Vicarious Liability and Nondelegable duties PDF

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Law of Tort, Vicarious liability Lecture...

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Vicarious Liability

INTRODUCTION

Vicarious liability means liability which falls on one person as a result of an action of another person, i.e. it is not personal, primary, liability. In terms of the law of tort, it means that one person is made to account for the damage caused by another person's tort. We are concerned only with the situation where one person is liable for a tort actually committed by someone else where the fault lies with that other, and the only basis of liability is the relationship between the two defendants, not the conduct of the first defendant. In other words the first defendant is not personally at fault. It usually applies in cases of ‘master and servant’, where the ‘servant’, or ‘employee’ is employed under a ‘contract of service’. As we shall see, some other relationships are now treated as ‘akin to’ contracts of service. Non-delegable duties seek to address a similar problem, but in a different context. The ‘employer’ is under a personal duty, but entrusts the performance of it to others. These will typically be independent contractors, operating under a ‘contract for services’. There are suggestions in Woodland (2013) that the relationship of these principles will need to be reassessed, but for the moment they are separate and distinct..

WHAT IS VICARIOUS LIABILITY? The basic principle: “Vicarious liability is a general doctrine of law under which the legal responsibility for one person’s act is imposed upon another person. In the context of the law of tort it is generally identified with the rule under which an employer is made liable for torts committed by his employee in the course of the employee’s employment.” K M Stanton, The Modern Law of Tort – p127 A simple example:

Rationale for the Doctrine Originally the basis of vicarious liability lay in two rather vague Latin maxims, which can be roughly translated as 'let the superior person be responsible', and 'who acts by another acts himself'. “… The doctrine of vicarious liability has not grown from any very clear, logical or legal principle but from social convenience and rough justice. The master having (presumably for his own benefit) employed the servant, and being (presumably) better

able to make good any damage which may occasionally result from the arrangement, is answerable to the world at large for all the torts committed by his servant within the scope of it.” (Lord Pearce, Imperial Chemical Industries Ltd v Shatwell [1965] AC 656.) Vicarious liability is legal responsibility imposed on an employer, although he is himself free from blame, for a tort committed by his employee in the course of his employment.” (Lord Steyn, Lister v Hesley Hall [2002] AC 215.) Vicarious liability – its origins and its ordinary application: (extract from the judgment of Ward LJ in JGE v Trustees of the Portsmouth Roman Catholic Diocesan Trust [2013] QB 722: Although in his interesting article A Theory of Vicarious Liability (2005) Alberta L.R 1, p.2, J.W. Nevers introduces his paper saying, "Vicarious liability occupies a mysterious place in the common law", it remains firmly entrenched in tort law despite speculation about the need for some rationalisation and reform. It imposes liability on D (the Defendant) to compensate C (the Claimant) for the damage suffered by C caused by the negligent or other tortious act of A (the Actor) even though D is not personally at fault at all. It is thus a form of strict liability. That may seem harsh on D. As O.W. Holmes observed (5 Harv LR 1, 14): "I assume that common sense is opposed to making one man pay for another man's wrong, unless he actually has brought the wrong to pass according to the ordinary canons of legal responsibility." That view may account for the alternative theory (for which there is some academic support and which may be gaining ground) for fixing D with personal liability by extending the range of non-delegable duties for which he is responsible. So how did this apparently unjust rule develop and, more importantly, what is the ambit of the rule today? Although Pollock claims to have been the first to coin the phrase (see Pollock-Holmes Letters, vol i, p. 333), its origins are buried deep in the medieval law. It seems to have started in circumstances where the master had expressly commanded his servant to commit a wrong and it developed to encompass acts done by implied command. "Every act which is done by a servant in the course of his duty is regarded as done by his orders and consequently is the same as if it were the master's own act", Bartonshill Coal Co v McGuire (1858) 3 Macq 300, 306 per Lord Chelmsford . The traditional, but hard- worked, phrases respondeat superior and qui facit per alium facit per se may have been apposite then, though as Lord Reid acidly observed in Staveley Iron & Chemical Co Ltd v Jones [1956] AC 627, 643, "the former merely states the rule badly in two words, the latter merely gives a fictional explanation of it." Salmond credits Sir John Holt (1642-1710) with the beginning of the adaptation of those ancient notions to the needs of a modern society. As the Chief Justice said, "Seeing somebody must be a loser by this deceit, it is more reasonable that he, that employs and puts his trust and confidence in the deceiver, should be the loser than the stranger", Hern v Nichols (1700) 1 Salk 289. By the end of the eighteenth century there was a shift away from the notion of implied command arising from the relationship of master and servant. In its place grew an acceptance by the middle of the next century, aided by the great Victorian judges and the recognition of a changing and developing industrial society, that the existence of the master/servant relationship was itself enough to impose liability on the master if the servant was acting within the scope of his employment. Lord Brougham explained, "The reason I am liable is this, that by employing him I set the whole thing in motion; and what he does, being done for my benefit and under my direction, I am responsible for the

