Lord Bishop of Leeds v Dixon Coles And Gill (A Firm) & Ors

Until the beginning of January 2016, the long-established and well-respected Wakefield solicitors firm of Dixon Coles and Gill (DCG) had 3 equity partners, Mrs Linda Box, Mr Julian Gill and Mrs Julia Wilding. On Christmas Eve 2015 Mr Gill, no doubt to his horror, discovered evidence that Mrs Box had dishonestly made unauthorised payments from client account. She was confronted by Mr Gill and Mrs Wilding and acknowledged her defalcations and she was promptly expelled from the partnership at the beginning of January 2016 and reported to the police.

Initially it seems that the wholly innocent partners, Mr Gill and Mrs Wilding, were under the impression that the misappropriation of client monies was confined to the tens of thousands of pounds. In fact, it soon transpired that her dishonest misappropriation of client monies had been going on for years and the sum total of her misappropriations ran into the millions of pounds.

In March 2017 she pleaded guilty to 12 offences of dishonesty comprising offences of theft, fraud and forgery involving the misappropriation of a little over £4 million. She was sentenced to a term of imprisonment of 7 years.

As a result of her dishonesty not only did she create victims of clients of the firm and others who relied upon her integrity, but she also created victims out of Mr Gill and Mrs Wilding and no doubt all the employees of DCG because, at the end of January 2016 the firm, which had been established some 200 years previously, was obliged to close. In April of that year the Solicitors Regulation Authority (SRA) intervened through their agents, Messrs Gordons, and took away all DCG’s files and accounting records. In June 2016 DCG entered into a Partnership Voluntary Arrangement.

Sad as the closure of their firm is, that is not the only consequence of Mrs Box’s dishonesty that Mr Gill and Mrs Wilding have to confront. They currently face 2 separate claims brought by parties who assert that they have been significantly financially disadvantaged by Mrs Box’s defalcations and who look to Mr Gill and Mrs Wilding, as Mrs Box’s erstwhile partners, to make good their losses. The applications with which I have to deal arise in those 2 separate claims.

Rule 2.1 of the SRA Indemnity Insurance Rules 2013 requires all solicitors to carry professional indemnity insurance which accords with the SRA Minimum Terms and Conditions of Professional Indemnity Insurance (MTC). I shall deal with the terms of the MTC in much greater detail below but for introductory purposes I need only recount that one of the terms of the MTC is that the sum insured for any one claim must be at least £2 million. Another clause in the MTC (known as the Aggregation Clause) provides that, when considering what may be regarded as one claim for the purpose of the limit of indemnity, certain claims can be aggregated and be treated as one.

DCG had their cover with HDI Global Specialty SE (HDI). The policy provided merely for the minimum permissible cover of £2 million and it also contained an aggregation clause. Mr Gill and Mrs Wilding, as they were entitled to do as innocent partners, claimed under the policy for HDI to remedy the breach of the SRA accounting rules and make good the deficiency in client account caused by Mrs Box‘s defalcations and thus, essentially, for indemnity in respect of any liability that they may have to those adversely financially affected by her conduct.

It is anticipated I think that misappropriations will significantly exceed £2 million. If the misappropriations are one claim then HDI’s obligations will be satisfied as and when they have paid £2 million and any balance must be met, so far as possible, by Mr Gill and Mrs Wilding personally in so far as they are found to be liable for Mrs

If, however, the claims by each party are separate claims, as Mr Gill and Mrs Wilding assert, then each attracts its own £2 million indemnity limit. The personal exposure therefore of Mr Gill and Mrs Wilding in those circumstances would be considerably attenuated.

The current position is that proceedings have been instituted against DCG, Linda Box and HDI by the Right Reverend, the Lord Bishop of Leeds (the Bishop) and the Leeds Diocesan Board of Finance (LDBF). These claimants assert that all the equity partners in DCG are liable as partners and trustees for Mrs Box’s misappropriations of their funds and, in that capacity, are liable to account for misappropriated monies had and received by DCG and also monies that have not been received by DCG but were received and misappropriated by Mrs Box in the course of the business of the firm and with DCG’s apparent authority deriving from her position as a partner in that firm.

One of the applications before me, dated October 2019, is an application by the Bishop and LDBF for summary judgment for an account from the former partners in DCG as trustees. In addition, there is an application for an interim payment and, further, for a declaration that HDI is not permitted to aggregate the claims of the Bishop with those of LDBF or indeed with the claims of other victims of Mrs Box’s misconduct.

A second application before me arises out of proceedings instituted by 4 charities (the Scholefield claimants) who were residuary beneficiaries pursuant to the Will of Mr Ernest Scholefield dated 15 July 2005. The Will appointed Mrs Box and Mr Gill as executors of the estate and, in that capacity, they retained DCG to act on their behalf following the death of Mr Scholefield in September 2007. The actual administration of the estate was carried out solely by Mrs Box.

It is asserted that, in fact, the residuary estate to which the Scholefield claimants were entitled as residuary beneficiaries amounted to £660,952.78 but, because Mrs Box misappropriated monies belonging to the estate, the aggregate amount paid to them was only £206,723. They therefore claim the difference of £454,229.78 plus interest and they look to Mr Gill for that in his capacity as executor and Mr Gill and Mrs Wilding on the basis that, as partners in the firm instructed by the executors, they are fixed with liability for their defaulting partner.

This second application is the Scholefield claimants’ application for summary judgment for a declaration in the same terms as that sought by the Bishop and LDBF namely that HDI is not entitled to aggregate the Scholefield claimants’ claims with the claims of other clients or entities entitled to bring a claim against DCG or its former partners.

The respective claims by the Bishop and LDBF on the one hand and the Scholefield claimants on the other have not been formally consolidated but, because of the obvious common features, they have been case managed together and all the parties agreed that the respective applications for summary judgment should be heard together.

The basis upon which HDI have been brought into the proceedings for the purpose of seeking declarations is to be found in the Third Parties (Rights against Insurers) Act 1930. Consideration was given to this legislation in my judgment in the Scholefield claimants’ action handed down on 21 July 2020 the citation for which is [2020] EWHC 1948 (Ch).

For the reasons contained in that judgment I concluded that the court had jurisdiction to make the declarations sought by the Scholefield claimants notwithstanding that there would not be a judgment against the defendants at the time when the declaration was sought.

It will be noted that the Bishop and LDBF seek summary judgment which would, if granted, at least to the extent that an order is made for an interim payment, engage the provisions of the 1930 Act but, on the authority of my decision in the Scholefield claimants case, they seek a declaration whether or not their current summary application results in liability being incurred by the defendants.

The Bishop and LDBF are represented by Mr David Halpern QC. The Scholefield claimants are represented by Mr Alexander Learmonth of counsel. Mr Gill and Mrs Wilding are represented by Mr Thomas Dumont QC in respect of the application against them for an account and interim payment but they are not represented on the question of the declaration in respect of aggregation. In that respect they are litigants in person. Their interests however in this context wholly coincide with those of the Bishop, LDBF and the Scholefield claimants and Mr Gill and Mrs Wilding had nothing to add other than to adopt the submissions made by Mr Halpern QC and Mr Learmonth in that connection. Mr Michael Pooles QC appears for HDI. I am grateful to all counsel for their very skilful presentation of their respective cases and extremely helpful skeleton arguments.

The grounds for summary judgment are set out in CPR 24.2. They are so familiar that it is probably unnecessary to recite them but for completeness CPR 24.2 states:

The test to be applied on an application for summary judgment is a well established one upon which I also trust it is not necessary to overly dwell. The court’s approach has been summarised by Lewison J, as he then was, in EasyAir Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]. It was stated that:

In this case there are issues which are fact sensitive. It is conceded by the claimants in both applications that, for the purpose of summary judgment in these applications, I must approach this matter on the basis that the facts are as the defendants assert them to be. It cannot be said that there is “no real substance in factual assertions made (by the defendants)” such as to dismiss them on the basis set out in iv) above.

