ALLEGATIONS OF DISHONESTY AGAINST SOLICITORS: CLEAR FINDINGS OF FACT MUST BE MADE

There have been two cases in the past few days where the Court of Appeal have overturned judgments because of a failure to give reasons for findings against solicitors.  In Clydesdale Bank PLC -v- Workman [2016] EWCA Civ 73 findings of dishonesty by the trial judge were overturned by the Court of Appeal.

“A finding of dishonesty, especially against a solicitor, should not be made without the most careful consideration of what the solicitor says in his own defence. In my judgment the judge simply failed to deal with what was, at least potentially, a good defence.”

“In a case in which a judge has failed to address expressly the solicitors’ evidence …and  failed to say that he disbelieved them, a finding of dishonesty is, in my view, insufficiently secure, especially when no motive for such dishonesty has ever been suggested.

KEY POINTS

  • Findings of dishonesty had to be made on a firm evidential basis.
  • There was inadequate consideration of the evidence in the current case to justify findings of dishonesty by the solicitors.

THE CASE

  • The trial judge had found that two solicitors were guilty of dishonest assistance in breach of a trust.
  • The breach of trust was a mortgage fraud.  Large parts of the proceeds of sale were obtained in a fraud on the lender.
  • The solicitors appealed against the findings of dishonesty.
  • The appeal was allowed and the court refused to order a retrial.

THE KEY CRITICISM: FAILURE TO ANALYSE THE SITUATION

There is a detailed consideration of the evidence before the trial judge.
  1. What, in my judgment, is missing from the judge’s analysis is any consideration of why Messrs Murphy and Denslow [the solicitors in question] acted as they did. It is true that the judge found that they followed the instructions given to them by their client, but that in my judgment is to stop the inquiry too soon. Why did they take the view that they had to follow their client’s instructions? If they had simply decided that they had to follow their client’s instructions willy-nilly that might be sufficient to found a conclusion that they were reckless. But their evidence was not that their client’s instructions trumped the Bank’s charge: it was that the Hayward charge trumped the Bank’s charge.
  2. I certainly do not say that the judge was bound to accept their evidence that they believed that the Hayward charge secured more than the proceeds of sale. But in my judgment he ought to have confronted that defence head on. Unless he was able to conclude that he did not believe it (which he did not say) I do not consider that he was entitled to find that they were guilty of dishonesty. A finding of dishonesty, especially against a solicitor, should not be made without the most careful consideration of what the solicitor says in his own defence. In my judgment the judge simply failed to deal with what was, at least potentially, a good defence.
  3. Mr Stewart also warned us, in strong terms, against disturbing a finding of fact made by an experienced trial judge, especially when that finding of fact was a finding about a person’s state of mind. I readily accept that an appeal court should be most reluctant to interfere with a trial judge’s finding of fact unless driven to it. I have said so myself many times (see for example Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5, [2014] FSR 29 at [114]). But this is not simply a question of reversing the judge’s finding of fact. In this case the judge has, in my judgment, failed to deal with a critical issue which was a necessary building block to his ultimate conclusion that Messrs Murphy and Denslow were dishonest.

THE JUDGMENT OF LORD JUSTICE LONGMORE

There is a succinct summary of the situation in the judgment of Longmore L.J.

  1. I also agree. Mr Stewart QC naturally laid much emphasis on the reluctance this court should adopt in reversing a finding of fact by a trial judge about the party’s state of mind when the judge had the advantage of seeing the relevant party giving evidence. He cited paragraph 43 of Twinsectra Ltd v Yardley [2002] 2 AC 164 where Lord Hoffmann said that this court should only take such a course in exceptional circumstances.
  2. It is to be noted that Lord Hoffmann’s critical remarks were made in a case in which this court found a party to be dishonest when the judge had not. This case is precisely the opposite way round and a finding of dishonesty in respect of a solicitor is an extremely serious matter. In a case in which a judge has failed to address expressly the solicitors’ evidence that they thought the Hayward charge amounted to more than the proceeds of sale and failed to say that he disbelieved them, a finding of dishonesty is, in my view, insufficiently secure, especially when no motive for such dishonesty has ever been suggested.

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