How do decision-makers assess whether a professional person acted dishonestly when he (or she) strongly believes in his honesty and is convinced that he was so acting? Is the conduct to be assessed objectively; or should some allowance be made for the subjective view point of the individual concerned?
This is a conundrum which courts and tribunals frequently have to grapple with, whether in criminal, civil or disciplinary matters. The approach adopted has varied depending on the jurisdiction and therefore the seriousness of the consequence of a finding of dishonesty.
So, in the criminal sphere, the applicable test when dishonesty must be proved as part of a criminal offence has both subjective and objective elements: “…a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest [objective]…If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest [subjective]. It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did.”1
The test for dishonesty in the civil context of accessory liability for dishonestly assisting a trustee to commit a breach of trust is predominantly an objective one: “whether, taking account of relevant subjective considerations such as the defendant’s experience and intelligence and his actual state of knowledge at the relevant time, the defendant’s conduct was dishonest by the ordinary standards of reasonable and honest people”. 2
In regulatorymatters, tribunals have adopted a combined test containing both objective and subjective elements:
- Was the defendant’s conduct dishonest by the ordinary standards of reasonable and honest people (the objective element)? ie, did he know that what he s doing would be regarded as dishonest by honest people?
- If so, did the defendant himself realise that, by those standards, his conduct was dishonest (the subjective element)?
Although admittedly similar to the dual criminal test (some would say identical), this test was in fact taken from a civil accessory liability case. That case was subsequently reinterpreted in the civil context, resulting in a reversion in that area of the law to the objective approach described above.3 So, for example, the Financial Services and Markets Tribunal adopted the combined test in its decision in Blackwell and Hoodless.4 It has not had to consider the change to the civil test which took place after that case.
Following the shift to the objective approach in the the civil sphere, the Solicitors Disciplinary Tribunal has on at least two occasions applied the new, objective civil test.5 The use of the combined test, and then, in linewith the change of approach in the field of accessory liability, the use of the objective test in disciplinary matters might suggest that dishonesty in disciplinarymatters is to be aligned with dishonesty as interpreted and applied in the civil context. The question whether that should be the correct approach has, however, been recently reconsidered in solicitors’ disciplinary appeal proceedings by the AdministrativeCourt in Bryant and Bench v The LawSociety. 6
Messrs Bryant and Bench were partners in the firmof Bryant Hamilton & Co. They faced seven charges of professionalmisconduct in relation to their acting for clients on a number of dubious transactions, all of which the Solicitors Disciplinary Tribunal found to have been made out. The Tribunal also concluded that Mr Bryant’s conduct amounted to dishonesty because, despite his own strong belief in his own honesty, his conduct was “so far beyond the standards to be expected of an honest and competent solicitor as to justify condemnation and…by the standards laid down by the profession it amounted to dishonesty”. The Tribunal struck Mr Bryant off the solicitors’ roll. In contrast, Mr Bench, against whom no such finding was made, was suspended from practice for three years.
On appeal, the Court had to consider whether the correct legal test had been applied in assessingwhether Mr Bryant had been dishonest. It was argued on his behalf that the Tribunal had applied a “purely objective” test to find him dishonest despite accepting evidence that Mr Bryant’s state of mind was not dishonest.
The Court noted that in the solicitors’ disciplinary context, the practice of the Tribunal since the introduction of the combined test in the civil context has been to apply that combined test, ie, including both objective and subjective elements; and that this is how the Courts have approached the question when Tribunal decisions have been appealed to them. (No reference wasmade to the Solicitors Disciplinary Tribunal cases where the tribunal had, subsequent to the shift of appoach in the civil context, applied the objective test). The Court therefore concluded that, notwithstanding the reinstatement of a predominantly objective test for dishonesty in the civil sphere, the test to be applied in the context of solicitors’ disciplinary proceedings is the combined test. Applying that test, the Court concluded that the Tribunal had erred in lawby failing to ask itself the second, subjective question, and accordingly overturned the Tribunal’s finding of dishonesty against Mr Bryant.
The distinction drawn between the criminal and civil testsmay flow from the proposition that “in criminal law the court looks at the guilty mind whereas in civil lawit is guilty conduct”. 7 Disciplinary proceedings tend also to focus on the latter; but where the consequences of a finding of misconduct on the individual involved are severe, tribunals tend to veer towards the requirements of the criminal law (for example, with regard to the standard of proof). Unsurprisingly, the Administrative Court in Bryant and Bench considered that the severity of the consequences for a solicitor of a finding of dishonesty against him in relation to his dealings with a client, both professionally (solicitors are generally struck off) and personally, justified “aligning the test with the criminal test in preference to the test for determining civil liability for assisting in a breach of a trust”.8 It would perhaps have been preferable if the Court had expressly adopted the criminal test, rather than describing the combined test by reference to a civil accessory liability case which has now been reinterpreted. This is particularly so given that, as the Court itself recognised, the combined test “corresponds closely to the test laid down in the criminal context” in any event.
In the financial services context, the question of honesty most readily comes into play with the requirement that an individual be a “fit and proper person”. The applicable criteria include reference to a person’s “honesty, integrity and reputation”, which is also relevant in determining whether to issue a prohibition notice or to withdraw approval froman approved person. The Hoodless and Blackwell case concerned decisions to withdraw approval as a fit and proper person. While adopting the objective and subjective approach for the test of dishonesty, the Tribunal said:
“It may be askedwhether the combined test is really appropriate in the present context,where one of the statutory objectives is the protection of consumers. Itmight be thought that a purely objective testwould be a better protection. But we think it right to adopt the approach urged upon us, since it was not in dispute thatwewere required, as an additional matter, to consider the applicants’ integrity,which both sides accepted involved the application of objective ethical standards. In our view‘integrity’ connotes moral soundness, rectitude and steady adherence to an ethical code. A person lacks integrity if unable to appreciate the distinction between what is honest or dishonest by ordinary standards.” 8
Similarly, under the new SolicitorsCode ofConduct, acting with integrity is one of the core duties stipulated in Rule 1.
So, if the absence of a subjective awareness that his behaviour is objectively dishonest enables the individual to escape a finding of dishonesty in regulatory or disciplinary proceedings, he may nonetheless be held to lack integrity on the basis of his inability to appreciate the dishonest nature of his conduct. The end result may therefore be the same – a lack of fitness and propriety justifying withdrawal of approved person status, or a breach of a core duty justifying removal fromthe solicitors’ roll, as the case may be.