Four members of a firm of solicitors were trustees of large settlement, and mone

Question

Four members of a firm of solicitors were trustees of large settlement, and money was paid into the firm’s client account in their name. Those trustees misappropriated the money. Helen, another partner in the firm had no actual knowledge of the misappropriation and acted throughout honestly and reasonably in regard to the firm’s affairs, although as a partner he had access to documents, the inspection of which might have revealed a breach of trust. Helen died before the proceedings were commenced by the trustor.

Based on the facts above:

Advise the trustor as to his rights against Helen’s executors.

(b)        Explain if your answer would be different if Helen knew about the misappropriation.

Explanation / Answer

In this case it is clear that Helen did not commit wilful fraud and was not personally involved in misappropriation of the money. However, lack of knowledge about the fraud does not absolve Helen of the fraud. As a partner Helen had access to the documents whose inspection might have revealed the fraud. However, if it cannot be proved that Helen had the responsibility to inspect the documents or had reasons to believe that there was some misappropiration of money then the claim against Helen is very weak.
It is important to note that is the trustor is able to stake a claim against the firm of solicitors then Helen as a partner had the obligation to indemnify for the loss unless otherwise stated in the agreement with the trustor. In that case Helen;s executor would have the bear the share of the claim.

b) If Helen knew about the Misappropriation then this would be a case of wilful neglect and accessory to the fraud. In that case the trustor would have a clear claim against Helen's executors for compensation and even more if Helen's involvement is proved to be serious criminal offense.

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