consequences of doing it." So it should be: the master has the "deeper pockets" per Willes J. in Limpus v L.G.O. Co (1862) 1 H. & C. 526, 539. That was the established law on which we cut our teeth. We learnt that disputes about vicarious liability centred on two questions. First (the stage 1 with which we are concerned in this appeal), the issue was whether this was a true relationship of employer/employee (the notion of master/servant having become "obsolete" per Lord Steyn in Mahmud v B.C.C.I. [1998] A.C. 20, 45/46, though "servant" remains hard to eradicate from the language as in the time-honoured pleading "his servants or agents…"). Secondly, our stage 2, the enquiry was whether A was acting within the scope of his employment or whether he was on a frolic of his own. At the first stage the contrast has traditionally been made between the relationship the employer had with his employee and the one he had with an independent contractor. The analysis examined the difference between a contract of service and a contract for services. Control became the important factor. Was D instructing A how to do the work or contracting with him as to what work was to be done? But control has not survived as the crucial criterion for establishing vicarious liability and other tests for distinguishing the employee from the independent contractor developed as I must explain later in this judgment … when considering whether vicarious liability can be extended to a quasi employee who is in a relationship with his "employer" which is only akin to employment.

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Is this a fair doctrine?

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Remember that an employer can be both primarily liable (where he is at fault) and vicariously liable

VICARIOUS LIABILITY - THE BASIC RULES

MUST BE A TORT

COMMITTED BY AN EMPLOYEE

ACTING IN THE COURSE OF EMPLOYMENT

HAS A TORT BEEN COMMITTED? It can be any tort – although in practice we usually find it is common law negligence or breach of statutory duty, but it can extend to trespass to the person. It might also be a crime, but that is irrelevant. The victim can be anyone. Often the claimant will be a fellow employee, but it may be a customer, or a completely independent person.

All the normal ingredients of the tort must be proved against the employee in the usual way.

WHO IS AN EMPLOYEE/SERVANT? We now have to consider how the law distinguishes between 'independent contractors' and 'employees' (or 'servants') since the employer is only vicariously liable for the latter. Chambers English Dictionary defines 'employee' as: 'a person employed', and the word 'employ' as: 'to occupy the time or attention of; to use as a means or agent; to give work to'. This is a rather circular and unhelpful definition, since in everyday language a householder is as likely to talk about 'employing' a decorator, who will be an independent contractor, as the decorator is to talk about 'employing' an assistant who is likely to be a 'servant'. As vicarious liability usually arises from the employment relationship, it is clearly very important to be able to identify an employee, but, surprisingly at first sight, the law is very uncertain on the definition of 'employee' (or 'servant'). This is partly because the question of whether someone is an employee is relevant for a number of reasons, which include: Income tax - is it payable on an employment basis with deduction at source under Schedule E and PAYE, or on a self-employed basis in arrears under Schedule D? National Insurance - are employed contributions of Class 1 payable by employee and employer, or is the contractor alone liable to self-employed contributions of Class 2 and 4? Statutory duties - is a duty which applies to 'employees' relevant to the case? Employer's common law duty of care - does it apply to this particular person? Does employment protection legislation apply - can the 'employee' claim unfair dismissal, redundancy, discrimination in employment etc.?

