Dixon Coles and Gill (A Former Firm) v Baines, Bishop of Leeds and Another: CA 20 Jul 2021

Innocent Co-Trustee not Liable for Default

Proceedings were brought by former clients against their former solicitors. One of the partners stole money held in the firm’s client account on behalf of the claimants. The other two partners were entirely innocent of, and in no way implicated in, the frauds. Some of the losses sued for arose from transactions more than six years before the commencement of the proceedings. The issue on the appeal is whether the innocent partners, who are otherwise undoubtedly liable for the clients’ losses, can rely on a limitation defence in respect of those transactions, under section 21 of the Limitation Act 1980.
Held: The solicitors appeal succeeded: ‘A co-trustee is not to be treated as party or privy to another trustee’s fraudulent breaches of trust unless facts are alleged and proved which show the co-trustee to have been implicated in the frauds in some way, meeting the tests indicated in Thorne v Heard. It follows that DCG are not within the scope of section 21(1)(a) and they are entitled to rely on the six-year limitation period as a defence.’

Sir Timothy Lloyd
[2021] EWCA Civ 1097
Bailii, Judiciary
Limitation Act 1980 21
England and Wales
CitedMoore v Knight ChD 18-Dec-1890
The court considered the liability of partners in a solicitors’ firm for embezzlement of client money by an employee of the firm. Once the true position became known, after many years, the client sued the surviving partners, who relied on . .
CitedThorne v Heard CA 24-Jan-1894
A first mortgagee, Heard, had sold property under the power of sale and had retained a solicitor, Searle, to act in relation to the sale. Searle received the proceeds of sale, satisfied the first mortgage debt, but retained the balance, falsely . .
CitedThorne v Heard HL 1895
Recovery was sought from the partners of a defaulting solicitor.
Lord Herschell LC disposed of the argument about concealment first, and then turned to section 8, saying: ‘My Lords, the only remaining question is, Did the statute apply? It is . .
CitedBlair v Bromley ChD 18-Nov-1846
Two solicitors having entered into partnership, each of them continued to attend to the business of his former clients, but on the partnership account; and one of the partners having proposed to invest a sum of money belonging to a client in a . .
CitedBlair v Bromley CA 3-Jul-1847
Held; . .
CitedDubai Aluminium Company Limited v Salaam and Others HL 5-Dec-2002
Partners Liable for Dishonest Act of Solicitor
A solicitor had been alleged to have acted dishonestly, having assisted in a fraudulent breach of trust by drafting certain documents. Contributions to the damages were sought from his partners.
Held: The acts complained of were so close to . .
Appeal fromLord Bishop of Leeds v Dixon Coles and Gill (A Firm) and Others ChD 28-Oct-2020
The claimants had been clients of the defendant solicitors former firmer. A partner of the defendants had stolen large sums of money in the names of the claimants from the firm’s client account. The defendants themselves were not said to have been . .
CitedHughes v Twisden ChD 1886
One partner in a firm of solicitors committed a fraud on a client by using deeds held on behalf of the client as security for a loan for his own benefit, the funds, so far as appeared, not passing through the firm’s accounts. The fraudulent partner . .

Lists of cited by and citing cases may be incomplete.

Legal Professions, Limitation, Trusts, Company

Updated: 11 November 2021; Ref: scu.666020