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Petitioner: SABIHA JAMIL VS Respondent: Messrs UNI LEVER PAKISTAN LTD. through Company Secretary and another
Court Name: Sindh High Court Judge(s): Munib Akhtar Title:SABIHA JAMIL vs Messrs UNI LEVER PAKISTAN LTD. through Company
Secretary and another Case No.: Suit No.722 and C.M.A. No.6783 of 2013 Date of Judgment:2014-12-18 Reported As: 2016 CLC 259 Result: Application dismissed Judgment ORDER MUNIB AKHTAR, J.--- This application filed by the plaintiff, seeks interim relief in the following circumstances. Learned counsel for the plaintiff submitted that the plaintiff held 3326 shares (of par value Rs.10/-) in M/s Brooke Bond Pakistan Ltd. ("BBPL"). These shares were in the plaintiff's possession at all material times. The plaintiffs husband also held some shares in BBPL. In 1997, this company merged with M/s Unilever Pakistan Ltd., the defendant No.l. In lieu of the shares held by the plaintiff in the former company, she became entitled to 773 shares (of par value 50/-) in the latter. The defendant No.2 acted as the Share Registrar for the defendant No.1, performing all the functions ordinarily entrusted to such Registrars by listed companies. As presently relevant it had, at all material times, custody of the share certificates that the shareholders of BPPL were entitled to in the defendant No.1 on account of the merger. These shareholders could obtain those shares on surrender of their shares in BPPL. Many, including the plaintiff's husband, did obtain the share certificates. Others however did not and the plaintiff was one such. She retained her share certificates in the erstwhile BBPL, and her shares (represented by the relevant certificates) in defendant No.1 continued to remain with the defendant No.2. There was of course nothing unusual in this. 2. Having become a shareholder of the defendant No.1, the plaintiff was entitled to participate in such dividends as were declared by it from time to time. She continued receiving the relevant dividend warrants, which were sent by the share registrar, the defendant No.2. Learned counsel submitted that the first such warrant was received on 17.11.1997 and the last on 22.10.2009. It appears that in May 2010 the defendant No.1 declared another dividend. In the normal course the
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plaintiff's husband received his, dividend warrant. However, the plaintiff did not. She made inquiries and was shocked to be informed (by the defendant No.2) that no dividend warrant had been sent to her because she no longer held any shares in the defendant No. 1. The plaintiff immediately wrote to the defendant No.2 (on 10.07.2010) stating that she had never disposed off her shares in the defendant No. 1. In reply, she was informed (on 15.07.2010) that that her entire shareholding had been placed in the CDC system through a market participant, M/s Continental Capital Management (Pvt.) Ltd. ("Continental Capital"). It appears that the shares were thereafter sold on the stock market and have, since then, effectively disappeared. Although the plaintiff thereafter deposited her share certificates in BBPL on the assurance, according to her, that she would be given replacement shares in the defendant No.1, this never came about. 3. Referring to the correspondence between the parties, learned counsel submitted that the defendant No.2 initiated inquiries at its own end, and by letter dated 06.05.2011 informed the plaintiff that it appeared that the plaintiff's shares (in the defendant No.1) had been "fraudulently" inducted into the CDC system. According to the defendant No.2's inquiry a fictitious sub-account on the CDC system had been opened in the plaintiff's name through Continental Capital and this account was fraudulently used to dispose off the plaintiff's shares. Learned counsel emphasized that the plaintiff's shares in the defendant No.1 could not be dealt with at all unless she first surrendered the shares held in BBPL and, as noted above, this had not been done till after the fraud had come to light. The plaintiff thereupon served legal notices on both defendants who, according to learned counsel, by their respective replies admitted that a fraud had been committed on the plaintiff by and through Continental Capital. However, learned counsel emphasized that such fraud could not have been possible without the connivance and collusion of the staff and employees of the two defendants, and they were therefore as much liable to the plaintiff. The shares could not have been misappropriated without the involvement of the defendants' employees. 