The Guide Dogs for the Blind Association v Linda Mary Box
| Jurisdiction | England & Wales |
| Judge | Saffman |
| Judgment Date | 21 July 2020 |
| Neutral Citation | [2020] EWHC 1948 (Ch) |
| Date | 21 July 2020 |
| Court | Chancery Division |
| Docket Number | Case No: PT-2019-LDS-000143 |
[2020] EWHC 1948 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURT IN LEEDS
PROPERTY TRUSTS AND PROBATE (Ch)
The Court House
Oxford Row
Leeds LS1 3BG
His Honour Judge Saffman sitting as a Judge of the High Court
Case No: PT-2019-LDS-000143
Mr Alexander Learmonth for the Claimants
Mr Michael Pooles QC for the 4 th defendant
No attendance or representation on behalf of the 1 st 2 nd and 3 rd defendants.
Hearing date: 6 July 2020
Date draft circulated to the Parties: 8 July 2020
Date handed down: 21 July 2020
I direct that, pursuant to CPR PD 39A para 6.1, no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
Linda Box and Julian Gill, respectively the first and second defendants, were solicitors and partners in the third defendant firm of solicitors, Dixon Coles and Gill (the Firm). The fourth defendant, HDI Global Specialty SE (the Insurer) are their professional indemnity Insurer.
Over the course of a number of years Mrs Box stole a very significant amount of money from the client account of the Firm. That is not in dispute. She was ultimately and inevitably struck off the roll of solicitors and in 2017 was sentenced to 7 years imprisonment with a further 8 years if she failed to repay the sum of £2.452 million.
Mr Gill was unaware of her criminal activities. There is no suggestion that he acted dishonestly in the course of the business of the Firm. The Firm entered into a partnership voluntary arrangement on 7 June 2016.
This claim is one of 2 that have been brought by various claimants, all of whom are charities, who contend that they have sustained loss by virtue of Mrs Box's criminal activities. This particular case centres on the allegation that Mrs Box, in her capacity as a co-executor of the estate of Mr Ernest Scholefield deceased, appropriated monies payable by his will to the various claimant charities. It has been called in the documents generated by the case the “Scholefield Claim”.
The claim is brought against Mrs Box and her co-executor, Mr Gill and is also brought against the Firm on the basis that it was retained by the executors as the solicitors for the purpose of the administration of Mr Scholefield's estate and it is vicariously liable for losses sustained by these particular beneficiaries as a result of the fraudulent administration of the estate by Mrs Box.
In addition, the Scholefield Claim is brought directly against the Insurer. It is asserted by the claimant that a direct cause of action has arisen between the claimants and the Insurer by virtue of the provisions of the Third Party (Rights against Insurers) Act 1930.
A defence has been filed by Mr Gill and the Firm in which liability is denied. A defence has also been filed by the Insurer by which it admits that, if Mr Scholefield's estate suffered loss by reason of theft by Mrs Box, then the Firm is vicariously liable for such loss. It is not admitted, however, that such a loss has in fact been incurred by the claimants in this case.
The Insurer asserts that Mrs Box's modus operandi was a process known as “teeming and lading” by which monies are transferred to and from the Firm's client account ledgers, presumably in much the same way as a Ponzi scheme operates. A characteristic of a Ponzi scheme is that some innocent parties dealing with the wrongdoer suffer no loss because monies that the wrongdoer has misappropriated from them is replenished by money misappropriated from the funds of other innocent parties.
The Insurer's defence however more particularly centres on 2 specific assertions. First, that its liability in respect of any claims on the policy has been exhausted. Mr Alexander Learmonth, counsel for the claimants in the application that I am required to determine, puts it succinctly in paragraph 7 of the skeleton argument. He paraphrases the defence as an assertion that:
“ There is a single limit of indemnity cover which is applicable to all the claims against the Firm (the minimum allowed of £2 million) and that it has already paid out that limit in full, such that it cannot be liable for any other claims.”
This has become known as the “Aggregation Point”.
The second line of defence contained in the Insurer's defence is contained in paragraph 17 of the defence wherein it is denied that the 1930 Act entitles the claimants to bring any claim against the Insurer prior to having obtained a judgment against its insured, that is the first to third defendants.
The Aggregation Point arises in the second case against the defendants to which I have already briefly referred. In the course of this hearing that has been referred to as the Bishop's Claim. That is because it is a claim brought by the Bishop of Leeds on behalf of various Church of England organisations and charities who assert that they have been suffered significant loss by Mrs Box's criminal activities in her professional capacity.
As with the Scholefield Claim, the Bishop's Claim has been brought not only against the Firm but also against the Insurer on the basis that the claimants are entitled to sue the Insurer directly under the 1930 Act or the successor to that Act namely the Third Parties (Rights against Insurers) Act 2010. In paragraph 24 of the Particulars of Claim in the Bishop's Claim it is pleaded that:
“The claimants will be entitled to be subrogated to (the Firm's) rights against the Insurer by virtue of the third Parties (Rights against Insurers) Act 1930 subject to judgment being obtained against (the Firm) as claimed herein or agreement by (the Firm) that it is liable.”
In its defence to the Bishop's Claim the Insurer admits that. The defence to the action brought by the Bishop essentially centres on the Aggregation Point.
In the Bishop's Claim an application has been made for summary judgment against the Firm and, at the same hearing, the Bishop has sought summary judgment against the Insurer for a declaration to the effect that the Insurer is not entitled to aggregate the claims made by the Bishop with claims made by other clients of the Firm.
It does not appear to be in dispute that the claimants in the Bishop's Claim propose to seek the declaration consequent upon them having obtained the judgment that they seek against the Firm. In the application with which I am dealing the Insurer is represented by Mr Michael Pooles QC. At paragraph 5 of his skeleton argument he specifically makes the point that the Bishop's application against the Insurer is for summary judgment consequential upon the judgment which the Bishop seeks against the Firm. That application has been listed for hearing in September.
In this Scholefield Claim there is no application for summary judgment against the Firm or the individual partners. There is however an application for a declaration on a summary basis to the effect that the Insurer is not entitled to rely on the Aggregation Point in the Scholefield Claim. That too has been listed to be heard alongside the Bishop's application since it raises similar issues.
However, a preliminary issue has arisen for determination. It arises because the Insurer does not accept that the court has the jurisdiction to make the declaration in the Scholefield Claim that the claimant seeks. The Insurer draws a distinction between the manner in which the Bishop's Claim has been approached by the claimants in that case and the approach in this, the Scholefield Claim.
The Insurer argues that, quite properly, the claimants in the Bishop's Claim acknowledge that they can only proceed against the Insurer directly for their declaration or otherwise where the liability of the Firm and/or its partners to the claimants has been established.
That is indeed what appears to be the purport of paragraph 24 of the Particulars of Claim in the Bishop's Claim which, as has been seen, asserts that;
“The claimants will be entitled to be subrogated to (the Firm's) rights against the Insurer by virtue of the Third Parties (Rights against Insurers) Act 1930 subject to judgment being obtained against (the Firm) as claimed here in or agreement by (the Firm) that it is liable. (My emphasis)”
In this Scholefield Claim the claimants seek a declaration independent of a judgment against the Firm (or the partners) and independent of any agreement as to liability. Mr Pooles argues that the court has no jurisdiction to make such an order independent of any finding of liability or agreement as to liability.
This ultimately prompted the claimants to make an application on 4 May 2020 for a declaration to the effect that the court has jurisdiction to make a declaration on the Aggregation Point. It is this preliminary point which now falls for determination.
If I conclude that the court does have jurisdiction then the Aggregation...
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