Before: The Hon. Mr. Justice Rix
B E T W E E N
HANY MOHAMMED SALAAM and others
DATED: 17 July 1998
Until two settlement agreements, one reached in the course of trial and the other arrived at only after a draft judgment had been distributed to the parties, these proceedings had been concerned principally with a claim by the plaintiff to recover monies from those who, as it was alleged, had knowingly, ie dishonestly, received funds deriving from, and/or had assisted in, a breach of fiduciary duty. Secondarily and contingently, there were contribution proceedings involving defendants and third parties as to how any liabilities to the plaintiffs should be apportioned.
In the event, but only as the clock was moving towards the twelfth hour, the principal proceedings were finally settled. It has been agreed that, in the light of the history of this matter, my draft judgment should be amended to record and take account of that settlement, as well as certain other matters arising in the contribution proceedings which depended on the valuation of the settlements and the calculation of interest and which were argued before me or in subsequent written submissions in the light of my draft: but that otherwise my judgment should be perfected as though the settlement of the plaintiff's claim had not taken place. In particular, it was recognised and agreed that, despite the settlement, it was too late to seek to turn the clock back on the findings that I had made as a result of trial: too late, for instance, to alter the basis of those findings from being findings on the evidence to being assumptions on the pleadings. (The only somewhat hesitant note in that respect came from one of the third parties on whose behalf it was submitted that my findings might, if I saw fit, be expressed in part as assumptions. I shall revert to this.) The parties recognised that those findings had to be made in any event for the purpose of the contribution proceedings.
In the circumstances, the judgment which I now publish is that which I drafted, amended to take account of that last minute settlement and of the further submissions relating to the contribution proceedings, but otherwise left as far as possible untouched.
The plaintiff in these proceedings was Dubai Aluminium Company Limited ("Dubal"). It claimed to recover the otherwise unrecovered balance of payments totalling US$50,117,622 disbursed in the form of commissions and other like payments under a consultancy agreement made with Marc Rich & Co AG ("Richco") dated 1 September 1987 (the "Richco consultancy agreement"). In a nutshell, Dubal alleged that its former chief executive, Mr Ian Livingstone, conspired with Mr Hany Salaam, the first defendant, with the assistance of the latter's solicitor Mr Anthony Amhurst, the second defendant, to steal this sum under the guise of sham contracts for the purported provision of commercial services. The alleged scheme (the "scheme") was for the stolen monies to be paid out by Dubal to Richco under the Richco consultancy agreement and then onpaid by Richco under subsidiary consultancy agreements made between Richco and companies which were the creatures of Mr Salaam (the "subsidiary agreements"). I shall adopt the conveniently short expression "scheme", somewhat pejorative as it is, to refer to the transaction or series of transactions brought into existence and evidenced by the Richco consultancy agreement and the subsidiary agreements, irrespective of whether it was a dishonest scheme, as Dubal alleged, or an honest scheme, as the defendants alleged, because the expression was so used, as a matter of convenience, at trial, because circumlocutions to describe the transactions in terms which reflected the parties' respective evidence and submissions would create difficulties, and also because Dubal's preferred talk of "theft", even in the phrase "alleged theft", is of course even more tendentious. Dubal's business, as its full name implies, is the operation of an aluminium smelter in Dubai.
Mr Livingstone was not a defendant to these proceedings because an earlier action brought by Dubal in this court in 1995 against him (and his wife and companies) in respect of not only the scheme presently complained of but also other matters arising out of the period of his office with Dubal ended in an agreement dated 31 January 1996 under which he paid to Dubal, while denying liability, some $15,540,000 in full and final settlement of all Dubal's claims. Dubal alleged that $6,327,918.09 of that settlement was to be referred to the scheme, being the alleged total of all sums received by Mr Livingstone pursuant to it. Dubal's claim in this action started out therefore in the sum of the remaining balance of $43,789,703.91 (ie $50,117,622 less $6,327,918.09), together with interest and costs. I shall refer to this settlement as the Livingstone settlement.
That balance fell again when in the course of trial Mr Amhurst and his partners in the partnerships of Amhurst Brown Martin & Nicholson ("ABMN", the third defendants) and Amhurst Brown Colombotti ("ABC", the fourth defendants) settled with Dubal, on terms providing for the payment of $10,000,000 to Dubal by ABMN and ABC and the withdrawal of all allegations against Mr Amhurst and the partnerships by Dubal. Mr Amhurst had been sued on the basis that he had knowingly assisted in the scheme, but (as was ultimately conceded) had received none of its proceeds. The partnerships had been sued on the basis that they were vicariously liable under section 10 of the Partnership Act 1890. (Section 10 provides: "Where, by any wrongful act or omission of any partner acting in the ordinary course of business of the firm, or with the authority of his co-partners, loss or injury is caused to any person not being a partner of the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act.") I shall refer where it is convenient to do so to Mr Amhurst, ABMN and ABC compendiously as the "Amhurst defendants". I shall refer to this settlement as the Amhurst settlement.
The remaining defendants whom I have not so far mentioned were Nillet Development Incorporated ("Nillet", the fifth defendants) and Japan Metal Sales Corporation ("JMS", the sixth defendants), both Panamanian companies which at all relevant times had been, as Mr Salaam accepted, his alter egos. They were two of the four companies with which Richco entered into subsidiary agreements pursuant to the Richco consultancy agreement. The other two companies were Valo Developments Inc ("Valo") and Wid Enterprises Inc ("Wid"), also both Panamanian corporations. As it happened, no sums were paid under the scheme to Wid, which is why it had not also been made a defendant; and Valo, although the recipient of funds under the scheme, had been dissolved on 3 October 1991, which is why it had not been made a defendant. I shall refer to Mr Salaam, Nillet and JMS, when it is convenient to refer to them compendiously, as the "Salaam defendants".
Mr Livingstone, although not a defendant because of his settlement with Dubal, is a party to these proceedings as first third party. He was so joined in these proceedings by the Amhurst defendants.
There are two other third parties, each of whom might perhaps have been made defendants at the suit of Dubal, but had not. One is Richco itself, the second third party, now, following a management buy-out, renamed Glencore International AG. I shall nevertheless continue to call that company Richco. Dubal had reached its own accommodations with Richco, is still in business relations with it, and made no allegations against it in these proceedings. Indeed, it had granted Richco indemnities against any loss, liability or expense, including costs, which Richco might suffer by reason of its involvement in this action, and had itself relied on the evidence, called by Richco, of Mr William Strothotte, the architect of the management buy-out and now Richco's chief executive. The reason why Richco had been brought into these proceedings was that first the Amhurst defendants, and next the Salaam defendants served third party notices on it, saying in effect that if, which was denied, there was any validity in Dubal's claim, then Richco too was a knowing participant in the scheme and ought to contribute to any ultimate liability. As part of the Amhurst settlement in the course of trial, it was also agreed that the Amhurst defendants would drop their third party claim against Richco. From that point, only the Salaam defendants maintained a claim that Richco was knowingly and therefore dishonestly implicated in the scheme.
The other third party who might have been made a defendant, but had not, was the third third party, His Excellency Mr Mahdi Mohamed Al Tajir. He undoubtedly, and on his own admission, received sums of money which flowed from Dubal via Richco by reason of the Richco consultancy agreement. In that respect he is perhaps like Mr Salaam and Mr Livingstone, who both acknowledged that they shared in such funds, albeit said that they did so honestly. He seeks, however, to distance himself from Mr Salaam and Mr Livingstone in at least three respects. First, he disputes and rejects Mr Salaam's and Mr Livingstone's explanation for the scheme, and their principal defence as to the honesty of it, that it was legitimately authorised by him as the right hand man and confidant of the Ruler of Dubai and ultimate owner of Dubal. He says that he did not authorise the scheme, and was no longer in a position of state where he could do so. Secondly, his explanation for the receipt of such funds as he received is that he agreed with Mr Marc Rich, at that time (in or about May 1987) the principal shareholder and director of Richco, a personal commission for himself, payable by Richco out of its own funds, for bringing about a commercial alliance between Dubal and Richco. Thirdly, he contrasts the manner in which Mr Salaam and Mr Livingstone received such funds, via JMS under the subsidiary agreements and/or into secret accounts, with the manner in which he says he received all his funds, viz directly from Richco and openly into an account in the name of Al Tajir Ltd.
As I have said, Dubal had not made Mr Al Tajir a defendant. He has become a party to these proceedings only because the Amhurst defendants and the Salaam defendants have, as in the case of Richco, served third party notices against him as well, making a similar claim to contribution on the alternative basis that, if they are liable as knowing participants in the scheme, then he was himself a knowing participant too. There was some limited discussion before me as to why Dubal had not made Mr Al Tajir a defendant. After all, in opening his case on behalf of Dubal, Mr Richard Seymour QC expressly referred to Mr Al Tajir's role as "that of another villain". (Day 1, page 75: "...I should make clear that the Plaintiff's case is that although Mr Al Tajir was involved in the scheme to take the money from Dubal, his involvement was, and was to the knowledge of Mr Salaam and Mr Amhurst, that of another villain. He was, as it were, the get-away driver of this robbery. He was not standing there as a policeman, in front of whom the drama unfolded, and whose nod and wink or failure to intervene could be interpreted as indicating that what was being done was lawful.") Similarly, in final submissions Mr Seymour developed this thesis. Why, in that case, did not Dubal sue Mr Tajir? What if any inferences is it proper for me to draw from Dubal's failure to do so? In sum it appears that Dubal did, on learning from Richco's discovery in about June 1997 that Mr Al Tajir had been a recipient of funds from Richco in connection with the consultancy agreement, go so far as to issue a summons on 1 July 1997 for the purpose of joining Mr Al Tajir as seventh defendant and of amending its points of claim as a consequence. That summons was not, in the event, pursued. It seems to me that I cannot ultimately be sufficiently confident as to the reasons why Dubal did not sue Mr Al Tajir to be able to draw a safe inference from its failure to do so. I bear in mind, of course, that it did not do so. The facts are, however, that not only had Mr Al Tajir's participation in the scheme and his honesty been directly in issue by reason of the Salaam defendants' and the Amhurst defendants' third party notices; but also a critical issue, perhaps the most important single issue, in Dubal's claim and not merely in the third party proceedings had been whether Mr Al Tajir had authorised the scheme whereby the funds generated by the Richco consultancy agreement were to be shared among the participants in the scheme (as Mr Salaam had alleged, relying on that authority, or honest belief in that authority, as existing and being legitimate, as a defence to any allegation against him of dishonest receipt or assistance), or whether, as Mr Al Tajir alleged, he did not. Dubal also alleged that he did not authorise the scheme, but with this difference. Dubal agreed that he had no legitimate position or power to authorise the scheme; but otherwise it did not ultimately take issue with Mr Salaam's (and Mr Livingstone's) evidence that Mr Al Tajir was a party to it. Mr Al Tajir, on the other hand, said that not only did he have no position or power to authorise such a scheme on behalf of Dubal and the Ruler of Dubai, but also that he did not seek to do so at all, whether with or without legitimate authority: he did not participate in the scheme at all, but merely negotiated with Richco a legitimate business commission for himself.
I should also mention in this introduction Mr Saad Salaam, Mr Salaam's brother. It had emerged in Richco's (and Mr Amhurst's) discovery and also in the witness statements of the parties, that Mr Saad Salaam also participated in the proceeds of the scheme, albeit not initially. There came a point, however, quite early on, when he laid claim to a share of his brother's income from the scheme. The brothers were not on speaking terms, and it was left to Mr Al Tajir to broker an arrangement. In due course what happened was that both Mr Salaam and Mr Livingstone each gave up one quarter of their respective shares of the principal income stream from the scheme. This income stream was 2.5% of the value of all sales of Dubal's products. Mr Salaam (when I speak simply of Mr Salaam I intend to refer to the defendant, Mr Hany Salaam) initially received 30% of that income, as did Mr Livingstone. After his accommodation, Mr Saad Salaam received 15%, and Mr Salaam's and Mr Livingstone's shares were reduced ultimately to 22.5% each. In the result Mr Saad Salaam received $6,001,861 in his account at Banque Gutzwiller.
Apart from the third party proceedings described above, there was also a third party notice served by the Amhurst defendants against Mr Livingstone (but no third party claim was brought against him by the Salaam defendants). There were also contribution notices served by the Salaam defendants against the Amhurst defendants, and vice versa. Mr Al Tajir originally brought no proceedings for a contribution, but at a late stage made a contingent claim on Mr Amhurst. Mr Livingstone brought no proceedings for a contribution, although there came a moment during the trial when he trembled on the brink of doing so. That was on the eve of Mr Livingstone's oral evidence, when his solicitors sent a letter to the solicitors acting for Richco to inform them that Mr Livingstone would invite the court to apportion contribution between the third parties, should the Amhurst defendants' third party claim against him succeed. However, a few days later, while Mr Livingstone was still being cross-examined, I was informed that that claim for contribution had been withdrawn.
The structure of the dispute argued before me can therefore be encapsulated as follows. Dubal, having paid out between 4 September 1987 and 11 February 1993 a total of $50,117,622 and recovered $15,540,000 from Mr Livingstone (out of which it gave credit in these proceedings for only $6,327,918) in 1996 and a further $10,000,000 from the Amhurst defendants (out of which it gave credit for $9,250,000 and referred the balance of $750,000 to costs) during the course of trial, made the following financial claims against the Salaam defendants:
(1) against Mr Salaam himself:
in knowing assistance: $50,117,622 plus interest and costs (less a credit of $15,577,918);
in knowing receipt: $27,848,149.61 etc.
(2) against Nillet:
in knowing receipt: $2,975,000 etc.
(3) against JMS:
in knowing receipt: $14,272,846.61 etc.
The figure of $27,848,149.61 put against Mr Salaam in knowing receipt is the total of the alleged receipts of Mr Salaam and his companies, Nillet, JMS and Valo. Dubal made no formal claim against Mr Al Tajir or Mr Saad Salaam, but submitted on the evidence before me that the former was a full participant in the dishonest scheme and received $15,604,877.10 out of the $50,117,622 disbursed. The essence of its case was that Mr Livingstone breached his fiduciary duty as a director and chief executive of Dubal in promoting and participating in the scheme, that Mr Salaam (and Mr Al Tajir) were also involved in promoting and participating in the scheme, and in sharing in its rewards. It said that Mr Al Tajir had no authority from the Ruler of Dubai to advance the scheme, and that Mr Salaam's reliance on such authority was not merely misplaced but dishonest. It submitted that the Richco consultancy agreement and the subsidiary agreements were sham agreements in that the parties to them did not contemplate that the services stipulated under them would be provided in return for the payments stipulated in them, so that they were merely, or at any rate in very large part, a device for extracting money from Dubal. Nevertheless, Dubal made no allegations of dishonesty against Richco, having reached its own accommodation with it, and indeed by reason of the indemnities given to Richco had in any event promised to pay for any liability or loss Richco might suffer by reason of these proceedings. It began the trial by alleging that Mr Amhurst was guilty of knowing assistance in the scheme (having dropped as against him any claim of knowing receipt), but by reason of the Amhurst settlement had withdrawn all such allegations.
Mr Salaam, on the other hand, said that the scheme was honest in its conception and execution; that it was intended to benefit Dubal by bringing to it a commercial alliance with the largest and strongest metal trader in the world, Richco, and that that alliance has continued to this day; that it was promoted to Mr Salaam by Mr Al Tajir himself, with all the prestige and authority that he exercised formally as Director of the Office of the Ruler of Dubai's Affairs or less formally but equally effectively as the real and acknowledged protector in Dubai of Dubal's interests; that the income earned by him and his companies from the scheme was essentially a reward for securing for Dubal its alliance with Richco, and that custom and practice in Dubai in such matters exonerated him from any accusation of dishonesty; that Mr Al Tajir's participation in the scheme was likewise a guarantee of its legitimacy, as Mr Amhurst's involvement as a well-known City of London solicitor in the drafting and execution of the documents and in the implementation of the scheme was itself proof of its bona fides. He emphasised the long history of his and his companies' business support for Dubal and expertise, in the light of which it was, he felt, only natural that Mr Al Tajir, Dubal and Richco should have involved him and wanted to retain his involvement in the commercial alliance. Mr Salaam gave evidence and faced cross-examination in support of his case.
Mr Amhurst's pleaded case was to the effect that he was only acting as a solicitor, knew nothing to put him on notice of any dishonesty in the promotion or execution of the scheme, and derived no benefit from it, other than his firm's legitimate fees and expenses. The absence of any benefit, he submitted, was itself a proof of honesty. He was entitled to say that under the settlement agreement all allegations against him had been withdrawn. He did not personally contribute to the payment of $10,000,000 to Dubal, all of which was met by his partners in ABMN and ABC. He did not give evidence, because the settlement agreement forestalled the need to do so.
Mr Livingstone's case was similar to that of Mr Salaam, but more ambivalent. He regarded Mr Al Tajir as clothed with the authority of the Ruler of Dubai and liaised with him generally regarding Dubal's affairs as the Ruler's representative. It was he, Mr Livingstone, who identified the need for a commercial alliance between Dubal and Richco. With Mr Al Tajir's approval, Mr Salaam assisted him to negotiate that alliance, which was in the commercial interests of Dubal. The Richco consultancy agreement was part of a strategy and a package of transactions which embraced an Alumina Supply Agreement (the "ASA"), also dated 1 September 1987 and made with Richco's subsidiary Clarendon Limited, which was designed to safeguard Dubal's supplies of raw material, and in due course led in 1989 to a Pre-Sales Agreement, under which Richco advanced $250 million to Dubal against Dubal's forward sales of aluminium to Richco over the next five years. Mr Al Tajir and Mr Salaam required payment for their assistance in promoting the Richco alliance, and it was Mr Al Tajir who agreed the division of the income generated by the scheme between himself, Mr Salaam and Mr Livingstone, and subsequently Mr Saad Salaam. He regarded his own share of the income not as something that he had stipulated for but as in the gift of Mr Al Tajir, and as reflecting the customary method in Dubai of rewarding good service. He was, however, ambivalent about the honesty of such payments. He had of course settled with Dubal even before these current proceedings were commenced, and had done so without serving a defence to Dubal's action against him. In his witness statement, which became his evidence in chief before me, he said this:
"What happened in Dubal from 1992 onwards [when the Richco consultancy agreement came under question, a process which culminated in Mr Livingstone leaving Dubai in October 1992 and in Dubal giving notice to Richco of the termination of the agreement on 22 March 1993] was the phenomenon well-known in autocratic feudal regimes; namely a "changing of the guard". Those around the Ruler change and the first objective of the new regime is to discredit everything done by the old one. However, it is only the players who change; the game remains the same."
In his cross-examination, he presented two separate faces. First, he acceded to questions to the effect that the payments under the scheme had been dishonest. When, however, he resumed his cross-examination after the intervention of a weekend, he insisted that in the light of the custom and practice prevailing in Dubai and on the basis that what had been done had been properly authorised by Mr Al Tajir, the scheme and the payments made under it were not dishonest.
Mr Al Tajir's evidence, however, was that he had ceased to be Director of the Ruler's Affairs in 1981, and thereafter had no formal role in the government of Dubai or in the administration of Dubal. His interest in Dubal thereafter was purely that of an interested and informed private businessman. The approach regarding an alliance with Richco had come from Mr Livingstone, who asked him to contact Marc Rich personally. Marc Rich was a neighbour in St Moritz and good friend. He did contact him, and agreed with Mr Rich that he would receive from Richco 1% of the value of the transaction, however it might be structured. Independently, Mr Livingstone had also approached Mr Salaam on the subject of the alliance: he explained this to Mr Al Tajir as being useful for the negotiation and implementation of the alliance. Mr Al Tajir asked Mr Livingstone to clear the matter with Sheikh Hamdan, one of the Ruler's sons and chairman of Dubal. He had no knowledge of the payments made to Mr Salaam or Mr Livingstone, or of any dishonesty, until he heard of Dubal's action against Mr Livingstone. He had not even realised that payments related to the Richco alliance had been arriving into the account of Al Tajir Limited. I was told that Mr Al Tajir had been intending to give evidence in person: at the last moment, however, he was unable to do so, for he was taken into hospital with chest pains, for examination and rest. I was provided with a letter from his cardiologist explaining the matter. In the circumstances, his witness statement was admitted as his evidence, but there was no opportunity to test it by cross-examination.
Richco's case was supported, so far as evidence went, by Mr Willy Strotthote. In 1987 he had been head of metals and minerals trading at Richco. He said that he had not been party to the initial meeting that Mr Rich had had with the scheme's promoters, but that he was given instructions to put into operation a project for a commercial alliance under which most of the monies payable in the first place to Richco would flow through under subsidiary agreements into the hands of other parties. It was his understanding that the scheme had the approval, through Mr Al Tajir, of the Dubai government. He regarded the Richco consultancy agreement as a genuine agreement, at any rate so far as that portion of the monies payable by Dubal which would remain with Richco was concerned: he put that portion at half of the 2.5% 2commission payable on all Dubal's sales, viz 1.25%, in return for which Richco was to provide, and did provide, genuine consultancy services. The subsidiary agreements, on the other hand, were "a cosmetic arrangement", mere "vehicles for payment", under which there was never any question of any performance being required on the part of Richco's contract partners. He recognised that Nillet, JMS, Valo and Wid were mere front companies for the ultimate beneficiaries of such payments, but he said that he did not know who those beneficiaries were. He was assured by Mr Livingstone and Mr Amhurst that the commercial alliance had to be structured in this way in order to be acceptable to Dubal. It was his understanding, in reliance on Mr Livingstone's executive authority, Mr Al Tajir's political standing and the involvement of a reputable London solicitor, Mr Amhurst (whom he regarded as acting for Dubal rather than Mr Salaam), that the scheme had the approval of Dubal and the government of Dubai. Mr Strothotte was called to give evidence on behalf of Richco, but, because his evidence was also relied on by Dubal, he was not cross-examined on behalf of Dubal.
It had been agreed between the parties, and so ordered, that the trial would take place in two parts. In the first part, all evidence which any of the parties might wish to call whether relevant to the main action or the third party and contribution proceedings would be called, and submissions would be made so far as was relevant to the main action, but not so far as the third party and contribution proceedings were concerned. It was contemplated that submissions in the latter proceedings could not conveniently be addressed, in effect would have to be addressed on too many possible contingencies all of which would be unnecessary if I found wholly in favour of the defendants, for those submissions to take place at the same time as submissions in the main action. It was therefore contemplated that, when my findings of fact over the whole spectrum of the evidence and my decisions in the main action were known, the parties would then proceed, if necessary, to a second hearing for the purpose of submissions in the third party and contribution proceedings.
At the end of the first part of the trial, however, I proposed to the parties for their consideration a procedure which might be more convenient to them. I proposed making, after a short adjournment of a day or two, what I termed "unreasoned findings" as to the liability of the defendants and as to the honesty of all parties whose honesty was in issue. Armed with those findings, the parties could then proceed to draw up written submissions so that the second part of the trial, dealing with contribution, could take place promptly. That proposal was adopted by the parties. In the circumstances I published my "Unreasoned Findings" on 6 November 1997, and heard further submissions in the contribution proceedings one week later.
In my "Unreasoned Findings" I found as follows:
1. Mr Ian Livingstone (the First Third Party) was in breach of his fiduciary duties as Chief Executive of Dubai Aluminium Company ("Dubal") in connection with the promotion and organisation and operation of a scheme, involving the making and operation of the Richco Consultancy Agreement and the Subsidiary Agreements (collectively the "Agreements"), for the payment of monies to be derived from Dubal, routed through Marc Rich & Co AG ("Richco", the Second Third Party, now known as Glencore International AG) and paid to participants in the scheme (the "scheme"); and in so doing dishonestly received US$6,327,918.09 as one of the participants. The consequence of his breach(es) of fiduciary duty was the loss to Dubal of a gross sum of $50,117,622.
2. Mr Hany Salaam (the First Defendant) dishonestly assisted Mr Livingstone in that breach of fiduciary duty by participating in the promotion, organisation and operation of the scheme. His dishonest assistance led to the whole of the gross loss to Dubal of $50,117,662. He, either personally or through his companies Nillet Development Incorporated ("Nillet") and Japan Metal Sales Corporation ("JMS"), the Fifth and Sixth Defendants, dishonestly received $21,846,488.39 as a participant in the scheme.
3. Nillet dishonestly received $2,975,000. JMS dishonestly received $8,270,985.33.
4. Mr Anthony Amhurst (the Second Defendant) and the firms of Amhurst Brown Martin & Nicholson ("ABMN", the Third Defendants) and Amhurst Brown Colombotti ("ABC", the Fourth Defendants) have settled Dubal's claims against them on terms providing for the payment of $10,000,000 to Dubal and the withdrawal of all allegations against them. I am informed that Mr Amhurst is making no contribution to that payment, and that the whole of the $10,000,000 is to be provided by ABMN and ABC. For the purposes of any contribution proceedings I must assume, in accordance with section 1(4) of the Civil Liability (Contribution) Act 1978 that the factual basis of the claim made against Mr Amhurst could have been established. There remains, I am told, an issue as to whether, on the factual basis pleaded in Dubal's claim, ABMN and ABC would have been liable.
5. H.E. Mr Mohamed Al Tajir (the Third Third Party) dishonestly assisted Mr Livingstone in the latter's breach of fiduciary duty by participating in the promotion, organisation and operation of the scheme. He dishonestly received $15,604,878.04 as a participant.
6. Mr Tajir did not have authority, whether actual or ostensible, from the Ruler of Dubai at the relevant time, HH Sheikh Rashid, nor from the Government of Dubai nor from the ultimate owners of Dubal, to authorise the scheme or the Agreements or the payments made under them, and there was no honest belief by any of the participants in such authority.
7. Richco dishonestly assisted Mr Livingstone in his breach of fiduciary duty by participating in the organisation and operation of the scheme. All of the gross sum of $50,117,622 was paid to Richco. Richco in turn paid a total of $49,780,944 to the participants (or at their direction) under the Subsidiary Agreements, either (up to 23.1.91) out of sums already received under the Richco Consultancy Agreement ("RCA") or (in respect of the capitalised payments referred to in paragraph 8 below) out of such sums as well as in anticipation of sums to be received under the RCA and secured by means of a Performance Bond dated 18 February 1991.
8. Under the Agreements Richco was in effect to retain up to one fifth (20%) of the fee of 2.5% on the value of all sales of Dubal's products provided for under the Agreements. However, by reason of the capitalised payments made to the participants in discharge of the Subsidiary Agreements in March/April 1991 combined with the early termination of the RCA as of 22 March 1993, Richco had by that termination date received $50,117,944 under the RCA and paid to or at the direction of the participants $49,780,944 under the Subsidiary Agreements.
9. In ordinary circumstances Richco would have been entitled to charge Dubal a fee in return for services rendered under the RCA, and one fifth of 2.5%, ie 0.5%, of the value of all sales of Dubal's products would have been a reasonable and legitimate fee. In the absence of any documentary evidence of the provision of such services, however, it is impossible to find that any such services were in fact provided or to evaluate the value of such services if perchance any were. No services were expected to be rendered to Richco under the Subsidiary Agreements, nor were they. In the context of the scheme as a whole, the margin of 0.5% to be earned by Richco under the RCA and the Subsidiary Agreements cannot be regarded as a legitimate fee rather than the price demanded by Richco or allocated to Richco for Richco's participation in the scheme.
10. Each of Mr Livingstone, Mr Salaam, Mr Amhurst, Mr Al Tajir and Richco were participants in the scheme, and Mr Amhurst must be treated as dishonestly assisting the scheme in his role as a solicitor. Their relative responsibility falls to be debated further in the contribution proceedings. Subject to such further submissions, I find that each of them played an important and substantial, and not merely peripheral or incidental, role in the scheme. Alone of them, however, Mr Amhurst received nothing by reason of his assistance - other than the professional fees paid to his firm in respect of his work.
11. In March 1995 Dubal commenced proceedings against Mr Livingstone in respect of claims arising out of the scheme as well as other claims. Those proceedings were settled by the payment to Dubal of what Dubal concedes to be (some) $15,540,000. The settlement agreement makes no allocation of any part of that sum as between the claims common to the Livingstone and the present proceedings on the one hand and other claims on the other hand. Dubal gives credit to Mr Salaam in respect of that settlement in the sum of $6,327,918.09, thus reducing their claim in knowing assistance against Mr Salaam from the gross sum of $50,117,622 to $43,789,703.91; but Dubal has failed to prove that the admitted recovery arising out of the Livingstone settlement is to be limited to the sum of $6,327,918.09.
12. I find Dubal's claim in knowing assistance against Mr Salaam to be made good in the sum of $43,789,703.91 plus interest less a credit to be given in respect of the balance of the recovery under the Livingstone settlement in the sum of $9,212,081.91 and less also the sum of $10,000,000 to be received under the Amhurst settlement. Interest will itself have to be adjusted to take account of the timing of the respective payments under the settlements.
13. Dubal's alternative claims in knowing receipt prima facie succeed as against Mr Salaam in the sum of $21,846,488.39, as against Nillet in the sum of $2,975,000 and as against JMS in the sum of $8,270,985.33, plus interest. There may have to be further submissions as to the interrelationship of the various liabilities and credits.
On the occasion of the further submissions on contribution, the Amhurst defendants, who at the first part of the trial had been represented by a single team of solicitors and barristers spearheaded by Mr Anthony Boswood QC, were now in a position where Mr Amhurst himself and ABMN/ABC had to be separately represented. Only ABMN and ABC had contributed to the payment of monies under the settlement agreement with Dubal, and therefore only ABMN and ABC were in the position of claiming a contribution from others. Mr Amhurst, who on this occasion was represented by Mr George Leggatt QC, was facing claims for contribution from the Salaam defendants.
The essential structure of the contribution claims can be summarised as follows. The Salaam defendants sought contribution from the Amhurst defendants, Richco and Mr Al Tajir (but not from Mr Livingstone). ABMN and ABC (other than Mr Amhurst) sought contribution from the Salaam defendants, Mr Livingstone and Mr Al Tajir (but not from Richco). The third parties (Mr Livingstone, Richco and Mr Al Tajir) did not seek contribution from anyone, save that late in the trial Mr Al Tajir formulated a contingent claim against Mr Amhurst.
At the time of the further submissions on contribution, I was informed by Mr Malek QC, on behalf of Mr Al Tajir, that a settlement between Mr Al Tajir and Dubal was likely. This subsequently came to fruition while I was preparing my judgment and I was informed of it. It provides for the payment of $18 million by Mr Al Tajir to Dubal, in three instalments of $6 million each, the first on 31 January 1998, the second on 31 December 1998 and the third on 31 December 1999. The payment is expressed to be "in full and final settlement of the claims against the Third Third Party in respect of the subject matter of the Action" and to be inclusive of interest and costs. Dubal agreed that it would upon signature of the settlement agreement give credit in the sum of $18 million against its claims in these proceedings against the Salaam defendants. The effect of this settlement, therefore, was that, for instance in the case of Mr Salaam, Dubal's claim had at that time fallen to: $50,117,622 plus interest and costs less $6,327,918.09 (the Livingstone settlement), $9,250,000 (the Amhurst settlement) and then $18,000,000 (the Al Tajir settlement).
Finally, there came the last of all the settlements, which I shall refer to as the Salaam settlement. At that time the Salaam defendants were of course the only outstanding defendants in the proceedings. Just as I was completing my judgment and preparing to put the parties on notice to stand by for its distribution in draft, I was asked if I would be willing to postpone judgment to enable Dubal and the Salaam defendants to reach agreement, if they could. Having consulted all the parties, I agreed, since they all wished me to do so, to postpone judgment for a defined time. At the end of that period, having heard that no settlement had been reached, I gave notice that I would distribute my draft judgment: the parties had informed me that they would in any event wish to address me further on interest rates, which was relevant inter alia to my final dispositions in the contribution proceedings. I was then requested, again with the consent of all the parties, to grant a further period to enable Dubal and the Salaam defendants to reach a settlement. When that further time expired, my draft judgment was distributed. The Salaam settlement then occurred, on the eve of the appointed hearing and became unconditional on the morning of the hearing, 1 June 1998. At that hearing the consequences of that settlement was discussed, and it was agreed as I have already mentioned that, despite that settlement and thus the conclusion of the primary proceedings, my judgment should be perfected nevertheless, with only such minimal changes as were necessary to refer to the Salaam settlement and to take it into account. There were also at that time further submissions on interest rates and their ramifications. I shall revert to the latter below, when I come to the contribution proceedings.
