Judgments - Dubai Aluminium Company Limited v. Salaam (Original Respondent and 2nd Cross-Appellant) and Other

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    37. I add two points for completeness. In the course of presentation of the oral arguments reference was made to evidential material which seems to support this characterisation of Mr Amhurst's activities. For instance, it appears that Mr Salaam was a client of the firm, and that a bill rendered to him by the firm included a charge for drafting the consultancy agreements. It would not be right to take into account matters such as these. They were not pleaded, and they were not the subject of adjudication by the court.

    38. Secondly, Mr Malek QC placed reliance on the wide range of facts pleaded against Mr Amhurst personally. They are summarised in the judgment of Rix J at [1999] 1 Lloyd's Rep 415, 466. They appear to include his giving advice and assistance to Mr Livingstone and Marc Rich & Co, who were not his or the firm's clients. Mr Malek submitted that all these acts should be considered together. When so considered, it is apparent they cannot be characterised as so closely connected to the acts Mr Amhurst was authorised to do that they can properly be regarded as part of the ordinary course of business of the Amhurst firm. I am unable to accept this submission. The claims against Mr Amhurst and the firm having been compromised, the firm's entitlement to pursue a contribution claim against Mr Al Tajir and Mr Salaam must be determined on the basis only of the facts pleaded against the firm.

    39. A further point arises here. The additional facts pleaded against Mr Amhurst unwittingly led the Court of Appeal astray. Evans LJ stated that 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 [2001] QB 113, 133. Aldous LJ was of a similar view. I respectfully consider this proposition, as it stands, is ambiguous. The ambiguity would be removed if the proposition were amended to read that vicarious liability is not imposed unless all the acts or omissions which are necessary to make the servant personally liable took place within the course of his employment. That is the present case. That was not the position in Credit Lyonnais Bank Nederland NV (now known as Generale Bank Nederland NV) v Export Credits Guarantee Department [2000] 1 AC 486, the case relied upon by the Court of Appeal: see Lord Woolf MR, at p 495. In the present case, drafting the consultancy agreement and other agreements were acts of assistance by Mr Amhurst and, coupled with dishonesty, they were sufficient in themselves to give rise to equitable liability on his part. That assistance was given by Mr Amhurst while acting in the ordinary course of the firm's business, as discussed above. The firm is liable accordingly. It matters not, for the purpose of establishing vicarious liability, that Mr Amhurst may have done other, additional acts while acting outside the ordinary course of the firm's business.

The case of Mara v Browne

    40. I must also mention a passing dictum of Lord Herschell sitting in the Court of Appeal in Mara v Browne [1896] 1 Ch 199, 208, to the effect that it is not within the scope of the implied authority of a partner in a firm of solicitors that he should so act to make himself a constructive trustee, and thereby subject his partner to the same liability: see also A L Smith LJ at page 212, and Rigby LJ at page 214.

    41. These dicta do not assist the respondents in the present case. The claim against Mr Amhurst is that he dishonestly procured or assisted Mr Livingstone to commit a breach of the fiduciary duty he owed Dubai Aluminium. Such misconduct by Mr Amhurst gives rise to a liability in equity to make good resulting loss: see : Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, 392. The liability of a firms of solicitors in respect of acts of a partner which render him liable in this way depends upon an application of the ordinary principles relating to vicarious liability. There is no special rule of law applicable to this head of equitable liability.

    42. I do not think Lord Herschell or the other members of the Court of Appeal can be taken as suggesting otherwise. Their statements in Mara v Browne should not be so read. In so far as Vinelott J did so read these statements, or did so decide, in In re Bell's Indenture [1980] 1 WLR 1217, 1230, I respectfully consider he fell into error. The statements in Mara v Browne were directed at a different question : whether acting as a trustee, although not having been so appointed, can be regarded as conduct within the scope of the business of a solicitor. Whether the views expressed by the Court of Appeal on this question are still good law, having regard to later developments in the principles relating to vicarious liability, is a matter I prefer to leave for another occasion.

Contribution and vicarious liability

    43. On the footing that the Amhurst firm was liable to Dubai Aluminium for the same damage as Mr Amhurst, Mr Al Tajir, Mr Salaam, Mr Livingstone and Marc Rich & Co, their respective contributions fall to be determined in accordance with section 2 of the Contribution Act. Section 2(1) provides that 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'. The contribution recoverable may amount to a complete indemnity: section 2(2).

