Published on June 23, 2020
1. AMALIA SULAIMAN UKM LAW SCHOOL 2020 TORT II- VICARIOUS LIABILITY (TANGGUNGAN BERALIH) 1. DEFINITION: Vicarious liability is where one person is held liable for the torts of another, even though that person did not commit the act itself. It is therefore a form of strict liability (in that the defendant is not at fault). The most common form of vicarious liability is when employers are held liable for the torts of their employees that are committed during the course of employment. The issue of vicarious liability can be seen to be unjust in that someone who is not at fault can be held liable. The liability that may be incurred by A to C is due to damage caused to C for negligence or other tort B. It is necessary that A have a relationship with B. 2. LEGAL MAXIM: qui facit per alium facit per se:-- • he who does a thing by an action of another effectively does it himself / he who acts through another is deemed to act in person. (Respondeat Supervisor) • a principal is liable for the acts of his agents 3. WHO IS AN EMPLOYEE? CASE: HEWITT V BONVIN,  1 KB 188, 161 LT 360 Facts: A son obtained from his mother, who had authority to grant it, permission to drive his father’s motor car. The son wanted the car for his own purposes in order to drive two girl friends home to Wisbech. Neither the father nor the mother knew the girls and it was no concern of either of them that the girls should be driven to Wisbech. On the way back, through the negligent driving of the son, Employer (Defendant) Client (Plaintiff) Employee (Culprit)
2. AMALIA SULAIMAN UKM LAW SCHOOL 2020 the car was upset and a friend who had accompanied the party to Wisbech was killed. In an action by the administrator of the deceased man against the father, the owner of the car. Held: the son was not driving the car as his father’s servant or agent or for his father’s purposes, and therefore the father was not liable for his son’s tortious act. Mac Kinnon LJ: “Any person employed by another to do work for him on the terms that he, the servants, is to be subjected to the control and direction of his employer in respect of the manner in which his work is to be done”. ➔ This definition refers to 'exclusive employee', a person who is employed to work only with that employer. ➔ 'Exclusive employee' is a person who works with an employer under a contract of service. ➔ Contract of service VS Contract for service CONTRACT OF SERVICE CONTRACT FOR SERVICE The employer can control: • The outcome of a job • The manner in which the job is performed in detail. The employer can control: • Only the outcome of the job • There is no control over how the job is being conducted. 4. THE RATIONALE OF VICARIOUS LIABILITY The Benefit and Burden Principle The “Deep Pocket” Principle Observation could be made by employers CASE: IMPERIAL CHEMICAL INDUSTRIES LTD V SHATWELL,  2 ALL ER 999  2 ALL ER 999 Facts: The claimants were brothers who were qualified shotfirers employed by the defendant. They were injured as a result of an explosion at the defendant's quarry caused by the brothers' negligence. They had insufficient wire to test a circuit to allow them to test from a shelter. Another worker had gone to fetch more wire but the brothers decided to go ahead and test with the shorter wire. Each brother claimed against the defendant based on their employer's vicarious liability for the negligence and breach of statutory duty of the other brother. The defendant raised the defence of volenti non fit injuria in that the brothers had full knowledge of the risk and were acting against express instructions. At trial, the judge held that the defence of volenti could not apply where there was breach of a statutory duty. This was upheld in the Court of Appeal.
3. AMALIA SULAIMAN UKM LAW SCHOOL 2020 Held: The appeal was allowed. The brothers had deliberately acted in defiance of the employer's express instructions in full knowledge of the risks. The workers were under the statutory duty not the employer. The employer had been instrumental in bringing in the statutory regulations and ensured all workers were aware of them. They had also previously dismissed a worker for flouting the regulations. Lord Pearce: “My Lords, the employers, Imperial Chemical Industries Ltd had striven without compromise to prevent shotfirers testing in the open. They had done everything that they could to enforce the safety rules. They had been influential in tightening up the regulations imposed on the shotfirers personally, they had publicly punished and degraded a shotfirer who tested in the open, and they had in consequence faced trouble with the union. They had arranged a system of work and pay designed to discourage the cutting of time and the taking of risks. The two shotfirers George and James knew all this. In spite of it they deliberately broke the statutory regulations which were laid on them personally and together tested in the open. As a result they blew themselves up. They were trained, trusted, certificated men, and it would have been absurd to have someone to watch over them”. “Although in this action George alone is the plaintiff, each should be entitled, on the plaintiff's argument, to get damages from the employers on the ground that the other's negligence and breach of statutory duty renders the employers vicariously liable. Whatever precautions the employers had used to prevent the two men testing in the open, they would, if the men had managed to evade those precautions and blown themselves up, still be liable vicariously to the men for their negligence in doing so. That result offends against commonsense”. “A comparable absurdity would exist if a workman, who deliberately breaks a regulation or duty which he is properly delegated to perform, could, when injured solely through his own breach, claim damages on the ground that the employers are liable because they are vicariously in breach of duty or regulation in so far as the workman himself broke it. The law has, however, dealt with and declined”. 5. THE ELEMENTS OF VICARIOUS LIABILITY Relationship between employer and employee Negligent must be made while conducting the work
