Frolic Of Their Own? A Firm's Responsibility For Solicitors' Actions

The High Court's decision in Nayyar & Others v Denton Wilde Sapte & Another was handed down last month. In his judgment, Mr Justice Hamblen had to grapple with the two thorny issues of ex turpi causa and vicarious liability of a firm for the actions of its employees. This judgment will be of interest to law firms, particularly those seeking to expand into foreign markets, and their insurers.

Background

The claimants were travel agents, one of whom, Mr Nayyar, was acquainted with the second defendant, Ms Advani, a senior solicitor employed by Denton Wilde Sapte ("DWS") principally in a marketing capacity. It was alleged that in early 2004 Ms Advani informed Mr Nayyar that she could introduce him to a third party through whom he could obtain a contract to become the exclusive global sales agent ("GSA") for Air India in the UK. After various meetings and discussions, (most of which were disputed in the proceedings), the claimants agreed to make a payment of £2 million (said to include £250,000 in respect of legal fees), with an initial payment of £400,000 (variously referred to as a "consultancy" fee or "commission") which the claimants contended they believed was to be made to a third party (a Mr Yadav, former Minister of Tourism in the State of Uttar Pradesh in India), as a fee to assist them to obtain a "letter of appointment" as a precursor to appointment as the GSA. In any event, the claimants transferred various sums of money to Mr Yadav but never received the letter of appointment nor appointment as GSA. Having failed to recover the sums paid, the claimants turned to DWS and Ms Advani.

Ex turpi causa

The defendants submitted that the claim was barred on the basis of ex turpi causa non oritur actio. In essence, the defendants asserted that the claimants must have known that the sum paid to Mr Yadav was an illegal inducement to secure a preference over other applicants in relation to the GSA. Hamblen J held that an attempted bribe was sufficient to engage the ex turpi causa principle and concluded that: 'in their pursuit of the ''ultimate dream'' of a GSA the Claimants were prepared to make whatever payment was needed to secure it regardless of legalities.' The claim failed.

Vicarious liability and actual/ostensible authority

In addition, DWS contended that even if the claim did not fail on the grounds of illegality, the claim against it must nevertheless fail because the acts alleged to have been carried out by Ms Advani were not carried...