Construction disciplinary trends analysis #3: fraud and dishonesty

This article is the third instalment in our mini-series analysing trends in disciplinary decisions involving construction professionals, with insight from our specialist disciplinary team.

How have the trends we identified developed?

In our first article, we mapped the regulatory landscape and highlighted the number of sanctions imposed on architects and surveyors for failing to meet their continuing professional development obligations (CPD). Since this article was published, another 15 surveyors and an architect have been sanctioned for failure to comply with CPD requirements; 11 of whom were expelled from the profession and a further individual refused re-admission to the profession.

Our second article focussed on engagement letters, considered some recent cases and set out our top 5 risk management takeaways. Since this article was published, a further 5 architects were sanctioned for providing clients with inadequate or non-compliant terms of engagement.  This brings the total number of architects sanctioned to 11 in the past year, 5 of whom were expelled.  

The third trend that we identified was sanctions imposed on construction professionals for acting without integrity or acting dishonestly, which is the topic of this article. 

New trends

We have also noted an increased in professionals being disciplined for competency or advice failings. In the past year, eight architects and one surveyor were disciplined for providing inadequate professional services; something which historically would more likely to be considered a private civil matter, rather than a regulatory issue. The regulators' focus on competence is unsurprising given the new competency requirements brought in by the Building Safety Act 2022 and the emphasis in the industry on building safety. 

On the other end of the spectrum, four architects and two surveyors were sanctioned for criminal convictions in the past 14 months; including child sex offences and fraud-related offences. 

The regulation of ethics generally

Ethics is ultimately about trust.   Professional regulation aims to answer the question: why should a client trust you?  The answer is because you are subject to regulation requiring compliance with higher moral standards that the public (and regulators) expect from professional people. 

Honesty and integrity are key tenets of all professional codes of conduct. Rule 1 of RICS' Global Rules of Conduct 2021, Standard 1 of the ARB's The Architect's Code: Standards and Professional Conduct and Practice and Principle 1 of RIBA's Code of Professional Conduct 2021 each require members to act with honesty and integrity at all times.  As such, dishonesty and acting without integrity are the most serious types of misconduct, attracting the most serious sanctions. 

The regulation of ethics can be a contentious and challenging area, as any professional will know from grappling with ethical issues in their day-to-day practice. Acting ethically means behaving in a manner that is morally correct and responsible.  In order to be able to tell whether we are acting morally correctly, we need to understand what actions are “good” and what are “bad/evil”. This is often fact specific and dependent upon the context of the actions.  As such, there may not be one objective answer in each case – particularly if your actions will benefit some stakeholders and harm others.  

Acting ethically is often considered to be synonymous with acting with integrity.  However, acting with integrity itself can be hard to define (we will come onto this) and has been described as a “nebulous concept”.  And the standard for assessing dishonesty is whether the conduct would be considered dishonest in the minds of reasonable honest people, which is a somewhat circular definition.

As this is an area full of nuance, it is imperative for the decision making process to be documented.  In relation to any situation where you feel you are making a judgment whether something is ethical, every firm and member should be able to justify their actions and be able to explain the approach they took, especially if they needed to depart from behaviour recommended by their relevant code of conduct. 

Fraud and dishonesty

Allegations which have led to a finding of dishonesty in the 13 cases over the past year include the following:

• Dishonest expenses claims;
• Fraud convictions;
• Lying about having inspected works;
• Misuse of client money;
• Misrepresenting and exaggerating experience, including in a RIBA Professional Experience and Development Record (PEDR) and by copying someone else's case study;
• Forgery of documents;
• Failing to disclose a conflict of interest.

The law has long grappled with how to detect dishonesty when it essentially requires an inquiry into an individual's state of mind – and if the person was dishonest, their explanation may not be reliable. The law has solved this by adopting a combined subjective and objective test: ie by asking whether, taking into account what the professional knew or genuinely believed about the facts, they were dishonest by the standards of ordinary decent people. 

