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

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    Conclusion

    144. I would allow Amhursts' appeal and uphold the judge's conclusion that Amhursts are entitled to claim a contribution towards the $10 million they paid in settlement of Dubal's claim.

    (7) Apportionment of liability

The statutory provisions

    145. So far as material section 2 of the 1978 Act provides as follows:

    "Assessment of contribution

    (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 judge's approach

    146. In considering the relative responsibility of the various parties to the proceedings for contribution, the judge had regard to their respective moral blameworthiness and "the causative potency" of their respective actions.

    147. The judge found that in terms of the promotion, organisation and operation of the scheme there was little to choose between the five principal parties. He regarded Mr Livingstone, Mr Al-Tajir and Mr Salaam as in effect partners, each of whom brought something indispensable to the scheme. Richco was not an originator, but was a necessary part of the scheme. Mr Amhurst was not a principal, nor an originator, but in his own way he was a necessary part of the setting up of the scheme and by his presence he lent a colourable respectability to it. The judge said of Mr Amhurst that he regarded his responsibility in the promotion, organisation and operation of the scheme as being "a little less than that of the others, but not by much."

    148. Taking these and other factors into account, including the parties' gross receipts, ie, the amounts originally obtained by the parties from the scheme (see paragraph 4 above) and their subsequent conduct, the judge reached the interim conclusion that a fair allocation between the five principal parties would be:

      Mr Salaam    36%

      Mr Al-Tajir    29%

      Mr Livingstone  15%

      Richco      10%

      Mr Amhurst    10%

    He then considered three further matters. First, not everyone was claiming contribution or facing contribution claims. Secondly, there were the settlements already made. And thirdly there were the parties' net receipts, ie their respective financial positions taking into account the amount retained by them after repaying the sums needed to settle the action. Taking these factors into account he ordered that Mr Salaam and Mr Al-Tajir should give Amhursts a complete indemnity in respect of the $10 million they had paid to settle the action.

    149. In reaching this conclusion the judge was influenced by two principal considerations. First, Amhursts (unlike Mr Amhurst) were personally innocent of any wrongdoing. This was to be contrasted with the dishonesty of Mr Salaam and Mr Al-Tajir. The judge accepted that in terms of causative potency those vicariously liable probably had to stand in the shoes of the wrongdoer, but he said that it did not follow that they must necessarily do so in terms of blameworthiness. That might be so in the case of negligence, but dishonesty was different. It would, he said, be unjust if the defendant who was vicariously liable for his employee's fraud could not have his personal innocence of dishonesty count in his favour. He was answerable to the claimant for the fault of his employee, but he was entitled to invoke his own innocence of dishonesty when making or resisting a claim for contribution. In the Court of Appeal Evans LJ disagreed.

    150. The judge did not, however, regard Amhursts' personal innocence by itself as entitling them to a full indemnity, nor did he say what contribution he would have ordered on this basis if it had stood alone. There was no need for him to do so, because any conclusion in this regard would be outweighed by the second matter which influenced him, viz, the parties' net receipts. The judge considered that it would not be "just and equitable" (to quote the words of the subsection) to require one party to contribute in a way which would leave another party in possession of his spoils.

    151. In round figures and with interest to the end of 1997, Mr Salaam had received some $30 million from the scheme and Mr Al-Tajir $24.5 million. The judge assessed the contributions which they had each made under their respective settlements on the same basis at approximately $17 million. Amhursts had received nothing and contributed $10 million. As at that date, therefore, Mr Salaam could contribute a further $13 million and Mr Al-Tajir a further $7.5 million before either of them exhausted his net receipts. Since their undisgorged receipts substantially exceeded the amount of Amhursts' claim for contribution, the judge allowed the claim in full.

    152. The remaining question was how their liability to indemnify Amhursts should be split between them. The judge thought that a fair allocation would be that Mr Salaam should pay $7.5 million and Mr Al-Tajir $2.5 million. This would still leave Mr Salaam with $5.5 million of his receipts inclusive of interest and Mr Al-Tajir with $5 million. In order to protect Amhursts against the risk of either Mr Salaam or Mr Al-Tajir becoming insolvent while the other was still in possession of undisgorged receipts, the judge ordered that Mr Salaam and Mr Al-Tajir should be jointly and severally liable to the extent of $5 million and that Mr Salaam should alone be liable for the balance.

