Sutherland v Archer

[1992] TASSC 84

COURT:  SUPREME COURT OF TASMANIA

CITATION:              Sutherland  v Archer [1992] TASSC 84; B2/1992

PARTIES:  SUTHERLAND, Jennifer Lesley

SUTHERLAND, Janet Isobel (a minor by WILLIS, Albert Henry, her next friend) and
SUTHERLAND, Elizabeth Anne (a minor by the said Albert Henry Willis, her next friend)

v
  ARCHER, Cecil McRae

UPCHURCH, Geoffrey James Joseph and
DAVID JONES (trading as ARCHER JACKSON & JONES, a firm)

FILE NO/S:  107/1984
DELIVERED ON:  21 February 1992
JUDGMENT OF:  Cox J

Judgment Number:  B2/1992
Number of paragraphs:  27

Serial No B2/1992

List "B"

File No 107/1984

JENNIFER LESLEY SUTHERLAND, JANET ISOBEL SUTHERLAND (A MINOR by ALBERT HENRY WILLIS, HER NEXT FRIEND) & ELIZABETH ANNE SUTHERLAND (A MINOR BY THE SAID ALBERT HENRY WILLIS, HER NEXT FRIEND) v. CECIL McRAE ARCHER, GEOFFREY JAMES JOSEPH UPCHURCH & DAVID JONES (TRADING AS ARCHER JACKSON & JONES, A FIRM)

REASONS FOR JUDGMENT  COX J

21 February 1992

1. The first named plaintiff seeks to recover from the first and third named defendants certain funds paid by her to the second named defendant Upchurch when he was a partner of the other defendants in the Ulverstone legal firm of Archer Jackson & Jones. The funds in question were misappropriated by Upchurch, who eventually was declared bankrupt, leaving her without any effective remedy against him. For reasons which will become apparent, her daughters, who joined in the action by their next friend, never acquired an entitlement to any part of the funds and cannot succeed in the action. Hereafter I shall refer to the first named plaintiff as "the plaintiff".

1. In April 1979 the plaintiff's husband, a printer employed by Mercury Walsh Ltd, Hobart, was found to be suffering from cancer. Surgery was undertaken late the following month in the hope of arresting the progress of the disease, but in July he suffered a set back and entered the terminal stage, dying on 15 August 1979. The defendant Upchurch was the husband of Mr Sutherland's sister and the families had been on friendly terms for many years. Upchurch had some qualifications in accountancy and commenced a law degree in the early 1960's. He graduated after nine years' study and was admitted to practice in 1973. After a year or so in the Crown Law Department he settled in Ulverstone, working for the firm of Archer Jackson & Jones as an employed solicitor. In January 1975 he entered into partnership with the first and third named defendants and Mr Desmond Jackson, who retired from the firm prior to the events in 1979 and following, the subject matter of this action.

1. In May 1979 Upchurch visited his in–laws in Hobart and spoke to Mr Sutherland, who asked him to look after his affairs and discussed the desirability of his making a will in view of his impending surgery. Upchurch did not then recommend that a will be made as Mr Sutherland intended his wife to be the sole beneficiary of his estate which was of a size which would be likely to pass exclusively to her in the event of his dying intestate. Upchurch suggested that Mr Sutherland should despatch to him for safe custody in his strongroom at Ulverstone the deeds to the Sutherland's blocks of land at their holiday home at Primrose Sands. These documents, together with a life assurance policy, were collected from other solicitors in Hobart and sent to Upchurch prior to Mr Sutherland's death. When it became apparent that he was in the terminal stage of the disease, Mr Sutherland decided to make a will and gave instructions to Upchurch on one of his visits to Hobart to draw one, appointing himself and the plaintiff executors and trustees, and leaving the whole of the estate to the plaintiff. Upchurch had the will prepared and engrossed at his firm in Ulverstone, the backsheet of the document bearing the endorsement "Archer Jackson & Jones, Solicitors, Ulverstone", and brought it to Mr Sutherland's home where it was executed on Sunday 11 August 1979, four days before his death. Upchurch took the will back to Ulverstone at the end of the week–end and placed it in a tray used by him to hold deeds and other important documents upon which he was currently working or on which he anticipated he would shortly need to take some action. Each partner in the firm had such a tray which was put in the strongroom overnight. It appears that the titles to the blocks of land at Primrose Sands and the assurance policy previously sent by the Sutherlands to Upchurch had also been housed in this tray.