    44. When directing that the Amhurst firm should recover from Mr Al Tajir and Mr Salaam contribution amounting to a complete indemnity, the combination of two matters in particular weighed with the judge: see [1999] 1 Lloyd's Rep 415, 476. The first was that the partners in the Amhurst firm, as distinct from Mr Amhurst himself, were personally innocent of any wrongdoing. This personal innocence of dishonesty was to be contrasted with the dishonesty of Mr Salaam and Mr Al Tajir. Rix J considered it would be unjust if a defendant who was vicariously liable for his employee's fraud could not have his innocence of dishonesty count in his favour: see [1999] 1 Lloyd's Rep 415, 472. In the Court of Appeal Evans LJ disagreed: see [2001] 1 QB 113, 136.

    45. I prefer the conclusion of Evans LJ. On the approach of Rix J an employer is in a better position, vis-à-vis co-defendants, than the employee for whose wrong the employer is vicariously liable. A co-defendant is worse placed to resist a contribution claim from an employer than he is from the wrongdoing employee.

    46. This cannot be right. It would mean that a co-defendant's liability to make a contribution payment differs, according to whether contribution is being sought by the employer or the employee. An employer could obtain contribution from a co-defendant in circumstances where the wrongdoing employee himself could not. If an employee was one of two wrongdoers equally to blame, his 'innocent' employer could look to the other, blameworthy wrongdoer for a contribution even though the employee could not. Or take a more extreme case, where an employee is four-fifths responsible for an accident and a co-defendant one-fifth. If the employer's blamelessness could be taken into account in contribution proceedings, the co-defendant could find himself saddled with responsibility for more than a one-fifth share of the damages. The personally 'innocent' employer, vicariously responsible for the acts of the employee who bears most of the responsibility for the accident, could recover contribution amounting to an indemnity from the individual wrongdoer whose blameworthiness, as between the two individual wrongdoers, is assessed at only one-fifth.

    47. Examples such as these point irresistibly to the conclusion that vicarious liability involves the notion that, vis-à-vis third parties, the employer, although personally blameless, stands in the shoes of the wrongdoer employee. This is so, both for the purposes of liability to the plaintiff claimant and for the purposes of contribution proceedings. In both cases the employer's liability is vicarious, that is, substitutional, not personal. The employer is liable for the fault of another. This approach accords with everyday practice. No contrary authority was cited to your Lordships' House on this point.

    48. Rix J was minded to treat cases of dishonesty differently from cases of negligence. I can see no basis for drawing such a distinction. The consequences of vicarious responsibility do not differ according to the nature of the wrong, with the employer being able to rely on his personal blamelessness in a case of dishonesty but not in a case of negligence. Nor is there anything unjust in this approach. An employer is only required to assume vicarious liability for his employee's dishonesty when the dishonest act was so closely connected with acts the employee was authorised to do that it may fairly and properly be regarded as done by the employee in the course of his employment.

    49. Accordingly, in my view the personal innocence of the partners in the Amhurst firm was not a relevant matter to be taken into account by the judge when deciding the contribution proceedings. The Amhurst firm, vicariously liable for Mr Amhurst's assumed dishonest wrongdoing, stands in his shoes for all relevant purposes. The judge therefore fell into error when taking the personal innocence of Mr Amhurst's partners into account : see [1999] 1 Lloyd's Rep 415, 476. Having misdirected himself in this regard it thus becomes necessary for this House to make its own assessment pursuant to section 2 of the Contribution Act.

Contribution and proceeds of wrongdoing

    50. The other major factor which weighed with the judge when deciding to direct that the Amhurst firm should be entitled to an indemnity was that Mr Salaam and Mr Al Tajir had still not disgorged their full receipts from the fraud. The judge considered it would not be just and equitable to require one party to contribute in a way which would leave another party in possession of his spoils: see [1999] 1 Lloyd's Rep 415, 475.

    51. Mr Salaam and Mr Al Tajir submitted that this approach is impermissible. Under section 2(1) of the Contribution Act the court is required to assess the amount of contribution recoverable from a person which is just and equitable 'having regard to the extent of that person's responsibility for the damage'. 'Responsibility' includes both blameworthiness and causative potency. However elastically interpreted, 'responsibility' does not embrace receipts.

