There have been two recent decisions of the Supreme Court in England which it would be useful for any Hong Kong practitioner to consider when dealing with the fundamental questions of (1) whether the relationship is one to which vicarious liability principles apply and (2) whether, even if it is such a relationship, the employee’s wrongdoing is such that liability should attach to the employer.
The two decisions are Barclays Bank plc v Various Claimants  UKSC 13 and WM Morrison Supermarkets plc v Various Claimants  UKSC 12. They were both given in the context of class actions, and although they comprise separate judgments the members of each judicial panel were the same. In Barclays Bank the judgment was given by Lady Hale, with whom the other members agreed, and in WM Morrison the judgment was given by Lord Reed, with whom the other members agreed. Barclays Bank dealt with the first fundamental issue, and WM Morrison dealt with the second.
They are of some considerable importance in this context because whilst, as Lady Hale said at the beginning of her judgement in Barclays Bank, citing the words of Lord Phillips in Various Claimants v Catholic Child Welfare Society  UKSC 56(the Christian Brothers case): “The law of vicarious liability is on the move” these two recent decisions now appear to have put a brake on that move, at least so far as concerns English law, and to have set limits on its expansion.
It is a remarkable fact that at first instance vicarious liability was held to have been established in each case, and that determination was upheld by the Court of Appeal in each case, seemingly by the application of the subsisting case law, but this finding was reversed in each appeal by the Supreme Court.
Dr Bates was a self-employed medical practitioner. His work included conducting medical assessments and examinations of prospective Barclays Bank employees. Barclays provided Dr Bates with a pro forma report headed “Barclays Confidential Medical Report”. Dr Bates was paid a fee for each report and Barclays did not pay him a retainer. If the report was satisfactory, the applicant’s job offer would be confirmed, subject to satisfactory examination results. Dr Bates conducted the medical examinations in a consulting room at his home. It was alleged that he sexually assaulted the 126 claimants in the group action during their medical examinations. After Dr Bates died in 2009, the claimant sought damages from Barclays.
It is worth reminding ourselves as to the principles underpinning vicarious liability. In the Christian Brothers case Lord Phillips listed a number of policy reasons usually making it fair, just and reasonable to impose vicarious liability upon an employer for the torts committed by an employee in the course of his employment:
1. 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.
2. The tort will have been committed as a result of activity being taken by the employee on behalf of the employer.
3. The employee’s activity is likely to be part of the business activity of the employer.
4. The employer, by employing the employee to carry on the activity, will have created the risk of the tort committed by the employee.
5. The employee will, to a greater or lesser degree, have been under the control of the employer.
In England the question of whether there is a relationship which could give rise to vicarious liability has become less than straightforward because of a number of decisions at the highest level which have imposed liability in a situation which is not a strictly employer-employee situation but rather one which is non-commercial. So, in the Christian Brothers case, serious physical and sexual abuse was alleged against teachers who were members of the Institute of Christian Brothers in a residential school owned by the Catholic Child Welfare Society, and it was held that the Institute could be vicariously liable even though they were not employers; in Cox v Ministry of Justice  UKSC 10 it was held that the prison service could be vicariously liable for injuries caused to a prison catering manager by the negligence of a prisoner who was working under her direction on prison service pay, but where there was no contract of employment between the prison and the prisoners; and in Ames v Nottinghamshire County Council  UKSC 60 the County Council was held vicariously liable for physical and sexual abuse allegedly carried out by two of the foster parents with whom the claimant was placed by the County Council while in its care, and again the relationship was not one of employer-employee.
In Barclays Bank the Bank was held not to be vicariously liable. As Lady Hale put it: “The question therefore is, as it has always been, whether the tortfeasor is carrying on business on his own account or whether he is in a relationship akin to employment with the defendant. In doubtful cases, the five “incidents” identified by Lord Phillips [as set out above] may be helpful in identifying a relationship which is sufficiently analogous to employment to make it fair, just and reasonable to impose vicarious liability. Although they were enunciated in the context of non-commercial enterprises, they may be relevant in deciding whether workers who may be technically self-employed or agency workers are effectively part and parcel of the employer’s business… where it is clear that the tortfeasor is carrying on his own independent business it is not necessary to consider the five incidents”.
So here there was no need to consider the five incidents because Dr Bates was clearly carrying on his own independent business: he was not an employee of Barclays; nor, viewed objectively, was he anything close to an employee; he was not paid a retainer which might have obliged him to accept a certain number of referrals from Barclays; and he was free to refuse an offered examination should he have wished to do so.
We should also mention that whilst Barclays Bank represents what might be regarded a brake on the movement towards imposing vicarious liability in situations which do not fall within the conventional employer-employee situation, it is conceivable that Hong Kong courts will in any event not even embark on that movement. We say this because in Ho Kwok Kei v A.S.Watson  HKCFI 1618 at paragraphs 50-72 (where there was an argument that a person could be vicariously liable for the acts of his independent contractor or of the contractor’s employees, but where ultimately the Judge did not have to decide the question) Lam J carried out a survey of the English authorities which imposed vicarious liability outside the conventional situation, and considered recent Hong Kong cases in this area, and said at paragraph 69 of his judgment that given the existing state of law in Hong Kong “I have some doubt as to whether it is open to the Court of First Instance to follow the Cox line of authorities and expand the scope of vicarious liability in this way”.
What of the employee who does something malicious to spite his employer? WM Morrison operates a chain of supermarkets and employed a Mr Skelton on its internal audit team. He received a verbal warning after disciplinary proceedings for minor misconduct and bore a grievance against WM Morrison thereafter. One of his tasks was to transmit payroll data for WM Morrison’s entire workforce to its external auditors. He did so but also made and kept a personal copy of the data and used this to upload a file containing the data to a publicly accessible file sharing website. Some of the affected employees brought proceedings against WM Morrison on the basis that it was vicariously liable for, amongst other things, misuse of private information and breach of confidence.
In Dubai Aluminium Co Ltd v Salaam  UKHL 48 Lord Nicholls said that when determining what is the touchstone for determining whether what the employee did was within the scope of his employment “perhaps the best general answer is that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm’s business or the employee’s employment…”
We are all familiar with the concept that an employer will not be liable for the acts of an employee when the employee is “on a frolic of his or her own”. Here it was held that he was on a frolic of his own. As Lord Reed said: “… It is abundantly clear that Skelton was not engaged in furthering his employer’s business when he committed the wrongdoing in question. On the contrary, he was pursuing a personal vendetta, seeking vengeance for the disciplinary proceedings some months earlier. In those circumstances, applying the test laid down by Lord Nicholls in Dubai Aluminium in the light of the circumstances of the case and the relevant precedents, Skelton’s wrongful conduct was not so closely connected with acts which he was authorised to do that, for the purposes of Morrisons’ liability to third parties, it can fairly and properly be regarded as done by him while acting in the ordinary course of his employment”.
Certainly the decision in Barclays Bank signals an indication in a commercial context not to expand vicarious liability in England beyond the employer-employee relationship, a step which Hong Kong courts have not in any event thus taken (see the discussion in Ho Kwok Kei above) albeit that in non-commercial relationships there is still going to be room for argument based upon the other Supreme Court decisions to which reference is made in Lady Hale’s judgment. As regards WM Morrison this is a clear decision to the effect that someone acting out of spite towards his or her employer will be treated, in the old-fashioned expression, as acting on a frolic of his or her own and so outside the course of his or her employment.