Vicarious Liability – Why a man should be liable for the negligence of his servant

Friday , 10, June 2016 Leave a comment

Full Federal Court on the English v Australian approaches

Legal principles concerning vicarious liability

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‘How are things at work?’

The concept of “vicarious liability” has caused great difficulty in the law since it was first coined by Sir Frederick Pollock in 1877.

Shortly after that, Lord Bramwell remarked to the Parliamentary Committee of 1876 (Cd 285, 46) that he had “never been able to see why the law should be so – why a man should be liable for the negligence of his servant, there being no relation constituted between him and the party complaining”.

Part of the difficulty may have arisen because the manner in which Pollock used the term was a misnomer. Pollock intended to use the term “vicarious liability” in the sense of liability for the act of another not for the wrong (or liability) of another.

If “vicarious liability” had been confined to Pollock’s intended meaning as a liability for the attributed acts of another then the rules might simply have been based upon those of the law of agency which are concerned with attribution of one person’s conduct to another.

The attribution of acts of one person to another by the rules of agency is well known.

Indeed, those rules are indispensable for companies because a company “cannot act in its own person for it has no person … So it must of necessity act by directors, managers, or other agents”

The early history of vicarious liability involved a variety of different principles, associated with different forms of pleading, and a series of changes, both unintended and intended.

During the 19th century, the misnomer meaning of vicarious liability, as liability based upon the attribution of the acts of another, built upon 18th century cases to become the dominant meaning.

Agency is “merely a concept, the meaning and purpose of which is to say ‘is vicariously liable’” and it was probably the intended meaning of the Latin maxim qui facit per alium facit per se (“He who acts through another does the act himself.” It is a fundamental maxim of the law of agency)

In contrast with these 19th century cases vicarious liability began to acquire its literal meaning in the 20th century. The liability of an employer for the wrongful acts of the employee has “evolved in the last 150 years to a vicarious liability”.  It is now undeniable that in England it is possible to attribute either acts or liability. In England, the former is now confined to agency and vicarious liability refers to the latter.

The modern English test for this vicarious liability that has emerged is that an employment relationship, or even one outside employment, is capable of giving rise to vicarious liability where there is a sufficient connection between the relationship (in this case, employment) and the tort committed.

…a relationship other than one of employment is in principle capable of giving rise to vicarious liability where harm is wrongfully done by an individual who carries on activities as an integral part of the business activities carried on by a defendant and for its benefit (rather than his activities being entirely attributable to the conduct of a recognisably independent business of his own or of a third party), and where the commission of the wrongful act is a risk created by the defendant by assigning those activities to the individual in question.

The English approach to vicarious liability has not been without criticism, sometimes strident criticism.  It is heavily based upon a theory that a defendant should be liable for wrongdoing that can be regarded as part of the risks of its business activities, whether or not the wrongdoing is committed for the purpose of furthering those activities.

In other words, the enterprise that obtains the benefit should pay the cost of the risks that are fairly part of those activities.

For some time it might have been thought that the English approach could not be adopted in Australia.

In Australia we took the traditional approach to vicarious liability as meaning only the attribution of acts to create a direct liability as Pollock had originally intended, however  the “liability [as] a true vicarious liability: that is to say, the master is liable not for a breach of a duty resting on him and broken by him but for a breach of duty resting on another and broken by another”

Whether liability was to arise directly, as a result of attribution or indirectly as a result of imposition, the result would be the same. Indeed, the various verbal formulations used in relation to both theories of vicarious liability place emphasis on the same notion of a “course of employment”.

The first characterisation of vicarious liability is as a liability based on the attribution of the acts of another which are in the course of employment.

Those acts need not be expressly or impliedly authorised. The classic formulation of this test is that an employer is liable for authorised acts or for unauthorised acts which involve improper modes of performing authorised acts.

Although this test has been criticised, it is clear that it has never been a bar to the attribution of acts to an employer solely because they were not expressly or impliedly authorised. In the law of agency, for example, ostensible authority can sometimes permit attribution of acts which a principal had forbidden.

Examples of Vicarious Liability Situations and What the Court has decided.

Contrary to what the phrase “course of employment” might be thought to mean, it may include within its reach some acts done by an employee in direct contravention of explicit and binding directions given to that employee by the employer. It may also include within its reach some acts that are contrary to law. Thus no one doubts that the employer who instructs an employee driver to drive within the road rules will be vicariously responsible if, contrary to that instruction, the employee speeds and causes injury to a third party.

