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 limitation, and in particular section 8. Stirling J noted that the second exception in the section might well apply, since the money had been received by the members of the firm and converted to the use of the firm, but he did not decide the case on that footing. Instead he based his decision on the concealment of the fraud, following Blair v Bromley (1847) 2 Ph 354. Interest had been paid to the client all along as if the fund had been invested as it should have been. That payment of interest was the act of the partnership, so that the partners were all affected by the implicit representation that the funds had been invested as they should have been, thereby concealing the fraud, even though they were innocent of the fraud. It was not argued that the first exception to section 8 applied, and this is therefore of no assistance on the application of the phrase ‘party or privy’.
Sterling J said: ‘Money came into the hands of the firm of Messrs Bromley without fraud and that one of the firm afterwards committed a fraud in respect of it, but made misrepresentations (some of which were attributable to the firm) which prevented the fraud from being discovered until the period fixed by the Statute of Limitations had expired. It was held that the innocent partner was deprived of the benefit of the statute by those representations which bound him as a partner. The decision rests on principles of the law relating to representation and to partnership, not on those which relate to trusts.’
Sterling J
(1891) 1 Ch 547, [1890] UKLawRpCh 172
Commonlii
Trustee Act 1888 8
England and Wales
Cited by:
Distinguished – Thorne 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 . .
Cited – Lord 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 . .
Cited – 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, . .
Lists of cited by and citing cases may be incomplete.
Updated: 22 July 2021; Ref: scu.666142 br>