UK: Solicitors PI: Illegality And Vicarious Liability

Last Updated: 25 January 2010
Article by Laura Taylor, Simon Chandler and Peter Maguire

In a case last month, a claim against solicitors failed on the basis of the illegality defence. The judge found that the payment that the claimants were seeking to recover had been intended by them to be a bribe and that they could not rely upon their own illegal or immoral conduct to recover compensation.

The case also raised a number of other issues:

  • the circumstances in which a firm may be vicariously liable for the actions of its employees in circumstances where – as here – the employee, although a solicitor, was primarily concerned with marketing and business development and acted as a "deal maker";
  • whether, notwithstanding the absence of a solicitor/client relationship, the employee may nevertheless owe a personal duty of care;
  • the inferences that a court is likely to draw if a party fails to give evidence in person at trial without good reason.

To view the article in full, please see below:



Full Article

A recent case considered whether the illegality defence precluded a claim by a purported client against a solicitor for an unreturned payment that had been intended to be a bribe.

A group of travel agents brought a claim against Denton Wilde Sapte ("DWS") and a senior solicitor in its India Group, a Ms Gauri Advani. Ms Advani, whose role in the firm was focused on business development rather than fee earning, had introduced the travel agents to an opportunity to be the exclusive Global Sales Agent ("GSA") of Air India for the UK and Ireland. As part of the deal, payments totalling around £370,000 were made by the travel agents to a third party. The GSA was never awarded and the sums paid over were not returned. DWS and Ms Advani were sued by the disappointed travel agents for the loss of this so-called 'deposit'.

Illegality

The claim against both Defendants failed on the basis of the illegality defence - the principle that a claimant cannot rely upon its own illegal or immoral conduct to recover compensation.

The court found that the 'deposit' was intended to be a bribe in civil law and that it was not necessary to consider whether there had been a breach of criminal law. It did not matter that the bribe was unsuccessful; the moral turpitude of the briber was the same whether the bribe was actual or only attempted. The agents' argument that the illegality related to the underlying GSA transaction rather than any contract being sued on did not defeat the defence. The judge was satisfied that there was a very clear and close connection between the wrongful conduct and the claim made - the wrongful conduct was the payment of the attempted bribe and this payment was the thing being claimed.

Vicarious liability of DWS

DWS were sued on the basis that they were vicariously liable for Ms Advani's actions and/or that these were within her actual or ostensible authority. Although he did not need to, the judge did make findings in this regard.

The essential question for vicarious liability is whether the tort is so closely connected with the employment that it would be fair and just to hold the employer vicariously responsible. Whether Ms Advani's actions fell under her actual and/or ostensible authority depends upon whether her actions could be said to fall within her actual role and/or the usual role and business of a solicitor performing her role.

It was found that Ms Advani's role at DWS was primarily one of marketing and business development, although she was and was held out to be a solicitor and her role did on occasions extend to providing legal advice or assistance. The judge found, however, that Ms Advani's role in this transaction could be best described as a deal broker and that none of these activities were within her marketing role as held out by DWS or within the ordinary course of a solicitor's business. Accordingly, she was not acting within her actual or ostensible authority and DWS were not vicariously liable for her actions.

Of relevance was the fact that Ms Advani had a personal role and financial stake in the deal. The £250,000 fee demanded by her was found to be effectively her commission for broking the deal, rather than a payment for legal services. Out of that sum, she would pay any legal costs involved, but this represented her personal fee, rather than DWS's fee.

These facts and matters were found to be known to the travel agents. Objectively, it would be apparent to reasonable and competent people in their position that Ms Advani was not performing a solicitorial or legal advisory role and that her actions were not so closely connected with her employment that it would be fair and just to hold DWS vicariously responsible.

Ms Advani's personal breach of duty

The court found that although no solicitor / client relationship arose between Ms Advani and the travel agents, she did assume a duty of care to them in her role as negotiator and deal broker. Had the illegality defence not succeeded, the court indicated that it would have found Ms Advani in breach of that duty and liable for 80% of the travel agents' losses.

Ms Advani's failure to give evidence

Ms Advani was not assisted by the fact that, although she had submitted witness statements to support her defence, she did not give evidence at trial.

The fact that a witness is not present at trial, in the absence of some good reason, tends to indicate that the witness does not have confidence in his or her statement. Such evidence will also not have been tested by cross-examination.

In Wisniewski (A Minor) –v- Central Manchester Health Authority (1998), the Court of Appeal had summarised the relevant principles to be applied:

  • in certain circumstances, a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action;
  • if a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness;
  • there must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue;
  • if the reason for the witness's absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his absence or silence may be reduced or nullified.

The main reason Ms Advani gave for not giving evidence was that there was no case to answer because the evidence of the travel agents' witnesses was so unreliable that none of it could be safely relied upon, as it was uncorroborated. This was rejected by the judge. Whilst not all the evidence of these witnesses was accepted, it was found that there was "a core of truth in the allegations underlying the claim" and that there was an evidential case to answer.

An ancillary reason offered by Ms Advani was that, even if their evidence were accepted, the claim would fail for illegality. This was not accepted as a reason for Ms Advani's failure to back up her stark denials of key aspects of the factual case against her.

The judge held that, as there was a positive case to answer, he was entitled to draw adverse inferences from Ms Advani's failure to give evidence at trial.

Comment

Although the illegality related to the underlying transaction, rather than the actual contract sued under , the defence succeeded. This is a logical and unsurprising application of the principle of illegality because compensation for the unreturned bribe was the very thing being claimed. On any view of the matter, experienced businessmen paying bribes can (and should) expect no sympathy or assistance from the courts.

The firm – as Ms Advani's former employer - prevailed on the vicarious liability issue. The travel agents were not, and never had been, clients of the firm and Ms Advani had been acting outside the scope of her actual or ostensible authority. She was acting on her own behalf (rather than on behalf of DWS) and the £250,000 was, in reality, a commission payment to her personally, rather than a payment for legal services.

Although the facts of the case were fairly extreme, it does highlight a wider concern for solicitors doing business in emerging markets where business practices may be different to those in their own jurisdiction. In addition, where solicitors are engaged principally in marketing and development and the introduction of parties in the commercial field with a view to generating fees, they may well seek to "put deals together" between interested parties. Where matters proceed, care needs to be taken to avoid actual or potential conflicts of interest and allegations of breach of fiduciary duty. This is best done by identifying the client at the outset and ensuring that the firm does not, during the course of preliminary discussions, acquire any relevant confidential information about Party A which could disable it from acting for Party B when it is proposed that a solicitor-client relationship be established with the latter.

Although DWS were not liable for Ms Advani's actions in this instance, had her involvement been different and she had been acting within the scope of a solicitor's usual role, DWS could have found itself liable for her breach. It would then have been left relying solely upon the public policy illegality defence. The Law Commission has decided that this is an area to be developed through case law and has suggested that judges should only allow a defence of illegality to succeed where justified by a public policy rationale and where depriving a claimant of his rights is a proportionate response. It is, therefore, possible that less flagrant circumstances could arise in which the defence would not be available to a law firm to defeat the claim against it.

Further reading: Nayyar & Others v Denton Wilde Sapte & Another [2009] EWHC 3218 (QB)

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 22/01/2010.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.