4. Learned counsel submitted that the plaintiff was thereafter constrained to institute a criminal complaint under section 200, Cr.P.C. Against the officers of the defendants and Continental Capital. The magistrate marked the matter to the concerned police station (PS Mithadar, Karachi) for inquiry. Learned counsel referred to the results of the inquiry in some detail and submitted that these clearly showed that the fraud and misappropriation had been perpetrated by the employees of the defendant No.2 acting in connivance with those of Continental Capital. Referring to the results of the inquiry learned counsel submitted that all the relevant facts stood admitted and established (certainly for purposes of the present application). There was theft of the plaintiff's shares from the offices and custody of the defendant No.2. The inquiry showed that it was a staff member of the defendant No.2 who acted in collusion with some employees of Continental Capital to give effect to the conspiracy whereby the plaintiff was deprived of her shares. In particular two persons, one Noman who was the employee of the defendant No.2 and one Imran, an employee of Continental Capital, were identified in the police inquiry as having played a central role in the whole affair. Learned counsel submitted that the defendant No.2 was vicariously liable for the acts of its employees, and the defendant No.1 was vicariously liable for the acts of its share registrar, the defendant No.2. This constituted the core of the plaintiffs case. Learned counsel submitted that the record clearly established that the plaintiff had made out a case for interim injunctive relief and prayed accordingly. I may note that the interim relief sought is for the defendants to deposit either 773 shares in the defendant No.1 with the Nazir of the Court or a sum of Rs.11,595,000/-, representing the market value of the shares. On 30.05.2013 (when the suit was instituted) an ad interim order was made to this effect. This order was challenged in appeal by the defendant No.1 (HCA 89/2013) and on 21.11.2013 was modified to the extent that it applied only in respect of the defendant No.2. As so modified, it continues to hold the field.
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5. Learned counsel for the defendant No.2 opposed the application. The facts, as stated above, were not denied in any material respect. However, it was contended, and this was the central point made by learned counsel, that the defendant No.2 was not vicariously liable.. The said defendant's employee (the aforesaid Noman) was not acting in the course of his employment when he committed the theft/fraud in respect of the plaintiff's shares. Learned counsel also made certain submissions on other points. I intend no disrespect by not recording them but this is so because in my view the central issue --- and it is an important and interesting one --- that is raised by the present application is of vicarious liability. The other points taken are, with respect, without merit. Insofar as the defendant No.2 is concerned the question is therefore whether this defendant is vicariously liable for the acts of its employee? To this, learned counsel submitted, the only answer could be in the negative. He prayed that the application be dismissed. 6. Learned counsel for the defendant No.1 submitted that this defendant had no liability for, or on account of, the acts of the defendant No.2 or any of its employees. Such liability, if at all, would arise only vicariously and by reason of the defendant No.2 acting as the share registrar of the defendant No. 1. Learned counsel submitted that there was no such liability. He prayed that the application be dismissed, either outright or at any rate insofar as the defendant No.1 was concerned. At the conclusion of the hearing, I had given permission for the filing of written submissions. Learned counsel for the plaintiff and the defendant No.2 did so, relying also on certain case law. 7. I have heard learned counsel as above, examined the record with their assistance and considered the case law relied upon. The material facts are not denied or disputed and, for purposes of the present application, can be regarded as established. These have been stated above and, to the extent required, are further set out below. As already noted, the question is of vicarious liability. Is the defendant No.2 vicariously liable for the acts of its employee and if so, is the defendant No.1 likewise so liable for the liability that would arise against the defendant No.2? Obviously, the first part of the question is crucial for if there is no vicarious liability of the defendant No.2 there cannot be any of the defendant No.1. The analysis thus conveniently divides into two parts and I proceed accordingly. 