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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Dubai Aluminium Company Ltd v Salaam & Ors [2000] EWCA Civ 118 (7 April 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/118.html
Cite as: [2000] PNLR 578, [2001] QB 113, [2000] 3 WLR 910, [2000] EWCA Civ 118, [2000] Lloyd's Rep PN 497, [2000] 2 Lloyd's Rep 168
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Case No: QBCMF 98/1115/A3, QBCMF 98/1116/A3, PTA 00/5574/A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF
JUSTICE QUEEN'S BENCH DIVISION
COMMERCIAL COURT MR JUSTICE RIX
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday 7 April 2000
LORD JUSTICE EVANS
LORD JUSTICE ALDOUS
and
MR JUSTICE TURNER
- - - - - - - - - - - - - - - - - - - - -
DUBAI ALUMINIUM COMPANY LIMITED |
Plaintiff | |
|
||
(1)
HANY MOHAMED SALAAM |
Defendants |
(1) IAN DAVID LIVINGSTONE
(2) GLENCORE INTERNATIONAL A.G.
(3) HIS EXCELLENCY MAHDI MOHAMED AL TAJIR
(4) HANY MOHAMED SALAAM
- - - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
MR ALI MALEK QC/MS SARA COCKERILL(instructed by REID MINTY for the APPELLANTS)
MR ANTHONY BOSWOOD QC/MR PHILIP BROOK SMITH (instructed by BARLOW LYDE & GILBERT for the RESPONDENTS)
MR NIGEL DAVIS QC (instructed by BIDDLE & Co.for MR SALAAM APPELLANT/FIRST DEFENDANT)
MR GEORGE LEGGATT QC (instructed by CMS CAMERON McKENNA) for MR AMHURST RESPONDENT/SECOND DEFENDANT)
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE EVANS:
Background
These facts were found by Mr Justice Rix and they are not contested on this appeal. Between September 1987 and March 1993 the government-owned Dubai Aluminium Company Ltd ("Dubal") paid sums in excess of $50m. to Marc Rich Co. A.G. ("Richco") ostensibly in accordance with a Consultancy Agreement dated 1.9.87 which entitled Richco to a 2.5% commission on all sales of Dubal products. The agreement was a sham, dishonestly conceived between the managing director of Dubal, Mr Ian Livingstone, and senior officers of Richco and Mr H. Salaam. It was a cover for abstracting those sums from Dubal so that they could find their way into the pockets of Mr Livingstone and Mr Salaam and also of H.E. Al Tajir who received some 40% of the total. The original distribution was 20% (one fifth) to Richco, equal to 0.5% of the commission, and the remaining four-fifths to Mr Al Tajir, Mr Livingstone and Mr Saad Salaam in the proportions 40 : 30 : 30. Soon afterwards, some time in 1988, a 15% share of the four-fifths (80%) of the total commission was diverted to Mr Salaam's brother, Mr Saad Salaam, and it was only the remaining 85% of that amount which was divided between Mr Al Tajir, Mr Livingstone and Mr Salaam. Mr Al Tajir continued to receive 40 per cent and so the other two were reduced to 22.5% each (or 25.5% - see the judgment page 436).
As the result of the detailed examination of accounts and figures at the trial, and the full and meticulous judgment of Mr Justice Rix, the following figures were established:-
Claim (paid to Dubal to Richco) $50,117,622
Paid on by Richco $49,780, 944
Receipts
H. Salaam $20,338,348 (40.5%)
Al Tajir $16,466,667 (32.9%)
Livingstone $6,327,918 (12.5%)
Said Salaam $6,001,861 (12%)
Richco passed on four-fifths of the payment it received from Dubal under a number of Subsidiary Agreements between off-shore companies in which Mr H. Salaam was taken to have a controlling and beneficial interest. On the face of these Subsidiary Agreements Richco undertook to pay only half of the 2.5% commission which it received from Dubal but the judge found that there were other arrangements; the nature of which is not relevant for present purposes, as a result of which the on-payments in fact represented 80% of Richco's receipts.
Like the Consultancy Agreement, the Subsidiary Agreements were a total fiction. Indeed,. they helped to expose the Consultancy Agreement as the sham that it was. The Marc Rich organisation was a leading international commodities trader and its undertaking to provide advice and assistance to Dubal on its purchases of raw material, namely aluminium, and sales of its aluminium products might have been said to give the Consultancy Agreement the semblance of a genuine commercial transaction. But this could not explain why Richco under the Subsidiary Agreements purported to delegate the whole of its advisory functions to Mr Salaam or his companies, wide though the range of Mr Salaam's trading activities undoubtedly was, particularly in the Eastern Mediterranean and the Middle East.
In these proceedings, none of the parties to any of these Agreements contended that they were genuine. Mr Livingstone and Mr Salaam, who were defendants, contended that they were authorised by Mr Al Tajir with at least the apparent authority of Dubai's Royal family, who were and are the owners of Dubal. Their defence failed and the judge found that Mr Al Tajir himself was a party to the dishonest transaction. Mr Al Tajir denied this and this is the only one of the judge's findings of fact which is challenged on this appeal. Mr Al Tajir's case is that he introduced Dubal to Richco, in return for which he was promised a 1% commission by Mr Marc Rich on behalf of Richco, but that he was involved no further than this. He said that he left the negotiation of the Agreements and the payments to him or his family company, Al Al Tajir Ltd, which totalled more than $16 million, to his staff and that he knew nothing of them.
Reverting to the judge's findings which are not challenged, the total figures set out below do not reflect the retention by Richco which was agreed ostensibly as one-half but implemented as one-fifth only, as stated above. The figures found by the judge were -
Paid by Dubal (received by Richco) $50,117,622
Paid by Richco $49,780,944
Retention by Richco $366,678
(A sum which in the context of this case may be regarded as negligible.) However, the figure for payments made to the other participants included a so-called capitalisation payment which was agreed and made in 1991. Under that agreement, Richco paid a capital sum which represented the expected revenue stream from Dubal for the remaining period of the Consultancy Agreement, securing itself by obtaining a performance bond from Dubal covering the same period. The Agreements however came to the knowledge of Dubal (apart from the dishonest knowledge of Mr Livingstone) in 1993 and the payments to Richco ceased forthwith. In the result, therefore, Richco paid out more to the other participants than was due to them in respect of the amounts which it actually received from Dubal.
One other feature of the total figures of sums received by the participants (other than Richco) should be noted at this stage. The Consultancy Agreement stipulated for payments by Dubal to Richco, in addition to the 2.5% commission in Dubal sales, of a so-called introductory commission of $2m. and monthly payments of $85,000 ($1.2 million p.a.), and these sums were paid on under the Subsidiary Agreements for the benefit of Mr Salaam and Mr Livingstone, but not Mr Al Al Tajir. The judge said that this might mean that Mr Salaam negotiated those payments for himself and Mr Livingstone and kept Mr Al Tajir in the dark about them -
"I am left with a feeling of deep scepticism as to whether Mr Al Tajir was permitted to know all the ins and outs of the scheme as negotiated by Mr Salaam and Mr Livingstone" (page 444)
Whatever the explanation for this may be, the figures of individual receipts found by the judge include these payments to Mr Salaam and Mr Livingstone.
The issues
Precise figures do not matter. Dubal's claim in these proceedings was for repayment of the $50,117,622 which it paid to Richco, after giving credit for $6,327,918 part of $15,540,000 paid by Mr Livingstone under a settlement agreement dated 31 January 1996, a net claim of $43,789,703. No claim was made against Richco or against Mr Al Tajir. The claim was for compensation based on knowing receipt by the defendants of Dubal's money or for knowing assistance given by them to the scheme which deprived Dubal of it. "Knowing" in this context means dishonest: Royal Brunei Airlines v. Tan [1995] 2 AC 378. The judge found that the defendants, Mr Livingstone and Mr H. Salaam, were dishonest, and Mr Al Tajir also, who was not made a defendant to Dubal's claim but was joined as a third party in the contribution proceedings. As stated above, only Mr Al Tajir challenges this finding, but he like the defendants agreed a settlement figure with Dubal before final judgment was given.
The history of the proceedings was unusual. The trial began on 6 October 1997. It lasted until 4 November. On 22 October, however, the judge was told that a settlement was agreed by Dubal with Mr Amhurst, and also with Mr Amhurst's partners in his two firms who were third and fourth defendants in the action, Amhurst Brown Martin & Nicholson and Amhurst Brown Colombotti. Under the settlement agreement, a payment of $10 million was made to Dubal by or on behalf of the two firms, the third and fourth defendants. No payment was made by or on behalf of Mr Amhurst, and all the allegations made against him and the firms were withdrawn by Dubal. After this and before the proceedings continued with the contribution issues that arose between various defendants, the judge, with the parties' agreement, made his "Unreasoned Findings", which he gave to the parties on 6 November (they are incorporated in his judgment [1999] 1 Lloyd's Rep. at 422-4).
A further hearing then took place on the contribution issues. At this stage, Mr Amhurst and his partners were separately represented, the partners by Mr Anthony Boswood Q.C. who previously represented Mr Amhurst also, and Mr Amhurst by Mr George Leggatt Q.C. who was a newcomer to the case. The judge was told that the need for separate representation arose from the terms of the settlement agreement which had been reached in October. The hearing continued on this basis, as did this appeal. This meant treating the third and fourth defendants as Mr Amhurst's partners, rather than the firms themselves, but the title of the proceedings was never formally amended.
After the trial including the contribution proceedings was ended the judge was told that settlement negotiations were taking place between Dubal and Mr Salaam and Mr Al Tajir, and at their request he deferred giving final judgment until July 1998. Mr Salaam settled Dubal's claim against him in April 1998, agreeing to pay $18 million. Mr Al Tajir meanwhile had agreed to pay the same amount to Dubal, in January 1998. In the result, Dubal received a total of $61,540,000 in settlement of its claim for $50,117,622 plus interest from 1987/1993. The sums agreed to be paid were allocated to principal and interest in a calculation set out by the judge (pages 463-5).
The settlement figures therefore were as follows :-
(Dubal claim $50,117,622 (net $43,789,703) plus interest.
