Vicarious liability - clarification by the Supreme Court
 

In two long awaited Judgments, WM Morrison Supermarkets Plc v Various Claimants [2020] and Barclays Bank Plc v Various Claimants [2020], the Supreme Court has provided welcome clarification of the law on vicarious liability.

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When considering vicarious liability, the Courts are concerned with two issues:

 

1. Whether there is a relationship between the two persons which makes it proper for the law to make the one pay for the fault of the other?

2. The connection between that relationship and the tortfeasor’s wrongdoing.

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Recent cases have ‘muddied the waters’ on both issues and appeared to expand the circumstances in which vicarious liability will be found. The Supreme Court’s Judgments rein in that expansion.

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Barclays Bank Plc v Various Claimants [2020] UKSC 13

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The Barclays case concerned the first issue. Briefly, the facts were that applicants for jobs at Barclays who were successful at interview would be told that they would be offered a job, subject to passing a medical examination and obtaining satisfactory results in their GCE examinations. The Bank arranged medical examination appointments with Dr Bates, told the applicants when and where to go and provided Dr Bates with a pro forma report to be filled in headed ‘Barclays Confidential Medical Report’. Dr Bates was paid a fee for each report. He was not paid a retainer by the Bank. The examinations took place in Dr Bates’ home. The Claimants alleged that Dr Bates sexually assaulted them in the course of those examinations. A preliminary issue trial was ordered of whether the Bank was vicariously liable for any assaults that Dr Bates was proved to have perpetrated in the course of medical examinations carried out at the Bank’s request. At first instance, it was held that the Bank was vicariously liable. The Court of Appeal dismissed the Bank’s appeal.

 

Before the Supreme Court, the Bank relied upon the statement of Lord Bridge of Harwich in D & F Estates Ltd v Church Comrs [1989]; “It is trite law that the employer of an independent contractor is, in general, not liable for the negligence or other torts committed by the contractor in the course of the execution of the work”. The Bank argued that although recent decisions had expanded the categories of relationship which can give rise to vicarious liability beyond a contract of employment, they had not so expanded it as to destroy this trite proposition of law.

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The Claimants argued that the recent Supreme Court cases of Various Claimants v Catholic Child Welfare Society [2012] (generally known as Christian Brothers), Cox v Ministry of Justice [2016] and Armes v Nottinghamshire County Council [2017] had replaced that trite proposition with a more nuanced multi-factorial approach in which a range of incidents are considered in deciding whether it is ‘fair, just and reasonable’ to impose vicarious liability upon a person for the torts of another person who is not his employee.

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In Christian Brothers, Lord Phillips had listed ‘a number of policy reasons’ usually making it fair, just and reasonable to impose vicarious liability upon an employer for the torts committed by an employee in the course of his employment as follows:

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1. The employer is more likely to have the means to compensate the victim than the employee and can be expected to have insured against that liability.

2. The tort will have been committed as a result of activity being taken by the employee on behalf of the employer.

3. The employee’s activity is likely to be part of the business activity of the employer.

4. The employer, by employing the employee to carry on the activity, will have created the risk of the tort committed by the employee.

5. The employee will, to a greater or lesser degree, have been under the control of the employer.

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Lady Hale, giving the unanimous Judgment, considered the development of case law and stated that there was nothing in the trilogy of Supreme Court cases relied upon by the Claimants to suggest that the classic distinction between employment and relationships akin or analogous to employment, on the one hand, and the relationship with an independent contractor, on the other hand, had been eroded. “The question, therefore, is, as it has always been, whether the tortfeasor is carrying on business on his own account or whether he is in a relationship akin to employment with the Defendant. In doubtful cases, the five “incidents” identified by Lord Phillips may be helpful in identifying a relationship which is sufficiently analogous to employment to make it fair, just and reasonable to impose vicarious liability… But the key, as it was in Christian Brothers, Cox and Armes, will usually lie in understanding the details of the relationship. Where it is clear that the tortfeasor is carrying on his own independent business, it is not necessary to consider the five incidents”.

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Applying that to the facts of this case, Dr Bates was not an employee of the Bank, nor, the Court held, was he anything close to an employee. Whilst Dr Bates did work for the Bank, he was not paid a retainer and was free to refuse work. He carried his own medical liability insurance. He was in business on his own account as a medical practitioner with a portfolio of patients and clients. One of those clients was the Bank.

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Accordingly, the Court allowed the appeal, finding that the Bank was not vicariously liable for any wrongdoing of Dr Bates in the course of the medical examinations he carried out for the Bank.

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WM Morrison Supermarkets Plc v Various Claimants [2020] UKSC 12

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The Morrisons case concerned the second issue and, as Lord Reed put it, provided “The court with an opportunity to address the misunderstandings which have arisen since its decision in the case of Mohamud v WM Morrison Supermarkets plc [2016]”.

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The Claimants in this case were 9,263 employees of Morrisons about whom personal information was published on the internet by another employee of Morrisons, ‘S’. S was a senior auditor in Morrisons’ internal audit team. In July 2013, he was subject to disciplinary proceedings for minor misconduct and was given a verbal warning, following which he harboured an irrational grudge against Morrisons.

