Supreme Court rules no duty of care owed to employees by employers when conducting civil litigation

The Supreme Court has ruled that a proposed duty on employers to protect the economic and reputational interests of employees whose misconduct formed the subject of a civil claim against that employer "would not be fair, just or reasonable."

The decision will provide a measure of protection for employers who are required to defend civil claims brought against them (as an employer) on a vicarious liability basis for the actions of their employees. Had the proposed duty been permitted, it would have raised several questions on how litigation in such claims should be conducted, and inevitably produced conflicts of interest for employers.

Background

In 2003, four Metropolitan Police officers ("the officers") took part in the arrest of a suspected terrorist, BA. BA alleged the officers seriously assaulted and injured him during the arrest. In October 2004, the Independent Police Complaints Commission (“IPCC”) brought one charge against one of the officers, which was dismissed. However, the IPCC released the officers' identities into the public domain in 2005, leading to threats of serious violence against them and their families.

On 18 October 2007 BA commenced civil proceedings against the Commissioner alleging that the Commissioner was vicariously liable for the alleged assaults. Despite not being parties to the case, the officers met with legal advisers instructed on behalf of the Commissioner, during which they were allegedly assured that the legal advisers were also acting on the officers' behalf.

At a second meeting prior to the trial of BA’s claim in March 2009, the officers alleged they were told this was no longer the case. They declined to give evidence without measures to protect their identity. The claim was settled with an admission of liability by the Commissioner and an apology for the officers' “gratuitous violence”. The officers were all acquitted in the Crown Court of charges of assault occasioning actual bodily harm arising out of the arrest of BA in 2011.

In September 2013, the officers issued proceedings against the Commissioner seeking compensation for reputational, economic and psychiatric damage on the basis that:

1. A retainer had arisen with the Commissioner’s legal team following their assurances;
2. These assurances meant the Commissioner had assumed a duty of care
3. This duty required the Commissioner to take reasonable care to safeguard their safety, health, welfare and reputational interests when defending BA's claim.

These claims were struck out. The judge found, amongst other things, that the officers had no direct interest in BA's claim against the Commissioner.  The consequential impact on their reputations was "insufficient to create such an interest to which the Commissioner would be legally required to have to or promote or safeguard."

Court of Appeal

The officers’ appeal to the Court of Appeal was partly successful. The Court held that it was arguable that the Commissioner owed a duty of care to the officers to safeguard their economic and reputational interests. This duty of care was considered to extend to the conduct of the litigation by the Commissioner and her legal representatives.

Supreme Court

The appeal to the Supreme Court sought to clarify whether the Commissioner owed a duty to her officers to take reasonable care to protect them from economic and reputational harm, in circumstances where the Commissioner is the subject of proceedings as a result of the officers' alleged misconduct.

The appeal was successful.

The Supreme Court noted that despite Counsel's submissions, they were "not referred to any decided case in any jurisdiction which holds that an employer owes such a duty of care to his employees." To find such an obligation would be to move beyond the duties established to date, and would require an extension of the law. The Supreme Court was not convinced that such an extension was reasonable for the following reasons:

The implied duty of trust and confidence

• The Court found that, to derive an implied term of trust and confidence from the terms of an employment contact (or in this case, the relationship between the Commissioner and her officer, akin to an employment contract), would be to move substantially beyond the specific derivative duties established to date. The Court considered that it was necessary to test the proposed duty against relevant policy considerations.
• Referring to the decision in Calveley v Chief Constable of Merseyside, the Court found that if a Chief Constable does not owe a duty of care to protect the economic and reputational interests of officers in disciplinary proceedings, it is difficult to see why he should owe a duty when defending a claim brought against him/her by a third party.

Conflicting interests

• The Court found that "a duty of care may give rise to conflicting interests," which will then be "a weighty consideration against its imposition." The Court held that there would be many situations in which an individual owed potentially conflicting duties to different persons. The interests of an employer sued on the basis of vicarious liability for the tortious conduct of their employees differed fundamentally from the employees' interests. Lord Lloyd Jones stated it would not be fair, just and reasonable to require an employer to defend proceedings for the purpose of upholding the economic or reputational interests of an employee. Referring again to Calveley, "it would be contrary to public policy" to prejudice police investigations of misconduct by officers, by requiring them to undertake such investigation in such a manner as to protect those officers' reputations.

Conduct of litigation

• The consideration of legal policy and the practical conduct of proceedings also weighed heavily against the duty sought. There is an important public policy that parties should be able to resolve litigation without "fear of incurring liability to third parties". This could have "a chilling effect on the defence of civil proceedings." Furthermore, the recognition of the duty would result inconsistency between employers attempting settlement, but being wary of consequential claims.

Legal professional privilege

• The officers submitted that the 'shared interest' meant that a common interest privilege arose between the parties, and therefore, the Commissioner was unable to rely on legal professional privilege in order to prevent disclosure of materials to the officers. The Supreme Court disagreed. It was found that “something more” than a shared interest (as contended by the officers) was required before common interest privilege could be used to enable the officers to gain access to privilege legal documents belonging to the Commissioner.

What can we learn?

• The decision is important for employers who are required to defend civil claims brought against them (as employer) on a vicarious liability basis for the actions of their employees;
• As stated above, had the duty sought by the officers been established, it would have resulted in inevitable conflicts and caused issues in respect of how an employer would conduct claims of the nature faced from BA by the Commissioner;
• This would have meant a further expansion of the duties owed by employers in the overall context of vicarious liability, given the recent expansion of the concept in Barclays Bank v Various Claimants. The decision confirmed that the independent contractor defence is no longer recognised, and reaffirmed the principles set out in Cox and Mohamud in determining whether a party is vicariously liable for the conduct of a third party.

Authors: Siobhan Mullins (Partner) and Lucy Gallagher (Associate)