of defrauded companies will need to reassess whether dishonest assistance claims against lawyers remain viable without direct evidence of actual knowledge. A trainee on a professional liability matter would assist with preparing chronologies of the key transactions, indexing disclosure documents, and researching the case law on dishonesty and blind eye knowledge for inclusion in skeleton argument bundles.
Interview prep
Question you might get
“What does the Court of Appeal's ruling in the Grosvenor Property Developments case mean for law firms' exposure to dishonest assistance claims in property transactions?”
Sign up free to see the full answer
A model answer you can lift into an interview — how to frame this story for a partner.
Sign up freeMy notes
saved