8. The vicarious liability of an employer for the wrongful acts of his employees has many aspects but, as relevant for present purposes, depends on whether the wrongful act was within the course of the employment. What the courts have understood as constituting the course f employment has developed over the decades. The test most frequently opted is that which was advanced by Sir John Salmond in his well known treatise on the law of torts. In the most recent edition of that work, the wrongful act is in the course of employment: "If it is either (1) a wrongful act authorised by the master, or (2) a wrongful and unauthorised mode of doing some act authorised by the master. It is clear that the master is responsible for acts actually authorised by him: for liability would exist in this case, even if the relation between the parties was merely one of agency, and not one of service at all. But a master, as opposed to the employer of an independent contractor, is liable even for acts which he has not authorised, provided they are so connected with acts which he has authorised that they may rightly be regarded as modes although improper modes of doing them. In other words, a master is responsible not merely for what he authorizes his servant to do, but also for the way in which he does it. ... On the other hand, if the unauthorized and wrongful act of the servant is not so connected with the authorized act as to be a mode of doing it, but is an independent act, the master is not responsible: for in such a case the servant is not acting in the course of his employment, but has gone outside it." (Salmond and Heuston on the Law of Torts, 21st ed., 1996, pg. 443)
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' The position in English law that has emerged more recently is stated as follows in the well known treatise Clerk and Lindsell on Torts (20th ed., 2010) where, after reproducing the foregoing passage from Salmond and Heuston, the learned editors state as follows (pp. 371-2; internal citations omitted): "6-29 Close connection test ... Adopting [the Salmond] test, the Courts historically sought to distinguish between those acts of an employee which constitute an improper mode of carrying out his duties and those acts which fall outside the scope of his employment. However, in the light of the leading case, Lister v Hesley Halt Ltd. [[2001] UKHL 22, [2001] 2 All ER 769] that test is now inadequate in cases involving an employee's intentional wrongdoing. There, the issue for the House of Lords was whether the employers of a warden of a school boarding house could be vicariously liable for the acts of sexual abuse perpetrated by that warden on boys in his care. Their Lordships held that the Salmond test was unhelpful in cases of intentional wrongdoing, particularly where the employee sets out to benefit himself. Instead, they looked to the close connection between the acts in question and the employment. As Lord Steyn put it, the test for whether an employee has acted in the course of his employment was whether the tort was "so closely connected with his employment that it would be fair and just to hold the employer vicariously liable". Applying this test to the facts of Lister it was held that, rather than the employment merely furnishing an opportunity to commit the sexual abuse, the connection between the employment and the torts was very strong. Lord Steyn noted that, "the reality was that the County Council were responsible for the care of the vulnerable children and employed the warden... To carry out that duty on its behalf. And the sexual abuse took place while the employee was engaged in duties at the very time and place demanded by his employment." Thus, he concluded, the sexual abuse was "inextricably interwoven with the carrying out by the warden of his duties". In a similar vein, the Court of Appeal held in Gravil v. Carroll [[20081 EWCA Civ 689] that a punch thrown by the defendant club's player in the melee that followed the final whistle in a professional rugby match, and which injured an opposition player, could be regarded as a sufficiently ordinary incident of a rugby match to engage the Defendant's vicarious liability. ' More broadly, Lister gives rise to considerable confusion. As Lord Nicholls accepted in the later case of Dubai Aluminium Co. Ltd. v. Salaam [[2002] UKHL, [2003] 1 All ER 97] where the test was again applied, the close connection test tells us nothing about what type or degree of connection is necessary in order to invoke the vicarious liability of the employer. As he put it: "this lack of precision is inevitable, given the infinite range of circumstances where the issue arises ... Essentially the Court makes an evaluative judgment in each case, having regard to all the circumstances and, importantly, having regard also to the assistance provided by previous Court decisions." A further confusion to which Lister gives rise is the way in which we are now to interpret certain earlier decisions --- such as those in Morris v. CW Martin & Sons Ltd. [[1965] 2 All ER 725] and Lloyd v. Grace Smith & Co. [[1912] UKHL 1, [1912] AC 716J-- which were presented as though they involved vicarious liability when in fact they have been widely thought to turn upon the Defendant's breach of a non-delegable duty of care." ' At para 6-48 vicarious liability on account of theft by an employee is stated to arise in the following terms (internal citations omitted): "6-48 Employee's theft. It was formerly thought that an employer could not be liable for a theft committed by his employee on the ground that the act of stealing must necessarily be an act outside the course of his employment. However, theft by an employee, to whom the goods had been entrusted, has been interpreted to be an improper mode of performing what he was employed to do. This is the explanation of the decision of the Court of Appeal in Morris v. CW Martin & Sons Ltd. [supra] favoured by their Lordships in Lister v. Hesley Hall [supra]. However, it is possible to say of that case. - in which an employee stole a fur coat that had been entrusted to him - that
