Honesty is a fundamental principle common to all regulated professions.

The concept of a regulated profession is predicated on the basis that certain professionals are held to a “higher standard” than others and reflects the heightened level of trust and confidence which the general public place in such professionals.

For that reason, codes of ethics and conduct will commonly require registrants to act with “integrity”, in a way which is “straightforward”, “truthful”, or “honest”. That expectation of fair and honest dealing has permeated even further, and is often included in the codes of ethics for professional membership bodies more widely.

While the specific wording of the honesty requirement may differ by professional body, it is standard practice for regulatory/membership bodies to look to the common law definition of dishonesty to inform their disciplinary approach. That definition has evolved over time, and the generally accepted test is that as set out in the well-known case of Ivey v Genting Casinos [2017] UKSC 67. That test was reaffirmed in the more recent criminal case of R v Barton and another [2020] EWCA Crim 575.

The Ivey test contains two parts; a subjective element and an objective element. Firstly, the fact-finder must ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts. Secondly, the fact-finder should consider whether the conduct in question was honest or dishonest by applying the (objective) standards of ordinary, decent people.

There are a couple of pitfalls for investigating teams in applying this definition in the context of a disciplinary investigation, which can sometimes create a reluctance to include dishonesty within the charges put to the member.

Firstly, there is the danger of applying the wrong standard (objective vs. subjective) to the wrong part of the test. In terms of determining the member’s understanding of the facts (i.e. the first part of the Ivey test), whether or not the belief was reasonable should not, in and of itself, be determinative; the crucial question is whether that belief was genuinely held by the member. In this way, ignorance can, in the right circumstances, be an excuse. This does not mean that the credibility of the member’s understanding cannot be tested – it certainly should be, based on the evidence available. By the same token, in terms of whether the conduct would be considered dishonest (i.e. part two of the test), it is not relevant to consider whether the member themselves (subjectively) considered their conduct to be dishonest. Fact-finders should not be dissuaded from pursuing a charge of dishonesty simply because there is no “smoking gun” which shows that the member considered that they were behaving in a dishonest way. This was the legal position under R v Ghosh [1982] QB 1053, but this has since been expressly overturned. The relevant standard to apply is the objective standard of ordinary, decent people. A sensible development as, if the subjective mindset of the member was determinative, the lower the ethical standards of the member, the easier it would be for them to escape a charge of dishonesty.

Another common difficulty for fact-finders is establishing, with the requisite degree of certainty, the subjective understanding or belief of the member being investigated. There will often be an evidential challenge in satisfying this first element of the Ivey test, with the only available evidence being the testimony of the member themselves. However, it may be possible to obtain additional evidence which helps inform the assessment of whether the belief was genuinely held. One of the simplest ways to do this is to point to a clear objective obligation or standard, which the member was aware of and failed to meet. For example, if a member was clearly signposted to a set of written professional rules and obligations, and expressly confirmed their understanding of these obligations, this will seriously undermine the credibility of any argument that they did not understand the responsibilities incumbent on them. In cases like this, it is possible to infer that this is so unreasonable that it cannot have been the genuinely held belief. Importing this objective concept of reasonableness into the subjective first element of the test can be a difficult balance to strike, but is often necessary in the absence of first-hand evidence of the member’s understanding.

What about a case where the evidence is not strong enough to confirm that the member categorically knew of wrongdoing, but does indicate that the member suspected something was amiss and deliberately turned a blind eye? In these cases, a charge of dishonesty might still be appropriate. The doctrine of “blind-eye knowledge” allows a fact-finder to infer actual knowledge from (i) the existence of the member’s suspicion that certain facts may exist and (ii) a conscious decision not to take any further steps to confirm the existence of those facts (Group Seven Ltd v Notable Services [2019] EWCA Civ 614; Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2003] 1 AC 469; Twinsectra Ltd v Yardley [2002] 2 AC 164). It is not enough simply to show that the member negligently failed to investigate a matter which they ought to have (this would better support a competency-related charge); the evidence must point to both a suspicion and a conscious decision not to investigate. When considering how to demonstrate blind-eye knowledge, one possibility is to look to the member’s contemporaneous notes or communications with third parties; if the member noted a concern or raised a query, but there is no evidence that this was addressed or subsequently followed up, this could suggest that the member held a suspicion but decided not to probe further into whether that suspicion was justified.

Turning lastly to what is meant by the objective standards of “ordinary, decent people”. Clearly, standards of honesty vary across the population and across industries, but for the purpose of this test, the fact-finder must put themselves in the position of a reasonable, honest member of the public. It is important that the objective standard applied is that of society as a whole, not of a more narrowly-focused market or profession. For example, in R v Hayes (Tom Alexander) [2018] 1 Cr. App. R. 10, a banker accused of conspiracy to defraud was unsuccessful in arguing that the jury should measure his conduct against an objective standard for a market or a group of traders, instead of the ordinary standards or honest and reasonable people. This was firmly rejected, on the basis that allowing a market or industry to set the objective standard of dishonesty would “gravely affect the proper conduct of business”.1 The Court of Appeal referenced the damage which can be caused when markets abandon the standards of honesty held by ordinary, reasonable people. This interpretation of the objective standard of honesty should act as a deterrent to professionals – and wider markets – from adopting practices which stray from the societal norms of honesty.

Whether to include a charge of dishonesty in the context of a disciplinary allegation will ultimately be a matter of professional judgment for the fact-finder. Of course, evidential challenges will endure in any matter which requires an investigator to look beyond the member’s actions and consider the member’s knowledge at the time. However, as demonstrated by the evolving case law, the member’s mindset is not the only factor to consider. The final, determinative factor will be whether the ordinary, decent member of the public would consider the conduct to be dishonest. This is significant, and appropriate, given that the purpose of a dishonesty charge is to protect the public from professionals who have breached the enhanced level of public trust and confidence which they enjoy.

This article was originally published by The Association of Regulatory and Disciplinary Lawyers in their quarterly Spring Bulletin.

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