“Some plaintiffs will win. Some plaintiffs will lose.” The High Court considers the principles of vicarious liability in Australia.

Background

ADC was a boarder at Prince Alfred College in the early 1960s. When 12 years of age, he suffered significant and prolonged sexual abuse perpetrated by an assistant boarding housemaster, Dean Bain (Bain). Bain was subsequently charged and convicted in 2007 for his assault of ADC and other boarders.

After entering into a commercial settlement with the college in the 1990s, ADC ultimately commenced these proceedings against the college in 2008.

An ancillary issue in the case was whether the discretion exercised by the Full Court (and affirmed on appeal) to extend the limitation period should be upheld. This issue will not be discussed in this paper, given section 6A of the Limitation Act 1969 in New South Wales, which removes statutory limitations that would otherwise apply to abuse claims.

First instance

At trial Vanstone J found in favour of the college. In addition to finding that the claim was statute barred, Her Honour held that ADC had failed to establish on the limited evidence available that the college was in breach of the duty of care it owed to ADC, or that the college ought to be held vicariously liable for the criminal acts of Bain.

Supreme Court of South Australia

The Full Court of the Supreme Court of South Australia found that the claim was not statute barred and overturned the findings of the trial judge.

Relevant to this paper, the Court also unanimously found (albeit for different reasons) that the school was vicariously liable for the unauthorised sexual assault of ADC by Bain. Grey J also found that the college was in breach of the duty of care it owed to ADC.

The Full Court held that Bain had at least ostensible authority to supervise and discipline the boarders including supervising the showering and other preparations for bed and telling stories to the boarders to settle them into sleep. The authority which Bain used to accomplish his criminal purpose could be said to have been conferred by the enterprise of running a school and to be characteristic of that type of enterprise in the community. Accordingly, it could be seen that the college’s “enterprise model” of trust (in Bain) rather than supervision (of Bain), materially increased the risk of sexual assault and hence the harm that eventuated to ADC.

In addition, the Full Court found that Bain’s practice of inviting groups of boys to his room to watch television established that Bain, under cover of his (at least ostensible) authority, “groomed” ADC in such a way as to make him vulnerable to sexual exploitation. This process took place within, and was made possible by, a disciplinary power structure that was an inseparable part of the functioning of the business of running the boarding school.

The college appealed this decision to the High Court.

ADC also filed a Notice of Contention, seeking to argue that the decision in Lepore was wrongly decided, and the Full Court should have found that the college breached its non-delegable duty of care to ADC given the criminal acts perpetrated against him by Bain.

The High Court

The High Court unanimously overturned the decision of the Full Court and found in favour of the college.

They agreed with the trial judge that the claim was statute barred under the relevant limitation legislation, as the delay in commencing proceedings and since the subject abuse occurred meant that a fair trial on the merits was no longer possible.

ADC’s Notice of Contention was dismissed on the grounds that it did not “address the matters required to invoke the authority of this Court to reconsider a previous decision”. As a result, the principles of Lepore, that generally a party’s non-delegable duty of care does not extend to a duty to protect against intentional criminal conduct of an employee, has been maintained.

The High Court provided a useful analysis of the development of the law of vicarious liability both in the UK and Australia. This included consideration of the oft-quoted decisions in Lloyd v Grace, Smith & Co [1912] AC 716 (where a law firm was held vicariously liable for the actions of its conveyancing clerk who illegally transferred ownership of a client’s properties to himself) and Deatons Pty Ltd v Flew (1949) 79 CLR 370 (where an employer was not held vicariously liable for the actions of its bar maid who threw a glass at a patron following an altercation).

The High Court noted that the test typically used for determining whether vicariously liability applies was as summarised by Justices Gummow and Hayne in Lepore:

“For present purposes, it is enough to conclude that when an employer is alleged to be vicariously liable for the intentional tort of an employee, recovery against the employer on that basis should not be extended beyond the two kinds of case identified by Dixon J in Deatons: first, where the conduct of which complaint is made was done in the intended pursuit of the employer's interests or in the intended performance of the contract of employment or, secondly, where the conduct of which complaint is made was done in the ostensible pursuit of the employer's business or the apparent execution of the authority which the employer held out the employee as having”.

A very recent decision of the UK Supreme Court (the highest UK court) in Mohamud v Wm Morrison Supermarkets [2016] AC 677 was considered by the majority. In that case a petrol station sales attendant physically assaulted a patron at his car after a verbal altercation occurred within the shop. Despite the fact that the employee deliberately left the shop to confront and then assault the patron, the Supreme Court found his employer vicariously liable for his actions.

