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    123. Judges have frequently used the word dishonesty in civil cases in an objective sense to describe deliberate wrongdoing, particularly when handling equitable concepts such as concealed fraud. In Beaman v ARTS Ltd [1949] 1 KB 550 the defendants were sued for conversion. They had stored packages for the plaintiff. The plaintiff found herself stranded in enemy occupied Europe during the war and was unable to communicate with the defendants. The defendant's manager, who was about to be called up and was anxious to close the business down for the duration, opened the packages. Finding their contents to be of little or no value, he considered himself justified in giving them away to the Salvation Army, though he kept one package for himself. The trial judge (Denning J) expressly acquitted the manager of dishonesty or moral turpitude. Reversing the judge, Lord Greene MR described the defendant's conduct as reprehensible. They would, he said, at p 561:

"no doubt be shocked to hear their conduct described as fraudulent. That is, however, quite immaterial. Mr Ingram, who misappropriated one of the plaintiff's cases for his own use, was no doubt shocked when counsel described his action as stealing. No amount of self-deception can make a dishonest action other than dishonest; nor does an action which is essentially dishonest become blameless because it is committed with a good motive" (emphasis added).

This is as clear a statement of principle as can be imagined. Neither an honest motive nor an innocent state of mind will save a defendant whose conduct is objectively dishonest. Mr Ingram was not criminally dishonest, since it never entered his head that other people would regard his conduct as dishonest. But equity looks to a man's conduct, not to his state of mind.

    124. The Law Commission must plead guilty of the same usage. In their Report on Limitation of Actions (Law Com No 270) they propose replacing the expression "deliberate concealment" in Section 32(1)(b) of the Limitation Act 1980 by "dishonest concealment". They explain this concept, at paragraph 3.137 of their Report as follows:

"We are of the view that our proposals in relation to 'concealment' should only apply where the defendant has been guilty of 'unconscionable conduct' - or in other words, if the concealment can be said to be 'dishonest' … the claimant must show that the defendant was being dishonest in [concealing information]. We do not consider that the concealment could be described as 'dishonest' unless the person concealing it is aware of what is being concealed and does not wish the claimant to discover it … by covering up shallow foundations the builder . . . . cannot be said to have been guilty of 'dishonest concealment' unless he was aware that his work was defective or negligent, and does not want the claimant to discover this" (emphasis added).

    In the context it is clear that the Law Commission are indicating requirements which are not only necessary but sufficient. It would be self-defeating to require the plaintiff to establish subjective dishonesty: many people would see nothing wrong, and certainly nothing dishonest, in seeking to avoid legal liability by refraining from disclosing their breach of duty to a potential plaintiff.

    125. The modern tendency is to deprecate the use of words like "fraud" and "dishonesty" as synonyms for moral turpitude or conduct which is morally reprehensible. There is much to be said for semantic reform, that is to say for changing the language while retaining the incidents of equitable liability; but there is nothing to be said for retaining the language and giving it the meaning it has in criminal cases so as to alter the incidents of equitable liability.

    126. The question for your Lordships is not whether Lord Nicholls was using the word dishonesty in a subjective or objective sense in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378. The question is whether a plaintiff should be required to establish that an accessory to a breach of trust had a dishonest state of mind (so that he was subjectively dishonest in the R v Ghosh sense); or whether it should be sufficient to establish that he acted with the requisite knowledge (so that his conduct was objectively dishonest). This question is at large for us, and we are free to resolve it either way.

    127. I would resolve it by adopting the objective approach. I would do so because:

(1) consciousness of wrongdoing is an aspect of mens rea and an appropriate condition of criminal liability: it is not an appropriate condition of civil liability. This generally results from negligent or intentional conduct. For the purpose of civil liability, it should not be necessary that the defendant realised that his conduct was dishonest; it should be sufficient that it constituted intentional wrongdoing.

(2).The objective test is in accordance with Lord Selborne's statement in Barnes v Addy LR 9 Ch App 244 and traditional doctrine. This taught that a person who knowingly participates in the misdirection of money is liable to compensate the injured party. While negligence is not a sufficient condition of liability, intentional wrongdoing is. Such conduct is culpable and falls below the objective standards of honesty adopted by ordinary people.

(3)  The claim for "knowing assistance" is the equitable counterpart of the economic torts. These are intentional torts; negligence is not sufficient and dishonesty is not necessary. Liability depends on knowledge. A requirement of subjective dishonesty introduces an unnecessary and unjustified distinction between the elements of the equitable claim and those of the tort of wrongful interference with the performance of a contract.