Date Settlement figure Principal
Livingstone 21.2.96 $15,540.000 $11,409,691 (22.8%)
Amhurst Partners 12.11.97 $10m. $6,761,325 (13.5%)
Salaam 31.12.99 £18m. $11,422,506 (22.8%)
Al Tajir 31.12.97 $18m. $11,394,985 (22.7%)
(Totals) $61,540.000 $40.988,507
Contribution
Not all the defendants claimed contributions from all of the others. The judge held that the third and fourth defendants (the Amhurst partners) should recover an indemnity for the whole of the $10 million they agreed to pay Dubai from Mr Salaam and Mr Al Tajir in the proportions 75 : 25 ($7,500,000 and $2,500,000) and that those two should be jointly and severally liable to the partners up to $7.5 million. The judge made no order against Mr Amhurst personally, nor was he asked to make any in his favour (the $10m. payment made in respect of the claim against the Amhurst partners was said expressly not to have been made by him or on his behalf).
Issues on the appeal
Contribution
The appellants are Mr Salaam and Mr Al Tajir. They contend that they should not be ordered to contribute towards or pay any part of the $10 million settlement made by the Amhurst partners with Dubal. Alternatively, Mr Salaam contends that Mr Amhurst should make some contribution also. The partners and Mr Amhurst say that the judge's order should not be disturbed.
Dishonesty
Mr Al Tajir contends that the judge's finding that he acted dishonestly, made in the contribution proceedings rather than the trial itself (he was not a defendant), was unsupported by the evidence and was wrong. The respondents disputed this.
It is convenient to consider this issue first.
(1) Dishonesty
There was no documentary evidence which implicated Mr Al Tajir in the making of the Consultancy Agreement between Dubai and Richco. There was, however, unchallenged accountancy evidence that payments representing almost exactly 1% of the 2.5 % consultancy fee (40% of the sums paid by Dubal under the Agreement) was paid on by Richco to Mr Al Tajir's company, Al Tajir Ltd, totalling $16,466, 667 over the six-year period from 1987 to 1993.
Mr Al Tajir's evidence given in his witness statement was that he was wholly unaware of the Consultancy Agreement and its terms or that these payments were being made under it and the Subsidiary Agreements associated with it. He said that he knew in a general way that large sums were being paid to him or his companies by Richco throughout the period, but he attributed these to an oral agreement which he said he made with Mr Marc Rich, then the proprietor of Richco and a personal friend and neighbour in Switzerland. He said that he introduced Dubal to Richco having in view a long-term commercial arrangement under which Richco would arrange for the supply of raw material (alumina) to Dubal, thus securing its supplies at competitive prices from one of the world's foremost metal traders, which Richco was. In return, Marc Rich agreed that he should receive a 1% commission on all supplies, and it was this sum which, he assumed, was being paid into his or his company's accounts. He arranged a meeting between Mr Livingstone and Mr Salaam, on behalf of Dubal, and Mr Strothotte on behalf of Richco. Thereafter he left the whole matter, including the payments which became due to him, to his managers and staff.
He therefore accepted that the payments in question were made to him, but he denied that he had any knowledge that their source was Dubal or of the transaction, including the Consultancy Agreement, which the Judge found was a sham, a finding which Mr Al Tajir does not dispute. He denied that he was dishonest in any way.
The judge's finding, is set out at [1999] 1 Lloyd's Reports pages 457-9. The passage begins -
"Mr Al Tajir did not seek to say that he possessed the authority of Dubal or the Ruler to give effect to the scheme. His evidence was rather that he played a purely facilitative role in bringing Dubal and Richco together, for which he had stipulated a fee by way of commission negotiated directly, and separately with Marc Rich himself. He sought to distance himself from Mr Livingstone and Mr Salaam, and indeed from the whole transaction. He said he was unaware until a late date that any payments had been made into his (family) account at all."
and concludes :-
"I regret therefore to conclude that Mr Al Tajir was also a dishonest participant in the scheme."
Also relevant is Unreasoned Finding no. (at p.423 of the judgment) -
"5. H.E. Mr Mohamed Al Tajir (the third party) dishonestly assisted Mr Livingstone in the latter's breach of fiduciary duty by participating in the promotion, organisation and operation of the scheme. He dishonestly received U.S. $15,604,878.04 as a participant."
Background
Mr Tajir is a man of enormous wealth and was distinguished for the part he played in the creation of modern Dubai during the reign of HH Sheikh Rashid bin Sa´id al Maktoum ("Sheikh Rashid") between 1958 and 1990. As the judge put it -
"Sheikh Rashid is credited during his reign, until the stroke which totally incapacitated him in 1981, with steering his emirate with wisdom and foresight towards its modern prosperity as one of the trading entrepôts of the region" (p.428)"
During this period -
"...... his most powerful representative and confidant, outside the immediate royal family, was Mr Al Tajir. It is said that such a representative answers only to the Ruler, and his fortunes rise and fall with those of the Ruler : his authority becomes, for all practical -purposes, equal to that of the Ruler himself ..... In 1963 Mr Ali Tajir became Director of HH the Ruler's Affairs and Petroleum Affairs and effectively the most powerful man in Dubai after the Ruler himself" (p.428).
From 1981, Sheikh Rashid was incapacitated, and although he lived until 1990 the government of Dubai was in the hands of his three sons, HH Sheikh Maktoum (the Crown Prince, who became Ruler on his father's death in 1990), Sheikh Hamdan (now deputy Ruler, and chairman of Dubal since its incorporation in 1975) and Sheikh Mohamed, currently the Crown Prince and since 1981, on the evidence heard by the judge (see p.432), in charge of the country's oil affairs. On the evidence also, Mr Al Tajir ceased to have any direct involvement in the country's business affairs on behalf of the Royal family from 1981, although he became the United Arab Emirates's Ambassador to the Court of St James and continued in that post until 1987.
Against that background, Mr Livingstone and Mr Salaam contended that the Consultancy Agreement and its associated arrangements for the payment of a 2.5% commission on all sales of Dubai's aluminium products to them and to Richco and Mr Al Tajir (and later to Mr Saad Salaam also) was authorised by Mr Al Tajir acting, as they said they believed,. on behalf of the Royal family who were effectively the owners of Dubal. Mr Al Tajir gave no support to this defence. He denied, as stated above, all knowledge of the Agreement and the arrangement. The defence was comprehensively rejected by the judge. The sole issue of fact on this appeal is whether Mr Al Al Tajir was a knowing party to the dishonest arrangements.
The judge gave three reasons for finding that he was (page 458). First, he accepted those parts of Mr Livingstone's and Mr Salaam's evidence which gave details of his complicity. In particular, he found that Mr Al Tajir was present at lunch with them at the Mirabelle restaurant in London where they agreed a three-way split of the commission payments becoming due from Dubal in the proportions 40 : 30 : 30 in Mr Al Tajir's favour (pages 436 and 458). That was in mid-1987. He found that Mr Al Tajir relied on Mr Salaam and Mr Livingstone to promote his interests in their negotiations with Richco (p.458). He found that it was also significant that Mr Saad Salaam came to receive part (15%) of the proceeds after complaining to Mr Al Tajir who then brought pressure to bear on Mr Salaam and Mr Livingstone to reduce their proportions of the receipts from 30% to 22.5% in Mr Saad Salaam's favour, though Mr Al Al Tajir's proportion remained at 40 per cent. The judge concluded -
"I reject his attempt to distance himself from Mr Salaam and Mr Livingstone, and I regard that attempt as proceeding from consciousness of guilt" (page 458)."
The judge relied, secondly, on the scale and nature of the payments made to Mr Al Tajir and to Al Tajir Ltd. He said this -
"It is true that from [August 1988] payments were openly made into that family account : but Mr Al Tajir is not able to claim the benefit of that openness, since he insists that he knew nothing about any payments at all" (p.458).
Mr Livingstone gave evidence that Mr Al Tajir gave close attention to his receipts. Two specific examples were given. First, additional payments of $5 and $10 per ton were negotiated and made at Mr Al Tajir's request, according to Mr Livingstone (pages 443 and 458). The second was the capitalisation payment made in 1991 : "the impetus came from Mr Al Tajir" (p.458). Moreover, a striking piece of evidence emerged at the trial. A payment of $2.6 million was made to Al Tajir Ltd on Mr Tajir's instructions, in fact to cover the cost of chartering private aircraft for his diplomatic activities in the Middle East, when he was engaged in the Lebanese peace process (as Mr Salaam also was), but disguised as payment for a "bogus option" transaction apparently made in the course of Dubal's business (pages 437 and 458).
Finally, the judge relied on the fact that, by the time judgment was given, Mr Al Tajir agreed to pay Dubal no less than $18 million, although he was not sued by them (pages 419 and 458)/ This,. at first sight surprising, reliance on an agreement made at a later stage and after the trial was explained as follows -
"That neutralises an argument previously advanced on Mr Al Tajir's behalf that it was impossible to infer any dishonesty on Mr Al Tajir's part in circumstances where no claim had been brought against him by Dubal" (page 458)."
Mr Al Tajir's evidence
Mr Al Tajir was unable to give oral evidence at the trial, because he suffered from heart trouble and was admitted to hospital in London shortly before the time came for him to be called as a witness. He could not then be contacted by his solicitors and his witness statement was admitted as his evidence, though of course he could not be cross-examined on it. The judge assumed in his favour that this was a disadvantage for him (pages 457-8). The essential part of his statement was paragraph 20 which the judge quoted in part -
"...I did not even realise that any separate monies had been paid purportedly connected with this transaction by Richco, simply because monies had been paid to Altajir Limited anonymously and distributed without reference to me. As we were always receiving large sums of money from Richco during this period, and I did not handle specific or detailed accounts of the companies in which I was involved, (instead delegating these duties to respective managers, employees and members of family,. etc.), I saw no reason to "chase" Marc Rich when I knew from a global point of view of all AlAl Tajir's family businesses that huge sums were coming in from Richco. This encompassed all business with Richco, including business ventures other than Dubal, including commodity trading with Iran .... hundreds of millions of pounds were going thorough numerous companies connected with the Al Al Tajir family."