4. AMALIA SULAIMAN UKM LAW SCHOOL 2020 ELEMENT 1- Relationship between employer and employee Various tests have been conducted to determine the existence of employer-employee relationships ❖ CONTROL TEST (UJIAN KAWALAN) CASE: YEWEN V NOAKES  6 QBD 530 Facts: There was a statutory exemption for premises which were occupied by a “servant” or person occupying the premises “for the protection thereof.” A man and his family occupied a number of rooms within an office building on the alleged basis that he was the caretaker of the building owner. The man was a clerk who was paid a salary of 150 pounds per annum. Issue: The question arose as to whether the man constituted an employee of the building owner for the purposes of exempting the premises from statutory tax duties. Held: The Court of Appeal: Bramwell LJ: held that an employee, or a servant to adopt the Court’s nomenclature, is defined as a “person who is subject to the command of his master as to the manner in which he shall do his work.” On the facts of the case, the Court held that the man was not a “servant” or an employee of the building owner as the owner had no right to control the man’s work and manner in which it was done. The man earned a salary of 150 pounds per annum in his separate role as a clerk and merely enjoyed residence of the building with his family members. Thus, he did not constitute an employee of the building owner for tax purposes. CASE: SHORT V J & W HENDERSON LTD  62 TLR 427 Lord Thankerson : Four factors have to be considered in order to determine a contract of service 1. the power of selection by the employer; 2. the power in determining the salary or other remuneration; 3. the power of the employer to control the method in which the work was done; and 4. the power of the employer to terminate the employee. CASE: SIME (pursuer) v. SUTCLIFFE CATERING SCOTLAND LTD (defenders),  IRLR 228 Plaintiff – was working in the cafeteria when another worker dropped some leftover food on the floor which resulted in the plaintiff’s injury.
5. AMALIA SULAIMAN UKM LAW SCHOOL 2020 Defendant- a catering company that manages the canteen under a contract between the defendant and the plaintiff's employer, the manufacturer. Facts: Although the canteen management was given to the defendants, all canteen workers were retained, even those manufacturers who paid the canteen workers' salaries Issue: Is the worker who spilled the leftover food a worker of defendant or a worker of the manufacturer? Held: Because the manufacturer has control over the canteen worker in terms of how the work should be done, the manufacturer should be held liable for any wrongdoing by the worker. ❖ ii) Business Integration Test The work that the employee does should be an important part of the employer's business Example: o hospital physicians - is doctoral service an essential part of hospital-based services? o teachers at school - is teacher service an important part of school? o university building cleaning services - is it an integral part of the university? If the service provided by the employee is an integral part of an organization, then that employee is an employee to the employer thus, the employer-employee relationship exists *Refer to the directory below: Manufacturer Defendant sue Plaintiff Catering Company
6. AMALIA SULAIMAN UKM LAW SCHOOL 2020 CASE: STEVENSON, JORDAN HARRISON LTD V MACDONALD & EVANS  1 TLR 101 Definition of an employee under a ‘contract of service’ for the purposes of determining the copyright of a work. Facts: An engineer wrote a book that used knowledge that he acquired whilst he was working for a firm in different capacities. Section 5(1) of the Copyright Act 1911 provides that that if the author of a work was under “a contract of service,” then the first owner of the copyright shall be the person by whom the author was employed. Issue: The question arose as to whether the person was considered to be an employee under a “contract of service” for the purposes of allotting copyright to the employer under Section 5(1) of the Copyright Act 1911. Held: The Court distinguished between a “contract of service” and “contract for services” provided to the firm. The Court applied the traditional ‘control test’ concerning whether the employer has the right to control the way in which a person does the work. The Court further stipulated that a person is considered an employee under a “contract of service” when the work is integrated in that of the business and considered an integral part of the business, whereas an independent contractor for services is merely an accessory to the business and, thus, not an employee. On the facts of the case, the Court concluded that the engineer’s contract was mixed between the two at different times. It was held that the engineer was the author of the work, but that specific material that he acquired whilst he was an employee fell within the Copyright Act 1911 and should be excluded from the publication. Is the job scope of the employee an integral part of the employer's business? YES that employee is an employee to the employer the employer- employee relationship exists NO that employee is NOT an employee to the employer the employer- employee relationship DOES NOT exists
