GROUP SEVEN LIMITED & ANOR V NOTABLE SERVICES LLP & ANOR [2019] EWCA CIV 614
Earlier this year, the Singapore High Court in MSP4GE Asia Pte Ltd and another v MSP Global Pte Ltd and others [2019] SGHC 20 (“MSP4GE”) dealt with, inter alia, the law on dishonest assistance, and held that the law remains that as set out in the Privy Council decision of Royal Brunei Airlines Sdn Bhd v Philip Tan Kok Ming [1995] 2 AC 378 (“Royal Brunei Airlines”). There is now another decision on this issue of dishonest assistance in Group Seven Limited & Anor v Notable Services LLP & Anor [2019] EWCA Civ 614 (“Group Seven”).
Royal Brunei Airlines: objective standard. As highlighted by the Singapore High Court in [118] MSP4GE, the question of what constitutes dishonesty in the context of dishonest assistance in the breach of trust was explained in the following manner by Lord Nicholls in Royal Brunei Airlines:
“Whatever may be the position in some criminal or other contexts … in the context of the accessory liability principle acting dishonestly … means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct…. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual .If a person knowingly appropriates another’s property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.”
(emphasis as per [118] MSP4GE).
The Twinsectra issue. In this regard, in MSP4GE, the Singapore High Court noted the divergence from Royal Brunei Airlines in the subsequent House of Lords decision of Twinsectra Ltd v Yardley [2002] AC 164 (“Twinsectra”), as well as the subsequent Privy Council decision of Barlow Clowes International Ltd (in liquidation) v Eurotrust International Ltd [2006] 1 WLR 1476 (“Barlow Clowes”), where the Privy Council clarified that the majority decision in Twinsectra did not depart from the objective test as set out in Royal Brunei Airlines.
To summarise, the “divergence” in Twinsectra appeared most clearly (as identified in [122] 0 [123] MSP4GE and [40] Group Seven) in the speech of Lord Hutton, and from the speech of Lord Hoffmann, where Lord Hoffmann said:
"For the reasons given by my noble and learned friend, Lord Hutton, I consider that those principles [i.e. those laid down by the Privy Council in Tan] require more than knowledge of the facts which make the conduct wrongful. They require a dishonest state of mind, that is to say, consciousness that one is transgressing ordinary standards of honest behaviour."
That appeared to set out a “subjective” requirement that the defendant had to know “that what he was doing was dishonest by the standards of honest and reasonable men” ([128] MSP4GE).
However, subsequently in Barlow Clowes, Lord Hoffmann then clarified Twinsectra in the following manner:
“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 the Twinsectra case 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.
Similarly in the speech of Lord of Hoffmann, the statement (in para 20) that a dishonest state of mid 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 require him to have thought about what those standards were.”
The result of Barlow Clowes is to clarify that Twinsectra does not depart from the objective test for honesty as set out in Royal Brunei Airlines.
Latest EWCA decision. Recently, on 11 April 2019, the England and Wales Court of Appeal (Civil Division) delivered its judgment in Group Seven Limited & Anor v Notable Services LLP & Anor [2019] EWCA Civ 614 (“Group Seven”), and held that pursuant to the United Kingdom Supreme Court decision of Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67, [2018] AC 391 (“Ivey”), there is no room for doubt that Twinsectra has to be understood in light of the explanation in Barlow Clowes ([51] Group Seven).
We cite in full [55] – [56] Group Seven below:
“55. In an important passage, Lord Hughes also considered the role of dishonesty in civil proceedings:
"62. Dishonesty is by no means confined to the criminal law. Civil actions may also frequently raise the question whether an action was honest or dishonest. The liability of an accessory to a breach of trust is, for example, not strict, as the liability of the trustee is, but (absent an exoneration clause) is fault-based. Negligence is not sufficient. Nothing less than dishonest assistance will suffice. Successive cases at the highest level have decided that the test of dishonesty is objective. After some hesitation in [Twinsectra], the law is settled on the objective test set out by Lord Nicholls of Birkenhead in [Tan]: see [Barlow Clowes], Abou-Rahmah v Abacha [2007] Bus LR 220 and Starglade Properties Ltd v Nash [2011] Lloyd's Rep FC 102. The test now clearly established was explained thus in the Barlow Clowes case [2006] 1 WLR 1476, para 10 by Lord Hoffmann, who had been a party also to the Twinsectra case:
"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."
63. Although the House of Lords and Privy Council were careful in these cases to confine their decisions to civil cases, there can be no logical or principled basis for the meaning of dishonesty (as distinct from the standards of proof by which it must be established) to differ according to whether it arises in a civil action or a criminal prosecution. Dishonesty is a simple, if occasionally imprecise, English word. It would be an affront to the law if its meaning differed according to the kind of proceedings in which it arose."
56. After a full review of the criminal case law since Ghosh, Lord Hughes then stated his conclusions at [74] and [75]. He said that the second leg of the Ghosh test does not correctly represent the law, and that the test of dishonesty is as set out by Lord Nicholls in Tan and by Lord Hoffmann in Barlow Clowes at [10]. Lord Hughes continued:
"When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest."
Accordingly, as Lord Hughes explained at [75], if (contrary to his previous conclusion) the concept of cheating at gambling included an additional legal element of dishonesty, it would be satisfied by the application of the above test. It may be that Mr Ivey was truthful when he said that he did not regard his conduct as cheating, but that could not amount to a finding that his behaviour was honest. Whatever his own views on the question may have been, Mr Ivey's conduct constituted cheating, and it was also dishonest.”
Takeaway. While there does not appear to have been any reported decisions affirming either Ivey or Group Seven in Singapore (yet), given the Singapore High Court’s decision in MSGP4GE, practitioners would do well to take heed of both Ivey and Group Seven, as these decisions may well affect how Singapore Courts’ application of the approach in Royal Brunei Airlines.
This is especially since in Group Seven, the England and Wales Court of Appeal elaborated issues such as blind-eye knowledge, as set out in [58] – [60] Group Seven (where the England and Wales Court of Appeal made clear that “suspicions which fall short of constituting blind-eye knowledge” are relevant to the question of whether the alleged accessory has acted dishonestly, and these are matters which are to be “taken into account at the objective second stage of the test … The state of a person’s mind is in principle a pure question of fact, and suspicions of all types and degrees of probability may form part of it, and thus form part of the overall picture to which the objective standard of dishonesty is to be applied.”), and commented, albeit obiter, on the issue of whether there is a “minimum content of knowledge which must be satisfied” at [100] – [103] Group Seven.
We also note that in Group Seven, one of the issues on appeal was the judge’s attribution of vicarious liability on the bank. It is beyond the scope of this blog to address this issue, but we commend interested readers to read the judgment in Group Seven in full.
Tags: Dishonest assistance; Breach of Trust; Royal Brunei Airlines v Philip Tan Kok Ming; Twinsectra v Yardley; MSP4GE v MSP Global
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