The Vagaries of Vicarious Liability

Introduction

The concept of vicarious liability, whereby the law imposes liability on an employer for the wrongful conduct of an employee, derived originally from mediaeval times[1] and has been recognised in the common law since at least 1690.[2] In 1882, Pollock enunciated the difficulty in identifying a justification in principle for this concept:

“We can all understand that a [person] should be liable for what [the person] really does by another’s hand, – for actions which [the person] has authorised or tacitly allowed. But here the question is why [the person] should be liable for actions [the person] has in no way authorised, just as if [they] had authorised them, – why [they] should be deemed to have done by [their employee’s] hand things which [the person] has not commanded, permitted, or desired.”[3]

More than a century later, the High Court observed that “a fully satisfactory rationale for the imposition of vicarious liability in the employment relationship has been slow to appear in the case law.”[4] In recent times, litigation by victims of sexual abuse against institutions such as schools, residential facilities and religious institutions has heightened the necessity of identifying the parameters of application of this doctrine.

On 2 August 2023, the High Court allowed an employer’s appeal against a finding that it was vicariously liable for the negligent action of its employee causing injury to the respondent, a fellow employee, while the two shared accommodation provided by the employer for their use while working in hospitality roles on Daydream Island.

The High Court’s decision – CCIG Investments Pty Ltd v Schokman[5] – will be of considerable benefit to practitioners, as the judgment provides elucidation of the elusive concept of vicarious liability and much-needed guidance concerning the metes and bounds of its application in unusual factual scenarios.

The common law of Australia retains the “objective and rational rule” that an employer will only be vicariously liable for an employee’s wrongful act committed in the course or scope of the employee’s employment

Background

The respondent, Mr Schokman, was employed at the Daydream Island Resort and Spa as a food and beverage supervisor. To work on the Island, he had to reside in shared accommodation assigned by his employer, CCIG Investments Pty Ltd (“CCIG”). He was assigned to share a studio-style room and adjoining bathroom with a fellow employee, Mr Hewett, who worked as a team leader in the same restaurant.  The employees were charged a weekly amount for rent and provided with a tenancy agreement governing the provision of accommodation on the Island, though the agreement was not in evidence.

In the evening of 6 November 2016, after work had finished for the day, Mr Hewett consumed some alcohol in the staff bar on the Island before returning to the room he shared with Mr Schokman. He complained about the work environment and the management team, then left the room to let Mr Schokman sleep. Mr Hewett returned to the room at about 3.00am and vomited in the bathroom. A short time later, Mr Schokman was woken, distressed and unable to breathe, by Mr Hewett urinating on him. That highly distressing event caused Mr Schokman to suffer a psychiatric disorder and exacerbation of his pre-existing conditions of narcolepsy and cataplexy.  

The Supreme Court – Trial Judgment

Mr Schokman claimed damages against CCIG on two alternative bases. He contended that CCIG was negligent in requiring him to share accommodation with Mr Hewett because Mr Hewett was his subordinate in the restaurant where they both worked and he had previously made complaints about Mr Hewett’s conduct that he perceived as odd. That claim failed and no appeal was pursued by Mr Schokman from the dismissal of his claim in negligence.

In the alternative, Mr Schokman claimed that CCIG was vicariously liable for Mr Hewett’s tortious act in urinating where he did. Mr Hewett did not give evidence, and Mr Schokman accepted that the available evidence was insufficient to conclude that Mr Hewett’s actions were intentional, but it was contended that Mr Hewett was negligent in failing to take care where he urinated, and it was foreseeable that Mr Schokman would suffer injury in consequence. He argued that the tort was committed in the course of Mr Hewett’s employment by CCIG because Mr Hewett was accommodated in that room so as to facilitate performance of his employment on the Island. It was further argued that CCIG was vicariously liable because it had placed Mr Schokman in a position of vulnerability and intimacy with Hewett so as to provide the occasion for the tort to occur.

The trial judge accepted that Mr Hewett’s act constituted an unintentional tort. However, by reference to the approach of in the judgment of McLaughlin J (as she then was) of the Supreme Court of Canada in Bazley v Curry,[6] the trial judge found that there was an absence of sufficient connection or nexus between CCIG’s employment enterprise and Mr Hewett’s “bizarre conduct” to justify the imposition of vicarious liability for that act “in terms of a fair allocation of the consequence of the risk and/or deterrence.”[7]

A short time later, Mr Schokman was woken, distressed and unable to breathe, by Mr Hewett urinating on him. 