7. AMALIA SULAIMAN UKM LAW SCHOOL 2020 Lord Denning : in a contract of service, the person concerned works as part of the organisation and his work forms an integral part of that organisation, whereas in a contract for services even though the work is done for the organisation, it is not integrated into it but is only accessory to it. CASE: MAT JUSOH BIN DAUD V SYARIKAT JAYA SEBERANG TAKIR SDN BHD  2 MLJ 71 Facts: In this case the plaintiff was employed as a sawyer in the plaintiffs sawmill. He was injured in the course of his employment and as a result lost three fingers of his right hand. Because of the injuries he was refused further employment at the defendant's sawmill. He was out of work for one year until he found employment as a labourer. He sued the defendants and claimed general and special damages. The defendant denied liability contending that the plaintiff was not their employee but the employee of the defendant's contractor Lim. In the alternative the defendants pleaded that even if the plaintiff was held to be their employee, the defendants were not liable because the accident was wholly caused by the plaintiff's own negligence. The defendants also pleaded contributory negligence by the plaintiff. Held: Salleh Abbas FC : Applying the test of organization…it is clear that what was done by Lim and the workmen procured by Lim was done as an integral part of the defendants’ business. Lim procured the workmen for the defendants’ business, and the workmen cut or split the logs also for the business of the defendants. Under no circumstances could they be held to be working for Lim. After all, the essence of a contract of service is the supply of labour and skill by a servant to the master. It is to the defendants and not to Lim that these workman supplied their service and skill. Even on the question of control, the ultimate authority to decide wheather a log was to be sawn or not and how may logs were to be sawn obviously resided with the defendants who conveyed their decisions through their supervisors. In the circumstances I therefore have no hesitation to hold that the plaintiff was an employee of the defendants. CASE: LEE TING SANG APPELLANT AND CHUNG CHI-KEUNG AND ANOTHER RESPONDENTS [APPEAL FROM THE COURT OF APPEAL OF HONG KONG]  2 A.C. 374 The applicant, a mason, was working for a subcontractor, at a construction site, chiselling concrete as instructed by the subcontractor. The applicant used tools supplied by the subcontractor and his work was not supervised but was inspected periodically by the main contractor's foreman. Depending upon the nature of the work he had to do the applicant was paid either a piece-work rate or a daily rate for working from 8 a.m. to 5 p.m. If he finished his work early, he assisted the subcontractor to sharpen tools. He sometimes worked for other contractors but he gave priority to urgent work of the subcontractor telling those for whom he was then working to replace him. During the course of his
8. AMALIA SULAIMAN UKM LAW SCHOOL 2020 work at the site he was injured. On his application against both the subcontractor and the main contractor for compensation under the Employees' Compensation Ordinance the judge dismissed the claim holding that the applicant was not an employee within section 2(1)1 of the Ordinance but an independent contractor. The Court of Appeal upheld that decision. On the applicant's appeal to the Judicial Committee: - Held, allowing the appeal, that English common law standards had to be applied in determining whether the applicant was working as an employee of the subcontractor or an independent contractor, the fundamental test being whether or not he was performing services as a person in business on his own account and thus as an independent contractor; that since the factual circumstances in which he performed his work had to be investigated and evaluated in determining the applicant's status it was a question of fact for the trial judge, and an appellate court would not interfere with his finding unless it was unsupported by the evidence or was one which he could not reasonably have reached if he had properly directed himself on the law; but that, although the courts below had concurrently found as a fact that the applicant was an independent contractor, they had been misled in assessing the facts by wrongly relying on two dicta from inapposite cases; that the finding was contrary to the established facts and so unreasonable as to constitute an error of law, so that the Board were justified in reversing their decisions; and that, therefore, the applicant was working as an employee under a contract of service with the subcontractor and was entitled under the Employees' Compensation Ordinance to be compensated by the subcontractor and main contractor for his injury. CASE: MARKET INVESTIGATIONS LTD. v. MINISTER OF SOCIAL SECURITY  2 Q.B. 173 Facts: A woman was engaged by a market research company to act as an interviewer on a part-time basis. For each particular survey, she would conduct interviews in exchange for payment. She was required to work for a certain number of days at a time during each occasion, follow a comprehensive ‘Interviewer’s Guide’ and comply with other contractual terms. Issue: The question arose as to whether extent and degree of control exercised by the company over the woman qualified her as an “employed person” under a contract of service for the purposes of the National Insurance Act 1965.