    52. I cannot accept this submission. It is based on a misconception of the essential nature of contribution proceedings. The object of contribution proceedings under the Contribution Act is to ensure that each party responsible for the damage makes an appropriate contribution to the cost of compensating the plaintiff, regardless of where that cost has fallen in the first instance. The burden of liability is being re-distributed. But, of necessity, the extent to which it is just and equitable to re-distribute this financial burden cannot be decided without seeing where the burden already lies. The court needs to have regard to the known or likely financial consequences of orders already made and to the likely financial consequences of any contribution order the court may make. For example, if one of three defendants equally responsible is insolvent, the court will have regard to this fact when directing contribution between the two solvent defendants. The court will do so, even though insolvency has nothing to do with responsibility. An instance of this everyday situation can be found in Fisher v C H T Ltd (No 2) [1966] 2 QB 475, 481, per Lord Denning MR.

    53. In the present case a just and equitable distribution of the financial burden requires the court to take into account the net contributions each party made to the cost of compensating Dubai Aluminium. Regard should be had to the amounts payable by each party under the compromises and to the amounts of Dubai Aluminium's money each still has in hand. As Mr Sumption submitted, a contribution order will not properly reflect the parties' relative responsibilities if, for instance, two parties are equally responsible and are ordered to contribute equally, but the proceeds have all ended up in the hands of one of them so that he is left with a large undisgorged balance whereas the other is out of pocket.

    54. Rix J considered this was obvious. So did Ferris J, in K v P [1993] Ch 140, 149. I agree with them.

The contribution claims: overall assessment

    55. Mr Salaam was the largest beneficiary of the scheme, keeping about 41 per cent of the receipts ($20.3 million). Next to him was Mr Al Tajir, at 33 per cent ($16.5 million), and then Mr Livingstone, at 13 per cent ($6.3 million). Marc Rich & Co retained nothing, and Mr Amhurst received nothing. Under the respective compromise agreements, Mr Salaam, Mr Al Tajir and Mr Livingstone each contributed about 23 per cent to the principal sum claimed by Dubal Aluminium, and the Amhurst firm about 13 per cent.

    56. This means that, in round figures, the net financial position of Mr Salaam and Mr Al Tajir was as follows. Taking 31 December 1997 as the date for the purpose of making comparisons, Mr Salaam's receipts, with interest, amounted to $30.2 million. The value of his settlement payment was $17 million. So he still retained net receipts of some $13 million. Mr Al Tajir's receipts, with interest, amounted to $24.5 million. The value of his settlement payment was $16.9 million. Thus his retained net receipts amounted to some $7.5 million. The position of the Amhurst firm was that it had made a settlement payment of $10 million. No one pursued a contribution claim against Mr Livingstone or Marc Rich & Co.

    57. As matters have developed, the extant contribution claims are twofold. The Amhurst firm seeks contribution from Mr Salaam and Mr Al Tajir. Mr Salaam seeks contribution from Mr Amhurst in the event he is held liable to make a contribution to the Amhurst firm.

    58. I have no doubt that the appropriate order is an order in the terms directed by Rix J. The starting point is the judge's finding that in terms of the promotion, organisation and operation of the scheme there was little to choose between the five principal parties: Mr Salaam, Mr Al Tajir, Mr Livingstone, Marc Rich & Co and Mr Amhurst. The only exception was that Mr Amhurst's (assumed) responsibility was a little less than the others but not very much. Thus, there is little to choose between Mr Salaam, Mr Al Tajir and Mr Amhurst in terms of gravity of fault or potency of causal contribution to the loss.

    59. This suggests that a just and equitable distribution of the burden of liability calls for a substantial measure of equality between the three of them. In this regard an unusual, and notable, feature of this case is the extent to which some parties to the fraud, but not others, remain in possession of substantial amounts of misappropriated money even after the plaintiff's claims have been met. Taken together Mr Salaam and Mr Al Tajir are still net recipients to the extent of over $20 million. If equality of burden is the goal, the Amhurst firm ought not to be left out of pocket in respect of its $10 million settlement payment. The firm should not be out of pocket so long as Mr Salaam and Mr Al Tajir retain a surplus in hand. Unlike Mr Salaam and Mr Al Tajir, neither the Amhurst firm nor Mr Amhurst received any money from the fraud.

    60. Mr Simpson submitted it was a 'greater evil' that Mr Amhurst, an assumedly dishonest solicitor, should escape scot-free than that Mr Salaam should retain some of the money. I do not agree. The Contribution Act casts upon the court the task of adjudicating upon a just and equitable distribution of the burden of liability between all manner of wrongdoers. In the present case equality of burden among thieves can hardly be thought an exceptional approach.

