Dubai Aluminium Co Ltd v Salaam

A partner’s dishonest assistance in a breach of fiduciary duty is a wrongful act within section 10 of the Partnership Act 1890. The provision is not confined to torts. The firm is liable, however, only where every element making the partner personally liable occurred in the ordinary course of the firm’s business or with the authority of the other partners.

A solicitor who conceives, plans and implements a dishonest scheme through sham agreements acts outside the ordinary business of a solicitors’ firm. If vicarious liability exists, the innocent firm cannot disregard the wrongdoer’s responsibility when seeking contribution under the Civil Liability (Contribution) Act 1978.

Dubai Aluminium Company Ltd paid more than US$50 million under a sham consultancy agreement forming part of a dishonest scheme. Its former managing director and other participants received the proceeds. It alleged that Mr Amhurst, a solicitor and partner in two firms, had dishonestly assisted the scheme.

The principal claims were settled. Mr Amhurst’s innocent partners paid US$10 million without admitting liability, while the allegations against Mr Amhurst personally were withdrawn. Rix J nevertheless ordered Mr Salaam and Mr Al Tajir to indemnify the partners in contribution proceedings. He also found Mr Al Tajir to have participated dishonestly: [1999] 1 Lloyd's Rep 415.

The appeals concerned Mr Al Tajir’s dishonesty, the partners’ potential vicarious liability under section 10 of the Partnership Act 1890, and the assessment of contribution under the Civil Liability (Contribution) Act 1978.

1. Disposition. Mr Al Tajir’s appeal against the finding of dishonesty was dismissed. His and Mr Salaam’s appeals against the contribution orders in favour of the Amhurst partners were allowed. Mr Salaam’s appeal seeking contribution from Mr Amhurst personally was dismissed. Evans and Aldous LJJ agreed on those results; Turner J agreed in the result but dissented on the construction of section 10 of the Partnership Act 1890.

2. Dishonesty. Per Evans LJ, with whom Aldous LJ agreed, the appellate court had to evaluate the whole body of evidence when reviewing a finding of dishonesty. Although the principal witnesses implicating Mr Al Tajir were themselves dishonest, their account was strongly supported by the scale and pattern of his receipts and by the implausibility of his claimed ignorance. His knowing complicity and dishonesty were proved.

3. Meaning of “wrongful act or omission”. Evans and Aldous LJJ held that section 10 was not confined to torts. Its general language encompassed equitable accessory liability for dishonest assistance in a breach of trust or fiduciary duty. Turner J disagreed, considering that the statutory context confined section 10 to tortious liability.

4. Ordinary course of business. The court unanimously held that the assumed wrongdoing was outside the ordinary course of the solicitors’ firms’ business. The question depended on the actual or apparent business of the particular firm and on all acts constituting the wrong. Mr Amhurst was alleged not merely to have advised upon and drafted agreements, but to have conceived, planned, administered and implemented a dishonest scheme through sham agreements. No partner authorised that conduct, and all those with whom he dealt were participants in the scheme. The innocent partners therefore would not have been liable under section 10.

5. Contribution. Under section 1(4) of the Civil Liability (Contribution) Act 1978, settlement did not dispense with the requirement that the partners would have been liable if the pleaded facts were proved. That condition failed. Evans LJ further held that, had the partners been vicariously liable, their responsibility under section 2 could not be assessed as though they were wholly free from the wrongdoing attributed to Mr Amhurst. Vicarious liability would be the foundation both of their liability to the claimant and of their contribution claim.

6. It was not just and equitable to order Mr Amhurst to contribute to Mr Salaam. Mr Salaam’s attributed responsibility and receipts exceeded the principal element of his settlement, while Mr Amhurst had received no proceeds apart from professional fees. A contribution would therefore have increased the profit retained from the dishonest scheme.

1. Court of Appeal: In [2000] EWCA Civ 118, dismissed Mr Al Tajir’s challenge to the finding of dishonesty, allowed the appeals against the contribution orders favouring the Amhurst partners, and dismissed Mr Salaam’s contribution appeal against Mr Amhurst. Permission to appeal to the House of Lords was refused.

2. High Court, Commercial Court: Rix J found Mr Al Tajir to have participated dishonestly and ordered Mr Salaam and Mr Al Tajir to indemnify the Amhurst partners for their US$10 million settlement: [1999] 1 Lloyd's Rep 415.