Two recent United Kingdom Supreme Court judgments – Cox v Ministry of Justice [2016] UKSC 10, and Mohamud v WM Morrison Supermarkets plc [2016] UKSC 11 – illustrate vicarious liability may be developing to offer plaintiffs significant opportunities in defendant shopping, to increase insurers’ exposure to claims for such liability, and to give businesses added caution in dealing with customers and clients.
Vicarious liability in principle
One person’s vicarious liability for another’s commission of a civil wrong is classically understood to arise when the other commits the wrong in close connection with an employment or comparable relationship for the first person. Both may then be liable for the wrong.
Importantly, the wrong is committed by the other person; the first person becomes liable for that wrong by reason only of its vicarious liability. Such liability is to be viewed distinctly from the first person’s direct liability for wrongs committed by the other person in their capacity as the first person.
Vicarious liability is thus answering a policy question: when should one person be liable for wrongs separately committed by another? The policy answer is in circumstances in which the first person should bear the burden as much as the benefit of the relationship, and may be incentivised to control the impact of that relationship on third parties.
Vicarious liability in practice
The employment relationship is an obvious target for application of the policy. An employer engages others to conduct its business, hoping to benefit from their labour. The exercise of that labour introduces risk to third parties, for which the employer should be liable. It is in the employer’s interest to manage the conduct of its business in such a way as to limit that risk. And recourse to the employer may more reliably indemnify the third party.
To take a simplistic example, while delivering the employer’s goods to a customer, an employee negligently crashes the employer’s vehicle into a third party’s car. No part of the employee’s function involves incompetent driving, so s/he is not acting as the employer. But the employer introduced risk to the third party when it directed its employee to deliver its goods. The employer has opportunity to mitigate that risk by ensuring only competent drivers drove its vehicles. If, as transpires, that was not the case, policy dictates the employer should also be liable – for the employee’s wrong, committed in close connection with that employment relationship.
However, if the employer contracted a courier company to deliver its goods, and the courier driver negligently crashed, it is not the employer who has introduced that risk to third parties (but the courier company). Orthodox application of policy would not entertain the employer’s vicarious liability (although the courier company may comparably be vicariously liable for its driver’s negligence).
Why should that be so? The distinction between the employer’s choice of an employed driver or a contracted driver may not be meaningful in terms of introducing opportunity for risk to third parties; terms of engagement of either employee or contractor may make equivalent provision for reduction in that risk. And the potential for introduction of risk to third parties, in the course of conducting one’s own activities through others, is scarcely limited to employment relationships and their like.
Vicarious liability in transition
Recognising those realities – in S v Attorney-General [2003] 2 NZLR 450 (CA), in which the Crown was held vicariously liable for the abuse visited by foster parents on wards of the state – the Court of Appeal commended (at [111]) focus on “the nature of the relationship in comparison with the conventional ones”, to determine “whether, in light of all relevant features of the relationship, the law should or should not impose vicarious liability for misconduct which has a sufficient connection with and is within the risks created by the relationship”.
Rising to that invitation, in his last judgment as President of the UK Supreme Court, Lord Phillips recorded in Various Claimants v Catholic Child Welfare Society [2012] UKSC 56; [2013] 2 AC 1, [19]: “The law of vicarious liability is on the move”. He identified the material incidents of a vicarious liability relationship (at [35] and [47]) as being when:
- the defendant is more likely to have the means to compensate the plaintiff than the wrongdoer, and can be expected to have insured against that liability;
- the wrong will have been committed as a result of as a result of activity being taken by the wrongdoer on the defendant’s behalf;
- the wrongdoer’s activity is likely to be part of the defendant’s business activity;
- the defendant, by engaging the wrongdoer to carry on the activity, will have created the risk of the wrong committed; and
- the wrongdoer will, to a greater or lesser degree, have been under the defendant’s control.
In complementary judgments given on 2 March 2016, the UK Supreme Court observed the law of vicarious liability “has not yet come to a stop”. Cox v Ministry of Justice examines the nature of the defendant’s qualifying relationship. Mohamud v WM Morrison Supermarkets plc reinforces the wrongdoer’s qualifying conduct. These judgments, said the Court in Cox, “take stock of where [the law of vicarious liability] has got to so far” (at [1]).
Cox v Ministry of Justice
Mrs Cox was the catering manager at Swansea Prison. She supervised prisoners working in the kitchen. One negligently injured her. She sued the prison service.
The trial judge considered prison work was a matter of penal policy, rather than the voluntary engagement characteristic of employment. The Ministry was not vicariously liable for the prisoner’s negligence. Mrs Cox’s consequent appeal was allowed, as prison work was done on behalf of and for the benefit of the prison service, and in a relationship even closer than voluntary employment contracts – that conferred by compulsory custodial sentences.