The White Book paragraph 24.2.5 makes it clear that the overall burden of proof rests on the applicant to establish that there are grounds to believe that the respondent has no real prospect of success and that there is no other reason for a trial but, if an applicant does adduce credible evidence in support of its application, the respondent then becomes subject to the evidential burden of establishing some realistic prospect of success. But that evidential burden is not an onerous one. All a respondent essentially has to establish is that its case is not false, fanciful or imaginary and is simply better than merely arguable.

Where, however, the question is whether summary judgment should be granted where the relief sought is a declaration the court’s approach is more nuanced. Indeed, the approach the court should take in those circumstances was recently considered in Abaidildinov and London Infrastructure Ltd v Amin [2020] EWHC 2192 (Ch). Mr Robin Vos sitting as a judge of the Chancery Division closely analysed the earlier decision of Neuberger J, as he then was, in Financial Services Authority v Rourke [2001] EWHC 704 (Ch) and concluded, at paragraph 49 that:

“49 The reference to the “claim or issue” in CPR 24.2(a)(ii) must therefore in my view refer to the underlying facts or matters to which the declaration relates and not to the question as to whether, as a matter of discretion, the court should make the declaration once it is satisfied in relation to those underlying facts or matters.”

In paragraphs 47 and 48 the judge had this to say:

“47 “…..whether or not the underlying facts or matters relevant to the declarations are made out is the key issue as far as summary judgment is concerned. If the defendant has a real prospect of successfully defending the points put forward by the claimant in support of the declarations summary judgment should not be granted.

48 However, once it is established that the defendant has no real prospect of mounting a successful defence in respect of those facts or matters, it is unlikely to be in accordance with the overriding objective to require a full trial in order to decide whether the court should exercise its discretion to make the declarations which have been sought”

In this case therefore, as Mr Pooles conceded, I must approach the question of a declaration on ordinary principles. It is not appropriate to decline to make a declaration simply because the defendants have a real prospect of successfully resisting it at trial. Once the conclusion has been reached that there is no real prospect of successfully challenging the facts or matters upon which the applicant relies in support of his application for a declaration, then the declaration should be granted at this, summary, stage if the reasons for doing so outweigh the reasons for not doing so.

I should add that in this case Mr Gill and Mrs Wilding raise a limitation defence. It is arguable I suppose that a limitation defence invites the court to make a declaration as to whether a claim is statute barred. However, Mr Halpern concedes that, for the purpose of an application for summary judgment, all that Mr Gill and Mrs Wilding need to establish is that their limitation point has a real prospect of success and thus simply satisfies the relatively undemanding criteria necessary to avoid summary judgment.

DCG appears to have had a long association with the Church. At all material times before April 2014 DCG acted as solicitors for the Bishop of Wakefield and the Wakefield Diocesan Board of Finance.

For many years until 2005 Mrs Box was the Registrar of the Diocese of Wakefield. The duties of a Registrar are currently set out in schedule 2 of SI 2019/1187, The Legal Officers (Annual Fees) Order 2019. I am told that these duties have not altered significantly and were basically the same during Mrs Box’s tenure as Registrar. Essentially, as Mr Halpern puts it in paragraph 39 of his skeleton argument, they amount to being the in-house lawyer to the Diocese. It is a fact, and apparently was then, that only qualified solicitors or barristers who are communicants of the Church can act as Registrars.

In 2005 Mrs Box became Chancellor of the Diocese of Southwell and Nottingham and was thus obliged to relinquish the office of Registrar which was assumed by Mr Gill and Mrs Wilding. It seems that their respective roles were displayed on the firm’s note paper, Mr Halpern suggests as a “selling point”. Under the name of each of the equity partners they are described as Chancellor or Diocesan Registrar, as applicable.

In 2013/2014 there was a reorganisation within the Church of England as a result of which the assets and rights of the Bishop of Wakefield and the Wakefield Diocesan Boards were vested in the Bishop of Leeds and LDBF. From 20 April 2014 property and trusts formerly in the name of the Bishop of Wakefield and any Wakefield Diocesan Board became vested in the Bishop of Leeds and the corresponding Leeds Diocesan Board. Mr Gill and Mrs Wilding then became joint registrars of the Diocese of Leeds along with Mr Peter Foskett, a partner of Lupton Fawcett who act for the Bishop and LDBF in this application.

When Mr Gill discovered a defalcation in the client account in Christmas 2015, in addition to reporting it to his insurance broker, he and Mrs Wilding commissioned accountants to investigate the extent of Mrs Box’s wrongdoing. It appears that he also reported this to Mr Foskett because he attended at the offices of DCG in January 2016 and removed a quantity of papers amongst which were found some particularly incriminating ones so far as Mrs Box was concerned.

These included a red ledger in Mrs Box’s handwriting entitled “The Bishop of

The documents removed by Mr Foskett also included a list of sums held for the Bishop of Wakefield as at 31 December 1999 with the Churches, Charities and Local Authority’s Investment Management Ltd (CCLA). That document records 8 funds, details of which appear in a further document headed “Total number of charitable donations made to clergy from trust funds at the disposal of the Bishop of Wakefield for the past 3 years (1997, 1998, 1999)”. The total amount recorded as invested with CCLA is £982,638.85. There appears to be no record of what has happened to this money other than £188,820 which the Bishop accepts has been received by him. The fact appears to be that Mrs Box nefariously appropriated it for her own purposes.

There has also been revealed a DCG ledger entitled “Bishops Trust BIS 0071” which, it is said, contains wholly spurious entries and which does not appear to refer to any transaction in respect of which Mrs Box or DCG were specifically instructed. This account records transactions totalling about £1.2 million some of which are apparently also recorded in the Red Ledger. When double-counting and other necessary adjustments are made Mr Halpern argues that the amount in respect of which Mr Gill and Mrs Wilding are obliged to account for the criminal activities of Mrs Box revealed by this ledger is just short of £760,000.

At this point I should record that there is a specific issue in relation to a payment of over £1.126 million recorded in this ledger as having been paid into client account on

Furthermore, and moving on from BIS 0071, an in-depth analysis of DCG’s ledgers relating to conveyancing transactions where Mrs Box was instructed in her capacity as a partner in the firm reveal a considerable number of payments out ostensibly to or on behalf of LDBF but which it does not recognise. There is a significant claim in respect of these payments.

So far as the Bishop and the LDBF are concerned these documents evidence systematic and long-term theft of Church funds by Mrs Box.

Paragraph 10 of the Re-Re-Amended Particulars of Claim refers to those documents (and indeed others which are not relevant to this application) and forms the basis of the claim by the Bishop and LDBF as it is currently pleaded. The sum total of transactions revealed by these documents amounts to about £2.5 million.

What all those documents appear to reveal is that some funds were stolen by Mrs Box from the Bishop or LDBF (as successors to the Wakefield diocese) which did not go through DCG’s client account while others did.

One of the issues in this case is the extent to which Mrs Box indulged in teeming and lading. Teeming and lading is defined more fully in paragraph 252 below but briefly it is the process by which monies are moved around between bank accounts or ledgers to hide the fraudulent removal or use of those funds. Mr Pooles argues that in this case the evidence would suggest that teeming and lading operating through DCG’s client account was extensive and that, if it is not necessarily the case now, the evidence in support of that analysis may well follow. He argues that this is important in the context of establishing what is a “claim” for the purpose of insurance cover. Mr Halpern, and Mr Learmonth on behalf of the Scholefield claimants, suggest that it is irrelevant to the question of what amounts to a claim but in any event both assert that teeming and lading was not extensive at all.

Mr Gill and Mrs Wilding argue that they have no knowledge of Mrs Box’s involvement in the Bishop of Wakefield’s Fund recorded in the Red Ledger. They deny that Mrs Box’s involvement was with their authority or in the ordinary course of the firm’s business.