The circular nature of the definition reflects the fact that dishonesty has always been a "jury question" – something you know when you see. Some of these examples seem to fall clearly on the wrong side of the line (eg forging documents or fabricated expenses), but it is easy to see how some examples could be more nuanced: for example, everyone wants to sound as experienced as possible on their CVs, but there is an ethical line between presenting your experience in the best way and exaggerating it. Or in the case of the architect who failed to disclose a conflict of interest: what if the architect had considered whether there was a conflict of interest and determined that there was not – clearly there would be no scope for a finding of dishonesty here.  But what if the architect had deliberately chosen not to turn their mind to it, for fear of what they might conclude. 

In such a case, this would require the PCC to consider what is commonly called "blind eye knowledge" or "Nelsonian blindness"; in other words, choosing not to investigate in case your suspicions are confirmed. The reference is to Vice Admiral Horatio Nelson, who was blind in one eye and who, during the Battle of Copenhagen, lifted the telescope to his blind eye so that he could not see the signal ordering him not to attack.

Nelsonian blindness was recently considered by the Court of Appeal in AXIS Specialty Europe SE v Discovery Land Co LLC [2024] EWCA Civ 7 (see our article here). This was a dispute about whether a solicitors' professional negligence policy covered a claim for return of client funds dishonestly misapplied by one member (M1) of the law firm limited liability partnership.  The court had to decide whether the other member condoned M1's conduct by "turning a blind eye". Discovery Land significantly widened the scope for dishonesty by confirming that it is possible to condone dishonesty without knowing about the specific dishonest act – for example because the condoner was aware of previous instances of dishonest or a pattern of dishonest behaviour.

Lack of integrity

Another nebulous concept that is difficult to define, the requirement to act with integrity has also left a messy trail of case law behind it before arriving at the current position, which is that integrity means meeting the ethical standards of your profession.  It is more than mere honesty, as a professional is expected to be even more scrupulous than a member of the public in their day-to-day dealings.

If integrity means following the rules, why have it? Why do we need a separate rule that tells you to follow the rules? This may seem like an academic debate but it’s absolutely crucial for regulated professionals to understand what standards they need to meet and the law (which has not developed significantly since Wingate) on this is arguably unsatisfactory, making it difficult for regulated members to defend themselves against an allegation of acting without integrity.

Despite these difficulties, acting without integrity featured prominently in nine cases in the last year.  Arguably this allegation is often included to signal the higher level of moral culpability. Only three professionals proven to have acted without integrity succeeded in escaping erasure or expulsion.  In one case, the architect's failure to promptly produce evidence of expenses lacked integrity.  A £2,500 fine was imposed for acting without integrity, failing to produce adequate terms of engagement and issuing an invoice for fees which had not been agreed.  In the other case, the architect's encouraging a client to withdraw a regulatory complaint lacked integrity and a £1,500 penalty order was imposed for this and for other breaches. In the final case, an architect whose failure to advise on copyright and assignment lacked integrity was suspended for 6 months.

Our top 5 risk management tips

Our top tips for ensuring that you act honestly and with integrity are as follows.

1. Trainee lawyers are often told to imagine each document that they write being read out in Court and scrutinised by a judge.  Architects and surveyors can take a similar approach by approaching difficult ethical questions by imagining their regulator scrutinising their actions years after the event, possibly without the same grasp of the nuances and characters involved, and when memories have faded.
2. To that end, ensure any difficult ethical decisions are documented, recording:
   a. The key facts that you knew at the time, any assumptions you have made and any beliefs you hold;
   b. The reasoning behind your decision (spell it out); 
   c. Not only your reasoning for reaching the decision you did, but the reasons why your chosen course of action could be criticised and how you would meet those criticisms. 
3. Make use of resources offered by your regulator, such as the RICS decision tree. 
4. Correct any inadvertent misleading immediately – a moment's embarrassment is better than the loss of your career.
5. Do not be tempted to cover up any mistakes – the consequences of the cover up will almost certainly be worse than the original mistake. 

As with any type of alleged misconduct, a better result is often reached by early cooperation with your regulator and with the benefit of an experienced legal team, like RPC. 

We would be delighted to discuss any queries or comments arising out of this article, which should be addressed to our specialist construction regulatory lawyers Emma Wherry, Ben Goodier, Alex Anderson or Kat Cusack.