The Salaam settlement was in the total sum of $18,000,000 in full and final settlement of all Dubal's claims against the Salaam defendants in this action. Of that sum, $3,000,000 had already been paid on 2 April 1998, a further $6,000,000 was paid on 1 June 1998 itself, a further $3,000,000 was to be paid within 90 days of 27 May 1998 - by my calculation by 25 August 1998, and the final instalment of $6,000,000 was to be paid by 31 December 1999.
I was also then informed that, as part of that settlement, the Salaam defendants had dropped their third party claim against Richco. There was no other third party claim against Richco. As it happened, I had made no financial disposition against Richco in my draft judgment: consequently there was nothing in substance to amend in that respect. It was, nevertheless, submitted on behalf of Richco that findings, or at any rate some findings, that I had already made concerning Richco should be treated as assumptions rather than findings. It seems to me that that was unrealistic. It was accepted by Richco that my Unreasoned Findings would have to stand in any event. My judgment explains those Findings. The findings that I make, upon all the evidence I have heard, are inextricably interconnected. In order to do justice between the parties in the contribution proceedings I have in any event had to apportion responsibility between the various parties.
Before returning to explain my reasons for the decisions which I notified to the parties at the end of the first part of the trial, I need to set out the background facts in further detail.
I shall begin, out of chronological sequence, but having regard for the central place which they play in the story, with the terms of the Richco consultancy agreement and the subsidiary agreements themselves.
The Richco consultancy agreement and the subsidiary agreements
The Richco consultancy agreement begins with a preamble which seeks to explain the agreement's commercial logic. Since such matters are relied upon in support of the genuineness of the scheme, I set them out:
1. possesses the world's largest multi-source alumina supply system and DUBAL wishes to become less reliant on a single source of supply;
2. has developed highly successful commercial information and management systems and a recognised expertise in the techniques of the terminal market for aluminium which has become the overriding influence on aluminium prices;
3. has an international aluminium trading system, handling some 1.5 million tonnes of metal annually in all major markets and feeding its aforementioned commercial information and management systems;
4. has widely established participation within producers' and consumers' systems through its tolling conversion and swapping arrangements, enabling revenues to be maximised
and WHEREAS DUBAL
5. has established an international reputation for its products but is a non-integrated producer, lacking the aforementioned capabilities and yet obliged to compete in a rapidly changing industry with integrated, multinational organisations."
Clause 1 then set out the essence of the agreement, which was to make Richco the "sole and exclusive commercial consultant" both for the sale of all Dubal's products throughout the world (the only exception being territories to which exports by Dubal might be prohibited by law) and for the purchase of Dubal's alumina requirements. The term of the agreement was by clause 2 stated to run for initially 10 years and 4 months from 1 September 1987 to 31 December 1997 and thereafter for an evergreen period on 12 months notice by either party. The only right by Dubal to terminate the agreement within the initial 10 year period was for breach, or in the event of Richco's liquidation or change of control (clause 8). No express right of termination was given to Richco. There was no provision for the assessment of Richco's performance. Richco's obligations were set out in clause 3 which in its lettered sub-paragraphs (a) to (s) provided for a range of services (among a number of prohibitions), of which the following is a sample: to advise on effective hedging procedures; to use best endeavours to promote and extend sales of Dubal's products by means of personal visits, correspondence and advertising; to safeguard Dubal's trademarks and intellectual property rights; to bring to Dubal's attention any useful marketing information; to act in relation to the sale, distribution and exploitation of Dubal's products in Dubal's best interests; to seek to procure orders from any person whom Dubal has advised Richco to be a potential customer; to supply reports and other information upon written request or at designated intervals; to assist upon request in the collection of debts; to explore opportunities to acquire or participate in alumina production facilities; to develop active trading in aluminium and alumina; and to help to ensure continuity of effective management of Dubal's commercial functions, including assistance in the training of Dubal's personnel. It will be observed that such services are an amalgam of those of a management consultant, a sales agent, a marketing consultant, a financial and strategic adviser, and a management trainer.
The fees to be paid to Richco for such services were set out in clause 7 and the Third Schedule. There were three elements to such fees:
(1) a "once-for-all establishment fee" of $2,000,000;
(2) a fixed fee of $85,000 per month;
(3) a fee of 2.5% of the sales value of all Dubal's sales.
Under the subsidiary agreements, the whole of these services, and the whole of the first two fee elements and effectively 80% of the third were sub-contracted to Mr Salaam's Panamanian companies. For reasons which are not clear, the sub-contracting was done to four separate companies, and in the case of the JMS and Valo contracts, there were two versions. Although all the subsidiary agreements were dated 1 September 1987, it would appear that only the original versions of the JMS and Valo contracts were made at that time, and that all the others were made in about March 1988. The position is essentially as follows.
Under the original versions of the JMS and Valo contracts, the period of the agreement was the same as in the Richco head contract: thus clause 2 stated that they should remain in force "for an identical term to the Primary Agreement". The JMS contract appears to have been the leading contract among the subsidiary agreements, for it alone contains recitals. These state that JMS had for several months been in detailed negotiations with Dubal concerning the latter's desire to alter its approach towards aluminium sales, and that as a result JMS had with Dubal's approval invited Richco to enter into a direct relationship with Dubal, leading to both the Richco consultancy agreement (there called the "Primary Agreement") and to the ASA (there the "Supply Agreement"). The recitals then conclude:
"Richco acknowledges the value of JMS in having brought the Primary Agreement and the Supply Agreement to it and recognises the need and assistance of JMS in carrying out Richco's obligations under the Primary Agreement and the obligation of its affiliate Clarendon Limited under the Supply Agreement".
Clause 1 of the JMS contract then provides that Richco appoints JMS and "subject to the provisions of Clause 5 hereof" JMS agrees to act as "Richco's adviser and consultant" in the carrying out by Richco of its duties and obligations under the Richco consultancy agreement, with the exception of those services dealt with in the last four sub-paragraphs, viz (p) (q) (r) and (s), of clause 3 of that agreement. The services dealt with in those four sub-paragraphs are the subject-matter of the Valo contract. Clause 5, which appears in identical form in all the subsidiary agreements provides as follows:
"Richco hereby acknowledges that there are no circumstances and will be no circumstances hereafter relating either directly or indirectly to the activity of or lack of performance of JMS [Valo etc] in relation to this Agreement or howsoever at the date hereof or any time during the existence of this Agreement which would entitle Richco to terminate this Agreement."
In other words, JMS and the other companies could do nothing whatsoever to earn their fees under the subsidiary agreements (which is what happened) but would still be entitled to them, for as long as the full term of those agreements.
As for those fees, the JMS and Valo contracts provided respectively as follows. JMS was to receive (a) half of the 2.5% fee on sales provided for in the Richco consultancy agreement, and in addition (b) a fee of $5 per tonne of alumina supplied by Clarendon under the ASA plus a fee of $2 per tonne of alumina traded between Dubal and Richco and/or Clarendon in addition to the annual tonnage supplied pursuant to the ASA (the "$5s and $2s"). The JMS contract made it clear that the $5s and the $2s were intended to be an alternative compensation to JMS for what had earlier been proposed more simply as a straightforward 80% of the 2.5% fee on sales. Thus clause 6(vi) of the JMS contract provided that -
"it is acknowledged by the parties that the original agreement to apportion the fees (hereinafter called "original apportionment") due under Clause 6(i) on the basis of 80% to JMS and 20% to Richco has been superseded through the granting of the Supply Agreement relating to Alumina and through amending the fees due on Aluminium to a 50/50 apportionment between the parties as now provided in Clause 6(i) nevertheless the parties wish to maintain the benefit of the original apportionment as above and therefore agree as follows..."
and there then followed complex provisions to ensure that JMS would receive a sum equivalent to up to 80% of the 2.5% fee on sales. (I simplify somewhat: thus any surplus above 80% generated by the $2s was to be carried forward to be available in future years to fund future deficits below 80% or ultimately to be shared at the end of the contract 50/50 between Richco and JMS. Moreover, the $2s were only to be available to JMS after an initial $1,000,000 excess had been generated for Clarendon's account: but that $1,000,000 was to be paid out to Valo under clause 6(ii) of the Valo contract, a detail I mention only here. In effect, under these compensatory arrangements, JMS/Valo were taking the theoretical risk that the $5s and the $2s would not generate sufficient funds to make good the whole of the difference between 50% and 80% of the 2.5% fee on sales. In practice, however, no one has suggested that the risk was other than immaterial.) Meanwhile the Valo contract provided for the payment to Valo of the $2,000,000 establishment fee and the fee of $85,000 per month. Thus, by reason of the first versions of the JMS and Valo contracts, the whole of the fees payable under the Richco consultancy agreement, with the exception only of 20% of the 2.5% fee on sales, was to be paid to JMS or Valo throughout the life of the Richco consultancy agreement.
Come March 1988 these first versions of the JMS and Valo contracts were replaced by four new contracts. For present purposes the sole relevant differences related to the periods during which and parties to whom such payments were to be made. Thus under the second version of the JMS contract its period was restricted to the 7 or so years ending on 30 September 1994. The payments which would have been made to JMS under the first version after that date were now to be paid to Wid: thus the Wid contract stated that it started on 1 October 1994 and would remain in force for as long as the Richco consultancy agreement was in force. Similarly, under the second version of the Valo contract its period was limited to the six months commencing on 1 September 1987 and ending on 29 February 1988: the payments which would have been made to Valo under the first version after the latter date were now to be paid to Nillet. As before, however, the whole of the fees payable to Richco by Dubal, with the exception of 20% of the 2.5% fee on sales, was to be paid out to one or other of Mr Salaam's Panamanian companies over the life of the Richco consultancy agreement. The explanation for these changes and multiplication of "adviser[s] and consultant[s]" was never vouchsafed. It may be that the on-payment of the fees was split either to make the subsidiary agreements more flexible for the purpose of their use as collateral, or to disguise the destination of the fees, or both. It may be that, as Mr Salaam said, the Wid contract was for himself alone, as a post-dated "kicker": but whether that was something agreed with his partner Mr Al Tajir, I do not know but doubt. Since the scheme did not survive into October 1994, I cannot tell for sure.
Since the subsidiary agreements make reference to the ASA, and indeed the payment of the $5s and $2s depends on the ASA, I should say something further about that agreement here. It was also dated 1 September 1987 and was given the same term as the Richco consultancy agreement. It operated on a calendar year basis, commencing with 1988. For each year Clarendon agreed to sell, and Dubal agreed to buy a base quantity of 260,000 tonnes of alumina, with options to increase or decrease. For the purpose of the $5s, that base quantity would alone generate a fee income under the subsidiary agreements of $1,300,000. The price was determinable by a formula dependent on the London Metal Exchange ("LME") market price for aluminium (ie the product, not the raw material) averaged out over each month, on the deemed basis that the annual supply would be delivered in twelve equal instalments over the twelve months of the year. There was a put and call option arrangement to determine aluminium prices in the years after 1988. Although the ASA contained full terms for the physical delivery of alumina, the contract contemplated that in at any rate 1988 and 1989 Dubal would be primarily supplied by its pre-existing supplier, Alcoa, and the ASA would for those years operate only as a contract for differences, in the sense that if the price payable by Dubal to Alcoa were lower than the ASA formula price, then Dubal would pay the difference to Clarendon, and vice versa. In effect, therefore, the ASA guaranteed to Dubal a source of supply for 10 years at a price, related to the market price of aluminium in 1988, and thereafter determined by put and call options.
As matters turned out, Dubal did well out of the ASA for two years, until the pricing formula was changed by an amendment in September 1989. After that, Dubal did badly.
A consideration of the terms of the Richco consultancy agreement and the subsidiary agreements standing by themselves raise obvious questions as to the commercial sense and indeed propriety of what is going on. If, as the recitals to the Richco consultancy agreement suggest, Richco is such a powerful and useful partner in a commercial alliance, why is there any need for Richco itself to sub-contract its services to four Panamanian companies, creatures of Mr Salaam, at the cost of practically the whole of the earnings to be derived under it? Why should Dubal want to rely on the Panamanian companies' advice and assistance rather than on Richco's? And even if Dubal did want advice and assistance from the Panamanian companies, why not contract directly with them? What evidence is there that Richco performed any services under the Richco consultancy agreement? What evidence is there that JMS, Valo and/or Nillet performed any services? Why should clause 5 of the subsidiary agreements state that the Panamanian companies should be entitled to their fees even if they had done nothing to earn them? Why is there no right in Dubal to terminate its obligations on giving suitable notice within the ten year period?
Dubai, the Dubal smelter, and Gulf Resources Corporation
I now have to set the Richco consultancy agreement in its historical context.
Dubai is one of the Gulf emirates, part of the United Arab Emirates (UAE). In the eighteenth century it was a fishing village. The dynasty of the al-Maktoum family in Dubai was established by Maktoum bin Buti, who ruled there until his death in 1852. HH Sheikh Rashid bin Sa'id al-Maktoum ("Sheikh Rashid)" came to power in 1958. As Ruler he traditionally enjoyed absolute discretion in financial affairs, tempered only by tradition and not by institutional limitations. He could dispense funds and gifts to members of the royal family and other notables, as dictated by tradition and as he deemed fit. With the discovery of oil in Dubai, pressures towards urbanisation and modernisation increased, but the Ruler continued to retain absolute powers particularly over financial affairs. Even today, the distinction between public and private monies is ambiguous. Sheikh Rashid is credited during his reign, until the stroke which totally incapacitated him in 1981, with steering his emirate with wisdom and foresight towards its modern prosperity as one of the trading entrepots of the region. It was only in 1969 that Dubai produced its first oil, from which time it has developed fast from its trading origins into the modern economic state it is today. In 1971 Dubai became one of the seven founding emirates of the UAE, a federation with a central constitution, but within each individual emirate power remained in the hands of the Ruler and his family. In the words of one writer,
"The government of Dubai has been described as a vast holding company in which the Ruler acts as chairman, governing board and chief executive"..."[The] Ruler stands at the apex of decision making process." (John Duke Anthony, Arab States of the Lower Gulf: People, Politics, Petroleum, Washington DC The Middle East Institute, 1975, at pp 154/5.)
Sheikh Rashid died in October 1990, and was succeeded by his eldest son, HH Sheikh Maktoum Bin Rashid Al Maktoum ("Sheikh Maktoum", the present Ruler of Dubai). His second son, and the present deputy Ruler, is Sheikh Hamdan bin Rashid Al Maktoum ("Sheikh Hamdan"). He has been chairman of Dubal since its incorporation in 1975. Sheikh Rashid's third son, Sheikh Mohamed bin Rashid Al Maktoum ("Sheikh Mohamed") is the current Crown Prince of Dubai, and since at least 1981 has been in charge of Dubai's oil industry and revenues.
During Sheikh Rashid's reign, until incapacity overtook him in 1981, his most powerful representative and confidant, outside the immediate royal family, was Mr Al Tajir. It is said that such a representative answers only to the Ruler, and his fortunes rise and fall with those of the Ruler: his authority becomes, for all practical purposes, equal to that of the Ruler himself. As such, he is likely, with the express or even tacit approval of the Ruler, to accumulate great wealth by means of commissions not only from foreign businesses which he is asked to sponsor within Dubai (all foreign businesses need a sponsor in Dubai), but even from the domestic affairs over which as royal representative he has responsibility within Dubai.
In 1963 Mr Al Tajir became Director of HH the Ruler's Affairs and Petroleum Affairs and effectively the most powerful man in Dubai after the Ruler himself. There is an issue as to whether he ceased to hold that position in 1981 when Sheikh Rashid was incapacitated. I shall refer to that issue in greater detail below. For the moment I will simply record my finding that, in accordance with the evidence of Mr Al Tajir himself and of Sheikh Hamdam, albeit neither of those could be cross-examined on their statements, Mr Al Tajir did lose or resign his position in 1981 with the downfall of Sheikh Rashid's health and thus the waning of his personal power. Mr Al Tajir thenceforth gave up his office in the offices of the Ruler's Department and operated from his home. He remained, however, UAE Ambassador to the Court of St James, an Emirates post, until 1987. There is nevertheless no dispute that at least up to 1981 Mr Al Tajir spoke for the Ruler, and played an active role, in connection with the affairs of the project for the construction of an aluminium smelter in Dubai and ultimately of Dubal itself.
Dubal was created by decree on 5 May 1975. The decision to build an aluminium smelter in Dubai owed much of course to the presence in the Gulf and in particular in Dubai of plentiful supplies of cheap energy, which is essential for such a plant, but was also due to Sheikh Rashid's vision of industrialising Dubai and to the support of Mr Al Tajir for the enterprise. Mr Salaam, who had been involved in the development of aluminium and chemical plants in the Gulf, was himself an early exponent of the idea of an aluminium smelter for Dubai. Sheikh Rashid started out as owner initially of 80% of Dubal's shares, but before long acquired the remaining 20%. The development of the smelter was financed entirely by him. Dubal was therefore owned and financed by the Ruler, and his second son, Sheikh Hamdan was installed as chairman.
In February 1978 Mr Livingstone, who was by profession a chartered accountant but had long worked in industry, commenced work as managing director of Dubal. Mr Al Tajir was instrumental in that appointment, although Mr Livingstone's recommendation came from Dubal's then deputy chairman, Mr Paul Brauner, who was also chairman of British Smelter Constructions Ltd ("BSCL"). That company was the constructor of the smelter, and had previously built the Alba (Aluminium Bahrain) smelter in Bahrain. Mr Livingstone had been first finance manager and then general manager at Alba since February 1971, and had guided it through the final stages of construction into start-up and then established production. In 1975 he had been awarded the CBE, with the approval of the government of Bahrain, for services to British commercial interests on account of the success of the Alba project. In October 1979 Mr Livingstone succeeded Mr Brauner as deputy chairman and a director of Dubal and also became its chief executive. At the same time he was granted two powers of attorney, in identical terms save that one was governed by Dubai law and the other by English law. By clause 1 of each Mr Livingstone was empowered -
"To transact, manage, carry on and do all and every business matter deemed requisite and necessary or in any manner connected with or having reference to the business and affairs of the company in relation to the financing of the company's business, the placing of contracts and all other relevant matters of whatsoever nature pertaining to the whole of the company's undertaking and business including without limiting the generality thereof its smelter and related products in Dubai and elsewhere"
and by clause 9 he was authorised -
"To execute sign enter into acknowledge perfect and do all such deals agreements instruments acts and things which will be requisite for or in relation to all or any of the purposes or matters aforesaid."
It is common ground that by reason of his appointment as chief executive, director and attorney of Dubal, there was a fiduciary relationship between Mr Livingstone and Dubal and a fiduciary duty owed by the former to protect the latter and its assets.
Mr Salaam and the GRC Management Agreement
On 29 October 1979, on the same day that Mr Livingstone entered upon his new appointments and received his powers of attorney, the board of Dubal approved and Mr Livingstone signed on behalf of Dubal a management contract with one of Mr Salaam's Panamanian companies known as Gulf Resources Corporation ("GRC"). The GRC management agreement gave to GRC for twenty years and thereafter on one year's notice responsibility inter alia for the purchase of all Dubal's raw materials, the sale of all its products, the acquisition of all its spares, plant and equipment, the recruitment of all its employees, the provision of advice in the management and investment of all its funds, the provision of general management skills and advice, the development of a range of financial and commercial services and the exploitation of its technological know-how. In return GRC was to be reimbursed all its actual costs and in addition earn fees equal to 2% of Dubal's purchases of raw materials, 3.5% of its sales (reducing in stages to 2.5% [Originally 1.5%, but increased by amendment in December 1981.] from 1982 onwards), 5% of purchases of spares, supplies and services, 15% of the first year's gross annual salary of anyone recruited, and on top of everything else 0.8% of the annual sales turnover of Dubal. GRC had the option of terminating this agreement at the end of every five years of the initial twenty, but Dubal could not terminate within that initial period. Since GRC's fees were on top of the reimbursement of its actual costs, it was a very profitable contract.
Mr Salaam was born in Beirut in 1937 into a Lebanese family prominent both in politics and in business. Over the last half century or so his family has provided three prime ministers of Lebanon and one of Jordan, has founded Middle East Airlines, and has played an important role in the business development of the Gulf states. Mr Salaam's own career has straddled business and politics. He was asked on several occasions to form a cabinet in Lebanon, but had to decline. In 1986 and 1987 he acted as an envoy of the President of Lebanon in diplomatic efforts to end the Lebanese civil war. He is on personal terms with members of the ruling families of many Arab states. He is an engineer by training. His first business venture was a construction company in Kuwait. In the 1960s he allied himself with the new opportunities which the Gulf's oil wealth created, and which led to large-scale construction projects. He was invited by the Bahraini minister of development who was also chairman of Alba to assist with the development of that project. It was in that context that he first came into contact, albeit briefly, with Mr Livingstone.
Mr Salaam has known Mr Al Tajir for some thirty years. He was first introduced to him in Lebanon at a time when Mr Al Tajir was already the Director of the Ruler of Dubai's Affairs. The two began a business association which has had its ups and downs but which certainly continued into the time with which these proceedings are concerned. They began by purchasing the American Life Building in Beirut on a 50/50 basis. The building is still the headquarters of Mr Salaam's corporate affairs. They also became partners in the purchase of the Fidelity Bank building in Philadelphia. Mr Salaam always regarded Mr Al Tajir as speaking with the authority of the Ruler of Dubai, and claimed to continue so to regard him even beyond the Ruler's stroke in 1981 and down to his death in 1990.
In about 1971 Mr Salaam was touring the Gulf states with the chairman of Kaiser Aluminium, seeking to promote a "Grand Smelter Scheme", for the repetition of the Alba project in other nations such as Saudi Arabia, Qatar, Abu Dhabi and Dubai. He met Sheikh Rashid and Mr Al Tajir in Dubai in connection with these ideas. There was talk of letters of intent, which however came to nothing. Instead, Dubai turned to BSCL (a company within the Wimpey group) for the construction of the Dubal smelter. Then in 1979 Mr Al Tajir personally invited Mr Salaam to lend his aid to Dubal. The outcome of that invitation was the GRC management agreement.
The evidence before me concerning that agreement was not so much in conflict, as conducted at wholly separate levels. Dubal's thesis in this connection was that the GRC management agreement was an attempt, a very successful attempt, to fleece Dubal, orchestrated by Mr Salaam, Mr Al Tajir and Mr Livingstone: in other words a prototype of the Richco consultancy agreement scheme. Mr Salaam's thesis, on the other hand was that in 1979 the Dubal project was in danger of collapse, with the potential loss of the vast funds which had been invested in it: that he and his organisation (GRC was specifically created for the purpose) were brought in to conduct a rescue operation, and had succeeded in completing the project and establishing Dubal as a world-class smelter; and that GRC had then been rewarded by being forced out of its contract. To determine the full rights and wrongs of those competing theses is certainly beyond the scope of these proceedings. Indeed, Dubal's opening submissions introduced the GRC management agreement for the purpose of a much narrower and more focused submission. Thus, to quote its opening skeleton:
"There is no issue in this action as to the merits or otherwise of the GRC management agreement. Its significance to the issues in this action lies...in the dealings between Mr Salaam, Mr Amhurst and Mr Livingstone in relation to GRC; and...in the circumstances in which it came to an end..."
What then were those dealings and circumstances? First, Mr Livingstone was a director of GRC. It might seem surprising that that was so, since Mr Livingstone was the chief executive of the employer of GRC under the management agreement, and there was obvious potential for conflict of interest. Later, in March 1982, Mr Amhurst became a director and secretary of GRC. It is plain that Mr Salaam benefitted from the employment of his company as Dubal's manager, and so did Mr Livingstone. In its action against Mr Livingstone, one of the matters Dubal complained of was his illicit receipt of sums under the GRC agreement. Moreover, in cross-examination both Mr Salaam and Mr Livingstone said that Mr Al Tajir also benefitted from the GRC agreement. Mr Livingstone's cross-examination by Mr Seymour on behalf of Dubal contained this passage (on day 10 at 88/91):
"Q. GRC was thus extremely well remunerated under this agreement, was it not?
A. It was fully remunerated, certainly.
Q. If we wonder why GRC was so handsomely remunerated under this agreement, we perhaps need only remind ourselves of the evidence of Mr Salaam yesterday that Mr Tajir received half of all this money; do you agree with that?
A. Half? I am trying to remember whether it was half.
Q. Mr Salaam's evidence, your recollection may be that Mr Tajir's percentage was different?
A. Why I was hesitating is I am not sure whether Mr Tajir got half of what came from the company, but I do believe he had half of the shares, yes.
Q. It is not very difficult to see what the half would have been. It would have been half of all the fees received, no account having to be taken of any expenses because they were covered separately; that is right, is it not?
A. Yes, more or less.
Q. What did you get?
A. Very little.
Q. Tell his Lordship how little.
A. It was supposed to be, after the thing was done I was informed that I would get 10 per cent of what Mr Tajir got.
Q. Who else was in for a share?
A. Mr Tajir of course, Mr Salaam's companies, and that was it, as far as I know....
Q. You see, what we have got here at the outset of your involvement with the Dubai Aluminium Company, I suggest, is an agreement being put in place, the object of which, at least from your personal points of view, and by you I mean you personally, Mr Al Tajir and Mr Salaam, was to steal money from Dubal?
A. That was certainly not the only objective of the agreement, it would be wrong.
Q. I am not suggesting that nothing was [done], that no services were provided under this agreement... But certainly a feature of this agreement was that it was a means of abstracting cash from Dubal?
A. Inter alia, yes...
Q. Whose idea was it?
A. Well, we were not short, in Dubai, of people with ideas of this kind and I am, unfortunately, in the role that I have, if I was to stay there and build the company, which is what I wanted to do, you had to accommodate these to some degree. That was the environment in which we were and there is as much point in complaining about it as there is complaining about the weather. You have to deal with it, I am afraid.
Q. So you are telling his Lordship that it was Mr Al Tajir's idea?
A. Well, Mr Al Tajir and Mr Salaam put it to me and I went along with it."
As for the circumstances in which the GRC agreement came to an end, they were as follows. Sheikh Rashid suffered his incapacitating stroke in around August/September 1981. By 2 February, the Government of Dubai, in the name of the Ruler but effectively in the form of a committee chaired by Sheikh Mohamed and also containing on it Mr Ahmed Al Tayer, the finance minister of the UAE and a confidant of Sheikh Hamdan, but significantly not Mr Al Tajir, had commissioned a report on Dubal from the accountants, Messrs Price Waterhouse. Their report is dated 25 February 1982. Among its main findings are the following:
"1.02 DUBAL's plant is impressive. The smelter is already producing high quality aluminium at more than its rated capacity of 135,000 tonnes per annum...However the cost of Dh5,654 million is substantially higher than originally envisaged and this has resulted in DUBAL having heavy loan commitments and interest charges...Consequently after interest and depreciation, DUBAL is reporting large losses and continues to require additional finance from the Government...
"1.11 DUBAL entered into a management agreement with Gulf Resources Corporation on 2 October 1979 which commits DUBAL to substantial payments in respect of commissions on sales and purchases and reimbursement of expenses charged by GRC. The total amounts charged to DUBAL for 1980 and 1981 amounted to Dh 16 million and Dh 48 million.
"1.12 We have been unable to ascertain the shareholdings interest in GRC but from what we have so far ascertained it does not appear that either DUBAL or the Government owns the shares.
"1.13 DUBAL's director and chief executive, Mr Livingstone, is also a director of GRC and certain affiliated companies and informed us that these appointments were accepted at the request of the Government of Dubai. We believe there is a conflict of interest in these arrangements which is unsatisfactory...
"1.15 We believe that the amounts paid to GRC are out of proportion to the commercial benefit received by DUBAL and that the service provided by GRC could be wholly or largely carried out by management employed directly by DUBAL or a subsidiary company...
Price Waterhouse therefore recommended that the GRC agreement should be brought to an end, if possible.
As a result of this recommendation, Mr Livingstone began to report to Mr Al Tayer in Dubai and to Mr Amhurst in London in connection with the renegotiation of the GRC agreement. There was discussion about reducing the term of the agreement from 20 years to 10 years, and capping the fees; but the negotiations dragged on in a desultory way. In December 1982 Sheikh Hamdan gave instructions for the termination of the agreement. On 11 March 1983 a meeting took place in Dubai between Sheikh Mohamed and Mr Salaam and his brother. Manuscript notes (in English) of this meeting survive and were disclosed by Mr Amhurst in these proceedings. Item 12 in this document reads as follows:
"New era in Dubai. MRM [Sheikh Mohamed] describing that MMT's [Mr Al Tajir's] ways of business are over."
Mr Salaam was asked about this meeting. He accepted that it had taken place, but denied that the notes of it were his. He said he was unable to say whether they were in his brother's handwriting. He accepted that his brother was at the meeting, and was a protégé of Sheikh Mohamed; also that his brother and Mr Amhurst were in contact with one another. I therefore infer that the notes are those of Mr Saad Salaam. Mr Salaam said that if the notes were his brother's, then they were not trustworthy. However, in an affidavit which Mr Salaam made for the purpose of these proceedings (his third affirmation, at para 83) Mr Salaam had said this:
"I recall that at one stage I was sufficiently frustrated by what was going on and the confused messages which were coming through to GRC that I intervened directly with HH Sheikh Mohamed...What I do clearly recall is that in my audience with HH Sheikh Mohamed while there was, predictably given the political rivalries endemic to Dubai life, a certain amount of invective about HE Mahdi Tajir and the money HH Sheikh Mohamed (no doubt, correctly) believed that he was earning in connection with his stewardship of Dubal and about Mr Livingstone, HH Sheikh Mohamed was not critical of me or GRC..."
Mr Salaam was asked about that passage in his affirmation (at day 8, page 20):
"Q. Would you like to tell his Lordship about the certain amount of invective about Mr Al Tajir at your meeting with Sheikh Mohamed that you refer to in this paragraph?
A. Nothing to do with any criticism of Mr Al Tajir. He just asked about whether we know anything about Gulf Resources trading in oil and I said, "No, Sheikh Mohamed, Gulf Resources did not trade in oil." He said, "Would you know why Mahdi Tajir might have used Gulf Resources?" I said, "I have no idea Sheikh Mohamed." That is the only bit about the invective you were referring to. Nothing to do with any criticism. It was a query.
Q. I do not mean this in any offensive way, Mr Salaam, but could you explain to his Lordship your understanding of the English word "invective"?
A. I thought inquisitive, that is really, and if I have used the wrong word I am sorry.
Q. So a certain amount of invective about Mr Al Tajir should be read as Sheikh Mohamed asked some questions about him, should it?
A. Just one question on oil."
In my judgment, this was unsatisfactory evidence on a point which Dubal had flagged in its opening skeleton as of particular significance. Thus it was there submitted that as a result of the conversation on 11 March 1983 Mr Salaam knew that Mr Al Tajir was not in a position to give authorisation on the part of Dubal or the government of Dubai to any transactions, and in particular not in a position to authorise the payment of any "commission" to any one. I accept that submission: indeed, that was Mr Al Tajir's own evidence, as I have already mentioned.
It was, however, almost another year, 1 March 1984, before Dubal and GRC entered into a new agreement to give effect to the proposed termination of the management agreement. Under the March 1984 agreement GRC's management duties and fees were limited, pending final termination on 1 September 1989. After the March 1984 agreement GRC began to negotiate the capitalised buy-out of its remaining rights: and finally a complete quietus was given to the Dubal/GRC relationship under a termination agreement dated 29 September 1984 which recorded the past payment of some $22 million by Dubal to GRC under the March 1984 agreement and the promise of further payment of $24.5 million to GRC in instalments over the period up to January 1986. Thus it cost Dubal over $46 million to rid itself of GRC.
I do not have to go into the merits or otherwise of the work performed by GRC under its contract with Dubal. Mr Salaam's evidence was to the effect that his help saved the whole project from disaster. He remains bitter to this day that GRC was forced from its position by what he regarded as the wrongful unilateral termination of the GRC management agreement, for which the compensation GRC received made but small amends. He ascribed the process by which GRC was forced from its position as "Dubaisation": he said that nominally the process was put in terms of a direct request by Sheikh Hamdan, but that he "always presumed at the time that Mahdi Tajir was also behind "Dubaisation"".