They point out that Mrs Box was a close friend of Bishop Nigel, the Bishop of Wakefield until 2002 and subsequently Bishop Stephen who was installed in 2002. They contend that she administered this fund on that, personal, basis. Insofar as some money may have been channelled through client account, this was simply a moneylaundering exercise to facilitate Mrs Box’s frolic of her own.

I should add that it was the Bishops who seem to have given Mrs Box the sole authority to sign cheques in respect of this fund. I have been referred to a letter dated 15 December 1995 from Mrs Box to Bishop Nigel which suggests that the Bishop is the trustee of these funds but, conveniently, the nature of the trust was such that the Bishop was under “no legal duty to divulge the accounts to anyone”.

I remind myself that it is only Mr Halpern on behalf of the Bishop and LDBF who at this stage seeks an account against, and an interim payment from, the former partners in DCG. In paragraph 13 of his skeleton argument Mr Halpern summarises the basis of his claim. He describes it as in essence being very simple:

“DCG at one time held very substantial assets belonging to (the Bishop and LDBF). A large part of those assets has been stolen by Mrs Box. DCG is liable to account as trustee of these assets. Accordingly (the Bishop and LDBF) are entitled to summary judgment for accounts and enquiries pursuant to CPR r25.1 (1)(o) and 24PD 6.”

The contention is that Mr Gill and Mrs Wilding are trustees by virtue of their position as equity partners in the firm and on that basis are liable for money which went through their client account and for other losses sustained by Mrs Box’s wrongful acts.

As Mr Halpern’s skeleton argument makes clear, the claim is based on the footing of wilful default. Thus, it is grounded on the allegation of misconduct. It is by means of a claim on the footing of wilful default that a trustee is obliged to account for a passive breach of trust namely an omission to do something which, as a prudent trustee, he ought to have done as well as an active breach of trust where the beneficiaries look to a trustee because the trustee has done something which he ought not to have done. In short, an account on the footing of wilful default seeks to charge the trustee not only with assets actually received but also with assets which he has not received but which he would have received but for his breach of duty. Accordingly, it gives rise to a power to surcharge the errant trustee with items that they would have received but for their wilful default.

Sections 9 to 13 of Partnership Act 1890 provide:

Mr Halpern asserts that all 3 equity partners have a direct liability insofar as money passed through the client account of the firm because any money passing through the client account is held on trust for the client to whom it belongs. He also prays in aid in this context s11(b) which makes the firm liable to make good losses for monies received by it which are misapplied by one or more of the partners and s9 which fixes every partner in the firm with liability for all the debts and obligations of the firm.

As I have said, it is common ground that some money misappropriated by Mrs Box did not pass through the firm’s client account but he argues that, in receiving that money, Mrs Box was acting within the scope of her apparent authority when she misapplied it and thus, by virtue of s11(a) the firm is liable to make good the loss and, as above, s9 fixes the innocent partners with those liabilities.

The provisions of s10 impose an obligation on innocent partners to make good any losses caused by the wrongful act or omission of any other partner acting in the ordinary course of the business of the firm or with the authority of his co-partners. Furthermore, in respect of both scenarios, the liability of each partner is joint and several by virtue of the provisions of s12which provides that each partner’s liability shall be joint and several where that liability arises under sections 10 or 11.

Whilst sections 9 to 12 fix the partners with a liability for the conduct of co-partners, s13 is a limiting provision which absolves a partner in specific circumstances from liability for misappropriations by a trustee who happens, incidentally, to be a partner.

Through Mr Dumont, Mr Gill and Mrs Wilding accept that, subject to a limitation defence, they have a duty to account in respect of monies that may have been misappropriated by Mrs Box in the course of conveyancing transactions carried out by Mrs Box on behalf of the Bishop and/or LDBF or their predecessors, because, as Mr Dumont puts it at paragraph 36 of his skeleton argument “conveyancing was, of course, four-square within the firm’s business”.

Accordingly, Mr Gill and Mrs Wilding do not dispute an obligation to account for monies misappropriated as a result of conveyancing transactions on behalf of Mr Halpern’s clients where the claim is not statute barred. They accept, as indeed it seems to me they must, that such transactions were in the ordinary course of the firm’s business and that accordingly they are fixed with liability as partners and as trustees of money passing through the client account.

One such transaction concerns a conveyance in relation to Thornhill Lees, Dewsbury where it is acknowledged that £33,062.38 is presently unaccounted for. Another is All Souls, Hayley Hill Sunday School where it is acknowledged that there is presently £188,014.61 unaccounted for. However, they resist any application for an interim payment on the basis that the documents are so unreliable that it not appropriate to make any order for interim payment until there has been a detailed account.

They deny any liability in respect of all misappropriations other than those connected to sufficiently recent conveyancing transactions on the grounds not only that certainly in relation to some they are statute barred but also because Mrs Box’s conduct was not in the ordinary course of the firm’s business and nor was it authorised by them.

In Dubai Aluminium Co Limited v Salaam [2003] 2 AC 366 the House of Lords had occasion to consider the position of partners in the context of what was taken, for the purposes of the hearing, to be the dishonest conduct of one partner in a firm of solicitors.

The case is important in the context of the consideration of when a solicitor is acting in the ordinary course of business, the phrase utilised in s10 of the Act and Mr Halpern relies on it for that purpose. At paragraph 110 Lord Millett had some observations on the interrelationship between these various sections cited above which it is worthwhile repeating.

As I have said, Mr Halpern relies on section 10 in the context not least of monies misappropriated by Mrs Box which did not go through the firm’s client account (Footnote: ¹) but in order to do so he must of course ultimately establish that Mrs Box’s wrongful acts occurred when she was acting in the ordinary course of the firm’s business or with the authority of her co-partners. It is in this context that Dubai Aluminium is particularly apposite.

At first blush one might think that it can never be part of the ordinary course of the business of a firm of solicitors to misappropriate monies but that is not what Dubai Aluminium says. In that case it was held that a solicitor would have been acting (Footnote: ²) in his capacity as a partner and in the ordinary course of the firm’s business when he dishonestly assisted in the perpetration of a fraudulent scheme by drafting various agreements necessary to the fraud.

As Lord Nicholls said at paragraph 19:

“Partners do not usually agree with each other to commit wrongful acts. Partners are not normally authorised to engage in wrongful conduct. Indeed, if vicarious liability of a firm for acts done by a partner acting in the ordinary course of the business of the firm were confined to acts authorised in every particular, the reach of vicariously liability would be short indeed. Especially would this be so with dishonesty and other intentional wrongdoing, as distinct from negligence.”

Accordingly, Lord Nicholls was of the opinion, expressed in paragraph 21, that:

“whether an act or omission was done in the ordinary course of a firm’s business cannot be decided simply by considering whether the partner was authorised by his co-partners to do the very act he did.”

And at paragraph 23:

“If, then, authority is not the touchstone, what is?....... Perhaps the best general answer is that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm…… the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm’s business……”

What does the phrase “fairly and properly” mean? As Lord Nicholls points out at paragraph 24, phrases such as that betoken a value judgment by the court. The conclusion (as to whether an act is done within the ordinary course of business) is a conclusion of law based on primary facts rather than a simple question of fact.

But what degree of connection between the act of the errant partner and those authorised by the firm would be sufficiently close to prompt the conclusion that the act is in the ordinary course of business? In other words, at what point does an errant act become characterised as work-related rather than personal?

At paragraph 31 Lord Nicholls approves the judgment of Henn Collins MR in Hamlyn v John Houston and Co [1903] 1 KB 81 in which it was said that:

“If it was within the scope of Houston’s authority to obtain the information by legitimate means, then for the purpose of vicarious liability it was within the scope of his authority to obtain by illegitimate means and the firm was liable accordingly”

In that case one aspect of the business of the defendant firm was to obtain, by lawful means, information about its competitors’ activities. Houston, a partner in the defendant firm, obtained confidential information on Hamlyn by bribing one of their employees. He had no express authority to do that but nonetheless the firm was held liable.

