Dubai Aluminium Company Limited v Salaam 2002

FACTS:-

The Claimant company was induced to pay $50 million between September 1987 and March 1993 under a bogus consultancy agreement with Marc Rich & Co. AG. Several people shared in the proceeds of the fraud, including a Mr Hany Mohamed Salaam who was a client of two successive firms of solicitors, “the Amhurst firm.” It was claimed that the senior partner of this firm dishonestly assisted in the fraud, although he denied any such wrongdoing and there was no finding by any court that he had acted dishonestly. In addition to suing Mr Amhurst, Dubai Aluminium sued the Amhurst firm, on the basis that the firm was vicariously liable in respect of some of Mr Amhurst’s activities although the other partners were personally innocent of any dishonesty.

At various stages, the various Defendants settled the claims against them. However these settlements left outstanding contribution claims brought by some of the Defendants against each other and other third parties.

The Amhurst firm needed to prove that they were vicariously liable for Mr Amhurst’s allegedly wrongful acts in order to obtain contribution under the Civil Liability (Contribution) Act 1978 from other Defendants.

JUDGMENT:-

Lord Nicholls said that the facts were not in dispute. It was only ten years ago that clubs such as these had begun to employ their players, and he agreed with the trial judge that until then no question of vicarious liability on the part of such clubs could have arisen.

Section 10 of the Partnership Act 1890 stated:-

“Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm, or with the authority of his co-partners, loss of injury is caused to any person not being a partner in the firm, of any penalty is incurred, the firm is liable therefor the same extent as the partner so acting or omitting to act.”

Lord Nicholls said that the language of Section 10 would not be confined to common law torts, but also to the equitable wrong of dishonest participation in a breach of trust or fiduciary duty, which was the wrong pleaded by Dubai Aluminium.

It was also claimed that the Amhurst firm was not liable for Mr Amhurst’s alleged acts because these acts were not done by him while acting in the ordinary course of business of the firm. Mr Amhurst had allegedly drafted the consultancy agreements by way of dishonest assistance to another Defendant to act in breach of the fiduciary duties that he owed to the Claimant, Dubai Aluminium.

Lord Nicholls considered the meaning of “ordinary course of business” and “vicarious liability.” The underlying legal policy behind vicarious liability was based on the recognition that carrying on a business enterprise necessarily involved risks to others. Lord Nicholls considered the following cases:-

• Morris v CW Martin & Sons Ltd [1966] 1 QB 716
• Lister v Hesley Hall [2001] UKHL 22
• Bazley v Curry (1999) 174 DLR (4^th) 45
• Plumb v Cobden Four Mills Co. Ltd [1914] AC 62
• Barwick v English Joint Stock Bank (1867) LR 2 Ex 259
• Hamlyn v John Houston & Co. [1903] 1 KB 81
• Bugge v Brown (1919) 26 CLR 110
• Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462

There was little factual material in this other than that pleaded, but there could be no doubt that in drafting the agreements and acting in his capacity as a partner, Mr Amhurst was acting for and on behalf of the firm, as distinct from acting solely in his own interests or the interests of others. He was seeking to promote the business of the firm. On this basis, the firm was liable for Mr Amhurst’s alleged dishonest assistance in the fraudulent scheme, the assistance taking the form of drafting the necessary agreements.

Lord Nicholls said that it did not matter, for the purposes of establishing vicarious liability, that Mr Amhurst may have done other, additional acts while acting outside the ordinary course of the firm’s business.

The personal innocence of the partners in the Amhurst firm was not a relevant matter to be taken into account by the judge when deciding the contribution proceedings. The Amhurst firm stood in the shoes of Mr Amhurst and was vicariously liable for his alleged wrongdoing.

In addition a just and equitable distribution of the financial burden required the court to take into account the net contributions each party made to the cost of compensating the Claimant.

Lord Nicholls went to consider the overall assessment of the contribution claims.

Lords Slynn, Hutton, Hobhouse and Millett agreed.