The claimant insurers sought declarations that the claims made under the defendant solicitors’ professional indemnity policy arose “from dishonest or fraudulent acts or omissions committed or condoned by the insured” so that they were not obliged to indemnify the insured. The central issue was whether the son and daughter insureds had condoned the dishonest acts of their mother who also practised from the family firm. The judge concluded that they had condoned the dishonest handling of money and breaches of the Solicitors’ Practice Rules. They must have known that the firm could not sustain the drawings made on it, they knew that funds were being mixed and had divested themselves of any responsibility of how the firm was being run. This was dishonest behaviour and the insurers were not required to pay out under the policy.
Comment: there has been a continuing debate as to whether the civil test of dishonesty requires there to have been subjective dishonesty so that the wrongdoer appreciated that what he was doing was dishonest. The House of Lords confused the issue with conflicting judgments in Twinsectra v Yardley but were taken to have held that the test was subjective. In Barlow Clowes International Ltd v Eurotrust International Inc the Privy Council held that the test did not require subjective dishonesty. The Court of Appeal in Abou-Ramah v Abacha held that the Barlow Clowes approach was right. The judge in the present case also followed the Barlow Clowes approach - whether the individual was aware that his conduct fell below the objective standard is not part of the test. For a more detailed discussion of the test, see Angus Turner’s article on dishonest assistance in the forthcoming Spring edition of Covernote.