The Right Reverend Nicholas Baines, Lord Bishop of Leeds v Dixon Coles & Gill (A Firm)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Phillips,Lord Justice Nugee,Lord Justice Moylan |
| Judgment Date | 06 August 2021 |
| Neutral Citation | [2021] EWCA Civ 1211 |
| Docket Number | Case No: A3/2021/0151 |
| Court | Court of Appeal (Civil Division) |
And In the Estate of Ernest Leathley Scholefield deceased
[2021] EWCA Civ 1211
Lord Justice Moylan
Lord Justice Phillips
and
Lord Justice Nugee
Case No: A3/2021/0151
Case No: A3/2021/0162
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
BUSINESS LIST (ChD)
HHJ Saffman sitting as a Judge of the High Court
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Michael Pooles QC and Ms Lucile Taylor (instructed by DWF Law LLP) for the Appellant in both appeals
Mr David Halpern QC (instructed by Lupton Fawcett LLP) for the Respondents in appeal 2021/0151
Mr Alexander Learmonth QC (instructed by Wilsons Solicitors LLP) for the Respondents in appeal 2021/0162
Mr Dominic Kendrick QC (instructed by Russell-Cooke LLP) for the Intervener
Hearing date: 22 July 2021
Approved Judgment
Introduction
These two appeals concern the question whether claims brought against a firm of solicitors, Dixon Coles & Gill ( “DCG”), should be aggregated for the purposes of the limit of indemnity in the firm's professional indemnity insurance.
The claims all flow from thefts of clients' money carried out over a long period and on a vast scale by DCG's former senior partner, Mrs Linda Box. The relevant insurance policy has a limit of £2m for any one Claim, and contains an aggregation clause which provides that for these purposes all Claims arising from one series of related acts or omissions will be regarded as one Claim. The position of the insurer, HDI Global Specialty SE ( “HDI”), is that Mrs Box's thefts form a series of related acts and that all the claims should be aggregated. Having already paid out claims up to the limit of £2m, HDI denies that it is liable to pay out any more.
The question of aggregation arose in two actions brought against DCG, one ( “the Bishop's action”) brought by the Bishop of Leeds and the Leeds Diocesan Board of Finance ( “the Bishop” and “the LDBF”), and the other ( “the Scholefield action”) brought by four charities who are the residuary beneficiaries under the will of Mr Ernest Scholefield. In each action HDI was joined as a party and the claimants applied for summary judgment on, among other things, the aggregation point. The applications were heard together by HHJ Saffman sitting as a High Court Judge in Leeds ( “the Judge”). He handed down a single judgment at [2020] EWHC 2809 (Ch) on 28 October 2020 ( “the Judgment”). This dealt with a number of issues (including a quite separate point on limitation that has already reached this Court: see Dixon Coles & Gill v Baines [2021] EWCA Civ 1097) but among other things he decided the aggregation point in favour of the claimants, and by orders in each action made on 1 December 2020 made declarations accordingly.
HDI appeals in each action with permission of the Judge himself. HDI appeared by Mr Michael Pooles QC with Ms Lucile Taylor. The appeal was opposed by both the claimants in the Bishop's action, who appeared by Mr David Halpern QC, and the claimants in the Scholefield action, who appeared by Mr Alexander Learmonth QC. It was also opposed by Solicitors Regulation Authority Ltd ( “the SRA”), which was given permission to intervene by Moylan LJ and which appeared by Mr Dominic Kendrick QC.
Despite Mr Pooles' careful argument, I would uphold the Judge's decision on the aggregation point and dismiss the appeals.
Facts
DCG was a firm of solicitors in Wakefield until it was forced to close in 2016 as a direct result of the events which give rise to these proceedings. The practice could trace its history back for some 200 years. It undertook residential and commercial conveyancing, probate and estate administration, wills, trusts and tax planning, civil litigation and other non-litigation work. It had three equity partners: Mrs Box, Mr Julian Gill and Mrs Julia Wilding. Mrs Box had been the senior partner since 1994, and was head of the probate department. She appeared entirely respectable and held senior offices in the Church of England, being Registrar of the Diocese of Wakefield for many years until 2005, when she became Chancellor of the Diocese of Southwell & Nottingham.