However, Lord Nicholls made it clear that there are limits on this broad principle. A distinction is to be drawn between those situations where an employee or partner took an unlawful step for the purpose of furthering the business of the firm and one where the partner is engaged only in furthering his own interests. In that latter case then:

“… The mere fact that the act was of a kind the employee (or in this case partner) was authorised to do will not of itself fasten liability on the employer (or in this case co-partners) (Footnote: ³).”

Applying those principles in Dubai Aluminium Lord Nicholls, in a judgment with which the other members of the House of Lords agreed, held that a firm was liable for the acts of one of its partners whose dishonest assistance helped to facilitate the fraud.

As Lord Nicholls pointed out at paragraph 36:

“Drafting agreements of this nature for a proper purpose would be within the ordinary course of the firm’s business. Drafting these particular agreements is to be regarded as an act done within the ordinary course of the firm’s business even though they were drafted for a dishonest purpose. These acts were so closely connected with the acts Mr Amhurst (the solicitor taken to have been dishonest for the purposes of the case) was authorised to do that, for the purpose of the liability of the firm, they may fairly and properly be regarded as done by him while acting in the ordinary course of the firm’s business.”

Lord Millett in the same case thought (at paragraph 113) that the issue could be reduced to an analysis of whether the acts of the dishonest solicitor “are legally capable of being performed by a solicitor acting in the ordinary course of his firm’s business.” Similarly, at paragraph 122 he explained that (Footnote: ⁴) “the vicarious liability of an employer (and thus a co-partner) does not depend upon the employee’s (the errant partner) authority to do the particular act which constitutes the wrong. It is sufficient if the employee (errant partner) is authorised to do acts of the kind in question.”

However, Lord Millett made it clear that that principle is not by any means immutable. At paragraph 125 he stated (Footnote: ⁵):

“The question of whether the employee (errant partner) was acting in the course of his employment (in the ordinary course of business) or was engaged on a frolic of his own is not necessarily determined by the fact that he was merely doing work of the kind he was employed to do. Even in such a case the employee (partner) may step outside the limits of his employment (the ordinary course of business of the partnership).

And at paragraph 130 he had this to say:

“In the present case the principal participants in the fraud needed a solicitor to draw the agreements which were to be the instrument of carrying out their scheme. They instructed Mr Amhurst, a partner in Amhurst’s; and he is to be assumed to have carried out his instructions “in his role as a solicitor of the firm”, that is to say he was not moonlighting but acting in the course of the firm’s business. Drawing such agreements honestly and for a proper purpose would plainly be in the ordinary course of the firm’s business. By drawingthem dishonestly for an improper purpose and for his own benefit or for thebenefit of his confederates, the court might, on an overall assessment of theevidence at trial, have concluded that Mr Amhurst had sufficiently departedfrom the ordinary course of the firm’s business to defeat Dubal’s claimagainst Amhurst’s. He would have been engaged on a frolic of his own andnot acting in his role as a partner of the firm. But such a conclusion would not have been inevitable; deliberate and dishonest conduct committed by a partner for his own soul benefit is legally capable of being in the ordinary course of the business of the firm.”

The underlining above is mine. It emphasises an observation upon which Mr Dumont relies.

Lord Millett in Dubai Aluminium also considered the extent to which acting as a trustee is acting in the course of a solicitor’s business. He had regard to the case of Mara v Browne [1896] 1 Ch 199. The Court of Appeal in that case had concluded that

But, while Lord Millett did not demur from that conclusion, he was clear that it all depended on what was meant by a “constructive trustee”. His position was that he agreed with the observations of the Court of Appeal in Mara where the meaning of constructive trustee is confined to a de facto trustee who had taken upon himself the custody and administration of property on behalf of others. In that sense Lord Millett recognised that such a person, as a de facto trustee, is actually a trustee. They are, to use his words at paragraph 138, “true trustees and fully subject to fiduciary obligations”.

This is to be contrasted with a different kind of constructive trustee namely a person who has wrongfully taken possession in his own right and was thus liable to be declared a trustee by a court of equity. This sort of constructive trustee does not assume the position of trustee like that of a de facto trustee. As was said in paragraph 141 “if he receives the trust property at all he receives it adversely to the claimant and by an unlawful transaction which is impugned by the claimant”.

Calling such a person a trustee is actually a misnomer. It is, to cite paragraph 142, merely the creation by the court to meet the wrongdoing alleged. It is “nothing more than a formula for equitable relief”. Such a person is in reality not accountable as a constructive trustee at all but is simply accountable in equity. Lord Millett had this to say at paragraph 143:

“The distinction between the two kinds of constructive trustee is of critical importance in the present context. If, as I think, it is still not within the ordinary scope of a solicitor’s practice to act as a trustee of an express trust, it is obviously not within the scope of such a practice voluntarily to assume the obligations of a trustee and so incur liability as a de facto trustee…… But given that a solicitor may be guilty of deliberate and dishonest conduct while acting within the ordinary scope of his practice, there is no conceivable reason why his firm should not thereby incur vicarious liability for loss caused by the conduct (of an errant partner) for which that partner is accountable in equity.”

Mr Halpern argues that Mrs Box is quite clearly one of these second type of constructive trustees that is, not in fact a trustee at all but merely a person who is accountable in equity for her actions. The sentence which I cite above to the effect that “if he receives the trust property at all he receives it adversely to the claimant and by an unlawful transaction which is impugned by the claimant” is clearly one upon which he relies in support of that contention.

Accordingly, he prays in aid the opinion of Lord Millett expressed in the final sentence in paragraph 74 above in support of his contention that Mr Gill and Mrs Wilding are liable for Mrs Box’s misconduct. He does however draw my attention to the point made by Lord Millett at paragraph 155 to the effect that their liability is vicarious, it is not a direct liability. Mr Gill and Mrs Wilding are liable even though they are personally innocent because their partner, Mrs Box, is guilty.

Bringing all these threads together Mr Halpern suggests that in order to obtain an order for account he must establish that the Bishop’s funds were received in the ordinary course of business or were held out as such or were held by Mrs Box as a constructive trustee of the second type identified by Lord Millett.

He points out that Mrs Box carried out her functions from DCG’s offices. All the documents on which the claimants rely were found at DCG’s offices. That Mrs Box performed her office of Registrar as part of the practice of DCG, as did Mr Gill and

On the issue of an account and indeed an interim payment, Mr Halpern does not dispute that there is a paucity of documents to establish precisely what has been stolen from his clients, in other words, what has become of these Church funds. In order to meet any contention that this should preclude an order for an account or an interim payment Mr Halpern argues that there is a presumption that the missing information is as favourable to the claimants and as unfavourable to DCG as possible given that it is DCG’s breach of duty which has led to the information not being available.

As was said in One Step (Support) Ltd v Morris-Garner [2018] UKSC 20 at paragraph 38:

“Insofar as the defendant may have destroyed or wrongfully prevented or impeded the claimant from adducing relevant evidence, the court can make presumptions in favour of the claimant. The point is illustrated by the case of Armory v Delamirie (1721) 1 Str 505 where a chimney sweep’s boy found a jewel and took it to the defendant’s shop to find out what it was. The defendant returned only the empty socket, and was held liable to pay damages to the boy. Experts gave evidence about the value of the jewel which the socket could have accommodated, and Pratt CJ directed the jury

“that unless the defendant did produce the jewel, and shew it not to be of the finest water, they should presume the strongest against him, and make the value of the best jewels the measure of their damages.””

That principle had been adopted in Keefe v The Isle of Man Steam Packet Company Ltd [2010] EWCA Civ 683. This was a noise-induced hearing loss claim brought by a claimant who had worked on the defendant’s ships. It was dismissed at first instance because there was no engineering evidence of noise levels on the ships in which Mr Keefe served during his employment with the defendants. There was, however, an obligation on the defendants to take measurements of noise levels to ensure they did not exceed levels which were dangerous. The defendants were in breach of that duty.

