Decoding Vicarious Liability: Insights from the Schokman Case

The judgment of Edelman and Steward JJ In the recent decision of CCIG Investments Pty Ltd v Schokman¹ contains a fascinating examination with respect to the history and application of the doctrine of vicarious liability, and perhaps a glimpse of where this area of law may head in the future. In this article we examine this decision, in significant detail, with particular emphasis upon the joint judgment of Edelman and Steward JJ.

The facts in the Schokman decision are unique and one could reasonably assume are unlikely to be replicated. The original plaintiff (respondent on the appeal), Mr Schokman, commenced employment with CCIG Investments Pty Ltd (appellant) as a food and beverage supervisor. The employment was at Daydream Island Resort, situated in the Whitsundays off the coast of Queensland. As for practical purposes the position required the respondent to reside on the island, it was noted in his employment contract he would be provided furnished share accommodation at a cost of $70 per week.

The respondent initially resided alone, but not long afterward another worker, Mr Hewett, moved in and shared the accommodation. Mr Hewett was also an employee of the appellant, and it was accepted the terms of his employment, relevant to accommodation arrangements, was consistent with the respondents. Both men worked at a restaurant within the resort, with the respondent a supervisor and Mr Hewett in the inferior position of team leader.

On the evening of 6 November 2016, both the respondent and Mr Hewett were in the staff bar. The respondent left and returned to his room at around 1.00am, with Mr Hewett following shortly thereafter. Once back in the room, Mr Hewett complained to the respondent about issues he was having with the management team. The respondent informed Mr Hewett he did not want to discuss work issues and that they could be discussed the following day. Mr Hewett subsequently left the unit, taking some drinks with him. The respondent went to sleep and was awoken at about 3.00am by Mr Hewett, who had returned and was vomiting in the bathroom. The respondent again fell asleep, only to be woken again about 30 minutes later, this time on account of being urinating upon by Mr Hewett which was causing him to choke.

The respondent pursued a common law claim against his employer. It is of interest to note that to be able to do so, the respondent’s statutory claim for workers compensation must have ultimately been accepted (and statutory benefits paid), which means either it was accepted voluntarily, or found, the respondent suffered an ‘injury’ which, per section 32 of the Workers Compensation and Rehabilitation Act 2003 (Qld), is defined as a personal injury arising out of, or in the course of, employment if the employment is a significant contributing factor to the injury’.

The claim was premised on the basis the employer was vicariously liable for the tortious actions of Mr Hewett. It failed at first instance, with the primary judge finding the actions of Mr Hewett were not committed in the course of his employment. The respondent’s appeal was subsequently allowed by the Court of Appeal, and he was awarded damages in the sum of $431,738.88. The rationale being:

‘The present case is analogous to Bugge v Brown, although the act in this case occurred in the course of the provision of shelter, rather than sustenance to the employee. It was a term of Hewett’s employment that he reside in the staff accommodation on the island, and more particularly in the room assigned to him. Whilst he remained employed at the resort, he was required to live there, and once he ceased to be employed at the resort, he was required to leave. The terms of his employment required him to take reasonable care that his acts did not adversely affect the health and safety of other persons. That was an obligation which governed his occupation of the room. He was not occupying the room as a stranger, but instead as an employee, pursuant to and under the obligations of his employment contract. There was in this case the requisite connection between his employment and the employee’s actions. The respondent should have been held to be vicariously liable for his negligence and the loss which it caused’.

The employer appealed to the High Court. In a unanimous decision the appeal was allowed, and the respondent’s claim was dismissed with costs. Dealing briefly with the principal joint judgment of Kiefel CJ, Gageler, Gordon and Jagot JJ, the sole focus was upon whether the tortious act of Mr Hewett was committed ‘in the course or scope of the employment’. It was noted ‘whether a tortious or other wrongful act was committed in the course or scope of employment depends upon the circumstances of the particular case²’. It was also observed ‘whether an act was committed in the course or scope of employment is not determined by reference to whether the tortious employee’s act can be said to have been authorised by the employer. An unauthorised, intentional or even criminal act may be committed in the course or scope of employment, and therefore render the employer liable’.³

After analysing decided cases applying the principle of vicarious liability, it was observed ‘where no more can be pointed to than that the employment provides an opportunity for the employee’s wrongful act to take place, the connection with the employment is tenuous’⁴.

The judgment did note this circumstance can be distinguished from a situation where an employee ‘is placed in a special position by reason of the employment so that the act in question may be seen as one to which the ostensible performance of the employer’s work by the employee “gives occasion”, to adopt the words of Dixon J in Deatons Pty Ltd v Flew. In such circumstances the requisite connection would be present’⁵.