    61. By the same token, I can see no occasion for the court to direct that Mr Amhurst personally should make a contribution payment to Mr Salaam. I reiterate that in these contribution proceedings the Amhurst firm is standing in the shoes of Mr Amhurst. The factors which make it right for the Amhurst firm to succeed against Mr Salaam equally make it right that Mr Salaam's claim against Mr Amhurst should fail.

    62. The judge split the contribution payments between Mr Salaam and Mr Al Tajir as follows. He considered that, in round figures, Mr Salaam should pay $7.5 million to the Amhurst firm and Mr Al Tajir should pay $2.5 million. This would leave them with almost equal undisgorged receipts. Mr Salaam would be left with $5.5 million and Mr Al Tajir $5 million. The judge considered that, to the extent of these undisgorged receipts, they should each bear the risk of the other's insolvency. To achieve this result he directed that each should be jointly liable with the other, but in the case of Mr Al Tajir up to a maximum of an additional $5 million: see [1999] 1 Lloyd's Rep 415, 477.

    63. I can see nothing wrong with this reasoning or this result, once it is accepted, as I have accepted, that Mr Al Tajir and Mr Salaam should indemnify the Amhurst firm in respect of its settlement payment of $10 million. In the ordinary way, orders for contribution payments are made severally against the persons concerned. But there is no reason in principle why the court should not make provision for what is to occur in the event of insolvency. That is the purpose and effect of the judge's order.

    64. I would allow the appeal of the Amhurst firm, set aside the order of the Court of Appeal, and restore the order of Rix J. The appeals of Mr Al Tajir and Mr Salaam should be dismissed.


My Lords,

    65. I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Nicholls of Birkenhead. For the reasons he has given, I would allow the appeal of the Amhurst firm, set aside the order of the Court of Appeal, and restore the order of Rix J. I would dismiss the cross-appeals of Mr Al Tajir and Mr Salaam.


My Lords,

    66. I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Nicholls of Birkenhead and Lord Millett. I agree with them, and for the reasons which they give I would allow the appeal of the Amhurst firm, set aside the order of the Court of Appeal and restore the order of Rix J, and dismiss the appeals of Mr Al Tajir and Mr Salaam.


My Lords,

    67. The present appeals all concern claims to contribution under the Civil Liability (Contribution) Act 1978. The questions which they raise derive from certain complicating factors present in this case. These are the treatment of settlements, the relevance of liability which is vicarious only, the treatment of multi-party cases, the ability to obtain a contribution from another wrongdoer, the equitable sharing of the loss.

    68. Upon the separate question arising on s.10 of the Partnership Act 1890, I do not wish to add anything to what is said in your Lordships' opinions.


    69. Section 1(1) of the 1978 Act requires the person claiming a contribution to prove that he was a "person liable in respect of" the damage suffered by the injured party. But subsection (4) qualifies this where the person claiming the contribution has made a bona fide settlement or compromise of the claim against him, in which case all he need prove is that he would have been liable "assuming that the factual basis of the claim against him could be established". This raises the question: how is the factual basis of the claim against him to be identified? The answer to this question must obviously depend upon the circumstances. The claim may have been settled or compromised without the commencement of legal proceedings or it may only be settled later after the exchange of pleadings or during the trial. Some proceedings may be governed by strict procedural rules; others may allow a party to inform the other of the factual basis of his claim with greater informality. Pleadings may be dispensed with. In the Commercial Court factual allegations can be particularised informally in a number of ways.

    70. In the present case the factual allegations in the pleading were more than sufficient to lay the factual basis for a liability of the partnership under s.10 of the Partnership Act 1890 in the tort of deceit. So, once it is appreciated that it is a case of the vicarious liability of the partnership for the tort committed by one of the partners in the course of the partnership business no further problem arises under this head. But I would not wish it to be thought that material other than pleadings may never have to be looked at. The variety of circumstances to which I have already referred demonstrates this. Further, if the state of the pleadings is to be decisive, a defendant wishing to compromise a case may have to insist that the claimant first amend his pleading so as to make express the basis of claim which justifies the settlement, even though neither would be taken by surprise nor able later to resist appropriate amendments. The purpose of subsection (4) is to facilitate bona fide settlements without prejudicing the rights of the paying party to claim a contribution from another. Of course the factual basis for the claim has to be identified in order to enable the remainder of s.1 to be applied but it would be mistaken to introduce inappropriate formalities into the criterion required by the subsection.

Multi-party Cases:

    71. In a simple case, say, injury to a passenger arising from a collision between two cars, both to blame, no problem arises. The court apportions the liability between the two drivers. But where, as in the present case, there has been a conspiracy to defraud involving a number of individuals, complications can arise. Only some of them may be before the court; some may be beyond the practical reach of the law; some may be insolvent; the routes by which liability has arisen may differ.