9. AMALIA SULAIMAN UKM LAW SCHOOL 2020 Held: Firstly, the Court stipulated that employment is determined by the degree and extent of control that a company exercises over the person’s performance of the task to show ‘a master and servant’ relationship. Secondly, the Court held that in order to distinguish between a contract ‘of service’ and ‘for services,’ the test to be applied is: whether the person is engaging the services “as a person in business on his own account.” Considering the surrounding circumstances and contractual provisions, if the answer to the question is “no,” the person is an employee under a contract ‘of service.’ On the facts of the case, the Court placed weight on the way in which the company exercised control over, for example, the technique of interviewing, subjects of the interviews, content of the interviews, questionnaires, forms and other details concerning the performance of the task, and the way in which the woman was not conducting the business on her own account but on behalf of the company. Accordingly, the Court held that the woman was an employee of the company under a ‘contract of service.’ ❖ MULTIPLE TEST CASE: Ready Mixed Concrete Ltd v Minister of Pensions  2 QB 497 Definition of an employee under a ‘contract of service’. Facts: A driver contracted with a mixed concrete company for the delivery of concrete. The contract declared him an “independent contractor” and set out wages and expenses. The driver was to purchase his own vehicle, yet with a requirement that the vehicle be painted in company colours. He was to drive the vehicle himself but under compliance with certain company’s rules including, for example, the manner of vehicle repairs and payments. Issue: The question arose as to whether the driver was an “employed person” under a contract of service with the company for the purposes of the National Insurance Act 1965. Held: Firstly, the Court held that whether a contract creates a ‘master and servant’ relationship between an employer and employee is determined on the basis of contractual rights and duties, and that the nomenclature used in the contract is irrelevant. Thus, the fact that the contract termed the driver to be an “independent contractor” is not material. Secondly, the Court held that employment under a contract of service exists when: (1) a person agrees to a perform a service for a company in exchange for remuneration;
10. AMALIA SULAIMAN UKM LAW SCHOOL 2020 (2) a person agrees, expressly or impliedly, to subject himself to the control of the company to a sufficient degree to render the company his “master,” including control over the task’s performance, means, time; (3) the contractual provisions are consistent with ordinary contracts of service. On the facts, the Court held that the driver had sufficient freedom in the performance of his contractual obligations as he was free to decide the vehicle, his own labour, fuel, and other requirements in the performance of the task. In lieu of these freedoms, he was an independent contractor and not an employee of the company. ELEMENT 2- Negligent must be made while conducting the work Two conditions are mentioned in the scope of the work ❖ The employee’s work is authorized by the employer; and ❖ Doing an authorized act in an unauthorised manner CASE: BEARD V LONDON OMNIBUS CO  2 QB 530 Employer’s vicarious liability for an employee’s negligent act outside his scope of employment. Facts: The conductor of an omnibus drove the omnibus through side streets, outside of the bus route, at a fast pace in the absence of the bus driver. In doing so, he negligently hit and injured a man. The man sued for damages from the owners of the omnibus. Issue: The issue arose as to upon whom the burden of proof lay to show whether the conductor was acting within the scope of his employment and whether, accordingly, the employer will be held liable for the injury caused to the man due to his negligent acts. Held: The Claimant failed to discharge the burden of proof to show that the employer of the conductor was liable for the conductor’s negligent acts. The Court held that “the onus of proof lay on the plaintiff to show that such an act was within the authority of the conductor”. The Claimant did provide sufficient evidence to show that the conductor was acting within his scope of the employment. To the contrary, evidence concerning, for example, the way in which the conductor was on side streets and not on the usual bus route, shows that he was acting outside of his scope of employment. Therefore, the employer cannot be held responsible for the negligence of the conductor.
