A missed AML check is not a blind eye: Portner appeal allowed

A failure to follow the firm’s own anti-money-laundering policy, weak source-of-funds work, third-party receipts into client accounts, and “sloppy” certificates to lenders can be negligence, a regulatory breach, or both.

• They are not, without more, dishonest assistance.

For firms, liquidators and insurers, the distinction is the point of this case.

• Grosvenor Property Developers Ltd (in liquidation) v Portner Law Ltd [2026] EWCA Civ 1238

The Court of Appeal has now drawn that line.

• On 2 October 2026,

  • It allowed Portner Law Limited’s appeal.

  • It set aside the High Court’s finding that partner Daniel Broughton had turned a “blind eye” to fraud, and

  • It dismissed the liquidators’ claim.

Lady Justice Falk, with whom Lord Justice Phillips and Lord Justice Nugee agreed, held that the trial judge had asked the wrong question.

• “An honest solicitor would have asked” IS NOT a substitute for findings that the solicitor

  • Actually, suspected specific facts and

  • Deliberately decided not to confirm them.

The AML suspicion lesson

Blind-eye, or Nelsonian, knowledge has two subjective elements. Both must be proved.

• There must be a suspicion,

  • Firmly grounded and targeted on specific facts,

  • That those facts may exist.

• There must be a deliberate decision not to take the steps that would confirm them.

The court has to ask why the enquiries were not made.

• Foolish trust, negligent oversight, and a habitual failure to follow the firm’s own policies

  • Do not make a decision to avoid knowledge.

• Knowingly cutting corners is not enough unless

  • The suspicion is targeted and

  • The choice not to enquire is made for fear of the answer.

That is a different standard from the Money Laundering Regulations and the Solicitors Regulation Authority’s conduct rules.

• Those regimes are concerned with systems, controls and competence.

• Civil liability for dishonest assistance concerns the defendant’s actual state of mind.

The two can, and in this case did, diverge.

• Lady Justice Falk (Falk LJ) was explicit that the result does not condone lax practice:

  • There is a critical distinction between negligent behaviour, even in its grossest form, where it is known that standards are not being met or are being ignored, and dishonesty.

• A claimant who wants blind-eye knowledge

  • Must plead and prove both

    • The specific suspicion and

    • The deliberate decision and

  • Must

    • Put the case to cross-examination.

• It is not enough to show that a diligent solicitor would have done more.

Background

• Grosvenor Property Developers Limited (GPDL) was set up, on its face, to acquire and convert a former hotel in Bristol into student accommodation.

• It raised money from investors and went into liquidation before taking any steps to acquire the building.

• Its sole de jure director, Jonathan England, and its de facto director, Sanjiv Varma, were found in other proceedings to have fraudulently misappropriated about £7 million.

  • Varma has also been found in contempt and has left the country.

• Portner was instructed by Varma and his son, Siddhant Varma, on London property work. The son was not said to have been involved in the fraud.

• The firm accepted that £2,399,000, to which GPDL was beneficially entitled, or its traceable proceeds, passed through its client account and was used in three transactions:

  • An aborted purchase of a flat in Green Street, London W1;

  • The purchase, later transfer and sale of a flat in Hallam Street, London W1; and

  • A £2 million loan by Dare to Invest Limited towards a property in Charles Street, London W1.

• The pattern the liquidators relied on is familiar AML territory.

  • Beyond proof of identity, the firm’s own anti-money-laundering checks were not carried out.

  • A deposit came from an account in the name of Casa Investments Limited, a company of which England was the sole director, which the firm said Broughton mistook for a Varma company.

  • Funds were received from, and in one case returned to, someone other than the client, contrary to the firm’s policies and the client-care letter.

  • Broughton told a mortgage lender that nobody apart from Siddhant Varma would contribute to Hallam Street, while treating money from the father, the son and their companies as one “family pot”.

  • He later signed a certificate that he had acted for My Casa for a year when that was the first instruction from the company.

  • Source-of-funds evidence for the £2 million was not sought for two months, and the explanation accepted was that the father had given it to the son and that this was “all approved by the Home Office”.

  • The liquidators pointed to circularity: Varma controlled the proposed borrower, Grosvenor PBSA Limited.

• The firm accepted that it would be vicariously liable if Broughton had been dishonest, and that dishonest conduct would amount to assistance.

  • The only issue at trial was dishonesty.

  • There was no case that he actually knew of the underlying misappropriation.