    72. Section 2 of the statute requires the court to order contribution in an amount which is "just and equitable having regard to the extent of that person's responsibility for the damage in question", the "person" being the person being ordered to contribute and the "damage in question" being the damage suffered by the victim for which the persons claiming and paying contribution were both liable. The concept of what is just and equitable corresponds to the restitutionary principles applied elsewhere in the law, for example, contributions between sureties or between insurers. The right to a contribution arises from the fact that one person has borne a disproportionate burden which it is just that another should share (or even bear in full, s.2(3)). Likewise responsibility includes both the degree of fault and the causative relevance of that fault. The power given to the court is principled but not otherwise restricted. It is this power which the court must use to solve any problems and arrive at a just and equitable outcome.

    Vicarious Liability:

    73. A possible problem is the distinction between actual and vicarious liability. There may be actual tortfeasors who have each committed a tort which has contributed to the causing of the victim's damage. But there may be behind them one or more employers or principals who are also liable in respect of the same damage but their liability is vicarious: they are only liable because of their servant or agent's fault. Is it just and equitable to distinguish between the actual fault of the former and the vicarious liability of the latter?

    74. As between the servant and his employer (or agent and his principal), clearly it is prima facie just and equitable to make a distinction. But it will not necessarily be as simple as that. The relationship between them will normally be contractual and include express or implied terms to the benefit of one or other party which have a decisive impact. For instance, there may be terms concerning the provision of insurance cover. The apportionment, as between them, will have to take such factors into account.

    75. As between the employer (or principal) and another tortfeasor, the answer is normally more simple. The vicariously liable employer has in law the same responsibility as his employee: the law attributes the responsibility of the employee to the employer. The only qualification is if, as is alleged against Mr Amhust in the present case, the employee's tortious acts included acts committed both within and without the scope of his employment, or if the employer has also been to some degree personally to blame, in which case the assessment of the employer's responsibility will have to be adjusted accordingly. But as against other tortfeasors, the employer cannot escape his legal responsibility for his employee's tort committed within the scope of his employment. The justice of attributing responsibility for the acts of an employee or agent to his employer or principal is equally cogent when considering apportionment as between tortfeasors and any other conclusion would lead to absurd and unjust results. The employer of a negligent lorry driver would be able to transfer to, say, another car driver the whole of its third party liability notwithstanding that as between the employer and the car driver, say in respect of damage to the car, the car driver would be able to hold the employer liable for the fault of his lorry driver.


    76. The fraud involved stealing money from Dubal. Neither Mr Amhurst nor the partnership received any of the stolen money. But the two parties from which the partnership is claiming the contribution did receive large sums and have succeeded in retaining a substantial part of them. Mr Salaam and Mr Al-Tajir are still net beneficiaries from the fraud. Their argument is that such advantageous retentions should be disregarded, that such enrichment should not be taken into account. There are two main answers to this argument. The 1978 Act is an application of the principle that there should be restitutionary remedies for unjust enrichment at the expense of another. To allow Mr Salaam and Mr Al-Tajir to retain these gains and resist a claim by the partnership for a contribution to the net loss of $10 million which, by reason of its liability to Dubal, the partnership has incurred would be to allow them to be unjustly enriched at the expense of the partnership. Secondly, the reason why Dubal still had an unrecovered loss after settling with Mr Salaam and Mr Al-Tajir is that Mr Salaam and Mr Al Tajir have wrongfully not returned to Dubal the full sums taken. Accordingly the responsibility of Mr Salaam and Mr Al-Tajir for Dubal's loss must take into account this wrongful and continuing retention.

    77. The judge was right to hold that it was just and equitable and in accordance with their respective responsibilities for the damage to Dubal that Mr Salaam and Mr Al-Tajir should bring into the assessment the sums which they had retained and that the partnership should be entitled to obtain a 100% contribution from them, pro rata. The same logic applies to the cross-claim for a contribution against Mr Amhurst personally. It is true that should Mr Amhurst hereafter be proved to have been fraudulent, he would not be free from legal responsibility. But focussing on the question of arriving at a just and equitable distribution of the burden of the liability to Dubal, neither Mr Salaam nor Mr Al-Tajir will, even after a 100% contribution to the partnership, be out of pocket and it follows that they can have no basis for claiming a contribution from Mr Amhurst.

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