Vicarious liability

Cox (Respondent) v Ministry of Justice (Appellant) [2016] UKSC 10

Lord Reed: 15. Vicarious liability in tort is imposed upon a person in respect of the act or omission of another individual, because of his relationship with that individual, and the connection between that relationship and the act or omission in question. Leaving aside other areas of the law where vicarious liability can operate, such as partnership and agency (with which this judgment is not concerned), the relationship is classically one of employment, and the connection is that the employee committed the act or omission in the course of his employment: that is to say, within the field of activities assigned to him, as Lord Cullen put it in Central Motors (Glasgow) Ltd v Cessnock Garage & Motor Co 1925 SC 796, 802, or, adapting the words of Diplock LJ in Ilkiw v Samuels [1963] 1 WLR 991, 1004, in the course of his job, considered broadly. That aspect of vicarious liability is fully considered by Lord Toulson in the case of Mohamud.

16.     It has however long been recognised that a relationship can give rise to vicarious liability even in the absence of a contract of employment. For example, where an employer lends his employee to a third party, the third party may be treated as the employer for the purposes of vicarious liability. In recent years, the courts have sought to explain more generally the basis on which vicarious liability can arise out of a relationship other than that of employer and employee.

17.    The general approach to be adopted in deciding whether a relationship other than one of employment can give rise to vicarious liability, subject to there being a sufficient connection between that relationship and the tort in question, was explained by this court in the Christian Brothers case, in a judgment given by Lord Phillips with which the other members of the court agreed. That judgment was intended to bring greater clarity to an area of the law which had been unsettled by a number of recent decisions, including those of the House of Lords in Lister v Hesley Hall Ltd [2001] UKHL 22; [2002] 1 AC 215 and Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366.

18.              The case concerned the question whether the Institute of the Brothers of the Christian Schools, an international unincorporated association whose mission was to provide children with a Christian education, was vicariously liable for the sexual abuse of children by members of the institute, otherwise known as brothers, who taught at an approved school. Another organisation managed the school and employed the brothers as teachers. It had been held to be vicariously liable for the abuse. The issue was whether the institute was also vicariously liable. The Supreme Court held that it was. Vicarious liability was thus imposed on a body which did not employ the wrongdoers, in circumstances where another body did employ them and was also vicariously liable for the same tort.

19.              At para 35 of his judgment, Lord Phillips stated:

"The relationship that gives rise to vicarious liability is in the vast majority of cases that of employer and employee under a contract of employment. The employer will be vicariously liable when the employee commits a tort in the course of his employment. There is no difficulty in identifying a number of policy reasons that usually make it fair, just and reasonable to impose vicarious liability on the employer when these criteria are satisfied: (i) 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; (ii) the tort will have been committed as a result of activity being taken by the employee on behalf of the employer; (iii) the employee's activity is likely to be part of the business activity of the employer; (iv) the employer, by employing the employee to carry on the activity will have created the risk of the tort committed by the employee; (v) the employee will, to a greater or lesser degree, have been under the control of the employer."

At para 47, he added:

"At para 35 above, I have identified those incidents of the relationship between employer and employee that make it fair, just and reasonable to impose vicarious liability on a defendant. Where the defendant and the tortfeasor are not bound by a contract of employment, but their relationship has the same incidents, that relationship can properly give rise to vicarious liability on the ground that it is 'akin to that between an employer and an employee'."

20.              The five factors which Lord Phillips mentioned in para 35 are not all equally significant. The first - that the defendant is more likely than the tortfeasor to have the means to compensate the victim, and can be expected to have insured against vicarious liability - did not feature in the remainder of the judgment, and is unlikely to be of independent significance in most cases. It is, of course, true that where an individual is employed under a contract of employment, his employer is likely to have a deeper pocket, and can in any event be expected to have insured against vicarious liability. Neither of these, however, is a principled justification for imposing vicarious liability. The mere possession of wealth is not in itself any ground for imposing liability. As for insurance, employers insure themselves because they are liable: they are not liable because they have insured themselves. On the other hand, given the infinite variety of circumstances in which the question of vicarious liability might arise, it cannot be ruled out that there might be circumstances in which the absence or unavailability of insurance, or other means of meeting a potential liability, might be a relevant consideration.

