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Bishop of Leeds v. Dixon Coles & Gill – solicitors’ fraud and limitations

Thomas Dumont KC (assisted by Poppy Rimington-Pounder, also of Radcliffe Chambers) and Derek Bambury & Lisa Henty of Browne Jacobson LLP succeeded in the Court of Appeal today in establishing that solicitors can (despite Lewin on Trustees’ view to the contrary) rely on the innocent trustees’ 6-year limitation period, even when their fraudulent partner had stolen the proceeds of conveyancing transactions. And their partner, Linda Box, was certainly fraudulent. She was sentenced to 7 years imprisonment. She stole more than £2m from the firm’s clients, just to pay her credit cards over a couple of years. She was also a former registrar of the Diocese of Wakefield (now Leeds) and Chancellor of the Diocese of Southwell. As a senior solicitor and church member, she was much trusted by the Church and Bishop. She returned that faith by stealing huge amounts from them, too. The limitation defence in this case covered thefts totaling almost £1m.

The Court of Appeal accepted Tom’s submission that his clients could not have been “party or privy” to Linda Box’s fraud (the acid test), merely by being her partners. If they had absolutely no knowledge of the fraud, did not benefit by it or ratify it – as the Bishop & Diocese readily accepted – then they were innocent trustees within s. 21 Limitation Act 1980, and could plead a 6-year limitation defence. The Partnership Act 1890, the Court of Appeal decided, makes a partner liable for the sins of fellow partners, but does not make a partner “party or privy” to them.

This landmark decision lays down an important principle. Surprisingly it has never before been determined, despite Parliament first introducing the innocent-trustee limitation period in 1888 and carrying it through into the Limitation Act 1980.

The Law Society Gazette has published an article on the case which you can read here.