Supreme Court refuses to hear bid to reinstate dishonesty finding against solicitors

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23 June 2016

Supreme Court: no arguable point of law

Supreme Court: no arguable point of law

The Supreme Court has refused to hear an appeal against a decision that cleared two solicitors of “dishonest assistance in a breach of trust”, in this case a mortgage fraud.

In its decision, the Court of Appeal had warned that findings of dishonesty, especially against solicitors, should not be made without “the most careful consideration” of what they say in their defence.

Refusing permission to appeal the judgment in Clydesdale Bank plc v John Workman and others [2016] EWCA Civ 73, the Supreme Court said that the application did not raise an arguable point of law.

In February, the Court of Appeal overturned a High Court decision that went against partner Simon Denslow and associate John Murphy, both working at the time at commercial firm Cobbetts, which no longer exists, and then at Shoosmiths. Neither works there now.

Lord Justice Lewison said the trial judge, Judge Pelling QC, “failed to deal with what was, at least potentially, a good defence”.

Lewison LJ said that what was missing from the judge’s analysis was “any consideration of why” the solicitors 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?”

Lewison LJ said the “critical issue” was the solicitors’ belief “about the status and extent” of a first charge over development land in Stourbridge, which was registered by a solicitor from another firm at HM Land Registry, but not also, “as it should have been”, at Companies House.

The lord justice said that, having discussed the issue, the solicitors – who were acting for the seller – concluded that the first charge “trumped” a further charge in favour of Yorkshire Bank, a trading name of Clydesdale Bank, which was registered at Companies House but not at the Land Registry.

“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,” Lewison LJ said. “But their evidence was not that their client’s instructions trumped the bank’s charge: it was that the Hayward charge [the first charge] trumped the bank’s charge.

“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.”

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