In my judgment, however, the critical fact behind the rise and fall of GRC was that in 1979 when the management agreement was made, Mr Al Tajir was in the ascendant, whereas after 1981, when Sheikh Rashid suffered an incapacitating stroke, he had lost his power base in Dubai as the representative of the Ruler and the Director of his Affairs. Since Mr Salaam justifies the Richco scheme on the authority or presumed authority of Mr Al Tajir, it is necessary to go into this matter in greater detail, and this is a suitable moment to do so.
Sheikh Rashid remained the Ruler of Dubai until his death in 1990: but from the time of his incapacitating stroke in 1981, his effective rule was over. The court received a clear insight into the destructiveness of Sheikh Rashid's illness and the effect it had on the reins of power from the evidence Mr Jack Briggs. Mr Briggs had served throughout his working life in various police forces in the middle east, and in 1965 became the Commandant of Police in Dubai, at Sheikh Rashid's personal request. He saw Sheikh Rashid every day, as part of his employment. He became a trusted friend. His admiration and affection for the Ruler were clear from his evidence. Sheikh Rashid's first stroke occurred in 1979. It did not render him incapable of performing his duties as Ruler, but his health began to deteriorate and he began to shift the responsibilities of government to his sons. From the time of his second stroke in 1981, however, Sheikh Rashid was confined to a wheelchair, he was blind and incapable of any but a few words. Mr Briggs continued to visit him regularly, faithfully. Mr Briggs would be present when Mr Al Tajir would also visit. Of necessity, of course, no business was, or could be, discussed.
Mr Briggs was well placed to observe and understand the transfer of power which followed on the Ruler's illness. Mr Briggs' evidence was that as the Ruler began to involve his sons in the affairs of government following his initial stroke, so the power of Mr Al Tajir began to wain. In his view it had ceased altogether by the time of the Ruler's second devastating stroke. Mr Briggs exemplified that process by reference to a letter which he was asked by Sheikh Mohamed to approve. He was somewhat uncertain as to the date of this letter, putting it variously at November 1980, or in 1981 or early 1982, and the letter has not itself surfaced into evidence, but what Mr Briggs said about it was as follows. It was a letter written by Sheikh Mohamed to the Dubai oil company, emphasising that Mr Al Tajir no longer had any responsibility or authority for oil affairs, and that he, Sheikh Mohamed, was now in charge of such affairs. Mr Briggs also said that Mr Al Tajir's office at the Ruler's court was vacated shortly afterwards and he ceased thereafter to carry out any duties or functions on behalf of the government of Dubai. I find Mr Briggs' evidence about the vacation of Mr Al Tajir's office to be particularly significant. The official title of that office was the Office of HH the Ruler's Affairs and Petroleum Affairs. It makes sense that if Mr Al Tajir lost control of Petroleum Affairs to Sheikh Mohamed, and lost his role as representative of the Ruler, due to the Ruler's ill-health, then he would lose both his position and his physical station in the Ruler's Office at the Ruler's court. Mr Briggs' recollection was that the office was taken over by the Director of Customs and Ports in 1981. It was put to Mr Briggs on behalf of Mr Livingstone (day 2, page 75) that
"when Sheikh Mohamed took over responsibility for Dubai Petroleum, Mahdi Tajir stopped going to his office every day but still retained his office there, he still retained his desk there and the staff continued to work for him?"
To which Mr Briggs replied "I have no recollection of that whatsoever". Mr Briggs also made it clear that following Mr Al Tajir's exit from an official role in government in Dubai, everyone knew of the change in his status. He said that by 1982 it was well known by everyone in the business community in Dubai or those involved with its government or businesses controlled by it that Mr Al Tajir had ceased to act on behalf of the government. This was despite the fact that no official announcement was ever made. It was his view that it would have been totally untrue as well as out of character for Mr Al Tajir to have claimed to act on behalf of the government of Dubai after 1981. It was well known that acting rulership had passed out of the hands of Sheikh Rashid into those of his eldest son (and the present Ruler) Sheikh Maktoum. As Mr Briggs said (day 10, page 83) in the context of Sheikh Mohamed's letter:
"this sort of thing in the place like Dubai goes round. I mean everybody knows what's happening. It was common knowledge."
In my judgment Mr Briggs was an excellent witness, an independent witness, and I have no hesitation in accepting his evidence as to such matters. It accords with common sense, in that it is to be expected that Mr Al Tajir, whose personal power was linked to that of Sheikh Rashid, would lose his unique position with the effective end of his patron's rule. It is Mr Al Tajir's own evidence that this is what happened, that he had resigned from his position in 1982, and even though Mr Al Tajir was not cross-examined on his witness statement, on such a matter his evidence can hardly fail to carry particular weight. It is in any event corroborated by Mr Briggs. It is also confirmed by the witness statement of Sheikh Hamdan, admitted under the Civil Evidence Act: he also states that Mr Al Tajir resigned and that control of the Ruler's Office was taken over by Sheikh Mohamed in 1981. It is moreover consistent with what happened in connection with the GRC management agreement. To my mind it is no coincidence that by February 1982 an investigation into the GRC contract is being spearheaded by Sheikh Mohamed (even though the chairman of Dubal was Sheikh Hamdan), and that Mr Tayer seems to have taken over from Mr Al Tajir as the government minister most concerned. As Mr Livingstone said, albeit in another context, there was a "changing of the guard".
In these circumstances, the fact that the federal UAE telephone company continued to list Mr Al Tajir up to 1995 as still holding his previous position must, as Sheikh Hamdan has stated, be viewed as an uncorrected error. Similarly Mr Al Tajir's own entry in "Who's Who" continued to list him as Director of the Ruler's Affairs down into the 1990s: but I cannot regard that as significant in the light of Mr Al Tajir's own evidence, quite apart from the other evidence which I have taken into account.
Only Mr Salaam and Mr Livingstone say that Mr Al Tajir remained in power and in office as Sheikh Rashid's representative, at any rate in matters relating to Dubal, and able to authorise the Richco scheme: that is evidence which, for the reasons given above, I cannot accept. Its rejection undermines an essential strand in Mr Salaam's defence in these proceedings. That is something to which I will revert below.
Mr Livingstone's evidence that he was a beneficiary of the GRC management agreement rings true, quite apart from the fact that it gains credibility as evidence against his own interest. I regard his evidence that Mr Al Tajir was also a beneficiary, and a major beneficiary, of the GRC contract with more circumspection: Mr Al Tajir's statement does not deal with the GRC contract at all, and his entry into hospital robbed him of the opportunity of dealing with this aspect. However, cross-examination of Mr Livingstone on behalf of Mr Al Tajir did not challenge that part of his evidence, even though it was designed in general to show up Mr Livingstone in a poor light. Moreover, Mr Salaam's evidence was that in general Mr Al Tajir and he were fifty/fifty partners in their business ventures; as for GRC, he said that Mr Al Tajir had sponsored it in Dubai (every foreign business needed its Dubai sponsor), but more than that, "he was our partner" (day 7, page 101). That would be consistent with what I would infer to be Sheikh Mohamed's criticism of Mr Al Tajir at the meeting with the Salaam brothers in March 1983. I would therefore accept Mr Livingstone's (and Mr Salaam's) evidence regarding Mr Al Tajir's interest in the GRC contract via a 50% shareholding, in GRC. Whether that interest was known to or authorised by Sheikh Rashid is beyond the scope of these proceedings.
The importance of the GRC management contract is therefore this: it shows Mr Salaam, Mr Livingstone and Mr Al Tajir associated in an earlier venture under which the proceeds of a highly profitable management contract with Dubal passed into their hands; and it shows that that contract was brought to an end after the ill-health of Sheikh Rashid had led to the resignation of Mr Al Tajir from his previous role in government as the representative of the Ruler and the Director of the Ruler's Office; and it shows that Sheikh Mohamed, who had effectively succeeded to Mr Al Tajir's position, had told Mr Salaam that Mr Al Tajir's "ways of business are over". These are not propitious circumstances in which to find that the Richco scheme was authorised by Mr Al Tajir as representative of the government or Ruler of Dubai.
The origins of the Richco consultancy agreement
It seems to me that a proper evaluation of the Richco consultancy agreement and its subsidiary agreements must begin with their origins. It is necessary to record the evidence of the major protagonists, to the extent that it was available.
Mr Salaam's evidence
Mr Salaam traced the origins of the scheme to Mr Al Tajir himself. He said that since GRC left Dubai in 1984, despite shared business interests, he only renewed close personal contact with Mr Al Tajir in 1986 when they were both deeply involved as diplomatic go-betweens in the Lebanese peace process. At that time Mr Al Tajir spoke to him about Dubal, apparently with the authority of the Dubai government: Mr Salaam asserted that Mr Al Tajir was still Director of the Ruler's Office and of Petroleum Affairs. He recognised that his influence and presence in government affairs had waned, but that this "did not apply to Dubal...where Mahdi Tajir's authority on behalf of the Dubai Government was unquestioned". Mr Al Tajir told him of his concerns for Dubal: lack of vertical integration, lack of control over its alumina supplies, the need for a fourth potline to increase production and lower costs, the lack of necessary capital, the uncertainty of long term gas supplies for the smelter's energy needs, ultimately Dubal's long term viability. Mr Al Tajir ended by asking him to investigate two things: alternative and additional gas supplies, and the feasibility of opening and running a sales agency operation in the United States.
Mr Salaam said that he set to work on both those requests. He asked his employees at GRC, a Mr Mike Thomas and a Mr Ray Christopherson, to investigate the possibility of alternative gas supplies for Dubal. Nothing ultimately came of this. As for a proposed United States sales agency, this was delegated to his right hand man and chief accountant in his organisation, Mr Alex Ayoub (who unfortunately died in 1991), as well as to his solicitor, Mr Amhurst, in liaison with Mr Livingstone. A Swiss tax structure was developed, and two Panamanian companies were acquired for the venture, Valo and JMS (the latter under its previous name, Giffens Trading and Finance Co SA). Mr Amhurst developed over various drafts a sales agency contract (the "Valo sales agreement"), providing for a commission of 2.5%, a mobilisation fee of $1.5 million, and a monthly payment of $100,000 towards office overheads. This was negotiated with Mr Livingstone and vetted by Dubal's own solicitors, Messrs Allen & Overy. In the end, this project also came to nothing, although Mr Salaam was rather vague about why this was - "I think this may have been because of Alex Ayoub's doubts about its viability".
It was at about this time, said Mr Salaam, that Mr Al Tajir raised with him the subject of the Marc Rich organisation. He asked him to look into whether Richco might potentially be a suitable commercial ally for Dubal. Mr Al Tajir knew Marc Rich personally, they were neighbours in St Moritz, but he needed Mr Salaam to appraise the commercial and technical ramifications of such an alliance. He wanted Mr Salaam to act as a "catalyst", working with Mr Livingstone. Nothing specific was said at that time about remuneration, save that Mr Al Tajir instructed him that their rewards were to come out of the payment (or "pot") which he, Mr Salaam, was to negotiate with Mr Rich. He assumed that there would be a fifty/fifty split between Mr Al Tajir and himself. Mr Al Tajir set up a meeting with Mr Rich, to be attended by Mr Salaam and Mr Livingstone. (That meeting or series of meetings took place on what can be established to be 26 or 27 May 1987). He regarded Mr Livingstone as Mr Al Tajir's and the government's representative. He looked on the detail of the Richco/Dubal side of the arrangement to be a matter for Mr Livingstone to discuss with Richco, while his "essential role" was to persuade Mr Rich himself into an alliance and, if that succeeded, to negotiate with him the terms on which he (Mr Salaam) and Mr Al Tajir were to receive commission for introducing Dubal and Richco to one another. That was discussed in a private meeting between him and Mr Rich, his only meeting with Mr Rich. They negotiated a split of the 2.5% fee on Dubal's sales of 20% for Richco and 80% for Mr Al Tajir and himself. He ascribed the proportions of that split to Mr Rich's interest in the alliance and optimism in bigger and better things. He said of the 80%:
"This payment was essentially in the nature of a fee for being instrumental in effecting the introduction of Dubal to Richco. I should have preferred it if the fee had been paid on a one-off basis or by a few instalments. However, Marc Rich was not prepared to agree that...He wanted [GRC] to be tied-in. At that stage he was not altogether comfortable with the idea of having to deal with Dubal (who he did not know well) alone. He regarded the Gulf in general as my part of the world. He knew that I knew Dubai and Dubal well. In effect, he wanted us in as a safeguard."
He also negotiated the mobilisation fee of $2m and the monthly fees of $85,000 with Mr Rich, but these were not, he said, intended to be split with Mr Al Tajir or even discussed with him. They reflected the fees already negotiated with Dubal in the context of the Valo sales agreement: the $2m was an upfront mobilisation fee, without which he was not prepared to commit GRC's resources, a "show of goodwill and seriousness", and the $85,000 monthly fee was an estimate of the likely costs of an office in Dubai (if one should be needed). ( No office was ever opened.) It was hoped that the alliance would lead to further engineering projects in due course, eg in connection with alternative gas supplies or the proposed fourth potline; there was also the expectation of providing Richco with stand-by consultancy services. It was only as things turned out that, once Mr Rich was comfortable with his relationship with Dubal, he, together with Mr Al Tajir and Mr Livingstone, effectively excluded Mr Salaam from further involvement. However, the Richco consultancy agreement
"was a bona fide agreement, of real and perceived potential benefit to Dubal (as well as Richco); and...Richco agreed to pay my companies, by way of the subsidiary agreements, by way of the reward for the introduction effected as well as to secure our involvement in the operation of the Richco Consultancy Agreement if required..."
Mr Salaam was vague about the reason for the use of four separate companies as signatories to the subsidiary agreements, or for the replacement of the original Valo and JMS agreements by their later versions - he ascribed such details as being the domain of Mr Ayoub and Mr Amhurst. He said, however, that the term of the original version of the JMS agreement was an error, for he was certain that his original agreement with Mr Al Tajir was that the fee to be split between them was only to be for seven years, and that the last three years (ultimately covered by the Wid agreement) was to be for Mr Salaam alone: his expression was that the Wid agreement was to "kick in".
There came a stage, said Mr Salaam, when Mr Al Tajir gave him specific instructions as to the division of the commission arrangements. It was around the time when the original documentation was signed, viz 1 September 1987, but he could not remember where their meeting took place, other than that it was face to face. He said that Mr Al Tajir's instructions were that he should get 40%, Mr Salaam should get 30% and Mr Livingstone should get 30%. He did not regard Mr Livingstone's windfall as unusual: senior executives in the Gulf or Arab world would often be compensated in such form, in the absence of share options or the other elements of a remuneration package which might have been available in the West. However, Mr Salaam was not happy: he had thought that he would share the commission equally with Mr Al Tajir. Worse was to come, for his brother Saad found out about the commission arrangements and demanded a share, on the basis ("quite wrongly", said Mr Salaam) that the Richco scheme was a continuation of the GRC management agreement, in which it had been agreed that Saad Salaam would receive a share for running the Dubai office. Saad Salaam intervened directly with Mr Al Tajir at around the turn of 1987/88, the upshot of which was that Mr Al Tajir directed that Saad was to receive 15% of the available commission. This was effected through Mr Livingstone and with the aid of Mr Amhurst: on 28 February 1988 Mr Amhurst instructed Richco on behalf of JMS (and Valo) that 15% of the amount payable to those subsidiaries should be paid to a separate account at Banque Gutzwiller, Geneva. (Mr Amhurst had previously given instructions to Richco on behalf of JMS and Valo on 8 January 1988 to the effect all sums due under the JMS and Valo agreements should be sent to an account at the Fidelity Bank, London.) That was Saad's account. Mr Salaam represented this as a fait accompli with which he had nothing to do. The upshot was that Saad received 15% of what was available, and the original three participants divided the remaining 85% in accordance with Mr Al Tajir's formula, which now brought Mr Salaam 25.5% of the total commission. (A subsequent change reduced Mr Salaam's share to 22.5%. In effect Saad's share came solely from Mr Salaam and Mr Livingstone.)
Mr Livingstone's evidence
Mr Livingstone's evidence went through several changes. He came before the court, of course, as one who had, without serving a defence, settled with Dubal on payment of $15,540,000. In his witness statement, which became his evidence in chief, he put the matter in this way. In 1987 Mr Livingstone was concerned about the following aspects of Dubal's business: long term financial success required a fourth potline, but Mr Al Tajir informed him that the Ruler would not be willing to fund the expansion himself; expansion was unsafe without ensuring the availability of increased supplies of alumina at reasonable prices; as it was, Alcoa was indicating that it no longer wished to continue as Dubal's exclusive supplier; tariff problems were causing difficulties in finding sufficient outlets for Dubal's premium products. He discussed these problems with Mr Al Tajir, as he had always discussed Dubal's business with him. He had always regarded Mr Al Tajir as the Ruler's representative in matters relating to Dubal, and continued to do so until March 1992, when a decree formally appointing a new Director of the Economic Department of the government made it clear that the Director would be the government's representative in Dubal. He had never heard of Mr Al Tajir's resignation from his position as Director of the Ruler's Office. Mr Al Tajir continued to function in relation to Dubal after 1981 as he had done before. "He was the Ruler's man for Dubal and the Ruler remained with us until October 1990." His instructions were therefore always to be followed. Mr Livingstone's own position depended on his approval.
Mr Livingstone presented the Valo sales agreement and then the Richco alliance, as well as Mr Salaam's involvement in both, as taking their origin from his own suggestions to Mr Al Tajir. However, in cross-examination he stated that Mr Salaam's involvement proceeded from Mr Al Tajir's wish, rather than his own (day 11, page 125). At any rate, Mr Salaam was involved because of his previous experience of Dubal's business via the GRC management agreement. As for Richco,
"I decided that Dubal's commercial interests would be best served by establishing a close commercial relationship or alliance with Richco. In or about May 1987, I explained this to His Excellency Mahdi Al Tajir (in his capacity as Ruler's representative). His Excellency Mahdi Al Tajir agreed and asked me to enter into negotiations with Richco..."
The resultant Richco consultancy agreement was a commercial agreement, which made use of Richco's worldwide marketing strengths and financial intelligence. The ASA would not have been possible on the terms agreed with Clarendon but for the consultancy agreement. As it was, Dubal earned some $33m in 1988 and $45m in 1989 under the ASA.
With Mr Al Tajir's approval, Mr Livingstone therefore began negotiating with Mr Rich ("I had known Marc Rich personally for many years") and with Mr Salaam. It was always clear from the beginning that both Mr Al Tajir and Mr Salaam expected to receive payment in the event of the fruition of an alliance with Richco. Nothing could be done without Mr Al Tajir's consent, and Mr Salaam felt that the alliance with Richco was his own idea, and it had grown out of discussion regarding the failed agency (Valo) arrangement. In the one case approval, in the other case the germ of the idea, were the justifications for payment: and because of Mr Al Tajir's involvement, he, Mr Livingstone, believed the payments were authorised by the government. The division of payment was discussed at lunch (at the Mirabelle restaurant in London) in mid 1987. Mr Salaam proposed, and Mr Al Tajir agreed a 40% (Mr Al Tajir), 30% (Mr Salaam) and 30% (Mr Livingstone) split. The three of them were there. That was the first time that he, Mr Livingstone, had known "for certain" that he too would be paid. The fact that he was to receive payment "played no part whatsoever in my own reasons for committing Dubal to this arrangement". Mr Al Tajir told him that his salary could never be sufficient to recognise the extraordinary degree of responsibility which he carried or the progress that Dubal had made under his leadership.
The negotiations with Mr Rich included Mr Livingstone himself. Mr Salaam proposed a 20%/80% split, but this was not acceptable to Mr Rich and as a result discussions broke down for a while. As, however, discussions developed for the ASA, so Mr Rich and Mr Salaam were prepared to agree a 50%/50% split with additional payments becoming due to Mr Salaam's companies on sales and purchases under the ASA.
When Saad Salaam complained to Mr Al Tajir with his demand to be included in the payments, Mr Al Tajir deputised Mr Livingstone to negotiate with Saad. The result was that Mr Al Tajir was to remain entitled to 40%, Saad would receive 15%, and Mr Salaam and he would each receive 22.5%. (At first, that agreement appears to have been operated in such a way that Saad Salaam got 15%, and the other three participants received respectively 40%/30%/30% of the remaining 85%, so that Mr Al Tajir received 34%, and Mr Salaam and Mr Livingstone received 25.5% each. By October 1988, however, Saad's 15% was coming out of Mr Salaam's and Mr Livingstone's 30%, but not out of Mr Al Tajir's 40%: thus Mr Al Tajir received 40%, Mr Salaam and Mr Livingstone received 22.5% each, and Saad Salaam received 15%.)
That was the effect of Mr Livingstone's evidence in chief, namely that the Richco scheme was a bona fide commercial arrangement, arising out of Dubal's needs as interpreted by Mr Livingstone, approved by Mr Al Tajir as representative of the government, and with the participants (other than Saad Salaam) being rewarded, in proportions approved again by Mr Al Tajir, for their respective roles in bringing the Richco alliance to fruition.
Mr Livingstone's cross-examination fell into two very different halves. It began on a Thursday, when he was cross-examined first by Mr Boswood on behalf of the Amhurst defendants and then by Mr Seymour on behalf of Dubal. On that day Mr Livingstone was compliant with his cross-examiners. I have already quoted above from some of his answers in relation to the GRC management agreement. He also gave the following testimony. He accepted that the Richco scheme could not have gone ahead without his participation, since to him would fall the responsibility of explaining to his fellow employees at Dubal and to Dubal's auditors what the Richco consultancy agreement was about. He accepted that he was the "paymaster, as it were", ie held responsible by Mr Al Tajir for seeing what happened to the money, in charge of ensuring that receipts (from Richco) and payments were correctly dealt with. In this connection he identified a Richco accounting document which had been sent to him dated 5 October 1988, marked "Attn. Mr. Livingstone", which he accepted had presumably been sent to him because Richco "knew that I was the person who, if you like, they had to account to for these things". He accepted that he acted in this capacity primarily for Mr Al Tajir, but also incidentally for Mr Salaam. When in March/April 1991 the subsidiary agreements were paid up and bought out by Richco in the form of capitalised payments, it was Mr Livingstone who handled those arrangements with Richco on behalf of the participants. He was also involved in the arrangements made in September 1988 for a bogus option undertaken between Clarendon and Dubal under which Clarendon paid $3,000,000 to Nillet, and which, when unscrambled, led to the need to repay the $3m: Mr Livingstone said that the $3m had originally gone to Mr Salaam, "who had problems with his cashflow", and that when the money had to be repaid, it came out of his, Mr Livingstone's, own pocket.
There was another bogus option for $2.6 million arranged by Mr Livingstone in December 1988: it was Dubal who this time paid that money to Richco as the price of the option, and Clarendon in due course paid that money on to an account in Zurich for the benefit of Metal Production Consultants, a company under the control of M & F Engineering, in payment of the cost of hiring aircraft in connection with Mr Al Tajir's shuttle diplomacy in the Lebanese peace process. Mr Livingstone explained (day 10, page 38ff):
"A. ....These were substantial bills which really had nothing to do with [Dubal] and I was charged with finding a way in which to settle the matter...
Q. So you were quite happy to generate an entirely bogus and fraudulent option agreement in order to cover the repayment to M & F Engineering of expenses it had apparently incurred on behalf of Mr Tajir; is that right?
A. But I have to repeat to you what I said before. I believed that if I was instructed to do something by Mr Tajir then it was all right for Dubal. That was my position then and it remains my position today.
Q. How could it possibly have been all right for Dubal to pay, through these bogus transactions, Mr Tajir's travel expenses? What did they have to do with Dubal?
A. It may not seem right in this court, Mr Boswood, but this was not in this court and it was not today, it was some years ago in Dubai and things were different...
Q. Because there was nothing improper, because you say Mr Tajir told you it was all right. Not only that, there was nothing improper about simply using Dubal as a sort of piggy bank to pay Mr Tajir's travel expenses, or indeed any other expenses he chose to have paid, or provide him with any other money if he said he wanted it; is that true?
A. I think you are exaggerating slightly but there is something in what you say, yes.
Q. In order to make it all look proper on the face of it, because after all there were people like auditors, both internal and external I suppose, who might ask questions, it was necessary to generate these bogus documents rather than simply writing a cheque for Mr Tajir's travel expenses?
A. Yes. One was living in two different worlds, Mr Boswood, I should add, simultaneously...
Q. ...One world was the world in which it was perfectly proper to receive $13 million. What was the other world?
A. The world of the other people in the business, of the normal business of the company, of which there was a great deal...
MR. JUSTICE RIX: The other world was the normal business world of running an alumina smelter?
A. Exactly, sir, yes.
MR. BOSWOOD:In that world payments have to be made for the proper purposes of the company, payments have to be properly vouched and documented and so on; is that right?
Q. So would it have been possible simply to, for example look at this transaction, openly write a cheque for $2.6 million in favour of M & F Engineering against an entry in the company's books "Reimbursement of Mr Tajir's travel expenses"?
A. I think that would have been looked at askance, as they say."
Thus far Mr Livingstone was answering to Mr Boswood. Later in the day, in answer to Mr Seymour, he became franker still, and all but dropped the defence that Mr Tajir's authority made such arrangements proper in the "other" world of Dubai. Thus, in connection with the GRC management agreement, in the passage I have already cited, he was prepared to agree that that contract was inter alia "a means of abstracting cash from Dubal". His cross-examination then turned to the Richco consultancy agreement (at day 10, page 92ff):
Q. And that is what happened, in due course, when we got to the Richco Consultancy Agreement, is it not?
A. No that was different. That was different in the sense that in that case, as I think you heard from Mr Strothotte, it was a very valid argument commercially and industrially for the kind of alliance that I wanted to build and which Richco could see some great benefit in. I think he has already explained that to you and I could not have done it better myself. That is a little different, I think, to this. But, nevertheless, in this case, there were grievous needs that the company had. We needed help; we were struggling. We had, the biggest risk was, of course, the whole thing would stall and then the Ruler of Dubai would be up to his hocksters for hundreds of millions if not billions. If the plant did not succeed, if it did not start and produce and sell metal, consequences would be catastrophic for Dubai, not just for the Dubal.
Q. I am sure you are not suggesting to his Lordship that that is in any sense a justification for stealing money from Dubal?
A. No, but it was a justification - there was a need for services and these proposals came along and I could see a need to go along with them. This is the position, as I have stated it before.
Q. So what you are telling his Lordship perhaps amounts to this, that you knew perfectly well that insofar as the sums payable under the GRC Management Agreement exceeded reasonable remuneration for whatever services were provided, money was being stolen from Dubal? It was not your idea, but you got some of it; is that what it amounts to?
A. If you wish to put it that way.
Q. Can we not put those essentials really as the description of the Richco Consultancy agreement and the subsidiary agreements, that, whether there were any services provided or not, a function of the agreement was to provide a pretext for abstracting very large sums of money from Dubal for your benefit, Mr Al Tajir's benefit and Mr Salaam's benefit?
A little further on (at pages 108/9) there was also the following passage:
Q. You have told his Lordship that you became involved in the GRC agreement and in receiving a share of the money paid under this agreement because you were asked to do so?
Q. You were asked by Mr Al Tajir?
Q. Only Mr Al Tajir?
A. Mr Salaam was aware of this and wanted to have my involvement, of course. As the person running the company, I could understand why he wanted that involvement very well, but I was asked by both of them, yes.
Q. Were you asked by both of them to become involved in the Richco Consultancy agreement and the subsidiary agreement?
Q. You appreciated at all times, did you not, that in asking you to become involved they were inviting you to join them in a dishonest scheme?
A. Yes, I would have to I think explain, my Lord, that, whilst these two gentlemen were involved, really the central person from my point of view was Mr Tajir. He was the person who had, as I perceived it, and I believe reasonably, the authority in order to approve these arrangements, whatever we may think of them here. So it was really primarily to Mr Tajir that I looked.
Mr Livingstone's cross-examination continued on the following Monday: he was then cross-examined by Mr Nigel Davis QC on behalf of Mr Salaam and by Mr Ali Malek QC on behalf of Mr Al Tajir. When cross-examined on behalf of Mr Salaam, he was led, by counsel's skilful guidance, to re-emphasise anew his implicit reliance on Mr Al Tajir's authority and his belief in the honesty of what had been done in the context of the Dubai of the day. For instance (at day 11, pages 31/2):
Q. Was it your perception that Sheikh Hamdan left it to people like Mr Tajir to get things done?
A. Well, I think I have said in my evidence, and I would like to repeat it, that I had the impression, gained over many years with the chairman, that he really did not give the impression that he thought Dubal was his business. He may say differently now, he may say differently now, but that was the impression I got over many years. This was business that was started by Mr Tajir with his [Hamdan's] father, and I had a distinct impression that he really did not want to get involved in it. There had to be some reason why he would never respond, never intervene, never come and see the place or talk about it with interest and concern, and that was the only reason I could come up with.
Q. Your perception was that Sheikh Hamdan thought that Dubal was Mr Tajir's turf?
A. Exactly. This was a business that he had created with the blessing of His Highness The Ruler. Yes, Sheikh Hamdan was appointed as chairman, but that was just running up the Dubai flag. It had no impact on the way the business was run.
At day 11, page 47/8 he was asked about the passage on day 10 where he had conceded that the Richco consultancy agreement had been part of a dishonest scheme:
Q. So you say Mr Tajir was the person who had, as you perceived it, and you believe reasonably, the authority in order to approve these arrangements?
Q. The authority of whom?
A. Of the Ruler.
Q. So it would be right to say that your perception was that this was not a dishonest scheme?
A. No. I mean, I know there is this magic word, yes, at the beginning of the thing, but if you look later on I say "Whatever we may think of them here", so I am making the same point as I have just made this morning, this whole thing is taken out of context. In the context of Dubai, at the time, this was absolutely normal.
Q. You considered that this had the authority of the Ruler?
A. Yes, I do.
Q. Through Mr Tajir?
A. Yes, and I believe that such things had been going on for 30 years or more, 30/40 years. It is possible, if I may say so, my Lord, that the present Rulers of Dubai do not like this idea, they think it should be changed...But at the time, I assure you, it was perfectly normal..."
When cross-examined on behalf of Mr Al Tajir, however, his position reverted to at least the implicit acknowledgement of dishonesty. Thus he was asked why he had not sought to defend himself against the proceedings which Dubal had brought against him by seeking to implicate Mr Al Tajir, in reliance on the latter's legitimate authority in Dubai to promote the scheme. His reply was that he had gone to see him, but "it was quite clear from that he was not prepared to undertake any responsibility of any kind" (day 11, page 85). There was then this passage (at page 87):
Q. I suggest the reason that you did not seek to blame Mr Tajir or to say that he had authorised this was that you knew perfectly well that he could not be implicated and was not implicated in your fraud on Dubal?
A. Well he was determined not to be implicated, but that was another matter.
He was also asked about the origins of the scheme, and the involvement of Mr Salaam. He said that Mr Al Tajir as well as he wanted Mr Salaam to be involved; and that it was he, Mr Livingstone, who had negotiated with Mr Rich. He did not think that Mr Al Tajir had even made so much as an initial approach to Mr Rich, or had ever met him. He disputed Mr Al Tajir's case that the latter had entered into a separate commission arrangement with Mr Rich. He had no idea whether Richco knew at the time that he was going to receive a percentage of the fees - it was not something that he had ever discussed with Mr Strothotte.
