Vicarious liability: Independent contractor defence no longer recognised

The Court of Appeal has held that the independent contractor defence is no longer recognised for vicarious liability claims.

The two stage test postulated in Cox and Mohamud applies when considering whether party is vicariously liable for the conduct of any third party, even an independent contractor.

Applying these tests, the Court of Appeal upheld the first instance finding that Barclays were vicariously liable for sexual assaults allegedly perpetrated by Dr Gordon Bates during pre-employment medical examinations.

Background

In this group litigation, 126 Claimants are seeking damages against Barclays Bank in respect of alleged sexual assaults perpetrated by Dr Gordon Bates during pre-employment medical examinations.

In the High Court, Mrs Justice Davies ordered the determination of the preliminary issue whether Barclays Bank was vicariously liable for the sexual assaults allegedly perpetrated by Dr Bates.

Mrs Justice Davies agreed the determination of the preliminary issue involves a two stage test as reiterated in the cases of Cox and Mohamud.

1. Is the relevant relationship one of employment or "akin to employment"?
2. Was the tort sufficiently closely connected with that employment or quasi employment?

On applying these tests, the Court found Barclays is liable for the conduct of Dr Bates.

Barclays appealed to the Court of Appeal on the basis that the application of stage 1 of the test was incorrect, and on the basis that Dr Bates' status as an independent contractor was a complete defence to the claim. The Respondents submitted that the initial decision should be upheld.

It should also be noted that since the first instance decision, the Supreme Court affirmed the two-stage approach laid down in Cox and Mohamud in Armes v Nottinghamshire County Council.

The Court of Appeal acknowledged this, albeit noting that "they address wildly different factual situations". Furthermore, the Court highlighted that when "adopting the approach of the Supreme Court, there will indeed be cases of independent contractors where vicarious liability will be established."

Court of Appeal

The original decision was upheld by the Court of Appeal.

The Court of Appeal rejected the submission that Dr Bates' status as an independent contractor was a defence to the claim. The Court of Appeal emphasised that the correct method is to apply the two –stage test to the particular facts of the case.

On doing so, the Court of Appeal found as follows:

Stage 1 test

As set out previously, Mrs Justice Davies was satisfied that the five criteria applicable to stage 1 - as identified by Lord Philips in Catholic Child Welfare Society v Various Claimants [2012] UKSC 56 – had been met.

The Court of Appeal agreed, reviewing the five criteria as follows:

1. It acknowledged that Barclays "had more means to satisfy the claims than the (long distributed) estate of Dr Bates," but that Mrs Justice Davies was correct to give this little weight in her initial judgment. It was stated that "no liability could be founded on this consideration alone." By the same token, however, it must be noted that Barclays were the only available compensator, following the distribution of Dr Bates' estate several years earlier.
2. The medical examination, whilst of some benefit to the employment, was “clear beyond doubt that [it's] principal benefit was to the prospective employers".
3. The Court stated that in selecting employees "there could hardly be a clearer example" of an activity being part of a defendant’s business activity. In providing Barclays with a medical assessment on physical suitability, this was integral to Barclays' business.
4. The Court accepted the circumstances obviously give rise to the risk of tort than other circumstances, but that the "variety of facts in negligence cases are legion," and concluded that the risk on these facts was established
5. The Court stated the question of control to be "perhaps the most critical factor". It dismissed Barclays' suggestion that these examinations were comparable to those carried out by medical experts in litigation, highlighting the relative scarcity of need for experts to "conduct a general health examination, and rarer to do so against a standard formula set by the commission party."

Stage 2 test

The second stage of the test was not appealed by Barclays, yet the Court of Appeal reiterated that the "medical examinations were sufficiently closely connected with the relationship between Dr Bates and the Appellants [Barclays]. They were the whole purpose of that relationship."

What can we learn?

• The decision confirmed that the independent contractor defence is no longer recognised.
• Once again, the judiciary have reiterated their appetite to extend the application of vicarious liability both in a sexual abuse context and beyond, reaffirming the principles set out in Cox and Mohamud.
• This decision may result in increased interest from claimants who were previously prevented from pursuing a cause of action. Accordingly the scope of abuse claims may shift and there will likely be in an increased exposure for insurers should claims be pursued against "non-traditional" historic abuse defendants, including commercial institutions, voluntary organisations, sports clubs and non-conventional religious organisations.
• When considering the third criteria of 'integration' in Stage 1, the Court found that the "process was part of the business activity of the Bank. There could be hardly be a clearer example of that than the selection of suitable employees. " This does raise the question as to whether or not the recruitment of employees is part of business activity and therefore whether vicarious liability may attach to an organisation in relation to action carried out by independent service providers.
• Furthermore, the challenge of determining those activities which are 'within the course of employment' will remain in issue for the Courts. There will still remain circumstances in which it is unclear how to distinguish between acts which are sufficiently connected to an employee's work, and those which are opportunistic.
• The recent decision in the matter of X v Kuoni Travel Limited [2018] EWCA Civ 938 highlighted this. The High Court had found that an opportunistic sexual assault in a hotel by an electrician employed there was outside the range of vicarious liability. Had the Court of Appeal considered this when the case was referred to them, they may have reached a different conclusion.
• Currently, it is apparent that any lack of certainty is bad news for institutional defendants when deciding whether to defend or settle a claim.
• Despite the evolving scope of vicarious liability in historic abuse cases such claims can still be defendable; limitation and causation should always be thoroughly investigated and are useful weapons in a defendant's armoury.