    Apportionment of responsibility and vicarious liability

    153. Section 2(1) of the 1978 Act requires the court to have regard to the parties' responsibility for the damage. Amhursts submit that the judge's conclusion that they should receive a full indemnity from Mr Salaam and Mr Al-Tajir sits comfortably with this requirement. On the assumed facts, Amhursts are liable for the damage but they were not responsible for it. They are answerable for Mr Amhurst's wrongdoing, not their own. Yet the judge would not have awarded Amhursts a full indemnity on this basis; were it not for the fact that Mr Salaam and Mr Al-Tajir had undisgorged receipts from the fraud, he would have left Amhursts to bear some reduced but unidentified part of the liability.

    154. Something seems to have gone wrong. In my opinion, it was the judge's whole approach to the nature of Amhursts' liability. He recognised that vicarious liability does not depend upon fault, and took account of Amhursts' innocence of wrongdoing accordingly. But the feature of vicarious liability which is relevant to the apportionment of liability is not that the party concerned is liable without personal fault but that he is answerable for the fault of another.

    155. The judge treated Amhursts as independently liable to Dubal, as if they had personally committed a legal wrong, albeit innocently. But that is not the nature of vicarious liability. It is, as I have said, a loss allocation device. The employer is not a wrongdoer; he is not liable in respect of his own conduct. He is answerable for his employee's wrongdoing, and his liability is co-extensive with that of his employee. He is personally innocent, but he is liable because his employee is guilty.

    156. It follows that in any contribution proceedings he must be treated as standing in his employee's shoes; the amount of his contribution should reflect his employee's share of responsibility for the damage, not his own. This can best be demonstrated by considering a commonplace situation without the complicating features of dishonesty and undisgorged receipts. Let it be supposed that proceedings are brought for negligence against two defendants, A and B. Judgment for damages is entered against both. They are jointly and severally liable. The claimant recovers damages from A alone, and A brings contribution proceedings against B. If the court finds that A and B were equally to blame, then other things being equal it will order B to contribute 50% of the sum which A has paid. This achieves the object of the 1978 Act, which is to avoid the injustice which would arise if the liability to meet the judgment depended on the whim of the claimant. He would consider only his own interests, and would proceed to enforce the judgment against whichever defendant had the deepest pocket or the most easily realisable assets. This is fair to the claimant but not to the defendants. Justice requires that the ultimate incidence of meeting the claim should be adjusted so that it is borne by defendants in whatever proportions are just and equitable as between them.

    157. But suppose that B had been an employee acting in the course of his employment. A, having met the judgment in full, can bring contribution proceedings against both B and his employer. They are both parties "liable in respect of the same damage". But it would make no sense if the availability of another source of contribution had the result of increasing the amount of the contribution which A obtained. It does nothing to reduce his share of responsibility for what happened. He was 50% to blame, and should bear 50% of the cost of meeting the judgment. This has nothing to do with the fact that B's employer is relatively blameless when compared with A. It is because B's liability is vicarious. He is answerable for B's wrongdoing, and any payment by him discharges B's liability pro tanto. It follows that B and his employer between them should bear 50% of the cost of meeting the judgment, and A should continue to bear his own 50% whether he recovers a contribution from B or his employer or both.

    158. Now suppose that A had also been an employee acting in the course of his employment, and that his employer has met the judgment in full and been indemnified by A. A now claims contribution from B and his employer. The position is the same. A's employer has dropped out of the picture. A is entitled to 50% contribution, whether he recovers it from B or his employer. It does not matter that A bore his share of the cost of meeting the judgment by indemnifying his employer instead of discharging it directly.

    159. But why should it matter whether A's employer has obtained an indemnity from A? If he has not, then he will be the party claiming contribution. But this should not affect the amount of the contribution which he obtains. Both employers suffered judgment because they were answerable for their employee's negligence, and both employees are liable to indemnify their employers whether their employers choose to enforce the liability or not. As between A and his employer on the one hand and B and his employer on the other, the cost of meeting the judgment should be shared equally.

    160. These considerations show that the correct approach is to consider the relative responsibility of the parties personally liable and apportion liability between them accordingly, whether contribution is ordered in favour of or against the employee or his employer or both. As between themselves, the employer and his employee are, of course, independent actors with rights and obligations inter se; but as between them and the other parties "liable for the same damage", they are to be identified with each other. This would certainly accord with commercial reality especially when, as is often likely to be the case, the contribution proceedings are brought for the benefit of insurers.