Mr Al Tajir's evidence
I have already found that Mr Al Tajir did resign from his position as Director of the Ruler's Office in 1981, as indeed he had stated in his witness statement. His evidence, which of course was not cross-examined, continued to the following effect. He said that he had become friends with Mr Livingstone and saw him from time to time as such, but that he had no further role after 1981 in the administration of Dubai. Sometime in 1986 his response to Mr Livingstone's telling him about his concerns for Dubal was that he should go to see his chairman, Sheikh Hamdan, about them. In 1987 in a similar conversation Mr Livingstone informed him that the management of Dubal had identified Richco as the company with which to form a strategic alliance to assist Dubal in its pressing problems. He was asked if he would assist Dubal in approaching Mr Rich, his good friend and neighbour in St Moritz, personally. He regarded Mr Livingstone as completely honest, and was delighted to be given the opportunity of involvement in so prestigious a project. He assumed that the matter had been discussed with Sheikh Hamdan and the latter's close confidant Mr Al Tayer, the minister of finance and industry. He therefore contacted Mr Rich initially by telephone and then in a meeting in St Moritz or Zug (Richco's headquarters). Mr Rich suggested that "his people" meet Mr Livingstone to discuss actual figures. It was agreed with Mr Rich that in the event of any deal he, Mr Al Tajir, would be looking for 1% of the value of the transaction. He reported all this back to Mr Livingstone. At about this time, Mr Salaam told him that he had also been approached by Mr Livingstone to assist him on a deal with Mr Rich. He did not tell Mr Salaam about his own involvement. He subsequently raised the question of Mr Salaam's role with Mr Livingstone, and was told that Mr Salaam was needed for his experience in transnational commercial transactions. He warned Mr Livingstone to check with Sheikh Hamdan, and was told that Mr Livingstone had already done so. He played no part in the implementation of arrangements with Richco. He was unaware of the subsidiary agreements. He had a further meeting with Mr Rich in late 1987 or early in 1988, and frequent meetings with Mr Strothotte in connection with mutual business relating to power engineering and infrastructure projects in the middle east, but he was never told of Mr Salaam's involvement in the Richco deal, nor of any payments to Mr Livingstone. As far as he had been aware, he had never himself received any payments deriving from the Richco deal, until Richco had itself disclosed such details. (In the course of 1997.) He explained this as follows:
"...I did not even realise that any separate monies had been paid purportedly connected with this transaction by Richco, simply because monies had been paid to Altajir Limited anonymously and distributed without reference to me. As we were always receiving large sums of money from Richco during this period, and I did not handle specific or detailed accounts of the companies in which I was involved, (instead delegating these duties to respective managers , employees and members of family, etc.), I saw no reason to "chase" Marc Rich when I knew from a global point of view of all Altajir's family businesses that huge sums were coming in from Richco. This encompassed all businesses with Richco, including business ventures other than Dubal, including commodity trading with Iran...hundreds of millions of pounds were going through numerous companies connected with the Altajir family...."
As for Mr Saad Salaam, Saad had requested him on one occasion to ask Mr Salaam to honour a long standing business arrangement between the brothers, whereby Saad was to receive a share of the profits of any business in the Gulf. He acted on that request, but without involving himself in any details, and subsequently learned from Saad that the matter had been resolved to his satisfaction.
In effect, therefore, his evidence was to distance himself from both Mr Salaam and Mr Livingstone, and indeed from the whole transaction.
Mr Strothotte's evidence
In the absence of any evidence from Mr Marc Rich himself, the only evidence from Richco came from Mr Strothotte. That evidence was also presented as Dubal's own evidence. It was to the following effect.
In late spring or early summer of 1987 (we now know that it was on 26 or 27 May), Mr Rich and Mr Pincus Green (the latter being Richco's President - there has been no evidence from him either) came into Mr Strothotte's office to say that they had that day met Mr Livingstone and Mr Salaam. (Mr Strothotte thought that he had been told by Mr Rich and Mr Green that the meeting also embraced Mr Al Tajir, but he was prepared to accept that he might have been mistaken about that. Mr Al Tajir was not at that meeting. His name, however, is quite likely to have been mentioned in this context.) Mr Strothotte had met Mr Livingstone before, but not Mr Salaam (or Mr Al Tajir). Mr Rich had said that a commercial alliance had been proposed, the starting point of which would be a consultancy agreement. Dubal would pay a monthly fee plus a commission on sales of aluminium. A proportion of these fees and commissions would have to be paid to beneficiaries to be nominated by Dubal. It was made clear that this was the way that business was done in Dubai and that Richco would not get the business otherwise. Dubal had proposed the passing over of 80% of the fees, but Mr Rich thought that too high. He, Mr Strothotte, regarded Mr Livingstone as in executive control of Dubal, and Mr Al Tajir as a man of considerable political influence, who filled a power vacuum left by the inactivity of the sick Ruler's sons: the scheme therefore appeared to be approved by the government of Dubai. He did not know how Mr Salaam came to be involved, but he understood from Mr Rich that he was an associate of Mr Al Tajir. Mr Livingstone introduced Mr Amhurst as the solicitor who would be drawing up the agreements. Mr Livingstone was very much in control of their form. The subsidiary agreements were obviously a cosmetic arrangement, and there was never any question of them being performed. They were "clearly vehicles for payment". Nevertheless, in accepting them he relied on the executive authority of Mr Livingstone, the political standing of Mr Al Tajir, and the involvement of an apparently reputable London solicitor, Mr Amhurst. In any event, without the consultancy agreement and the subsidiary agreements, Dubal would have taken the business elsewhere. He did not, however, then know that Mr Livingstone was one of the beneficiaries of the subsidiary agreements.
The ASA was worked upon at the same time, and this was toughly negotiated, and was a good deal for Dubal, even though subsequent amendments to it worked to Richco's advantage. From time to time during the life of the scheme, Mr Livingstone made approaches on behalf of his principals (one of whom was clearly Mr Al Tajir) for more funds, eg for $55 per tonne on quantities of aluminium bought by Richco under the 1989 Pre-Sales Agreement, or for an additional $10 per tonne on alumina sales, or, ultimately, for the capitalisation and payment "up front" of all monies due under the subsidiary agreements, including for these purposes the additional $10 per tonne on alumina sales. He understood Mr Livingstone to be under pressure from "people on his back", who clearly included Mr Al Tajir. Richco agreed to make the capitalised payments, but only against the security of a Performance Bond dated 18 February 1991 to secure future payment of sums due to Dubal under the Richco consultancy agreement, which continued. The capitalised payments were made in March/April 1991.
Although Mr Strothotte was clearly of the view that the subsidiary agreements were cosmetic or sham agreements, and that no performance was ever expected to be rendered under them, or was in fact rendered under them, he also said that to the extent of Richco's interest in 50% of the 2.5% fee on Dubal's sales, the Richco consultancy agreement was a valid agreement, under which Richco rendered Dubal valuable services which were commensurate with Richco's earnings. His view of the Richco consultancy agreement itself therefore fell into two parts. To the extent that it was the means by which Dubal provided a flow of money to Richco, which Richco would then divert to payment of similar fees under the subsidiary agreements, it was a dishonest sham; but to the extent that it provided, when viewed against the scheme as a whole, in effect for 50% of the 2.5% fee on sales to remain with Richco, it was a valid, real and honest agreement, under which Richco earned what it was awarded. This appeared more clearly from his cross-examination than from his evidence in chief itself. Thus in the latter, he plainly termed the subsidiary agreements mere vehicles for payment, without expressing a view as to the status of the primary agreement - other than in a passage where he explained Richco's reasons for arriving at a settlement with Dubal in 1993. In that passage he accepted the whole scheme as improper, for he said:
"...the main reason for the 1993 settlement was the need to dissociate the company from the Consultancy/Nillet arrangement which now seemed improper..."
"Nillet" was the term under which he referred to the four subsidiary agreements and the reference to "Consultancy" was therefore a reference to the primary agreement with Richco itself.
In his cross-examination, however, he was, at any rate to the extent of that 1.25% fee, less apologetic. Thus, in response to questions from counsel on behalf of the Salaam and Amhurst defendants and Mr Livingstone, who were seeking to elicit evidence to meet Dubal's opening submission that the Richco consultancy agreement was itself a mere sham, he gave answers such as the following:
Q. Of course, your position was and is, as I understand it from the answers you have given to my learned friend Mr Davis, that the Consultancy agreement, the Richco Consultancy agreement, was a perfectly proper agreement for Dubal to have entered into under which it could have expected to receive and did receive real and proper benefits?
A. Yes. (day 5, page 23);
Q. The Consultancy agreement was, as you have said several times, in your, Richco's, understanding, an entirely proper, arm's length commercial agreement under which Dubal could have received and did receive material benefits?
A. Yes. (day 5, page 108)
I interpolate the comment that such questioning from parties in the same interest shows the limits of cross-examination in such circumstances. On any view of the matter, it was not Mr Strothotte's evidence, other than in words put in his mouth, that the Richco consultancy agreement was a "perfectly proper agreement"; and as for the suggestion that it was an "arm's length" agreement, that was flatly contradictory to other evidence that Mr Strothotte gave. The fees which Dubal was to pay under the Richco consultancy agreement were pushed on Richco by Dubal (of course to fund the subsidiary agreements) rather than negotiated by Richco for its own account on an "entirely proper, arm's length commercial" basis. More helpful perhaps was the following exchange:
Q. If I could ask you about performance under the Consultancy agreement. At the time you negotiated the Consultancy agreement, was it your understanding that you were not required to provide any services to Dubal in return for the 1.25 per cent you were to receive?
A. No, it was not our understanding that we were not to provide any service. It was clearly the understanding that we would, through this Consultancy agreement, have a basis of exchange between us. It was sort of my feeling that it would not take the form as prescribed and be much more active and alive, which it then became. So the service in terms of there was of course regular dialogue on market exchanges, but these things took place at the level of the operating people and frequently with the inclusion of Livingstone, yes. (day 5, page 144)
Perhaps the equivocal line that Mr Strothotte was trying to maintain emerged in this answer:
Q. To the best of your knowledge, were there any aspects of the commercial alliance which were disadvantageous to Dubal?
Q. To the best of your knowledge, were there any aspects of the commercial alliance which were in fraud of Dubal?
A. I do not know about fraud. The part of the Consultancy agreement which was part, which was the document governing the alliance where payments were to be passed on were the part that, you know, we did not understand and we did not know to whose benefit that was. We were interested in the commercial side of it, and that was beneficial to Dubal and Richco. (day 6, page 14)
At the end of his evidence I asked Mr Strothotte whether in effect it was only 20% of the 2.5% fee, ie a fee of 0.5%, that was retained by Richco, and not 50%, by reason of the provisions in the subsidiary agreements for the payment of the $5s and $2s. It will be recalled that Richco had been only willing to pass on 50% of the 2.5% until the ASA was also negotiated, and then had been willing to make up the difference between 50% and 80% of the 2.5% fee by means of the $5s and the $2s. He gave a somewhat confused answer to my question, but in final submissions Mr Temple QC on behalf of Richco accepted that this was in fact the case, that Richco was to retain in effect only 0.5%. I therefore regard Mr Strothotte's evidence as amounting to this: a commercial alliance between Richco and Dubal made sense, but Richco's interest in the consultancy agreement was ultimately for only 20% of the 2.5% fee on sales, in return for which proper services were rendered to Dubal, albeit not in the form provided for in the consultancy agreement itself, but in terms of a "regular dialogue on market exchanges".
Dubal's other evidence
Dubal also relied on certain witness statements admitted under the Civil Evidence Act, and which were not therefore the subject of cross-examination. The most important of these was the statement of Sheikh Hamdan.
Sheikh Hamdan's main concern, apart from dealing with the matter of Mr Al Tajir's succession by Sheikh Mohamed as effective director of the Ruler's Affairs and Petroleum Affairs in 1981, was to oppose the evidence given by Mr Livingstone to the effect that he had taken no interest as chairman in Dubal's affairs, and had left matters to his executives and to Mr Al Tajir. He said that he was always available at his majlis (Majlis are a form of state open house, at which anyone with business can attend for an audience) for any meeting which Mr Livingstone desired, and that he did meet Mr Livingstone regularly to discuss Dubal's affairs. He had only once been asked by Mr Livingstone to sign Dubal's accounts, and that was after the (Price Waterhouse) report which had thrown up the question of the substantial payments being generated by the GRC management agreement. He had refused to sign them pending further investigations. As for the Richco consultancy agreement, he did not recall being informed of any intention to enter into any such agreement. He added:
"In the light of what had been discovered about the GRC Consultancy Agreement, I know that I would not have consented to a further consultancy agreement being entered into unless first satisfied that the making of such an agreement was in the best interests of the company. In any event, I am absolutely sure that Mr Livingstone did not tell me that it was intended Dubal would enter into a consultancy agreement with a third party as a means by which substantial sums of money were to be paid by Dubal to either himself or Mr Salaam or Mr Altajir."
Mr Dilip Koshy has since 1994 been head of the internal audit unit of Dubal. He has had special responsibility for locating all files relevant to the Livingstone or current proceedings brought by Dubal. His witness statement says that he is confident that if documents existed relating to the following topics, he would have found them, but he has not. There are no documents, whether in report form, or in informal form, relating to any market research or market intelligence information provided by Richco to Dubal; there are no documents prior to September 1987 suggesting Dubal's inability to sell its products at satisfactory prices; there are no documents prior to September 1987 suggesting or investigating a problem in relation to the supply of alumina; there are no documents which suggest that Dubal was receiving any instructions from or having contact with Mr Al Tajir as a representative of the government of Dubai, or at all (other than in the context of projects outside Dubai, eg a smelter project in Iran); and there are no documents relating to the proposed Valo sales agency.
Mr Farhad Pochkhanawala, Dubal's finance manager since 1989, also provided a witness statement in which he said that as finance manager he became a member of the Pricing Committee, whose role was to review market information and advise on pricing and hedging strategies for the benefit of Mr Livingstone and Mr Alawi, the sales manager. At the meetings of that committee, expert reports would be considered, but there was never any written report from Richco nor any verbal reports attributed to Richco.
The evidence regarding the origins of the Richco scheme reviewed
What does this evidence suggest? I put it this way, because final conclusions will have to await the investigation of other matters such as the distribution of the monies via the subsidiary agreements. For the moment, however, I would draw the following provisional insights from this evidence.
First, each of Mr Salaam, Mr Livingstone and Mr Al Tajir claimed to have been the instrumental party in effecting the alliance with Richco through an initial approach to Marc Rich. Thus, Mr Salaam's evidence was that, although it had been Mr Al Tajir who approached him about this matter of an alliance with Richco, it was he, Mr Salaam, who was asked by Mr Al Tajir to negotiate the alliance with Mr Rich. Mr Al Tajir, on the other hand, said that although the initial idea of an alliance with Richco had come from Mr Livingstone, it was he, Mr Al Tajir, who had made the initial contact with his friend and neighbour Mr Rich. And Mr Livingstone said that it was he himself who had both developed the strategy of an alliance with Richco and had negotiated it with Mr Rich, who was personally known to him. In my judgment, each of these three protagonists was interested to be seen as the ultimate forger of the alliance because that role could best be viewed as earning the justification of an introductory commission. Yet, of course, the accolade of being the forger of the alliance could not fall on each. In the absence of any evidence from Mr Rich himself, I have to approach this issue with circumspection. It seems to me, however, that the most likely answer is that the initial contact was made by Mr Al Tajir. That was Mr Salaam's view of the matter, that it had been Mr Al Tajir who had set up the initial meeting that he and Mr Livingstone attended with Mr Rich in Zug. Mr Livingstone may have been Dubal's chief executive, but it was Mr Rich and Mr Al Tajir who were the world business men, principals rather than employees: and it seems to me to be altogether more likely that the meetings of 26/27 May 1987 in Zug had been preceded by some private conversation between Mr Rich and Mr Al Tajir. That was in a sense also Mr Strothotte's understanding from Mr Rich, that Mr Al Tajir had been involved (as well as the two visitors to Zug): but I pay less regard to that, since Mr Strothotte was obviously mistaken to think, as he had originally said, that Mr Rich had reported having had a joint meeting with Messrs Al Tajir, Livingstone and Salaam in Zug; and in any event what Mr Rich said to Mr Strothotte was merely hearsay.
Secondly, if Mr Al Tajir made the initial contact with Mr Rich, it is nevertheless reasonably clear that the original concept of the alliance came from Mr Livingstone, or at any rate developed out of his conversations and discussions with Mr Al Tajir and/or Mr Salaam. That is the effect of Mr Al Tajir's and Mr Livingstone's evidence; and Mr Salaam's evidence was not inconsistent with that. It is also a matter of common sense: it was Mr Livingstone who alone of the three lived his whole business life in the world of Dubal.
Thirdly, I find that the three protagonists were well used to working with one another in such a venture. They had all been involved together previously in the GRC management agreement, and had all received financial benefits out of it. Mr Salaam and Mr Livingstone appear to have remained close associates throughout the period which this judgment covers, even down to today. Mr Livingstone had been a director of GRC during the period of the GRC management agreement. Following Mr Livingstone's departure from Dubal and Dubai, Mr Salaam was able to offer him a consultancy appointment with GRC. They still play golf together, at any rate up to the recent past. Similarly, there was a business partnership of a kind between Mr Salaam and Mr Al Tajir, and they were working together at the material time on the Lebanon peace process. Furthermore, it is clear from Mr Livingstone's and Mr Strothotte's evidence that Mr Livingstone was prepared to act on behalf of Mr Al Tajir (and Mr Salaam) for instance in negotiating further payments from Richco. He was also trusted by both Mr Al Tajir and Mr Salaam in resolving the claims of Mr Saad Salaam. Where trust to a common end might be necessary, the three knew each other well and could obviously work together.
Fourthly, there is an ambivalency about the status of the monies generated by the scheme. Mr Al Tajir's stance is the most clear cut, in that he seeks to say that his 40% was negotiated directly with Mr Rich as the price he charged to Richco for introducing it to Dubal. Even so, this was plainly a price which would have to come out of Richco's earnings: and Mr Al Tajir appears to have shown little concern about how such earnings were to be generated or priced, leaving all such matters to Mr Livingstone and Mr Salaam to negotiate. Moreover, Mr Al Tajir's further demands for compensation in the form of the $55s and the $10s, even though those payments are not themselves the subject matter of a claim for recovery in these proceedings, show that he was willing to require payment to him that went beyond an introductory commission. In any event, the evidence of Mr Salaam and Mr Livingstone, which Mr Al Tajir was not in a position to contradict, that he was himself a party to the agreement that the monies generated by the scheme were to be divided 40%/30%/30% between the three protagonists, strongly suggests that Mr Al Tajir's position was no different from those of Mr Salaam and Mr Livingstone. Indeed, if he was to get 40%, and the other two were to get 30% each, it followed that the cake which was being divided was shared not between him and Richco, which was what his evidence had sought to suggest, but between him and Messrs Salaam and Livingstone. If he was to get 40% of what Richco was to earn out of the alliance, and Messrs Salaam and Livingstone were to share 60%, then there was nothing left for Richco. Such calculations are simply incompatible with his basic case of a separate deal made between him and Mr Rich for 40% of Richco's earnings.
Mr Salaam and Mr Livingstone were more ambivalent about the source of their earnings under the scheme. Mr Salaam also sought to say that his companies' earnings under the subsidiary agreements were essentially an introductory commission. But a commission from whom? From Richco, for introducing it to Dubal, or from Dubal for introducing it to Richco? This was never made entirely clear, and there were elements of both rationalia in his evidence: but, of course, the fact that the source of the monies was to come from Dubal and to flow through the subsidiary agreements made it difficult to represent the payments as being made by Richco rather than Dubal. Thus the "mobilisation fee" of $2m and the monthly payments of $85,000 were even said by Mr Salaam to reflect the agreements previously negotiated directly between Valo and Dubal. Certainly Mr Strothotte understood all these payments, including the 2.5% to the extent that that was being passed on, as the payment of commissions "indirectly" by Dubal. As he said in his witness statement:
"I was not particularly surprised that Dubal wanted to pay commissions indirectly. It seemed to me that politically, or for some other reason, it was unacceptable for Dubal to pay direct, and the concept of State companies in developing countries distributing funds to favoured individuals or companies was consistent with what I had heard about such dealings..."
Mr Livingstone, perhaps even more than Mr Salaam, accepted that the fees were being paid by Dubal, rather than Richco. The money was "abstracted" from Dubal (even if that was with the authority of Mr Al Tajir). It was not something he had stipulated for, he had no entitlement to it, but it was in the form of a bonus from his employer, Dubal, authorised by Mr Al Tajir, in recognition of his responsibilities, achievements and leadership.
Ultimately, the fact that both Mr Salaam and Mr Livingstone relied on the authority of Mr Al Tajir and on the custom and practice of Dubai showed that their thesis was that their commissions or other payments came from Dubal, rather than Richco.
Fifthly, the episode about Mr Saad Salaam is instructive. Saad played no role whatever in the scheme, its genesis or its execution. Nevertheless, Mr Al Tajir supported, and Mr Livingstone was left to engineer, Saad's cut in the proceeds. Mr Salaam had to suffer it, plainly against his will. Equally plainly, neither Richco nor Dubal received any value from Saad Salaam. This may therefore indicate the importance of Mr Al Tajir's role in the scheme, but it also further indicates the difficulty of Mr Al Tajir's position that his only involvement was as the man who broked a deal for Richco's benefit and was paid by Richco out of its own resources. He not only proposed (Mr Salaam's evidence) or agreed (Mr Livingstone's evidence) the 40%/30%/30% split, but then threw his weight behind a reallocation of that split to accommodate Saad's demands.
Sixthly, for reasons which I have already sought to make plain, the reliance which both Mr Salaam and Mr Livingstone, and through Mr Strothotte to some lesser extent also Richco, sought to place on the authority of Mr Al Tajir as representative of the Ruler of Dubai and owner of Dubal cannot be accepted. Mr Al Tajir was no longer vested with that authority: and it is impossible to accept that Mr Livingstone or Mr Salaam, or even Mr Rich, can have supposed that Mr Al Tajir was still vested with the Ruler's authority.
Seventhly, in any event, it is reasonably plain that Mr Salaam did not even rely on Mr Al Tajir's authority in respect of all elements of Richco's payments under the subsidiary agreements. There is no evidence that Mr Al Tajir knew about the payment of the $2m mobilisation fee, or the monthly payments of $85,000. If he had done, he would have stipulated for his 40% share: for his evidence was that he had agreed with Mr Rich that he would get 40% of the value of the transaction. One possible reason why the on-payments by Richco were divided between four subsidiary agreements was that Mr Al Tajir was not supposed to know about, and thus was not to share in, the payments generated outside the second version of the JMS agreement. It is true that Mr Salaam explained the curtailment of the JMS agreement from a minimum of ten years in its first version to only seven years in its second version as something that had been agreed with Mr Al Tajir at the outset. If that is so, however, it is difficult to know why the JMS agreement in its first version did not reflect that agreement with Mr Al Tajir, or why the Wid agreement only entered at the stage of the second version of the JMS agreement; or, indeed, why Mr Al Tajir should have been prepared to forego any payment during the last three years of the Richco consultancy agreement - especially as that agreement might have continued evergreen for many more years than ten. I am left with a feeling of deep scepticism as to whether Mr Al Tajir was permitted to know all the ins and outs of the scheme as negotiated by Mr Salaam and Mr Livingstone. The impression that I have is one that reflects the "cut-throat" defences of the three main protagonists before me: that theirs was a coming together of convenience, but not of candour; of intrigue, but not of integrity.
I will now set out the course of the payments and receipts generated by the scheme. The details are taken from the evidence of Mr Tony Horat, an operations manager with Richco who had been responsible for arranging the onward payments under the scheme, subject to the supervision of Mr Strothotte. Among the documents annexed to his two witness statements was a schedule (the "Horat schedule") appended to Mr Horat's first witness statement as part of its Appendix 1. It contains a helpful summary of all sums received by Richco pursuant to the Richco consultancy agreement and paid out by Richco pursuant to the subsidiary agreements, as well as, in addition, details of the further payments made by Richco of $10 per tonne of alumina sold to Dubal by Clarendon. Further details, prepared by Mr Horat, of the additional payments made by Richco of $55 per tonne of aluminium sold by Dubal to Richco were included on a revised version of the Horat schedule, served under cover of Messrs Clyde & Co's letter of 8 May 1997 as particulars of payments made by Richco, and confirmed by Mr Horat in his second witness statement (the "revised Horat schedule").
Payments of the $5s and $2s (and of the $10s) were in fact made by Clarendon rather than Richco, because Clarendon was the Richco subsidiary which was responsible for alumina. Mr Horat said that for internal accounting purposes
"there would have been a transfer by Richco to Clarendon of the funds received from Dubal under the Consultancy Agreement to enable Clarendon to make payment out to the Beneficiaries."
It seems to me not to matter whether those internal accounting entries were made or not. It was Richco who was responsible under the subsidiary agreements for making the requisite payments; and if Richco procured a discharge of its obligations under those agreements by getting Clarendon to make the necessary payments, that is a matter of pure mechanics. What the proper state of the books as between Richco and Clarendon was or ought to have been, is not a question which I need to enquire into.
For the most part, payments by Richco (by which I mean to embrace, for the reason just stated, payments made by Clarendon) were made within a few days after the corresponding payment was received by Richco from Dubal. Occasionally, however, Richco would make a payment out before receipt of the corresponding payment from Dubal. These, however, were the exceptions: an example is that in January, April and July 1989 Richco made payment out in respect of the quarterly payments of (50% of) the 2.5% commission and of the $5s up to some four weeks or so earlier than Richco's corresponding receipt of the 2.5% commission from Dubal. Mr Horat assumes that advanced payment of these amounts was requested on behalf of the beneficiaries. While such advance payments illustrate a variation on the mechanics of the scheme, they do not in my judgment affect anything in principle. Richco was prepared to make the advance in anticipation of the receipt of the corresponding funds. If the corresponding funds had failed to materialise, the scheme would have been in peril of failing. Another, but different, example of advance payments is to be found in the capitalised payments made in March/April 1991: these payments, discounted for early receipt, otherwise reflected the earning stream under the subsidiary agreements throughout the remaining course of their lives. (The $10s were also paid up in capitalised form, but not the $55s) After these capitalised payments were made, the subsidiary agreements (other than the Wid agreement) were paid up and terminated, and only the primary agreement continued to operate, with Richco receiving payments of 2.5% commission on sales and of $85,000 per month. However, Richco made sure that these payments were secured by requiring Dubal to enter into a Performance Bond as part of the agreement for the capitalised payments.
Mr Salaam sought to rely on such exceptions as undermining Dubal's claim. Whatever might have been the position if Dubal's claim rested on the need to trace funds, the claim in these proceedings for equitable compensation for knowing assistance in the breach of a fiduciary duty ultimately makes all such tracing issues superfluous. In any event, the reality of the situation is that Richco made these advance payments only because it had been promised the receipt of the corresponding funds under its primary agreement with Dubal, and, in the case of the capitalised payments, because of the additional security of the Performance Bond.
Turning to the detail of Richco's receipts and payments, I find as follows.
The first versions of the JMS and Valo agreements were signed on 1 September 1987. On 4 September 1987 Dubal paid to Richco, and on 8 September 1987 Richco paid on to Valo at the Fidelity Bank, London, the mobilisation fee of $2m and the first monthly payment of $85,000. Thereafter the monthly payments were regularly made by Dubal to Richco, and within a few days, by Richco to Valo, up to March 1988.
In February 1988 Dubal made its first payment to Richco of the 2.5% commission on sales, in the amount of $2,077,467.40. Within 9 days Richco had paid on to JMS at the Fidelity Bank, London, the amount of $1,412,677.83, which I calculate to be 68% of the sum received by Richco. Another two weeks later, on 1 March 1988, a further $249,590.64, ie a further 12%, was paid (nominally to JMS) to an account at Banque Gutzwiller, Geneva. That is now known to be the nominated account of Mr Saad Salaam. That was the first payment made to his account. 12% of 100% represents 15% of 80%, Mr Saad Salaam's cut. Thus a total of 80% of the 2.5% commission received by Richco was paid on in these two payments. In Richco's records this 80% was not subdivided between 50% of the 2.5% commission and the balance made up of the $5s and $2s. This to my mind supports my reading of the JMS/Valo agreements as stipulating, in one form or another, for the onward payment of up to 80% of the 2.5%.
In March 1988 the monthly payment of $85,000 was originally passed on by Richco to Valo, but within a week that payment had been reversed, and on 31 March 1988 the $85,000 was paid by Richco to Nillet instead. This helps to date the emergence of the Nillet and Wid agreements and the second versions of the JMS and Valo agreements to March 1988. Thereafter the monthly payments of $85,000 were regularly paid on to Nillet within a few days of their receipt by Richco.
On 24 March 1988 two payments were made by Richco in respect of the $5s: one of $205,416.70 to JMS and the other of $36,250 to Mr Saad Salaam's account. Again, Mr Saad Salaam received 15% of the total amount paid out by Richco. At the time of those two payments Richco had not received any corresponding payment from Dubal. On 22 April 1988, however, Richco received $1,563,489.80 from Dubal by way of the 2.5% commission; and on 25/27 April Richco made four payments, two each to JMS and to Saad Salaam, in respect of the 2.5% commission and the $5s. The total of the six payments made by Richco, ie the two March payments and the four April payments, amounted to $1,144,244.95, or some 73% of the $1,563,489.80 received by Richco. The March payments are therefore another example of Richco making a payment in advance of a corresponding receipt. The 2.5% commission payments to JMS and Saad Salaam are on this occasion exactly 50% of the 2.5% commission payment received by Richco. I do not know for sure why the onward payments totalled only an additional 23% or so, rather than the 30% contemplated, but I presume it is related to the fact that on this occasion on-payments were only made in respect of the $5s, and not in respect of the $2s. Thus Mr Horat's schedule only identifies payments in respect of the $5s; and there is a manuscript note of this period in Mr Horat's handwriting, saying "$2.- Not to be paid until end of year".
There is a fax dated 21 April 1988 in Mr Livingstone's handwriting, sent to Mr Salaam, relating to the April payments totalling $1,144,240. The fax shows that $1,144,240 figure broken down into four subsidiary figures of $171,636, $389,042, $291,781 and $291,781. A calculator shows that these subsidiary figures are respectively 15%, 34%, 25.5% and 25.5% of the first figure, and that the sub-total of the last three figures ($972,604, also recorded on the fax) sub-divides into 40%, 30% and 30% of that sub-total. Mr Livingstone confirmed these calculations in his evidence and said that they represented the division of the total Richco on-payment between Saad Salaam (15%), Mr Al Tajir (34%, or 40% of the remainder after Saad Salaam's share), Mr Salaam and himself (25.5% each, or 30% of the remainder after Saad's share). The figures in Mr Livingstone's fax, and their attribution between Saad Salaam and the rest, are reflected in the payments to JMS and Saad Salaam recorded in Mr Horat's schedule. The tripartite shares in the amounts paid by Richco to JMS were presumably the subject of further on-payments by JMS to the ultimate beneficiaries, Mr Al Tajir, Mr Salaam and Mr Livingstone: I revert to this below.
On 29 July 1988 Richco received $1,834,700.90 by way of 2.5% commission, and on various days between 4 and 18 August made onward payments totalling $1,252,395.50, or a little over 68% of the amount received. Again the onward payments in respect of the 2.5% commission amounted to exactly 50% of the 2.5% commission payment received by Richco. Again, the additional 18% or so transferred in respect of the $5s (nothing in respect of the $2s) fell short of the 30% maximum contemplated.
On this occasion, in August 1988, the first direct payment to Al Tajir Ltd is found, to an account at the Republican National Bank, New York. According to Mr Al Tajir's evidence, he knew nothing about this. According to the evidence of Mr Livingstone, however, the payment to Al Tajir Ltd was arranged at Mr Al Tajir's request, because Mr Al Tajir had found out that Mr Saad Salaam was receiving his share directly from Richco into his own account, and Mr Al Tajir wanted similar treatment rather than to receive his share via JMS. I accept Mr Livingstone's evidence as to this, including his evidence that Mr Al Tajir paid a fair degree of attention to his receipts from the scheme: see below.
On 31 October 1988 Dubal paid Richco $1,895,487.80 in respect of the 2.5% commission, and on 14 November Richco paid on a total of $1,427,959.38 to JMS, Saad Salaam and Al Tajir Ltd, a little over 75% of the amount Richco had received. Again, the amounts on-paid in respect of the 2.5% commission constituted 50% of the amount received by Richco. The additional 25% is on this occasion recorded in Mr Horat's schedule as reflecting both the $5s and the $2s. Although that 25% is closer to the 30% than previous payments, it is still short of it. Again, Saad Salaam received 15% of the on-payments, but on this occasion Al Tajir Ltd received 40% (not 34% as before), and JMS received 45% (not 51% as before). It would appear, therefore, that Mr Livingstone, presumably prompted by Mr Al Tajir, had revised his instructions to Richco so as to ensure that Saad Salaam's 15% came out of only Mr Salaam's and Mr Livingstone's shares, and not also out of Mr Al Tajir's share.
On 31 January 1989 Richco received $1,914,265.30 from Dubal in respect of the 2.5% commission. It had already pre-paid $550,000 to JMS on 13 January. On 10 February Richco paid a further $519,721.06 to Al Tajir Ltd and $194,895.49 to Saad Salaam: in all, including the January payments to JMS, a total of $1,264,616.55, or some 66% of the amount it had received. The lower percentage appears to reflect the fact that the prepayments to JMS were of provisional figures in the rounded amounts of $400,000 in respect of 2.5% commission and $150,000 in respect of the $5s.