The cases are drawn from the range of contexts mentioned above, and extreme care is needed in transferring arguments to another context by way of analogy. Given these complications, it is not surprising that there is no single, comprehensive test to answer the question 'Is Vera the employee of Winifred, or not?' What makes sense in one context may not do so in another. We also have to remember that in any given case someone, whether Vera, Winifred or a third party such as Revenue and Customs or the victim of Vera's tort, has an interest in arguing one way or the other, while other parties will contend for the opposite. In theory, it is difficult to see how someone can be an employee for one purpose but not another, but it is clear that they can. An independent contractor is said to have a contract for his services with his employer, whilst an employee (or servant) works under a contract of service. Thus, a convenient starting point for our inquiry is the terms of the contract between the parties: how does the contract classify the person in question, as an employee or as an independent contractor? The terms of the contract, however, are not conclusive where liability to third parties is concerned and, in any case, the contract may be silent or ambiguous on the matter. Nevertheless, this is a factor to be considered by the court. No single authoritative test for determining this issue is available, but various possible tests have been formulated in the cases. The oldest of these is the 'control' test, or 'can the

employer direct not only what is done, but where, when and how it is done'. The weakness of this traditional approach is that in the case of modern, highly specialised tasks it is difficult for the employer to exercise control over the method of doing the work, for example in the case of airline pilots, lawyers or surgeons. Indeed problems were identified as long ago as 1909: Hillyer v. Governors of St Bartholomew’s Hospital [1909] 2 KB 820 Here the court held that nurses were not employees of the hospital when carrying out duties in the operating theatre as they took their orders from the operating surgeon and not from the hospital authorities.

A variant on this is the 'organisation or integration test', is the worker an integral part of the organisation, or an accessory to it. A full-time chauffeur would, for example, be an employee, whereas a taxi driver would be an independent contractor on this reasoning. This test has, however, been little used as a discrete formula; it is regarded as just another, wider, way of looking at 'control'. The same can be said for the 'economic reality' test suggested by MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1965] 2 QB 497. This would take into account such factors as the method and frequency of payment, and the power of selection, suspension and dismissal, holiday entitlement, pension rights, whose tools, equipment and premises are to be used and the intention of the parties. The issue of status arose in the context of National Insurance Contributions. The workers drove lorries for the appellants. The salient features of the relationship were as follows: the drivers were buying the lorries from the appellants on hire purchase the lorries had to be painted in the Company’s colours the drivers wore company uniforms they agreed to drive exclusively for the Company they agreed to submit to all reasonable orders by the Company the drivers could provide substitute labour the drivers were taxed under Schedule D (i.e as self-employed) the drivers were paid piece rate on the amount of concrete delivered. Three conditions were identified for a contract of service: 1. Employee agrees that in consideration of a wage or other remuneration he will provide his own work and skill in performing the service. 2. There must be a sufficient degree of control 3. The other provisions of the contract must be consistent with it being a contract of service.

Factors for consideration on application of this test: Who bears the financial risk? Who provides the work? Who provides the tools?