    128. If Mr Sims' undertaking was contractual, as Mr Leach thought it was, then Mr Leach's conduct would have been actionable as a wrongful interference with the performance of the contract. Where a third party with knowledge of a contract has dealings with the contract breaker which the third party knows will amount to a breach of contract and damage results, he commits an actionable interference with the contract: see D C Thomson & Co Ltd v Deakin [1952] Ch 646 CA, 694; Sefton v Tophams Ltd [1965] Ch 1140, where the action failed only because the plaintiff was unable to prove damage.

    129. In British Motor Trade Association v Salvadori [1949] Ch 556 the defendant bought and took delivery of a car in the knowledge that it was offered to him by the vendor in breach of its contract with its supplier. There is a close analogy with the present case. Mr Leach accepted payment from Mr Sims in the knowledge that the payment was made in breach of his undertaking to Twinsectra to retain the money in his own client account until required for the acquisition of property.

    130. In Sefton v Tophams Ltd the defendant bought land in the knowledge that the use to which it intended to put the land would put the vendor in breach of his contractual obligations to the plaintiff. Again the analogy with the present case is compelling. Mr Leach knew that by accepting the money and placing it at Mr Yardley's free disposal he would put Mr Sims in breach of his contractual undertaking that it would be used only for the purpose of acquiring property.

    131. In both cases the defendant was liable for any resulting loss. Such liability is based on the actual interference with contractual relations, not on any inducement to break them, so that it is no defence that the contract-breaker was a willing party to the breach and needed no inducement to do so. Dishonesty is not an ingredient of the tort.

    132. It would be most undesirable if we were to introduce a distinction between the equitable claim and the tort, thereby inducing the claimant to attempt to spell a contractual obligation out of a fiduciary relationship in order to avoid the need to establish that the defendant had a dishonest state of mind. It would, moreover, be strange if equity made liability depend on subjective dishonesty when in a comparable situation the common law did not. This would be a reversal of the general rule that equity demands higher standards of behaviour than the common law.

    133. If we were to reject subjective dishonesty as a requirement of civil liability in this branch of the law, the remaining question is merely a semantic one. Should we return to the traditional description of the claim as "knowing assistance", reminding ourselves that nothing less than actual knowledge is sufficient; or should we adopt Lord Nicholls' description of the claim as "dishonest assistance", reminding ourselves that the test is an objective one?

    134. For my own part, I have no difficulty in equating the knowing mishandling of money with dishonest conduct. But the introduction of dishonesty is an unnecessary distraction, and conducive to error. Many judges would be reluctant to brand a professional man as dishonest where he was unaware that honest people would consider his conduct to be so. If the condition of liability is intentional wrongdoing and not conscious dishonesty as understood in the criminal courts, I think that we should return to the traditional description of this head of equitable liability as arising from "knowing assistance".

    135. The question here is whether it is sufficient that the accessory should have actual knowledge of the facts which created the trust, or must he also have appreciated that they did so? It is obviously not necessary that he should know the details of the trust or the identity of the beneficiary. It is sufficient that he knows that the money is not at the free disposal of the principal. In some circumstances it may not even be necessary that his knowledge should extend this far. It may be sufficient that he knows that he is assisting in a dishonest scheme.

    136. That is not this case, for in the absence of knowledge that his client is not entitled to receive it there is nothing intrinsically dishonest in a solicitor paying money to him. But I am satisfied that knowledge of the arrangements which constitute the trust is sufficient; it is not necessary that the defendant should appreciate that they do so. Of course, if they do not create a trust, then he will not be liable for having assisted in a breach of trust. But he takes the risk that they do.

    137. The gravamen of the charge against the principal is not that he has broken his word, but that having been entrusted with the control of a fund with limited powers of disposal he has betrayed the confidence placed in him by disposing of the money in an unauthorised manner. The gravamen of the charge against the accessory is not that he is handling stolen property, but that he is assisting a person who has been entrusted with the control of a fund to dispose of the fund in an unauthorised manner. He should be liable if he knows of the arrangements by which that person obtained control of the money and that his authority to deal with the money was limited, and participates in a dealing with the money in a manner which he knows is unauthorised. I do not believe that the man in the street would have any doubt that such conduct was culpable.