On 10 May 1989 Richco received $1,896,616 from Dubal in respect of the 2.5% commission. It had again prepaid an apparently provisional total of $550,000 to JMS, on 14 April: JMS's account had moved to First City Bank, Houston. On 16 May it paid a further $529,323.20 to Al Tajir Ltd and $190,996.20 to Saad Salaam: in all a total of $1,270,319.40, or some 67% of what it had received.
On 16 August 1989 Richco received $1,782,404 from Dubal in respect of the 2.5% commission. For a third time it had prepaid an apparently provisional total of $550,000 to JMS on 18 July. On 25 August it paid a further $486,480.80 to Al Tajir Ltd and $182,430.30 to Saad Salaam: in all a total of $1,218,911.10, or some 68% of what it had received.
On 11 October 1989 Richco received $2,429,307.10 from Dubal in respect of the 2.5% commission. On 16 October it paid: to JMS, $546,594.09 in respect of 2.5% commission and $150,109.64 in respect of $5s and $2s; to Al Tajir Ltd, $485,861.41 in respect of 2.5% commission and $133,430.79 in respect of $5s and $2s; and to Saad Salaam, $182,198.03 in respect of 2.5% commission and $50,036.55 in respect of $5s and $2s; a total of $1,548,230.50, or nearly 64% of what it had received. 50% of the 2.5% commission received by Richco was passed on as such; the balance of some 14% was passed on as $5s and $2s.
On 15 December 1989 Richco (Clarendon) paid $1,400,000 to an account number 12.822 in the name of "J Diem" held at Bank fur Handel und Effekten, Zurich. It is common ground that that was Mr Salaam's account, held in the name of his bank manager. There was no payment from Dubal to Richco in the same or similar amount, either shortly before or shortly after that date. Mr Horat's schedule ascribes the payment to the $5s. A Richco accountancy schedule dated 18 May 1990 also ascribes it to the $5s. It appears to be linked in that schedule in some way with a similar payment, also ascribed to the $5s, made by Richco (Clarendon) to Al Tajir Ltd on 23 February 1990: in that case too there appears to be no payment from Dubal to Richco in the same or similar amount either shortly before or after that date. Mr Livingstone provided some evidence about the first of these payments, under cross-examination by Mr Malek (at day 11, pages 139/144). The clue appears to be a manuscript document in Mr Horat's handwriting dated 15 December 1989, the date of the payment to Mr Salaam's account. This shows that the $1,400,000 is a prepayment in respect of an estimated quantity of 300,000 tonnes of alumina to be supplied by Clarendon to Dubal in calendar 1990: 300,000 x $5 = $1,500,000, from which $100,000 was discounted for early payment. That would explain why the year "1990" and "300,000" mt are put beside the $1,400,000 entry in Mr Horat's document of 18 May 1990. ("1991" and "300,000" mt are similarly to be found in that document against the payment of February 1990 to Al Tajir Ltd in the sum of $1,296,944.)
Mr Livingstone was also questioned in this context about documents showing that he and Mr Salaam were in account with one another regarding an investment in the Fidelity Bank Building, Philadelphia, which Mr Salaam and Mr Al Tajir had originally bought in partnership together. It looks as though Mr Salaam had proposed to Mr Livingstone that he should invest in that property his proceeds from the scheme (and/or his share in the additional $55 payments). One item in this account, an item dated 18 December 1989, is the transfer by Mr Livingstone to Mr Salaam of the sum of $1,400,000. It is not clear if this is the same sum as was transferred by Richco (Clarendon) to Mr Salaam at Bank fur Handel (the identity of the amount and the closeness of the dates are intriguing), or whether it is a different sum of $1,400,000. If it is the same sum, then it would seem that this $1,400,000, although apparently paid to Mr Salaam, was actually for the benefit of Mr Livingstone. As it was, Mr Livingstone never saw any return from his investment in the property.
This item of $1,400,000 remains a puzzle, for additional reasons. Even if it was an advance on the $5s for 1990, it ought to have been shared between Mr Salaam, Mr Saad Salaam, Mr Al Tajir and Mr Livingstone: but in that case, 15% should have gone directly to Saad, 40% to Al Tajir Ltd, and the balance shared between Mr Salaam and Mr Livingstone. As it was, it was not dealt with in this way; nor was the JMS portion sent in the usual way to JMS's account (now) with First City Bank, Houston. Similarly, it is not easy to see why Al Tajir Ltd alone receives a payment in February 1990 by way of an advance in respect of 1991's $5s. It remains to be seen how the $5s were dealt with in 1990/1. For the moment, I note these apparently anomalous payments of December 1989 and February 1990, without any clear view as to their true nature.
On 22 January 1990 Richco received $2,157,931 from Dubal in respect of the 2.5% commission. On 29 January Richco paid out the following amounts: to JMS, $659,714.02; to Al Tajir Ltd, $589,412.47; and to Saad Salaam, $219,904.68; a total of $1,469,031.17 or some 68% of what Richco had received. Again, the sum transferred on by Richco in respect of 2.5% commission was exactly 50% of what it had received, and the balance of some 18% was in respect of $5s and $2s.
On 18 April 1990 Richco received a further $1,696,806 from Dubal in respect of the 2.5% commission. On this occasion Mr Horat's schedule shows Richco as paying out on 20 April a total of only $765,324 in respect of 2.5% commission, less than 50% (about 45%) of the amount received. I do not know why that is. In addition a total of $375,000 was paid on in respect of $5s, but not until 12 June 1990. Taking all those payments by Richco together provides the passing on of just over 67% of the amount received by Richco.
On 25 July 1990 Richco received from Dubal $1,638,986 in respect of 2.5% commission. On 30 July, it passed on: $527,062.42 to JMS, $468,499.93 to Al Tajir Ltd, and $175,687.47 to Saad Salaam, a total of $1,171,249.82, or over 71% of what it had received. Once again, the sum passed on under the heading of 2.5% commission was less than 50% of what Richco had received, viz $736,249.82 or just under 45%: I do not know why.
On 15 October 1990 Richco received from Dubal $1,709,562 in respect of 2.5% commission. On 5 November it paid on a total of $1,229,781, or some 72% of what it had received. 50% of what it received was passed on as 2.5% commission. On this occasion, for the first time, the normal payment to JMS in respect of the 2.5% commission was split, 50/50, between payments to JMS and to Utary Establishment, of which it is common ground that Mr Livingstone was the personal beneficiary. Mr Livingstone had previously received his share of the $55 payments directly into Utary, starting with a payment of 18 April 1989. It would seem, however, that prior to 5 November 1990, Mr Livingstone had received his share of the proceeds of the scheme either via JMS or simply as credit items to the running account which he maintained with Mr Salaam in respect of his investment in the Fidelity Bank Building. His share of the $5s and $2s continued to be paid directly to JMS, as did his half share in the monthly sums of $85,000 being paid to Nillet. His account with Mr Salaam shows that at least from July 1988 he was credited with half of such monthly payments.
On 14 January 1991 Richco received $1,954,279 from Dubal in respect of 2.5% commission. On 23 January Richco made payments totalling $1,412,139.50, or over 72% of what it had received, to JMS, Al Tajir Ltd, Saad Salaam, and Utary. 50% of what Richco received was passed on under the category of 2.5% commission. On this occasion Utary (Mr Livingstone) received direct payment not only in respect of his share of the 2.5% commission, but also in respect of his share of the $5s and $2s.
In March/April 1991 Richco made prepayments of the discounted capitalised values of the outstanding rights of JMS and Nillet under their agreements. The Valo agreement had already expired in 1988, and the Wid agreement had not yet come into force: there was no capitalised buy-out of that agreement. Capitalised payments were also made in respect of the $10s, but not of the $55s. Mr Livingstone says that the idea for these arrangements was his: he had no wish to continue dealing with "other people's cashflow problems". He therefore discussed the matter with Mr Al Tajir, obtained agreement in principle from Mr Strothotte, negotiated the payments, and obtained final agreement from the various beneficiaries. Mr Salaam said that he was pleased to have the cash, but concerned that he was being edged out by his partners. Mr Strothotte recalled Mr Livingstone presenting the request for capitalised payments as originating from Mr Al Tajir. Certainly it was Mr Al Tajir who benefitted most from these payments. Mr Al Tajir's evidence of course was that he had no knowledge of these arrangements or payments at all, even though he received a total of $11,442,433 (including payments in respect of the $10s) from them! In my judgement it is likely that, as Mr Livingstone gave Mr Strothotte to understand, the impetus came from Mr Al Tajir. The capitalised payments were as follows:
(1) In respect of the 2.5% commission:
$6,187,200 to Al Tajir Ltd (Mr Al Tajir)
$3,480,301 to JMS (Mr Salaam)
$3,480,301 to Utary (Mr Livingstone)
$2,320,203 to Saad Salaam.
(2) In respect of the $5s:
$2,312,733 to Al Tajir Ltd (Mr Al Tajir)
$1,623,789 to Mr Salaam (at Bank fur Handel)
$762,789 to Utary (Mr Livingstone)
$1,082,525 to Saad Salaam
(3) In respect of the monthly payments of $85,000:
$1,501,213 to Mr Salaam (at Bank fur Handel)
$1,574,771 to Utary (Mr Livingstone). (There were also capitalised payments in respect of the $10s in the sums totalling $2,942,500 to Al Tajir Ltd, and $2,942,500 to Utary.)
The payments in respect of the 2.5% commission reflected the established share of 40% for Mr Al Tajir, 22.5% each for Mr Salaam and Mr Livingstone, and 15% for Saad Salaam.
The payments in respect of the $5s reflected 40% for Mr Al Tajir, some 28% for Mr Salaam, some 13% for Mr Livingstone, and nearly 19% for Saad Salaam. I do not know why there were these divergences from the normal shares between the four beneficiaries. Similarly, I do not know why the payments to Mr Salaam and Mr Livingstone in respect of the monthly payments of $85,000 were not in identical amounts. The total of these capitalised payments was $24,325,825.
Following these capitalised payments, the only further payments made by Richco were in respect of the $55s. However, Richco continued to receive monthly payments of $85,000 and quarterly payments in respect of the 2.5% commission: in April 1991 of $2,222,562, in July 1991 of $2,433,877, in October 1991 of $2,461,713, in January 1992 of $2,353,939, in April 1992 of $1,969,541, in July 1992 of $2,082,182, in November 1992 of $2,181,800, and finally in February 1993 of $2,250,589. Thus, after the capitalised payments had been made Richco continued to receive a total of 23 payments of $85,000 each, or $1,955,000, and a total of 8 further commission payments amounting to $17,956,203, a grand total of $19,911,203.
A summary of these receipts and payments is as follows:
(1) Richco received in all $50,117,622 from Dubal under the Richco consultancy agreement: of which $30,206,419 was received before the capitalised buy-out, and $19,911,203 was received after that time. (In addition there were further disbursements in respect of the $55s and $10s which are not the subject matter of claim.)
(2) Richco disbursed $49,780,944 under the subsidiary agreements: of which $25,455,119 was paid out prior to the capitalised payments, and $24,325,825 was paid out as part of that arrangement.
(3) The straightforward balance between what Richco received and what it paid out under the scheme is therefore $336,678. However, that figure disguises the fact that it paid out some $24 million as capitalised payments in advance of receipt. In time value terms, therefore, it paid out more than it received. Its anticipated further receipts were cut short by Dubal's termination of the Richco consultancy agreement on 22 March 1993.
(4) Mr Steven Neal, a chartered accountant and partner in the firm of Kingston Smith, instructed on behalf of Mr Salaam to analyse the payments and receipts, sought to emphasise in his report that Richco had (by and large) retained 50% of the 2.5% commission: a figure he calculates at $20,630,312.41, approximately half of the total receipts by Richco of 2.5% commission in the sum of $42,507,505.26. However, in my judgment that is to ignore two matters. First, the effective structure of the scheme, which, as I have sought to show, used the funds generated by the 2.5% commission to feed not only the onward transmission of half of that commission but also the payment of the $5s and $2s up to a further 30% of that commission. And secondly, the fact that the capitalised payments, although temporally financed (at the beneficiaries' cost) by Richco, were secured on and ultimately, in practice and effect, derived from the continuing payments under the Richco primary agreement, at any rate until its early termination.
(5) Mr Salaam received $21,846,288.33 pursuant to the scheme, either personally, or through his companies, JMS, Valo and Nillet. The figure is made up as follows:
(a) Valo (the mobilisation fee of $2m and six monthly payments of $85,000): $2,510,000
(b) Nillet (35 monthly payments of $85,000): $2,975,000 (This is the figure pleaded in Dubal's points of claim and also endorsed by Mr Horat's appendix 3, where he seeks to summarise receipts, recipient by recipient. It is also the figure accepted by me in my Unreasoned Findings. On reflection, it seems to me that it may be more accurate to say that Nillet received 36 monthly payments, totalling $3,060,000. In the end, however, it makes no difference, because the additional $85,000 is either properly to be attributed to Nillet, or, as Dubal's points of claim and Mr Horat's appendix 3 have recorded it, to Mr Salaam personally at Bank fur Handel. I shall for the sake of convenience adopt the latter formulation.)
(c) JMS (the payments in respect of 2.5% commission and the $5s and $2s, made to JMS's account at Fidelity Bank, London and latterly First City Bank, Houston): $8,270,985.33 (In my Unreasoned Findings, I found that JMS had received $14,272,846.61. This, however, was to ignore the fact that $6,001,861.28 of that amount was credited to Saad Salaam's account at Banque Gutzwiller. Again, the point is of little consequence, because it matters not whether Saad Salaam's receipts are to be deducted from those attributed to JMS, or from those attributed to Mr Salaam in general, in circumstances where he is to be regarded, as he accepts, as receiving not only what he received into his personal accounts but also what his companies received.)
(d) Mr Salaam personally (the payments made into his account at Bank fur Handel): $8,090,303
(e) Mr Salaam personally or through his companies (items (a), (b), (c) and (d) above): $21,846,488.39 (As a matter of strict arithmetic, this figure should probably be $21,846,288.33, some $200 less than the figure given in the text above. In my Unreasoned Findings, however, I cited the higher figure for Mr Salaam's total receipts of $21,846,488.39. I obtained that figure from para 6 of Mr Davis' Outline Closing Submissions on behalf of the Salaam defendants, citing Mr Neal's report at para 12. The difference of $200 is not likely to be material. As an agreed figure, it seems to me to be the one that I should remain with.)
(6) Mr Saad Salaam received (at Banque Gutzwiller) the total sum of $6,001,861.28.
(7) Mr Livingstone received (at Utary) the sum of (at least) $6,327,918.09. This was the figure adopted by Dubal, accepted Mr Livingstone, and not disputed by Mr Salaam or the other parties. It is the figure to be found in my Unreasoned Findings. For the purposes of Dubal's claim, it is good enough, and it binds Dubal. It is possible, however, or even likely, that prior to November 1990 Mr Livingstone received additional sums under the scheme, indirectly from Dubal, through JMS. It would follow in such a case that Mr Salaam retained less than he received, but, if so, Mr Salaam did not rely on this point in relation to Mr Livingstone, as distinct from the position vis-a-vis Mr Al Tajir.
(8) Similarly, Mr Al Tajir received (through Al Tajir Ltd) the sum of (at least) $15,604,877.10. As far as it went, this was a figure accepted or not disputed by all parties, save for Mr Tajir himself. (On behalf of Mr Al Tajir it was submitted that he had only received, in relation to the Richco consultancy agreement, the sums of $4,148,771 in respect of his share of the 2.5% commission and of $6,187,200 in respect of the capitalised buy-out of his share of the 2.5% commission. That submission, however, ignored the further payments he received, both the quarterly payments and the capitalised payments in respect of the $5s and $2s totalling $5,268,906. They appear to have been ignored on the ground that they related to the ASA and were paid by Clarendon. I have, however, already given my reasons for regarding these payments as part and parcel of the benefits of the scheme in relation to the Richco consultancy agreement. They were written into the subsidiary agreements.) It is again the figure to be found in my Unreasoned Findings. However, at the contribution proceedings, it was argued that Mr Al Tajir had received additional sums prior to August 1988, via Mr Salaam or his companies. If that was so, it would mean that Mr Salaam retained less than he received. I shall revert to this question below.
(9) The two sums of $1,400,000 and $1,296,944, paid in respect of the $5s in the former case to Mr Salaam (at Bank fur Handel) in December 1989 and in the latter to Al Tajir Ltd in February 1990, are included in the above figures as receipts of Mr Salaam and of Mr Al Tajir respectively. The investigation of the $1,400,000 payment might suggest that that is to be regarded as for the benefit of Mr Livingstone rather than Mr Salaam. If so, that might also affect the ultimate amount retained by Mr Salaam, but it was not relied upon by Mr Salaam as doing so. In any event, these payments remain something of a mystery. There was no investigation before me as to how they are to be taken into account in the overall scheme of things. I have however conducted, of my own initiative, the following experiments with the figures at my disposal. I have calculated that up to the time of the capitalised payments made in March 1991, Richco received $24,636,419 in respect of 2.5% commission and paid out a total of $19,885,119 in respect of 2.5% commission and the $5s and $2s (including the payments of $1,400,000 and $1,296,944) or (if those two payments are excluded) $17,188,175. The latter pay-out total is nearly 70% of the corresponding sum received, and the former pay-out total rises to just over 80% of that sum received. Unchecked by other hands, those figures are, of course liable to error. There may also have been some cross-over in the calculations of the capitalised payments, rendering a strict "before and after" March 1991 approach faulty. It may be, nevertheless, that these two otherwise mysterious payments are part of the overall calculation of the parties to the scheme which brings the pay-out close to the 80% contemplated. Whether that be deliberate or not, it would appear that Richco did pay out, up to the time of the capitalised payments in March 1991, approximately 80% of what it received by way of 2.5% commission, as well as all of what it received by way of the mobilisation fee of $2m and the monthly payments of $85,000.
There was little dispute before me as to the law, save as to whether the test of dishonesty is objective or subjective. It was, for instance, common ground that where an issue of dishonesty is concerned, the burden of proof is a heavy one: Hornal v. Neuberger Products Ltd  1 QB 247.
There are two main types of accessory liability where a breach of trust or fiduciary duty is concerned. They are commonly referred to as "knowing receipt" and "knowing assistance". As to the former, a third party will be liable as a constructive trustee if he is the recipient beneficially of trust property or of assets representing that property, in the knowledge that the property of which he is in receipt is traceable to a breach of trust or fiduciary relationship: see Agip (Africa) Ltd v. Jackson  1 Ch 265 (Millett J),  Ch 547 (CA), El Ajou v. Dollar Land Holdings  2 All E R 685. It does not matter that he no longer retains the property in question, for he remains liable personally to compensate the claimant for the loss caused by the breach of trust. Under this heading questions might arise, for instance, as to whether the property received represented trust property; as to what might constitute the requisite "knowledge", and in particular whether some kind of dishonest knowledge was necessary, or whether constructive knowledge sufficed; and as to whether the property received was received beneficially or not.
As to "knowing assistance", the essence of this type of accessory liability is the dishonest assistance in or procurement of a breach of trust or fiduciary relationship. As Lord Nicholls said in Royal Brunei Airlines Sdn Bhd v. Tan  2 AC 378 (PC) at 382E:
"Liability as an accessory is not dependent upon receipt of trust property. It arises even though no trust property has reached the hands of the accessory."
One essential issue in such a case, as it was in Tan, is what kind of knowledge is required to render such an accessory liable. Is dishonest knowledge required, and if so is the test of dishonesty more or less subjective, or objective? As to this issue, Lord Nicholls pointed out that the jumping-off point had been Lord Selborne LC's famous dictum in Barnes v. Addy (1874) LR 9 Ch App 244 at 251-2 that -
"...strangers are not to be made constructive trustees...unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees."
His conclusion was stated thus (at 392F/G):
"Drawing the threads together, their Lordships' overall conclusion is that dishonesty is a necessary ingredient of accessory liability. It is also a sufficient ingredient. A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation. It is not necessary that, in addition, the trustee or fiduciary was acting dishonestly, although this will usually be so where the third party who is assisting him is acting dishonestly. "Knowingly" is better avoided as a defining ingredient of the principle, and in the context of this principle the Baden  1 W.L.R. 509 scale of knowledge is best forgotten."
As for the test of dishonesty, Lord Nicholls had said that the standard was objective, "simply not acting as an honest person would in the circumstances" (at 389C). The relevant passage of his judgment reads as follows (at 389C/G):
"Whatever may be the position in some criminal or other contexts (see, for instance, Reg. v. Ghosh  Q.B. 1053), in the context of the accessory liability principle acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as a honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are most concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their ow standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.
"In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others' property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Not does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless."
Lord Nicholls further exemplified the test in the following passage at 390F/G:
"The only answer to these questions lies in keeping in mind that honesty is an objective standard. The individual is expected to attain the standard which would be observed by a honest person placed in those circumstances. It is impossible to be more specific. Knox J. captured the flavour of this, in a case within a commercial setting, when he referred to a person who is "guilty of commercially unacceptable conduct in the particular context involved:" see Cowan de Groot Properties Ltd. v. Eagle Trust Plc.  4 All E.R. 700, 761."
Nevertheless, it was submitted by Mr Davis on behalf of the Salaam defendants that Lord Nicholls was mistaken, and that their Lordships' advice in the Privy Council in Tan could not be reconciled with binding authority in the court of appeal in cases such as Belmont Finance Corporation Ltd v. Williams Furniture Ltd  Ch 250, eg at 267G, where Buckley LJ said:
"[Lord Selborne LC's] formulation has stood for more than 100 years. To depart from it now would, I think, introduce an undesirable degree of uncertainty to the law, because if dishonesty is not to be the criterion, what degree of unethical conduct is to be sufficient? I think we should adhere to the formula used by Lord Selborne L.C. So in my judgment the design must be shown to be a dishonest one - that is to say, a fraudulent one."
In that case, however, the issue was whether there had to be any pleaded allegation of dishonesty on the part of the defendants: the issue was not as to the nature of the test of dishonesty, although the court was happy to adopt Lord Selborne's reference to a "dishonest and fraudulent design" and to say that no distinction was to be drawn between those epithets. In Tan the privy council reviewed all lines of earlier authority, and preferred the test of dishonesty to other fault-based principles, relying in this connection on the Belmont case itself (at 388B/E): but that still left open for further refinement the question of the test of dishonesty itself. In my judgment, I should regard Tan as laying down the modern test.
It was submitted nevertheless that in applying the Tan test I should have regard to the custom and practice of business and public affairs in Dubai. In Arab Monetary Fund v. Hashim (unreported, 29 July 1994) Chadwick J (at 45/6 of the transcript) said this:
"The second requirement, as it seems to me, was that the English Court must have satisfied itself that there was no rule of law of any relevant foreign law which - in the words of Lord Pearson in Boys v. Chaplin ( AC 356, 397) - would provide a defence to the AMF's cause of action; or - as it might, perhaps, be put in the context of a Barnes v. Addy constructive trust claim - would make it inequitable to hold that an FNBC defendant should be treated as if it were a trustee. If, as the authorities show, the basis of such a claim is dishonesty or lack of probity on the part of the defendant, then it must be right to judge honesty or dishonesty in the light of all relevant circumstances; and those circumstances must include relevant provisions of the local law.
"It follows that the appropriate course, in the present case, is to examine the evidence as to Swiss law not for the purpose of identifying any rule of that law which the English court would have been concerned to enforce, but rather for the purpose of deciding whether, having regard to the legal framework within which the FNBC and its affiliates were conducting the operation of the numbered accounts at its Geneva branch, there was such dishonesty or lack of probity as would have made it equitable for the English court to treat those defendants as if they were trustees."
In the present case no evidence of Dubai law is relied on: the most that is put before me is evidence of custom and practice in Dubai, in the form of passages from a report from Mr Khaled El Fadl. The report was procured on behalf of the Amhurst defendants, but not ultimately relied on by them. Mr Salaam then sought by way of a Civil Evidence Act notice to rely on specified passages from the report. The notice was accepted by Dubal, subject to comment. I have not therefore heard Mr El Fadl cross-examined. I will refer to what he has to say below. For the moment I merely comment I would accept that Dubai custom and practice may be in theory relevant, in the sense spoken to by Chadwick J in the citation above, to the overall question which I have to decide, as a matter of English law, as to the honesty or otherwise of the parties before me. However, it seems to me to be capable of having little, if any, bearing on the acts of the parties before me carried on outside Dubai, as for the most part they were.
I revert to the principle of knowing receipt. In the light of Tan the question arises whether the mental element of "knowing" is to have the same content in knowing receipt as in what should now be called "dishonest assistance". Indeed Cowan de Groot Properties v. Eagle Trust, which Lord Nicholls had quoted in the passage cited above, was a case of knowing receipt. Knox J's test, approved by Lord Nicholls, of "commercially disreputable conduct in the particular context involved" comes, in fact, from the obiter part of the former's judgment, in case he was wrong to say, as he preferred, that constructive knowledge would not suffice to render a defendant liable in knowing receipt. It seems to me that in the circumstances, the test in knowing receipt and dishonest assistance is likely to be the same.
In the present case, the focus was in any event on dishonest assistance rather than knowing receipt. This was first because, subject to the question of dishonesty, there was no issue as to whether Mr Salaam had assisted in the scheme; secondly, because the claim in dishonest assistance was the larger claim, and embraced all Dubal's payments to Richco; and thirdly, because no submissions were made to the effect that Mr Salaam's or his companies' receipts were not received beneficially (subject to the point mentioned below in the context of the contribution proceedings that some of the monies passed through Mr Salaam's hands to other parties) - otherwise than in the case of the payments to Saad Salaam, and those in any event appear to have been paid directly to the latter's personal account, even if under the name of JMS. Thus it was accepted that Mr Salaam had received $21,846,488.39 (paragraphs 5/6 of Mr Davis's closing submissions on behalf of the Salaam defendants). In the circumstances, very little attention was paid to any separate issues which might otherwise have arisen under the heading of knowing receipt. I have already said that in the light of Tan I would regard the test of the mental element involved as being dishonesty in the Tan sense. As for beneficial receipt, the matter was dealt with by the concession I have just referred to: and that concession remained, even though in other parts of Mr Davis' submissions, for instance in dealing with the quantum of Mr Al Tajir's receipts (in anticipation of an issue in the contribution proceedings) it was submitted that Mr Al Tajir had received his agreed share from Mr Salaam prior to the commencement of direct payments in August 1988. As for whether the receipts in question at least represented trust property, that issue too at the end of the day was not taken by Mr Salaam. In any event I have expressed the view that they did, even in the case of the capitalised prepayments.
Ultimately, therefore, the only issue of law I had to decide in respect of the main action was as to the appropriate test of dishonesty: and I have decided that by adopting the test in Tan. As it is, Dubal made it clear that, while it only had to meet the test in Tan, what it alleged against Mr Salaam was actual dishonesty, the subjective knowledge that what he was participating in was dishonest "theft".
Strictly speaking, the only person whose honesty was formally in question for the purpose of the main action, following the Amhurst settlement, was Mr Salaam. However, his position could not realistically be considered separately from those of Mr Livingstone and Mr Al Tajir. Mr Livingstone's position had to be considered, also because it was a condition precedent of any liability in the main action that Mr Livingstone had acted in breach of his fiduciary obligations. Tan makes clear that a fiduciary may well be in breach without being himself dishonest: but for the purposes of the contribution proceedings the question of Mr Livingstone's honesty was itself in issue. For similar reasons Richco's honesty was in issue. The Amhurst defendants' honesty was no longer in issue after their settlement with Dubal: instead I had to proceed in their case on the assumption that what Dubal had factually pleaded against them was true. In effect therefore, I shall have to consider the parties' honesty or otherwise all of a piece. I must start, however, with Mr Livingstone: was he in breach of a fiduciary obligation? and if so, had he been dishonest? Before turning to those questions, however, I must say something more about Dubai custom and practice.
Dubai practice and custom
It has been submitted on behalf of Mr Salaam that the issue of dishonesty should be judged in the light of Dubai custom and practice and in this connection he relies on the evidence of Mr Khaled El Fadl. Mr El Fadl was born in Kuwait and is now an American citizen and member of the Pennsylvania and New Jersey bars. He is also a member of the Committee on Islamic and International Law of the American Branch of the International Law Association, an adjunct Professor of Islamic and Middle Eastern Law at the University of Texas, and a consultant to the law firm of Medhat Abou El Fadl in Cairo.
It is not clear to me exactly how Mr Salaam relies on the evidence of Mr El Fadl. His report is not cited in Mr Davis's Outline Closing Submissions under the heading of "Accepted Custom and Practice". Instead, reliance is there placed on passages from the evidence of Mr Livingstone, Mr Salaam, Mr Strothotte and Mr Briggs to the effect that commissions were part of the accepted culture of Dubai. That, however, was on the premise that such commissions were authorised, for instance by a foreign company in favour of its Dubai sponsor or by the ruling family in the case of companies within its control. Similarly a large part of Mr El Fadl's report is concerned with the position of the Ruler's representative. I have found, however, that Mr Al Tajir was not the Ruler's representative and was not acting as such in the context of the scheme.
Mr El Fadl opines at one point that a belief by Mr Salaam that Mr Al Tajir was closely associated with the Ruler and was his effective representative "would reasonably have been held" as long as Sheikh Rashid was alive. He develops that thought to a certain extent, eg by doubting whether the ruling family itself, until the death of Sheikh Rashid, was clear about Mr Al Tajir's authority, or by stating that none of the clear signs of Mr Al Tajir's disempowerment had occurred. I, however, must be the judge of those matters, on all the evidence before me, and I have found that Mr Salaam did not believe that Mr Al Tajir was the Ruler's representative, and could not have reasonably done so. In doing so I have borne in mind what Mr El Fadl has written. I very much doubt, nevertheless, that Mr El Fadl has any standing, albeit an expert on Dubai law, to seek to express an opinion on the facts of the case in this way.
Finally I mention that, under the heading "Commissions - Government Enterprises", Mr El Fadl opines that it is not unusual, in the absence of prohibition by law, for a manager or executive of a government organisation to receive or share in a commission as part of his expected remuneration. The context of that opinion, however, is that the commission in question has been granted by the Ruler or his representative. Again, that question does not arise.
I therefore find that I am not assisted in this context by Mr El Fadl's report. I would merely add that, if I had received compelling evidence, tested under cross-examination, that payments of the kind and size of the payments in this case were acceptable under Dubai custom and practice even in the absence of the clear consent of the owners of the business concerned, I would have had to consider to what extent such evidence was relevant to transactions for the most part negotiated in Switzerland, evidenced by agreements expressly made subject to English law, and performed by the making of payments in Switzerland, England and the USA. As it is, that question does not arise.
I revert to the questions posed: was Mr Livingstone in breach of a fiduciary obligation? and if so, had he been dishonest? There was no dispute that Mr Livingstone was in a fiduciary relationship with Dubal, or that he had participated in the making of the Richco consultancy agreement, the setting up of the scheme, and the receiving of payments under it. The question was first, whether he was in breach of fiduciary duty, and secondly whether he was dishonest, in so acting.
In my judgment, the fact that he was in breach of his fiduciary duty to Dubal must follow from my rejection of the submission that in acting as he did he was acting with the authority of Mr Al Tajir as a representative of the Ruler of Dubai. That was ultimately the alleged basis of the legitimacy of the scheme as a whole and his participation in it. It was not in the end alleged that the scheme - and certainly not the scheme as I have found it to be, with only a small fraction of Dubal's total expenditure remaining in Richco's hands - was within his ordinary or even extraordinary powers as chief executive of Dubal, or within his powers of attorney. There was no separate part of the final submissions on behalf of either Mr Salaam or Mr Livingstone that sought to submit that he had acted in accordance with his fiduciary duty, unless he had acted with the authority of Mr Tajir. Moreover, there was no submission in any event, nor of course could there be, that Mr Livingstone was acting in accordance with his fiduciary duty, unless he was acting honestly. I regret to say, however, that in my judgment he was acting dishonestly. I say so for the following reasons.