11. AMALIA SULAIMAN UKM LAW SCHOOL 2020 CASE: CENTURY INSURANCE V NI ROAD TRANSPORT BOARD  AC 509 Employer’s vicarious liability for damages caused by the acts of an employee. Facts: A transport undertaking had a contract with a petroleum company for the carriage and delivery of their petrol in lorries, agreeing to insure the lorries against any spillage or fire of the petroleum. The lorries were insured by an insurance company against liability to third parties. While one of the lorries was delivering petrol at a gas station, the undertaking’s driving lit a cigarette, causing an explosion and consequent damages. Issue: (1) Firstly, the question arose as to whether the employer or the insurance company was liable. (2) Secondly, the question arose as to whether the employee’s smoking of the cigarette was in the course and scope of his employment for the purposes of rendering the employer’s vicariously liable. Held: Firstly, the Court held that the employer is the party who has the right to control the conduct of the act at the given time. The transport company was in control of their own truck drivers to deliver the petrol and it, not the insurance company, must be held to be the employer. Secondly, the Court held that the truck driver’s act, albeit careless, took place during the course of his employment as he was in the midst of delivering the petrol to a tank. Recent authority has overturned the requirement that the act be done for the benefit for the employer. The employee was negligent in the discharging of his duties by smoking as he did, yet was nevertheless in the course of discharging his duties to his employer and, thus, the employer was liable. Accordingly, the transport undertaking was held vicariously liable for the damage caused by their employee’s negligence. CASE: ROSE V PLENTY AND ANOTHER,  1 ALL ER 97 Facts: A milkman was employed by his employers, a dairy company, to go round on a milk float delivering milk to the employers' customers, collecting empty bottles and obtaining payment for the milk. The employers exhibited notices at the milk depot which expressly prohibited the milkman from employing children in the performance of his duties and from giving lifts on the milk float. Contrary to those prohibitions, the milkman invited the plaintiff, a boy aged thirteen, to assist him with the milk round in return for payment. The plaintiff rode on the milk float and helped to deliver milk and return empty bottles to the float. Whilst riding on the milk float, the plaintiff was injured when the milkman drove the float negligently. The plaintiff brought an action for damages for negligence against the milkman and the employers. He obtained judgment against the milkman, but his claim against the employers was dismissed on the ground that the milkman had been acting outside the scope of his
12. AMALIA SULAIMAN UKM LAW SCHOOL 2020 employment in employing the plaintiff and carrying him on the float contrary to the employers' instructions. The plaintiff appealed against the dismissal of his claim against the employers. Held (Lawton LJ dissenting)—The employers' instructions only affected the milkman's mode of conduct within the scope of his employment and did not limit or define the scope of the employment. It followed that, although the milkman's acts of employing the plaintiff and carrying him on the float were prohibited, they had been performed by the milkman within the scope of his employment having been performed for the purpose of the employers' business. Accordingly the employers were vicariously liable for the milkman's negligence and the appeal would therefore be allowed. Express Prohibition CASE: TWINE V. BEAN’S EXPRESS LTD (1946) 62 TLR 458;  1 ALL ER 202 Under an agreement between B Ltd and the Post Office Savings Bank, B, Ltd, provided a commercial van and driver for use by the Bank, the driver remaining the servant of B, Ltd. It was further agreed that B Ltd, accepted no responsibility for injury suffered by persons riding in the van who were not in their employment. They expressly instructed their driver that no one was to be allowed to travel on the van. Owing to the driver's negligent driving, an accident occurred and T was fatally injured. It was contended by T's personal representative that, since the accident happened while the driver was engaged on an authorised job, the acts of the driver were done in the course of his employment notwithstanding that T was an unauthorised passenger, and therefore B Ltd as the driver's employers, were liable to T for the driver's negligence:— Held – (i) The duty of B Ltd as the driver's employers, to take care in the driving of the van was only to persons who might reasonably be anticipated by B Ltd as likely to be injured by negligent driving of the van at the time and place in question. (ii) in the circumstances of the case, T was a trespasser in the van in relation to B, Ltd. B Ltd therefore, owed no duty to T to take care in the driving of the van, because they could not reasonably anticipate that he would be a passenger in the van at the time and place of the accident. CASE: CONWAY V GEORGE WIMPEY & CO LTD  2 KB 266 Employment – Negligence – Trespass Facts: Conway (C) was on his way to work on an aerodrome when he hailed a lorry belonging to the George Wimpey & Co Ltd (W) and driven by one of their employees (D). The lorry was crossing the aerodrome taking a number of the defendants’ servants to their work. D had been expressly told by W’s transport manager that he could only transport W’s men, and a notice to this effect had been affixed in his cab. Nevertheless, D gave C a lift for a short distance. When C dismounted the lorry, he
13. AMALIA SULAIMAN UKM LAW SCHOOL 2020 caught his right leg under a wheel of the lorry and had to have it amputated after it was badly crushed. C raised an action against W for damages. Issue: The issue in question was whether W as D’s employers could be held liable for the injury caused to C as a result of the lorry ride D provided for C against W’s instructions. Held: Both D, as the lorry driver, and C were equally responsible for the accident. C was effectively a trespasser when he mounted the lorry, and it was immaterial whether he knew he was one or not. D performed a wrongful act in allowing C, who was not an employee of W, to ride the lorry, and as this performance was not one which he was employed to perform at all, the act was outside the scope of his employment. W could therefore not be held liable for C’s injury as a result of C’s trespass. Trespass will arise where a person crosses the property of another on reliance of the permission of a person who has no authority to give that permission. AN EMPLOYEE COMMITS A CRIME CASE: KEPPEL BUS CO LTD v SA'AD BIN AHMAD  1 MLJ 191 Facts: The respondent was assaulted by a servant of the appellant company. At the relevant time when the act was committed, the respondent was a passenger in a bus belonging to the appellants and the servant was the conductor of that bus. There had been an argument between the conductor and the respondent and subsequently the conductor struck the respondent's glasses, breaking them and causing the respondent to lose his eye. There was no evidence to show an emergency situation calling for forcible action on the part of the conductor. There was no evidence of disorder among the passengers of the bus. The question in the case was whether the conductor did what he did “in the course of his employment.” Held: The trial judge specifically rejected the conductor's version of the incident, gave judgment in favour of the respondent and the Court of Appeal dismissed the appeal by the appellant company (  2 MLJ 121 ). The company appealed to the Privy Council. The conductor was not a party to the proceedings before the Court of Appeal or to the present appeal. The act was done outside of work because at the time of the attack, the cause of the attack was that the old woman was no longer on the bus.