Pausing there, the decision in Mohamud quite clearly contrasts with the decision of the High Court in Deatons Pty Ltd v Flew, and adopts a worryingly broad approach to assessing an employer’s liability for the criminal acts of its employees. Fortunately, the decision in Mohamud is unlikely to be followed in Australia, noting the High Court’s commentary in considering it:

“The explanation given for the employer being held liable in Mohamud was that, because the employer had entrusted the employee with the position of serving customers, it was just that the employer should be held responsible for the employee's abuse of it. The requirement was made out because there was an "unbroken sequence of events" and a "seamless episode", which involved the employee "following up on what he had said to the [customer]". This might show, in a temporal and causal sense, that there was a connection, but it would not give the answer to why it was fair and just to impose liability for the assaults. It does not explain how the actions could or should be said to be in the course or scope of the employment”.

The High Court then contrasted the UK and Australian approach with the approach in Canada, which had previously emphasised an ‘enterprise risk theory’ – in summary the concept involves policy considerations and whether the business enterprise has “created” or “enhanced” the risk that materialises. The Court noted that the theory was similar to the rationale applied by the Court in Lloyd v Grace, Smith & Co, where the firm’s actions in placing the clerk in a “special position” of responsibility, with ostensible authority, enhanced the risk that he may defraud a client.

However, the High Court noted that in more recent cases involving sexual abuse the Canadian courts had “disapproved” of the ‘enterprise risk theory’ and instead focussed upon the effect of the “authority and power” that the employee was permitted or entrusted with.

It is apparent from the High Court’s comments that the ‘enterprise risk theory’ will not be applied here. The majority of Court noted that “the "enterprise risk theory" did not attract any significant support in New South Wales v Lepore” and appeared to endorse the approach in Lepore.

So what then is the position with respect to vicarious liability in Australia, in particular with cases involving sexual abuse?

Ultimately, the majority of the High Court suggested that the “relevant approach” to vicarious liability in Australia is to assess, based on the facts and evidence in each case, the nature of the relationship between the employee and those who are abused (or assaulted), and the nature of the power and responsibility was assigned to the employee.

As the majority relevantly stated:

“In the present case, the appropriate enquiry is whether Bain's role as housemaster placed him in a position of power and intimacy vis-à-vis the respondent, such that Bain's apparent performance of his role as housemaster gave the occasion for the wrongful acts, and that because he misused or took advantage of his position, the wrongful acts could be regarded as having been committed in the course or scope of his employment. The relevant approach requires a careful examination of the role that the PAC actually assigned to housemasters and the position in which Bain was thereby placed vis-à-vis the respondent and the other children”.

However, some caution is to be taken in applying this “relevant approach”. As Justices Gageler and Gordon stated in their joint judgment:

“The "relevant approach" described [by the majority] is necessarily general. It does not and cannot prescribe an absolute rule. Applications of the approach must and will develop case by case. Some plaintiffs will win. Some plaintiffs will lose. The criteria that will mark those cases in which an employer is liable or where there is no liability must and will develop in accordance with ordinary common law methods. The Court cannot and does not mark out the exact boundaries of any principle of vicarious liability in this case.”

Implications

Unfortunately, whilst the High Court has provided some guidance on the “relevant approach” to be adopted in assessing whether vicarious liability applies (in particular to an employer in a case involving sexual assault committed by an employee), the approach is not a hard-and-fast rule. Rather, it requires the analysis of the available facts and evidence in each case.

In our view, the “relevant approach” proposed by the High Court appears to support the opinion expressed by Gleeson CJ at paragraph 64 in Lepore:

“It cannot be said that the risk of sexual abuse ought to be regarded as an incident of the conduct of most schools, or that the ordinary responsibilities of teachers are such that sexual assaults on pupils would normally be regarded as conduct (albeit serious misconduct) within the scope of employment. However, there are some circumstances in which teachers, or persons associated with school children, have responsibilities of a kind that involve an undertaking of personal protection, and a relationship of such power and intimacy, that sexual abuse may properly be regarded as sufficiently connected with their duties to give rise to vicarious liability in their employers” (emphasis added).

Consideration needs to be given in each case where vicarious liability is alleged, to the relationship between the abuser and the victim, the power and responsibility with whether the abuser was entrusted, and the role the employer played by way of granting authority and supervising its employee. An analysis of the employer’s employment contract, policies and procedures will be required. Evidence of how these policies worked in practice will also be important.

In conclusion, it is clear from Prince Alfred College Incorporated v ADC that the application of vicarious liability in Australia is far from settled, although some guidance has now been provided by the High Court. No doubt further guidance will be given when another case, not influenced by limitation issues, comes before the High Court.