    161. This is why I said earlier that defendants to an action who, if found liable, may find themselves bringing or resisting proceedings for contribution are not concerned with the question whether another party is or is not also vicariously liable for the same damage. The question may affect the identity of the party who brings or defends the claim for contribution but it should not affect the amount of the contribution which is ordered. Its relevance in the present case is due to the way in which Amhursts structured their settlement and the contribution proceedings. Had the settlement been differently expressed, and had Mr Amhurst been joined as an alternative claimant for contribution, Mr Salaam and Mr Al-Ajir would not have been able to marshall the arguments they have advanced.

    Taking account of net receipts

    162. Mr Salaam and Mr Al-Tajir argued that the judge was wrong to take their undisgorged receipts into account. They said that these had nothing to do with their responsibility for the damage suffered by Dubal, which was the only matter to which section 2(1) directs the court to have regard.

    163. I cannot accept that submission. In a case like the present, the defendants' gains match the plaintiff's loss. The more a defendant has taken, the more the plaintiff has lost, and the greater is the degree of the defendant's responsibility for the loss. His gross receipts are directly relevant to the degree of his responsibility. But it would obviously be unfair not to give him credit for what he has repaid; it would also be wrong, for the amount repaid goes to reduce the plaintiff's loss and correspondingly to reduce the defendant's responsibility.

    164. But in any case the statutory jurisdiction is to order contribution in an amount which the court finds is "just and equitable". I do not read the words which follow as limiting words. Where the wrongdoing has produced not only a loss to the plaintiff but a profit to the defendants, it is obviously just and equitable to direct that any contributions required to allocate the cost of meeting the claim fairly among those responsible should be paid first out of their retained profits. It is increasingly recognised today that the ends of justice sometimes go beyond compensating a plaintiff for his loss and may extend to stripping a defendant of his profits.

    Other matters

    165. This is sufficient to dispose of the cross-appeals, since if Amhursts are entitled to a contribution from Mr Salaam and Mr Al-Tajir then neither of them can be entitled to claim contribution whether from Amhursts or from Mr Amhurst. However, two matters were canvassed in the course of argument with which I should deal briefly.

    166. Amhursts argued that Mr Al-Tajir's claim did not fall within the scope of the 1978 Act at all. It was not a contribution to Dubal's loss, but to his own contribution to the loss suffered by Amhursts. There could, it was said, be no contribution in respect of a contribution. I cannot accept this argument. Amhursts' payment of $10 million was made in respect of the damage suffered by Dubal, and it follows that any payment which Mr Al-Tajir may be ordered to pay to Amhursts is an indirect contribution in respect of the same damage.

    167. Finally it was submitted by Mr Al-Tajir (though not by Mr Salaam) that there was no proper basis for the joint and several order which the judge made. I cannot accept this submission either. His order was designed to ensure that Mr Salaam and Mr Al-Tajir should each bear the risk of the other's insolvency, but only to the extent of their own undisgorged receipts. I can see nothing unfair in that. Nor do I see it wrong in principle. A defendant who is insolvent or who has no money simply passes out of the picture. The plaintiff may well not proceed against him at all; but whether he does or not the whole of the liability of meeting the judgment falls to be apportioned between the other defendants, as otherwise the deficiency arising from the insolvency is borne by whichever defendant happens to satisfy the judgment, a result which it is the purpose of the 1978 Act to avoid: see Fisher v CHT Ltd (No 2) [1966] 2 QB 475. If the impact of a known insolvency can be taken into account in the assessment of contributions, it is difficult to see why the prospect of a possible future insolvency should not be reflected in the order; and there is academic authority for the proposition that it may be: see Glanville Williams, Joint Torts and Contributory Negligence (1951) at pp 170-172. The author formulated a complex form of order for this purpose. The trial judge in the present case found a simpler and more elegant way to achieve the same result.

    Conclusion in respect of contributions

    168. The judge fell into error in the way in which he approached the nature of Amhursts' liability and their innocence of wrongdoing. But (although the judge's language is not entirely clear), I do not think that his error contributed to the result, which was ultimately based on the parties' net receipts. If he had adopted the correct approach the outcome logically have been the same. In these circumstances I do not think that we are obliged to set his decision aside and re-examine the question for ourselves. If, however, we must re-examine the matter for ourselves, then I too would uphold the judge's conclusion.

    (8) Disposal of the case

169.     I would allow Amhursts' appeal, set aside the order of the Court of Appeal, and restore the order of the trial judge. I would dismiss the cross-appeals.

 
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Prepared 5 December 2002