14. AMALIA SULAIMAN UKM LAW SCHOOL 2020 If the crime is closely related to the work of the employee CASE: LISTER V HESLEY HALL LTD  1 AC 215 Employer’s vicarious liability for personal injury caused by torts committed by employees. Facts: A warden was employed at an annex of a boarding school for boys and responsible for the day- to-day running of the school, discipline of the boys, organisation of their daily activities, as well as supervision and care of the boys after school hours. Between 1979 and 1982, the warden had sexually abused a number of the boys, yet unbeknownst to his employers. The sexual abuse took numerous forms and was usually administered in the context of the warden’s control and discipline at the boarding school. Issue: The question arose as to whether the employers of the warden may be held vicariously liable for their employee’s intentional sexual abuse of school boys placed under his care. Held: The House of Lords held that vicarious liability can arise for unauthorised, intentional wrongdoings committed by an employee acting for his own benefit, in so far as there exists a connection between the wrongdoings and the work for which he was employed to render it within the scope of employment. The Court rejected the restrictive view that vicarious liability could only arise when the employee is acting for his employer’s benefit. On the facts of the case, the Court held that there was a sufficient connection between the work that the warden was employed to do and the abuse that he committed to render it within the scope of employment. The abuse was committed at the time, premises and during the course of the warden’s care of the boys. The warden’s function was to care for the boys and the fact that he performed that function in an abusive manner does not sever the connection with his employment for the purposes of vicarious liability. Accordingly, the employers were held liable. CASE: BALFRON TRUSTEES LTD V PETERSON,  IRLR 758,  LEXIS CITATION 1678,  ALL ER (D) 103 (JUL) The claimant was the current trustee of a pension fund, the C group retirement and dependant’s benefit scheme. The scheme had about 210 beneficiaries, who were former employees of C plc, a company which later changed its name to B Ltd. In September 1994 the sum of £2,135,000 was extracted from the scheme, paid to various off-shore entities and never recovered. The Serious Fraud Office commenced an investigation of the scheme in October 1997. On 22 November 2000 that investigation led to charges against the third and fourth defendants for conspiracy to defraud. In the
15. AMALIA SULAIMAN UKM LAW SCHOOL 2020 instant proceedings the trustee sought to recover damages or compensation from all the defendants, each of whom was alleged to have participated in the misappropriation of scheme assets or to be liable for the misappropriation alleged caused against other defendants. At the time of the material events the eighth defendant was employed by the ninth defendant, a firm of solicitors (RJW), as a consultant to it in charge of setting up a company commercial department. RJW was said to be vicariously liable for the alleged acts of knowing assistance committed by the eighth defendant. RJW applied to strike out the claims against it or for summary judgment in its favour. Held – The application would be dismissed. “When determining whether an employer was vicariously liable for an employee’s wrongful act it was necessary to identify the duty or responsibility of the employer to the victim. If such duty or responsibility existed, the employer could not avoid liability because it was delegated to an employee who failed to comply with his employer’s instructions. Even though the employee’s acts were so heinous that they could not reasonably be said to form part of his obligations vis a vis his employer, they were treated as within the scope of employment vis a vis the victim, since he was employed to discharge the employer’s duty to the victim.” Therefore the first issue to be determined was whether or not the employer owed a duty to the victim/claimant. Whether or not a duty of care of the employer to the victim was involved, there had to be some form of responsibility towards the victim. Once there was, the employer could not escape his obligations by delegating to an employee. On that analysis if the court asked the question whether any of the acts of assistance in the breach of trust, for which the eighth defendant was allegedly liable, occurred while he was employed by RJW and while the latter had obligations to the harmed client, the answer had to be ‘yes’. It followed that it was not possible to hold that the case against RJW was so weak that it should be struck out. CASE: DUBAI ALUMINIUM CO LTD V SALAAM  3 WLR 1913 A solicitor firm’s vicarious liability for a partner’s dishonest assistance to a client. Facts: The senior partner of a firm drafted a consultancy agreement and other requisite documentation for a client’s fraudulent enterprise. A company was induced to pay an amount of USD 50 Million over time under this fraudulent consultancy agreement. The company sued the firm claiming that it was vicariously liable for their senior partner’s dishonest assistance to a client.