Reference should here be made to the Aluminium Supply Agreement ("A.S.A.") between Dubai and Richco, dated 1 September 1987, the same day as the Consultancy Agreement. All parties acknowledged that both Agreements resulted from the same negotiations. Indeed, Mr Salaam, Mr Livingstone and Mr Strothotte all said that the Consultancy Agreement was the accepted method of achieving "commission" payments by Dubal at the same time as the ASA was being entered into (pages 434,436 and 440). The ASA may be regarded as a valid commercial arrangement, under which Richco undertook to supply Dubal's alumina requirements at fixed prices (by reference to market levels - pages 423 and 440), and according to the witnesses it worked to Dubal's advantage for two years. Enormous quantities of alumina were purchased by Dubal, and there was evidence that from time to time Mr Al Tajir and others claimed the right to be paid at the rate of U.S. $55 and $10 per tonne (the $55s and $10s - see page 440) on these purchases by Dubal.
Appeal submissions
Mr Ali Malek Q.C.'s admirable submissions on behalf of Mr Al Tajir may be summarised as follows. The judge made no reference to Mr Al Tajir's distinguished career and the "good character" which he is entitled to claim from his long period of public service both in Dubai and as the UAE Ambassador in London. He failed to have sufficient regard to the fact that Mr Al Tajir was unable to give evidence at the trial and therefore could not rebut Mr Salaam's and Mr Livingstone's evidence against him. Rather, the judge accepted their evidence in this respect, although he rejected it on virtually all other matters. He did so without reminding himself, expressly at least, that they were, as he found, parties to a dishonest scheme, whose evidence against an alleged co-conspirator should not be relied upon unless there was independent confirmation or corroboration of it. Of such independent evidence, Mr Malek submitted, there was none.
Moreover, Mr Salaam and Mr Livingstone were by no means consistent with each other in the evidence they gave of Mr Al Tajir's alleged involvement in the scheme. One example was their different accounts of what the judge found was the Mirabelle lunch attended by all three.
As for the judge's second and third reasons, Mr Al Tajir's lack of knowledge of the payments made to his family company was explained by his witness statement, quoted above, and it was wrong and illogical for the judge to rely on the post-trial settlement agreement with Dubal as an admission of liability, particularly when it could not have influenced the judge's preliminary unreasoned finding, made before the agreement was entered into.
Mr Boswood Q.C for the respondents submitted that the judge was entitled to accept Mr Salaam's and Mr Livingstone's evidence against Mr Al Tajir to the extent that he did, more particularly because of the detailed account they gave of his involvement, for example with regard to the introduction of Mr Saad Salaam and his insistence on being paid additional sums (the $55s $10s $5s and $2s) from time to time. Their evidence of the "bogus option" payment was not disputed and it could scarcely have been invented or untruthful. Although Mr Al Tajir was prevented from giving oral evidence, he was able to give instructions to his solicitors and counsel until the day he was taken ill, and he was sometimes present in Court during the trial. If he was able to answer the evidence given against him, leave could have been sought to introduce a supplemental statement from him, but no application was made.
As regards Mr Al Tajir's explanation that he agreed a 1% "introductory commission" with Mr Rich, this was manifestly untrue, it was submitted, not least because Dubal and Richco already had a trading relationship with each other.
Conclusion
I am prepared to accept Mr Malek's submissions that the judge's finding, that Mr Al Tajir was aware of and involved in the sham transaction and was dishonest, rests largely on his acceptance of Mr Salaam's and Mr Livingstone's evidence in these respects, and that findings of this kind cannot properly be made without anxious consideration of such independent evidence as there may be which supports their allegations against him. I accept also that there are cases where the Court of Appeal finds itself able to reach a different conclusion from the trial judge on a question of this sort (The Ocean Frost [1985] Lloyd's Rep. 1, where the finding of fraud was reversed (p.56)), just as there are others where the Court of Appeal may be compelled to make a finding of dishonesty which the trial judge did not make (The Ikarian Reefer [1985] 1 Lloyd's Rep.455). In the present case, where Mr Al Tajir did not appear as a witness, the trial judge had no advantage in this respect over the Court of Appeal.
Nevertheless, in my judgment, there is a substantial weight of evidence which supports the judge's finding. This lies not in specific parts of the evidence which invite or require rejection of what Mr Salaam and Mr Livingstone said about Mr Al Tajir's participation, but rather in the fact that two inferences which Mr Al Tajir invites the Court to draw in his favour are to my mind wholly unrealistic and unacceptable. First, he asserts that, having agreed a 1% introductory commission with Mr Rich he took no further part in negotiating the agreements under which the commission was to be paid. The inference, he suggests, is that Mr Salaam and Mr Livingstone, who negotiated on behalf of Dubal, and Mr Strothotte on behalf of Richco, reached a form of agreement which was not just inconsistent with but contradictory of what he had authorised and was expecting them to negotiate, in part on his behalf. A one per cent introductory commission would have been paid by Richco to Mr Al Tajir and without an additional charge to Dubal (assuming that the ASA was on commercial terms) and it would have been calculated by reference to Dubal's purchases from Richco. What was agreed in fact was a 2.5 per cent commission, paid as to 40 per cent to Mr Al Tajir, on Dubal's sales of its products to third parties, who may or may not have included Richco. The additional payments by Dubal under the Consultancy Agreement from their inception were no more and no less than a means of abstracting money from Dubal, as the judge found, and they could not be lawful. If Mr Al Tajir had any knowledge of what was agreed, he must have realised this. If he did not, then the question arises whether he could have taken no interest over such a long period in an arrangement which was designed to produce and did produce a source of revenue which cannot have been insignificant, even for him.
This leads to the second inference that Mr Al Tajir invites the Court to draw, which is that he was wholly unaware, throughout the whole six-year period, of the state of accounts between himself and his family, on the one hand, and Richco and Dubal on the other hand. When there is direct evidence that he was personally involved in these matters, even though it comes from what must be regarded in the light of the judge's uncontested findings as a tainted source, namely, Mr Livingstone and Mr Salaam, then in my judgment there is a strong likelihood that their evidence in these respects is true.
I would hold, therefore, that in the circumstances of this case the judge was entitled to accept their evidence, to the extent that he did, and that his finding of Mr Al Tajir's involvement can be supported on this ground alone. The support is reinforced by his findings as to the receipt of the moneys by or on behalf of Mr Al Tajir, which factually I do not think are challenged. The judge's reliance on the fact of Mr Al Tajir's settlement with Dubal was limited for the reason he gave. It does serve to reject any suggestion that Dubal did not regard Mr Al Al Tajir as being under any obligation to make restitution or pay compensation to it.
It is important, when a finding such as this is challenged on appeal, to stand back and seek to evaluate the whole of the relevant evidence, uninfluenced as far as possible by the finding which the trial judge made and which is the subject of the appeal. Doing this to the best of my ability, I find that the evidence of Mr Al Al Tajir's knowing complicity in the transaction and the payments is overwhelming, and that with such knowledge he cannot have been unaware that the source of the money was Dubal, that Mr Livingstone was acting in breach of his fiduciary duty towards Dubal and that the agreements were unlawful. I therefore would agree with the judge that the allegation of dishonesty was proved against Mr Al Al Tajir, and I would dismiss this part of his appeal.
(2) Contribution
It will be recalled that Dubal's claims against Mr Amhurst (second defendant) and against his firms (third and fourth defendants) were settled by agreement between them on 20 October 1997, during the course of the trial. The settlement involved a payment of $10 million to Dubal, of which the judge attributed $6,761,325 to principal, representing 13.5 per cent of the claim for $50 million (approx.), and the balance to interest. His orders in the third party proceedings were that the third and fourth defendants, on whose behalf he was told the payment of $10 million was made, should recover the whole of this payment, from Mr Salaam as to $7.5 million and Mr Al Tajir as to the remaining $2.5 million (with a contingent liability on Mr Al Tajir to pay a further $5 million if Mr Salaam was unable to do so).
The judge made no order for or against Mr Amhurst personally, as the second defendant (pages 476-7).
Strictly, the third and fourth defendants, namely, the firms in which Mr Amhurst was a partner (he retired in 1999, we were told, although he remains a consultant), include Mr Amhurst, whom the judge held on the alleged facts gave knowing assistance to the dishonest scheme for abstracting money from Dubal, as well as his innocent partners. For practical purposes, however, once Mr Amhurst and the firms were separately represented, the third and fourth defendants, now the respondents to this appeal, became Mr Amhurst's innocent partners, although the title of the proceedings has not been changed. I shall refer to them, as the judge did, as the "Amhurst partners", in this sense.
Their liability, if any, was vicarious, as the judge noted (page 471) and as Mr Boswood confirmed to us. It arose if section 10 of the Partnership Act 1890 applied -
"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 or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act."
Two issues under section 10 are raised by the appeal. The first is whether the section applies at all, in a case where the wrongful act or omission committed by one partner gives rise, not to a liability in tort, but to the liability in equity for "wrongful assistance" which is alleged against Mr Amhurst here. The second is whether his alleged wrongful activities were "in the ordinary course of the business the firm" as required by section 10.
Thirdly, an issue is raised as to the operation of the contribution provisions of the Civil Liability (Contribution) Act 1978 ("the 1978 Act") where the claim for contribution is made by or against a person who is vicariously liable for a wrongful act committed by another.
It is important to stress at the outset that Mr Amhurst has never admitted liability towards Dubal or that he gave `knowing assistance' to the unlawful transaction or that he was dishonest. As a term of the tri-partite settlement agreement, Dubal withdrew the allegations which it had made against him. The payment of $10 million was made to Dubal under the settlement agreement, the judge was told, expressly on the basis that it was made on behalf of the third and fourth defendants, meaning the Amhurst partners, and not on behalf of Mr Amhurst, and that the allegations against Mr Amhurst were withdrawn.
