Case law update

IPA Insolvency Practitioner newsletter, October 2025

An insolvency case law update prepared by Tanya Barrett, Associate Director at Manolete Partners PLC.

Prior to joining Manolete in July 2018, Tanya was part of the insolvency team at Moon Beever where she qualified as a solicitor in September 2010 and largely acted for Insolvency Practitioners. Tanya has experience of a broad range of contentious insolvency matters, including both personal and corporate insolvencies and from low value to multi-million pound claims.

Turning a Blind Eye: Lessons from Grosvenor v Portner for Insolvency Practitioners

Introduction

The High Court’s recent judgment in Grosvenor Property Developers Ltd (in liquidation) v Portner Law Ltd [2025] EWHC 2362 (Ch) provides valuable guidance for insolvency practitioners pursuing claims. While the case has attracted attention for its implications on solicitors’ conduct, it also demonstrates how insolvency practitioners can use the doctrine of dishonest assistance to recover assets diverted through professional intermediaries.

The case concerned whether a solicitor’s repeated failures in anti-money laundering (AML) compliance and client account management amounted merely to negligence or rose to the level of dishonest assistance in a breach of fiduciary duty. The court concluded that dishonesty had been established, exposing the firm to significant liability.

The judgment confirms that professionals who facilitate, or turn a blind eye to, the misuse of company funds may be held liable even without direct participation in the fraud.

Background

Grosvenor Property Developers Limited was set up to convert a hotel into student accommodation. Before the project began, the company collapsed after around £7 million of investor funds were misappropriated by its statutory and de facto directors.

Following successful proceedings against those individuals, the de facto director left the country to avoid imprisonment and the liquidators looked to Portner Law Limited (“Portner”), a law firm used by the directors in several property transactions. Roughly £2.4 million of company money, or its traceable proceeds, had flowed through Portner’s client account in connection with three deals: Hallam Street, Green Street and Charles Street.

The liquidators claimed that Portner, through its partner Mr Broughton, had dishonestly assisted the directors’ breach of fiduciary duty. Portner accepted that funds had passed through its account and that it was vicariously liable for Broughton’s conduct if dishonest, but denied dishonesty. Its defence was that Broughton had been careless, not deceitful.

The Legal Test

To establish dishonest assistance as set out in established case law, four elements must be proven:

1. A fiduciary duty owed by primary the wrongdoer (in this case, the company directors)
2. A breach of that fiduciary duty
3. Assistance by the defendant in that breach
4. Dishonesty on the part of the defendant in providing that assistance

The test for dishonesty was modernised by the Supreme Court in Ivey v Genting Casinos [2017] UKSC 67, and involves two steps:

• Determining what the defendant actually knew or believed about the facts
• Assessing whether their conduct was dishonest by the standards of ordinary decent people

Importantly, the defendant’s own view of their dishonesty is irrelevant. Dishonesty is measured by an objective standard informed by the defendant’s actual knowledge.

“Dishonesty…means simply not acting as an honest person would in the circumstances. This is an objective standard” – Grosvenor v Portner, citing Royal Brunei v Tan [1995] 2 AC 378

What the Court found

The Court found Broughton’s conduct went well beyond carelessness, it was, in fact, dishonest. Several aspects of his behaviour stood out:

• Repeated AML failings: despite being Portner’s deputy AML officer, Broughton accepted funds from third parties without checks or proper source-of-funds evidence.
• “Family pot” approach: he treated individuals and entities connected to the de facto director as interchangeable, blurring distinctions between clients.
• False certifications: he gave assurances to lenders he knew to be inaccurate, such as confirming that no third-party money would be used.
• Blind-eye conduct: he ignored obvious red flags that would have prompted any honest solicitor to question the transactions. The court stating “Any honest conveyancing solicitor of Mr Broughton’s experience would have carried out basic checks to ensure that he or she was not facilitating money laundering, given the number of parties participating in the transaction.”
• Post-liquidation transfers: even after being notified by the liquidators about suspected misappropriation, he continued to process funds and issue confirmations.

The court described the pattern of behaviour as a deliberate failure to confront obvious risks that were apparent on the evidence. It rejected Portner’s argument that the conduct was mere incompetence. Portner was held vicariously liable for it’s partner’s dishonesty.

On quantum, the court accepted that prior recoveries must be credited to avoid double recovery but left the final figure to be resolved later.

Why the Case Matters for Insolvency Practitioners

1. Professionals can be proper targets

This case confirms that law firms and other intermediaries are viable targets in recovery actions. Where misappropriated funds have passed through professional hands, insolvency practitioners should consider whether there is a basis for dishonest assistance or knowing receipt.

• Dishonesty can be inferred

The court made clear that dishonesty does not require an explicit admission or evidence of fraud. It can be inferred from the circumstances, particularly where a professional turns a blind eye to warning signs. Insolvency practitioners should therefore focus on identifying patterns of conduct, multiple unexplained transfers, inconsistent client instructions, or repeated AML breaches rather than single mistakes.

• “Blind-eye” knowledge is enough

The concept of blind‑eye dishonesty continues to have real force. A professional who suspects something’s wrong but chooses not to look too closely can still be held to have acted dishonestly. For insolvency practitioners, that means being alert to evidence that someone avoided asking obvious questions.

• Professional defendants can be valuable targets

Even if the primary wrongdoers are impecunious or untraceable, professional facilitators can represent realistic recovery opportunities. They are often insured and motivated to settle to protect their firm’s reputation. Claims like this can therefore deliver genuine returns for creditors while reinforcing high professional standards.

• AML duties aren’t box ticking exercises

The judgment also underlines how fundamental proper AML compliance is. The days of relying on “I thought I knew the client” are long over. Solicitors and other professionals need to document their checks, verify funds properly, and challenge anything that doesn’t stack up.

Conclusion

The High Court’s decision in Grosvenor v Portner is a strong reminder that insolvency practitioners have many tools when trying to recover lost assets. The doctrine of dishonest assistance is a powerful way to hold facilitators accountable, even if they weren’t the ones pocketing the funds. Where misused money leads through professional hands, the story doesn’t end there; it may be a route to a recoverable claim.

For professionals, the message is equally clear: ignoring red flags is not an option. The Courts will not hesitate to treat blind eye conduct as dishonesty when the facts demand it.

Content courtesy of IPA principal sponsor Manolete Partners PLC.

Manolete Partners PLC is an investment business focused on dispute finance. It is not a law firm and does not provide legal advice.

Please note that guest articles do not necessarily represent the views of the IPA.