    138. Mr Leach's pleaded case was that he parted with the money in the belief, no doubt engendered by Mr Yardley's assurances, that it would be applied in the acquisition of property. But he made no attempt to support this in his evidence. It was probably impossible to do so, since he was acting for Mr Yardley in the acquisition of the three properties which had been identified to him on 23 December, and must have known that some of the payments he was making were not required for their acquisition. In his evidence he made it clear that he regarded the money as held by him to Mr Yardley's order, and that there was no obligation on his part to see that the terms of the arrangements between Twinsectra and Mr Sims were observed. That was Mr Sims' responsibility, not his.

    139. The judge found that Mr Leach was not dishonest. But he also found as follows:

"He was clearly aware of [the terms of the undertaking]. Indeed, his pleaded defence asserts … that he believed their 'substance ... to be that the advance would be applied in the acquisition of property' and that he had received them on the footing that they would be so applied. Yet, in evidence, he frankly admitted that he had regarded the money as held simply to the order of Mr Yardley, without restriction. Again, I have to conclude that he simply shut his eyes to the problems. As far as he was concerned, it was a matter solely for Mr Sims to satisfy himself whether he could release the money to Mr Yardley's account."

    140. The Court of Appeal thought that the judge's two conclusions (i) that Mr Leach was not dishonest and (ii) that he "simply shut his eyes to the problems" (or, as he put it later in his judgment "deliberately shut his eyes to the implications") were inconsistent. They attempted to reconcile the two findings by saying that the judge had overlooked the possibility of wilful blindness. Potter LJ put it in these terms [1999] Lloyd's Rep 438, 465, para 108:

"Mr Leach clearly appreciated (indeed he recorded) that an undertaking in the form proposed created difficulties for Mr Sims (as Mr Sims himself recognised) yet, as from that point … [he] deliberately closed his eyes to those difficulties in the sense that he treated them as a problem simply for Mr Sims and not for himself or his client."

    141. I do not think that this was a case of wilful blindness, or that the judge overlooked the possibility of imputed knowledge. There was no need to impute knowledge to Mr Leach, for there was no relevant fact of which he was unaware. He did not shut his eyes to any fact in case he might learn the truth. He knew of the terms of the undertaking, that the money was not to be at Mr Yardley's free disposal. He knew (i) that Mr Sims was not entitled to pay the money over to him (Mr Leach), and was only prepared to do so against confirmation that it was proposed to apply the money for the acquisition of property; and (ii) that it could not be paid to Mr Yardley except for the acquisition of property. There were no enquiries which Mr Leach needed to make to satisfy himself that the money could properly be put at Mr Yardley's free disposal. He knew it could not. The only thing that he did not know was that the terms of the undertaking created a trust, still less a trust in favour of Twinsectra. He believed that Mr Sims' obligations to Twinsectra sounded in contract only. That was not an unreasonable belief; certainly not a dishonest one; though if true it would not have absolved him from liability.

    142. Yet from the very first moment that he received the money he treated it as held to Mr Yardley's order and at Mr Yardley's free disposition. He did not shut his eyes to the facts, but to "the implications", that is to say the impropriety of putting the money at Mr Yardley's disposal. His explanation was that this was Mr Sims' problem, not his.

    143. Mr Leach knew that Twinsectra had entrusted the money to Mr Sims with only limited authority to dispose of it; that Twinsectra trusted Mr Sims to ensure that the money was not used except for the acquisition of property; that Mr Sims had betrayed the confidence placed in him by paying the money to him (Mr Leach) without seeing to its further application; and that by putting it at Mr Yardley's free disposal he took the risk that the money would be applied for an unauthorised purpose and place Mr Sims in breach of his undertaking. But all that was Mr Sims' responsibility.

    144. In my opinion this is enough to make Mr Leach civilly liable as an accessory (i) for the tort of wrongful interference with the performance of Mr Sims' contractual obligations if this had been pleaded and the undertaking was contractual as well as fiduciary; and (ii) for assisting in a breach of trust. It is unnecessary to consider whether Mr Leach realised that honest people would regard his conduct as dishonest. His knowledge that he was assisting Mr Sims to default in his undertaking to Twinsectra is sufficient.

    145. Each of the sums which Mr Leach received for his own benefit was paid in respect of an acquisition of property, and as such was a proper disbursement. He thus received trust property, but not in breach of trust. This was very properly conceded by counsel for Twinsectra before your Lordships.

Conclusion