The Modern Theory of Vicarious Liability

In recent years, the law relating to vicarious liability has been extended dramatically in England and Wales. There have been a number of landmark Supreme Court decisions which have broadened the scope of the doctrine beyond the traditional employment relationship.

Grubb v Shannon (2018) SC GLA 13 was the first reported Scottish case to consider these judgements. In reaching his decision, Sheriff Reid helpfully summarised the development of the law in this area south of the border and acknowledged the significant changes which have been made in recent years. Ultimately, Sheriff Reid followed the Supreme Court decisions, providing the first Scottish authority for widening the circumstances where one person may be held liable for another person's wrongful act or omission. This article explores the development of the law and considers what can be expected in the future.

Traditional Vicarious Liability - before its modernisation

Vicarious Liability is when one person is held liable for the action or omission of another individual. The classic example of this is an employment relationship. Traditionally, courts applied a two stage test, the purpose of which was to determine whether there was a true employer/employee relationship between the defender and the wrongdoer. If there was not, and the wrongdoer was held to be an independent contractor, the relationship was insufficient to trigger vicarious liability. If the wrongdoer was held to be an employee, the second stage of the test determined whether the wrongdoer's act or omission fell within the scope of his employment, or if it was a "frolic" of his own, in which case the doctrine would not apply.

However, the modern work environment contemplates a broader range of workers than those who are employed in the traditional sense. This has resulted in the law becoming outdated and failing to sufficiently protect injured third parties from the wrongdoings of people who were not subject to an employment contract. Whilst an essential element of the relationship test related to whether there was control exerted over the individual, many professionals were not subject to such control. In circumstances where the wrongdoer was an independent contractor, subject to certain exceptions, the employer was often held not to control them which meant that the doctrine did not apply.

Our modern workplaces are substantially different from a standard employment relationship where an employee works full time for one employer under a contract of employment. A flexible work force now exists which includes self employed workers, part time workers, temps, agency workers and home workers. Given that these workers may not satisfy the first stage of the test, the concern was that there were a variety of situations where injured third parties had no recourse against the employer. Accordingly, it was evident that the law required updating to ensure the social policy objectives of vicariously liability remained, including protection of injured third parties, loss distribution and risk allocation.

Development of the Law

Four Supreme Court cases, as set out below, have developed this area of the law, resulting in a modernised two stage test for vicarious liability which applies is triggered if (1) the relationship between the defender and the alleged wrongdoer has certain characteristics similar to those found in employment which make it just, fair and reasonable for liability to apply; and (2) the act or omission of the wrongdoer is so closely connected with the field of activities assigned or entrusted by the defender to the wrongdoer.

In the Christian Brothers case, Various Claimants v The Catholic Church Welfare Society (2012) UKSC 56, Lord Phillips extended the scope of vicarious liability to situations where there was no employment contract between the person who committed the negligent act and the defender, where the relationship was "akin to that between an employer and an employee". This case concerned whether the Institute of Brothers of the Christian Schools, a school where members - known as brothers - educated children on Christianity, was liable for the sexual abuse of children. Another organisation managed the school and employed the brothers, so the issue was whether the Institute was vicariously liable for their actions. Policy considerations clearly came into play in this case, with the rise in publicity of historic child physical and sexual abuse allegations and the desire for justice for victims making claims against various religious and care organisations.

Lord Phillips identified five characteristics of a relationship, as follows:- (1) that the defender will be more likely to have the means to compensate the victim than the wrongdoer and be expected to have insured against that liability; (2) that the wrong will have been committed as a result of activity being taken by the wrongdoer on behalf of the defender; (3) that the wrongdoer's activity is likely to be part of the business activity of the defender; (4) that the defender, by engaging the wrongdoer to carry on the activity, will have created the risk of the wrong committed by the wrongdoer; and (5) that the wrongdoer will, to a greater or lesser degree, have been under the control of the defender.

Subsequent to this, Lord Reed in the Supreme Court decision in Cox v Ministry of Justice (2016) UKSC 10, acknowledged the law on vicarious liability had not yet come to a stop. In this case, the claimant was a catering manager who was injured in the course of her employment by the negligent act of a prisoner working in the prison kitchen. Whilst the prisoner received training and was paid, albeit below minimum wage, this was not a typical employment relationship. Prison work was compulsory and the prison was not carrying on activities of a commercial nature. Therefore, the issue was whether the relationship between the defender and the prisoner was sufficient to trigger vicarious liability. Lord Reed held that it was.