The Court of Appeal Judgment

Mr Schokman’s appeal to the Court of Appeal was confined to the issue of CCIG’s vicarious liability for Mr Hewitt’s negligence. The appeal was allowed. [8]

The parties to the appeal agreed, and the Court of Appeal found, that the trial judge was in error in applying the approach enunciated in Bazley v Curry.[9] 

The Court of Appeal considered it to be significant in determining the question of CCIG’s vicarious liability for Mr Hewet’s act that CCIG required its employees to reside on the Island, controlled the allocation of rooms, regularly reviewed whether rooms should be reallocated, required its employees to give up vacant possession of the accommodation within 24 hours of termination of employment, and required its employees (including Mr Hewett) to take reasonable care that their acts did not adversely affect the health and safety of other persons. Taking into account all of the circumstances, the Court of Appeal considered Mr Schokman’s case was analogous to Bugge v Brown[10], a case in which an employer was found vicariously liable for the negligence of an employee who lit a campfire to cook food for a meal while undertaking fieldwork. The question asked in that case to test the limit of the scope of employment was whether the employee had lit the fire as a “stranger” to his employer.[11] By analogy, the Court of Appeal considered that Mr Hewett occupied the room he shared with Mr Hewett not as a stranger to his employment, but in the capacity of an employee, pursuant to and as required by his contract of employment, and subject to the term of his employment that he take reasonable care that his acts did not adversely affect the health of others.

The High Court Judgment

The High Court unanimously allowed CCIG’s appeal.[12] The majority judgment of Kiefel CJ, Gageler, Gordon and Jagot JJ emphasised that the approaches emerging from Canada and the United Kingdom have not been adopted in Australia. The common law of Australia retains the “objective and rational rule” that an employer will only be vicariously liable for an employee’s wrongful act committed in the course or scope of the employee’s employment. That test is satisfied by reference to the circumstances of the particular case, focusing on the nature of what the employee is employed to do, in a functional, geographical or temporal sense, and considering the conduct of the parties subsequent to the formation of the contract between them.[13] The majority emphasised that guidance may be drawn from previously decided cases with relevantly similar circumstances, or cases that have developed a logical enquiry so as to test the boundaries of the scope of employment. Employers may be held liable for acts that are unauthorised, intentional or criminal, but will not be liable for acts that are an employee’s own “frolic” or that are “totally unconnected with the employment”.[14]

Decisions such as Bugge v Brown[15] had focused on whether the tortious act has a “sufficiently strong connection with the employment” so as to be said to have been done in the course of employment. The tests proposed by Sir John Salmond[16] for vicarious liability included unauthorised acts that are “so connected” with authorised acts as be regarded as improper modes of performance of those acts. [17]  While an enquiry as to connection can be useful, the majority cautioned that sufficiency of connection must be constrained by the outer limits of the course or scope of employment. Something more is necessary than that the employment has “merely created the opportunity for the wrongful act to take place… 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”.[18]

Furthermore, in some cases (particularly cases involving criminal acts such as sexual abuse), it is necessary that there be more than sufficiency of connection to hold an employer vicariously liable. In such cases, the focus may be on a special role in which the employee was placed by the abuser so as to “provide the very occasion” for the wrongful act. Features of the position in which an abuser is placed such as “authority, power, trust, control and the ability to achieve intimacy” may point to a “strong connection between the employment and the wrongful act”. [19] However, in the circumstances of this case, Mr Hewett was not placed into a special role vis-à-vis Mr Schokman. The physical proximity created by the shared accommodation provided no more than the “mere opportunity” for Mr Hewett’s actions to affect Mr Schokman while he slept.[20]

Edelman and Steward JJ explained that the process of determining whether a wrongful act is within the scope of employment of an employee is to identify the employee’s powers or duties of employment, characterise the wrongful act “at the appropriate degree of generality”, then consider whether that act was “sufficiently or closely connected with [the] powers or duties of employment”. In this case, the wrongful act was the act of urination.[21] Observing that that act was committed outside work hours, while Mr Hewett had been drinking alcohol on his leisure time, away from his place of work, and in circumstances where his employer could not be present or monitor him, their Honours concluded that the act was not connected with any of Mr Hewett’s duties or powers of employment.[22]

[T]he proper use of that concept is confined to the attribution to an employer of the liability of an employee for torts or wrongs, whether authorised or not, that are committed in the course of the employee’s employment

Gleeson J agreed that Mr Hewett’s wrongful act fell “comfortably outside” the limits of the course of his employment.[23] In her Honour’s opinion, Mr Hewett’s employment created neither an “opportunity” nor the “occasion” for the tortious act. Her Honour explained that employment may provide “the occasion” for a wrongful act when an employee takes advantage of some aspect of their role to commit the wrongful act. In contrast, a wrongful act that is “spontaneous” may be more likely to be committed through the mere opportunity of employment,[24] such as the barmaid’s act of throwing a beer glass at a patron in Deatons Pty Ltd v Flew.[25]

Her Honour regarded the terms of the employment contract as insufficient to establish a requisite connection between Mr Hewett’s act in the shared accommodation and his employment. The terms that related to the provision of accommodation did not concern the work that Mr Hewett was required to do, nor the manner in which he was to perform that work. In context, the term of the contract requiring Mr Hewett to take reasonable care not to adversely affect the health and safety of others bound Mr Hewett only in relation to the performance of his duties in the workplace, not while he was at leisure.[26]