16. AMALIA SULAIMAN UKM LAW SCHOOL 2020 Issue: The question arose as to whether the firm could be held vicariously liable for the dishonest assistance of the partner in breach of fiduciary duty for “wrongful act or omission during the ordinary course of business of the firm” under Section 10 of the Partnership Act 1980 Act. Held: For the firm to be vicariously liable for the partner’s actions, the wrongful conduct must have occurred in the ordinary course of the firm’s business. The House of Lords held that, as a point of law, whether the conduct of an employee occurs during the “ordinary course of employment” is to be given an “extended scope” (para. 22) as the underlying legal policy of vicarious liability recognises the risks borne by business enterprises to third parties, and that when “those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.” (para. 21). Accordingly, the Court held that the fact that the partner’s conduct was not authorised by his co-partners and the personal innocence of the co-partners thereto is not relevant to their vicarious liability The partner was acting in his capacity as an employee of the firm when he aided in drafting the consultancy agreement and other documentation. Thus, the firm was held vicariously liable for the damages borne by the partner’s dishonest assistance. *Following LISTER's case. HOL emphasized that the correct test was whether there was a 'close and direct connection' between the employee's duties and the criminal act. CASE: BOHJARAJ KASINATHAN V.NAGARAJAN VERAPPAN & ANOR  3 AMR 3260 The conduct of the bus conductor is closely related to the actions of his employer. They are considered modes - even improper modes. If the crime is within the apparent authority of the employee CASE: LLOYD V. GRACE, SMITH & CO.  AC 716 If an agent commits a fraud while acting or purporting to act in the course of the business which he is authorised, or held out as authorised, to transact on account of his principal, the principal, although innocent of the fraud, is liable for the fraud of the agent whether the fraud results in a benefit to the principal or not. Where, therefore, a solicitor's managing clerk was authorised by the solicitor to receive deeds and carry through sales and conveyances on the solicitor's behalf, and, while acting as the representative of the solicitor's firm persuaded a client of the firm to sign documents (of the contents of which she was unaware) transferring to him a mortgage under which she was mortgagee and conveying to him
17. AMALIA SULAIMAN UKM LAW SCHOOL 2020 a freehold property owned by her, and then called in the mortgage, sold the freehold property, and appropriated the proceeds, the solicitor throughout being innocent of any participation in the fraud, slid. in an action by the client against the solicitor for detinue of the title deeds of the freehold property and 450 pounds had end received in respect of the mortgage, the jury found that in receiving the deeds and taking instructions to call in the mortgage and sell the freehold property the managing clerk professed to act as conveyancing manager to the solicitor, Held: as the fraud was committed in the course of the clerk's employment and not outside the scope of his authority the solicitor was liable to the client although he was innocent of the fraud and the fraud was committed, and for his benefit, but for the benefit of the clerk. CASE: MORRIS V CW MARTIN & SONS LTD,  1 QB 716,  2 ALL ER 725,  3 WLR 276,  2 LLOYD'S REP 63 Plaintiff sent her mink stole to a furrier for cleaning. He told her that he did not do cleaning, but would arrange for the fur to be cleaned by defendants. She agreed. The furrier, contracting as principal not agent, arranged with defendants for them to clean plaintiff’s fur on the current trade conditions, of which the furrier knew. Defendants knew that the fur belonged to a customer of the furrier, but did not know to whom it belonged. The current trade conditions provided that ‘goods belonging to customers’ on defendants’ premises were held at customer’s risk, and that defendants should ‘not be responsible for loss or damage however caused’. The conditions further provided that defendants should compensate for loss or damage to the goods during processing by reason of defendants’ negligence ‘but not by reason of any other cause whatsoever’. M, an employee of defendants was given the task of cleaning the fur. He had entered defendants’ employment only recently. They had no reason to suspect his honesty. While the fur was in M’s custody he stole it. Plaintiff sued defendants for damages: Held defendants were liable to plaintiff for the fraudulent criminal act of M for the following reasons (1)(a) because, where a master had in his charge goods belonging to another person in such circumstances that he was under a duty to protect them from theft or depredation, then, if he entrusted that duty to a servant or agent, he was liable for the servant’s breach of it, notwithstanding that the breach was a criminal act; (b) because defendants, as sub-bailees for reward, were under such a duty of care; (c) because plaintiff, as owner of the goods bailed, could sue defendants, as sub- bailees for reward, for breach of duty as bailees; (d) although defendants, as sub-bailees, could rely as against plaintiff on the exceptions contained in the contract of bailment with the furrier, since plaintiff had impliedly consented to his contracting for the cleaning of the fur on usual terms, yet the exceptions did not in the present case protect defendants, since the ‘customer’ in the context of the exceptions was the furrier, not plaintiff, and the fur was not ‘goods belonging to’ the furrier; (2)