1. Upchurch opened an office file entitled "1979, Sutherland, Charles Findlay, Re Will" when he prepared the will shortly before 11 August 1979. Although that file was in one sense completed when the instructions to draw and have the will executed were carried out, the same folder was retained for the subsequent work carried out by Upchurch who, on his brother–in–law's death, made a further endorsement on its cover "Died 15 August 1979 at Hobart aged 44". Thereafter Upchurch proceeded to carry out the normal activities of a solicitor acting for an estate in the grant of probate. Letters were sent seeking valuations of assets, enquiring of the deceased's employer details of outstanding entitlements, and seeking information on the state of the mortgage over the Sutherland's home. All these letters were sent on office letterhead, were prefaced with the words, "We act for the estate of the late Mr Sutherland", and were concluded in type, "Yours faithfully, Archer Jackson & Jones, Per:". They were signed by Upchurch and invited enquiries to be addressed to him. A reference "UNF" was also endorsed, representing Upchurch and his secretary, Mrs Foster. Upchurch drafted the affidavit of assets and liabilities, executors' oath and the other necessary papers for a grant of probate, all of which were endorsed "Archer Jackson & Jones, Ulverstone, Proctors". Out–of–pockets for Supreme Court fees were drawn against the general office ledger account opened by Upchurch and entitled "Sutherland, C.F., Estate". Prior to Christmas 1979 a grant of probate had been made and returned to the firm, where it was held in Upchurch's custody. The estate was quite modest, as the family home and holiday blocks had been in the names of the deceased and the plaintiff as joint tenants and passed by survivorship to the latter. The life policy was worth a little over $4,000.00 and what with accrued leave entitlements and other small assets, a distribution to the plaintiff of all assets belonging to the estate realised by Upchurch amounted to $5,337.68. This was paid to her on 21 December 1979 accompanied by a formal letter reconciling the receipts and payments, again signed "Yours faithfully, Archer Jackson & Jones, Per: G. J. Upchurch". The assets realised by Upchurch had been placed by him in the firm's trust account in the name "Sutherland, C.F., Estate", the first entry on 4 September 1979 recording the receipt from Mr Sutherland's employers of holiday pay. Shortly before Upchurch accounted to the plaintiff for the funds received on behalf of the estate, Mr Archer, the first named defendant, observed that the estate was in credit several thousand dollars and wrote in pencil on the ledger card "? If not settled before Christmas – Dep". This was intended as an instruction to deposit the funds on behalf of the client in an interest–bearing account or facility in the name of the firm at a Building Society or bank (there is some doubt as to which particular account Mr Archer had in mind). Upchurch, noting this, wrote the word "No" in pencil alongside it and distributed the money, retaining sufficient to cover the out–of–pockets drawn by the estate on the general office account of the firm. He made no charge for professional costs for preparing the will, acting in the grant of probate or carrying out any executorial duties. The will had not contained any clause authorising a solicitor trustee to charge for his services.

1. At the time of the funeral the plaintiff was very distressed and business discussions were kept to a minimum. Upchurch suggested to her that she apply for the widow's pension. Although she had nursing qualifications, her two daughters were still young and attending school, and the possibility in the circumstances of her returning to the workforce and earning sufficient to live on was remote. They arranged to meet in Ulverstone in about September 1979, the plaintiff staying with Upchurch and his wife. By this time the plaintiff had been granted a widow's pension. During the visit she went with Upchurch to his office in the building occupied by Archer Jackson & Jones and there had a discussion about the assets of the estate. It was known that Mr Sutherland had a superannuation entitlement which was worth a little under $60,000.00. Both Upchurch and the plaintiff thought this would be an entitlement of the estate, but in fact the trustees of the superannuation fund had a discretion to distribute to the employee's personal representative or direct to his dependants. In the event, they exercised the discretion to distribute to the plaintiff alone, and in due course gave her a cheque in the sum of $59,243.00 made payable to her. In the September discussion, anticipating that she would receive this sum, albeit by distribution through the estate, in addition to the remaining assets of the estate and her rights to the realty by survivorship, Upchurch suggested that she would be able to remain on the pension by investing some of the money in a family trust. He advised that there would also be taxation advantages. It was decided to postpone further discussions until the superannuation cheque had been received, the estate finalised, and the cash position was known. It was agreed that the plaintiff should come to Ulverstone again in December 1979.

