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Justin Santiago, BAppSc (Hons), MBA, LLB (Hons) comes from a journalism, market research, intellectual property and strategic communications consulting background. Now based in Melbourne he spends his time advising businesses on how to communicate to their customers as well as writing on various subjects of interest in this blog.

Thursday, February 26, 2009

Vicarious Liability

Vicarious liability runs counter to two principles of the law of tort, namely that a person should only be liable for loss or damage caused by his own acts of omissions and secondly that a person should only be liabile when he has been at fault. Discuss.

Vicarious liability is one person’s liability for another’s act/omission which caused loss to another. An example of vicarious liability is the liability of an employer for acts by his or her employee. The burden of the liability on the employer is justified because the employer derives economic benefit so needs to bear any losses/liability incurred and it is justifiable to impose liability as he has substantially greater means and may have the necessary insurance to cover such contingencies.

Employers are vicariously liable, under the respondeat superior doctrine, for negligent acts or omissions by their employees in the course of employment.However there has to be a balance between firstly furnishing an innocent victim with recourse and secondly hesitation to foist undue burden on business enterprises.
For an act to be considered within the course of employment it must either be authorised or be so connected with an authorised act that it can be considered a mode, though an improper mode, of performing it.

Various tests have been formulated in order that this balance is achieved.

An employee has to be clearly defined under a contract of service as opposed to contract for service.Under the control test formulated in Yemen v Noakes an employee is one who is subject to the command of his master as to the manner in which he shall do his work. This test was further elaborated in Ready Mixed Concrete v Minister of Pensions which said a contract of service exists if these three conditions are fulfilled.

(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. The wage represents the consideration and if there is no consideration there is no contract of any other kind.

(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. However, it was also made clear in the judgment that, although a right of control is an important factor in determining employment status, it is not necessarily a determining factor.

(iii) The other provisions of the contract are consistent with its being a contract of service. Factors such as ownership of significant assets, financial risk and the opportunity to profit are not consistent with a contract of service.

The "Salmond Test" is used to determine if an act of an employee occurred in the course of employment and, therefore, whether the employer should be liable. This test deems an act to have been committed in the course of employment if it is either:

(a) something authorised by his employer, or
(b) an unauthorised mode of doing something authorised.

The second limb of the Salmond Test is particularly difficult to apply and the House of Lords in the U.K. has recently expressed its preference for a less technical test which was followed by the Court of Final Appeal. This new test focuses on whether the employee's act is so closely connected with his employment that it would be fair and just to hold his employer vicariously liable (Lister v Hesley Hall Limited [2002] 1 AC 215).

Ultimately, the focus of the "close connection" test is still whether or not the act of the employee in question is carried out in the course of employment. However, in determining this point, the "close connection" test appears to allow a broader and more flexible examination of the facts and circumstances of a particular employment as the court does not have to determine if the act in question is authorised, whether expressly or impliedly. The law was deemed mature enough to hold an employee vicariously liable for deliberate, criminal wrongdoing on the part of an employee overruling Trotman v North Yorkshire.

To avoid vicarious liability, an employer must demonstrate that the employee was acting in his own right rather than on the employer's business. Factors to take into consideration whether it was a frolic or detour : Joel v Morrison, fow own benefit, whether it was wholly independent act, or was it incidental to employment or was it a prohibited conduct : Rose v Plenty.

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