Legacies lost due to solicitor’s fraudulent acts – who is liable?

Linda Box was given a seven-year custodial sentence in 2017 in relation to 12 offences of fraud, theft and forgery whilst working as a senior partner at Dixon, Coles and Gill Solicitors ('DCG') in Wakefield.

Box was a solicitor and over the course of 12 years, she stole over £4 million pounds from clients who had entrusted her to administer their estates as their executor. She used the stolen funds to buy vintage wines, take extravagant holidays and go on shopping sprees as well as paying off multiple mortgages for various friends.

Her criminal prosecution represented justice for all the beneficiaries of the estates that Box stole from, but it did not resolve the financial loss that many of those beneficiaries suffered. Earlier this year, the charitable beneficiaries of the estate of Ernest Scholefield mounted a claim against Box, her co-executor and partner of the same law firm, Julian Gill and DCG's professional indemnity insurer, HDI Global Speciality SE (HDI) to recover the loss they suffered. A separate claim was brought by the Bishop of Leeds on behalf of various Church of England organisations that Box defrauded.

HDI denied any liability on the basis that all the actions of Box related to one claim and they had already paid out the maximum sum of £2 million payable under the terms of DCG's insurance cover. The Court disagreed, resulting in a positive outcome for the defrauded beneficiaries, but an expensive bill for the insurers.

The availability of professional indemnity insurance

The Solicitors Regulation Authority Indemnity Insurance Rules 2013 require all solicitors to carry professional indemnity insurance. DCG had their insurance cover with HDI. The terms of their cover provided that the sum insured for any one claim was capped at £2 million. Their cover also included an 'Aggregation clause' which provided that certain claims could be aggregated and treated as one claim within the £2 million cap.

Julian Gill and his partner in DCG, Julia Wilding, claimed under the HDI insurance policy to cover the shortfall in their firm's client account that had arisen as a consequence of Box's dishonest actions.

The insurers' reasons for limiting funds paid out

The money stolen by Box exceeded the sum insured of £2 million.  HDI argued that all the claims against DCG in respect of Box's multiple thefts of client money should be treated as one claim and therefore capped at £2 million. HDI submitted that because Box engaged in 'teeming and lading' whereby she would replace stolen money from one estate with money from another estate, all the actions were connected and amounted to a single course of conduct.  

If HDI had succeeded with this argument, their total liability would have been capped at £2 million, leaving a shortfall for many of Box's victims. The charities and the Church of England would have had to pursue Julian Gill and Julia Wilding personally for the shortfall, if they were found jointly liable for Box's dishonest actions.

Reasons for the Court's decision

At a summary judgment hearing, HHJ Saffman in the Leeds District Registry of the High Court allowed the charities and the Church of England's applications for a declaration that the claims could not be aggregated into one single claim. HHJ Saffman found that the act of teeming and lading by Box was incidental to her criminal acts.  It was a means of concealing the thefts, rather than a unifying factor that united Box's acts of theft for insurance aggregation purposes.

This judgment may have an impact on professional indemnity insurers and the level of cover they provide solicitors, perhaps even affecting the level of premiums payable, though it should be noted that cases like that of Linda Box are very rare.

The case represents a positive outcome for those organisations that had suffered financial loss at the hands of Box's dishonest and fraudulent actions and highlights that each act of theft represented different losses to different clients rather than one single loss.  This will enable each organisation to maximise their ability to recover their individual losses. HDI are expected to appeal the decision.

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