First, it was the foundation of his case on honesty that he was acting with Mr Al Tajir's authority as the representative of the Ruler of Dubal, or at least believed himself to be. I have already found that Mr Al Tajir had no such authority at the relevant time. Nor do I accept that Mr Livingstone believed that Mr Al Tajir had such authority. Mr Livingstone was the chief executive of Dubal and lived in Dubai. He must have been aware of Mr Al Tajir's resignation from his official position as the Director of the Ruler's Affairs, and of his vacation of his old office. He must have been aware of this all the more because the fall or at least departure of Mr Al Tajir from his previous official, governmental and personal status as the Ruler's representative was in my judgment the reason why the GRC management agreement began to unravel: and that was a matter in which Mr Livingstone was intimately involved both as the chief executive of Dubal and by reason of his personal interest in the profits of that agreement. The very fact that Mr Livingstone has staked so much on his contention and his evidence that Mr Al Tajir still retained his former status, or that he at least believed him to have done so, at any rate in relation to Dubal, means, with my rejection of that contention and evidence, that Mr Livingstone has been shown to have taken up a false position: and that is symptomatic of his lack of honesty in relation to the scheme.
Thirdly, the fact that Mr Livingstone himself received large payments under the scheme, and that he was one of originally three and then four major beneficiaries of it, is inconsistent with his honesty. It was his own evidence that he was not entitled to any payment, and that he had not stipulated for any payment: he merely resigned himself to something which he regarded as a form of unofficial, but if pressed he would say deserved, bonus. It was not, however, a bonus handed out by Dubal, or by the government, or by his chairman Sheikh Hamdan. It was something which he agreed with Mr Al Tajir and Mr Salaam, in circumstances where he asserts, but I reject, Mr Al Tajir's authority to agree such payment on behalf of Dubal or its owners. In any event, Mr Livingstone was already very well remunerated, so that his attempt to explain his receipts from the scheme as an unofficial bonus was in my judgment spurious: apart from his more than adequate salary, he had received a $1,131,176 gratuity in 1988.
Fourthly, there was the background of his participation in the GRC management agreement. Even if that agreement began its life in the era of Mr Al Tajir's ascendancy, it came to an end after he had resigned his official position as the Ruler's representative, and in my judgment those two matters were not unconnected. I cannot accept that Mr Livingstone was not aware that a new regime had come to power in Dubai, that that was reflected in a change in the power structure in Dubal, and that the creaming off of Dubal's funds by means of the GRC agreement was unacceptable in the new climate. As Mr Livingstone was at times candid enough to admit, the GRC agreement was "a means of abstracting cash from Dubal", and involved the theft of money from Dubal ("If you wish to put it that way"). In my judgment, the Richco consultancy agreement and the subsidiary agreements were structured as they were, with Mr Livingstone's dishonest complicity, in order to disguise the fact that this scheme was but a further and more refined device for abstracting Dubal's money: for on this occasion the abstraction was to operate under the cloak of an apparently arms-length agreement with an independent partner in the form of Richco. Under the Richco scheme, no one at Dubal, except for Mr Livingstone himself, was supposed to know that most of the funds paid out by Dubal to Richco was to end up in the hands of Mr Livingstone and the other beneficiaries of the scheme.
Fifthly, there is the fact that in his cross-examination, as I have sought to describe it above, Mr Livingstone at times accepted, both implicitly and even expressly, the essential dishonesty of the Richco scheme. At best, his oral evidence on this subject relied on the fig-leaf of Mr Al Tajir's authority: without that protection, however, he was compelled to recognise the scheme for what it was.
Sixthly, the invidious and entirely false position that Mr Livingstone found himself to be in, as "paymaster, as it were", can be illustrated by the occasions when he was left to organise what he himself accepted were totally bogus transactions, such as the September 1988 option for $3,000,000 and the December 1988 option for $2,600,000.
Seventhly, the dishonesty of his situation can also be pointed up by his unsatisfactory evidence regarding his relations with his chairman, Sheikh Hamdan, in connection with the Richco scheme. In his statement he said that
"I believe that I informed Sheikh Hamdan about the Richco Consultancy Agreement because it was not in the usual course of Dubal's business. I believe that I said something to him like "We are going to enter into a consultancy agreement with the world's leading aluminium and alumina traders..."
In my judgment, the element of uncertainty reflected in the language "I believe..." is inappropriate to the importance of this evidence. Mr Livingstone here accepts that the Richco arrangement was not in the usual course of business and therefore something which he ought to mention to his chairman. It was indeed; and I regard it as inconceivable that if he had mentioned it to Sheikh Hamdan in any suitable manner he would not have remembered the occasion well. In any event, to mention the arrangement without at the same time explaining to Sheikh Hamdan what was really unusual about it, namely that up to 80% of the monies payable under it were to flow through to Mr Salaam's companies and through them to Mr Al Tajir and to Mr Livingstone himself, as well as to Mr Salaam, would have been to present a wholly disingenuous account of the scheme. I conclude that Mr Livingstone did not make any presentation, and certainly no adequate presentation, of the scheme to Sheikh Hamdan. That is what Sheikh Hamdan says in his own statement, and I accept his evidence, conscious as I am that he has not been cross-examined upon it. Mr Livingstone's failure to present the matter properly to his chairman, especially against the background of the GRC management agreement and its termination, is of course consistent only with Mr Livingstone's recognition to himself of the dishonesty of the scheme.
Eighthly, there is the fact that Mr Livingstone has always hitherto been unable or unwilling, or both, to give an account of the scheme which refers its unusual and apparently uncommercial elements to the legitimate authority of Mr Al Tajir. This was so both when he was first questioned about the Richco consultancy agreement in 1992 before he left Dubal, and when he was sued by Dubal in the Livingstone proceedings. In my judgment the obvious explanation for his response, or absence of response, is the correct explanation: not only did Mr Al Tajir possess no authority which could legitimise the scheme, but Mr Livingstone knew that the implication of Mr Al Tajir could provide him with no defence, not even with the colour of an excuse.
I regret therefore that I must find that Mr Livingstone was a dishonest participant in the scheme. It follows both from that conclusion and from many of the elements which have gone to support that conclusion that it is almost inevitable that I must find Mr Salaam's and Mr Al Tajir's participation to have been dishonest as well.
I would express my conclusions about Mr Salaam's role as follows.
First, like Mr Livingstone, he knew that Mr Al Tajir no longer had authority from Dubal or the Ruler to legitimise the scheme. He knew Mr Al Tajir well: he had been and remained business partners with him in various ventures, and was cooperating with him in the diplomatic missions arising from the Lebanese peace process. I cannot accept that Mr Al Tajir would have sought to lead Mr Salaam into the belief, or leave him disabused in the belief, that he retained his former role within the government of Dubai or in the affairs of Dubal. In any event, the unwinding of the GRC management agreement would have taught Mr Salaam the very pertinent truth of Mr Al Tajir's waning influence. If Mr Al Tajir had remained in power, there was no reason why the GRC agreement could not have continued as before. On top of all that, Sheikh Mohamed had told Mr Salaam to his face in March 1983 that Mr Al Tajir's "ways of business are over". I have already made the point above that Mr Salaam's evidence in relation to that meeting was unsatisfactory. It follows that Mr Salaam, like Mr Livingstone, has based his case on the false defence that the scheme was authorised by Mr Al Tajir. The falsity of that defence is in itself strong evidence of dishonesty.
Secondly, Mr Salaam likewise knew that Mr Livingstone had no justification for sharing in the spoils of the scheme. He knew that Mr Livingstone was responsible to Dubal and its owners for its proper management, and that his participation in a scheme for diverting its assets under the guise of a "strategic partnership" with Richco was dishonest. He knew that Mr Livingstone's complicity was indispensable to the scheme. He knew, for he agreed the division of the spoils, the huge sums which were allotted to Mr Livingstone. Even if the earning of an unofficial bonus could be regarded as a legitimate part of the mores of Dubai business life, at any rate when authorised by Dubal's owners, Mr Salaam knew that the immense sums allotted to Mr Livingstone were not the payment of a bonus, but the price of an indispensable partner in dishonesty.
Thirdly, I reject Mr Salaam's explanations of his own receipts. He sought in the main to represent them as the payment of an introductory commission: but under the terms of the subsidiary agreements, of course, they constituted the consideration for the provision of ongoing services. No such services were in fact provided. I have made the point above that in his evidence Mr Salaam was ambivalent about whether the commission he spoke of was to come from Richco, for the introduction to Dubal, or vice versa. That ambivalence reflects the unreality of the explanation. Moreover, if Mr Salaam's share of the payments routed through Dubal was the payment of an introductory commission to him, what were the payments to Mr Livingstone and Mr Al Tajir? Did they all have to be rewarded for the same introduction? If so, the introductory commission payable by Richco, with Dubal's money, amounted to the great majority of the payments to be made by Dubal purportedly in consideration for services to be provided by Richco. The fact is, as Mr Livingstone accepted but Mr Salaam continued to deny, that the scheme was a device for abstracting money from Dubal, and that Mr Salaam together with Mr Livingstone and Mr Al Tajir divided up the spoils by agreement between themselves.
Fourthly, the dishonesty of Mr Salaam is confirmed by the form of the agreements. If the true basis of the scheme had been a strategic partnership, under which Richco was to be properly remunerated for its services and Mr Salaam was to share a commission with his partner, Mr Al Tajir, or was even to earn further sums for the provision of subcontracted services, there was no reason why the agreements could not have been drafted to reflect that situation. An honest scheme would have clearly marked out the sums due to Richco for what Richco could provide to Dubal, and the sums due to Mr Salaam's companies for any real provision by them of subcontracted services, as well as the sums due to Mr Salaam (or his companies) and Mr Al Tajir for any commissions earned by them. I can conceive that any secret but genuine bonus to be granted to Mr Livingstone would have to be disguised, but that would be a mere detail. It may be that Mr Livingstone himself played a part in the formulation of the scheme in the way it was ultimately set up: essentially, however, the agreements were the responsibility of Mr Salaam's solicitor, Mr Amhurst. As part of the Amhurst settlement, Dubal has withdrawn all allegations against Mr Amhurst. The price for that withdrawal, however, was the payment of $10 million by the Amhurst defendants to Dubal. It is unrealistic to see in that a complete exoneration of Mr Amhurst. Whatever be his position, however, and even if he is to be regarded as a solicitor merely acting on his client's instructions in complete innocence of his client's guilty complicity, that merely places the responsibility for the scheme's legal form where in any event it must ultimately lie, namely on Mr Salaam, who was Mr Amhurst's client. It was Mr Salaam who went to Zug with Mr Livingstone in May 1987 to negotiate the scheme with Mr Rich. As Mr Salaam said in his third affirmation (at para 108): "It was my face-to-face negotiations with Marc Rich which eventually led to agreements between Richco and Nillet, LMS, Valo and Wid, which were all Gulf companies". In any event, I reject the submission advanced on behalf of Mr Salaam, that because Dubal has withdrawn allegations of impropriety against Mr Amhurst, therefore Mr Salaam must also be wholly innocent.
Fifthly, I have to make up my mind about Mr Salaam as a witness. Was he a witness of truth? There are cases where the circumstances raise a heavy inference of wrongdoing, but a witness redeems himself by his evidence. In my judgment, however, Mr Salaam was an unsatisfactory witness, and I can place no confidence in his testimony. He was at times argumentative and evasive, and at times used bluster and arrogance to seek to carry him through. I did not accept his evidence about Mr Al Tajir as the legitimate source of authority for the scheme. I did not accept his evidence about the reasons for the structure of the scheme, or as to the legitimacy of the payments of the huge sums to his companies and to Mr Livingstone and Mr Al Tajir.
It was submitted on his behalf that unless I could find that the Richco consultancy agreement was itself a sham, then Dubal's claim must fail; and that it was impossible to find it to have been a sham in the light of Mr Strothotte's evidence that Richco intended to and did provide real services to Dubal under it. In my judgment, however, that submission is mistaken. Whether or not Richco did intend to provide or did provide any services to Dubal under the consultancy agreement (as distinct from the other agreements entered into between Richco and Dubal) seems to me to be ultimately beside the point. At most, Richco was expected to retain only a small fraction of the 2.5% commission and none of the other fees. The whole of the balance was paid over under the subsidiary agreements, which were on any view a total sham. In any event the scheme as a whole was thoroughly dishonest. Moreover, I would for my part regard the Richco consultancy agreement as itself a sham, even if Richco had been intended to retain its fraction of the monies paid over to it as recompense for any services: for the Richco consultancy agreement cannot be divorced from the scheme as a whole, together with the wholly spurious subsidiary agreements. As it is, I would in all the circumstances prefer to regard Richco's small retention under the scheme as its price for participating in the scheme, rather than as a genuine reward for providing services, of which there is no concrete evidence. I return to this matter below, under the heading of Richco.
In the circumstances, I regret that I must find Mr Salaam's participation in the scheme to have been dishonest as well.
Mr Al Tajir
Mr Al Tajir did not seek to say that he possessed the authority of Dubal or the Ruler to give effect to the scheme. His evidence was rather that he played a purely facilitative role in bringing Dubal and Richco together, for which he had stipulated a fee by way of commission negotiated directly, and separately, with Marc Rich himself. He sought to distance himself from Mr Livingstone and Mr Salaam, and indeed from the whole transaction. He said he was unaware until a late date that any payments had been made into his (family) account at all.
I bear in mind that Mr Al Tajir had the advantage or disadvantage of not being available to be cross-examined on his written evidence. I will assume in his favour that that was a disadvantage. Nevertheless, it seems to me to be impossible to do other than find that Mr Al Tajir participated fully, and therefore dishonestly, with his partners in the scheme, Mr Livingstone and Mr Salaam. My reasons are as follows.
First, while there is much in the evidence of Mr Livingstone and Mr Salaam that I cannot accept, and I do not accept that their participation in the scheme was authorised or believed by them to be authorised by Mr Al Tajir, nevertheless I do not for one moment think that they were making up an entirely fictitious account of Mr Al Tajir's full share in the planning and proceeds of the scheme. Whatever false gloss they sought to place on his role, viz as the legitimising sanction of the whole scheme, they were surely speaking the truth when they gave detailed evidence of his complicity.
It follows that I do not accept that his only role was to facilitate the initial contact with Richco through Marc Rich in return for a personally negotiated and private commission arrangement. I can believe that the importance of his involvement was to make the initial contact with Mr Rich: but there is no evidence to support his contention that that was the limit of his involvement. On the contrary, it is clear that he relied on Mr Livingstone and Mr Salaam to promote in negotiations with Richco what were obviously the joint interests of their partnership in the scheme. He was a party to the lunchtime agreement made at the Mirabelle restaurant for the three-way split of the scheme's proceeds, - or at any rate what he thought of as the scheme's proceeds, for whether he knew about the mobilisation fee and the monthly payments must be in doubt. He also played a crucial role in bringing Saad Salaam into the partners' share-out. In due course he made use of Mr Livingstone again for the purpose of negotiating new payments to him, the $55s and $10s. I reject his attempt to distance himself from Mr Salaam and Mr Livingstone, and I regard that attempt as proceeding from consciousness of guilt.
Secondly, there is the matter of his receipts, the manner of them and his evidence about them. I accept Mr Salaam's and Mr Livingstone's evidence that Mr Al Tajir shared in the allocations of the 2.5% commission from the very beginning, even before the insistence of Saad Salaam on being paid by Richco directly rather than through his brother's company, JMS, led to Mr Al Tajir expressing a similar preference, with the effect that from August 1988 his share was paid directly to Al Tajir Ltd. It is true that from that time payments were openly made into that family account: but Mr Al Tajir is not able to claim the benefit of that openness, since he insists that he knew nothing about any payments at all. As it is, Mr Livingstone gave evidence that Mr Al Tajir paid close attention to his receipts. The $55s and the $10s were negotiated, said Mr Livingstone, on Mr Al Tajir's initiative, and Mr Al Tajir's share was similarly paid to Al Tajir Ltd. Mr Livingstone said that, in general, he was "always held responsible by Mr Al Tajir for seeing what happened to the money"; Mr Al Tajir kept no records and relied on Mr Livingstone to assure him that "things were going as he had anticipated" (day 10, pages 25, 28). The bogus option for $2.6 million was generated to pay for Mr Al Tajir's flying expenses, on his instructions. I accept that evidence, although I recognise that it comes from a tainted source. Finally, the capitalised payments made in March/April 1991 resulted in a total of over $11,000,000 being paid to Al Tajir Ltd at that time. I have concluded above that the impetus for the capitalisation of these revenue streams came from Mr Al Tajir, who was after all the largest beneficiary of them. However, even if I am wrong to ascribe the impetus to him, it is clear that Mr Livingstone's evidence, that the idea of capitalising the payments was at least discussed with Mr Al Tajir and needed his approval, must be correct. It is also relevant to observe that Mr Al Tajir disclosed no documents in support of his evidence. In my judgment, Mr Al Tajir's evidence that he knew nothing about payments to him pursuant to the scheme is false, and the reason why such false evidence has been proffered is to disguise Mr Al Tajir's participation in a dishonest scheme.
Thirdly, although it is a matter which postdates the trial and my unreasoned findings, Mr Al Tajir has settled with Dubal under the settlement agreement described earlier in this judgment, under which he will pay a total of $18 million in instalments by 31 December 1999. That neutralises an argument previously advanced on Mr Al Tajir's behalf that it was impossible to infer any dishonesty on Mr Al Tajir's part in circumstances where no claim had been brought against him by Dubal. I have concluded in any event that no safe inference could have been drawn from Dubal's failure to sue Mr Al Tajir at that late stage in the preparation for trial when Dubal learned for the first time from Richco's discovery that he had been a recipient of funds under the scheme. That is because it is impossible to be confident that I am in a position to understand the political or tactical considerations which could lie behind Dubal's decision. Mr Al Tajir, although for many years now no longer the Ruler's representative, had been very close to the ruling family and to Sheikh Rashid's sons; and yet their present relationships with him may not, on the evidence before me, be unanimous. In any event Mr Al Tajir's honesty has always been in issue in the third party proceedings, and Mr Al Tajir has never been under any illusion in this trial about the way in which Dubal has presented its case.
I regret therefore to conclude that Mr Al Tajir was also a dishonest participant in the scheme.
It is necessary for the purposes of the third party proceedings to express a conclusion concerning Richco's role and honesty. In my judgment it is impossible to find that Richco was not also dishonestly participating in the scheme.
To start with, Richco was of course privy to the scheme as a whole, for it was a signatory to all the agreements and made the payments under it (albeit Mr Strothotte said that he was unaware of the ultimate beneficiaries of the scheme, other than Mr Al Tajir). Richco therefore knew, and Mr Strothotte conceded, that the subsidiary agreements were improper shams. Richco also knew that all of the monies generated by the Richco consultancy agreement were to be paid on under the sham subsidiary agreements, with the exception, as Mr Temple accepted, of 0.5% out of the 2.5% fee on sales. Mr Strothotte said that he was aware, or became aware, only that Mr Al Tajir was a beneficiary of those payments, and that he did not know about the other beneficiaries and in particular did not know that Mr Livingstone was one of them. In my view it would be unrealistic to accept that evidence; but be that as it may, in my view the inference is inescapable that Richco, through Mr Marc Rich himself, must have had a full understanding of the scheme, including the fact that the ultimate beneficiaries were to include Mr Salaam and Mr Livingstone as well as Mr Al Tajir. It was, as I have found, with Mr Rich that Mr Al Tajir first discussed the scheme. It was again with Mr Rich that Mr Salaam and Mr Livingstone had their initial discussions when they visited Zug in May 1987. Mr Rich has not given evidence on behalf of Richco: Mr Strothotte says that is because there are disputes between Richco and Mr Rich. That is a reasonable and likely explanation for the absence of his evidence. The fact remains that in the absence of his evidence there is nothing to counter the strong inference that he was fully privy to the scheme and its considerations. After all, Mr Salaam had not been introduced to Richco for the sake of the services which he or his companies were to provide under the sham agreements: it was inescapable therefore that he was to benefit in the payments to be made under the sham agreements. Mr Strothotte accepted that he was told by Mr Rich that Mr Salaam was an associate of Mr Al Tajir. Similarly, it seems to me to be entirely unrealistic to suppose that Mr Livingstone, who even on Mr Strothotte's evidence had shown such interest in the structure of the scheme and in the making of payments under it, was not also understood to be a beneficiary. At the very least Richco was reckless as to Mr Livingstone's status as a beneficiary, and ought to have been aware of it.
Mr Strothotte's evidence was to some extent ambivalent about whether the scheme was regarded by Richco as one that it could honestly enter into: as essentially redounding to Dubal's benefit and in reliance on Mr Al Tajir's "political standing", Mr Livingstone's executive authority, and Mr Amhurst's professional reputation; or whether it was recognised as being flawed by dishonesty in its very conception. In my judgment, the latter is the true position: it is inherent in the acceptance that the subsidiary agreements were shams, mere "vehicles for payment". In this connection Mr Strothotte said nothing to support a case that the payments were legitimate commissions; nor did he ultimately found himself on Mr Al Tajir's authority as distinct from Mr Livingstone's status as chief executive. Thus he said (at day 6, pages 11/12):
"Q. As far as you were aware, and I am talking about you and Richco, the authority within Dubal to conclude the commercial alliance, you saw that authority, first of all, in Mr Livingstone, as chief executive?
"Q. So the fact is, and this is the point, you never looked to Mr Tajir for authority, you never involved him in the drafting of the agreements, and you never involved him in the discussion of any of its terms. That is correct, is it not?
"A. That is correct."
It is impossible to my mind, however, to seek in Mr Livingstone's executive authority the justification for what are admitted to be sham vehicles for payment on such a scale, and that is so even if Mr Livingstone was not regarded as a beneficiary of such payments, but a fortiori if, as I find, he was or ought to have been so regarded.
To some extent Richco must get credit, even though it was acting under the exigencies of seeking to preserve its commercial relationship with Dubal, for being willing both to accommodate Dubal's concerns about the agreements entered into under Mr Livingstone's stewardship and to provide information to Dubal to enable it to pursue its claims. However, it must be accepted that Richco was slow at first to disgorge information regarding the full ramifications of the various payments made under the scheme and ancillary agreements, and in my view that was an implicit recognition of its complicity. Thus in December 1995 Richco provided answers to questions posed by Dubal, which are recorded in a document which has come to be known as the "Clyde memorandum". The information was provided under a general warning that it was based on memory and impressions created some years back and might therefore be in detail inaccurate: but the broad "picture" was believed to be accurate. Mr Strothotte approved the memorandum. Nevertheless, in cross-examination he was forced to concede that some of the answers to questions relating to the payment of monies were "grossly misleading" although as he would have it, unintentionally so. In particular question 16, which asked if any payments were made directly to (inter alios) Mr Salaam, Mr Al Tajir or Mr Livingstone, was answered:
"No payments were made directly to: Salaam, Tajir...or Livingstone (except Richco was aware that on a couple of occasions requests were made to send to an account which had Tajir's name on it but these were relatively minor amounts being from $5,000 to $200,000)."
Mr Strothotte when asked if that was not an outright lie agreed "It appears today to be, yes" but was "not so sure" that it was known at the time, in December 1995, by him to be. He agreed that he had known at the time of payment that enormous sums had been paid to Al Tajir Ltd, but was not sure that he had carried that in his mind when approving the memorandum. He explained:
"I had not focused on that fact. I had not focused on particular, whatever the amounts were, and they were important on who the individual companies were and what there was. I just wanted to step out of this thing when we settled with Dubal and be done with it and turn it over to the lawyers whatever residual activities would result from it. So in that I may have been negligent to not have been extremely precise."
In my judgment, however, Mr Strothotte must have recalled (in broad picture at any rate) that Mr Al Tajir (Al Tajir Ltd) had been paid enormous sums. I therefore cannot accept that he did not appreciate that monies were being paid, even if indirectly, to Mr Salaam and Mr Livingstone as well.
I regret therefore to find that Richco was also a dishonest participant in the scheme.
The contribution proceedings
I turn now to the contribution proceedings, and restate their essential structure. It will be recalled that the Amhurst defendants had for the purpose of the contribution proceedings divided into two separate interests: Mr Amhurst himself, now represented by Mr Leggatt; and ABMN and ABC excluding Mr Amhurst, whom Mr Boswood continued to represent (the "Amhurst partners"). The Salaam defendants sought contribution from Mr Amhurst, the Amhurst partners and Mr Al Tajir, ie from everyone except Mr Livingstone and (belatedly) Richco. (As stated above, the Salaam defendants dropped their contribution claim against Richco at the time of the Salaam settlement.) The Amhurst partners sought contribution from Mr Salaam, Mr Livingstone and Mr Al Tajir (but not from Richco: it was part of the Amhurst settlement that the Amhurst partners dropped their claim against Richco). None of the third parties had originally claimed contribution from anyone; but at the last moment Mr Al Tajir, following my unreasoned findings, amended his third party defence to counterclaim a contribution but solely from Mr Amhurst in the event that the Amhurst partners' contribution claim against him was successful. The contribution claims by the Salaam defendants concentrated essentially on Mr Salaam himself, and there was no contribution claim against Nillet and JMS, for it was recognised that they were insolvent. I shall therefore speak only of Mr Salaam. Mr Amhurst made no contribution claim, for under the Amhurst settlement he had paid nothing, and the Amhurst partners had alone funded the settlement.
- Mr Salaam claimed contribution against everyone except Mr Livingstone and Richco, and faced a claim by the Amhurst partners;
- the Amhurst partners claimed contribution from Mr Salaam, Mr Al Tajir and Mr Livingstone, and faced a claim from Mr Salaam;
- Mr Amhurst claimed contribution from no one, and faced a claim from Mr Salaam and a (contingent) claim from Mr Al Tajir;
- Mr Al Tajir claimed (contingently) only from Mr Amhurst, and faced a claim from Mr Salaam and the Amhurst partners;
- Mr Livingstone claimed contribution from no one, and faced a claim only from the Amhurst partners;
- Richco claimed contribution from no one, and (following the settlements) faced a claim from no one.
The Civil Liability (Contribution) Act 1978 ("the Act")
I set out below what for present purposes are the essential provisions of the Act. The entitlement to contribution is the subject of section 1, as follows:
"1(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).
"(2) A person shall be entitled to recover contribution by virtue of subsection (1) above notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, provided that he was so liable immediately before he made or was ordered or agreed to make the payment in respect of which the contribution is sought.
"(3) A person shall be liable to make contribution by virtue of subsection (1) above notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, unless he ceased to be liable by virtue of a period of limitation or prescription which extinguished the right on which the claim against him in respect of the damage was based.
"(4) A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established."
The assessment of the contribution is provided for in section 2:
"2(1) Subject to subsection (3) below, in any proceedings for contribution under section 1 above the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage in question.
"(2) Subject to subsection (3) below, the court shall have power in any such proceedings to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.
Section 2(3) deals with certain limitations which are not relevant to the case before me.
Otherwise I need only mention section 7(3), which provides as follows:
"7(3) The right to recover contribution in accordance with section 1 above supersedes any right, other than an express contractual right, to recover contribution (as distinct from indemnity) otherwise than under this Act in corresponding circumstances; but nothing in this Act shall affect -
(a) any express or implied contractual right to indemnity; or
(b) any express contractual provision regulating or excluding contribution;
which would be enforceable apart from this Act (or render enforceable any agreement for indemnity or contribution which would not be enforceable apart from this Act)."
In the present case it was not disputed, on the basis of my unreasoned findings, that Mr Salaam, Mr Livingstone and Mr Al Tajir (and for that matter Richco too at such time as Mr Salaam was claiming contribution from it) were all persons liable in respect of the same damage suffered by Dubal for the purposes of section 1(1) of the Act, and could therefore each claim contribution against the other or could each be the subject of a claim for contribution by any other. It was also common ground that Mr Amhurst would have been liable in respect of the same damage on the assumption that the factual matters pleaded against him had been established: and could therefore likewise be the maker or receiver of a claim for contribution. There was an important issue, however, whether the Amhurst partners "would have been liable assuming that the factual basis of the claim against [them] could be established" for the purposes of section 1(4). It was submitted that they would not have been liable, and therefore could not claim a contribution, or be liable to contribute. That issue depends on section 10 of the Partnership Act, 1896, for it is common ground that the only basis on which the Amhurst partners could have been liable for Mr Amhurst's assumed wrongdoing was by virtue of that section, under which co-partners may be held liable for the wrongs of a partner acting in the ordinary course of the business of the firm. It is not suggested that the Amhurst partners could have any but a vicarious liability in this case, or that there was any personal wrongdoing by other members of Mr Amhurst's firms. I shall develop that issue below.
If I held that the Amhurst partners would have been liable on the factual basis pleaded against them, then another issue which arose was whether in those circumstances the Amhurst partners were to be treated as "innocent", because they were not personally tainted with Mr Amhurst's assumed wrongdoing, or whether they could only claim contribution on the same basis as that on which they were rendered liable, namely as bearing responsibility for Mr Amhurst's assumed dishonesty. Mr Boswood submitted that because the Amhurst partners must be regarded as personally innocent, therefore they were entitled to a full indemnity under section 2(2) of the Act. That was disputed by other parties.
A third issue was whether any liability to contribute should be several, or joint and several, in other words whether the risk of insolvency of a contributor should lie with the co-contributor or with the claimant for contribution.
Otherwise, the argument concerned of course the assessment of the contribution to be made by the various parties, ie the amount to be found in each case to be "just and equitable" for the purposes of section 2(1). In this connection the debate centred on the extent to which the size of each party's receipts should be viewed as more or less critical. It was submitted by those who had received nothing, or comparatively little, viz by Mr Amhurst, the Amhurst partners, Richco and even Mr Livingstone, that the critical factor in the assessment ought to be the court's concern to see that those who had benefitted most should have their receipts taken from them: that no contributions should be ordered which would have the result of leaving receipts in the hands of those who had dishonestly obtained them. It was submitted on the other hand by those who had benefitted most, ie Mr Salaam and Mr Al Tajir, that receipts were only one of a whole spectrum of factors to be taken into account, and that the court should not be blinded by a single element to overlook the very real and important contribution that other parties had made to the promotion and efficacy of the scheme, even though such parties had not received the direct proceeds of it - such as Mr Amhurst and therefore the Amhurst partners, or Richco.
Thus the first group emphasised what Ferris J had said in K v. P  Ch 140 at 149G, in the context of a third party claim, by a defendant accused of fraud, against the plaintiff's own accountant, who, the defendant alleged, had negligently failed to warn the plaintiff of the dangers inherent in the defendant's transactions:
"In so far as the plaintiffs are seeking to recover from the third defendant money which he has obtained for his own benefit or for the benefit of companies which are, in effect, his alter ego, I can see that the third party would have an overwhelming argument that it cannot be just and equitable to require him to contribute to whatever the third defendant is ordered to pay to the plaintiffs. Contribution, if ordered, would enable the third defendant or his fellow conspirators to retain part of the proceeds of their conspiracy or fraud."
The second group emphasised, however, that the receipts of fraud were not conclusive and for this purpose cited Downs v. Chappell  1 WLR 426. There a plaintiff had purchased a bookshop on the fraudulent misrepresentation of the seller as to its turnover and profit figures, which had been negligently verified by the seller's accountant. The fraudulent seller recovered a 50% contribution from the merely negligent accountant. At 445F/H Hobhouse LJ said:
"I do not consider that this court should interfere with the assessment of the judge. Mr.Chappell was fraudulent. He was very seriously at fault. However it was not the statements he had made which induced the plaintiffs to buy. On the evidence, and as found by the judge, it was what was said in the letter of 24 May which induced the plaintiffs to contract. The plaintiff required the confirmation of the second defendants. The letter written by the second defendants purported to give them that confirmation. The letter was written recklessly. It contained statements which the second defendants must have known they had no basis for. The second defendants are liable to the plaintiffs because of their own reckless negligence. Indeed, on a strict view, their lack of care was a breach of their duty to Mr.Chappell as well.
"The extent of a person's responsibility involves both the degree of his fault and the degree to which it contributed to the damage in question. It is just and equitable to take into account both the seriousness of the respective parties' faults and their causative relevance. A more serious fault having less causative impact on the plaintiff's damage may represent an equivalent responsibility to a less serious fault which had a greater causative impact. The present case is such a case. The judge was entitled to decline to distinguish between the responsibility of the two defendants for the damage of the plaintiffs."
Ex turpi causa non oritur actio
I have myself raised the question whether it is open to the court to consider contribution claims on behalf of parties who have been found guilty of dishonest assistance or dishonest receipts. All parties submit that it is, and that the Act takes precedence over any consequence of the rule of ex turpi causa.