21.              The fifth of the factors - that the tortfeasor will, to a greater or lesser degree, have been under the control of the defendant - no longer has the significance that it was sometimes considered to have in the past, as Lord Phillips immediately made clear. As he explained at para 36, the ability to direct how an individual did his work was sometimes regarded as an important test of the existence of a relationship of master and servant, and came to be treated at times as the test for the imposition of vicarious liability. But it is not realistic in modern life to look for a right to direct how an employee should perform his duties as a necessary element in the relationship between employer and employee; nor indeed was it in times gone by, if one thinks for example of the degree of control which the owner of a ship could have exercised over the master while the ship was at sea. Accordingly, as Lord Phillips stated, the significance of control is that the defendant can direct what the tortfeasor does, not how he does it. So understood, it is a factor which is unlikely to be of independent significance in most cases. On the other hand, the absence of even that vestigial degree of control would be liable to negative the imposition of vicarious liability.

22.              The remaining factors listed by Lord Phillips were that (1) the tort will have been committed as a result of activity being taken by the tortfeasor on behalf of the defendant, (2) the tortfeasor's activity is likely to be part of the business activity of the defendant, and (3) the defendant, by employing the tortfeasor to carry on the activity, will have created the risk of the tort committed by the tortfeasor.

23.              These three factors are inter-related. The first has been reflected historically in explanations of the vicarious liability of employers based on deemed authorisation or delegation, as for example in Turberville v Stampe (1698) 1 Ld Raym 264, 265 per Holt CJ and Bartonshill Coal Co v McGuire (1858) 3 Macq 300, [1858] UKHL 3_Macqueen_300, 306 per Lord Chelmsford LC. The second, that the tortfeasor's activity is likely to be an integral part of the business activity of the defendant, has long been regarded as a justification for the imposition of vicarious liability on employers, on the basis that, since the employee's activities are undertaken as part of the activities of the employer and for its benefit, it is appropriate that the employer should bear the cost of harm wrongfully done by the employee within the field of activities assigned to him: see, for example, Duncan v Findlater (1839) 6 Cl & Fin 894, 909-910; (1839) MacL & Rob 911, 940, [1839] UKHL MacRob_911, per Lord Brougham and Broom v Morgan [1953] 1 QB 597, 607-608 per Denning LJ. The third factor, that the defendant, by employing the tortfeasor to carry on the activities, will have created the risk of the tort committed by the tortfeasor, is very closely related to the second: since the risk of an individual behaving negligently, or indeed committing an intentional wrong, is a fact of life, anyone who employs others to carry out activities is likely to create the risk of their behaving tortiously within the field of activities assigned to them. The essential idea is 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. This idea has been emphasised in recent times in United States and Canadian authorities, sometimes in the context of an economic analysis, but has much older roots, as I have explained. It was reaffirmed in the cases of Lister and Dubai Aluminium. In the latter case, Lord Nicholls of Birkenhead said at para 21:

"The underlying legal policy is based on the recognition that carrying on a business enterprise necessarily involves risks to others. It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on. When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged."

24.              Lord Phillips's analysis in the Christian Brothers case wove together these related ideas so as to develop a modern theory of vicarious liability. The result of this approach is that 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.

25.              Lord Phillips illustrated the approach which I have described by considering two earlier cases in the Court of Appeal. He discussed first its decision in Viasystems (Tyneside) Ltd v Thermal Transfer (Northern) Ltd [2005] EWCA Civ 1151; [2006] QB 510. That case concerned a situation of a kind which commonly arises in modern workplaces. Employees of the third defendants were supplied to the second defendants on a labour-only basis, under a contract between the two companies, and worked under the supervision of a self-employed person also working under a contract with the second defendant. The question was whether the second defendant, as well as the third, was vicariously liable for the negligence of the employees in the course of their employment. The Court of Appeal agreed that it was, but for different reasons: May LJ considered that the imposition of vicarious liability depended on who had the right to control the employees' activities, whereas Rix LJ formulated a test which was based not on control, but on the integration of the employees into the employer's business enterprise. He stated that vicarious liability was imposed because the employer was treated as picking up the burden of an organisational or business relationship which he had undertaken for his own benefit. Accordingly, what one was looking for was "a situation where the employee in question, at any rate for relevant purposes, is so much a part of the work, business or organisation of both employers that it is just to make both employers answer for his negligence": p 537. Lord Phillips endorsed the approach of Rix LJ.