It is still probably the case that 'control' is the main criterion considered by the courts, although expertise/professionalism is no longer seen as significant. Ultimately the decision must be taken on the facts; all the above factors are weighed up and evaluated and a balancing act is undertaken. Remember that it is the reality of the situation rather than any label the parties attached to it which will be definitive: Ferguson v Dawson and Partners (Contractors) Ltd [1976] 1 WLR 1213. Ferguson was described as a “labour only sub-contractor”. No doubt both he and the company were happy that he was paying only the Class II NIC and was responsible for his own income tax. However, in reality, he was simply an unskilled labourer working under the direction of the site agent. When he was injured, he claimed that he was in fact an employee, and the court agreed. One common factual problem arises where an employee is 'loaned out' or otherwise placed at the disposal of a third party who makes use of his services. This raises the problem of who, in law, employs, and is liable for, the loaned person. Many 'lenders' in these situations put a clause into the contract of loan, providing that the 'borrower' is to indemnify the 'lender', where the lender has paid damages for the loaned employee's tort, so they are protected whatever the actual status of the employee turns out to be. In fact, there is a rebuttable presumption in such a case that the employee is still in the employment of the lender, and the lender will only shift the presumption in exceptional circumstances. One case of this kind is Mersey Docks & Harbour Board v Coggins & Griffiths Ltd [1947] AC 1. This case involved a crane driver. He and the crane he drove were put at the disposal of a company to unload a ship, but the crane driver remained an employee of the harbour authority. It is easier for control to be passed if only a 'pair of hands' is being lent. However, in modern circumstances there is perhaps a greater willingness to accept that responsibility has shifted: Hawley v Luminar [2006] EWCA Civ 30, although all these cases are very fact sensitive. It seems that it will be necessary for the lender to show that he no longer has sufficient control in the sense of directing the work of the employee. Indeed, in rare cases, a given employee may be the responsibility of both the permanent and the temporary employer: Viasystems v Thermal Transfer and others [2006] EWCA Civ 18. However, note that a clause in the agreement specifying that the hirer is deemed to be the employer may still be effective, even if he is not found to be so, in the sense that it will allow for the hirer to be made ultimately liable by means of the indemnity against damages which this clause will provide. Many of the cases cannot be readily reconciled with each other. The decisions often turn on fine distinctions, and are influenced quite clearly by policy factors (i.e. whether the employer 'ought' to be liable because this will achieve what society, in the person of the judge, considers

appropriate). These policy factors have also changed over time (in particular the extent to which the employer should 'insure' his employee against injury at work, as opposed to this falling on the taxpayer through social security or on the worker himself). There is also a distinction in the cases between what might be called 'ordinary' or 'casual' negligence, and other torts. Another important factor is the distinction between liability to outsiders and liability to employees for the acts of other employees. In the first situation there is usually a much stronger 'business liability' argument for holding the employer liable. ACTING IN THE COURSE OF EMPLOYMENT There has been a very significant change in the criteria for determining what is in the course of employment in the last 15 years. However, there is nothing to suggest that actions which were regarded as being in the course of employment under the traditional ‘Salmond’ test will not be so regarded today. It is therefore worth looking at the traditional test, well remembering that it is not now the whole story

The ‘Salmond’ Test “A man is not responsible for a wrongful act done by his servant unless it is done in the course of his employment. It is deemed to be done so if it is either:

a wrongful act authorised by the master, or

a wrongful and unauthorised mode of doing some act authorised by the master.

On the other hand, if the unauthorised act of the servant is not so connected with the authorised 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 of it.” Salmond & Heuston The Law of Torts.

However, the real question is whether the act is properly regarded as being 'in the course of employment.' This means that it must be an act which is sufficiently connected with the employer's business that it is considered appropriate for liability to rest on the employer. This is sometimes a policy decision, and it is important to note that the approach of the judges as to where to draw the line has changed over the years, and is sometimes inconsistent. Cases, especially older ones, are therefore best regarded as examples rather than precedents, although there are some broad principles which apply. It is possible, for instance to distinguish between torts committed: In actually carrying out the assigned authorised task; In doing things which have been expressly forbidden;

In doing something ancillary to the assigned task, but still relevant to the employer's business; In travelling to and from work, or on other work-related journeys; In doing things purely for the employee's benefit, but where the employment has provided the opportunity (there is a 'close connexion' between the two).

Since the decision in Lister v Hesley Hall Ltd [2002] 1 AC 215, a differe...