1. On her return to Hobart the plaintiff was contacted by her late husband's employer and asked to come in and receive the superannuation cheque which had been appropriated by the trustees to her. This she did, but did not deposit it and merely retained it in a drawer in her home. Upchurch, not receiving the cheque from the employer, made a telephone enquiry and found out what had happened. He thereupon telephoned the plaintiff and urged her to send the cheque to him as it was losing interest. He said he would deposit it in the firm's trust account where it would gather interest. He also obtained her authority to discharge the mortgage to the Commonwealth Savings Bank over her home out of that fund. The plaintiff sent the cheque in an envelope addressed to him at the firm.

1. On 11 October 1979 Upchurch received the superannuation cheque and paid it into the firm's trust account in the name "Sutherland Family Trust". The office procedure for the opening of this account within the ledger was for the partner in receipt of such funds to prepare a document called a trust receipt requisition form. Indeed such forms were routinely prepared by those in receipt of any funds so as to initiate the preparation of a receipt which would be duly posted to the ledger. Such requisition contained the information that Upchurch had initiated the form and that he required a receipt to be made out to Davies Bros. Ltd. in the amount of $59,243.00 for the credit of the Sutherland Family Trust. The only entry under the heading "Details" was the word "Capital". This document, along with other similar requisitions, was in turn placed before each of the partners of the firm and both Mr Archer and Mr Jones placed their initials on it. Both gentlemen gave evidence that they regarded this practice as a convenient means of acquiring knowledge of the receipt of any funds they were expecting in respect of matters being handled by them. Whether or not this was its principal or sole purpose, it cannot be doubted that their initials constitute a clear acknowledgment that they had read the contents of the requisition, or at least had the opportunity to do so.

1. Having created this credit within the firm trust account, Upchurch then had a cheque drawn upon it for a like amount and had it deposited on call in a newly created account at the Permanent Building Society, Ulverstone in the name of "Archer Jackson & Jones ITF Sutherland Family Trust". Each partner of the firm was an authorised signatory of the account. A passbook or sheet in respect of it, prepared by the Society, was given to the accounts staff of the firm and retained among the accounting records at the office. Interest was periodically calculated and added to the balance of the account at the Society. Corresponding entries were made by journal entry to other records in the firm trust ledger which represented the total balance of clients' funds held by the firm in the Permanent Building Society. On 21 December 1979 Upchurch, with the plaintiff's previous authority, had $7,262.19 withdrawn from the Building Society and credited to the firm trust account ledger of the Sutherland Family Trust. Mr Archer signed the withdrawal form addressed to the Society. Once again a receipt requisition form in respect of the receipt of this sum was prepared, circulated among the partners and initialled by Mr Archer and Mr Jones. Then Upchurch had a cheque drawn for the same amount and used it quite legitimately to pay off the plaintiff's mortgage.

1. In December the plaintiff again visited Ulverstone and had a further discussion with Upchurch at his office. There, on 21 December 1979, he handed her a distribution cheque in respect of the estate amounting to $5,337.68 with the letter I have already referred to. At the same meeting he gave her a second letter which read as follows:

"21 December 1979

Mrs JL Sutherland,

7 Brendan Crescent,

AUSTINS FERRY ... TAS 7011

Dear Mrs Sutherland,

We wish to advise that of the money received from Mercury Walsh we now hold $53672.00 being :

Amount received  $59243.00

Add interest to 30.11.79            703.61

  

59946.61

Less Repayment of Commonwealth Savings Bank

Housing Loan    6274.61

  

$53672.00.