On Christmas Eve 2015 Mr Gill discovered an unexplained payment from the firm's account and after uncovering further discrepancies he, together with Mrs Wilding, confronted Mrs Box on 3 January 2016. She admitted making unauthorised payments from client account, among other things for her own credit card liabilities, and was required to leave the partnership. Mr Gill reported matters to the SRA who intervened in the practice, appointing Gordons LLP ( “Gordons”) as intervention agents in April 2016. DCG had already ceased practice at the end of January 2016, and on 7 June 2016 entered into a Partnership Voluntary Arrangement. It has not been suggested that either Mr Gill or Mrs Wilding had any involvement in or knowledge of Mrs Box's thefts, but although innocent they are potentially liable as her partners.
Following a hearing before a Solicitors Disciplinary Tribunal, Mrs Box was struck off the roll of solicitors on 14 November 2016. In their judgment the Tribunal described her conduct as involving “planned, deliberate, systematic, repeated dishonesty over a long period of time”. She was subsequently charged on an indictment alleging 13 counts of theft, fraud by abuse of position, and forgery, and, having pleaded guilty, was sentenced by Blake J at Leeds Crown Court on 24 March 2017 to a total term of imprisonment of 7 years.
Some idea of the length and scale of her dishonesty, aptly described by Blake J as “quite staggering”, can be obtained from the indictment and his sentencing remarks. He referred to her admitted offending as having started as long ago as February 2002, although the majority of it took place between 2010 and 2015 when she was regularly diverting enormous sums of money from the firm's client account to pay personal expenses of herself and her family. Count 3 alone charged her with having made payments to her credit card accounts between February 2010 and December 2015 totalling over £3m; other counts charged her with making payments to HMRC for her personal tax liabilities, to her bank accounts, to pay her mortgage liabilities, to pay her Council Tax, and so on. The total amount charged on the indictment was over £4m. Blake J referred to an independent auditor having found 75 individual client files and a further 10 church files that had been the subject of misappropriations, mainly from the estates of deceased persons. It seems very likely that this summary did not state the full scale of her thefts: for example in the Scholefield action it is alleged that she stole over £450,000 from Mr Scholefield's estate alone, and it is very doubtful if this is included in any of the counts on the indictment.
The Policy
Under s. 37 of the Solicitors Act 1974 the Law Society may make rules requiring solicitors to maintain professional indemnity insurance with authorised insurers and specifying the terms on which indemnity is to be available. The Law Society has delegated this function to the SRA which is a wholly-owned subsidiary of the Law Society. The rules are revised from time to time. They apply to losses arising from claims first made or intimated, or arising out of circumstances notified, during the relevant period.
In the present case DCG promptly notified its insurers of Mrs Box's admitted misappropriations in January 2016. The rules then in force were the SRA Indemnity Insurance Rules 2013 (as amended on 1 April 2015) ( “the 2013 Rules”). The 2013 Rules required solicitors to take out and maintain qualifying insurance with a participating insurer. To be qualifying insurance it had to comply with the Minimum Terms and Conditions ( “the MTC”) set out in Appendix 1 to the 2013 Rules. One of those terms (clause 4.12) was that the insurance must provide that if there was any inconsistency between any provision of the insurance and the MTC the latter would prevail, and to be a participating insurer the insurer had to enter into a commitment that the coverage in the MTC would apply as a minimum regardless of the policy wording actually issued.
The relevant policy of insurance ( “the Policy”) is that taken out by DCG for the period from 1 October 2015 to 30 September 2016. The sole insurer was HDI, then called International Insurance of Hannover SE. There was no top-up policy. The Policy duly provides at clause 5.13 that it is to be construed or rectified so as to comply with the requirements of the MTC and that any provision which is inconsistent with the MTC is to be severed or rectified accordingly. Mr Halpern suggested that in those circumstances it...
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