The settlement agreement was recorded in writing on 12 November 1997. We were shown copies of it, although the judge was not. Glencore (second third party) the successor to Richco was also a party. There is of course an insurance background. Mr Boswood told us that the payment was made by the firms' liability insurers (and excess insurers) on behalf of the partners other than Mr Amhurst, and that the insurers regard themselves as free to begin separate contribution proceedings in the name of those partners, in their exercise of subrogation rights against Mr Amhurst, if they fail to obtain a full indemnity from Mr Salaam and Mr Al Tajir in these proceedings. Such claims, they assert, might be made in contract or under the 1978 Act. They would be resisted, Mr Leggatt told us, on the ground inter alia that they could and should have been raised in these proceedings and that it would be an abuse of process to pursue them in a separate action, with the attendant risk of inconsistent findings in that action and this. If the action is able to be pursued, then Mr Leggatt made it clear that the allegations of knowing assistance and dishonesty will be denied. It follows that there could be a finding that he was innocent of any wrongful act, and the basis for a contribution finding in his or their favour in the present case would be removed.
We can only make it clear that the third and fourth defendants have had a full opportunity to make their claim for contribution against Mr Amhurst in these proceedings. We indicated that they might consider whether or not they should do so, but our offer was not taken up.
We emphasise, therefore, that the contribution proceedings in this action take place on the basis that Dubal's allegations against Mr Amhurst were withdrawn as a term of the settlement agreement. It becomes necessary, therefore, to consider them on the basis of the allegations made by Dubal. The allegations made against him, especially the allegation of dishonesty, have not been found to be proved.
The relevant provisions of the 1978 Act are these-
"1(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).
............
(4) A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established."
and as regards the assessment of contribution -
"2(1) Subject to subsection (3) below, in any proceedings for contribution under section 1 above the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage in question.
(2) Subject to subsection (3) below, the court shall have power in any such proceedings to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity."
The pleaded allegations
Section 1(4) of the 1978 Act thus makes it necessary to consider whether Mr Amhurst and the Amhurst partners "would have been held liable [to Dubal] assuming that the factual basis of the claim against him [them] could be established." It is not contested that the $10m. payment was made to Dubal "in bona fide settlement or compromise" of the claims made by Dubal against the third and fourth defendants, or that the claims made against Mr Amhurst were withdrawn as part of the same settlement agreement. The common law rule that a settlement payment may be recoverable when it is made reasonably to compromise the claims in the action (Biggin v. Permanite [1951] 2K.B.314) presumably means that the relevant allegations for the purposes of section 1(4) are limited to those which gave rise to the liability asserted by the person claiming contribution, but no difficulty arises in identifying the relevant allegations in the present case, and it was not suggested that the common law rule might be relevant in any other way.
Before the settlement agreement was reached, Mr Boswood, appearing for Mr Amhurst as well as the third and fourth defendants, naturally disputed that they were vicariously liable to Dubal on the facts alleged against them and Mr Amhurst. When the claims were settled and the third and fourth defendants became claimants in the contribution proceedings, Mr Boswood inevitably asserted that they were liable to Dubal. This superficial volte face, although acknowledged as a "forensic issue", was referred to at some length both by Mr Davis Q.C. for Mr Salaam and by Mr Boswood himself. I do not think that it adds anything to the arguments, either way.
I can now refer to the three issues in turn.
(1) Section 10 - construction
I agree with the judgment of Aldous L.J. (and with Millett J.'s views in Agip (Africa) Ltd v. Jackson [1991] 1 Ch.265 that the reference to "any wrongful act or omission" in section 10 is not limited to torts or even to wrongs which were actionable at common law. For historical reasons, the accessory liability of a person for giving knowing (dishonest) assistance to a breach of trust or fiduciary duty was described as that of a constructive trustee : see per Lord Selborne L.C. in Barnes v. Addy (1874) L.R.9 Ch. App 244 and Lord Nicholls in Royal Brunei Airlines v. Tan [1995] 2 AC 378 (J.C.P.C.).
Section 13 expressly refers to the receipt or employment of trust property and it is argued that section 10, by contrast, is concerned with common law liabilities alone. But the phrase used is "wrongful", not tortious, and "tort" was already an established part of the Parliamentary vocabulary, at latest from 1867 (County Courts Act 1867 sections 5 and 10). "Tort" was defined in common law terms, for example in Pollock on Torts (1887) -
"an action or omission giving rise, in the virtue of the common law jurisdiction of the Court, to a civil remedy which is not an action for contract."
By 1890, it was already time, as Lord Denning said later, to regard the principles of law and equity "in the light of their combined effect" (Nelson v. Larholt [1948] 1 K.B. 339 at 343). In these circumstances, the general words "wrongful act or omission" in section 10 cannot have been intended, in my judgment, to refer only to tortious acts which gave rise to liability at common law.
(2) Section 10 - "ordinary course of business of the firm"
The principles of vicarious liability underlying section 10 were those developed in connection with the vicarious liability of a principal for wrongdoing by his agent, and they are comparable with those governing the liability of an employer for wrongs committed by his employee in the course of his employment. The principal is liable "not only for the authorised acts of his agent but also for such unauthorised acts as fall within the scope of the authority apparently conferred upon him" (Lindley on Partnerships per Lord Lindley, see 17th ed. para. 12-88 p.332. Vicarious liability extends to fraudulent acts and omissions provided they were committed in the course of employment or within the scope of apparent authority, even if they were against the interest of the employer or principal : Lloyd v. Grace Smith & Co. [1912] A.C.716 Hamlyn v. Houston & Co. [1903] 1 KB 81 and cf. The Ocean Frost (Armagas v. Mundogas Ltd) [1986] AC 717).
Vicarious liability is not imposed unless all of the acts or omissions which make the servant personally liable as a tortfeasor took place within the course of his employment : see Generale Bank Nederland NV v. ECGD [1999] 1LI Rep.19, 1999 2 WLR 540. The same rule applies, in my judgment, to the vicarious liability of a principal for torts committed by his agent within the scope of the agency. The servant or agent may be held responsible for acts of his co-conspirators or other third parties, but vicarious liability for these acts is not imposed on the employer or principal unless they were in the course of the employment or agency.
The starting point for the present enquiry, therefore, has to be the allegations made against Mr Amhurst as the basis of the knowing assistance claim against him. These are summarised in the passage from the judgment of Rix J. quoted by Aldous L.J. They include, but are far from being limited to, the drafting of documents and other regular parts of a solicitor's business which he conducted for Mr Salaam, who was his client. They appear to have included giving direct advice and assistance to other wrongdoers, specifically Mr Livingstone and Richco, who were not his (or the firm's) clients. His work for Mr Salaam and for them was done in the context of the dishonest scheme to which they all parties. This was not, therefore, a case like Hamlyn v. Houston where the person dealing with the dishonest agent could believe that he was acting with the apparent authority of his principal. There was, and is, no suggestion that any of Mr Amhurst's partners authorised him or held him out as being authorised to act as he did, dishonestly, on their behalf.
For this short reason, I would hold that Mr Amhurst was not acting in the ordinary course of business of the firm when he took part in the dishonest scheme which caused loss to Dubal. I should add that it is not suggested that his partners held him out to Dubal as having authority to do what he did, or that Dubal relied upon any such holding out by them.
The situation could be different if the accessory liability for knowing assistance was incurred by a partner notwithstanding that the trustee or other person committing the breach of trust or fiduciary duty was not himself dishonest, being either innocent or merely negligent. In such a case, the accessory liability may nevertheless arise (this was the primary decision in Royal Brunei Airlines v. Tan (above)). Then, the client or other person dealing with the dishonest partner would not be disqualified, by his own participation in the dishonest scheme, from alleging that the advice or assistance was given in the ordinary course of the firm's business. It would become necessary to decide whether the law can be stated as broadly as Lord Herschell did in Mara v. Browne [1896] 1 Cl.199 -
"....it is not within the scope of the implied authority of a partner in such a business that he should so act as to make himself a constructive trustee, and thereby subject his partner to the same liability"(p.208).
(Rigby L.J. expressly agreed (p.214), and A.L. Smith L.J. indicated the same view (p.212)). The same view was adopted by Vinelott J. in In re Bells Indenture [1980] 1. W.L.R. 121). On the other hand, the firm was held liable (for the receipt of money and under section 11 of the Partnership Act 1890) in Bass Brewers Ltd v. Appleby [1997] 2 BCCL 700, and in Agip (Africa) Ltd v. Jackson [1990] 1 Ch.265 ; C.A. [1991] Ch 547, Millett J. held that a defendant was vicariously liable for the acts of his partner and employee, even though he could not be held directly liable himself ("Mr Bowers" page 296). In neither of these cases, however, was the contrary proposition argued.
If vicarious liability is imposed in the absence of notice on the partners of a person who incurs the accessory liability of a constructive trustee for giving knowing assistance to a breach of trust or fiduciary duty, then it is anomalous that there can be no vicarious liability under section 13 for the receipt or employment of trust property unless notice is established.
In my judgment, however, that result could be acceptable in cases analogous to Lloyd v. Grace Smith & Co. and Hamlyn v. Houston where the firm's client is innocent of any complicity in the wrongdoing. That is not the present case. Mr Amhurst dealt only with other parties to the dishonest scheme (referring as always to the allegations made against him), and his allegedly wrongful acts went outside the ordinary course of business between the firm and its client, Mr Salaam.
I therefore agree with Aldous L.J. that section 10 does not impose vicarious liability on the Amhurst partners in the circumstances of this case, and I would allow the appeal on this ground.
(3) The 1978 Act - contribution and vicarious liability
The issue of principle is raised whether a defendant who is liable vicariously for the wrongful act or omission of another person, whether his servant or partner or by reason of any other relationship between them, but who is not liable for any personal wrongdoing, can be treated as free from fault and responsibility for the loss caused to the claimant in contribution proceedings between himself and co-defendants or other persons who share the responsibility for it.
We are told that there is no reported authority on this issue. Both parties submit that this is because the answer is obvious and no decision has been necessary. But each submits that the answer is obvious in their own favour, and so the submission does not advance either argument further.
The nearest authority, perhaps, is Fisher v. C.H.T. Ltd [1966] 2 Q.B. 475. Three defendants were each found liable to the plaintiff in a personal injuries case. Liability between them was apportioned 60 : 20 : 20. Each defendant of course was liable to the plaintiff for the full amount. The defendants found liable to contribute 60 per cent were insolvent and contributed nothing. As Lord Denning M.R. said -
"But they have got no money. So they pass out of the picture. The other two, Crockfords and the plasterers, have got to bear the whole damages between them. The question is how they should bear them as between themselves. If the judge's decision was right, it meant that they would have to bear them half-and-half." (p.481).