In Deatons, a barmaid was employed by the defendant company in an hotel. She threw a glass of beer in Mr Flew’s face. He lost sight in one eye. Mr Flew said that the barmaid’s actions were unprovoked. The barmaid’s evidence was that Mr Flew had been intoxicated, he had struck her, and he made an abusive and insulting observation to her. She said that she threw the beer in his face in anger but the glass accidentally slipped out of her hand. The jury found that the employer was liable. In the High Court of Australia the various judgments emphasised that the barmaid’s duty was to serve drinks, not to keep order. On either version of the evidence, the Court concluded that the verdict should be overturned and the employer be given a directed verdict in its favour.

In Lloyd, Mrs Lloyd went to a firm of solicitors for advice concerning a property that she had purchased. The managing clerk of a firm of solicitors induced her to give him the deeds to the property, and to sign two documents, so that he could sell it. He sold the property and kept the proceeds, committing both a tort and a breach of contract. The firm was held to be vicariously liable.

…one of those wrongful acts done for the servant’s own benefit for which the master is liable when they are acts to which the ostensible performance of his master’s work gives occasion or which are committed under cover of the authority the servant is held out as possessing or of the position in which he is placed as a representative of his master…

There can be little doubt that the employer or firm is liable in a case like Lloyd where acts are done under cover of the authority that the servant is held as possessing.

Liability could arise where a person assumed a responsibility to ensure that care would be taken, not merely that it would take care.

A principal would be liable if “the agent commits the fraud purporting to act in the course of business such as he was authorized, or held out as authorized, to transact on account of his principal”.  The general rule is that a principal is liable “for the frauds, deceits, concealments, misrepresentations, torts, negligences, and other malfeasances and misfeasances, and omissions of duty of his agent in the course of his employment”.

The fraud was in the course of employment because it was “so cunningly contrived as to seem to the victim of the fraud a mere matter of course” .

The Court held that a distinction can not be based on the greater the authority that is conferred upon an employee, so that a fraud could be committed without the direct participation of the victim, the less likely that the fraud would be attributed to the employer.

As we have explained, the English approach to attribution of liability is based upon a test of close or sufficient connection between the relationship (here, employment) and the tort.

This approach is described as one which gives “the concept of ‘ordinary course of employment’ an extended scope”.

The English test has not yet been adopted by the majority of the High Court of Australia.

However, it has been adopted and applied in a number of intermediate appellate court decisions: Davis v Williams [2003] NSWCA 371; Blake v JR Perry Nominees [2012] VSCA 122; Crouch and Lyndon (a Firm) v IPG Finance Australia Pty Ltd [2013] QCA 220; A, DC v Prince Alfred College Inc [2015] SASCFC 161. In one of these cases, A, DC v Prince Alfred College Inc, special leave was recently granted for an appeal to the High Court.

The English “close connection” test was applied recently in Mohamud v Wm Morrison Supermarkets plc [2016] UKSC 11; [2016] 2 WLR 821.

In that case, Mr Mohamud asked an employee at the defendant company’s petrol station if it would be possible to print out some documents from a USB stick that he was carrying. The employee spoke to Mr Mohamud using foul, racist, and threatening language. He ordered Mr Mohamud to leave and never come back and then followed him to his car. At the car, Mr Mohamud was seriously assaulted, including being punched and kicked in the head. The Supreme Court of the United Kingdom unanimously found that the employer was vicariously liable.

In the primary judgment given by Lord Toulson, his Lordship explained that although the employee’s conduct was a gross abuse of his position, his actions were part of a “seamless episode” from the time he was behind the counter. It included an instruction to keep away from his employer’s business. There was sufficient connection between the job that the employee was entrusted to do and the assault upon Mr Mohamud.

The decision in Mohamud illustrates that acts can have a close connection with employment even if they are expressly or impliedly forbidden.

where the teacher-student relationship is invested with a high degree of power and intimacy, the use of that power and intimacy to commit sexual abuse may provide a sufficient connection between the sexual assault and the employment to make it just to treat such contact as occurring in the course of employment. The degree of power and intimacy in a teacher-student relationship must be assessed by reference to factors such as the age of students, their particular vulnerability if any, the tasks allocated to teachers, and the number of adults concurrently responsible for the care of students. Furthermore, the nature and circumstances of the sexual misconduct will usually be a material consideration.

The circumstances of this case illustrate a very close connection between Ms Dando’s acts and her employment. As we have explained, her fraud was only possible because of the authority she had to use the Origin CAP BUREAU system. She perpetuated the fraud through the additional authority and access that came with her role as manager and her authority to supervise the very acts that constituted her fraud. Ms Dando’s liability should also be attributed to her employer.

For these reasons, we accept the submission by Columbus that on any conception of vicarious liability, the primary judge was correct to conclude that Pioneer is vicariously liable.


Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] FCAFC 78 (9 June 2016)

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