At paragraph 19 Longmore LJ stated that:

“If it is a defendant’s duty to measure noise levels in places where his employees work and he does not do so, it hardly lies in his mouth to assert that the noise levels were not in fact excessive. In such circumstances the court should judge a claimant’s evidence benevolently and a defendant’s evidence

critically.”

Mr Halpern relies on this case to make good his point that the principle in Armory v Delamirie does not just apply to fraud but also negligence. The principle is therefore not diluted merely because Mr Gill and Mrs Wilding have not acted dishonestly. Gulati v MGN Ltd [2017] QB 149 is another example of the application of the principles in Armory insofar as it is doubted. Mr Halpern prays this case in aid of his assertion that these principles extend to applications for an account.

I should say however that it is right to observe that in that case it was pointed out by Arden LJ at paragraph 107 that the principle in Armory is not inflexible: “for example, if it was clear that a finding about the diamond’s real value could be made from other evidence”.

Mr Dumont however argues that Mr Gill and Mrs Wilding have clearly established a real prospect of successfully defending the claim against them based, as it is, on their position as trustees and partners to say nothing of the limitation defence to which I shall come shortly.

He neatly gives an overview of their defence in paragraph 9 of his skeleton argument in which he says:

Mr Dumont argues that the fact that Mrs Box was a diocesan registrar is neither here nor there. In fact, she ceased to occupy this office in 2005 and it is no part of a registrar’s duties in any event to administer trust funds on behalf of the diocese.

He argues that there is a real prospect of establishing that, with regard to this ledger, Mrs Box’s conduct was not conduct in the course of the firm’s business. Even more importantly, in acting as a signatory on the Bishop of Wakefield’s bank account (which actually enabled her to misappropriate these funds) she was not acting in that capacity.

He argues that it can make no difference that the Red Ledger was found in her office. He points out that often personal papers or other personal effects are kept by professionals in their office. He points out that in Kooragang v Investments Pty Ltd v Richardson and Wrench Ltd (1982) AC 462 and employee was using the firm’s stationery. At paragraph 127 of his judgment in Dubai Aluminium Lord Millett refers to this case in which a firm was held not to be liable for the negligent valuations of one of their employees who was moonlighting when he gave the valuation. At paragraph 127 he says that:

“Unless the use by the valuer of the defendant’s stationery in that case was enough to tip the scale, which it clearly was not, it merely amounted to a false representation that he was giving the valuation on their behalf”.

If using the firm’s stationery is not determinative the rhetorical question to be asked is how much less so can it be determinative, or even very relevant, that an incriminating document was found in Mrs Box’s office at DCG?

Furthermore, argues Mr Dumont, the fact that the stationery makes reference to Mrs Box’s status as the diocesan registrar means nothing. It is an office held within the Church of England and as Mr Halpern concedes, it is akin to being an in-house solicitor. Mr Dumont argues that that is in-house to the Church of England, not inhouse to DCG.

Additionally, even if she paid her retainer into the firm, that does not mean that she was acting in the course of the firm’s business. It is, says Mr Dumont, perfectly reasonable to argue that the retainer is simply to compensate the firm for the fact that, when she is working on Church of England business, Mrs Box is not fee earning for the firm. Nor, he argues, can it make a difference that it is a prerequisite of acting as the diocesan registrar that one is a solicitor or barrister. The same is true for judicial appointment but that does not mean that a partner who is a recorder is acting in the ordinary course of business of the firm of which he is a partner when he is sitting on the Bench.

Further as regards the Red Ledger, Mr Dumont makes the point, in paragraph 16 of his skeleton argument:

“….the Red Ledger is manifestly a diocesan Ledger. It was kept in manuscript, in a separate ledger book. It does not record monies held at all by DCG. It appears to record funds held in, received into and paid out of, the Bishop of Wakefield Fund bank account at Barclays and other accounts such as the

Diocesan Central Board of Finance. These were not funds held by Mrs Box or DCG for the Bishop/diocese but funds held by the Bishop/diocese itself.”

He reminds me that the evidence is that Mrs Box was a close friend of both Bishop Nigel and Bishop Stephen. Indeed, as regards Bishop Nigel he and Mrs Box and their respective spouses went out together to dinner and on breaks to Edinburgh and Dorset. Mr Dumont argues that it is clear that she was implicitly trusted with the administration of this fund, not specifically as a partner in DCG but in her own, personal, capacity. He asserts that it is manifestly arguable that when she raided this fund she was not acting as a solicitor in the course of business but on a frolic of her own. In short, it is at least sufficiently arguable to meet the requirements of CPR24 that what she was doing was personal rather than work related.

Even to the extent that she paid sums from the Red Ledger into DCG he argues that there is a real prospect of it being established that that was not in the ordinary course of the firm’s business nor indeed received by the firm in the course of its business, nor indeed authorised by the firm. It was paid into DCG’s bank account not in consequence of any underlying transaction but merely to launder the money she was stealing from the Bishop or the other diocesan entities. As he says in his skeleton argument paragraph 19:

“using the client account to launder stolen money where the firm is not acting on any underlying transaction, is not in the ordinary course, or in the course, of the firm’s business.”

On the issue of apparent authority which, it will be recalled, is a basis upon which a partner can be fixed with liability under both section 10 and section 11(a) Partnership Act 1890, Mr Dumont argues that in writing cheques for her benefit Mrs Box had actual authority but it was the authority of the Bishop, not DCG.

Nor, it is argued, can it be said that she has authority from DCG to receive money into client account. In order to pay money into client account there has to be an underlying transaction on behalf of the client. The Solicitors Accounts Rules 2011 rule 14.5 makes that clear. Rule 14.5 states:

“You must not provide banking facilities through a client account. Payments into, and transfers or withdrawals from, a client account must be in respect of instructions relating to an underlying transaction (and the funds arising therefrom) or to a service forming part of your normal regulated activities”

I am satisfied that Mr Dumont has discharged the evidential burden of establishing a real prospect of successfully defending the claim in respect of this ledger on the basis that there are sufficiently arguable issues revolving around ordinary course of business and apparent authority. That is not to say that at trial that defence will succeed. However even if success is improbable that is not enough for summary judgment. The test is simply that the defence is better than merely arguable.

While Mr Halpern’s submissions to the effect that Mrs Box’s dealings recorded in the Red Ledger were authorised or in the ordinary course of business are powerful, nevertheless I am satisfied that Mr Dumont’s counter to them are sufficiently strong to frustrate a claim for summary judgment for an account. I recognise that the claim is founded on the footing of wilful default and that requires a breach of duty by the trustees to have been established.

In reaching my conclusion I take into account in particular the observations of their Lordships in Dubai Aluminium. I have in mind paragraph 125 of that judgment to which I refer in paragraph 70 above to the effect that even if the wrongful conduct occurs in the course of doing work of the kind that the employee or partner was expected to do nevertheless an employee or partner may still step outside the limits of his employment or outside the limits of ordinary course of business and be treated on the basis that his conduct is a frolic of his own.

I also have regard to paragraph 130 of Dubai Aluminium where Lord Millett expressly recognises that somebody in the position of Mr Amhurst in that case or Mrs Box in this case could have sufficiently departed from the ordinary course of the firm’s business to defeat a claim against partners. It is difficult to see how, if that may apply to Mr Amhurst, it is not sufficiently arguable that it applies in respect of Mrs Box.

True it is that if Mrs Box is held to be a constructive trustee of the second type envisaged by Lord Millett in Dubai Aluminium then Mr Gill and Mrs Wilding may well be accountable. That is clear from that part of his judgment that I reproduce at paragraph 74 above. But that question may depend on questions such as the extent to which Mrs Box has taken upon herself the custody and administration of property belonging to the Church and recorded in this ledger and thus becoming a de facto trustee. I have in mind here the matters which I consider at paragraph 72 above. It would not be appropriate to discount the possibility that there are factual issues which may affect the question of the liability of Mr Gill and Mrs Wilding if that is to be based upon Mrs Box, rather than being a de facto trustee, being instead a constructive trustee of the second type described by Lord Millett.