Drawing a map

The judgment of Edelman and Steward JJ explains the differences between the three areas of law in which a defendant may be held liable for the wrongful acts of another despite an absence of fault, noting that these areas of law have sometimes been erroneously conflated and mislabelled as “vicarious liability”. Their Honours emphasised that the proper use of that concept is confined to the attribution to an employer of the liability of an employee for torts or wrongs, whether authorised or not, that are committed in the course of the employee’s employment.[27]

This area of law is to be distinguished from the law of agency, by which the acts of an agent (including an employee) that are actually or ostensibly authorised are attributed to the principal (including an employer). Properly characterised, such liability is based on “vicarious acts” or “vicarious conduct”, rather than “vicarious liability”. Lloyd v Grace, Smith & Co[28]is an example of an employer being held liable for an employee’s wrongful unauthorised acts on the basis that the employee committed the acts with ostensible authority. In that case, an employer was held liable for losses caused by an employee of a conveyancing business who fraudulently obtained conveyance to himself of a client’s properties on the basis that the acts were “committed under cover of the authority the [employee] is held out as possessing”. [29]

Their Honours explained that vicarious liability is also to be distinguished from the liability that results from the breach of a non-delegable duty, or duty to “ensure that reasonable care is taken”,[30] by which a defendant is liable for the negligence of independent contractors or employees who carry out the performance of the defendant’s duties. Non-delegable duties of care arise from certain relationships involving assumption of particular responsibility on the part of the defendant, such as employer and employee or school authority and student.[31]

Their Honours considered that, when the decision is properly understood, breach of a non-delegable duty of care was the basis of the employer’s liability in Morris v CW Martin & Sons Ltd[32], for an employee’s theft of a mink coat that had been bailed to the employer for cleaning. Although it was difficult to characterise the employee’s theft as being within the scope of his employment so as to give rise to “true” vicarious liability, the decision was explained on the basis of a breach by the employer of its duty pursuant to the bailment to ensure that reasonable care was taken with the coat.[33] However, their Honours acknowledged that the principal joint judgment of the High Court in Prince Alfred College Inc v ADC[34] had expressed a different view of the basis of liability in Morris, as being one of vicarious liability on the basis of the level of control over the coat conferred by the employer upon its employee. Their Honours noted that there is a degree of commonality between the factors relevant to consideration of the vicarious liability of employers for intentional wrongful acts such as sexual abuse inflicted by employees and the factors often relied upon to establish the existence of a non-delegable duty of care.[35]

Conclusion

This decision will require practitioners in this area to give careful consideration to articulation and proof of the facts and circumstances relied upon to support an argument that a wrongful act by an employee was within the scope of that person’s employment so as to give rise to vicarious liability on the part of his or her employer.

The discussion in the joint judgement of Edelman and Steward JJ of the tendency towards confusion between the laws of agency, vicarious liability and non-delegable duties of care encourages practitioners to focus upon the precise basis in law upon which liability for a wrongful act is sought to be attributed to another.

[1] Scott v Davis (2000) 74 ALJR 1410 at 1452; 175 ALR 217 at 275

[2] Boson v Sanford (1960) 2 Salk 440 [91 ER 382]

[3] Pollock, Essays in Jurisprudence and Ethics (1882) at 117, cited in CCIG Investments Pty Ltd v Schokman [2023] HCA 23 at [69].

[4] Hollis v Vabu per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ at 15

[5] [2023] HCA 21

[6] [1999] 2 SCR 534.

[7] Schokman v CCIG Investments Pty Ltd [2021] QSC 120 at [136] – [138].

[8] Schokman v CCIG Investments Pty Ltd [2022] QCA 38, per McMurdo JA, with Fraser JA and Mullins JA, as the President of the Court of Appeal then was, agreeing.

[9] Schokman v CCIG Investments Pty Ltd [2022] QCA 38 at [28].

[10] (1919) 26 CLR 110.

[11] (1919) 26 CLR 110 at 119.

[12] CCIG Investments Pty Ltd v Schokman [2023] HCA 21.

[13] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [15].

[14] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [16].

[15] (1919) 26 CLR 110 at 118

[16] Salmond, The Law of Torts (1907) at 83-84

[17] Prince Alfred College Inc v ADC (2016) 258 CLR 134 at 160; CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [20]-[23]

[18] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [32] – [33].

[19] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [34].

[20] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [35]-[38].

[21] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [85].

[22] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [87].

[23] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 per Gleeson J at [93].

[24] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [95]-[96].

[25] (1949) 79 CLR 370.

[26] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [100].

[27] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [65].

[28] [1912] AC 716, cited in CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [58]

[29] Per Dixon J in Deatons Pty Ltd v Flew (1949) 79 CLR 370 at 381, cited in CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [58].

[30] Kondis v State Transport Authority (1984) 154 CLR 672 at 686, cited in CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [70]

[31] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [70]-[71].

[32] [1966] 1 QB 716

[33] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [73]-[76].

[34] (2016) 258 CLR 134.

[35] CCIG Investments Pty Ltd v Schokman [2023] HCA 21 at [77]-[81].