Yours faithfully,

ARCHER JACKSON & JONES

Per : G J Upchurch "

1. I accept her evidence that at this meeting he also showed her the passbook or sheet relating to the account at the Permanent Building Society in the name of "Archer Jackson & Jones ITF Sutherland Family Trust".

1. Although there had previously been some general discussion about a family trust, there had been no detailed consideration of what this entailed. The plaintiff had a hazy idea that the superannuation funds, less the sum required to pay off the mortgage and less a further sum of $6,000.00 which she thought she might need to have at hand for her own short term needs, would be held by the firm of Archer Jackson & Jones yielding interest which would be capitalised and the funds used for the benefit of her two daughters. She does not seem to have given any thought to whether she would retain any interest in the funds. No specific form of investment was discussed with Upchurch, but I am satisfied that at that December meeting she knew the money was deposited in a Building Society account in the name of Archer Jackson & Jones in trust for her family, was content with that situation and gave no authority for it to be invested otherwise. I am satisfied also that Upchurch, from the receipt of the funds, intended to create a family trust and that he contemplated that some person other than the plaintiff, probably himself, would act as settlor of a nominal sum of money upon trustees (and he gave some thought to asking his partner, Mr Jones, and an accountant in Devonport to act in that capacity but did not approach either of them) and that the plaintiff would abandon her interest in the funds (after the mortgage had been paid off and possibly some other moneys set aside for her use). He failed to get around to procuring detailed instructions and establishing the trust. Thus the funds, though intended to benefit the infant plaintiffs, were never settled upon them and they have no standing in this action. The funds always remained the property of their mother, the plaintiff. I was invited to disbelieve Upchurch and to find that at all material times, including as early as October 1979 when he received the superannuation cheque, he had the intention of defrauding the plaintiff. I have, of course, considered his evidence with care as his later behaviour, on his own admission, was dishonest and devious, but although his general financial situation was at those times far from stable and he was in difficulties in respect of his taxation obligations which culminated in his bankruptcy in June 1983 at the suit of the Deputy Commissioner of Taxation, nevertheless I see no reason to suppose that he was not then conscientiously acting to protect and advance the interests of a recently bereaved relation by marriage whom he had accepted as his client, albeit he intended to act gratuitously. I so find.

1. From time to time thereafter until July 1983 when he confessed to her the fact of his bankruptcy, he advanced at her request sums of money amounting to $8,200.00. In June 1980 Upchurch advanced to a client of the firm, T. H. Harding, the sum of $7,262.19 in order that he might discharge an existing liability to an organisation called B.F.C. Finance. Mr Harding agreed to pay a rate of interest which was greater than that available on call at the Building Society where the plaintiff's funds were. Upchurch may well have intended to properly document the transaction and take an appropriate security, but in the event failed to do so. He withdrew that sum from the Building Society account of the Sutherland Family Trust, paid it into the firm trust account, where it shows on the Sutherland Family Trust ledger card, and his receipt requisition form was again circulated to and initialled by his partners. Having got it back into the firm trust account, he journalled it to Mr Harding's account and drew a cheque against it for payment to B.F.C. Finance. Records of the transaction appear on the trust ledger cards of the Sutherland Family Trust and Mr Harding. Most, if not all, of this sum together with interest on it was repaid to Upchurch by Mr Harding who had no knowledge of its source. $4,000.00 of his repayments to Upchurch were given by the latter to the plaintiff and formed part of the $8,200.00 she received from him. The balance seems to have been dissipated by Upchurch.

