Appellate Restraint in Dishonesty Findings: Board/Auditor “Authorisation” Belief Can Sustain a Non‑Dishonesty Conclusion for Non‑Trust Fund Payments

1) Introduction

Gable Insurance AG v Dewsall & Ors [2026] EWCA Civ 851 concerns the boundary between (i) serious director misconduct and (ii) dishonesty for the purposes of the Ivey test, and—crucially—the limited circumstances in which the Court of Appeal will overturn a trial judge’s evaluative finding on dishonesty.

The appellant insurer (“GIAG”), a Liechtenstein-regulated underwriter, pursued claims against its former director/CEO (“the director”) for breaches of Liechtenstein-law director duties connected with large payments to an associated service company (“Hogarth”) and other diversions of GIAG funds. The trial judge (Deputy High Court Judge Vos) found multiple breaches and several instances of dishonesty, but held that part of the “Hogarth loan” (the portion arising from direct payments from GIAG’s own bank accounts, not from the trust accounts) was not dishonest. GIAG appealed on that single issue.

The practical significance was sharpened by the director’s bankruptcy: dishonesty mattered because Insolvency Act 1986, s.281(3) prevents discharge from releasing “any bankruptcy debt” incurred by “fraud or fraudulent breach of trust”.

2) Summary of the Judgment

The Court of Appeal (Newey LJ; Asplin LJ and Baker LJ concurring) dismissed the appeal. It held that the trial judge:

  • directed himself by reference to the correct dishonesty test in Ivey v Genting Casinos (UK) Limited [2018] AC 391;
  • did not misapply that test merely because his reasoning structure was “unusual”;
  • was entitled to conclude that, for the non-trust-account component of the Hogarth indebtedness, the director was not dishonest given the judge’s unchallenged findings that the director believed the practice was board-authorised, disclosed to auditors, and expected repayment (supported by a personal guarantee);
  • could rationally distinguish between (a) misapplications of funds from trust accounts (involving breach of an express trust) and (b) direct GIAG payments later treated as an inter-company debt.

3) Analysis

3.1 Precedents Cited

(a) Dishonesty: the two-stage Ivey approach

The Court reaffirmed the modern dishonesty framework from Ivey v Genting Casinos (UK) Limited [2018] AC 391 (quoting [74]): (1) find the person’s actual knowledge/belief as to the facts (subjective), then (2) judge honesty by the objective standards of ordinary decent people. It also cited the alignment with Barlow Clowes International Ltd v Eurotrust International Ltd [2006] 1 WLR 1476 (Lord Hoffmann at [10]), emphasising that while the mental state is subjective, the standard is objective.

The appeal was not about restating Ivey, but about whether the judge had truly performed stage (2) for the non-trust-account payments. The Court held he had.

(b) Appellate restraint: when findings/evaluations can be overturned

The decision is heavily anchored in appellate discipline:

  • Henderson v Foxworth Investments Ltd [2014] 1 WLR 2600: interference only where the decision “cannot reasonably be explained or justified” (Lord Reed at [67])—not merely because the appeal court would have decided differently (see [62]).
  • Fage UK Ltd v Chobani UK Ltd [2014] FSR 29: reasons for deference include the trial judge’s immersion in the “sea of evidence” versus appellate “island hopping” (Lewison LJ at [114]), and the limits of appellate review based on documents/transcripts.
  • R (R) v Chief Constable of Greater Manchester [2018] 1 WLR 4079 and In re Sprintroom Ltd [2019] 2 BCLC 617: evaluative decisions should stand unless undermined by an identifiable flaw (gap in logic, inconsistency, failure to consider material factor).
  • Volpi v Volpi [2022] 4 WLR 48: appellate courts should not subject judgments to narrow textual analysis.
  • DPP Law Ltd v Greenberg [2021] IRLR 1016: where correct legal principles are stated, appellate courts should be slow to infer misapplication unless the language clearly shows it.

The Court also referenced (via Fage at [115]) authorities on sufficiency of reasons: Customs and Excise Commissioners v A [2003] 2 WLR 210, Bekoe v Broomes [2005] UKPC 39, and Argos Ltd v Office of Fair Trading [2006] U.K.C.L.R. 1135.