18. AMALIA SULAIMAN UKM LAW SCHOOL 2020 because defendants, by taking the fur into their possession for cleaning, knowing it to belong to a customer of the furrier, became bailees for reward towards plaintiff; as such they were liable to plaintiff for conversion, or for negligence or conversion, it being immaterial in the present case for which, and notwithstanding that M’s act was criminal defendants were vicariously liable for breach of duty, since he was the person whom they chose to discharge their duty to take care of the fur and to clean it. Per Lord Denning, MR: once goods bailed for reward are lost or damaged the burden is on the bailee to show that the loss or damage occurred without neglect or default or misconduct on the part of the bailee or of any of his servants to whom he delegated his duty. A BORROWED EMPLOYEE Which party is responsibled for the borrowed employee negligent? Is it the orginal employer that should be held liable or to whom the employee was borrowed? Answer: the company that the employee had been borrowed during the time of his employment. CASE: MERCY DOCKS AND HARBOUR BOARD V. COGGINS & GRIFFITHS (LIVERPOOL) LTD  AC 1 A worker was injured by a negligently driven crane. The crane and Board’s driver were hired out to stevedores for loading work. The stevedores controlled the crane’s operations, but did not direct how the driver controlled the crane. The hire contract made the driver the employee of the defendant stevedores. Held: The House upheld decisions that the Board, as the crane driver’s general employer, retained responsibility for his negligence. Decisions of this kind depend on the particular facts and many factors may bear on the result. Considerations include: (a) the burden of showing that responsibility does not remain with the general employer is on the general employer and is a heavy one (b) by whom is the negligent employee engaged? Who pays him? Who has power to dismiss him? (c) who has the immediate direction and control of the relevant work? Who is entitled to tell the employee the way in which he is to do the work upon which he is engaged? ‘The proper test is whether or not the hirer had authority to control the manner of execution of the act in question. Given the existence of that authority its exercise or non-exercise on the occasion of the doing the act is irrelevant’. (d) the inquiry should concentrate on the relevant negligent act, and then ask whose responsibility it was to prevent it. In the Mersey Docks
19. AMALIA SULAIMAN UKM LAW SCHOOL 2020 case, the stevedores had no responsibility for the way in which the crane driver drove his crane, and it was this which caused the accident. The ultimate question may be, not what specific orders or whether any specific orders were given, but who is entitled to give the orders as to how the work should be done. (e) a transfer of services can only be effected with the employee’s consent. (f) responsibility should lie with the master in whose act some degree of fault, though remote, may be found Viscount Simon: said that a heavy burden of proof lay on the general or permanent employer to shift responsibility for the negligence of servants engaged and paid by such employer to the hirer for the time being who had the benefit of the services rendered. This could only be achieved where the hirer enjoyed the right to ‘control the way in which the act involving negligence was done.’ Lord Porter : …among the many tests suggested I think that the most satisfactory by which to ascertain who is the employer at any particular time is to ask who is entitled to tell the employee the way in which he is to do the work upon which he is engaged. If someone other than his general employer is authorized to do this, he will, as a rule, be the person liable for the employee’s negligence. But it is not enough that task to be performed should be under his control, he must also control the method of performing it. Lord Uthwatt : …The proper test is whether or not the hirer had authority to control the manner of execution of the act in question CASE: MCDERMID V NASH DREDGING & RECLAMATION CO LTD  AC 906 Facts: The plaintiff worked as a deckhand on a tug. His work included untying ropes mooring the tug to a dredger. A system was operated whereby the plaintiff untied the ropes and gave two knocks on the side of the wheelhouse to indicate to the captain that the ropes were on board. On one occasion the captain moved the tug away from the dredger before the plaintiff had given the signal. The plaintiff was seriously injured. He brought an action in negligence against his employer, the owner of the tug. Held: an employer owed his employees a duty to exercise reasonable care to ensure that a safe system of work was operated. The duty had two factors: the devising of the system and its operation. The duty was non-delegable, which meant that if it was not performed, the employer could not raise a defence by showing that he had delegated performance to a person whom he had reasonably believed to be competent to perform it. In the present case the devising and the operating of the system had been delegated to the captain. It was an essential feature of the system that the tug should not begin to move until the plaintiff had completed its unmooring. It could be argued that the system itself was not safe, but assuming that it was, the crucial point was that the captain had not operated
20. AMALIA SULAIMAN UKM LAW SCHOOL 2020 it. His negligence had amounted to the abandonment of the safe system and the operation of an unsafe system; it could not be accepted that he had been negligent in the operation of the former. Accordingly, the employer had failed to operate a safe system of work and was personally, rather than vicariously, liable to the plaintiff.