1. The next transaction affecting the account "Archer Jackson & Jones ITF Sutherland Family Trust" occurred in early September 1980. By this time Upchurch had pressing accounts and was in urgent need of about $6,000.00. At this time the account, including accrued interest, was in credit in the sum of $49,930.61. Upchurch signed a withdrawal form on the account for the whole of this sum. The Building Society appears to have drawn two cheques totalling that sum, one for $45,706.20 representing the capital, and the other for $4,224.41 representing closing interest. Again receipt requisition forms were filled in to the credit of the Sutherland Family Trust, circulated and initialled by the other partners. Upchurch then drew two cheques on the firm trust account against the Sutherland Family Trust. This time the total received was divided into $6,000.00 which he paid into his own account at the Bass Building Society, and $43,930.61 which he deposited in a fresh account he opened at the Permanent Building Society in the name of "G. J. J. Upchurch in trust for Sutherland Family Trust". Both cheque requisitions falsely describe the payments as distributions. As to the $6,000.00 it was an unequivocal theft by Upchurch even if, as he claimed in his plea in mitigation when he pleaded guilty to stealing these funds from the plaintiff, he intended to repay them if and when his financial position improved. As to the balance, it was not until the following January that he withdrew some money from the account he had created and used that sum for his own purposes. Nevertheless he withdrew the money from the control of the firm and created an account which only he could control; he surreptitiously went to the Building Society and opened that account in his own name in trust for the Sutherland Family Trust, whereas the previous account had been opened using office personnel who had retained the passbook; he did not tell the plaintiff that he had taken the money from the account in the name of the firm and placed it in his own name, and had no authority to do so; and he admitted at the trial that upon determining to steal the $6,000.00 he decided to close the entire account lest the auditors should query the fate of the $6,000.00 and in order to get the balance out of the control of Archer Jackson & Jones and out of the auditors' sight. If not a dishonest misappropriation then to his own use, the creation of the second account at the Permanent Building Society on 4 September 1980 was clearly an unauthorised and dishonest misapplication of the funds.

1. By June 1983 nearly all the funds had been stolen by Upchurch and he was made bankrupt on the petition of the Deputy Commissioner of Taxation. His then partners (Mr D.G. Jones having retired from, and Mr W.J. Friend and Mr F.H. Jones having joined, the partnership) learned of the sequestration order and immediately dissolved the partnership. Upchurch was told to return his keys and permitted to remove his personal papers. He then took with him the file, together with probate of Mr Sutherland's will, certificates of title to the jointly held realty, an application by the plaintiff to be registered as proprietor thereof by survivorship, and a statutory declaration identifying her as the same person in the certificates of title which variously had one of her Christian names incorrectly spelt. In addition, lodgment forms in respect of these transactions and a cheque for filing fees which were with the file were taken by Upchurch. He had prepared these documents and sent them to the Land Titles Office in January 1980, but there was something defective which led to their being rejected for registration and being sent back to Archer Jackson & Jones shortly after January 1980. It may be that some application to correct the register was considered necessary by the Recorder of Titles and such a document does not appear to have been prepared. In any event, the rejected documents had remained with the file together with the unpresented cheque drawn on the firm general office account.

1. A few weeks later he told the plaintiff he was bankrupt and she asked the whereabouts of her money, whereupon he promised to give her a full account in due course. He failed to do so and absconded. The plaintiff then approached Mr Archer for information on the fate of her funds and he, after instituting enquiries, learned of Upchurch's dishonesty.

1. Before addressing the question of what rights, if any, the plaintiff has against the first and third named defendants, I make a number of comments and findings in respect of matters which have been the subject of evidence. I am of the view that it is of no significance that Upchurch failed to observe the office procedure of entering the deeds to the Primrose Sands blocks and the life assurance policy in the strongroom index at the firm. He had received them some weeks, if not months, before Mr Sutherland's death and had retained them among his current working papers in his deeds tray. I reject the submission that he deliberately kept them apart and out of the normal office indices because he treated his commission to hold them as a purely personal or family matter as opposed to a professional one which might involve his firm. The most probable reason for failing to adopt the office procedure of indexing all documents held for safe custody upon their receipt was slackness on his part.

1. Similarly, I attach no significance to the fact that the will was not similarly indexed. When it was executed it was obvious the testator's death was imminent and in fact he died four days later. There was no need to index the will and file it in the strongroom in the usual way. It required and received immediate attention as one to be proved in common form. The fact that the will file was not closed and entered in the firm's filing indices is insignificant. It covered on–going professional work from drawing and executing the will to proving it, marshalling and distributing the assets, discharging the mortgage on the principal asset and registering the surviving joint tenant as sole proprietor. The failure to create new files as each part in the overall transaction was concluded does not signify that Upchurch regarded it as a private file or was seeking to conceal his actions on behalf of the plaintiff from his partners.

