Liability of ’innocent’ partners broadened in key professional indemnity case
Amhurst Brown Colombotti has been found liable by the House of Lords for the alleged fraud of its former senior partner – but in a twist of fate is now owed $10m (£6.1m) as a result.
The case arose out of allegations by Dubai Aluminium (Dubal), a vast United Arab Emirates manufacturer, against Anthony Amhurst, the former senior partner and currently a consultant at the firm. The company accused him of administering a scheme that led some $50m (£31.8m) to be unlawfully paid out of Dubal during a six-year period.
It was alleged that Amhurst dishonestly drafted the consultancy and other agreements, which had been the supported basis for the payments. Amhurst Brown faced liability claims because he was working at the firm at the time.
The partners and Amhurst settled for $10m and the partners then sought a proportion of this to be paid in so-called “contributions” by two of the beneficiaries of the $50m payout, Hany Salaam and El Tajir.
Salaam and Tajir argued that Amhurst Brown was not liable to Dubal and, therefore, under the Civil Liability (Contribution) Act 1978, the firm should not have been able to seek contributions.
But last Thursday, the Lords held that, assuming Amhurst had dishonestly drafted the agreement, this did count as being within the ordinary course of a solicitor’s business and therefore that Amhurst Brown was liable.
The Lords went on to rule that the entire $10m it paid out should be reimbursed from Salaam and Tajir.
Amhurst Brown’s head of litigation Steven Morris told The Lawyer: “It’s not surprising that the courts are not content to allow those who have been found to be dishonest to benefit from their own fraud at the expense of others who have received no benefit at all.”
Amhurst Brown has always been regarded as innocent of any dishonesty in relation to the Dubal affair. The litigation, however, has continued on the assumption that Anthony Amhurst had been dishonest, even though this has never been proven and such allegations were withdrawn on settlement.
The case sends out a warning bell to law firms. William Fennell, a professional indemnity expert at 4 Paper Buildings, said: “This case probably marks a broadening of the liability of innocent partners in a solicitor’s firm for the acts of a dishonest partner. This may be bad news for honest partners and their insurers.” He added that it is also “bad news” for insurers who have to insure honest partners.