What the High Court decided, and why it was wrong

• In [2025] EWHC 2362 (Ch), judgment dated 24 September 2025, Saira Salimi, sitting as a Deputy High Court Judge, held that

  • An honest solicitor with Broughton’s skill and experience would not have acted as he did.

• She described

  • A pattern of disregard for professional obligations and “repeated turning of a blind eye to obvious causes for concern”, and

  • Said that was not the conduct of an honest solicitor.

• The September 2025 judgment decided liability only.

  • In a later judgment, the Deputy Judge ordered the firm to pay about £2.1 million, with interest tied to the 7.5 per cent return investors had been promised.

• The Court of Appeal’s dismissal of the claim means that the order no longer stands

• Falk LJ held that this compressed the mandatory two-stage test in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67. The court must

  • First find the defendant’s actual knowledge and beliefs.

  • It must then ask whether, given that state of mind, the conduct was honest or dishonest by the standards of ordinary decent people.

• A belief needs only to be genuinely held.

  • Whether it was reasonable is evidence of whether it was held, not an extra requirement.

  • Grupo Torras SA v Al-Sabah [2001] CLC 221 did not create a special professional test.

• The “most striking feature” of the first-instance judgment was that

  • The judge accepted Broughton’s case that he genuinely believed the Varmas were legitimately wealthy and that Varma was funding his son’s property ambitions.

  • He was not found to have suspected that anyone outside that family unit had a claim to the funds.

  • It was not put to him that he was lying.

  • There was no finding that he consciously decided not to ask further questions for fear of the answer.

  • Incorrect statements to a lender and breaches of undertakings did not fill that gap in the pleaded blind-eye case.

• The court set the decision aside and dismissed the claim. A retrial would have been unfair:

  • The liquidators had not secured the targeted findings on which their case was based and should not have another opportunity to obtain them.

• The underlying fraud is untouched.

• What failed was the attempt to treat missed AML checks and weak source-of-funds work as if they were, by themselves, a suspicion deliberately left unconfirmed.

Sources

• Court of Appeal judgment, [2026] EWCA Civ 1238, handed down 2 October 2026 (National Archives PDF): https://caselaw.nationalarchives.gov.uk/ewca/civ/2026/1238/data.pdf

• BAILII (as linked by Legal Futures): https://www.bailii.org/ew/cases/EWCA/Civ/2026/1238.html

• High Court liability judgment, [2025] EWHC 2362 (Ch), 24 September 2025: https://s47657.pcdn.co/wp-content/uploads/2025/09/Grosvenorj.pdf

• Courts and Tribunals Judiciary, appeal hearing listing (8–9 September 2026): https://www.judiciary.uk/live-hearings/grosvenor-property-developers-ltd-respondent-v-portner-law-limited-appellant/

• Legal Futures, 4 October 2026, “CA overturns ruling that solicitor turned ‘blind eye’ to fraud”: https://www.legalfutures.co.uk/latest-news/ca-overturns-ruling-that-solicitor-turned-blind-eye-to-fraud

• Law Gazette, 10 September 2026, on the appeal hearing: https://www.lawgazette.co.uk/news/firm-fighting-for-its-reputation-in-appeal-against-court-finding/5127866.article

• Law Gazette, 3 October 2025, on the High Court finding: https://www.lawgazette.co.uk/news/actively-dishonest-partner-helped-misappropriate-24m/5124637.article

• ZoomLaw case summary of [2026] EWCA Civ 1238: https://zoomlaw.co.uk/2026EWCACiv1238.html

• Estates Gazette, 5 October 2026, case note: https://www.estatesgazette.co.uk/legal/grosvenor-property-developers-ltd-in-liquidation-v-portner-law-ltd-3/

• ICLG, 25 September 2025, on the High Court decision: https://iclg.com/news/23103-law-firm-dishonestly-assisted-directors-misappropriation-of-almost-gbp-2-5-million/

• South Square, on the later quantum and costs judgment: https://southsquare.com/judgment-hand-down-grosvenor-property-developers-limited-in-liquidation-v-portner-law-limited/

• Wedlake Bell, 30 September 2025, note on the High Court judgment: https://wedlakebell.com/insights/grosvenor-property-developers-ltd-v-portner-law-ltd/

• Insolvency Insider, 8 October 2025: https://insolvency-insider.co.uk/p/law-firm-found-liable-for-partner-s-role-in-2-4m-investor-fraud

• Carruthers Law, 10 October 2025: https://www.carruthers-law.co.uk/articles/grosvenor-property-developers-v-portner-law-dishonest-assistance/