The Court of Appeal held that the judge's 20 : 20 apportionment should be varied to 10 : 30 so that "in respect of the whole damages" the defendants would pay one quarter and three quarters respectively (page 483).
It is suggested that this judgment supports the respondent's submission that one defendant's responsibility may be shared between other defendants when it becomes appropriate to do so. I do not think that it does. The decision was that 40 per cent of the total liability should be apportioned 10 : 30 between the two defendants, which had the consequence that their respective liabilities were for one - and three-quarters of the whole. But that consequence arose because they were each liable for the total damages to the plaintiff and because, when the other defendant was unable to make any contribution, it was equitable for them to bear his share of the damages in the same proportions. It does not mean that that defendant's responsibility was ignored when the proper apportionment between all three defendants was assessed.
Mr Boswood Q.C. submitted for the Amhurst partners that section 2(1) required the judge to assess what was "just and equitable" between the defendants, having regard to the extent of each defendant's responsibility for the loss caused to Dubal. It was common ground that the Act makes it necessary to consider both the culpability or blameworthiness and the `causative potency' of each defendant's conduct. On both scores, Mr Boswood submitted, the Amhurst partners could only be regarded as having no responsibility whatsoever. They were innocent of any wrongdoing, for there was no suggestion that any of them was personally involved or knew what Mr Amhurst was doing, and they could not be said in any sense to have caused Dubal's loss.
This submission was accepted by the judge. He held, first, -
"In terms of the promotion, organisation and operation of the scheme, I think there is little to choose between the five principal parties" (page 474).
These were Mr Livingstone, Mr Al Tajir and Mr Salaam, who were "in effect three partners", and Richco and Mr Amhurst. The last-named was not a principal or an originator, but (on the alleged facts) -
"... in his own way he was a necessary part of the setting up of the scheme, and he lent by his presence a colourable respectability to it .... I regard his responsibility ... as being a little less than that of the others, but not by very much" (page 474).
The Amhurst partners, on the other hand, he regarded as being personally innocent, as indeed they were, even if they were exposed to a finding of vicarious liability for Mr Amhurst's wrongdoing. He assessed Mr Amhurst's assumed responsibility as 10 per cent after taking account of the fact that he received no part of the sums extracted from Dubal except in payment of his proper professional fees (said to have been in the region of $60,000 only). But he discharged the Amhurst partners altogether -
"In my judgment they are neither bound by Mr Amhurst's assessed responsibility at 10 per cent nor automatically entitled to a full indemnity, other than from Mr Amhurst himself against whom they have made no claim [in these proceedings]. They have, however, contributed approximately 13.5 per cent which is 3.5 per cent more than my prima facie allocation of Mr Amhurst's responsibility. They are therefore in any event entitled to recover that additional 3.5 per cent" (page 476).
He continued -
"More than that, however, it seems to me that a combination of their personal innocence of any dishonesty coupled with the dishonesty of parties such as Mr Salaam and Mr Al Tajir who have not yet disgorged their full receipts means that they should receive a full indemnity from such parties" (page 476).
He then made it clear that he would not have ordered an indemnity in their favour in excess of "Mr Salaam's and Mr Al Tajir's undisgorged receipts".
Counsel for the appellants submitted to us that the judge appears to give no reasons for his conclusion which, they contend, cuts across the policy or principle on which vicarious liability is based. The reason for the rule is that the claimant should succeed against the master if the servant is unable to pay compensation and the wrong was committed in the course of his employment. As Professor Glanville Williams wrote in Joint Torts and Contributory Negligence -
"The attitude of the common law is that Jack is emphatically not as good as his master, financially speaking, and that the master must therefore recompense third parties for torts committed in the course of the employment" (pp.428-9).
Similarly, where the members of a firm are held vicariously liable for the wrongful acts of one of their partners, in the ordinary course of the firm's business, notwithstanding that they are personally innocent of any wrongdoing. their liability is vicarious, not personal, even if the basis of it is that they held out or authorised the partner to act on behalf of the firm and, another factor, that they shared the firm's profits. These are reasons why vicarious liability is imposed. They do not alter the nature of the liability which the master, or the partner, incurs.
In my judgment, the appellants' submission is correct. The defendant's vicarious liability to the claimant provides the basis for his claim for a contribution towards it from other defendants. I do not see how the defendant claiming contribution can assert a different liability from that which he was under towards the claimants, and in the present case, if the Amhurst partners were liable, they were liable vicariously for Mr Amhurst's dishonesty. If the rule was otherwise, there would be some remarkable results and the appellants are correct in saying that the rule could be turned on its head. One example will suffice. If two defendants are held equally responsible for the claimant's loss, they will pay one half each. If the master (or partner) of one of them is vicariously liable to the claimant, and that defendant is or becomes insolvent, then if the respondents' submission was correct, the other (solvent) defendant could be held liable to pay the whole of the loss, with no right to claim contribution from the innocent master or partner. So the risk of the servant's insolvency would fall upon him rather than rest with the master where it is placed by the law.
For these reasons, the judge was wrong in my opinion to hold that the Amhurst partners should recover a full indemnity from Mr Salaam and Mr Al Tajir, if they were liable to the claimants for Mr Amhurst's alleged wrongdoing.
Conclusion
For these reasons, I would allow the appeals by Mr Salaam and Mr Al Tajir against the judge's order that they should indemnify the Amhurst partners against (or bear any part of) the sum of $10 million which was paid to Dubal on their behalf. There remains a claim by Mr Salaam against Mr Amhurst for a contribution towards the $18 million which he has paid or agreed to pay in settlement of the claim by Dubal. I consider that no order should be made.
The judge assessed Mr Salaam's share of responsibility at 36 per cent. and Mr Amhurst's at 10 per cent (page 474). The 36 per cent. represents a prima facie contribution in excess of $18 million which is "some U.S. $6.6 million more than the baseline value of his settlement, and his receipts are still greater" (judgment page 475). His receipts were $20,338.348. Any payment to him by Mr Amhurst, therefore, would serve only to increase the profit he has made from the dishonest scheme, and Mr Amhurst's expense for he received nothing. In these circumstances I do not regard it as just or equitable that Mr Amhurst should be ordered to make any payment.
In connection with apportionment generally, I am unclear why priority was not given to requiring actual or notional repayment of all sums received out of Dubal payments, before apportioning liability for the balance of the sums accepted by Dubal. This balance represents the liability of the various defendants and third parties for wrongfully assisting in the breach of trust. However, this approach was not advocated before us and it is unnecessary to decide whether this would have been a correct approach.
LORD JUSTICE ALDOUS:
In his judgment ([1999] Lloyd's Reports 415) Rix J set out in detail the fraudulent scheme which resulted in about $50 million being extracted from Dubai Aluminium Company Ltd, the claimant. Dubal alleged that its former chief executive, Mr Livingstone, conspired with Mr Salaam with the assistance of Mr Amhurst, Mr Salaam's solicitor, to steal the $50 million using sham contracts. As found by the judge, and now agreed, the $50 million was distributed so that Mr Al Tajir received about $16.5 million, Mr H. Salaam received about $20.3 million and Mr Livingstone about $6.3 million. Mr Amhurst received nothing in his personal capacity, but his firm charged Mr Salaam about £66,000 for the work that he did.
The judge explained how at the twelfth hour the principal proceedings, namely the claim, was settled by agreement. Mr Livingstone paid to Dubal about $15.5 million, Mr Al Tajir paid $18 million, and Mr Salaam paid $18 million. The claim against Mr Amhurst and his firm was settled by an agreement between Dubal and the partners of the firm, excluding Mr Amhurst. I will refer to them as the Amhurst partners. The agreement provided for payment of $10 million which was paid in settlement of the claim against the Amhurst partners and release of the claim against Mr Amhurst.
As Dubal's claim had been settled there remained the contribution proceedings. In essence Mr Salaam sought contribution from Mr Amhurst and the Amhurst partners and Mr Al Tajir. The Amhurst partners sought contribution from Mr Salaam, Mr Livingstone and Mr Al Tajir. Mr Livingstone did not seek any contribution, but Mr Al Tajir maintained a contingent claim against Mr Amhurst.
Mr Livingstone and Mr Salaam attended the hearing and gave oral evidence. Mr Al Tajir's witness statement was admitted pursuant to a Civil Evidence Act Notice as he was too ill to attend the court for cross-examination. Mr Amhurst elected not to give evidence. The judge held that Mr Livingstone, Mr Salaam and Mr Al Tajir were dishonest participants in the fraud. The judge did not make any finding of fact as to whether Mr Amhurst was also a dishonest participant. Indeed he decided the contribution proceedings upon the basis that the facts pleaded against Mr Amhurst were true. It is common ground that that was the correct approach pursuant to section 1(4) of the Civil Liabilities (Contribution) Act 1978.
Before this Court, Mr Al Tajir submitted that the judge's conclusion that he was a dishonest participant in the scheme was wrong. Mr Salaam and Mr Al Tajir challenged the conclusion of the judge that the Amhurst partners could claim contribution and also the way that the judge had carried out the assessment of the contribution even if he was right that the Amhurst partners could claim contribution.
For the reasons given by Evans LJ, I reject the submission that the judge was wrong to conclude that Mr Al Tajir was a dishonest participant. I therefore turn to the other challenges to the judgment, starting with the challenge to the conclusion that the Amhurst partners were entitled to claim a contribution.
Are the Amhurst partners entitled to claim contribution?
Section 1(4) of the 1978 Act enables a person, such as the Amhurst partners, who has made a payment in bona fide settlement to recover contribution "provided, however, that he would have been liable assuming the factual basis of a claim against him could be established." It was accepted that the Amhurst partners did not have knowledge of the alleged dishonest acts carried out by Mr Amhurst. It followed that they could only have been liable under section 10 of the Partnership Act 1890.
Mr Nigel Davis QC, counsel for Mr Salaam, supported by Mr Malek QC, who appeared for Mr Al Tajir, submitted that, upon the assumed factual basis, no liability accrued to the Amhurst partners under section 10. That submission was opposed by Mr Boswood QC, who appeared for the Amhurst partners. Mr Leggatt QC, who appeared for Mr Amhurst, pointed out that it was in his client's interest that the submission of Mr Nigel Davis should succeed, but he did not advance any submission for or against the suggested conclusion.
