Turning a Nelsonian blind eye - Court of Appeal clarifies test for dishonesty

In Grosvenor Property Developers Ltd (in liquidation) v Portner Law Ltd [2026] EWCA Civ 1238, the Court of Appeal (Civil Division) (CofA) has considered the test for dishonesty in English law. The decision is an important reminder of the elements that must be established to demonstrate dishonesty, and while the case related to a civil dispute, the CofA provided a number of important observations on the correct approach to determining dishonesty and how an individual might commit a dishonesty offence through 'blind eye' knowledge.

Introduction

Law firm, Portner Law Ltd (Portner), has successfully appealed a High Court decision in which it was found to be liable for dishonest assistance in relation to breaches of fiduciary duty by former directors of property development company, Grosvenor Property Developers Ltd (GPDL).

In reaching its decision, the CofA analysed and re-confirmed the test for dishonesty, which was central to the High Court's original judgment. 

Background

GPDL had raised funds from investors with the apparent purpose of developing a property in Bristol. However, fraudulent misappropriation of these funds by the company's directors meant that GPDL went into liquidation before the building was purchased. 

Portner dealt with three property transactions for GPDL, during which time funds were misappropriated. A conveyancing partner at Portner (who was also the deputy anti-money laundering officer) was involved in these transactions. The question before the CofA was whether his actions amounted to dishonest assistance, for which Portner would be vicariously liable.

The High Court decision

As part of its determination of the claim, the High Court considered the question of whether the Portner partner concerned had a dishonest state of mind when advising in connection with the three relevant transactions. In September 2025, the High Court determined that the partner  had been "actively dishonest" in connection with the misappropriation of the funds and Portner was therefore liable for his actions. An important element of the judge's decision was that the partner had turned a 'blind eye' to potential money laundering issues in Portner's client onboarding process, although there was no suggestion that he had actual knowledge of the fraudulent nature of GPDL's underlying transactions. 

Portner appealed to the CofA.

The CofA decision

The appeal was allowed.

The CofA determined that the High Court had not applied the test for dishonesty correctly. It held that the judge had not properly applied the test set out in the leading case of Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67. The Ivey test for dishonesty requires a two-stage assessment:

1. the subjective test: what was the defendant's actual state of knowledge or belief as to the facts? and
2. the objective test: bearing in mind that knowledge and belief, was the defendant's conduct dishonest by the standards of ordinary decent people?

With regard to the stage 1 test, in determining the defendant's knowledge and beliefs, blind eye knowledge is treated in the same way as actual knowledge.

The CofA was critical of the High Court's approach to the blind eye test and applied the test provided by the House of Lords in Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2003] UKHL 1, namely, that there must exist a suspicion that certain facts may exist and be a deliberate or conscious decision to avoid taking steps, or to inquire, that would confirm the existence of those facts. 

The CofA concluded that it had not been established that the partner in question had actual knowledge or suspicion of the fraudulent nature of GPDL's scheme, nor that he made a conscious decision not to ask for further information from his client for fear of what he might find out. There was a difference between failing to take all necessary steps in relation to client on-boarding processes (even if the short cuts taken could amount to negligence) and acting dishonestly. 

The criminal context

While this decision related to a civil dispute, it is an important reminder of the test for dishonesty as it is applied in the criminal context. Dishonesty is a central element of many financial crime offences, in particular, the fraud offences set out at section 1 of the Fraud Act 2006 and the common law tax offence of cheating the public revenue.

The decision serves as a timely reminder of the two-stage Ivey test that should be applied when dishonesty is in question. In particular, it reinforces the importance of the actual state of knowledge and belief of the accused and draws the important distinction between negligent behaviour and regulatory non-compliance, which will not be sufficient to satisfy the 'blind eye' dishonesty test. 

Read Grosvenor Property Developers Ltd (in liquidation) v Partner Law Ltd [2026] EWCA Civ 1238.