1. Reliance was placed by the defendants on the fact that the documents prepared for registration and sent to the Land Titles Office but rejected by the Recorder of Titles were not entered in the strongroom index or in a register maintained at the firm of documents despatched to the Recorder of Titles and Registrar of Deeds. But I find that normally only the titles themselves and the probate (as opposed to discharges of mortgage or applications which affected the title which would be retained by the Recorder or Registrar) were entered in the strongroom index, and this only when registration had been concluded. As the documents despatched were rejected, they were not ready to be put away in the strongroom and their custody recorded. By rights Upchurch should have resubmitted them with whatever defect had been the subject of requisition overcome. Their absence from the register of documents despatched is a little puzzling, but I am satisfied that Upchurch did not deliberately bypass this method of recording and there was no occasion for him to do so. It seems it was the duty of a clerk to make these entries and then despatch the documents to the Land Titles Office, but an examination of the register (exhibit D11) shows only 34 transactions entered in the twenty month period between September 1979 and April 1981 which seems a remarkably small number for a three man general country practice, even allowing for the fact that many of the transactions in which they were involved may have been filed by solicitors for other parties e.g. mortgagees, and suggests that the register was often not filled in. Indeed between 6 September 1979 and 10 July 1980 there were only ten transactions entered. I accept that Upchurch gave the documents to his secretary to be despatched, but for some reason not connected with the capacity in which he was acting, they were not recorded in the despatch book. I also reject the submission that the removal of the file and other documentation by Upchurch after he was invited by the other defendants to remove his personal papers shows that he treated this material as private and not part of the ordinary business of the firm. Although not containing any directly incriminating matter, the file related to transactions in which he had engaged in acts of dishonesty not yet detected. Had he left the file there, the partners would, in all probability, have enquired of the plaintiff whether any further action was required, she would have enquired of the position, and the fraud would soon have been discovered, a situation he was naturally anxious to avoid or defer as long as possible.

1. I find that the firm's business was of a general nature. There was no written partnership agreement and no understanding that partners should confine themselves to certain kinds of work. They were prepared to undertake whatever proper business came their way. There was no prohibition on Upchurch engaging in the drawing of a will, proving it and doing the ancillary conveyancing work or establishing a family trust, receiving funds for this purpose. The fact that a partner might exercise a discretion not to charge a particular client for personal or family reasons did not make the work undertaken any the less work done in the ordinary course of the firm's business.

1. I also find that in the ordinary course of the firm's business sums of money were received by it and when they were not immediately needed for a specific purpose, they were not infrequently deposited in an account in a Building Society or like institution so as to attract interest for the client. Mr Archer's penciled notation on the C. F. Sutherland estate ledger card to deposit the balance if the matter were not settled by Christmas is an instance of this practice and there was evidence of other instances.

1. Another matter relied on by the defendants is the fact that when Upchurch pleaded guilty to a charge of stealing $53,072.16 from the plaintiff (and this is the only charge brought against Upchurch – there was never any suggestion that he had defrauded any other person or client of the firm) his counsel, on his instructions, urged the learned sentencing judge to proceed on the basis that there was no solicitorclient relationship between Upchurch and the plaintiff and that he was acting merely for a family member in a non–professional capacity. Upchurch conceded at the trial that he had given such instructions in the hope of receiving a lighter sentence than if his fraud were treated as an ordinary solicitor/client defalcation. This self–serving characterisation of the capacity in which he was acting cannot alter the objective facts or operate to prejudice the plaintiff. At best it reflects on Upchurch's credit, but in any event I do not think he should be judged too harshly for laying emphasis on the relationship with the plaintiff which had led her to entrusting the money to him. It does not appear that he advanced facts which were untrue to support that interpretation of the capacity in which he had acted.

1. The plaintiff's prime contention is that by virtue of the Partnership Act 1891, s16(b), the first and third named defendants are liable to make good her loss. That section relevantly provides:

"16      Where –

...