To understand the rival submissions as to the ambit of section 10 of the Partnership Act 1890, it is necessary to set out a number of the sections of that Act.
"1(1) Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.
...
9. Every partner in a firm is jointly liable with the other partners, and in Scotland severally also, for all debts and obligations of the firm incurred while he is a partner; and after his death his estate is also severally liable in a due course of administration for such debts and obligations, so far as they remain unsatisfied, but subject in England or Ireland to the prior payment of his separate debts.
10. 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 or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act.
11. In the following cases; namely -
(a) Where one partner acting within the scope of his apparent authority receives the money or property of a third person and misapplies it; and
(b) Where 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.
12. Every partner is jointly liable with his co-partners and also severally for everything for which the firm while he is a partner therein becomes liable under either of the two last preceding sections.
13. If a partner, being a trustee, improperly employs trust-property in the business or on the account of the partnership, no other partner is liable for the trust property to the persons beneficially interested therein:
Provided as follows:-
(1) This section shall not affect any liability incurred by any partner by reason of his having notice of a breach of trust; and
(2) Nothing in this section shall prevent trust money from being followed and recovered from the firm if still in its possession or under its control."
Mr Nigel Davis submitted that the Amhurst partners were not liable under section 10 of the Act for two reasons. First that the assumed facts did not establish a "wrongful act or omission". In essence his submission was that those words were to be construed as being confined to torts and therefore did not include the pleaded acts of knowing assistance. Second, the pleaded acts were not done "in the ordinary course of business of the firm". The first submission involves a question of law requiring construction of the words "any wrongful act or omission", whereas the second is primarily a question of fact depending upon what was the business of the firm and whether the assumed facts were carried out in the ordinary course of that business. I will deal with the construction issue first, but before doing so will set out the factual background.
The facts - As section 1(4) of the 1978 Act makes clear, liability has to be assessed assuming the factual basis of the claim. It was accepted that Mr Amhurst had not received any of the dishonest proceeds of the fraud. The judge therefore, rightly in my view, disregarded allegations that he had. There remained allegations of knowing assistance. The pleaded facts were accurately and succinctly set out by the judge at page 466.
"Those pleaded facts are to the following effect. Mr Amhurst was a solicitor and a director of a number of companies in Mr Salaam's group, including Valo; he represented to Richco that he held powers of attorney for Nillet and JMS; he drafted or dictated the drafting of the Richco consultancy agreement and the subsidiary agreements and was involved with Mr Livingstone in their negotiation, so much so that he "appeared to be part of the Dubal team"; he informed Richco that it was required to concur in the scheme if it was to do business in Dubai or with Dubal; he knew and made known to Richco that it was not expected to supply services pursuant to its consultancy agreement or to be supplied with services under the subsidiary agreements and the scheme was a mere vehicle for payment, and thus knew that the Richco consultancy agreement and the subsidiary agreements were shams; he executed the subsidiary agreements on behalf of the Salaam companies; thereafter he was "centrally involved in the administration" of the scheme, e.g. by giving instructions to Richco concerning the payment of money. In sum, he as well as Mr Salaam "dishonestly procured and/or assisted Livingstone to act in breach of his said fiduciary duties by conceiving, planning and assisting in giving effect to the scheme".
So it was that in my Unreasoned Findings I have found that Mr Amhurst must be treated as having dishonestly assisted the scheme in his role as a solicitor, and that, like the other participants, he had played (i.e. must be assumed to have played) an important and substantial and not merely peripheral or incidental role in the scheme."
The Construction Argument - Mr Nigel Davis submitted that, when read in the context of the other sections of the Act, the words "wrongful act or omission" were confined to torts. If he be right knowing assistance does not come within section 10 as knowing assistance, whether categorised as a breach of constructive trust or placed in some other category, has never been a tort.
According to Mr Nigel Davis, section 9 deals with obligations in contract, section 10 with acts or omissions giving rise to a liability in tort and sections 11 and 13 with obligations for breach of trust. He submitted that section 13 suffered from otiosity if section 10 covered equitable claims. He pointed out that section 13 only made a partner liable for breaches of trust by another partner if he had notice of the breach, whereas, if section 10 is construed to cover breaches of trust, the other partners would be liable whether or not they had notice provided that the breach was made in the ordinary course of the business of the firm. In support of his submission he drew attention to a statement, unsupported by reasoning, made by Professor Atiyah to the effect that section 10 related to tortious acts. He also drew attention to the judgment of Tipping J in Estate Realities v Wignall [1992] 2 NZLR 615 who made a similar statement at page 635 in relation to the equivalent New Zealand section to section 10. Of course they are right, but the question for decision is whether the section is confined to tortious claims.
Although there may be overlap between sections 9-13 of the Act, I do not believe there is any otiosity. Sections 11 and 13 are both concerned with third party money received by a firm. Section 11 deals with money properly received and afterwards misapplied. Section 13 is concerned with misappropriated money by a trustee who in breach of trust pays it to his firm. In that case his partners are only liable if the requirements of knowing receipt can be satisfied (per Millett LJ in Bass Brewers Ltd v Appleby [1997] 2 BCLC 707-11). Section 10 is also concerned with acts properly carried out in the sense that they are carried out in the ordinary course of the business of the firm and in that respect is like section 11. That is to be contrasted with section 13 which relates to improper acts by a partner who is a trustee.
The words "any wrongful act or omission" are in my view wide enough to encompass all wrongful acts or omissions. I see no reason to confine them to wrongs which are classified as torts. The word tort, derived from the Latin tortus meaning twisted or wrung, has become limited to encompass only certain civil wrongs, but unless there is compelling reason to the contrary, it would not be right to confine the words "wrongful acts" to such acts as are regarded as tortious. The general principles of agency underlie the 1890 Act. In general the principal is liable not only for the authorised acts of his agent, but also for such unauthorised acts as fall within the scope of the authority apparently conferred upon him. I can see no reason, providing the conditions as to authority are complied with, which should prevent the principal from avoiding liability for the knowing assistance of his agent. Similarly I can see no reason to restrict the ambit of section 10 in the way suggested by Mr Nigel Davis. I draw comfort from the conclusion reached by Millett J in Agip (Africa) Ltd v Jackson [1991] 1 Ch 265 at 296 where he concluded that Mr Bowers, an innocent partner, was liable for the acts of knowing assistance of his partner. That could only have been upon the basis that section 10 applied. In my view the judge was right to conclude at page 470:
"Section 10 itself is in the widest terms: it refers to "any wrongful act or omission" causing "loss or injury" or the incurring of a penalty. I do not see why that language cannot extend beyond torts properly so called wrongs such as accessory liability in equity. To confine it solely to torts is to construe the section with excessive formalism, and I do not see what there is in the language of the section to suggest such formalism. Section 11 provides that the firm is liable to make good loss caused by the misapplication of a third person's money or property received by either a partner "acting within the scope of his apparent authority" or by the firm "in the course of its business". That section only applies therefore in the case of receipt of property. It does not seem to me to follow that in a case otherwise within s. 10 it matters whether or not a third party's property has been received by a partner or the firm. Section 11 rather seems to me to be saying that in the case of the misapplication of property received by a partner or the firm, it is only where the property is received in the ordinary course of the firm's business that the firm can be made liable for the misapplication of any partner. The underlying principle is therefore consistent with s. 10. Finally, s. 13 deals with the position where a partner accepts the responsibility of being a trustee ("If a partner, being a trustee ...") and states that liability will only attach beyond the partner in question for misuse of trust funds in the partnership business where the funds can be traced or a partner has notice of the breach of trust. That section, however, appears to assume that the individual trusteeships which a partner may undertake are not something undertaken in the ordinary course of business, otherwise it would be inconsistent with s. 11: see Lindley & Banks at par. 12-136. That seems to me to leave open the situation where a partner, not being a trustee, nevertheless so conducts himself as an accessory to a breach of trust, that he is visited in equity with the remedies available against a constructive trustee: I do not see why that situation cannot be dealt with under the general principle enunciated in s. 10. I therefore see nothing in the terms of the Partnership Act itself to limit the application of the application of the s. 10 to torts alone, even though they may have been the primary focus of the section in its origin. I do not think that Mr Justice Tipping intended to say that the New Zealand equivalent of s. 10 was confined exclusively to torts."
The factual argument - Mr Nigel Davis submitted that Mr Amhurst was not acting in the ordinary course of the business of the firm of solicitors of which he was a partner when he carried out the pleaded acts which were the factual basis to be assumed. Mr Boswood submitted to the contrary. Both of them accepted that the conclusion was essentially one of fact, but referred us to cases which they submitted supported their submissions.
The words in section 10 "in the ordinary course of business" require consideration of what was the business actual or apparent. Decisions of judges as to what was in the ordinary business of a particular partnership may not be of guidance as to what was in the ordinary business of another partnership. For example solicitors in 1890 did not provide a full range of financial services whereas some do today. Thus the buying and selling of shares would not in 1890 be held to be in the ordinary course of the business of a firm of solicitors. The contrary could be true today, but the answer would depend upon the facts. At the start of the last century the question as to whether any act was within the actual or apparent course of a particular business of a particular firm would have been left to the jury to decide (see Hamlyn v John Houston & Co [1903] 1 KB 81). I believe that today the question should be approached in a similar way.
