Solicitors' PI - Recovery Of Costs From Former Employee

The recent decision in (1) Travelers Insurance Co Ltd (2) Denton Wilde Sapte v Gauri Advani [2012] concerns the recovery of defence costs from an insured former employee of a firm of solicitors, where the employee's conduct was "plainly dishonest".

Background

The recent decision builds upon the earlier case of Nayyar & Others v Denton Wilde Sapte & Advani [2010]. That case saw a claim fall foul of the ex turpi causa defence, namely, the maxim or principle that a claimant cannot rely upon its own illegal or immoral conduct to recover compensation. That case involved a claim by purported clients against Dentons and a senior solicitor in its India Group, a Ms Advani, for an unreturned "deposit" of £383,259. Ms Advani's role within Dentons was focused on business development, rather than fee earning. She introduced the Claimant travel agents to an opportunity, via a former Tourism minister for the Indian state of Utter Pradesh, to be the Global Sales Agents of Air India in the UK and Ireland. Total sums of £383,259 were paid over (out of a total cost originally stated to be £2.4m) although, in the event, the agency was not awarded nor was the money returned. The Claimants sued Dentons and Ms Advani for the return of the so-called deposit. The Judge held that the claim against both Defendants failed on the basis of the illegality defence. The "deposit" was intended to be a bribe and it was irrelevant whether this was successful or not; the moral turpitude of the briber was the same. That was the end of the matter, although the Judge went on to find that Dentons was not, in any event, vicariously liable for the acts and omissions of Ms Advani. The Claimants were not (and had never been) clients to the firm and, whilst Ms Advani acted as a "deal broker", she was not acting within her actual or ostensible authority; she was acting on her own behalf and, significantly, had a personal role and stake in the deal, having sought a commission of £250,000 out of the £2.4m total cost. To read more about the 2010 decision click here.

The Recent Decision

Dentons' insurer, Travelers, sought recovery from Ms Advani of a sum exceeding £500,000 which it had paid to fund her separate defence of the earlier action. Dentons sought from her that part of its own defence costs which it had been unable to recover, a sum of approximately £90,000. Travelers, whose policy covered Dentons' employees, argued that Ms Advani had acted dishonestly in the transaction and...