In the light of that finding obviously questions of an interim payment do not arise.

Many of the arguments marshalled by Mr Dumont in respect of the Red Ledger are deployed by him in connection with this account. The major difference of course is that BIS0071 is a DCG ledger. It is to be distinguished on that basis from the manuscript scribblings of Mrs Box in the Red Ledger.

In his skeleton argument at paragraph 33 Mr Dumont argues that, even in connection with this ledger, Mr Gill and Mrs Wilding can rely on the fact that the Partnership Act does not fix co-partners with liability for acts done by another partner which are outside the scope of apparent authority or outside the scope of the ordinary course of the firm’s business.

The argument is that this ledger did not reflect any genuine underlying transactions whatsoever. It was merely a means to raid Mr Halpern’s clients’ money. Accordingly, Mr Dumont argues that there is a real prospect of successfully arguing that the use of this account was simply outside the ordinary course of the firm’s business and nor can it be said that it was authorised, not least because it is directly contrary to the provisions of rule 14.5 of the Solicitors Accounts Rules.

Mr Pooles’s submissions were of course predominantly directed towards the Aggregation Issue but, in the context of the application for summary judgment, he urged upon me the fact sensitivity relating to questions as to how the monies that ultimately ended up in this account, and indeed elsewhere, came into the hands of Mrs Box and that thus the matter did not lend itself to summary judgment. I have of course considered that but it seems to me that what matters here is not how the monies came to be in client account or Mrs Box’s status when she received these monies and paid them into client account, but the fact that they were then misappropriated while in client account.

Accordingly, I have considerably more difficulty in reaching the conclusion that Mr Gill and Mrs Wilding have a defence with a real prospect of success in relation to the taking of an account in respect of this ledger.

It is hard to argue that setting up a client account ledger and transacting through it is outside the ordinary course of business of a solicitor. Indeed, such steps are integral to the running of a solicitors’ firm. I do not see how it can be realistically argued that the fact that no transactions going through this ledger are genuine renders what would otherwise be an account in the ordinary course of business (and for which co-partners would be responsible) into a ledger for which they are not responsible. That would mean that where there is total abuse of client account through the medium of a client account ledger co-partners would be absolved from liability but not where some of the transactions in the ledger were genuine. It would be odd indeed if that was the law.

It cannot even be said that the ledger is in the name of a wholly made-up client. The name “Bishop’s Trust” at the very least, bears a relationship to genuine clients of the firm. Indeed, the ledger card itself refers to the client as being an

“existing client”.

Furthermore, I do not see that it is realistically arguable that setting up and transacting through a client account ledger is outside the apparent authority of a partner. Solicitors do it, and are indeed expected to do it, every day. True it is that in this case it was for dishonest purposes but it is difficult to see any realistic basis for concluding that setting up and transacting through a client ledger is not sufficiently closely connected with the acts that the partner is authorised to do so as to make it an

act in the ordinary course of business. I have in mind here the use of the phrase

“closely connected” to which I refer in paragraphs 61 and 68 above.

I do not overlook Mr Dumont’s consideration of BIS0071 in his skeleton argument from paragraph 27 and indeed his oral submissions but they centre predominantly on what can be gleaned from this ledger in terms of the extent to which Church funds have been raided as opposed to the funds of other clients. In my judgment those issues are not in themselves a reason not to order an account. After all, the whole purpose of an account is to clarify the numbers.

Accordingly, I am satisfied that the Bishop and LDBF are entitled to summary judgment for an account in respect of this ledger because there is no real prospect of the court at trial concluding otherwise, but I am not satisfied that it is appropriate to order an interim payment.

First, there is the issue to which I refer above concerning the provenance of the £1.126 million that came from St James’s Place. Mr Halpern’s clients have produced no evidence that this money was ever theirs and, it is argued, it is equally possible that it belonged to somebody else.

Various scenarios have been speculated. Who is to say, argues Mr Dumont, that it was not stolen from the estate of a deceased client and just laundered through BIS0071? It is suggested that executors or beneficiaries of such a deceased person would have been likely to make it known if over £1 million had been misappropriated from the deceased’s estate. But that would only be the case if they knew about it. Those interested in the administration of a will for example may well be aware of a loss of £1 million if the estate was expected by the personal representatives or the beneficiaries to be quite sizeable but estate accounts produced by Mrs Box showed it to be modest. But if a deceased was a multimillionaire in any event those interested in the administration of his estate may not know that it was worth say £10 million rather than the £9 million that Mrs Box may have them believe.

If that £1.126 million is put on one side then the transactions going through BIS0071 amount to only £53,000 odd but it appears that £633,159.37 has been debited from that ledger and ostensibly credited to the benefit of the Wakefield Diocese in one form or other. In short, if the money from St James’s Place was not initially a Church investment then Mr Halpern’s clients may have been overpaid.

Mr Halpern relies on the principle in Armory, but, as Mr Dumont points out, it is arguable that it does not apply, certainly at this stage. That principle arose on the basis that it was impossible to ascertain the quality of the gem that had initially occupied the socket in the ring. But that is not analogous to this situation where forensic accounting may well throw some light on the extent of the misappropriations (Footnote: ⁶).

In my judgment CCLA is much more akin to the Red Ledger than it is to BIS0071. The financial transactions that are recorded are simply recorded on pieces of paper kept, it appears, by Mrs Box. They are not financial transactions in respect of which a client ledger was opened. They are different from the Red Ledger only in the sense that they are typed rather than manuscript and look a little more professional but that cannot be reason for making a meaningful distinction between the Red Ledger and the CCLA accounts.

For the same reason therefore that I decline to give summary judgment for an account in respect of the Red Ledger I decline to give summary judgment for an account in respect of this. As with the Red Ledger, it is sufficiently arguable for Part 24 purposes that monies that Mrs Box passed through the CCLA account were not passed through in the ordinary course of the firm’s business or with the apparent authority of her co-partners.

I allude to these in paragraph 36 above. Mr Dumont readily accepts that proceeds from sales of land belonging to LDBF in the sum of £221,076.99 in respect of which Mrs Box was instructed to act as a partner in DCG needs to be accounted for. He says as much in paragraph 9ii of his skeleton argument which I have reproduced above at paragraph 86.

The claim of the LDBF in respect of conveyancing claims relates however to 8 separate conveyancing transactions in which it is contended that monies belonging to LDBF have been siphoned away. The £221,076.99 in respect of which Mr Dumont concedes an account is appropriate relate to only 2 of those transactions, Thornhill Lees and All Souls, Hayley Hill Sunday School. In respect of those 2 properties however he resists Mr Halpern’s application for an interim payment on the basis that there is serious lack of clarity as to what, if anything, has been misappropriated and that, in the circumstances, it is just to await the outcome of the account.

Of the remainder, Mr Halpern pursues his claim for an account in respect of 2 but has withdrawn his claim for an interim payment in respect of them. These relate to the sale of St Luke’s C of E First School and Moorend C of E First School. Of the remaining 4 namely the sales of Headfield School, Ackworth Glebe, St Peters Car Park and 2 Kirkgate Lane South Hiendley, Mr Dumont raises a limitation defence.

It follows therefore that it is appropriate to accede to Mr Halpern’s application for an account in respect of the proceeds of sale of Thornhill Lees, All Souls, St Luke’s and Moorend. The issue is simply whether I should order an interim payment in respect of those 2 transactions in respect of which it is still pursued, namely Thornhill Lees and All Souls and indeed whether I should order an account and an interim payment in respect of any of the 4 transactions subject to the limitation defence if I conclude that that defence has no real prospect of success.

The claim form was issued on 25 September 2018. Mr Gill and Mrs Wilding argue that any claim for money misappropriated before 25 September 2012 is therefore statute barred.

