Estate fraud – Not a victimless crime

How will anyone ever find out?‘  ‘I will put the money back just as soon as … has happened.’  These are just a couple of the thoughts that we assume go through the minds of those who help themselves to money belonging to deceased people’s estates.  Sadly this occurrence is not as rare as one may hope.  

At Wilsons Solicitors we have a full case-load of matters arising from thefts from estates and all charities receiving significant legacy income will be victims of the crime.

The Court of Appeal judgment in HDI Global Specialty SE v The Guide Dogs for the Blind Association & Ors reported last month[1] is an example of an extreme level of theft by a probate practitioner.  Linda Box, the senior partner of Dixon Coles & Gill in Wakefield (now shut down by the Solicitors Regulation Authority) admitted to misappropriating client funds of more than £4m.  The reality, however, is that she would appear to have stolen a lot more.  A particular target of hers was the money belonging to deceased’s estates – often money due to charities.

Whilst Linda Box’s firm’s insurer was not obliged to cover her actions directly (her fraud vitiating the insurance contract), it was obliged to cover her two Partners (who are vicariously liable for her actions).  The insurer argued that it should only be liable up to the insurance limit of one claim, £2m (as Linda Box’s firm only had the minimum legally required insurance in place), for all claims arising out of her actions.  Its reasoning being that Linda Box’s dishonesty, even though it spanned over a decade, should be considered as one continuous act and thus one claim or a series of related acts.

The charity beneficiaries of Mr Scholefield deceased’s estate along with the Bishop of Leeds (Linda Box having also stolen money from the Bishop of Wakefield) have defended this line of argument all the way to the Court of Appeal thus far.  In doing so they have achieved a legal precedent that, provided it is not successfully appealed at Supreme Court level, will help all beneficiaries (both charities and individuals alike) deprived of their legacies by misbehaving probate practitioners operating on a large scale, who are either employees or operate in Partnership, that insurance companies would otherwise have been able to avoid covering.  This will, undoubtedly, also come as a huge relief to the Partners of probate practitioners who would otherwise have to fund their colleague’s misdemeanours out of their own pockets.

To limit the risk of such events even happening, a second pair of eyes on probate administration files is critical.  It was not until one of Mrs Box’s partners had to deal with a task on one of her files when she was away over Christmas 2015/2016 that her fraud was noticed.  He spotted that payments had been made from estate funds to a creditor that was not due money from the deceased’s estate.  When confronted, Linda Box immediately admitted misappropriating estate assets to pay, amongst other things, her own credit card bills[2].  She took over £500,000 from this one estate alone.  Upon further investigation, it was discovered that payments to the same range of creditors had been made from numerous other estate administration client account ledgers and the whole situation unravelled.

Above all, an understanding as to why beneficiaries, particularly charity beneficiaries who are all too aware of these events, request documents supporting the sums distributed to them, is vital.   It is important to charities to honour the wishes of the deceased benefactor who so kindly named them in their Will.  They will be in breach of their duties to the beneficiaries of their charities if, as residuary beneficiaries, they simply ‘bank and thank’ when receiving funds.  They are required to seek the supporting estate accounts and to check those accounts.   Where there are grounds to do so, they are required to request documents supporting those accounts.  It is disappointing that asking for this information sometimes appears to cause offence to estate administrators, but cases such as Mr Scholefield deceased’s estate show why it is important for charities to do so.  The estate accounts Linda Box produced to the beneficiaries bore no relation whatsoever to the reality of Mr Scholefield deceased’s assets.

Mr Scholefield deceased’s beneficiaries have not yet received the money he intended them to receive, thus his testamentary wishes have not yet been respected.  However, following the Court of Appeal’s judgment, they are one step closer to so being and the charities will continue to press for this to happen.

Whilst this judgment is excellent news for the beneficiaries of estates being administered by companies or multi-partner practices, what about those estate being administered by sole practitioners?  Any insurance they have is unlikely to apply if the actions were criminal.  This leaves the victims reliant on redress by the criminal him or herself (which will be of limited use if the money has been spent on lifestyle and liabilities such as school fees, as opposed to capital assets such as property), or the SRA Compensation Fund, only it has just tightened its rules to limit the number of claims it has to address[3].  Specifically, it will now not consider any application from charities with an annual income net of tax of £2m or more, or from trustees of a trust with an asset value of £2m or more, or from any one or more connected claims worth £5m or more.

At the time of writing, the insurers are seeking permission to appeal the judgment in the Supreme Court, so this may not be the final word on this legal matter. But as it stands, this ruling gives more protection to those who fall victim to financial abuse at the hands of a solicitor.

 

[1] HDI Global Specialty SE v (1) The Guide Dogs for the Blind Association (2) Yorkshire Cancer Research (3) British Heart Foundation (4) National Trust (5) Linda Box (6) Julian Gill (7) Dixon Coles & Gill A3/2021/0162

[2] See the Solicitors Disciplinary Tribunal judgment, case number 11509-2016

[3] See the Legal Services Board decision notice 14 June 2021 and the SRA Compensation Fund Rules 2021 at https://www.sra.org.uk/solicitors/standards-regulations/compensation-fund-rules/

 

Fiona Campbell-White is a Partner in the Contentious Trust & Probate Team at Wilsons Solicitors LLP

Hannah Wallis is Head of Legacies & Single Gifts at The Guide Dogs for the Blind

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