The former senior partner of the now closed firm Dixon Coles McGill, Linda Box (affectionately known as ‘Gangster Granny’ in the press) was convicted in 2017 of nine counts of fraud following her pleading guilty. It is estimated that she took £10 million from charities legacies over a 12 year period.
Mrs Box has obviously been struck off as a solicitor and has been sentenced to seven years in prison. Following the conviction, Linda Box, her former partner (notwithstanding the fact that it appears that he was entirely unaware of Mrs Box’s actions), Mr Gill, and the firm’s insurers have all been pursued through the Civil Courts by a number of charities. The fact that Mr Gill is being pursued also is perhaps not surprising when the terms of the Partnership Act 1890 are considered.
Legal action being taken by charities
The claims currently being brought are being pursued by Guide Dogs for the Blind Association, Yorkshire Cancer Research, the British Heart Foundation, the National Trust and Bishop of Leeds on behalf of various Church of England organisations and charities.
The claim is currently defended by Mr Gill and the firm on the basis that they claim that they had no involvement in the illegal conduct of Linda Box. The insurers have taken a different tack in that they accept that the firm would be liable for the actions of Mrs Box, on the basis of a principle known as vicarious liability flowing from section 10 of the Partnership Act 1890, which states:
“Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm, or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act”
However, the insurers refute that any loss has been suffered.
HHJ Saffman has summed up the means of Mrs Box’s fraud as set out below:
“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 maximum amount of cover available under the firm’s Professional Indemnity Insurance Policy is £2 million per claim. It is fairly typical for such insurance policies to have a clause that allows them to pool together claims that flow from the same wrongful act. If the insurers are allowed to invoke such a clause in this case by pooling all of the charities together for the purposes of establishing the total loss to be paid by the policy, it will limit the insurer’s liability to a maximum of £2 million in respect of all Claimant’s claims, notwithstanding the fact that the loss is estimated to be around £10 million. This is an issue still to be decided by the Court but if this issue is decided in favour of the insurer, it would not preclude successful Claimants in this case seeking to enforce against the personal assets of Linda Box and/or Mr Gill.
HHJ Saffman has confirmed a willingness to deal with whether the aggregation clause operates in the way that the insurers have claimed as a preliminary issue as the Judge believes that once dealt with, it will determine how the insurer approaches the matter in terms of resolving the dispute and/or litigating it further.
The application is due to be determined next month. Along with an application by one of the Claimants for summary judgment.