As a primary point I record that Mr Dumont made clear that the limitation defence essentially arises only in respect of some of the conveyancing transactions namely, as I have said, the sales involving Headfield School, Ackworth Glebe, St Peter’s Car Park and 2 Kirkgate which all concluded before that date. A small number of the Red Ledger transactions may have occurred before 25 September 2012 but he accepts that almost all occurred within the limitation period. Neither is it suggested that limitation applies to the BIS 0071 or CCLA

Remedies for breach of trust fall within s21 Limitation Act 1980 which provides:

“(1)

No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action –

(a)

in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or

(b)

to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by him and converted to his use. …

Section 23 Limitation Act 1980 provides that:

“An action for an account shall not be brought after the expiration of any time limit under this Act which is applicable to the claim which is the basis of the duty to account”.

It is clear from s23 that there is no separate limitation period in respect of the remedy of an account; instead, the limitation period is determined by the underlying cause of action.

Mr Halpern relies on s21(1)(a). He argues that Mr Gill and Mrs Wilding were “party or privy” to the fraudulent breach of trust perpetrated by Mrs Box because the Partnership Act fixes them with liability notwithstanding their personal innocence.

He also prays in aid Lewin on Trusts 20^th edition paragraph 50–009 to the effect that:

“An action against an innocent trustee liable for the fraud of his co-trustee, though not a party or privy to it is not within section 21(1)(a) and accordingly can be barred by lapse of time. The same applies where the fraud is that of the trustee’s solicitor or other agent. But an action against a trustee based on the fraud of the trustee’s employee or partner (my emphasis) seems to be within the section.”

The authorities that both Lewin on Trusts and Mr Halpern cite in support of the contention that co-partners fall within the ambit of s21(1)(a) as being “party or privy” so that no limitation period applies are Blair v Bromley (1847) 2 Ph 354 and Moore v Knight [1891] 1 Ch 547.

Mr Dumont’s first point was that Moore v Knight is actually not support for the proposition that the editors of Lewin have suggested in paragraph 50–009. It was a case dealing with misrepresentations, it was not an action for breach of trust. It is simply not a decision on the liability of innocent partners outside the 6 year limitation period.

In fact, Mr Halpern was constrained to agree with Mr Dumont that Moore v Knight might not be the appropriate authority but nonetheless his firm position was that the principle enunciated by Lewin was correct even if they prayed in aid the wrong authority to support it.

Of course, Lewin also cited Blair v Bromley in support of the proposition that an action against a trustee based on the fraud of the trustee’s partner seems to be within the parameters of section 21(1)(a). I was not provided with a copy of this judgment but Sterling J refers to it quite extensively in Moorev Knight. At page 555 he said:

“….. Money came into the hands of the firm of Messrs Bromley without fraud and that one of the firm afterwards committed a fraud in respect of it, but made misrepresentations (some of which were attributable to the firm) which prevented the fraud from being discovered until the period fixed by the Statute of Limitations had expired. It was held that the innocent partner was deprived of the benefit of the statute by those representations which bound him as a partner. The decision rests on principles of the law relating to representation and to partnership, not on those which relate to trusts….”

It is true that the whole essence of Mr Halpern’s argument is that Mr Gill and Mrs Wilding are not able to claim the protection of the Limitation Act because they are deemed, pursuant to s21(1)(a) to be “party or privy” to the fraudulent act of Mrs Box by reason of their partnership status. It is also true that the Partnership Act only fixes them with liability for acts done in the ordinary course of business or within

In the circumstances it does seem to me that there is no limitation period but the question is, is it sufficiently arguable for the purposes of Rule 24 that there is? Despite the somewhat low threshold, I have been unable to conclude that it is in the context of the conveyancing transactions which are so obviously within the scope of a solicitors’ business and authority.

I do not see a realistic basis for arguing that Mr Gill and Mrs Wilding are not party or privy to the fraud where the Partnership Act fixes them with a direct liability in respect of Mrs Box’s fraud. I accept that in one very obvious sense they are not party or privy because they knew nothing about the fraud but the fact is that the Partnership Act deems them to have been party or privy in the context of actions undertaken by the errant partner in the ordinary course of business or within the scope of apparent authority – as the conveyancing transactions quite obviously were.

I also observe, for what it is worth, that that conclusion does indeed accord with the views of the editors of Lewin, a much respected textbook on trust law – even if, as seems to be conceded, the editors appear to have taken the wrong route to the right conclusion.

I should say that if I am wrong and that, by virtue of the provisions of s21(3), the limitation period is actually 6 years, there is provision for extension under s32(1)(a) or (b). Section 32 states:

“32(1) [W]here in the case of any action for which a period of limitation is prescribed by this Act, either –

(a)

the action is based on the fraud of the defendant;

(b)

any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or (c) relief from the consequences of a mistake the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.

(2)

For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered

for some time amounts to deliberate concealment of the facts involved in that breach of duty.”

Mr Halpern argues that the final sentence of s32(1) makes it clear that the subsection is applicable since the claim is based on the fraud of Mr Gill’s and Mrs Wilding’s partner. He argues that it does not lie in their mouths to assert that his clients should have discovered the fraud sooner given that Mr Gill and Mrs Wilding, who owed regulatory and fiduciary duties, failed to do so.

I acknowledge that it would be arguable that LDBF could, with reasonable diligence have discovered the fraud which was being perpetrated on it. Mr Dumont relies on the fact that if anybody at LDBF had bothered to take even the slightest critical look at completion statements and the like that may well have led to a train of enquiry revealing that Mrs Box was up to no good. Instead it seems that LDBF’s misplaced trust in her was so all-encompassing that no critical consideration at all was adopted with regard to these transactions. As Mr Gill put it in his witness statement of 18 August 2020 paragraph 40:

“what strikes me as astonishing about these claims is that the diocese was so lackadaisical about receiving the net proceeds of these transactions from Mrs Box, or asking her to account for them. I can understand that Mrs Box was a highly trusted figure, but I cannot understand what the function of the Diocesan Secretary (effectively the CEO of the diocese) and his staff is, if not to receive these proceeds of sale after each transaction concluded”.

Had I concluded that the claims were statute barred I would have concluded that it was arguable that Mr Halpern’s clients could with reasonable diligence have discovered the fraud and that an extension of time was not appropriate. However, that argument does not arise in circumstances where, as I have concluded, there is no real prospect of establishing a limitation period in any event.

The conclusion is that it is appropriate to order an account in respect of Thornhill Lees, All Souls, Headfield School, Ackworth Glebe, St Peter’s Car Park and Kirkgate. The next question therefore is whether it is appropriate to order an interim payment pending the accounts.

I should perhaps add that, had it been the case that the limitation issue extended to heads of claim other than the conveyancing transactions then the same principles would inevitably have applied. Thus, it would have been arguable that Mr Gill and Mrs Wilding could have taken advantage, so far as it would have been relevant, of the Limitation Act in respect of the Red Ledger and CCLA (on the basis that it is arguable that they were not privy or party to those transactions) but not in respect of BIS 0071.

The conditions to be satisfied and the matters to be taken into account on an application for an interim payment are set out in CPR rule 25.7. It is unnecessary to reproduce the whole rule.

As I understand it, in respect of those matters where an account is ordered Mr Dumont does not suggest that the conditions necessary to make an order for interim payment have not been met. Rule 25.7 (4) provides that “the court must not order an interim payment of more than a reasonable proportion of the likely amount of the final judgment”.

In the light of my conclusion that a defence in relation to the Red Ledger is sufficiently arguable an interim payment is obviously not appropriate.

I do not regard it as appropriate to order an interim payment in respect of this account bearing in mind the matters to which I refer in paragraphs 112 to 117 above.

In the light of my conclusion that a defence in relation to CCLA is sufficiently arguable an interim payment is obviously not appropriate.

In his skeleton argument Mr Halpern spends a good deal of time on his analysis of losses and the interim payment that should be made in respect of them. The first point to make is that in respect of all matters for which he seeks an interim payment he relies heavily on the principle in Armory essentially to the effect that any doubt should be resolved in favour of his clients.

