Served in the Trawler Section, Royal Naval Reserve.

Awarded the Distinguished Service Medal in the London Gazette of 22 June 1917 for service in the Atlantic Ocean on the 30 April 1917 on board the 'Q' Ship, HMS Prize.

Awarded the Meritorious Service Medal in the London Gazette of 15 February 1919. For service on board the hired trawler 'Sidmouth' during mine sweeping operations in St. George's Channel.

At the outbreak of war, Leathley was living at Brierfield, Lancashire.

In early 1917, HMS Prize, a three-masted topsail schooner that was sailing under the German flag when it was the first enemy ship to be seized by the British after the outbreak of the First World War. Originally sold by the Admiralty to a shipping company, it was later offered to the Royal Navy for use as a decoy vessel and converted to a Q-ship in early 1917. This involved the addition of diesel engines, radio equipment and armament, including two 12-pounder guns; one was inside a collapsible deckhouse while the other was on a platform that was raised from the hold. A pair of Lewis guns and a Maxim machine gun were also fitted.

The conversion work on HMS Prize was carried out near Falmouth in mid-April 1917. Prize was formally commissioned into the Royal Navy a few days later, on 25 April, with a crew of 27, including Captain Sanders. It departed for its first patrol the next day. In the evening of 30 April, near the Scillies in the Atlantic, HMS Prize was attacked by a U-boat, U-93, commanded by Kapitänleutnant Edgar von Spiegel von und zu Peckelsheim. The Q-ship was badly damaged by shellfire from the U-boat's deck gun. Sanders, having dispatched the panic party to a small boat, remained under cover with his men. Despite several of them being wounded, the crew remained in place to maintain the facade of an abandoned ship. After 20 minutes of shelling, Prize appeared to the Germans to be sinking. The U-boat approached her port quarter, whereupon Sanders ordered the White Ensign hoisted and Prize opened fire. Within a few minutes the submarine had received severe damage to her conning tower, with several crew members blown into the water. After moving away, the U-boat disappeared from sight in mist, and was believed by the crew of HMS Prize to have been sunk.

The panic party, still in its boat, collected three survivors, including the captain of the U-boat, and brought them back to HMS Prize. The damage to the ship was serious, and the German prisoners assisted in repairs as it made for the Irish coast and received a tow as it approached Kinsale. In the meantime, U-93 managed to struggle back to the island of Sylt, near the German coast, nine days later.

While HMS Prize was being repaired, the First Sea Lord, Admiral Sir John Jellicoe, offered Sanders command of a destroyer of his choosing, which he declined. Preferring to remain in his current role, Sanders returned to sea in late May with HMS Prize conducting a second patrol for three weeks. Sanders was wounded slightly in the arm during an action on 12 June, in which Prize encountered another German submarine, UC-35, on the surface. It was fired at 30 times by the U-boat as it approached. Once Sanders gave the order to fire, the U-boat turned away. Only a few shots from HMS Prize were fired and the U-boat quickly submerged and got away.

After being repaired, HMS Prize undertook another patrol in late June and early July. On 22 June, while Sanders was at sea, his award of the Victoria Cross (VC) for his actions on 30 April was gazetted The VC, instituted in 1856, was the highest award for valour that could be bestowed on members of the military of the British Empire. All of the crew present on 30 April received awards; Sanders' lieutenant received the Distinguished Service Order (DSO), two other officers the Distinguished Service Cross, and the rest of the crew was awarded the Distinguished Service Medal. Sanders was also promoted to lieutenant commander. Because the use of Q-ships such as HMS Prize was still secret, the particulars of the action leading to the awards made to Sanders and his crew were not made publicly available. Instead, the published details of his VC when it was gazetted simply read, "In recognition of his conspicuous gallantry, consummate coolness, and skill in command of one of H.M. Ships in action".

Leonard Leadley must have left HMS Prize at this time because HMS Prize was lost with all hands on its next patrol.