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he had simply converted it after it had been passed to him by his employer making it a case of him having converted the coat in the course of his employment. (It would therefore be different if the coat had not been entrusted to him by his employer.) His conversion of it amounted to the dishonest performance of that which he had been employed to do. It is submitted that, mindful of the interpretation of Morris adopted in Lister v. Hesley Hall, in cases of theft by an employee the first sensible question to ask is whether or not the stolen goods had been put in the custody of the employee by his employer. If they had, then the theft will have been committed by the employee in the course of his employment and, unless there is something in the contract of bailment to the contrary, the employer will be vicariously liable. If they were not, then the employer will not be vicariously liable for the theft, though he may be liable for a breach of a personal duty of care owed to the bailor. The decision of the Court of Appeal in Morris v. CW Martin & Sons Ltd. Was approved by the Privy Council in Port Swettenham Authority v. TW Wu 4 Co. [[1978] UKPC 13, [1978] 3 All ER 337] when the Privy Council finally laid to rest the heresy that an employer can never be vicariously liable. For a dishonest act on the part of his employee. Note, however, that the goods concerned must in some way have been entrusted to the employee for the employer to be liable. The mere fact that the employment provided the opportunity for the theft will not be sufficient." (pp. 380-1) 9. Learned counsel for the plaintiff relied on Islamic Republic of Pakistan and others v. Abdul Wahid and others 2011 SCM R 1836. Three appeals, arising out of three suits, were disposed off together since the claims arose out of the same accident. The suits had been brought in this Court under the Fatal Accidents Act, 1885. The victims had all died in an incident at a railway crossing. The gates at the crossing had negligently not been closed by the Railway staff with the result that the victims crossed the railway lines at the same time as a locomotive was approaching. In the ensuing accident they lost their lives and the suits were brought by their legal heirs. The primary defense was of contributory negligence. The suits were decreed. The defendants appealed (by way of High Court Appeals) and the plaintiffs filed cross objections, being dissatisfied by the damages awarded. The appeals were dismissed and the cross objections allowed. The defendants appealed further to the Supreme Court. By means of the cited judgment, the appeals were dismissed. The issues requiring determination are set out at pg. 1842 and as presently relevant the question was whether the Pakistan Railways was vicariously liable for the negligence of its employees. As already noted, it had been found that the gates at the crossing had been left open negligently by the staff. After a consideration of the case law, the Supreme Court held the Railways liable "keeping in view the principle that the employer in the matter of accidents of the nature involved herein is vicariously liable for the acts of omission, commission and negligence of his/its employees" (pg. 1846). In my respectful view, the cited decision is not of direct relevance for present purposes. The facts and circumstances before the Supreme Court clearly fell in the second part of SaLMond's test and were rather different from those at hand. Here, the wrongful act is the theft or misappropriation of the plaintiff's shares. The other case relied upon, Pakistan and others v. Haji Abdul Razzaque 2005 SCM R 587 is also, with respect, not directly relevant. The petition for leave to appeal before the Supreme Court also arose out of a suit filed in this Court under the Fatal Accidents Act. The incident was a road accident. The victim had been riding a motorcycle and was involved in a fatal accident with a truck driven by an employee of the Pakistan Air Force. The suit was dismissed but the High Court Appeal succeeded. The defendants petitioned the Supreme Court for leave to appeal, which was refused. It was observed as follows: "The fact that the truck belonged to petitioner No.1 and was functioning under the management and control of petitioners Nos.1 and 2 and that petitioner No.3 was in the employment of the aforesaid two petitioners, clearly tends to suggest that ordinarily they would be responsible for the act of their agent" (pg. 589). Again, with respect, the facts of the cited decision appear to fall squarely within the second part of Salmond's test.