It seems that although the matter is regarded by Goff and Jones, The Law of Restitution, 4th Edition, 1993, at 329, as an open question or even subject to a prohibition on the enforcement of an illegal transaction, there has now been authority that a defence of ex turpi causa does not run in a contribution claim under the Act: see K v. P  Ch 140 at 148H/149B. Moreover, in Downs v. Chappell the court of appeal awarded contribution in favour of the fraudulent against the merely negligent. In any event, it does not seem to me that I am being asked to enforce an illegal transaction.
In the light of the submission that the receipts of fraud are critical to the division of responsibility, it is necessary to restate the figures.
In my Unreasoned Findings I found that Mr Salaam had received $21,846,488; that Mr Al Tajir had received $15,604,878; that Mr Livingstone had received $6,327,918; that Mr Amhurst and the Amhurst Partners had received nothing (other than professional fees); and that Richco had received $50,117,622 but had in turn paid on $49,780,944 under the subsidiary agreements.
Further submissions made to me in the second half of the trial necessitate some refinement to those figures.
It was submitted on behalf of Mr Salaam that the figure of $21,846,488 overstated his net receipts, because it included monies paid to him or his companies which he had passed on to Mr Al Tajir in the period prior to August 1988 (which was when Mr Al Tajir had begun to require payment directly into the account of Al Tajir Ltd). It therefore followed, the submission continued, that the figure of $15,604,878 in the case of Mr Al Tajir correspondingly understated Mr Al Tajir's true receipts. On behalf of Mr Al Tajir, Mr Malek submitted that there was insufficient evidence to show that Mr Al Tajir had benefitted from any payments prior to August 1988: but he accepted that I was fully entitled to revise the figures in my Unreasoned Findings, if it seemed to me to be right to do so. I am persuaded by the evidence before me that Mr Al Tajir must have shared for his 40% in the payments prior to August 1988, and that the only reason why those payments cannot be definitively traced to him is that the account from which Mr Salaam made the payments out is not in discovery, while Mr Al Tajir has provided no discovery. Even so, I can accept that the schedule of payments annexed to Mr Davis's closing submissions in the contribution proceedings, which sets out details extracted from the accounting material before me, is accurate in showing that over the period from February to April 1988 Mr Al Tajir must have received $861,791.24 from Mr Salaam. It follows that the figure for Mr Salaam's net receipts must be adjusted downwards to $20,338,348.42, and Mr Al Tajir's receipts must rise to $16,466,669.46.
It is possible, and perhaps likely, that a similar adjustment ought to be made for the payments out that Mr Salaam would have made to Mr Livingstone, prior to Mr Livingstone receiving payments directly into his Utary account in November 1990; and there is also the mysterious matter of the $1.4 million paid to Mr Salaam in December 1989 which would seem to be connected to a credit by Mr Livingstone in favour of Mr Salaam; but Mr Salaam has not sought to press or to quantify those possibilities. So no adjustment need be made on that score.
As for Richco's receipts, the net difference between the sums received and paid out by Richco is $366,678, and that is a figure which has frequently been mentioned in the proceedings. It seems to me, however, that that figure ignores the fact that by reason of the capitalised payments Richco paid out under the subsidiary agreements large sums in advance of reimbursement through its regular continuing income under its consultancy agreement. Effectively, therefore, Richco paid out more than it received. I shall therefore regard Richco's net receipts as being nil. I shall also bear in mind, however, that Richco had intended to benefit from the scheme by at least the amount of the 0.5% to be retained from the 2.5% fee on sales, or a figure of some $8 million.
I also bear in mind that, receipts apart, I have found that Mr Salaam's dishonest assistance led to Dubal's gross loss of $50,117,622, that Mr Livingstone, Mr Al Tajir and Richco were dishonest participants in the scheme, that Mr Amhurst must be treated as dishonestly assisting the scheme in his role as a solicitor, and that each of them played an important and substantial, and not merely peripheral or incidental, role in the scheme (Unreasoned Finding para 10).
Interest, and the value of the settlement agreements.
The fact that the capitalised payments were themselves discounted for early payment and thus of course represent larger sums which were to have been paid in the regular way over the outstanding years of the subsidiary agreements, is an example of the importance of interest, ie the time value of money, in the calculation of final liabilities and also in the calculation of contributions. This point assumes particular importance when the various settlements come to be factored in. Thus Dubal's losses occurred over a period of time commencing in September 1987 and increasing month by month down to February 1993, when they reached the total principal figure of $50,117,622. Payments stopped in March 1993, with the termination of the Richco consultancy agreement. Then on 31 January 1996 came Mr Livingstone's settlement in the sum of $15,540,000. The settlement agreement gives a settlement date of 21 February 1996.
The question arises: what is the credit to be allowed in respect of the Livingstone settlement? Dubal submitted that the credit should be regarded as no more than the sum which Mr Livingstone has been found to have received under the Richco scheme, namely $6,327,918. It was submitted on behalf of Mr Livingstone, however, that the whole of the sum of $15,540,000 paid under the Livingstone settlement ought to be regarded as credited to Dubal for the purpose of its present claim in these proceedings. This was a dispute worth some $9,000,000 about which I heard very little argument. In my judgment, the credit which has to be allowed is the full sum of $15,540,000. It is true that the claims in the Livingstone action embraced matters which went much wider than the payments made under the Richco consultancy agreement alone: it is possible therefore that some, most or even all of Dubal's recovery under the Livingstone settlement could have been properly allocated to claims other than Dubal's claim in these proceedings. The fact is, however, that no allocation was agreed in the Livingstone settlement. The Livingstone points of claim included (inter alia) a claim for the full sum lost by reason of payments under the Richco consultancy agreement in the sum there stated of $49,951,828. Although I may have overlooked it, I cannot even find a separate reference in that pleading to a receipts based claim in the sum of $6,327,918. Whereas Dubal's losses for the purposes of the present proceedings have been proved before me, the other claims included in the Livingstone proceedings have not been proved before me, and I have no particular insight into them. It seems to me that ultimately it is Dubal which bears the legal burden of proving its loss. If, therefore, it wishes to say that the $15,540,000 received from Mr Livingstone should not be credited to its present claim, but should be apportioned in some way across the whole gamut of the claims made in the Livingstone proceedings, then I think that Dubal bears that burden of proof. It has not even sought to discharge that burden. In the circumstances Dubal must give credit in these proceedings for the full amount of $15,540,000.
The next question which arises is: how much of that $15,540,000 should represent principal and how much should represent interest? That is important so that the various settlement agreements, all of which occurred at different times, and of which the Livingstone settlement occurred significantly earlier than any of the others, can be fairly measured against one another. Many of the submissions before me, including written submissions which followed the Al Tajir settlement at a time prior to the handing out of my draft judgment, confused or so it seemed to me the value of the various settlement payments because they did not take into account the fact that such payments represented a combination of principal and interest. It is only in the light of interest calculations that it is possible to evaluate the various settlements on a like for like basis.
For these purposes, however, it was necessary to adopt a definitive interest rate. For instance, should it be a simple rate, or a compound rate? In either event, at what level? The parties informed me that they wished to address further submissions on such matters after the handing down of my judgment. I was unable therefore to adopt a definitive interest rate while writing my draft judgment. At that time, however, I did have to hand calculations which Dubal had provided illustrating the build-up of interest month by month on the basis of simple interest at 1%, alternatively 2%, over the prevailing US dollar LIBOR for 3 month deposits, and also on the basis of the same alternative rates applied to interest compounded at annual rests. Working with such tables, I discovered that significant differences ensued dependent on whether, for instance, the highest rate claimed by Dubal was applied, viz 2% above LIBOR compound, or the lowest, viz 1% above LIBOR simple. Ultimately such differences could have had a significant effect upon my dispositions in the contribution proceedings, as I pointed out in my draft judgment. This was because the applicable interest rate would affect the question of how much parties such as Mr Salaam and Mr Al Tajir should be regarded as having received from the proceeds of the scheme. It was and is my view, as I will elaborate below, following what Ferris J said in K v. P, that the level of a contributing party's dishonest receipts is of particular importance in evaluating what is just and equitable for the purpose of section 2(1) of the Act. The question of such receipts therefore bore directly on the Amhurst partners' contribution claim, for they had had no such receipts. It also bore on the question of Mr Salaam's and Mr Al Tajir's respective liabilities to contribute.
Following the Salaam settlement and the final hearing after the distribution of my draft judgment, these difficulties were considerably simplified in two respects. First of all, the Salaam settlement, because it limited Mr Salaam's liability to $18,000,000 payable over the period from 1 April 1998 to 31 December 1999, meant that on any view Mr Salaam was paying out very much less than he had received. He had, after all, received $20,338,348 over the period from September 1987 to April 1991, while he is repaying only $18,000,000 some decade or so later. It follows that, whatever interest rate regime applies, Mr Salaam is very far from disgorging his receipts. Secondly, I am now in a position to fix a definitive interest rate. The two factors are to a degree interconnected in that I can be assured that the particular interest rate applied will not have a critical effect on other issues. To an extent, therefore, I can adopt a broader brush than I might have otherwise wielded.
At the final hearing there was evidence before me that Dubal and companies like it could have (and in fact did) borrow during the relevant periods at a rate of about 0.5% above LIBOR; and that an appropriate compound rate to reflect what a person like Mr Salaam or Mr Al Tajir might have done with their receipts was 0.1875% below LIBOR. The former evidence was advanced on the basis that whereas the usual Commercial Court practice is to award interest at bank rate or minimum lending rate or equivalent plus 1%, the practice is only a presumption which can be displaced by evidence of the rate at which plaintiffs with the general attributes of the actual plaintiff in the case could borrow money: see Shearson Lehman Hutton v. Maclaine Watson & Co (No 2)  1 Lloyd's Rep 441 at 451/2. The latter evidence was advanced on the basis that when compound interest is awarded, the rate of interest should reflect the value of money to a defendant, not a plaintiff, and should be fixed by reference to the return which a defendant earned or may reasonably be taken to have earned with the money: see Mathew v. T M Sutton Ltd  1 WLR 1455 and Kleinwort Benson Ltd v. South Tyneside Metropolitan Borough Council  4 All ER 972, 991a. There was debate before me as to whether it was appropriate to use a compound rate and, if so, whether such a rate should properly be confined to sums dishonestly received, as distinct from sums in respect of which there had been only knowing assistance (as in the case of the Amhurst defendants).
It seems to me that in the light of the Salaam settlement it is preferable to seek simplicity rather than perfect accuracy. Dubal no longer had any interest in the matter. The difference between 0.5% above LIBOR simple and 0.1875% below LIBOR compound is not significant, although the latter yields more than the former. I am not persuaded that the finer borrowing rates of 0.5% apply to the smaller sums of money (large as they are) that I am dealing with in this case, as distinct from the extremely large medium term loans of which evidence was given: such loans typically also involved commitment and other fees. Nor am I persuaded that the benefit to the recipients is to be measured by the rate at which they could have put the money on deposit as distinct from the rate at which they might have avoided the need to borrow. Taking all such matters into consideration, it seems to me that the fairest and simplest solution is to apply a standard 1% above LIBOR simple to all calculations.
I am now in a position to value each of the settlements on a like for like basis.
The Livingstone settlement. This involved a payment of what I have taken to be $15,540,000 as of 21 February 1996. With the aid of interest tables provided to me as an annex to the affidavit of Mr Stephen Podgorney, a chartered accountant, I calculate that this settlement represented a repayment of principal in what I shall call the "baseline" sum of $11,409,691 2plus interest (at 1% above LIBOR simple) of $4,130,309. I make that assessment by calculating that as at three-quarters through February 1996 the interest (at 1% over LIBOR simple) on Dubal's claim stood at $18,121,481, an increase of 36.2% over Dubal's original claim of $50,117,622. Discounting the Livingstone settlement by the appropriate amount ($15,540,000 ¸ 136.2% x 100%) gives a baseline $11,409,691. Mr Livingstone therefore paid Dubal approximately 22.8% of its original claim. (Complete accuracy is impossible, and is in any event probably unnecessary. Thus Mr Podgorney's tables are based on a Dubal original claim of not $50,117,622 but $50,117,505. In any event I am forced to work to the structure of Mr Podgorney's tables as being the most accurate tool I have to hand.)
The Amhurst settlement. This was dated 12 November 1997 and provided that the payment of $10,000,000 would be made within 21 days of various events including the executed counterparts of the agreement. I will assume that the payment was made on the last day of November 1997. By then the interest on Dubal's original claim had, as I calculate, risen to $24,014,348, an increase of 47.9% ($24,014,348 = 47.9% of $50,117,622). It follows that a payment of $10,000,000 represents a baseline of $6,761,325 in principal and $3,238,675 in interest. The Amhurst defendants therefore paid Dubal approximately 13.5% of its original claim.
Dubal submitted that only $9,250,000 out of the Amhurst settlement should be regarded as reflecting payment of principal and interest, and $750,000 should be regarded as allocated to costs. However, the settlement agreement provides for the making of a court order to the effect that Dubal's claims against the Amhurst defendants should be dismissed "with no order as to costs" and that the parties to the agreement "agree not to enforce any earlier costs orders between them". It seems to me therefore that no part of the $10,000,000 should be regarded as allocated to costs.
The Al Tajir settlement. The Al Tajir settlement is dated 13 January 1998 and provides for the payment of $6,000,000 (with interest at 2% above 3 month LIBOR from 31 December 1997) to be paid on 31 January 1998, a further $6,000,000 to be paid on 31 December 1998 and a final $6,000,000 to be paid on 31 December 1999. It follows that for interest purposes I must regard the first instalment as having been paid on 31 December 1997, but I shall disregard the consensual rate of LIBOR plus 2% and continue to work with my conventional figure of LIBOR plus 1%. 3 month LIBOR so far in 1998 has been approximately 5.65%. I shall assume therefore that LIBOR plus 1% will remain at 6.65% for the rest of 1998 and 1999. That means that the $6,000,000 payable at end 1998 is approximately the same as $5,625,879 at end 1997, and that the $6,000,000 payable at end 1999 is approximately the same as $5,295,675 payable at end 1997. Thus as of 31 December 1997 the Al Tajir settlement is worth some $16,921,554. At that time the interest on Dubal's original claim would have been some $24,308,454, a rise of 48.5%. $16,921,554 as at 31 December 1997 therefore represents a baseline $11,394,985 in principal plus some $5,526,569 in interest. The Al Tajir settlement therefore represents some 22.7% of Dubal's original claim.
The Salaam settlement. The total of this settlement is also $18,000,000, but payable as to $3,000,000 on 2 April 1998, $6,000,000 on 1 June 1998, $3,000,000 on 25 August 1998, and $6,000,000 on 31 December 1999. On the same basis as the calculations I have already indicated in connection with the Al Tajir settlement, I assess the value of the Salaam settlement as of 31 December 1997 as being $16,962,422. That in turn represents a baseline $11,422,506 in principal and $5,539,916 in interest. The Salaam settlement therefore represents some 22.8% of Dubal's original claim.
Mr Amhurst's responsibility
I have left detailed consideration of Mr Amhurst's responsibility to this point because, by reason of the Amhurst settlement and the withdrawal of all allegations against him, the matter must now be considered, pursuant to section 1(4) of the Act, on an assumed basis by reference to the facts pleaded against him. Those pleadings included allegations of dishonest receipt and also that Mr Amhurst together with Mr Salaam was the ultimate beneficial owner of Nillet, JMS, Valo and WID: but the case was opened by Dubal on the basis that Mr Amhurst had received none of the proceeds of the scheme and did not share in the ownership of the Salaam companies, and I therefore regard the pleadings as having been inferentially and implicitly amended to take account of those concessions. There remains a case of dishonest assistance, which it is common ground would have rendered Mr Amhurst liable on the assumed basis that the facts pleaded against him could be established.
Those pleaded facts are to the following effect. Mr Amhurst was a solicitor, and a director of a number of companies in Mr Salaam's group, including Valo; he represented to Richco that he held powers of attorney for Nillet and JMS; he drafted or dictated the drafting of the Richco consultancy agreement and the subsidiary agreements and was involved with Mr Livingstone in their negotiation, so much so that he "appeared to be part of the Dubal team"; he informed Richco that it was required to concur in the scheme if it was to do business in Dubai or with Dubal; he knew and made known to Richco that it was not expected to supply services pursuant to its consultancy agreement or to be supplied with services under the subsidiary agreements and that the scheme was a mere vehicle for payment, and thus knew that the Richco consultancy agreement and the subsidiary agreements were shams; he executed the subsidiary agreements on behalf of the Salaam companies; thereafter he was "centrally involved in the administration" of the scheme, eg by giving instructions to Richco concerning the payment of money. In sum, he as well as Mr Salaam "dishonestly procured and/or assisted Livingstone to act in breach of his said fiduciary duties by conceiving, planning and assisting in giving effect to the scheme".
So it was that in my Unreasoned Findings I found that Mr Amhurst must be treated as having dishonestly assisted the scheme in his role as a solicitor, and that, like the other participants, he had played (ie must be assumed to have played) an important and substantial and not merely peripheral or incidental role in the scheme.
The Amhurst partners' liability
I come now to one of the major points of principle argued before me on the contribution proceedings. Mr Salaam, Mr Livingstone and Mr Al Tajir (but not Richco or Mr Amhurst) submitted that on the facts pleaded by Dubal against the Amhurst partners they could not have been made liable to Dubal. The Amhurst partners, on the other hand, who could not otherwise have claimed the contribution and indeed full indemnity that they were seeking for their payment of $10,000,000, submitted that on the pleaded facts they would have been liable. For this purpose they confined themselves to liability under section 10 of the Partnership Act 1890, pleaded in Dubal's points of claim at para 7.6, and did not pursue the alternative basis on which Dubal had alleged liability under para 7.5 where Dubal had alleged that Mr Amhurst's knowledge and therefore dishonesty was to be attributed to each of them. In para 7.6 of its points of claim Dubal had pleaded as follows:
"Further or in the alternative to the previous paragraph hereof, at trial, Dubal will say that the firms of ABMN and ABC are liable to Dubal to the same extent as is Amhurst in respect of those acts or omissions alleged against him in section 6 above as were committed by him while a partner therein, to the extent that such acts alleged against him were carried out by him in the ordinary course of ABMN's and/or ABC's business."
That pleading is clearly intended to invoke section 10 of the Partnership Act, which provides as follows:
"Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm, or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act."
It is not entirely clear what matters pleaded against Mr Amhurst are alleged to have been carried out by Mr Amhurst in the ordinary course of the firms' business: but the clue I think is in para 7 as a whole, where Dubal pleads that the scheme agreements were drafted or dictated by Mr Amhurst "in his capacity as a partner" and, I would infer, that payment instructions were similarly given by him in the name of his firm. That is how Mr Boswood put it in paras 8/9 of his submissions in the contribution proceedings, and I think that is right.
The Amhurst partners' case in their points of defence, perhaps not surprisingly, had been to the contrary effect. They had there admitted that at any rate the subsidiary agreements had been drafted by Mr Amhurst as a partner of the firms, but liability had been denied (para 7 of the Amhurst defendants' points of defence). In his opening submissions Mr Boswood had submitted that the Amhurst partners were not liable for much the same reasons as have now been deployed against him in the contribution proceedings.
Thus it is now submitted against the Amhurst partners that Mr Amhurst's liability for dishonest assistance is a liability in constructive trust, and not in tort; that section 10 is concerned with liability in tort or by reason of agency but not in constructive trust; that liability in constructive trust is rather the subject matter of sections 11 or 13, which do not here apply and are not alleged to apply; that whether or not section 10 is capable of applying, it is not in the ordinary course of business, nor within the actual or ostensible authority of a partner, to make himself a constructive trustee; that these submissions are covered by authority; and that in the result the Amhurst partners could not have been made liable under section 10 even on the assumption that the factual basis of the claim pleaded against Mr Amhurst and his partners had been established.
On the other hand, it is submitted on behalf of the Amhurst partners (supported by Mr Amhurst and Richco) that the drafting of contracts is plainly within the ordinary business of solicitors, even if that is done as part of a scheme of dishonest assistance to a breach of trust; that there is nothing to prevent a firm or company being vicariously liable for such dishonest assistance and that section 10 is intended to deal with vicarious liability in general; that the line of authority relied on by the opposing parties was of uncertain value in the light of the principles vindicated for instance in Lloyd v. Grace Smith  AC 716, and had in any event not been followed in the most recent case of Agip (Africa) Ltd v. Jackson & Others  Ch 265,  Ch 547 (CA).
It is true that liability in dishonest assistance is not a liability in tort: Generale Bank Nederland NV v. ECGD (CA, 23 July 1997, unreported) at 53A, 59C. Rather it is a liability in equity to pay damages based on fault: as Chadwick J said in The Arab Monetary Fund v. Hashim (29 July 1994, unreported) at 42B:
"...the defendant is held liable in equity not because he is, or has been, a trustee of trust property; but because his conduct in relation to trust property has been such that he ought to be liable in damages for its loss as if he were a trustee who had disposed of the trust property in breach of trust. The claim is a claim for monetary compensation based on fault..."
The question is whether there can be vicarious liability pursuant to section 10 for such fault. It is common ground, and in any event my judgment, that section 10 is setting out a rule of vicarious liability.
The submission, therefore, is in effect that the wrong of dishonest assistance can never be effected in the ordinary course of a firm's business; or that, whether it can or whether it cannot, even so on the true construction of sections 10, 11 and 13, equity based remedies (other than tracing) are confined to cases where third party funds are received by the firm within the ordinary scope of its business (section 11) or where the other partners have notice of a breach of trust (section 13(1)), and that section 10 is confined to liability in tort.
In this connection the line of authority relied on by Mr Salaam and others begins with the obiter dicta of the court of appeal in Mara v. Browne  1 Ch 199. The case was argued after the Partnership Act but on facts arising before it came into effect. There two brothers HB and AB were in partnership together as solicitors. HB acted as solicitor to a trust and as such handled trust funds and applied them to specific investments on the instructions of trustees. It was argued (and had been found in the court below) that HB had constituted himself a constructive trustee and was therefore liable to make good losses resulting from improper investments, and that his partner AB was therefore also liable. The court of appeal disagreed, finding that HB had merely acted as a solicitor on instructions. Each member of the court however went on to say that even if HB had been liable as a trustee, his brother would not have been. Lord Herschell said (at 208):
"The only case against him is that, during the period covered by these transactions, he was in partnership as a solicitor with the other defendant. He took no part in them, and was ignorant of their nature. In my opinion, it is not within the scope of the implied authority of a partner in such a business that he should so act as to make himself a constructive trustee, and thereby subject his partner to the same liability."
AL Smith LJ (at 212) and Rigby LJ (at 214) opined to similar effect.
The matter did not arise for decision until the case of In re Bell's Indenture  1 WLR 1217. There trustees dissipated a trust fund with the active assistance of one Hickley, who was a partner in a firm of solicitors which acted for the trustees. Hickley died, and it was conceded that he was liable as a constructive trustee. Hickley's partner Heaver, who it was agreed had always acted honestly and reasonably, was nevertheless said to be liable, by reason of sections 10 and 11, on the ground that, whenever trust funds are received by a firm of solicitors and applied for a purpose which one of the partners knows to be a breach of trust, all the partners are liable to make good that breach. Vinelott J referred to this as an "at first sight somewhat surprising proposition" (at 1226A). At 1230E he referred to the dicta in Mara v. Browne and continued:
"Although elliptically expressed, as I understand the judgment, what Lord Herschell is saying is that a solicitor has the implied authority of his partners to receive trust moneys as agent of the trustees but does not have the implied authority to constitute himself a constructive trustee. Nor, I would add, does a solicitor in the ordinary course of his practice have the implied authority of his co-partners to accept office as a trustee and so make his co-partners liable for a misapplication of the trust property; as to this last point, see In re Fryer (1857) 3 K. & J. 317, where it was held that the partners of a solicitor who received money as a trustee which was lost were not liable for his default, the moneys having been received by him as trustee and not as a solicitor.
"If that is the correct principle, it can make no difference to the liability of the partners of a solicitor who does constitute himself a constructive trustee whether the moneys are paid into his private account or into his firm's client account. In Blyth v. Fladgate the firm became trustees because there were no trustees at the time when trust moneys were received by them and they could not therefore be considered agents of the trustees.
"In my judgment therefore the claim against Mr Heaver's executors is misconceived."
Also relied on in this connection was the New Zealand case of Estate Realities v. Wignall  2 NZLR 615. The New Zealand Partnership Act's sections 12, 13 and 16 are in the same terms as the English Act's sections 9, 10 and 13 respectively. Two partners in a firm of stockbrokers were in breach of fiduciary duty to a client by buying from that client shares in a company for themselves. A third partner was away at the time and ignorant of this breach. Tipping J, who considered the English authorities, held that the third partner, Wignall, could not be made liable to account for the secret profit made out of the company. It is relevant to point out that a fair price was paid for the shares, which was why the client sued for an account and not for loss or injury (at 633.37/9). Tipping J held that the partners at fault had acted in the ordinary course of the business of the firm (at 633.30 and 635.19). He reasoned, however, that despite that, they had no implied authority to constitute themselves constructive trustees in relation to the shares, and therefore Wignall could not be one either. He said (at 635.17/29):
"I am not unmindful of the fact that the breach of fiduciary duty by Messrs Egden and Norbutt-Munns which renders them liable as constructive trustees occurred during the course of the ordinary business of the firm. However it seems to me to be both fair and sound in principle to take the view that Mr Wignall did not become himself a constructive trustee, as their partner, unless and until he had such knowledge of the circumstances as to make it appropriate to tax him as a constructive trustee as well. The position is not covered by ss 12, 13 and 16 which deals respectively with contractual obligations, tortious obligations and obligations for breach of trust and thus depends on general principles. On that basis I do not consider Mr Wignall should be regarded as a constructive trustee and liable to account..."
On the other side Mr Boswood cites Agip (Africa) Ltd v. Jackson  Ch 265,  Ch 547 where Millett J at first instance and the court of appeal found an accountant, Bowers, vicariously liable for the dishonest assistance of his partner, Jackson, as well as of his employee, Griffin: at 296E, 570D. It has to be said that there appears to have been no dispute that the vicarious liability of Bowers followed automatically upon the liability of his partner, and there is no citation in the judgments of the Partnership Act or of Mara v. Browne and In re Bell's Indenture. It may be that the matter was conceded: it is to be remarked that both partners had the same legal representation. Even so, In re Bell's Indenture had been cited in argument to Millett J, albeit on a different point (at 270E), and it is difficult to assume that the courts would not have been familiar with the principle, if it is as fundamental as before me it has been suggested to be. Even so, I think I have to accept that the Agip case, which might otherwise have been binding on me, is of uncertain authority.
I was also referred to LINDLEY & BANKS, 17th Edition, 1995, at 12-21, 12-29, 12-118 and 12-141 and SNELL's Equity, 29th Edition, 1990, at 194, where Mara v. Browne and In re Bell's Indenture are cited without criticism, and to UNDERHILL and HAYTON, Law Relating to Trusts and Trustees, 15th Edition, 1995, where, on the other hand, it is remarked that In re Bell's Indenture has been criticised on the ground that the trust money had been received by the firm in the course of its business, and reference was made to Agip. In the event, the text-books do not really carry me beyond the cases.
I have to confess that I cannot see any reason in principle why a Barnes v. Addy type of accessory liability for breach of trust should not be at least capable of giving rise to vicarious liability in circumstances where a partner guilty of accessory liability has acted in the ordinary course of his partnership business. I do not see why it should be a principle of law, rather than a question of fact, or at most mixed fact and law, whether a partner has acted in the ordinary course of business in dishonestly assisting a breach of trust. Of course, no one is authorised to be dishonest or through dishonesty to render himself liable as though he were a trustee. That, however, is a familiar problem, or at any rate has become so since the landmark decision in Lloyd v. Grace Smith  AC 716. No one (generally speaking) is authorised or employed to be fraudulent, but even so it may be that an employee commits fraud in the scope of his employment or a partner does so in the course of his ordinary business. Lloyd v. Grace Smith concerned the case of an employee, and a slightly earlier decision, Hamlyn v. John Houston & Co  1 KB 81 (CA) concerned the case of a partner. There Collins MR said this (at 85/6):
"Was it within the scope of the authority given to Houston to obtain this information by legitimate means? If so, it was within the scope of his authority for the present purpose to obtain it by illegitimate means, and the defendants are liable. That is the law as expressed in the Partnership Act, 1890, and as laid down by the decisions previous to that Act, in which it has been held that a principal is liable for the fraud or other wrongful act of his agent if committed within the scope of his employment. The grounds upon which it seems to rest, as explained in such cases as Barwick v. English Joint Stock Bank appear to be that the principal is the person who has selected the agent, and must therefore be taken to have better means of knowing what sort of person he was than those with whom the agent deals on behalf of his principal; and that, the principal having delegated the performance of a certain class of acts to the agent, it is not unjust that he, being the person who has appointed the agent, and who will have the benefit of his efforts if successful, should bear the risk of his exceeding his authority in matters incidental to the doing of the acts the performance of which has been delegated to him."
The wrong in that case was not, as it happened, the tort of deceit, but consisted in bribing an employee of the plaintiffs to disclose confidential information and documents. There is no discussion in the report of the precise nature of the wrong committed by the guilty partner, but although I am prepared to assume that it was tortious, the wrong is not very different from dishonest assistance in a breach of trust, and if the bribery had been directed at a director of the plaintiffs, I do not see why one among other possible remedies might not have been in equity. It is also interesting to note that the question whether the partner had been acting within the scope of his authority had been left to the jury (at 85). In due course, Lloyd v. Grace Smith was also decided on the same ground, interpreting Barwick v. English Joint Stock Bank (an authority which the House of Lords said had been misunderstood, see at 725, 731) as standing in the line of authorities going back to Holt CJ's famous dictum in Hern v. Nichol (undated, c1700) 1 Salk 289 that -
"for seeing that somebody must be a loser by this deceit, it is more reason that he that employs and puts a trust and confidence in the deceiver should be the loser than a stranger."
Lord MacNaghten made a passing reference to partners at 738, where he said:
"If Sandles had been a partner in fact, Mr Smith would have been liable for the fraud of Sandles as his agent. It is a hardship to be liable for the fraud of your partner. But that is the law under the Partnership Act."
There is of course a line to be drawn between the Lloyd v. Grace Smith situation, where the employer has given the employee apparent authority to commit the tort, and the Ruben v. Great Fingall Consolidated  AC 439 situation, where the servant has merely taken the opportunity afforded by his service to commit some wrong otherwise than in the course of doing that class of acts which he was employed to do: see Morris v. Martin  1 QB 716 at 727, 737, Armagas v. Mundogas  1 AC 717.
In the present case, however, the submission is not that Mr Amhurst's acts in drafting the contracts and thereby lending dishonest assistance to the scheme fell on the wrong side of that line, but that liability as a constructive trustee could never fall within section 10, because it was not a tort, or because it could never be incurred in the ordinary course of business. So the question is whether section 10 or the authorities upon it require that conclusion.
Section 10 itself is in the widest terms: it refers to "any wrongful act or omission" causing "loss or injury" or the incurring of a penalty. I do not see why that language cannot extend beyond torts properly so called to wrongs such as accessory liability in equity. To confine it solely to torts is to construe the section with excessive formalism, and I do not see what there is in the language of the section to suggest such formalism. Section 11 provides that the firm is liable to make good loss caused by the misapplication of a third person's money or property received by either a partner "acting within the scope of his apparent authority" or by the firm "in the course of its business". That section only applies therefore in the case of receipt of property. It does not seem to me to follow that in a case otherwise within section 10 it matters whether or not a third party's property has been received by a partner or the firm. Section 11 rather seems to me to be saying that in the case of the misapplication of property received by a partner or the firm, it is only where the property is received in the ordinary course of the firm's business that the firm can be made liable for the misapplications of any partner. The underlying principle is therefore consistent with section 10. Finally, section 13 deals with the position where a partner accepts the responsibility of being a trustee ("If a partner, being a trustee,...") and states that liability will only attach beyond the partner in question for misuse of trust funds in the partnership business where the funds can be traced or a partner has notice of the breach of trust. That section, however, appears to assume that the individual trusteeships which a partner may undertake are not something undertaken in the ordinary course of business, otherwise it would be inconsistent with section 11: see LINDLEY & BANKS at 12-136. That seems to me to leave open the situation where a partner, not being a trustee, nevertheless so conducts himself as an accessory to a breach of trust, that he is visited in equity with the remedies available against a constructive trustee: I do not see why that situation cannot be dealt with under the general principle enunciated in section 10. I therefore see nothing in the terms of the Partnership Act itself to limit the application of section 10 to torts alone, even though they may have been the primary focus of the section in its origin. I do not think that Tipping J intended to say that the New Zealand equivalent of section 10 was confined exclusively to torts.
