Vicarious liability: Banking on bright lines

24 July 2018 by Jim Duffy

the-royal-courts-of-justice-1648944_1280A bank requires its would-be recruits and some of its existing employees to undergo a medical. It sends them to the home of one particular, self-employed doctor. There, they undergo a medical examination, unaccompanied by anyone from the bank.

 

The doctor completes the bank’s proforma examination form, headed with its logo and entitled “Barclays Confidential Medical Report”. The form is detailed. It includes sections on chest “Inspiration” and “Expiration”, “Abdomen (including Genito-Urinary System)”. It contains a section for “Female applicants only”, asking whether they have suffered from menstrual or pregnancy disorders.

The doctor – Gordon Bates – subsequently dies. A large group of women sue the bank alleging that it is liable for sexual assaults carried out by the doctor during the examinations. The question for the Court of Appeal in Barclays Bank plc v Various Claimants [2018] EWCA Civ 1670 was whether the bank could be vicariously liable.

Background

Following Dr Bates’ death in 2009, 126 women came forward alleging that he had abused them during medical examinations carried out on behalf of Barclays between around 1968 and 1984. The police concluded in 2013 that, had he been alive, there would have been sufficient evidence to pursue a criminal prosecution against him.

Dr Bates is alleged to have made all of the respondents undress at least down to their underwear and to have subjected them to inappropriate intimate examinations amounting to sexual assaults. For each examination he carried out, Dr Bates received a fee from Barclays, who often referred to him as “the Bank’s doctor” or “our doctor”. In one sample report considered by the trial judge, Mrs Justice Nicola Davies, Dr Bates had recorded:

Delay in onset of puberty. Normal development of secondary sexual characters (sic). Normal external genitalia. No evidence of any endocrine disturbance.

That candidate had been 16 years old. Some of the girls examined by Dr Bates had been just 15.

On Friday 20th July 2018, the Court of Appeal decided the preliminary issue of vicarious liability. It did so in the alleged victims’ favour after the Bank had appealed the trial judge’s decision. In their unanimous judgment, Sir Brian Leveson, Lord Justice McCombe and Lord Justice Irwin found that the judge had been correct to find vicarious liability established.

My colleagues Elizabeth-Anne Gumbel QC and Robert Kellar acted for the women in a judgment that has important implications for the liability of organisations for torts committed by third-party contractors.

The test

Like the trial judge, the Court of Appeal drew upon the analysis of the Supreme Court in two linked cases from 2016 that will be familiar to personal injury and employment lawyers alike: Cox v Ministry of Justice  and Mohamud v WM Morrison Supermarkets Plc (both discussed on this Blog here). A two-stage test for vicarious liability emerged from those cases:

  1. Is the relevant relationship one of employment or “akin to employment”?
  2. If so, is the tort sufficiently closely connected with that employment or quasi-employment?

As Lord Reed set out in Cox, Stage 1 itself breaks down into five component parts (in which “employee” denotes employment or quasi-employment):

  • The employer is more likely to have the means to compensate the victim and can be expected to have insured against that liability;
  • The tort will have been committed as a result of activity being undertaken by the employee on behalf of the employer;
  • The employee’s activity is likely to be part of the business activity of the employer;
  • The employer, by employing the employee to carry on the activity, will have created the risk of the tort committed by the employee;
  • The employee will, to a greater or lesser degree, have been under the control of the employer.

As the Barclays Bank case was making its way to the Court of Appeal, the Supreme Court confirmed the above approach in Armes v Nottinghamshire County Council [2017] UKSC 60 (discussed on this Blog here).

However, the Bank argued before the Court of Appeal that “one clear test” remained determinative of vicarious liability: the “independent contractor” test. It cited Lord Justice Ward in E v English Province (para 69):

“… the law is clear: the employer is not vicariously liable for the torts of his independent contractor.”

According to the Bank, there was nothing in the Armes case to abrogate or diminish the “independent contractor defence”. It also contended – in relation to the fifth criterion above – that there was no more control in these cases than there would be where an independent expert examined a litigant.