Lord Reed summarised the modern theory of vicarious liability as follows:-

“…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 defender and for the defender's benefit (rather than as 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 defender by assigning those activities to the wrongdoer."

Therefore, Lord Reed considered the defenders could not avoid liability on the basis of employment status, and he focussed on the business activities being carried out by the defender. He emphasised this approach was reflective of modern workplaces where in reality workers may be part of the workforce of an organisation without having a contract of employment. Essentially, this ensures that a business will ultimately be responsible for the risks created by its activities.

The Supreme Court also referred to the five characteristics set out in the Christian Brothers case by Lord Phillips, stating that they should not be applied rigidly and the weight to be attached to each of them would vary on a case by case basis. It was emphasised that the overarching purpose of them was to ensure an inherently fair, just and reasonable result. Accordingly, the second, third and fourth principles were held to be the backbone of the modern theory of vicarious liability.

In Armes v Nottinghamshire County Council UK SC 60, Lord Reed ruled that a local authority was vicariously liable for abuse by foster carers of the children they were caring for. This was despite an acknowledgement that the local authority could not control foster carers whilst they were in their own homes. This further extended the doctrine of vicarious liability to the actions of non employees. This was in line with his judgement in Cox. Lord Reed considered that in circumstances where the organisation was benefitting from the service being provided, that organisation should be liable to "bear the cost of harm which is wrongfully caused." Given that these negligent acts took place whilst foster carers were in their own homes, the control element was deemed to be less important.

Finally, in Mohamud v William Morrison Supermarkets plc (2016) AC 677, the court was concerned with the second stage of the test: whether the wrongdoer's act was so closely connected to the field of activities assigned or entrusted to him by his employer to trigger vicarious liability. The difficulty with the traditional test for vicarious liability related to a situation where an employee carried out an intentional wrongdoing such as a criminal act or an expressly prohibited act of misconduct. In the Morrison case, an employee at a petrol station attacked a customer. The motive for the attack was held to be irrelevant. Morrisons were held vicariously liable for their employee's intentional criminal act on the basis that, whilst an abuse of his position, it was closely connected with the field of activities which had been assigned to him.

Developing the Law in Scotland

The facts in the Grubb v Shannon case were unremarkable. Laura Grubb received a treatment from Rosanne Higgins which resulted in her suffering an allergic reaction causing swelling and eyebrow hair loss for eight weeks. Damages were assessed at £2,250, taking account of solatium and inconvenience. Despite the nominal sums involved, the court's decision is significant.

The defender, Ms Shannon, rented a beauty salon in Shettleston, Glasgow, and traded as "Blush Hair and Beauty". Unbeknownst to Ms Grubb, Ms Higgins was self-employed and she operated an independent business within Ms Shannon's salon. Ms Higgins kept income from the treatments she performed on her clients and paid a daily rate of £20 to Ms Shannon.

Nevertheless, Sheriff Reid held the relationship between Ms Shannon and Ms Higgins was "akin to that of employment such as to make it just, fair and reasonable…to impose vicarious liability" upon the defender. As with the previous cases, the focus was on the relationship between the defender and the wrongdoer. Sheriff Reid took account of the fact that Ms Higgins was not operating a recognisably independent business, and she operated within a salon rented by the defender who assigned Ms Higgins activities which were an integral part of her business, which she benefitted from.

The future

Since this decision, the Court of Appeal in Nassir Kafagi v JBW Group Limited (2018) EWCA Civ 1157 has ruled that a defender was not vicariously liable for the actions of an independent contractor who was a bailiff. This case can be distinguished from the previous cases as the bailiff was running his own discrete and readily identifiable business. For defenders, this will provide a welcome limit to the scope of vicarious liability.

Nevertheless, there will no doubt be further decisions to broaden the scope of vicarious liability in the future. Given the current climate of historic child abuse inquiries, there is clearly public support in allowing victims of abuse to seek justice and compensation. Legislation has been put in place to facilitate this, in particular The Limitation (Child Abuse) (Scotland) Act 2017 which allows victims to pursue claims which have time-barred. This will undoubtedly prompt an increase in Scotland of cases similar to those heard in England. Accordingly, I suspect the law in this area is far from settled and further decisions are awaited with interest.

Article by Nicola Edgar

Accredited Specialist in Personal Injury Law Associate

For Morton Fraser LLP

t: 0141 274 1104

www.morton-fraser.com