The Gazette 1989

GAZETTE.

SEPTEMBER 1989

Compensation Fund held liable to bank on basis of fraudulent undertaking.

trusts of which that solicitor is a trustee could not be interpreted as confining the portion of the Section dealing with dishonesty on the part of a solicitor in connection with that solicitor's practice as a solicitor to cases where the claim was made by a client because it was clearly a necessary provision to provide for dishonesty on the part of a solicitor acting as a trustee though not in his capacity as a solicitor. Secondly, wi th regard to the provisions of Section 23 it was submitted they could not be interpreted as doing anything more than providing for t he special s i t ua t i on of t he corresponding Society and of solicitors wi th practising certifi- cates from both the corresponding Society and the Society and as such could not lend any aid to the interpretation of the sub section. In the High Court Johnson J. in his judgment stated:- ''Initially there is no doubt that M's dishonesty was in his private capacity and not in his capacity as a solicitor. In this regard, his initial interview wi th the Bank and the request for credit for himself and his wife for the sale and purchase of a house was dishonest, we know that there was no such intention. However, when the Bank requested the undertaking from M at that time M acted dishonestly by (1) writing an undertaking on behalf of M's firm the contents of which he knew to be false (2) forging the signature of his partner which he also knew to be dishonest. This he did on behalf of his firm of which he was a practising partner, and, in my opinion, it would be unrealistic to force an interpretation on the facts in this case other than that in perpe- t r a t i ng the falsehoods and dishonesties in this event that M was acting and purported to act and held himself out as acting as the firm and what was done was done in the name of his practice". The Supreme Court came to the conclusion that Johnson J. was correct in the decision which he had reached and the reasons by which he had reached it. The Court could see no warrant for seeking to interpret the sub section concerned by consideration of other provisions in the Statute. In its judgment the Supreme

A Solicitor obtained an advance from a bank by way of bridging finance on the strength of an undertaking presented to the bank on the notepaper of the firm of solicitors of which he was a partner and apparently signed by the other partner in that firm as had been required by the Bank. It was represented to the bank that a property owned by M and his wife was being sold and another property being purchased by them. No sale or purchase was con- templated and M's wi fe was unaware of the application to the bank for the loan and did not sign or authorize the signing of any application. The signature of the partner to the letter of undertaking was forged by M and the partner was unaware of the application for the loan. The bank advanced £60,000 by way of t wo drafts payable to the firm and the monies were lodged into the client account of the firm. The monies which were to be repaid to the bank in 6 months were not repaid though some payments of interest were made. M on investigation by the Law Society was found to be in default in relation to his client account and was struck off the Register of Solicitors. Section 21 (4) of the Solicitors (Amendment) Act 1960 reads:- " ( 4) Where it is proved to the satisfaction of the Society that any person has sustained loss in consequence of dishonesty on the part of any solicitor or any clerk or servant of a solicitor in connection wi th that solicitor's practice as a solicitor or in connection wi th any trust for which that solicitor is a trustee, then, subject to the provisions of this Section, the Society shall make a grant to that person out of the Fund and the amount of the grant shall be such as represents in the opinion of the Society full indemnity for that loss". The Law Society contended that practice as a solicitor involved, as an essential ingredient, the solicitor or his firm having in respect of any

particular activity, a client on whose behalf that activity is carried out. It was urged that the firm did not have any client since the pretence that it was carrying out conveyancing work in connection with the sale and purchase of houses was entirely false. An alternative submission was that on the true construction of the sub section the phrase "any person" at the commencement of it, in the context of loss suffered in conse- quence of dishonesty in connection with the solicitor's practice as a solicitor as distinct from loss suf- fered in consequence of dishonesty by a solicitor as trustee, should be construed as being confined to a client of the solicitor. Reliance was placed on the provisions of Section 23 of the 1960 Act which provides for the mak i ng of reciprocal arrangements wi th Incorporated Law Society of Northern Ireland (referred to in the Section as " t he Corresponding Soc i e t y " ). Sub section 2 of Section 23 reads:- " ( 2) Where a scheme operated by the corresponding Society requires corresponding practit- ioners controlled by that Society to contribute to any fund or insurance policy or to take out any insurance policy, for the compensation or indemnification of clients for or against losses due to defalcations of such practitioners or their agents or servants" The Society argued that the use of the words "for the compensation or indemnification of clients" must be taken as having intended that the scheme which it had created in the provisions of Section 24 of the 1960 Act should also be a scheme confined to the indemnification or compensation of clients. The bank contended that the words contained in Section 21 (4) were unambiguous and must be given their .ordinary meaning without reliance on any of the other provisions of the Statute. They further argued that the provisions contained in Section 21 (4) of the Act dealing wi th dishonesty of a solicitor in connection wi th any

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