The Court’s analysis

 The Court of Appeal began by noting that the law of vicarious liability has been “on the move”. It pointed in particular to five recent decisions, beginning with E v English Province of Our Lady of Charity [2012] EWCA Civ 938 (vicarious liability of a Catholic diocese for alleged sexual assaults by a priest) and ending with Armes. It acknowledged that in none of the alleged tortfeasors in these cases was an obvious “independent contractor”.

However,

the law now requires answers to the specified questions laid down in Cox and Mohamud, and affirmed in Armes, rather than an answer to the question: was the alleged tortfeasor an independent contractor.

Giving the judgment of the Court, Lord Justice Irwin observed that if it had intended for this once decisive test to survive, the Supreme Court would probably have said so.

He also considered that there would be cases where vicarious liability was established in respect of independent contractors:

Changes in the structures of employment, and of contracts for the provisions of services, are widespread. Operations intrinsic to a business enterprise are routinely performed by independent contractors, over long periods, accompanied by precise obligations and high levels of control … It is clear that Lord Reed had such changes in mind, see Cox, paragraphs 16 and 31.”

The Court of Appeal then considered the present case against the five criteria affirmed in Armes:

  1. Nicola Davies J was obviously right to conclude that the bank had more means than the (long distributed) estate of Dr Bates. She was also right to give this point little weight. Interestingly, the Court rejected the Bank’s submission that this question should be looked at as at the time of the torts and not at the time of the litigation – a proposal that “would be impractical, cause satellite litigation and could operate to defeat rather than facilitate justice.”

 

  1. It was clear that the activity was undertaken on behalf of the Bank, even if for most applicants the medical examination brought benefit to them by opening the door to employment. However they would have received this benefit in any event had no examination been required. The principal benefit was to the prospective employers.

 

  1. This meant that the process was also a part of the business activity of the Bank.

 

  1. It was also correct that the risk of the tort arose from the arrangements made by the Bank. Here, in another interesting observation, the Court emphasised that vicarious liability concerns the liability of an innocent or partly innocent party. So criterion (iv) need not amount to negligence. If it were about negligence then there would be direct liability, rendering academic the question of vicarious liability. “This must qualify the meaning of risk in this context.” The Court noted that the Bank specified the nature of the examinations, and the time, place and examiner. The risk was properly established by Nicola Davies J.

 

  1. However, the degree of control was “the most critical factor here”. There were obvious distinctions with the scenario where an independent expert conducts an examination for the purposes of litigation: such an expert would rarely conduct a general health examination. It would be rare for such experts to be asked to conduct intimate examinations, or to go beyond a particularly part of the body or facet of mental health. The commissioning party would normally not be in a position to specify the particular tests, results or modes of physical examination to be performed. It was, in the Irwin LJ’s view, “not a particularly helpful comparison.” The Court could have gone on here: the panoply of experts’ duties under Part 35 of the Civil Procedure Rules and its Practice Direction must surely put to bed the utility of this comparison?

As for stage 2 of the test, the trial judge was obviously correct, the Court said, to find that the medical examinations were sufficiently closely connected to the relationship between Dr Bates and the Appellants:

They were the whole purpose of that relationship. Without them, the relationship would never have existed.”

The Court of Appeal upheld Mrs Justice Nicola Davies’ decision, finding it to be just and fair.

Lord Justice Irwin concluded with a firm rejection of the quest for brighter lines in this area in order to secure ease of business. This, he said:

“… cannot displace or circumvent the principles now established by the Supreme Court. Lord Faulks [Counsel for the Bank] advanced the status of self-employed independent contractor as representing a “coherent principle of law”, thereby seeking to justify the maintenance of such a principle. The submission may be attractive at first blush. However, as has now become tolerably clear from the fields of employment and taxation law, establishing whether an individual is an employee or a self-employed independent contractor can be full of complexity and of evidential pitfalls. In my view the Cox/Mohamud questions will often represent no more challenging a basis for analysing the facts in a given case.”

Vicarious liability on the move

And so the law of vicarious liability continues on its journey. This case demonstrates the application of a necessarily broad test to a specific and somewhat unusual set of factual circumstances. In doing so, the Court roundly repudiated a retreat to a narrower test previously discarded by higher authority.

Jim Duffy is a barrister at One Crown Office Row.

 

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