In the present case, for reasons which I will explain later, I do not believe that any of the authorities cited by counsel are of assistance in deciding what is primarily a question of fact. It was not suggested that the firm of solicitors of which Mr Amhurst was a partner carried on business other than that of a normal city firm. It follows that such acts as advising on and drafting legal agreements fell squarely within the ordinary course of their business and the Amhurst partners would have been liable if that had been the extent of Mr Amhurst's assumed participation. It was not. As stated by the judge, in the extract from his judgment quoted above, Mr Amhurst was instructed by Mr Salaam, but was involved with Mr Livingstone in the negotiations so much that he "appeared to be part of the Dubal team". He informed Richco that it was required to concur in the scheme if it was to do business in Dubai or with Dubal. He made known to Richco that it was not expected to supply services pursuant to its consultancy agreement and was "centrally involved in the administration of the scheme" for example by giving instructions to Richco concerning the payment of money. As the judge held "in sum, he as well as Mr Salaam 'dishonestly procured and/or assisted Mr Livingstone to act in breach of his said fiduciary duties by conceiving, planning and assisting in giving effect to the scheme". As pleaded in the particulars to paragraph 6.2 of the Amended Points of Claim all the relevant agreements "were sham agreements and were known to ... Amhurst to be so". It is not and never has been part of the business of a firm of solicitors to plan, draft and sign sham agreements giving effect to a scheme known to be dishonest which he had helped to plan. Such actions could not have been carried out in the ordinary course of the business carried on by the Amhurst partners. In my view the judge came to the wrong conclusion. He was right when he said at page 471 that there was no principle of law which compelled him to hold Mr Amhurst was acting outside the ordinary course of business of the firm. However he failed to take into account the full ambit of the factual matters alleged. In particular he failed to take into account that Mr Amhurst was intimately concerned in the conception, planning, assisting and giving effect to the scheme.
Mr Nigel Davis relied on Mara v Browne [1906] 1 Ch 199 for the proposition that it was not within the scope of a solicitor's business to constitute himself a constructive trustee. That being so, knowing assistance was not within the scope of the authority of Mr Amhurst. Any statement to that effect in that case did not form the basis of the reasoning for the decision. Even if such a conclusion was correct in 1895, it would not mean that particular acts, carried out in the 1990's, which rendered a solicitor a constructive trustee would be outside his ordinary course of business. However Lord Herschell did say at page 208:
"In my opinion, it is not within the scope of the implied authority of a partner in such a business that he should so act to make himself a constructive trustee, and thereby subject his partner to the same liability."
That statement was obiter and as is clear from the argument and from the judgment of A.L. Smith LJ at page 212, the suggestion was that the partner became liable as constructive trustee because he intermeddled so as to become a trustee de son tort. It may be that intermeddling in a way so as to make a solicitor a trustee de son tort could never be considered to be in the ordinary course of the business of a solicitor, but it does not follow that every act which would make a solicitor a constructive trustee would be outside the ordinary course of his business. It follows that I do not agree with the statement of the law by Vinelott J in In re: Bell's Indenture[1980] 1 WLR 1217 at page 1230. There is in my view no principle of law that a solicitor does not have implied or apparent authority to constitute himself a constructive trustee. The decision as to whether he does will depend upon the facts and factual background.
Mr Boswood relied on Hamlyn v Houston [1903] 1 KB 81 as establishing that the court should concentrate on the acts which were alleged, not the end result. I agree. In the present case it is necessary to concentrate on the pleaded acts, not the fact that they were dishonest. However I disagree with the submission of Mr Boswood that the pleaded acts were within the ordinary course of business of the tortfeasor. It was alleged that Mr Amhurst was centrally involved in the administration of the scheme and procured and/or assisted Mr Livingstone to act in breach of his fiduciary duty and also, with Livingstone, jointly conceived, planned and assisted in giving effect to the scheme. In so doing Mr Amhurst went outside the ordinary course of the business of his firm. Certainly there was no evidence to suggest that the firm did such business or held themselves out as doing so.
Similar to the Hamlyn case was Credit Lyonnais N.V v ECGD [1999] 2 WLR 540. In that case the employee of the bank, Mr Pillai, had issued guarantees which were supplied to ECGD, but the deceit relied on was the responsibility of a third party. Mr Pillai's implication in the deceit arose from his conduct outside his employment. The submission was that the bank was vicariously liable because an act had been carried out during the course of his employment. As Lord Woolf pointed out at page 547, that before there can be vicarious liability, all the features of the wrong which were necessary to make the employee liable had to be incurred in the course of the employment. Lord Woolf went on to point out that the acts of facilitating, as opposed to procuring and inducing, a tort were not actionable. Nothing in that case throws light upon whether the acts of Mr Amhurst, as pleaded, were in the ordinary course of his firm's business.
Having regard to the conclusion I have reached that the Amhurst partners are not liable under section 10 of the 1890 Act for the knowing assistance of Mr Amhurst their claim for contribution from Mr Salaam and Mr Al Tajir must be rejected.
For the reasons given by Evans LJ. I agree that it would not be just and equitable that Mr Amhurst should be ordered to make any payment.
MR JUSTICE TURNER:
I have had the advantage of reading the judgments in draft prepared by Evans and Aldous LJJ. Save as to what follows, I find myself to be in full agreement with them. In the result, my dissent makes no difference. Nevertheless, and since the point is of some importance, I have considered that it would be appropriate to address one of the major points discussed in the course of this appeal.
At p 466, column 2 (the stylistic reference j466/2 will hereafter be used) of the judgment, Rix J identified the legal problem which was central to the question of the Amhurst partners' ability to claim contribution under the Act of 1978 from Mr Salaam, Mr Livingstone and Mr Al Tajir. For the partners to be able successfully to maintain such a claim, despite their pleadings and opening submissions which were understandably to the contrary effect, they had to show that on the factual case made against them on the pleadings in the third party proceedings they would have been held liable to Dubal; see s.1(4). In the result, Rix J concluded that the partners would have been liable on the basis that
Section 10 itself is in the widest terms: it refers to "any wrongful act or omission" causing "loss or injury" or the incurring of a penalty, I do not see why that language cannot extend beyond torts properly so called to wrongs such as accessory liability in equity. To confine it solely to torts is to construe the section with excessive formalism, and I do not see what there is in the language of the section to suggest such formalism.
In so holding, the judge adopted the submissions made on behalf of the partners, or at least as they were made to this court. These were made on the basis that Mr Amhurst has to be taken as having dishonestly assisted Mr Livingstone to act in breach of his fiduciary duty towards Dubal by conceiving, planning and assisting jointly to put the dishonest scheme into effect. In the Amended Points of Claim it was alleged
6.2 Salaam and/or Amhurst dishonestly procured and/or assisted Livingstone to act in breach of his fiduciary duties by conceiving, planning the scheme (alleged).
A part of that scheme consisted of the Richco consultancy agreement together with the agreements which were ancillary to it. Such agreements were ancillary to the matters which must be assumed to be true as had been alleged in paragraph 6.2 of the amended Points of Claim, as above. All of these agreements had been drafted by Mr Amhurst as partner, and others in the firm, and, as such, carrying out work which, dishonesty apart constituted the ordinary work of a solicitor. In so far as the Richco agreement was concerned this also was drafted by Mr Amhurst, and those working under him, and dictated by him to Richco itself (see Amended Points of Claim paragraph 7.3) which was not and never had been a client of either the third or the fourth defendant firms.
The pleaded case against the partners was, thus, one of dishonest assistance by Mr Amhurst for which they were vicariously liable. As such Dubal were seeking an equitable remedy from them rather than one which was based in tort. The submission in the court below, and in the Court of Appeal, was to the effect that since Mr Amhurst had carried out the work of drafting the various agreements "in his capacity as a partner" (j467/1) the question then became whether such was done in the ordinary course of business of the firm. Whichever answer was correct, it was said, it was a question of fact which made no difference to the result because neither was capable of falling within the scope of s.10 of the Partnership Act 1890 which provides:
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 or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act.
On this approach, leaving aside for the moment the meaning to be ascribed to the words "in the ordinary course of the business.....", dishonest assistance falls fairly within the description of "wrongful act" and so a partnership would be liable in respect of acts of dishonest assistance which had caused loss to others. The essence of the submission was that, as identified by the judge:
s.10 is intended to deal with vicarious liability in general (j467/1)
The contrary argument was encapsulated by the judge also at j467/1 when he said
The submission, therefore, is in effect that the wrong of dishonest assistance can never be effected in the ordinary course of a firm's business; or that, whether it can or whether it cannot, even so on the true construction of ss.10, 11 and 13, equity based remedies (other than tracing) are confined to cases where third party funds are received by the firm within the ordinary scope of its business (s.11) or where the other partners have notice of a breach of trust (s.13(1)), and that s. 10 is confined to liability in tort.
Before considering in greater detail the conclusion reached by the judge as to the general effect of s. 10, it is necessary, in my judgment to have regard to some of the other provisions of the Partnership Act. Thus sections 5 and 6 provide for the acts of a partner done for the purposes of the business to "bind the firm and (the) partners, unless....." and "An act ... relating to the business of the firm ... is binding on the firm" respectively. As Lindley and Banks on Partnership (17th Edition) paragraph 12-08 suggests, the scheme of s.5 is to provide that
1. An act done within the scope of actual authority of a
partner will bind the firm;
2. An act done by a partner in the course of carrying on the
partnership in the usual way will prima facie bind the firm, unless the third party with whom he dealt knows otherwise or was unaware that he was a partner;
3. An act done by a partner otherwise than for the purposes of
carrying on the partnership business will prima facie not bind the firm.
Section 6 is concerned with contracts made in the firm name being binding on the firm and the partners in it. Section 7 makes savings for the firm when one of its partners pledges its credit for a purpose not connected with the ordinary course of its business. Section 8 can for present purposes be ignored. Section 9 is, by its terms, concerned with the liability of partners for the debts and obligations of a firm and as to the manner in which these are to be dealt with after the death of a partner as part of his estate (in other words matters of contract). Section 11 deals with the cases where either a partner or the firm receives money or property within the apparent authority (of that partner) or the ordinary course of business (of the firm) and it is subsequently misapplied and the firm is made liable to make good the loss. Section 12 makes partners jointly and severally liable for liability imposed on the firm under sections 10 and 11. Section 13 saves partners from liability for the improper employment of trust property in the firm unless any partner has notice of the breach of trust. Taken as a whole, therefore sections 5, 6, 9, 10, 11 and 13 provide a code of different circumstances in which a firm and its partners may become liable to third parties for acts done, or apparently done, by partners (within the scope of their apparent authority) and firms (in the ordinary course of their business). It is also a factor to be taken into account that the Act of 1890 was primarily, by its long title, "an Act to declare and amend the law of partnership" and that by section 46 it was provided that the rules of common law and equity were to remain in force, except insofar as they were inconsistent with its express terms.
