Fraudulent solicitor still entitled to pension
6 Mar 08
Partnership contract supported claim to payout
A solicitor who resigned from his firm and was subsequently jailed for defrauding his clients is entitled to claim a pension from his former partners under the terms of the partnership agreement, a sheriff principal has ruled.
John Kennedy Forster, a former partner of Ferguson & Forster in Stranraer, was sentenced to six and a half years in March 2004 for 34 charges of dishonesty against clients including churches, trust funds and charities, involving a total of £667,000.
In his action against his former firm, Forster argued that the agreement provided that if he resigned, he was entitled to be repaid his capital in the firm, or at his option to elect for a pension calculated as a proportion of his earnings from the firm. The same would have applied if he had been expelled from the firm as the contract treated an expelled partner as having resigned.
The defending partners argued that partnership was a relationship based on trust, and Forster having broken that trust, was not entitled to found on his rights under the agreement, under the principle of mutuality of contract.
Sheriff Principal James Taylor in Glasgow, reversing the sheriff, said that in Scots law before one party to a contract could withhold performance of an obligation under contract because of breach of obligation by another party, the two obligations had to be the counterpart of each other.
Although the contract might be said to be weighted in Forster's favour, he continued, avoiding conduct that permitted expulsion was not the counterpart of being entitled to a payout of capital. That was "a very powerful indicator that in relation to this particular contract the actings of the pursuer, reprehensible though they were, do not entitle the defenders, per se, to withhold payment to the pursuer of what would otherwise be due to him from his capital account".
Although Forster's earnings would have been inflated by his actings, the court could not go behind the firm's accounts, at least if the clients had not sought repayment from the firm.
Pleadings in the case are not yet final and further legal arguments may yet take place.
The sheriff principal's decision can be read at http://www.scotcourts.gov.uk/opinions/CA251_05.html .