Recent UK Supreme Court’s decisions touching on key elements of vicarious liability

Introduction

Vicarious liability is a long-established legal principle which imposes liability on an employer for the wrongful act committed by its employee against another person during the course of the employee’s employment.

The rationale of such legal principle aims at a fairer allocation of risk of losses by enabling the wronged individual to claim against the employer who is more likely to be able to satisfy the claim, and on whose behalf the act was (in essence) performed, as compared to the individual employee who committed the wrong.

For the legal principle of vicarious liability to apply, two elements will have to be shown.

1. the existence of a relationship between the “employer” and “employee” which justifies the above redistribution of risks
    
2. that the wrongdoing to be connected to that relationship.

Two recent decision from the Supreme Court of the UK have reviewed the above two elements of vicarious liability and helpfully restated the latest legal position. The case of Barclays Bank plc v Various Claimants [2020] UKSC 13, focuses on the former relationship element, whereas the case of Morrison Supermarkets plc v Various Claimants [2020] UKSC 12 focuses on the latter connection element.

1. Fundamental qualities of the employment relationship as a key indicator

In the Barclays Bank case, a group of claimants sought to claim against the Bank for the sexual assaults allegedly committed by a medical practitioner who was not an employee but who was  independently contracted by the Bank to perform medical examinations on the Bank’s prospective employees.

The main question was whether vicarious liability could apply in respect of an independent contractor as traditionally the legal principle of vicarious liability does not extend beyond the employer-employee relationship. The Supreme Court referred to two of the earliest decisions where the courts had departed from such default position.

• In the case of Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) Ltd [2005] EWCA Civ 1151, severe flood damage was caused to a factory due to the negligence of the fitters who were employed and supplied by one sub-contractor to another sub-contractor. The UK Court of Appeal held both sub-contractors to be vicariously liable on the basis that both of them were in a position of control of the fitters.
   
• In the case of E v English Province of Our Lady of Charity [2012] EWCA Civ 938, a claimant claimed against a diocesan bishop for the sexual abuse allegedly committed by a priest, who was appointed by him, during her stay at children’s home run by the church. The UK Court of Appeal held that the bishop was vicariously liable even though the priest was not an employee of the bishop or the diocese on the basis that the relationship was sufficiently “akin to employment” to make it fair and just to impose vicarious liability.

The Court reiterated that whilst the legal principle of vicarious liability can be fine-tuned to accommodate the diverse relationships in the modern-day, the key has always been whether the fundamental qualities that are also inherent in employer-employee relationship exist in each case so that it is fair, just and reasonable for the principle of vicarious liability to apply. In elaborating the test, the Supreme Court considered that the five ‘policy reasons’ behind the vicarious liability principle might help determine whether vicarious liability should also apply in a non-employment relationship. They can be summarized as follows:

1. the defendant (as compared to the individual wrongdoer) has the means to compensate the victim;
    
2. the wrongdoing was committed as a result of activity undertaken by the wrongdoer on behalf of the defendant;
    
3. the wrongdoing was part of the business activity of the defendant;
    
4. the risk of wrongdoing was created as a result of the defendant’s engagement of the wrongdoer; and
    
5. a certain degree of control was exercised by the defendant over the wrongdoer.

Applying the above test, the Supreme Court considered that the medical practitioner who committed the sexual assaults was in business on his own account as he was not engaged on a retainer basis by the Bank and was free to refuse work from it. On this basis, the Bank and the medical practitioner were not in a relationship sufficiently akin to that of an employment. The Bank was held not to be variously liable for any wrongdoing committed by the medical practitioner in the course of the medical examination carried out by him for the Bank. 

2. ‘Motive’ of the wrongdoer as a key connecting factor

In the Morrison Supermarkets case, a disgruntled employee (Mr. S), was provided with payroll data relating to his employer’s workforce and tasked with auditing duties by his employer. Mr. S made the payroll data public by uploading the onto the Internet purportedly in revenge for disciplinary proceedings a few months earlier. The affected employees brought claims against the employer for breach of its duties under the relevant data protection laws.

It was held in the courts below that the employer was vicariously liable for the disclosure made by Mr. S as both the High Court and the Court of Appeal considered that there was a close connection between the disclosure and Mr. S’s employment duties. The employer appealed to the Supreme Court, and the question of whether Mr. S was acting ‘in the course of his employment’ was brought into focus.

The Supreme Court considered that the Courts below were wrong in regarding the employer’s provision of payroll data as sufficiently proximate in time and cause for establishing a close connection between the disclosure and Mr. S’s employment and thereby considering it as being ‘in the course of employment’. The Supreme Court highlighted the unique feature of the case that at the time of the unauthorized disclosure of the payroll data, Mr. S was, in fact, acting with the intent to harm his employer’s interests and considered such motive to be highly relevant.

The Supreme Court, in particular, referred to two decisions to demonstrate the importance of motive as a factor in determining vicarious liability.

• In the case of Warren v Henlys Ltd [1948] 2 All ER 935, a dispute arose between a customer and a petrol station attendant who wrongly suspected the customer to be making off without payment. The customer called the Police to complain against the attendant’s conduct. The attendant then punched the customer in the face. The Court held that the employer was not vicariously liable for the attendant’s conduct as he was acting “entirely of personal vengeance”.
   
• In the case of Bellman v Northampton Recruitment Ltd [2018] EWCA Civ 2214, a managing director of a company, became annoyed after being questioned about his appointment decision at a staff Christmas party. He then summoned all employees together and made statements about him being the person in charge and the one paying their wages. When challenged by another employee, the managing director assaulted him. The Court held that the company was vicariously liable as the assault took place when the director was purporting to assert his authority.

In comparison, the Supreme Court considered that there is a strong indication that Mr. S was not acting on his employer’s business, but in pursuit of his own private ends (i.e. to retaliate against his employer for taking disciplinary action against him) at the time of disclosure of payroll data. Such motive displaced any temporal or causal connection between the disclosure made by Mr. S and the performance of his employment duties. On such basis, the Supreme Court held that Mr. S’s employer to be not vicariously liable to its other employees for his wrongful disclosure of the payroll data.

Conclusion of UK Decisions

Drawing from the legal position as captured by the two UK Supreme Court decisions, the two elements generally required for imposition of vicarious liability can be summarized as follows:

1. the existence of a relationship which is sufficiently analogous to an employment relationship; and
    
2. the wrongful act is carried out by the wrongdoer with the aim of furthering the interests of the defendant’s business (“business” not necessarily being purely commercial in nature).

Hong Kong

It should be noted, that in a recent Court of First Instance’s decision in the case of Ho Kwok Kei v AS Watson & Co Ltd [2019] 3 HKLRD 592, it appeared that the Hong Kong court might have reservations in following the UK approach to the expanded the application of vicarious liability to independent contractors. Since it remains unclear whether the Hong Kong courts will follow the broadened scope of vicarious liability as confirmed by the above decisions of the UK Supreme Court, employers should remain vigilant as to any potential liability which it may be exposed to from work carried out by its employees, but also its independent contractors in particular where there is a very strong and close degree of control is exercised by them.

Mark Chiu

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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.