(b)       a firm in the course of its business receives money or property of a third person and the money or property so received is misapplied by one or more of the partners while it is in the custody of the firm,

the firm is liable to make good the loss."

1. There are three essentials to establish liability. The firm must receive the money in question; it must do so in the course of its business; and the money so received must be misapplied by a partner while it is in the custody of the firm. As to the first, I think there can be no doubt that the money was received by the firm. It was received by Upchurch at the firm, paid into the firm trust account and therefrom to another trust account in the name and under the control of the firm at the Permanent Building Society. There was no endeavour to hide its receipt, which was duly recorded in the ordinary accounting records of the firm, and notice in the form of a receipt requisition was given to all partners. Thereafter all withdrawals on the Permanent Building Society account passed through and were noted in the firm trust account and notice of receipt thereof from the Society given to each partner by receipt requisition form. On one occasion Mr Archer signed the withdrawal form to enable funds to be procured to discharge the plaintiff's mortgage. The superannuation fund cheque was received by the firm, not by Upchurch in the capacity of a trustee. He was trustee of his late brother–in–law's estate, but this money did not belong to the estate but to the plaintiff exclusively until she should divest herself of it upon the creation of the contemplated family trust. Although the plaintiff's motive in entrusting her affairs to Upchurch rather than to anyone else was no doubt his relationship with her husband, the capacity in which the money was paid to him by her was as her solicitor, whom she knew to be a member of the firm of Archer Jackson & Jones. It was her belief as the result of discussions she had had with her husband that Upchurch had agreed to act as their lawyer and on the day the will was signed her husband had said to her in Upchurch's presence words to the effect:

"Don't worry. Everything is going to be handled by Geoff through the firm up there and all the documents you need will be there."

1. Although reliance was placed by the defendants on Re Bell's Indenture [1980] 3 All E.R. 425, that case is readily distinguishable as it deals with the alleged liability of the partners of a solicitor receiving funds as a constructive trustee of an established trust. In the present case the money was received to be held by the firm in an interest bearing account pending the formulation of a trust and the application of the fund to the trusts established by a deed which never came into existence.

1. As to the second requirement, I find that the money was received in the course of the firm's business. Prior to its receipt, Upchurch had suggested the creation of a family trust and the investment of some of the funds coming to the plaintiff for the benefit of the children. Prior to its receipt, it was known that the proceeds of the cheque belonged to the plaintiff and not to the estate. It was Upchurch's intention that it be held by the firm at interest pending the establishment of the trust. The practice of taking such a fund into the custody of the firm and placing it in an interest bearing account with a Building Society in the name of the firm and under its control was essentially no different from that adopted not infrequently by the firm when moneys were in hand awaiting specific disposition.

1. Portion of the fund was, I find, misapplied by Upchurch on 30 June 1980 when he withdrew from the custody of the firm and advanced to Mr Harding the sum of $7,262.19 without the plaintiff's knowledge or approval, either express or implied. The balance of $49,930.61 was misapplied on or about 4 September 1980 when Upchurch withdrew it from the custody of the firm and paid $6,000.00 of it into his own account at the Bass Building Society intending to use it for his own purposes and paid the balance which he deviously described in the office records as a distribution into a second account in his own name in trust for the Sutherland Family Trust at the Permanent Building Society without the plaintiff's knowledge and authority in the hope of concealing the theft of the $6,000.00 and of keeping the existence of the balance from the scrutiny of auditors.

1. In my view the plaintiff has established a liability by virtue of the Partnership Act 1891, s16(b), in the first and third named defendants to make good the loss she has sustained by the misapplication of those sums of money by Upchurch. It is unnecessary for me to consider any of the alternate bases of liability relied upon by her but there is no doubt in my mind that even if liability is not established under s16(b) Upchurch received the money acting within the scope of his apparent authority as a solicitor member of the partnership and misapplied it, thereby rendering the firm liable under s16(a). It has been agreed that I hear further submissions as to the appropriate consequential orders such as rates of interest (if any) to be applied in the calculation of the plaintiff's loss.