It is this type of rationale which has justified the possibility of imposing vicarious liability in cases involving acts of sexual abuse⁶. The Court noted ‘features of the employment such as authority, power, trust, control and the ability to achieve intimacy should be considered. Clearly a role embodying features of this kind may point to a strong connection between the employment and the wrongful act. The employment may be seen to provide more than a mere opportunity for the act to take place; it may provide the very occasion for it’.⁷

After applying these principles to the matter at hand, it was held the evidence failed to establish the requisite connection between employment and the tortious act. Thus, it was stated ‘it may readily be seen that the circumstances in Bugge v Brown are in no way analogous to the present case. Nothing in the present case points to the drunken act in question being authorised, being in any way required by, or being incidental to, the employment. In truth, it had no real connection to it’.⁸

Although reaching the same outcome, the far more interesting, albeit esoteric judgment, regarding the law with respect to vicarious liability was the joint judgment of Edelman and Steward JJ.

Their Honours lamented the confusion surrounding the state of the law in this area and set about trying to provide some clarity. They observed ‘the problem lies in the tendency to think about vicarious liability in a stovepipe manner as an agglomeration of areas of law where a defendant is liable in the absence of fault’.⁹

Their Honours observed the confusion has arisen on account of the term vicarious liability being used in three separate contexts. The first is in circumstances ‘where one person is, in broad terms, an agent for another. It is a primary liability: the acts of another are attributed to the defendant on the basis that they were part of a joint enterprise, or procured, authorised or ratified by the defendant. Each of these notions conveys the sense of something that is done for another with the “seal of [their] approval”, amounting to an acceptance of the act as the other’s own’.¹⁰ Their Honours observe this situation is not true vicarious liability, although is often described as such. They state, ‘this type of liability is really based on “vicarious acts” or “vicarious conduct”, rather than “vicarious liability”. It applies to all principals, whether employer or not, for whom the acts are done with their authority’.

The second is what their Honours describe as “true” vicarious liability, ‘based on the attribution of the liability of another’. The nuanced distinction was explained as ‘rather than attributing to one person the authorised acts of another, it attributed to an employer the liability of an employee, based upon the wrongful acts of the employee, whether or not those acts were authorised in the broad sense described above. But the employee’s wrongful acts had to be sufficiently or closely connected to the employee’s duties or powers of employment so that they could be said to have been performed in the “course of their employment”. This Court has not extended vicarious liability in this sense beyond employees’.¹¹

The third context in which the term vicarious liability was observed as sometimes being misused is where the liability, in truth, arises from the breach of a non-delegable duty. Their Honours observed ‘a non-delegable duty arises where “the nature of the relationship of proximity gives rise to a duty of care of a special and ‘more stringent’ kind, namely a duty to ensure that reasonable care is taken”.¹²

Their Honours then sought to disentangle the three different conceptions of vicarious liability by reference to cases which fall into each category. An example of the first concept of vicarious liability was said to be that of Lloyd v Grace, Smith & Co.¹³ In that decision an employee of a firm of solicitors was given authority to arrange and negotiate the sale of real estate. The plaintiff was a client of the firm and was dealing with that employee, who fraudulently convinced the plaintiff to transfer ownership of property to himself, which he subsequently used for personal gain.

In that decision the firm of solicitors was held liable. And although the basis for that conclusion has been referenced as being on the basis of vicarious liability, their Honours implicitly considered it was incorrect to use that term in the context of true vicarious liability and noted ‘although the employee’s action was not expressly or impliedly authorised, each of the members of the House of Lords spoke in terms consistent with the employee having acted with apparent or ostensible authority. As Dixon J explained in Deatons Pty Ltd v Flew, the acts were the product of “the ostensible performance of [the employer’s] work”, or were “committed under the authority the [employee] is held out as possessing or of the position in which [the employee] is placed as a representative of [the employer]”’.¹⁴

Whilst a very nuanced distinction, their honour’s considered the basis for liability in that matter was not true vicarious liability, in the sense that the employer was held liable, in a secondary sense, for the actions of the employee but, rather, a primary liability, on the basis the employee’s actions were within the authority provided by the employer and thus akin to their own.