DCG’s account ledger card shows £60,000 as having been credited to this account on 25 September 2014. The contention is that it was withdrawn in its entirety in transfers that LDBF do not recognise.

Mr Gill accepts that £33,062.38 of that initial credit of £60,000 is unaccounted for and he further accepts the need for an account. £60,000 is the amount that LDBF seeks by way of interim payment pending the account.

No ledger has been found for this particular transaction but papers found among DCG’s papers show that DCG acted for the diocese in the sale of this property and that the proceeds, net of costs and repayment of a loan, amounted to £188,014.61. There is a completion statement in the bundle which bears that figure. The contention of LDBF is that that sum has never been accounted for. This is a sum in respect of which Mr Halpern seeks an interim payment.

Mr Gill in his witness statement has managed to tie up with this transaction some correspondence with the Wakefield Diocesan Secretary, the Leeds Diocese and the Charity Commission which he says makes it difficult to establish whether in fact a good deal or all of this money may not have been genuinely paid away on behalf of the client. He argues therefore against an interim payment “given the uncertainty about what happened and when.”

£150,000 is shown as credited on a DCG ledger on 24 February 2012. The position of LDBF is that this was reduced to nil over the period to 21 December 2012 as result of debits which it does not recognise as legitimate save for £15,937.04 which it is acknowledged could be legitimate. The claim for interim payment therefore is in the sum of £134,062.96 in respect of which it is alleged there is no satisfactory explanation.

Papers found at DCG’s office show a sale of this land for £274,850. It seems that further payments were made to DCG pursuant to an overage agreement with the purchaser with the result that the total amount received in respect of the sale of this land was £512,872.66.

A DCG ledger appears to show this money coming into DCG in 7 tranches. The only amount that the diocese appears to have received is £84,267.37. No other payments out are considered to be justified other than perhaps £8243.88 in respect of costs. That would bring the amount claimed down to £420,361.41.

A witness statement from Mr Andrew Bogle in support of the application for summary judgment and interim payment contends that that is indeed the amount in respect of which such interim payment is sought. In Mr Halpern’s skeleton argument however, he limits it to £393,936.49. This is because it is recognised that one of the 7 tranches of payments amounting to £26,424.92 might not have been money to which the diocese was entitled.

Mr Gill does not formally challenge these figures. His challenge to interim payment in respect of this transaction is based upon the Limitation Act defence and the general unreliability, and lack of clarity, in respect of any figures produced by Mrs Box.

£30,000 was paid into client account on 30 May 2008. It is contended that that entire sum has been withdrawn in stages and none of the withdrawals are recognised as genuine. Once again, Mr Gill does not challenge the numbers. The defence is confined solely to limitation and the point he makes about the general unreliability, and lack of clarity, in respect of the figures bearing in mind the dishonest source from which they emanate.

So, bringing the threads together, were the acts of theft one series of related acts? I remind myself that in answering this question it is not enough that HDI has a case that satisfies the test necessary to avoid summary judgment. On the authority of Abaidildinov to which I have referred in paragraph 24 above, this question has to be decided on balance.

I have concluded that the thefts from Mr Halpern’s clients and from Mr Learmonth’s do not have a sufficient interconnection or unifying factor with any other claims to bring them within MTC 2.5(a)(ii) even if there was wholesale teeming and lading.

I accept that the language of this aggregation clause, when coupled with the glossary definition of claim, may not equate “claim” with cause of action and that the scope for aggregation by virtue of the MTC is wider than it was in Lloyds TSB but, notwithstanding that, I do not think that it permits aggregation of the Bishop’s Claim and the claim of LDBF on the one hand with those of the Scholefield claimants on the other, or of the claims of either party with claims of other clients whose claims have already been satisfied. (Footnote: ¹³)

In my view a unifying factor which is sufficient to unite these acts of theft for aggregation purposes is simply not present in this case. By reference to the comments of Lord Hobhouse which I recount at paragraph 225 above, what caused the financial losses to the two sets of claimants in this case were separate thefts from each of them.

It was not Mrs Box’s dishonesty which was the proximate cause of their loss. I agree with what Mr Halpern says in this connection which I recount at paragraph 200 above. Dishonesty is not an act, it is a state of mind. What caused these claimants’ losses were the individual thefts from them. True it is that these were motivated by dishonesty but it is the “acts” that matter, not the motivation for the “acts”. These acts resulted in different losses to different clients. There cannot, in my view, be said to be a single loss because I am satisfied that the acts of theft were not related on a proper construction of MTC 2.5(a)(ii).

Furthermore, I simply do not see that there is sufficient “interconnection” between the acts, to use the words of Lord Toulson in AIG to which I refer in paragraph 236 above. I do not see that the thefts from the Bishop and from LDBF “fit together” with the thefts from the Scholefield claimants save that they were all committed by the same person and perhaps concealed by the same process, factors which, in my judgment, are not enough.

I am much exercised by the observations of Lord Toulson at paragraph 27 of his judgment which I reproduce at paragraph 238 above. In the same way as he found it difficult to conclude that the transactions entered into by the Turkish investors were related to the transactions entered into by the Moroccan investors it is, to my mind, equally difficult to conclude that the thefts from the Bishop and LDBF are related to the thefts from the Scholefield claimants. They were, to use Lord Toulson’s words “separate and unconnected”, a conclusion that Lord Toulson reached in AIG despite the fact that the development companies were related and the legal structure of the development projects was similar. I am conscious that Lord Toulson was considering matters and transactions and their relationship but, as I mention in paragraph 236 above, I have no doubt that what he says there is transferable to the question of the relationship between different acts and omissions.

I remind myself of the test that Mr Learmonth promulgates and which I set out at paragraph 243 above. It seems to me that it has much to commend it. It is clearly consistent with the decision in AIG to the effect that the claims of the Turkish and Moroccan investors did not lend themselves to aggregation but the claims of the investors in each cohort would. It also fits comfortably with the decision in Lloyds TSB.

I readily accept that a connection is a fact-sensitive matter. That is made quite clear in both LloydsTSB and in AIG. I recognise of course the strength in Mr Pooles’s submission that there is a necessity to find facts before consideration can be given to the relationship between the acts. I have in mind here the observations of Lewison LJ in the Easy Air case to which I refer in paragraph 21 above, in particular guidance number vi where he remarks that “the court should hesitate about making a final decision without a trial where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case.”

However is also important to bear in mind what is said in the guidance paragraph vii about the need to grasp the nettle and not to simply allow a case to go

In my view, it is simply unrealistic to conclude that there is any basis upon which evidence can produce a sufficiently unifying connection between the thefts from the Bishop and LDBF on the one hand and the Scholefield claimants on the other, or with thefts from other clients whose claims have already been satisfied. (Footnote: ¹⁴) If, as I have concluded, wholesale teeming and lading does not do it, it is unrealistic to think that any other evidence might. I also observe that AIG was a preliminary issue.

Accordingly, I propose to declare that it is not open to HDI to aggregate the claims of Mr Halpern’s clients with those of Mr Learmonth’s, or either of those with any claims of any other of the firm’s clients arising out of Mrs Box’s thefts whose claims have already been satisfied¹⁵.

That does not answer the question as to whether it is open to HDI to aggregate the claims of the Bishop with those of LDBF, or indeed whether it is open to HDI to aggregate the claims of the Scholefield claimants with each other. That issue appears not to have been addressed in skeleton arguments and my notes suggest that it did not figure materially in the oral submissions. If the parties seek a declaration in relation to that issue then that might require further submissions. However, I notice that so far as Mr Halpern’s clients are concerned, Mr Halpern has already accepted that there are arguments contrary to his submissions (see paragraph 240 above). So far as the Scholefield claimants are concerned, I venture to suggest that, since their claims, even when aggregated, fall well within the limit of indemnity, whether they are open to aggregation as one claim or not is of only academic interest.