One of the questions debated in the course of this appeal has, of necessity, been the extent to which any of these provisions overlap or are mutually repugnant. If, as Rix J seems to have thought (j467/1 above) section 10 was intended to impose vicarious liability on partners for acts of a partner done in the course of business of the partnership, then it can be seen that there is scope, not only for overlap between various of the sections of the Act, but for repugnance as well. It was pointed out on behalf of Mr Salaam, and adopted on behalf of Mr Al Tajir, that while under s.13 partners are not liable (without notice) for acts committed by one of them as a constructive trustee, under s.10 such partners would be liable, notice or no notice, if the acts were done in the ordinary course of the business of the firm. It was submitted that this analysis was consistent with the authorities which had not recognised the existence of a tort of `knowing assistance'; see Estate Realities v. Wignall (1992) N2LR 615 p634-5 Generale Bank Nederland NV v. ECGD [1998] I Lloyds Reps (CA) 19 p42/1, and at [1999] 2 WLR 540 (HL) p551 E-F. With the exception of Estate Realities, this line of authority does not deal or purport to deal with the problem in relation to the scope of s.10. In the fourth holding in that case it was reported that Tipping J had held that
Although the breach of fiduciary duty occurred during the
course of the ordinary business of a partnership, a party who, through absence, did not knowingly assist in that breach and did not receive or deal with the property concerned with knowledge of that breach of duty did not, by virtue of his membership of the partnership, become himself a constructive trustee of the property nor liable to account for his share of any profit the partnership obtained from it.
In making this finding (at p 635 L18), Tipping J had relied on a line of cases including the English cases of Mara v. Browne [1896] 1 CL 199, In re Bell's Indenture [1980] 1 WLR 1217 and Vyse v. Foster (1872) LR 8 Ch Apps 309.
In the first of these cases, which as it so happened, had been decided after, but on facts which took place before, the commencement of the Act of 1890, it was held obiter, by all three members of what can be described as a `strong court', that it was not within the authority of a partner in a firm of solicitors to act as a constructive trustee and thereby impose a liability on his partners; see Lord Herschell at p 208, A L Smith LJ at p 212 and Rigby LJ at p 214. It was submitted that it was significant that all three members of the court had included these dicta in judgments which had been reserved. In In re Bell's Indenture, Vinelott J, again in a reserved judgment, applied the dicta in Mara v. Browne. Having quoted from the judgment of Lord Herschell (p 208) he said at p 1230
A L Smith LJ and Rigby LJ made observations on the same effect.... . Although elliptically expressed, as I understand the judgment, what Lord Herschell is saying is that a solicitor has the implied authority of his partners to receive trust moneys as agent of the trustees but does not have any implied authority to constitute himself a constructive trustee. Nor, I would add, does a solicitor in the ordinary course of his practice have the implied authority of his co-partners to accept office as a trustee and so make his partners liable for a misapplication of the trust property... . If that is the correct principle, it can make no difference to the liability of the partners of a solicitor who does constitute himself a constructive trustee..... .
It is pertinent to note that, in that case, one of the arguments put forward on behalf of the unsuccessful plaintiff was that s.10 imposed liability on the innocent partner for the act of the partner who had constituted himself a constructive trustee. This was described by Vinelott J as a `somewhat surprising proposition' and was rejected.
As the judge in the present case recognised, there have been cases which treat the liability for "act or omission" on a much wider basis. Thus can be seen the decision in Agip (Africa) Ltd v. Jackson [1990] Ch 265 in which Millett J held an accountant partner vicariously liable for the dishonest assistance of his co-partners and employee. Of this case, Rix J observed at j468/2
On the other side Mr Boswood cites Agip (Africa) Ltd v Jackson, [1990] Ch 265; [1991] Ch 547 where Mr Justice Millett at first instance and the Court of Appeal found an accountant, Bowers, vicariously liable for the dishonest assistance of his partner, Jackson, as well as of his employee, Griffin: at p. 296E; p. 570D. It has to be said that there appears to have been no dispute that the vicarious liability of Bowers followed automatically upon the liability of his partner, and there is no citation in the judgments of the Partnership Act or of Mara v Browne and In re Bell's Indenture. It may be that the matter was conceded: it is to be remarked that both partners had the same legal representation. Even so, In re Bell's Indenture had been cited in argument to Mr. Justice Millett, albeit on a different point (at p. 270E), and it is difficult to assume that the Courts would not have been familiar with the principle, if it is as fundamental as before me it has been suggested to be. Even so, I think I have to accept that the Agip case, which might otherwise have been binding on me, is of uncertain authority.
However, having discussed, in some detail the facts and submissions in Mara v. Browne and In re Bell's Indenture and Estate Realities, the judge reached the conclusion (j471/1) that
At the end of the day, the closest case on the facts is the Agip case. Although its authority is much weakened by the factors I have discussed above, the very naturalness of its decision carries a certain force. Having given careful consideration to the submissions and authorities presented to me, I conclude that there is no general principle of law, or matter of construction of the relevant sections of the Partnership Act, or authority, which compels me to hold that Mr. Amhurst was acting outside the ordinary business of his p[partnerships when, as I must assume, he dishonestly assisted Mr. Livingstone in the scheme by drafting and negotiation of the scheme contracts.
I respectfully think that at this point the learned judge has conflated the two limbs of s.10 and treated them as giving rise to only one question which the court needs to determine, videlicet "the absence of any principle of law or matter of construction which (compelled) him to hold that Mr Amhurst was acting outside the ordinary business of the partnership .... ." It may also be noted that, in linking this question to the role of providing dishonest assistance to Mr Livingstone in the scheme by drafting and negotiation of the scheme contracts, the judge has also understated Mr Amhurst's role in this affair. As has been seen elsewhere, Mr Amhurst has to be assumed to have been one of the instigators, if not the originator, of the whole scheme. Be that as it may, the matter of current interest is the proper construction of the words `wrongful act or omission' where they appear in s.10 and what was the legislative and historical context in which that section came to be enacted. Were, or are, those words apt and intended to cover, and only cover, tortious liability which is not only neither covered nor provided for in other sections of the Act but is also in conflict with them if the construction for which the Amhurst partners (but not Mr Amhurst) now contend?
In the current edition of Lindley and Banks section 10 is treated as being solely concerned with torts and frauds and in paragraph 12-88 the introduction to the subject by Lord Lindley, in the original edition of his work the book, is taken "clearly to be reflected" in the wording of s.10. In the 7th Edition of Lindley, it is stated that
As a rule, however, the wilful tort of one partner is not imputable to the firm, for example, if one partner maliciously prosecutes a person for stealing partnership property, the firm is not answerable, unless all members are, in fact, privy to the malicious prosecution. But a wilful tort committed by a partner in the course of and for the purpose of transacting the business of the firm may make the firm responsible.
Such, certainly is the view of Professor Atiyah in his seminal work Vicarious Liability in the Law of Tort in which, having quoted both sections 10 and 11 of the Act of 1970, he said at p. 117
It will be seen that s.10 is solely concerned with tort, section 11 deals in a somewhat curious way with a mixture of tortious and contractual liability. (Emphasis supplied).
There is no doubt that this form of vicarious liability is based on the principles of agency. The doctrine that each partner is the agent of the firm and of his co-partners is at the root of partnership law, and although this is concerned primarily with contractual liability it is equally true of liability in fact.
The professor provided no rationale for his stated view. Nor yet, except by inference, does he deal with the instant question whether or not the wrong of knowing assistance is caught by the section. His view is nevertheless entitled to some respect as appearing to exclude that possibility.
In Volume 35 Halsbury's Laws of England (4th Edition reissue) under the sub-heading (iii) Wrongful Acts paragraph 56, the provisions of the section are set out, but without further comment save to a footnote which refers to United Bank of Kuwait v. Hammoud & Others [1988] 1 WLR 1051. That case turned on the issue what constituted the ordinary course of business of a solicitor rather than, as here, the question whether or not the proper construction of section 10 requires that it only applies to liability in tort. In Agip v. Jackson (above) it is plain from the common representation of all the partners that this point cannot have been argued and the judgments of Millett J and the Court of Appeal gave no reasons for their conclusions on this point. I respectfully think that when the point was argued and expressly decided by Vinelott J and Tipping J those decisions are entitled to be accorded greater weight than those cases in which the point has not been fully argued.
On behalf of the Amhurst firms it was argued that section 10 makes provision for a rule of vicarious liability and that it is as capable of operating so as to confer liability in cases of equity based remedies such as `knowing assistance' as it is where the cause of action is tort based; see skeleton argument paragraph's 2.3 to 2.10. I respectfully think that these submissions did not address the contextual difficulties identified in the submissions made or adopted on behalf of Mr Salaam, Mr Al Tajir and Mr Amhurst respectively. It was a part of Mr Boswood Q.C.'s submissions that Vinelott J had misunderstood the obiter dicta of Lord Herschell, in particular, in Mara v. Browne (above). In reply on this topic, it was submitted that at the date when the Act was passed, a "wrong" would not have been equated with a breach of trust which was a cause of action expressly contemplated by sections 11 and 13. The concept of a breach of trust was wide enough to embrace conduct of the description `knowing assistance' by a person who made himself a constructive trustee by breaching the fiduciary duty which he owed to another.
In my judgment, it would be a strange result, indeed, if in a case in which, say, a solicitor intermeddled in a trust, with consequent loss to the beneficiaries, the partners were not liable under s.13 unless they had notice of the breach of trust. But in a case where a solicitor who constituted himself a constructive trustee liability would be imposed on his partners (if he was acting in the ordinary course of business of the firm) without them having knowledge of the fact that he had so conducted himself. This was the essence of the effective submission by Mr Davis Q.C in reply.
For those reasons I would also have allowed the appeal on this point. As it is, I find myself fully in agreement with the conclusions of Evans and Aldous LJJ where they have held that Mr Amhurst, in acting as he must be assumed to have acted, was not acting in the ordinary course of the business of the partnership. In these circumstances the partnership defendants would not have been held liable to Dubal and they would not have been liable to the plaintiffs and are not, therefore, entitled to claim contribution in respect of the sum which they paid to Dubal them in settlement of the claim made against them on the basis of their vicarious liability for the acts of Mr Amhurst
I agree, in the result however, that this appeal must be allowed.
(Order does not form part of the approved judgment)