3.2 Legal Reasoning

(a) The real appellate question: “open to the judge”

GIAG argued the judge focused on the director’s subjective beliefs (stage 1 of Ivey) and failed to conduct the objective stage 2 assessment; it said the director’s proven dishonesty in other episodes made it “inevitable” that the entire Hogarth course of conduct was dishonest.

The Court rejected that characterisation. It treated paragraph 221 of the trial judgment as a direct application of stage (2) “ordinary decent people” standards to the factual beliefs the judge had found at stage (1). The Court was also unwilling to infer misapplication given the explicit references to Ivey and repeated use of its language.

(b) Why the non-trust-account payments could rationally be treated differently

A key feature of the Court’s reasoning is its acceptance that a trial judge may permissibly draw qualitative lines between kinds of wrongdoing, even within a broader pattern of misconduct:

  • Trust-account excess payments were capable of being treated as more inherently dishonest because they involved payments from accounts where GIAG was beneficial owner and which were restricted to specified insurance-related uses—so misuse could be seen as a deliberate breach of an express trust arrangement.
  • For non-trust-account “excessive payments”, the judge’s unchallenged findings mattered: the director believed the practice had board authorisation, was disclosed to auditors, and would be repaid (supported by a personal guarantee). On those findings, the Court held it was not irrational to conclude that ordinary decent people would not characterise the conduct as dishonest (even if it fell “well below” expected standards).

Importantly, the Court did not endorse the conduct. It treated the appeal as turning on the strict Henderson threshold: whether the non-dishonesty conclusion was one no reasonable judge could reach. It held it was within the permissible range.

(c) “Capacity for dishonesty” is not a substitute for proof of dishonesty in the specific transaction

The director was found dishonest in several discrete episodes (including diversions, post-regulator-order payments, and later trust-account extractions). GIAG sought to leverage those findings to colour the earlier non-trust-account payments. The Court accepted that this showed a “capacity for dishonesty”, but held it did not compel a finding that the earlier conduct was dishonest—particularly where the judge had made specific findings about the director’s beliefs regarding authorisation, disclosure, and repayment expectation.

3.3 Impact

(a) Insolvency litigation: preserving the fraud exception requires transaction-specific dishonesty

The case illustrates that, even where a director is liable for substantial breaches of duty, proving dishonesty (and therefore engaging consequences such as Insolvency Act 1986, s.281(3)) remains highly fact-sensitive. Claimants must expect courts to assess dishonesty episode-by-episode, not by broad inference from general bad character or other dishonest acts.

(b) Appellate strategy: a “misapplied Ivey” argument faces a high bar

Where the first-instance judge has (i) cited Ivey, (ii) made express findings about the defendant’s beliefs, and (iii) articulated an objective conclusion using “ordinary decent people” language, the Court of Appeal will be slow to re-run the evaluation absent a clear logical gap, inconsistency, or failure to consider a material factor.

(c) Trust structures heighten dishonesty risk

The Court’s acceptance that trust-account misuse can be rationally distinguished signals a practical point: where corporate funds are held under expressly restricted trust arrangements, misapplication may more readily support dishonesty findings than equivalent-value transfers from general accounts later “papered” as inter-company debt.

4) Complex Concepts Simplified

  • The Ivey test for dishonesty: first decide what the person actually believed about the facts; then ask whether, given those believed facts, ordinary decent people would call the conduct dishonest. The person need not realise others would view it as dishonest.
  • Fraudulent breach of trust: misuse of property held on trust can amount to a fraud-type liability. In bankruptcy, such liabilities may survive discharge under Insolvency Act 1986, s.281(3).
  • Appellate restraint: appeals are not “re-trials”. Even if an appeal court suspects it might have reached a different view, it will not interfere unless the first-instance conclusion is outside the range of reasonable outcomes or is undermined by a clear error.

5) Conclusion

[2026] EWCA Civ 851 does not dilute the Ivey dishonesty standard; rather, it reinforces that dishonesty is a tightly fact-bound evaluation and that appellate courts will rarely disturb a trial judge’s conclusion where the correct test is identified and applied. The judgment also underlines a practical distinction: misuse of funds drawn from expressly restricted trust accounts may be more readily characterised as dishonest than comparable payments made from general corporate accounts and treated (however informally) as repayable indebtedness—particularly where the judge finds the decision-maker believed the position was board-authorised and auditor-disclosed.