As for the authorities, in Mara v. Browne the critical question was whether the partner concerned had been acting as a solicitor on instructions from trustees or whether he had been intermeddling in the trust. In their obiter dicta the court of appeal appear to have doubted that a solicitor would be acting in the ordinary course of his business if he did intermeddle so as to render himself liable as a constructive trustee. That must, however, it seems to me, ultimately be a question of fact. In this connection, it is as well perhaps to have in mind what Staughton LJ said in United Bank of Kuwait Ltd v. Hammoud  1 WLR 1051 at 1063F, where, having referred to some "elderly" cases on the subject of the ordinary authority of a solicitor, he remarked:
"That material should today be treated with caution, in my judgment; the work that solicitors do can be expected to have changed since 1888; it has changed in recent times and is changing now. So I prefer to have regard to the expert evidence of today in deciding what is the ordinary authority of a solicitor."
In In re Bell's Indenture Vinelott J looked at the matter in the context of express trusts. He regarded Lord Herschell as saying that a solicitor is authorised to receive trust monies as agent of the trustees, but not to constitute himself a constructive trustee in respect of those funds. He appears to have thought that that also followed from the fact that a solicitor is not authorised in the ordinary way to accept office as a trustee. It seems to me, however, that accessory liability is not necessarily the same thing. In such a case there is no express trust, but the law imposes a remedy in equity where someone has dishonestly assisted another to breach his fiduciary duty. That may well happen as part and parcel of the assistor's ordinary work, just as here, on the assumed facts, Mr Amhurst was assisting Mr Livingstone as part and parcel of his work as a solicitor in drafting the scheme agreements.
In Estate Realties v. Wignall Tipping J appears to have found that there would have been liability within section 13 (England's section 10), if the plaintiff had suffered any loss at the time of the sale of the shares (at 633.28/39); similarly he found that the partners had then acted in the ordinary course of their firm's business. To that extent the case is, I think, an authority in Mr Boswood's favour. What he declined to find, however, is that thereafter the partners were acting in the ordinary course of their firm's business in managing the company whose shares they had bought and in deriving a large profit from the shares' ultimate sale a year later. Their liability could only be as constructive trustees liable to an account, and the judge refused to find that Mr Wignall should also be liable to account as a constructive trustee, when he was in ignorance of the scheme. It seems to me, therefore, that this case does not assist Mr Davis.
At the end of the day, the closest case on the facts is the Agip case. Although its authority is much weakened by the factors I have discussed above, the very naturalness of its decision carries a certain force. Having given careful consideration to the submissions and authorities presented to me, I conclude that there is no general principle of law, or matter of construction of the relevant sections of the Partnership Act, or authority, which compels me to hold that Mr Amhurst was acting outside the ordinary business of his partnerships when, as I must assume, he dishonestly assisted Mr Livingstone in the scheme by the drafting and negotiation of the scheme contracts. The subsidiary agreements were contracts directly involving his clients, Mr Salaam and the Salaam companies. The Richco consultancy agreement did not directly involve his clients, but it closely interested them, and I do not see why a client may not as a matter of ordinary business instruct his solicitor to assist in the negotiation of such a contract. In any event, I do not see why the question of whether the relevant acts of Mr Amhurst were within the ordinary course of the Amhurst partners' business, raised by para 7.6 of Dubal's points of claim, is not ultimately a question of fact, as it were for the jury (cf Hamlyn v. Houston & Co), which I must assume (for present purposes) in favour of the Amhurst partners.
I therefore conclude that the Amhurst partners are entitled to claim a contribution.
I would add this. In Lloyd v. Grace Smith Lord Macnaghten at 738/9 referred to the incidence of insurance as relevant to his considerations. Firms will in the ordinary course take out comprehensive insurance policies, which insure them against even the fraudulent acts of their partners: such policies do not, however, indemnify the fraudulent partner himself. Professional firms are often required to take out such policies as a matter of their professional duties. It would hardly be a satisfactory rule of law which rendered liability in dishonest assistance cases against a dishonest partner, when he will have no cover, but forbids vicarious liability in appropriate cases against his partners, even though they are typically insured for such liability.
Are the Amhurst partners "innocent" claimants?
The next question is whether the Amhurst partners, whose liability is vicarious rather than personal, can present themselves for the purpose of their Contribution Act claim as innocents, or whether they must present themselves in the same light as Mr Amhurst himself.
The Amhurst partners submit that they are entitled to a full indemnity, because they are personally innocent of any dishonesty or wrongdoing. Examples of such full indemnities are cited, eg Lister v. Romford Ice and Cold Storage Company Ltd  AC 555, where Viscount Simonds and Lord Morton thought that an alternative route under which the employer could obtain a complete indemnity from its negligent employee was under the predecessor Act, the Law Reform (Married Women and Tortfeasors) Act 1935 (the "Act of 1935"): see at 579/580 and 584/5. The Amhurst partners' innocence was to be contrasted not only with the dishonesty of other parties, but in particular with the large receipts of such parties, which they should be made to disgorge. It would therefore be "just and equitable" for them to recover an indemnity.
Mr Salaam, Mr Livingstone and Mr Al Tajir submit otherwise. They submit that the argument of the Amhurst partners is novel and unsupported by authority. It would, if correct, enable all parties who were only vicariously liable, even in the typical case of vicarious liability for negligence, to present themselves as wholly without fault. Lister v. Romford Ice is not to the contrary, for there the employer had a cause of action in contract for an indemnity: the employee owed his employer a contractual duty of care. As against Mr Amhurst, therefore, the Amhurst partners might be entitled to a full indemnity, but not against Mr Salaam or the third parties. As against them the Amhurst partners must present themselves as wrongdoers standing in the shoes of Mr Amhurst: for it is only because they stand in his shoes that they are entitled to a contribution in the first place. That followed from a combination of the doctrine of vicarious liability itself, as a matter of construction of the Act since section 2(1) was dealing with responsibility "for the damage in question" for which the claimant was a "person liable" under section 1, and by reason of the doctrine of attribution whereby the knowledge and therefore dishonesty of Mr Amhurst was to be attributed to the Amhurst partners.
In my judgment, each of these opposing submissions has something in it. It appears that it may be correct that in the ordinary case of vicarious liability for negligence, the employer stands fully in the shoes of his employee. Thus in the leading textbook on the Act of 1935, GLANVILLE WILLIAMS, Joint Torts and Contributory Negligence, 1951, there is the following passage at 166/7:
"Where a tort is committed concurrently by D1 and D2, and D2 is acting on behalf of D3, who is vicariously liable for him, it is submitted that D3 is vicariously liable to D1 for the contribution payable by D2 to D1. Thus if the negligence of D1 and D2 was equal, D1 should be given judgment for contribution in respect of the 50 per cent of the plaintiff's judgment against D2 and D3 jointly. at the same time , D3 should be given indemnity against D2 in respect of any contribution that he thus has to pay to D1."
To similar effect is ATIYAH on Vicarious Liability at 430/1:
"In other words, in deciding what is "just and equitable"...as between D1 and D3 the court must have regard to D3's responsibility for the negligence of D2."
Lister v. Romford Ice and other such cases are not inconsistent with that, for in such cases there is a right to an indemnity outside the Act itself. Indeed, Viscount Simonds at 580 said that if the employer could not recover damages for breach of contract, he was precluded from obtaining contribution. Only Lord Morton, approving the decision at first instance, said that there was a right to obtain contribution, which in the judge's discretion could be a full indemnity, even in the absence of a claim in contract. That may well be correct in a two party case, where the issue of contribution is solely between the negligent employee and the vicariously liable employer: see GLANVILLE WILLIAMS at 162. It does not follow that it is equally correct in a multi-party case, such as discussed by Professors Williams and Atiyah above, where the vicariously liable defendant seeks a contribution from someone other than his employee. Even Mr Boswood agreed that his submission would not work in cases of negligence.
Even in such a case, however, I am not clear in my mind that the vicariously liable claimant must be held to have the same "responsibility for the damage in question" as primary wrongdoers. "Responsibility" has been held to cover both causative potency and blameworthiness: Madden v. Quirke  1 WLR 702 at 707E, Downs v. Chappell  1 WLR 426 at 445H. I can quite see that in terms of causative potency the vicariously liable probably has to stand in the shoes of the wrongdoer. It does not seem to me to follow that he must necessarily do so in terms of blameworthiness.
Whether that be so or not in the case of negligence, however, it does seem to me that the case of dishonesty is different. It would in my judgment be unjust if the defendant who was vicariously liable for his employee's fraud could not have his personal innocence of dishonesty count in his favour. There is nothing in section 2(1) of the Act to suggest otherwise. The vicariously liable bears the fault of the party for whom he is liable; but at the same time he is entitled to invoke his own innocence of dishonesty. My conclusion, therefore, is that ultimately it is for the Court to attempt, under the broad discretion given to it by the statutory language of "just and equitable", to reconcile all these factors in its assessment of contribution.
I do not think that there is anything in the doctrines of vicarious liability or of attribution, or in the construction of the Act, to require a different answer. As between a plaintiff and an employer, the doctrine of vicarious liability requires a full recovery, based on concepts of agency and the policy considerations expressed in Holt CJ's dictum. As between persons liable for the same damage, however, between whom there is no cause of action other than a right of contribution under the Act, it does not seem to me to follow that the doctrine of vicarious liability necessarily operates in the same way. As for the doctrine of attribution, I do not think that that applies at all, other than in the sense of a reference under another name to the doctrine of vicarious liability: the Amhurst partners are not liable to Dubal because Mr Amhurst's assumed dishonesty is attributed personally to them, but only vicariously. In such circumstances it would be odd if his dishonesty had to be personally attributed to his partners for the first time at the stage of contribution. If that could happen at all, it could only be so because of the demands of the Act itself, creating a special rule of attribution: see Meridian Global Funds Management Asia Ltd v. Securities Commission  2 AC 500 at 507B/F. However, I reject the submission that the Act itself requires the merely vicariously liable to have attributed to them the dishonesty of their agent for the purposes of contribution. Section 1 deals with entitlement to contribution, which depends on a person's liability for the damage in question. Section 2 deals with the assessment of contribution, which does not turn on that person's liability, for that has already been established, but on his responsibility for the damage in question: and that responsibility does not equate to the rule of law which has required liability, such as vicarious liability, but on an exercise of discretion, the finding of what is just and equitable. It is to that exercise that I now turn.
"Just and equitable".
The parties' submissions were as follows.
Mr Salaam submitted that each of the parties should contribute equally. Since Mr Livingstone had already paid (at least) 20% of the claim, there should be no further contribution from him, even if the Amhurst partners were entitled to some recovery. The effect of that submission would be to leave Mr Salaam in possession of some of his receipts.
Mr Livingstone, who claimed no contribution from anyone, also submitted that he had paid enough; that the Amhurst partners were not entitled to any contribution, and could in any event have obtained their recovery from Mr Amhurst himself; and that to ensure that Mr Al Tajir did not retain any of his receipts, he should be made to contribute to Mr Salaam, and, if the court felt after all that the Amhurst partners were entitled to anything, to the Amhurst partners. That was before the Al Tajir settlement. Following that settlement, Mr Livingstone now submitted that it should be Mr Salaam who should make any necessary contribution to the Amhurst partners, so as to prevent Mr Salaam from retaining any of his benefits. Implicitly, therefore, it was accepted that Mr Al Tajir had contributed enough through his settlement.
Mr Al Tajir submitted that only causative potency really distinguished the parties: and that on that score, the principal players were Mr Livingstone, Mr Salaam and Richco, that Mr Amhurst came next, and that he himself brought up the rear, since he was not involved in the drafting of the agreements, and was unaware of the subsidiary agreements and their detailed provisions such as the mobilisation fee and the monthly payments. He relied on Downs v. Chappell as being inconsistent with a receipts based approach. Following his settlement, he submitted that what has satisfied Dubal should be enough, and that in any event the Amhurst partners should not be awarded anything, since their settlement was modest compared with Mr Amhurst's responsibility.
Mr Amhurst, who apart from Mr Al Tajir's contingent claim faced a claim only from Mr Salaam, submitted that the primary consideration in justice was that Mr Salaam should obtain no contribution until he had at least been required to disgorge what he had received. In any event Mr Amhurst's responsibility was less than those of the others, both because he had received nothing, and was therefore less blameworthy, and also because his participation had less causative potency since the scheme would have gone ahead without him. He was also less blameworthy, and in particular vis-a-vis Mr Salaam, in that he was Mr Salaam's agent and it was Mr Salaam who as principal was giving him instructions. The Amhurst partners therefore should not be obliged to contribute to Mr Salaam either, but on the contrary should receive a full indemnity from those who had benefitted from the scheme. Mr Leggatt further submitted on his behalf that Mr Amhurst, as a solicitor, had already paid a high price because of this litigation in a way that went beyond the damage done to businessmen such as Mr Salaam, and that an order for contribution would face him with the prospect of ruin.
The Amhurst partners also submitted that the court's first duty was to ensure that Mr Salaam and Mr Al Tajir should retain none of their receipts. That could only be achieved by giving the Amhurst partners a complete indemnity from their contributions. I think that they were keener to obtain their indemnity from Mr Al Tajir than from Mr Salaam because they trusted his credit further: in any event they submitted that any order for contribution should be made against the parties held liable on a joint and several basis, so that the risk of insolvency should not fall on themselves. Following the Al Tajir settlement they submitted that interest considerations showed that Mr Al Tajir had not yet disgorged his full receipts: they calculated that he would still retain over $8,000,000. Therefore they continued to submit that he should be required to indemnify them in full. Even if as a result he paid out more than he had received, that was not something of which he could complain against them: whereas he had settled with Dubal even though Dubal had not sued him, they at least had sued him for a contribution.
Richco, which at the time faced a claim only from Mr Salaam, emphasised that its role had not been that of a promoter, that it had given Dubal considerable relief under its settlement agreements, and that its receipts had been in theory limited to 0.5% of the fee on sales, some $8,500,000, and in practice had been at most $366,678. If it should contribute at all, it should only be after Mr Salaam and Mr Al Tajir had disgorged everything. Mr Livingstone, on the other hand, had paid enough. It suggested that the Amhurst partners should receive a complete indemnity from Mr Salaam and Mr Al Tajir, and that even after that Dubal's claim would be met in full before those two had completely disgorged their receipts. Richco should therefore be required to contribute nothing.
In summary, therefore, no one suggested that Mr Livingstone should contribute, not even, at the end of the day, the Amhurst partners who were the only party to have claimed a contribution from him. Everyone save for Mr Salaam and Mr Al Tajir thought that the Amhurst partners should receive an indemnity. Richco and Mr Amhurst were on Mr Salaam's list as essentially equal partners.
I have taken account of all these submissions and looked at the matter from various points of view. To mention matters chronologically, I have considered the parties' responsibility for setting up the scheme in the first place, and to a lesser extent their responsibility for administering it. Secondly, I have had regard to the parties' receipts under the scheme. Thirdly I have considered the parties' attitude to Dubal's attempts to recoup its loss. That loss was of course increasing as time went by.
In terms of the promotion, organisation and operation of the scheme, I think that there is little to choose between the five principal parties. I regard Mr Livingstone, Mr Al Tajir and Mr Salaam as in effect three partners, each of whom brought something indispensable to the scheme. I have remarked above that the concept of the alliance with Richco probably came from Mr Livingstone, or at any rate developed out of his conversations and discussions with Mr Al Tajir and/or Mr Salaam. It is clear, however, that each had need of the other; and the fact that the original split of 40%/30%30% was roughly equal, favouring Mr Al Tajir slightly perhaps for no better reason than that he had the greatest influence in the world of business, supports my assessment. As it was, after his initial involvement, he appears to have left the organisation and operation of the scheme to his two partners. They were then able to negotiate extra payments, such as the mobilisation fee and the monthly $85,000, which I do not think Mr Al Tajir even knew anything about.
Richco was not an originator, but it was a necessary part of the scheme, and was prepared to lend itself to the sham transactions, not only for the sake of its anticipated earnings under the scheme itself, at least 20% of the fee on sales, but also no doubt because it had other expectations of the alliance. Indeed, it was only willing to reduce its demands from 1.25% of the fee to at least 0.5% on the basis that the ASA would be put in place, out of the operation of which the beneficiaries under the subsidiary agreements could earn per tonne commissions. In any event, playing paymaster to the others was, as Mr Amhurst explained, the key to business with Dubal and in Dubai.
Finally, Mr Amhurst was not a principal, nor an originator, but in his own way he was a necessary part of the setting up of the scheme, and he lent by his presence a colourable respectability to it. It is submitted that if it had not been him, it would have been someone else. That may not have been easily arranged, however. He was obviously a close associate of Salaam. He was a solicitor, which in the assumed circumstances must count against him. I regard his responsibility in the promotion, organisation and operation of the scheme as being a little less than that of the others, but not by very much.
I come next to net receipts, which I have identified above. Of course receipts enter into the overall question of responsibility. Mr Salaam was the biggest beneficiary, keeping $20,338,348. Next to him came Mr Al Tajir, at $16,466,699. Mr Livingstone received $6,327,918. Richco retained nothing, and Mr Amhurst received nothing. In percentage terms Mr Salaam got some 47% of those receipts, Mr Al Tajir some 38%, and Mr Livingstone some 15%.
Thirdly, there is the question of how well the parties behaved subsequently. Richco was the earliest to come to terms, and entered into a first settlement agreement in April 1993, as part of which the Richco consultancy agreement was agreed to be treated as over from 22 March 1993, the date of Dubal's letter to Richco terminating the agreement. That at least staunched the outflow of funds. There was also a second settlement agreement relating to the ancillary agreements. As late as December 1995, however, at the time of the so-called Clyde memorandum, Richco was still trying to withhold information about the full extent of Dubal's losses. A little earlier in March 1995 Dubal began its proceedings against Mr Livingstone. Given the arm-lock that Dubal had on Mr Livingstone in the form of a world-wide Mareva injunction, it may be that Mr Livingstone did not have all that much choice about what happened next: but the fact remains that Mr Livingstone decided not to defend his position, but to come to terms. He gets the credit of that capitulation. The settlement was designed in effect to take the greatest proportion of his assets, and produced for Dubal a recovery of nearly 23% of its claim.
I come next to these proceedings. That has led to the Amhurst settlement, which has produced another 13.5% for Dubal. Mr Al Tajir was not, of course, a defendant. Ill-health saved him from entering the witness box; and he has now come to terms in a settlement which has produced some 23% more of Dubal's claim with interest. Mr Salaam was the last to settle. I wrote in my draft judgment that he had been "defiant to the end". That was justified on my knowledge at that time. Shortly thereafter, of course, I learned of his settlement, and also that $3,000,000 had already been paid on 2 April 1998. It may be, therefore, that my original assessment was too harsh, but I do not think by very much. I bear in mind that, at the request of all the parties, this judgment was twice delayed to give Dubal and Mr Salaam a full opportunity to reach a settlement.
Taking all these matters together, I think that prima facie a fair allocation between these five parties would be Mr Salaam 36%, Mr Al Tajir 29%, Mr Livingstone 15%, Richco 10% and Mr Amhurst 10%. That, however, has to be checked against four further factors. The first is the structure of the contribution proceedings: not everyone was claiming against the other. The second is of course the matter of settlements already made. The third is the important matter of receipts, for I agree with what Ferris J said in K v. P, that it cannot be just and equitable to require one party to contribute in a way which would leave another party in possession of his spoils. I do not regard Downs v. Chappell as being inconsistent with that approach. The case merely demonstrates that the greater causative potency of the merely negligent may balance the greater blameworthiness of the dishonest.
The fourth consideration is the risk of insolvency. It has been recognised that insolvency is to be taken account in assessing contribution. Thus the insolvency of one defendant may mean that other defendants must bear a larger contribution: see Fisher v. CHT Ltd  2 QB 475 at 480G/481A per Lord Denning MR. There is no firm evidence before me as to the present means of any of the parties, with the exception of Mr Livingstone. Mr Al Tajir has a reputation as an extremely wealthy man, and I have received evidence from him himself as to his huge income in earlier days. His settlement with Dubal suggests that he is still wealthy, but in need or at any rate desirous of the technique of paying by instalments. Mr Salaam has also given evidence before me of very considerable wealth in earlier days, but has hinted bitterly at the ravages that the bringing of these proceedings has caused. There is obviously concern before me as to his ability to withstand the large liabilities that he faces. However, he has already paid $9,000,000, is due to pay a further $3,000,000 before the end of August, and otherwise, like Mr Al Tajir, is given until the end of 1999 for the final instalment of $6,000,000. It is submitted that, in the light of his greater liability and responsibility as indicated in my draft judgment, his settlement suggests that he is already at the limit of his financial capabilities. I do not think, however that I have sufficient reason to view Mr Salaam and Mr Al Tajir as being in materially different circumstances. Submissions on behalf of Mr Amhurst suggest that he faces ruin if a substantial award was made against him, and the fact that he has not contributed to the settlement may possibly support those submissions.
I will now consider each party in turn, taking these factors into account.
Mr Livingstone. I can eliminate Mr Livingstone straightaway, for no one actively sought any further contribution from him, not even the Amhurst defendants who had claimed it on the pleadings. In any event, Mr Livingstone has already paid nearly 23% of the claim, which is more than my assessment of 15%, and more than his receipts of about 15%.
Mr Salaam. His liability, which I had to assess for the purposes of my draft judgment, has now been superseded by the Salaam settlement. I have calculated that as representing a baseline $11,422,506 or some 22.8% of Dubal's original claim, whereas his receipts amounted to $20,338,348, which is some 41% of the original claim, and I have assessed his prima facie responsibility at 36%.
At 36%, Mr Salaam should prima facie contribute a baseline $18,042,343, which is some $6.6m more than the baseline value of his settlement, and his receipts are still greater. It follows that there is prima facie no reason why he should obtain a contribution from anyone else before he has disgorged those receipts. I do not regard the size or terms of his settlement with Dubal as preventing me from ordering him to make further contribution, although it is something of which I must obviously take note. Mr Salaam should in justice therefore be prepared to contribute up to the balance of his receipts. As at 31 December 1997 his receipts, with interest added, amounted to $30,202,446 ($20,338,348 x 148.5%). His settlement as at the same date has been assessed at $16,962,422. Therefore, Mr Salaam could in theory contribute some $13,000,000, before exhausting his receipts.
Mr Al Tajir. He has agreed a settlement which represents a baseline payment of $11,394,985 or some 22.7% of Dubal's original claim. He received, however, $16,466,669, or nearly 33%; and I have assessed his prima facie responsibility at 29%. As in the case of Mr Salaam, so in his case too, I do not regard the size or terms of his settlement as preventing me from ordering him to make further contribution, although again it is something of which I take note. Mr Al Tajir should in justice therefore be prepared to contribute up to the balance of his receipts. As at 31 December 1997 his receipts, with interest added, amounted to $24,453,003 ($16,466,669 x 148.5%). His settlement as at the same date has been assessed at $16, 921,554. Therefore, Mr Al Tajir could also in theory contribute some $7,500,000, before exhausting his receipts.
To whom, if anyone, should such contribution be provided? There is in effect only one candidate still in the field, the Amhurst partners. The only reason why Mr Al Tajir might contribute to Mr Salaam (there is no claim in the opposite direction) is if Mr Salaam was required to pay to the Amhurst partners more than what I would assess to be his several contribution, ie because of a joint and several liability to the Amhurst partners. The latter claim $10,000,000 as at end November 1997. Mr Salaam could by himself contribute up to a full indemnity to the Amhurst partners out of his receipts, whereas Mr Al Tajir could contribute some 75% of the Amhurst partners' claim out of his receipts.
Indeed, as a result of the Salaam settlement, it became apparent that there was more than enough left in the receipts of Mr Salaam and Mr Al Tajir, when the value of those receipts including interest over the years was taken into account, to fund a complete indemnity of the Amhurst partners. At the final hearing which took place after that settlement, it was therefore accepted that I would follow the ruling that I had already given in my draft judgment to the effect that I would in such a situation give to the Amhurst partners a full indemnity. There were, however, at that time and in ensuing written argument, competing submissions as to how Mr Salaam and Mr Al Tajir should respectively fund that indemnity. I shall visit that particular issue below.
Mr Amhurst. In one sense he has contributed nothing, and in another, through the Amhurst settlement, he has already contributed approximately 13.5% of the claim, against my assessment of 10% and nil receipts. Therefore, it seems to me that unless I order contribution in favour of the Amhurst partners, he should make no further contribution. I will therefore have to return to Mr Amhurst in due course.
The Amhurst partners. In my judgment they are neither bound by Mr Amhurst's assessed responsibility at 10%, nor automatically entitled to a full indemnity, other than from Mr Amhurst himself, against whom they have made no claim. (They assert that they have 2 years to do so. I make no comment about that.) They have, however, contributed approximately 13.5%, which is 3.5% more than my prima facie allocation of Mr Amhurst's responsibility. They are therefore in any event entitled to recover that additional 3.5%.
More than that, however, it seems to me that a combination of their personal innocence of any dishonesty coupled with the dishonesty of parties such as Mr Salaam and Mr Al Tajir who have not yet disgorged their full receipts means that they should receive a full indemnity from such parties. As I wrote in my draft judgment before the Salaam settlement and the further submissions regarding interest rates, if, as then seemed possible, Mr Salaam's liability would have exceeded not only my assessment of his prima facie share of responsibility but also his receipts, I would have limited the Amhurst partners' recovery by reference to the level of Mr Salaam's and Mr Al Tajir's undisgorged receipts. As it is however, by the same logic, as I made clear at that time, if there had been sufficient sums left in the hand of Mr Salaam and/or Mr Al Tajir, I would have been prepared to grant the Amhurst partners a full indemnity. It now appears, as set out above, that Mr Salaam's and Mr Al Tajir's undisgorged receipts well exceed the Amhurst partners' claim, and in my judgment that claim should succeed in full.
The remaining questions are how that liability to indemnify the Amhurst partners should be split between Mr Salaam and Mr Al Tajir; whether their liability should be joint or several; and whether to make any order for contribution against Mr Amhurst.
The split of Mr Salaam's and Mr Al Tajir's liability to indemnify the Amhurst partners. The first question is in what proportion I should order Mr Salaam and Mr Al Tajir to indemnify the Amhurst partners. One possible solution is to employ my respective prima facie assessments of their responsibility and thus to order their contribution in a proportion which reflects Mr Salaam's 36% and Mr Al Tajir's 29%. That would mean that Mr Salaam would contribute approximately 6 parts to Mr Al Tajir's 5 parts, or $5,535,714 to Mr Al Tajir's $4,464,286. At a time when I had mistakenly thought that the period limited for Mr Al Tajir to respond in writing to previous submissions had expired without him utilising that opportunity - in fact his written submissions had been served in time but had not reached me - I gave an informal indication to the parties that I would adopt that solution.
Following Mr Al Tajir's written submissions, however, to which Mr Salaam has had the opportunity to respond and has done so, it seems to me that that approach does insufficient justice to my overall approach. On reconsideration, I think that my allocation between Mr Salaam and Mr Al Tajir should also take account of their respective receipts and in particular how much each of them would, in theory, be left with as a result of my orders, as well as the way in which my prima facie assessment would affect them overall in the light of their settlements. If Mr Salaam contributed some $5.5m to the Amhurst partners, then he would still be left, as of end 1997, with some $7.5m of undisgorged receipts, whereas Mr Al Tajir, contributing some $4.5m, would be left with some $3m. Moreover, Mr Salaam's overall contribution (his settlement at a baseline $11,422,506 plus his contribution to the Amhurst partners at $5,535,714 which represents a baseline $3,727,753) at a total of $15,150,259 represents a liability of only 30.2% (as against my prima facie assessment - 36%); whereas Mr Al Tajir's overall contribution (his settlement at $11,394,985 plus $4,464,286 which represents a baseline $3,006,253) at a total of $14,401,238 represents a liability of 28.7% (as against 29%). There is an imbalance there.
It seems to me that a fairer allocation would be that Mr Salaam should pay the Amhurst defendants $7,500,000 and Mr Al Tajir should pay them $2,500,000. In that case, as of end 1997 Mr Salaam would be left with some $5.5m of his receipts (including interest on them), while Mr Al Tajir would be left with some $5m on the same basis. Moreover, Mr Salaam's overall contribution (his settlement at a baseline of $11,422,506 plus a baseline $5,050,505 in respect of his $7.5m contribution to the Amhurst partners) would be $16,473,011 or 32.9%, whereas Mr Al Tajir's overall contribution on the same basis would be $13,078,486 or 26.1%.
Mr Salaam and Mr Al Tajir: joint or several liability to contribute? The question has been raised whether such orders should be joint and several or several. In my judgment, this question should depend on the rationale of the order for contribution. If, as at one time seemed the case, it would have been only Mr Al Tajir who would be left with undisgorged receipts either at all or of any size, then it would have been wrong to ask Mr Salaam to guarantee Mr Al Tajir's solvency. As it is, however, both these parties have been left with substantial undisgorged receipts, even after the contribution orders which I am making in favour of the Amhurst partners. In the circumstances, I do not see why the Amhurst partners should take the risk of either Mr Salaam or Mr Al Tajir proving to be insolvent as long as the other of them is left with undisgorged receipts. Mr Salaam should therefore be jointly liable with Mr Al Tajir in respect of Mr Al Tajir's several liability to contribute $2,500,000, and Mr Al Tajir should be jointly liable with Mr Salaam, but only up to a maximum of $5,000,000, in respect of Mr Salaam's several liability to contribute $7,500,000. It follows that if both Mr Salaam and Mr Al Tajir are solvent, then they will contribute to the Amhurst partners $7,500,000 and $2,500,000 respectively. If, however, Mr Al Tajir proves to be insolvent and Mr Salaam solvent, then Mr Salaam may find himself having to shoulder the whole $10,000,000 - but even that would not exhaust his receipts. If, on the other hand, Mr Salaam proves to be insolvent and Mr Al Tajir solvent, then Mr Al Tajir may find that he has to pay the Amhurst partners a total of $7,500,000, thereby more or less exhausting his receipts.
Mr Amhurst, revisited. I have to consider whether to make any order for contribution against Mr Amhurst in the light of the fact that Mr Al Tajir's contingent claim has come into effect, and there also remains Mr Salaam's claim. The Amhurst partners will recover their settlement through my orders in their favour against Mr Salaam and Mr Al Tajir. In the circumstances, on balance nothing will turn out to have been paid in respect of Mr Amhurst's prima facie 10% responsibility. It has not been submitted on Mr Amhurst's behalf that I am not entitled to make an order against him under the Act merely on the basis of his assumed liability. I am unsure that I am entitled to do so: section 1(4) operates in favour of the defendant who has settled, but not expressly against him. However, it is understandable that Mr Amhurst, who has settled the claim by Dubal against him, does not wish to keep alive the question of that claim merely for the purpose of the contribution proceedings and is therefore prepared to face contribution on the basis of his assumed liability. Although Mr Salaam was Mr Amhurst's principal, Mr Amhurst was also in a sense Mr Salaam's collaborator, and had been so over a long period of time, going back to the times of the GRC agreement. He had also been a director of some of Mr Salaam's companies. He had earned fees from his work for Mr Salaam. He owed a duty to Mr Salaam to advise him as to his responsibilities. On this basis, it would have seemed to me that it would be just and equitable to order Mr Amhurst to pay a contribution to Mr Salaam, provided the effect of it was not to leave Mr Salaam with any of his receipts. As it is, however, even if Mr Salaam pays a full indemnity to the Amhurst partners, that would not exhaust his receipts. In the circumstances, there will be no contribution from Mr Amhurst to Mr Salaam. Nor will I order a contribution in favour of Mr Al Tajir. The effect of that would merely be to restore to Mr Al Tajir a portion of the benefits which he has been made to disgorge.
Richco. Mr Salaam has withdrawn his claim for a contribution against Richco. As it was, I had assessed its prima facie responsibility at 10%. The contribution it had already made through its settlement agreements cannot be quantified, but I was prepared to infer that it had been substantial. It had certainly assisted Dubal considerably in bringing these proceedings. I would also have borne in mind that any award I might have made against it was perhaps (but only perhaps) recoverable by it from Dubal under its indemnity arrangement. Only Mr Salaam had claimed against it. In all these circumstances I would in any event have made no order for contribution against it.