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

Summary judgment may determine a declaration where the underlying facts or matters are sufficiently established and there is no real prospect of a successful defence. A solicitor’s partners may be vicariously liable for a dishonest partner’s conduct where it is sufficiently closely connected with authorised work and is fairly regarded as occurring in the ordinary course of the firm’s business. That question remains fact-sensitive.

For professional indemnity aggregation, separate thefts from separate clients are not necessarily claims arising from one act or one series of related acts. Dishonesty is a state of mind, not the relevant act. Concealment methods such as teeming and lading do not themselves provide the necessary unifying factor. Relatedness requires a sufficient interconnection between the acts causing the respective losses.

The court heard applications arising from two claims concerning the dishonest misappropriation of more than £4 million by a former equity partner of a solicitors’ firm. The Bishop of Leeds and the Leeds Diocesan Board of Finance sought summary judgment for accounts, interim payments and declarations concerning insurance aggregation. Four charities sought a similar declaration concerning their claims.

The former partners disputed liability for some categories of loss, relying on the ordinary-course-of-business requirement, apparent authority and limitation. The insurer contended that the claims could be aggregated under the SRA minimum terms and conditions of professional indemnity insurance. The central issues were whether summary judgment and interim payments were appropriate, and whether the separate losses arose from one act or one series of related acts.

1. Summary judgment. The court applied the principles summarised in EasyAir Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch). A respondent need show only a realistic, better-than-merely-arguable prospect of success. For declaratory relief, once the underlying facts or matters are established and the defence has no real prospect of success, the court should ordinarily decide whether to grant the declaration without requiring a full trial.
2. Partnership liability and accounts. Applying Dubai Aluminium Co Limited v Salaam [2003] 2 AC 366, the relevant question was whether the dishonest conduct was sufficiently closely connected with work of the kind the partner was authorised to do. The Red Ledger and CCLA claims raised sufficiently arguable issues concerning a personal frolic, apparent authority and the status of the former partner as a de facto or constructive trustee. Summary judgment was therefore refused for those categories. BIS0071 was different: establishing and operating a client-account ledger was integral to the firm’s business, so an account was ordered.
3. An account was also ordered for specified conveyancing transactions. The limitation defence failed because the Partnership Act 1890 fixed the innocent partners with liability for fraud occurring in the ordinary course of the firm’s business or within apparent authority. No interim payment was ordered because the evidence did not establish a sufficiently reliable likely final judgment.
4. Aggregation. The MTC required objective construction. Each misappropriation was a separate breach of the SRA Accounts Rules and a separate act. Dishonesty was merely the state of mind motivating those acts. Extensive teeming and lading was only a method of concealment and did not create the necessary relationship between the thefts.
5. Applying Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] 4 All ER 43 and AIG Europe Ltd v Woodman [2017] UKSC 18, the thefts from the Bishop and LDBF were not sufficiently interconnected with the thefts from the Scholefield claimants or claims of clients whose claims had already been satisfied. HDI was declared unable to aggregate those claims. The issue of aggregation between the Bishop and LDBF, and among the charities, was left open.