On the Ministry’s further appeal, Lord Reed, delivering the UK Supreme Court’s unanimous judgment, considered Lord Phillips’ five factors were not equally significant in determining a vicarious liability relationship.
The first factor, of the defendant’s financial capability, was not a principled justification for imposing vicarious liability, although Lord Reed could not exclude “there might be circumstances in which [it]… might be a relevant consideration” (at [20]). And the fifth factor was only material for the fact of control, not that it was necessarily exercised – it is “unlikely to be of independent significance”, unless entirely absent, in which case vicarious liability should be negated (at [21]).
Lord Phillips’ remaining intermediate factors were inter-related, coalescing in “the essential idea … that the defendant should be liable for torts that may fairly be regarded as risks of his business activities, whether they are committed for the purpose of furthering those activities or not” (at [23]).
This comprised “a modern theory of vicarious liability” (at [24]). It was not to be limited to any special category of cases (although it was expressed by Lord Phillips in the context of sexual abuse of children) (at [29]). Neither was it to be undermined by semantic focus on the defendant’s business (at [30]) or the wrongdoer’s status (at [31]).
From this perspective, prior cases are aligned in imposing vicarious liability on defendants when wrongdoers (a) were put by defendants in positions, (b) to perform activities for defendants’ benefit, (c) from which they committed wrongs, (d) the commission of which was a risk inherent in the activities assigned to them.
The negligent prisoner was put by the prison service to work in the kitchen to support the prison’s administration and management. His negligent injury of Mrs Cox was an inherent risk in that activity. The prison service was vicariously liable to her.
The Court was not persuaded by floodgates and other arguments against such liability, which “like the Fat Boy in The Pickwick Papers … sought to make our flesh creep” (at [43]).
Mohamud v WM Morrison Supermarkets plc
Mr Mohamud went into a petrol station kiosk operated by Morrison to obtain service. Morrison’s employee racially abused him in the kiosk, and then seriously assaulted him on the forecourt.
The employee was employed to serve the petrol station’s customers, and was instructed to do so from behind the kiosk’s counter. The trial judge held there was insufficient “close connection” between the employee’s employment and his conduct to render Morrison vicariously liable. Mr Mohamud’s appeal was unsuccessful. The employee’s mere interaction with customers was not enough to make the employer liable for unforeseen acts of violence.
On further appeal to the UK Supreme Court, Mr Mohamud contended vicarious liability’s “close connection” test should be substituted for one which had regard for the setting in which the employer had placed the employee, and the range of activities open to being conducted there (at [9]).
Lord Toulson, with whom the other judges agreed, traced the origins and development of vicarious liability from the 14th century. Initially limited to a master’s liability at civil law for his servant’s misdeed done by his command and consent (at [11]), through liability for modes of commercial and industrial conduct expressly or impliedly authorised in his interests (at [12]-[25]), the modern law simply asked if the wrongs were so closely connected with the wrongdoer’s engagement by the defendant as to make the latter’s liability just (at [27]-[43]).[1]
The question is answered by identifying the broad nature of the wrongdoer’s engagement by the defendant, and then deciding whether social justice warrants fixing the defendant with liability for the wrongdoing that arose. Liability would fix if the wrongdoer used or misused its engagement by the defendant to injure the plaintiff (at [44]-[45]).
In this case, Morrison’s employee’s conduct was in connection with his employment to serve its customers. Morrison entrusted him with that position, and the Court held “it is just that as between them and [Mr Mohamud], they should be held responsible for their employee’s abuse of it” (at [47]).
In a concurring judgment, Lord Dyson emphasised, while there have been developments in the law as to the type of relationship giving rise to vicarious liability, the circumstances of that vicarious liability are not “on the move”. They remain simply where it is just for such liability to arise (at [55]-[56]).
Where to from here?
If these advances are adopted in New Zealand, vicarious liability may attach simply for wrongs done by others in the course of activities directed by the defendant.
Plaintiffs should contemplate the availability of deeper pockets than those of the wrongdoer alone. The employee/independent contractor divide may not be sufficient for defendants to escape liability. A broader range of relationships will need to be examined for the opportunity for risk they present to third parties. Insurers will find their potential exposure enlarged. And businesses and other enterprises will have to be more careful in their selection of reliable customer/client-facing staff.
[1] In Mohamud, at [27]-[30], the UKSC compares and contrasts two occasions of bar staff throwing glasses at customers, approving as “just” the bar owner’s vicarious liability found in Petterson v Royal Oak Hotel Ltd [1948] NZLR 136 (CA), and disapproving the bar owner’s avoidance of liability in Deatons Pty Ltd v Flew (1949) 79 CLR 370, despite the “tortuous and artificial” characterisation of the employees’ conduct as a ‘mode’ of performance of their duties.
[This article was first published in LawTalk 884 (24 March 2016) at 30]
PS: Applied in Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] FCAFC 78
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