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In preparation for an annual external audit in November 2013, KPMG requested payroll data from Morrisons. The task of collating and transmitting the data was given to S. S transmitted the data to KPMG. However, he also copied the data from his work laptop onto a personal USB stick. In January 2014, S uploaded a file containing the data of 98,998 employees to a publicly accessible file-sharing website, with links to the data posted on other websites. The file was created from the personal copy of the data which S had made on his USB stick. S made the disclosure when he was at home, using a pay-as-you-go mobile phone linked to a false email account he had created and software capable of disguising the identity of a computer which had accessed the internet. In March 2014, S sent CDs containing the file anonymously to three UK newspapers, purporting to be a concerned member of the public who had found the file on the file-sharing website. The newspapers did not publish the data. 

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One of them alerted Morrisons. Morrisons swiftly took steps to ensure that the data was removed from the internet, instigated internal investigations and informed the police. It also informed its employees and undertook measures to protect their identities. S was arrested, subsequently convicted of a number of offences and sentenced to 8 years’ imprisonment.

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The Claimants brought proceedings against Morrisons for its own alleged breach of the statutory duty created by section 4 (4) of the DPA, misuse of private information and breach of confidence. The claims were also brought on the basis that Morrisons was vicariously liable for S’s conduct.

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At a split trial of liability, the Judge rejected the contention that Morrisons was under a primary liability in any of the respects alleged, but held that it was vicariously liable for S’s breach of statutory duty under the DPA, his misuse of private information and his breach of his duty of confidence. The Judge rejected Morrisons’ argument that S’s wrongful conduct was not committed in the course of his employment, holding that Morrisons had provided S with the data in order for him to carry out the task assigned to him and that what had happened thereafter was “a seamless and continuous sequence of events… an unbroken chain” and that S’s disclosure to others than KMPG was “closely related” to what he was tasked to do. The Court of Appeal dismissed Morrisons’ appeal, adding that although it was an unusual feature of the case that S’s motive in committing the wrongdoing was to harm his employer, Lord Toulson had said in Mohamud that motive was irrelevant.

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Again, the Court considered the development of the law. The ‘close connection’ test was expressed by the House of Lords in Lister v Hesley Hall Ltd [2001] and elaborated upon by that Court in Dubai Aluminium Co Ltd v Salaam [2002] in which Lord Nicholls said “The wrongful conduct must be so closely connected with acts the employee was authorised to do that, for the purposes of the liability of the employer to third parties, it may fairly and properly be regarded as done by the employee while acting in the ordinary course of his employment”.

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Lord Reed, giving the unanimous Judgment, stated that the general principle set out by Lord Nicholls “Has to be applied with regard to the circumstances of the case before the court and the assistance provided by previous court decisions. The words “fairly and properly” are not, therefore, intended as an invitation to judges to decide cases according to their personal sense of justice, but require them to consider how the guidance derived from decided cases furnishes a solution to the case before the court”. Lord Toulson in Mohamud had not suggested any departure from the approach in Dubai Aluminium, and his comments had been taken out of context. The Judge and the Court of Appeal had misunderstood the principles governing vicarious liability in a number of relevant respects. The question whether Morrisons was vicariously liable for S’s wrongdoing was, therefore, considered afresh.

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Applying the general test laid down by Lord Nicholls in Dubai Aluminium, the question was whether S’s disclosure of the data was so closely connected with acts he was authorised to do that, for the purposes of the liability of his employer to third parties, his wrongful disclosure may fairly and properly be regarded as done by him while acting in the ordinary course of his employment.

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The connecting factor between what S was authorised to do and the disclosure was that S could not have made the disclosure if he had not been given the task of collating the data and transmitting it to KPMG. However, the mere fact that S’s employment gave him the opportunity to commit the wrongful act would not be sufficient to warrant the imposition of vicarious liability. Relevant case law illustrated the distinction drawn in Dubai Aluminium between “cases… where the employee was engaged, however, misguidedly, in furthering his employer’s business, and cases where the employee is engaged solely in pursuing his own interests: on a ‘frolic of his own”. 

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In the present case, it was abundantly clear that S was not engaged in furthering his employer’s business when he committed the wrongdoing in question. On the contrary, he was pursuing a personal vendetta, seeking vengeance for the disciplinary proceedings some months earlier. In those circumstances, applying the test laid down in Dubai Aluminium in the light of the circumstances of the case and the relevant precedents, S’s wrongful conduct was not so closely connected with acts which he was authorised to do that, for the purposes of Morrisons’ liability to third parties, it could fairly and properly be regarded as done by him while acting in the ordinary course of his employment. Accordingly, Morrisons could not be held liable for S’s conduct and the appeal was allowed.

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Comment

 

Whilst there remains potential for many nuances in relation to both the relationship issue and the ‘close connection’ test, which will, no doubt, be played out in future cases, the Supreme Court’s clarification of the law, and reining in of what had appeared to be the significantly expanding scope of vicarious liability, is welcome news for Defendants.