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10. Learned counsel for the 'defendant No.2 on the other hand relied on Armagas Ltd. v. Mundogas SA (The Ocean Frost) [1985] UKHL 11, [1986] 1 AC 717, [1986] 2 All ER 385 (HL) and Uxbridge Permanent Benefit Building Society v. Pickard [1939] 2 All ER 344 (CA). The facts in the first mentioned case were rather complicated and involved the employee's fraud by way of deceit. The appellants (plaintiffs) were induced to enter into what appeared to them to be a contract (a three year charterparty) with the respondents (defendants) on the basis of a representation that one Magelssen (M), a senior officer of the latter, had the necessary authority to do so. In fact, M had no such authority and an elaborate fraud had been perpetrated by him and one Johannesen. The contract was never known to the respondents. When the appellants sought to enforce it against the respondents they repudiated the same. The appellants contended that the respondents were vicariously liable for the acts of their employee and claimed damages for wrongful repudiation. The plea of vicarious liability was accepted in the High Court but rejected on appeal in the Court of Appeal and the latter decision was affirmed in the House of Lords. The decision of the House is stated as follows in the head note of the report in the Appeal Cases (pg. 718): "(1) that notwithstanding M. Having been appointed by the defendants as vice-president (transportation) and chartering manager, he was known not to have any general authority to enter into a three year charterparty and he could not, in the absence of any representation by the defendants as to his authority, reasonably be believed to have specific authority to notify the other contracting party that the defendants' consent had been obtained and thereafter to complete the agreement.... (2) That although an employer whose servant, having made a fraudulent representation which had caused loss to an innocent party contracting with him, could be liable to bear the loss by reason of having by words or conduct induced the innocent party' to believe that the servant was acting in the course of the employer's business, such circumstances did not exist where such belief, although present, had been brought about through misguided reliance on the servant himself, when the servant was not authorised to do what he was purporting to do, when what he was purporting to do was not within the class of acts that an employee in his position was usually authorised to do, and when the employer had done nothing to represent that he was authorised to do it; and that, accordingly, the defendants were not vicariously liable for M.'s deceit." ' As is apparent the facts of, and decision in, the cited case were far removed from those at hand. What is in issue here is the theft and misappropriation of the plaintiff's shares and not any contract induced on the basis of a fraudulent misrepresentation by any employee of any of the defendants. The second decision relied upon is also, with respect, of no direct relevance. The facts are more fully stated in the report of the High Court judgment appealed against (at [1938] 4 All ER 324, 325- 6). The plaintiff society advanced a sum of money to a fraudster, one Cox, on the basis of a mortgage created on the security of a forged deed. When the society sought to enforce the security it proved worthless and the sum was lost. The entire transaction had been handled on behalf of Cox by the managing clerk, one Conway, of the defendant solicitor. The solicitor himself was never involved in the transaction. In the High Court it was held that Conway was party to the fraud, though there was no such allegation against the solicitor himself. The defence was that the solicitor was not liable for his employee's fraud. This plea was rejected and the suit decreed. The appeal to the Court of Appeal failed, where the matter was put this way (pp. 347-348): "The initial approach to the building society was a thing which was within the scope, or, had it been a genuine approach, would have been within the actual authority, of Mr. Conway, and every step in the proceedings down to the delivery of the documents which took place, the answering of requisitions, the approving of the draft mortgage, the attendance at completion and the receiving, and giving of a receipt for, the money advanced, had they been taken within the course of a genuine transaction, would have been within the authority of Mr. Conway. When a person is put in
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that position, his actual authority and his ostensible authority are, in one sense, the same, because the ostensible authority of a solicitor's clerk put in such a position coincides with the actual authority which he is given. The ostensible authority, however, may go a little further, for the reason that it is not within his actual authority to commit a fraud. Nevertheless, it is within his ostensible authority to perform acts of the class I have mentioned. So long as he is acting…
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