Dubai Aluminium v Salaam

Legal Case Summary

Dubai Aluminium Co Ltd v Salaam [2002] 3 WLR 1913

A solicitor firm’s vicarious liability for a partner’s dishonest assistance to a client.

Facts

The senior partner of a firm drafted a consultancy agreement and other requisite documentation for a client’s fraudulent enterprise. A company was induced to pay an amount of USD 50 Million over time under this fraudulent consultancy agreement. The company sued the firm claiming that it was vicariously liable for their senior partner’s dishonest assistance to a client.

Issues

The question arose as to whether the firm could be held vicariously liable for the dishonest assistance of the partner in breach of fiduciary duty for “wrongful act or omission during the ordinary course of business of the firm” under Section 10 of the Partnership Act 1980 Act.

Decision / Outcome

For the firm to be vicariously liable for the partner’s actions, the wrongful conduct must have occurred in the ordinary course of the firm’s business. The House of Lords held that, as a point of law, whether the conduct of an employee occurs during the “ordinary course of employment” is to be given an “extended scope” (para. 22) as the underlying legal policy of vicarious liability recognises the risks borne by business enterprises to third parties, and that when “those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.” (para. 21). Accordingly, the Court held that the fact that the partner’s conduct was not authorised by his co-partners and the personal innocence of the co-partners thereto is not relevant to their vicarious liability The partner was acting in his capacity as an employee of the firm when he aided in drafting the consultancy agreement and other documentation. Thus, the firm was held vicariously liable for the damages borne by the partner’s dishonest assistance.