26.              Lord Phillips next considered the decision of the Court of Appeal in E v English Province of Our Lady of Charity [2012] EWCA Civ 938; [2013] QB 722. In that case, a diocesan trust, treated as being equivalent to the diocesan bishop, was held to be vicariously liable for sexual abuse committed by a Roman Catholic priest when visiting a children's home in the diocese, on the basis that the relationship between the priest and the Roman Catholic Church was akin to employment. Lord Phillips summarised Ward LJ's approach as asking "whether the workman was working on behalf of an enterprise or on his own behalf and, if the former, how central the workman's activities were to the enterprise and whether these activities were integrated into the organisational structure of the enterprise". Ward LJ found it possible to describe the relationship between the bishop and the priest as being akin to employment, as Lord Phillips put it, "by treating the ministry of the Roman Catholic Church as a business carried on by the bishop, by finding that the priest carried on that business under a degree of control by the bishop and by finding that the priest was part and parcel of the organisation of the business and integrated into it": [2013] 2 AC 1, paras 49, 54.

27.              Lord Phillips then considered the facts of the Christian Brothers case itself. In the context of vicarious liability, the relationship between the institute and the brothers had all the essential elements of the relationship between an employer and employees. The institute was subdivided into a hierarchical structure and conducted its activities as if it were a corporate body. The teaching activity of the brothers was undertaken because the local administration of the institute directed the brothers to undertake it. It was undertaken by the brothers in furtherance of the objective, or mission, of the institute. The manner in which the brothers were obliged to conduct themselves as teachers was dictated by the institute's rules. The relationship between the brothers and the institute differed from that between employer and employee in that the brothers were bound to the institute not by contract but by their vows, and in that, far from the institute paying the brothers, the brothers were obliged to transfer all their earnings to the institute. Neither of these differences was material. Indeed, they rendered the relationship between the brothers and the institute closer than that of an employer and its employees. The relationship was therefore sufficiently akin to that of employer and employee to be capable of giving rise to vicarious liability.

28.              The three cases which I have discussed illustrate the general approach set out by Lord Phillips at paras 35 and 47 of the Christian Brothers case. It may be said that the criteria are insufficiently precise to make their application to borderline cases plain and straightforward: a criticism which might, of course, also be made of other general principles of the law of tort. As Lord Nicholls observed in Dubai Aluminium at para 26, a lack of precision is inevitable, given the infinite range of circumstances where the issue arises. The court has to make a judgment, assisted by previous judicial decisions in the same or analogous contexts. Such decisions may enable the criteria to be refined in particular contexts, as Lord Phillips suggested in the Christian Brothers case at para 83.

29.              It is important, however, to understand that the general approach which Lord Phillips described is not confined to some special category of cases, such as the sexual abuse of children. It is intended to provide a basis for identifying the circumstances in which vicarious liability may in principle be imposed outside relationships of employment. By focusing upon the business activities carried on by the defendant and their attendant risks, it directs attention to the issues which are likely to be relevant in the context of modern workplaces, where workers may in reality be part of the workforce of an organisation without having a contract of employment with it, and also reflects prevailing ideas about the responsibility of businesses for the risks which are created by their activities. It results in an extension of the scope of vicarious liability beyond the responsibility of an employer for the acts and omissions of its employees in the course of their employment, but not to the extent of imposing such liability where a tortfeasor's activities are entirely attributable to the conduct of a recognisably independent business of his own or of a third party. An important consequence of that extension is to enable the law to maintain previous levels of protection for the victims of torts, notwithstanding changes in the legal relationships between enterprises and members of their workforces which may be motivated by factors which have nothing to do with the nature of the enterprises' activities or the attendant risks.

30.              It is also important not to be misled by a narrow focus on semantics: for example, by words such as "business", "benefit", and "enterprise". The defendant need not be carrying on activities of a commercial nature: that is apparent not only from the cases of E and the Christian Brothers, but also from the long-established application of vicarious liability to public authorities and hospitals. It need not therefore be a business or enterprise in any ordinary sense. Nor need the benefit which it derives from the tortfeasor's activities take the form of a profit. It is sufficient that there is a defendant which is carrying on activities in the furtherance of its own interests. The individual for whose conduct it may be vicariously liable must carry on activities assigned to him by the defendant as an integral part of its operation and for its benefit. The defendant must, by assigning those activities to him, have created a risk of his committing the tort. As the cases of Viasystems, E and the Christian Brothers show, a wide range of circumstances can satisfy those requirements.

31.              The other lesson to be drawn from the cases of Viasystems, E and the Christian Brothers is that defendants cannot avoid vicarious liability on the basis of technical arguments about the employment status of the individual who committed the tort. As Professor John Bell noted in his article, "The Basis of Vicarious Liability" [2013] CLJ 17, what weighed with the courts in E and the Christian Brothers case was that the abusers were placed by the organisations in question, as part of their mission, in a position in which they committed a tort whose commission was a risk inherent in the activities assigned to them.