An example of the second concept of vicarious liability, described by their Honours as ‘true’ vicarious liability is the decision of Bugge v Brown¹⁵. In that decision an employee was instructed to cook lunch at an old homestead, a mile from a paddock in which he was working. He instead lit the fire in the fireplace of a hut in the paddock in which he had been working, which subsequently spread to neighbouring land causing damage. The employer was held vicariously liable for the damage sustained. Speaking of this claim, their Honours observed:

‘Cooking the meal in this location was not authorised by his employer. Indeed, it was forbidden. But the employer was nevertheless held vicariously liable. As Isaacs J and Higgins J held, it did not matter that the acts of the employee were not expressly, impliedly or ostensibly authorised, or even whether the acts had been forbidden, provided that the employee’s acts were “in the course of [his] employment” and were not “distinctly remote and disconnected from his employment”¹⁶.

An example of the third concept of vicarious liability, which their Honours contend is more aptly described as a breach of a non-delegable duty, is the decision of Morris v C W Martin & Sons Ltd¹⁷. In that case the employer was found liable for its employee’s theft of a mink coat which had been bailed to the employer for cleaning. Their Honours noted that ‘although commonly given the label of “vicarious liability”, Morris v C W Martin & Sons Ltd cannot be properly explained as a case involving the first or second areas of law in which the term “vicarious liability” is used’ (and already referenced above) After examining the actual rationale for the conclusion the employer was vicariously liable, including by cases which subsequently endorsed Morris as a case of vicarious liability, their Honours noted this was consistent with the rationale and scope of a non-delegable duty, namely that the relationship was such that the duty owed was to see that care was taken, whether or not the actual performance of the duty was delegated to another.

In further explaining the difficulty which can arise in this area, and with particular reference to cases involving sexual abuse, their Honours noted the position in Australia was complicated by the decision in New South Wales v Lepore¹⁸, which involved three appeals referable to claims involving allegations of sexual assault.

Their Honours noted ‘a simple approach to that case might have been to apply the principles concerning non-delegable duties (which were discussed as part of that decision). With respect to vicarious liability, their Honours noted the often quoted passage of Sir John Salmond regarding an employer’s liability for an employee’s actions “in the course of employment”, as arising where the act was “either (a) a wrongful act authorised by the [employer], or (b) a wrongful and unauthorised mode of doing some act authorised by the [employer] and the challenges this can present in application. Thus, in discussing the joint judgment of Gummow and Hayne JJ in Lepore, and the acknowledgment therein the use of vicarious liability in those circumstances was different from the usual circumstances in which it was used, their Honours stated:

‘They noted that the employer was being made responsible not for “risks which attend the furtherance of the venture” but for “risks of conduct that is directly antithetical to those aims”. And they observed, with polite restraint, that in considering whether a school could be liable for sexual assaults committed on its students, “the notion of an unauthorised mode of doing an authorised act has evident difficulties in application”. Teachers are employed to care for children, not to abuse them. It is the very opposite of what they have been authorised to do”.¹⁹

It is impossible to argue with that logic, and their Honours further highlighted the point in discussing the more recent High Court authority of Prince Alfred College Inc v ADC²⁰, also a case involving sexual assault. And whilst that decision was an attempt to ‘clarify’ confusion around the scope and application of vicarious liability, and concluded it could arise in cases involving sexual abuse, their Honours commented of the majority judgment:

‘But they did not do so by making absurd suggestions that the sexual abuse of students was “in the course of employment” or by stretching Salmond’s formulation past breaking point on the basis of the ridiculous notion that the sexual abuse of children was an improper mode of caring for them. Instead, they recognised “vicarious liability” by having regard to factors such as “authority, power, trust, control and the ability to achieve intimacy with the victim”.²¹

Their Honours thus commented:

‘Indeed, the focus in the principal joint judgment in Prince Alfred College Inc upon factors of “authority, power, trust, control and the ability to achieve intimacy with the victim” has led leading writers in this field to make observations to the effect that in Australia “it might now be argued that imposing liability for breach of a non-delegable duty of care in cases of child sexual abuse is more appropriate than vicarious liability. Once again, the use of the label “vicarious liability”, conflating three distinct areas of law, can distract from the underlying legal principles’.²²

After completing the above analysis, their Honours noted the matter at hand was one which involved an analysis of the second concept of vicarious liability, or “true” vicarious liability only. And applying those principles, their Honours reached the same conclusion as in the principal judgment, observing ‘Mr Hewett’s negligent actions were not closely connected with any of his duties or powers of employment. The actions were not in Mr Hewett’s course of employment. The appellant, as his employer, cannot be attributed with Mr Hewett’s liability for negligence’.²³

Takeaways

As the joint judgment of Edelman and Steward JJ highlights, there is considerable confusion over the state and scope of the law insofar as it pertains to vicarious liability. Their Honours summed it up by stating:

‘By sinking into the “dogmatic slumber” of using vicarious liability as a broad concept that extends to various different areas of law where liability arises “despite the employer not itself being at fault”, courts have created in vicarious liability an “unstable principle”. Unless the different areas of law with which “vicarious liability” are concerned are identified and kept distinct, courts may be driven to absurd and distorted reasoning’.²⁴

In terms of key takeaways, whilst not really advancing the understanding of what can be considered “in the course of employment”, the decision certainly provides some greater clarity in relation to same, particularly with respect to cases involving what Edelman and Steward JJ describe as “true vicarious liability”. The decision also confirms that cases involving at least “true vicarious liability” start and finish in the context of an employment relationship.

This is of critical importance given the other concepts of vicarious liability discussed by Edelman and Steward JJ. If each situation is categorised separately, such that other than for “true vicarious liability”, the liability which arises is primary, (be it in circumstances akin to an agency type relationship or on the basis of the existence of a non-delegable duty of care), as opposed to the secondary attribution of liability for the torts committed by another, there is certainly potential for the allocation of liability to alter, possibly significantly.

The area which immediately comes to mind involves labour hire arrangements. The recent decision of Mt Owen Pty Ltd v Parkes²⁵ illustrates the potential. In that decision, the plaintiff, Mr Parkes, was injured whilst performing his employment duties at a coal mine. His injury was caused, at least in part, by the negligent operation of a bulldozer by another worker, Mr Kemp. The mine was owned and operated by Mt Owen Pty Ltd (“Mt Owen”). Both the plaintiff and Mr Kemp were however employed by Titan Technicians Enterprise Pty Ltd (“Titan”), whom had been engaged by Mt Owen to supply qualified mechanics to work on heavy machinery.

The trial judge found the incident occurred as a result of the negligence of Mr Kemp, as well as the direct negligence of both Mt Owen and Titan (for systemic failures). Liability was apportioned 60% on account of the negligence of Mr Kemp and 20% each for the direct negligence of Mt Owen and Titan. Relevant to the issue at hand was the apportioning of the 60% liability attributed to Mr Kemp. The case was particularly relevant because it involved a finding where the employment relationship was transferred pro hac vice (for this occasion only) from Titan (the legal employer) to Mt Owen (the host employer).

The impact of that finding was that Mt Owen bore the 60% of liability apportioned to the actions of Mr Kemp. Successfully establishing a transfer of employment pro hac vice is quite rare and, ordinarily, it would be expected Titan, as Mr Kemp’s legal employer, would be the party vicariously liable for the 60% of liability apportioned to him.

It is however arguable this type of situation is more appropriately placed into the first concept of vicarious liability discussed by Edelman and Steward JJ, noting that broadly speaking the actions of Mr Kemp, in working at the site and operating the bulldozer, were authorised by (at least) Mt Owen. Adopting this reasoning it may not, therefore be the case the party who is found to be the employer is truly vicariously liable (and thus entirely responsible) for the liability apportioned to Mr Kemp. Rather, it could be argued the actions of Mr Kemp are attributed to one, or potentially both of Mt Owen and Titan, and each are then responsible on a primary basis for the liability arising from same (in proportions to be determined by the Court).

A further potential extension of this line of reasoning may be with respect to liability arising for the actions of parties purporting to be independent contractors, especially in some regular settings whereby in practice the task being performed by the contractor, whilst specialist in nature, may be seen as an extension of the enterprise being conducted by the principal, and directions or parameters may be given and / or set by the principal, and thus less ‘independent’ than in other settings. One example of such a situation could be a security contractor providing security services in a licensed premises.

It must of course be remembered the judgment of Edelman and Steward JJ comprised a minority of the Court, and the principal joint judgment of Kiefel CJ, Gageler, Gordon and Jagot JJ did not descend into the same level of analysis. And whilst each judgment does not expressly contradict the other, in operation there would be conflict and implicit in the principal joint judgment is a conclusion cases involving vicarious liability currently fall to be determined on the more simplistic conflation of all three concepts.

In light though of the detailed analysis of Edelman and Steward JJ, and what remains a fairly inadequate explanation of the rationale, definition and scope of vicarious liability, we would suggest that in any claim in which the facts suggest the actions of an individual, as opposed to systemic failures, play a significant role, very careful consideration ought be given to the issue of vicarious liability, as cogent arguments may be available to, at the very least, highlight the uncertainty and negotiate a more favourable outcome than what might otherwise appear likely on a simplistic assessment of the issue.

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Peter Dovolil

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