10.
The judge stated the law in terms largely derived from the advice
of the Board given by Lord Nicholls of Birkenhead in Royal
Brunei Airlines Sdn. Bhd. v Tan [1995] 2 AC 378. In summary,
she said that liability for dishonest assistance requires a dishonest
state of mind on the part of the person who assists in a breach
of trust. Such a state of mind may consist in knowledge that the
transaction is one in which he cannot honestly participate (for
example, a misappropriation of other people's money), or
it may consist in suspicion combined with a conscious decision
not to make inquiries which might result in knowledge: see Manifest
Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2003]
1 AC 469. Although a dishonest state of mind is a subjective mental
state, the standard by which the law determines whether it is
dishonest is objective. If by ordinary standards a defendant's
mental state would be characterised as dishonest, it is irrelevant
that the defendant judges by different standards. The Court of
Appeal held this to be a correct state of the law and their Lordships
agree.
11.
The judge found that during and after June 1987 Mr Henwood strongly
suspected that the funds passing through his hands were monies which
Barlow Clowes had received from members of the public who thought
that they were subscribing to a scheme of investment in gilt-edged
securities. If those suspicions were correct, no honest person could
have assisted Mr Clowes and Mr Cramer to dispose of the funds for
their personal use. But Mr Henwood consciously decided not to make
inquiries because he preferred in his own interest not to run the
risk of discovering the truth.
12.
Their Lordships consider that by ordinary standards such a state
of mind is dishonest. The judge found that Mr Henwood may well have
lived by different standards and seen nothing wrong in what he was
doing. He had an "exaggerated notion of dutiful service to
clients, which produced a warped moral approach that it was not
improper to treat carrying out clients' instructions as being
all important. Mr Henwood may well have thought this to be an honest
attitude, but, if so, he was wrong."
13.
Lord Neill of Bladen QC, who appeared for Mr Henwood, submitted
to their Lordships that such a state of mind was not dishonest unless
Mr Henwood was aware that it would by ordinary standards be regarded
as dishonest. Only in such a case could he be said to be consciously
dishonest. But the judge made no finding about Mr Henwood's
opinions about normal standards of honesty. The only finding was
that by normal standards he had been dishonest but that his own
standard was different.
14.
In submitting that an inquiry into the defendant's views
about standards of honesty is required, Lord Neill relied upon
a statement by Lord Hutton in Twinsectra
Ltd v Yardley [2002] 2 AC 164, 174, with which the majority
of their Lordships agreed:
35.
There is, in my opinion, a further consideration which supports
the view that for liability as an accessory to arise the defendant
must himself appreciate that what he was doing was dishonest
by the standards of honest and reasonable men. A finding by
a judge that a defendant has been dishonest is a grave finding,
and it is particularly grave against a professional man, such
as a solicitor. Notwithstanding that the issue arises in equity
law and not in a criminal context, I think that it would be
less than just for the law to permit a finding that a defendant
had been 'dishonest' in assisting in a breach of trust where
he knew of the facts which created the trust and its breach
but had not been aware that what he was doing would be regarded
by honest men as being dishonest.
36.
... I consider that the courts should continue to apply that
test and that your Lordships should state that dishonesty requires
knowledge by the defendant that what he was doing would be regarded
as dishonest by honest people, although he should not escape
a finding of dishonesty because he sets his own standards of
honesty and does not regard as dishonest what he knows would
offend the normally accepted standards of honest conduct.
15.
Their Lordships accept that there is an element of ambiguity in
these remarks which may have encouraged a belief, expressed in
some academic writing, that Twinsectra had departed from
the law as previously understood and invited inquiry not merely
into the defendant's mental state about the nature of the
transaction in which he was participating but also into his views
about generally acceptable standards of honesty. But they do not
consider that this is what Lord Hutton meant. The reference to
"what he knows would offend normally accepted standards of
honest conduct" meant only that his knowledge of the transaction
had to be such as to render his participation contrary to normally
acceptable standards of honest conduct. It did not require that
he should have had reflections about what those normally acceptable
standards were.
16.
Similarly in the speech of Lord Hoffmann, the statement (in para
20) that a dishonest state of mind meant "consciousness that
one is transgressing ordinary standards of honest behaviour"
was in their Lordships' view intended to require consciousness
of those elements of the transaction which make participation
transgress ordinary standards of honest behaviour. It did not
also to require him to have thought about what those standards
were.
17.
On the facts of Twinsectra, neither the judge who acquitted
Mr Leach of dishonesty nor the House undertook any inquiry into
the views of the defendant solicitor Mr Leach about ordinary standards
of honest behaviour. He had received on behalf of his client a
payment from another solicitor whom he knew had given an undertaking
to pay it to Mr Leach's client only for a particular use. But
the other solicitor had paid the money to Mr Leach without requiring
any undertaking. The judge found that he was not dishonest because
he honestly believed that the undertaking did not, so to speak,
run with the money and that, as between him and his client, he
held it for his client unconditionally. He was therefore bound
to pay it upon his client's instructions without restriction on
its use. The majority in the House of Lords considered that a
solicitor who held this view of the law, even though he knew all
the facts, was not by normal standards dishonest.
18.
Their Lordships therefore reject Lord Neill's submission that
the judge failed to apply the principles of liability for dishonest
assistance which had been laid down in Twinsectra. In
their opinion they were no different from the principles stated
in Royal Brunei Airlines v Tan which were correctly summarised
by the judge.
