Corporates face wider risks as court rules on Christmas party assault

The concept of vicarious liability continues to expand, with implications for corporates and risk managers. A recent UK Court of Appeal decision (Clive Bellman v Northampton Recruitment Limited) in which a company was found vicariously liable for an assault committed by its managing director on an employee at its Christmas party, provides further guidance on the application of the two-stage test to hold a company vicariously liable.

This extension of vicarious liability presents businesses with further liability risks that need to be managed. More comprehensive risk assessing of business activities allied to better reporting and record keeping will be essential in ironing out weaknesses. Reviewing and strengthening contract terms must also be carried out to improve recovery prospects should claims arise.

This case arose from an incident following a work Christmas party at a golf club, when half of the guests travelled to a nearby hotel for drinks. At the hotel, a conversation regarding work duties resulted in the managing director of the defendant lecturing the employees. A subsequent argument led to the claimant being assaulted by the MD. The claimant suffered traumatic brain damage. In overturning the first-instance decision, the Court of Appeal found that there was a sufficiently close connection between the actions of the managing director and the defendant’s business. The connection was established despite the unusual location and time at which the incident occurred.

The claimant alleged the defendant company was vicariously liable for the actions of the MD.  At first instance, the court held there was insufficient connection between the assault and the MD’s employment, and the vicarious liability claim failed. It found that as the official Christmas party had concluded, so had the ‘work event’. The conversation resulting in the argument was deemed to be insufficient to be considered something within the course of employment. Emphasis was placed on the time and place of the conversation, rather than the content.

On appeal, it was argued that that the lower court’s application of the facts in determining whether there was sufficient connection was defective. The recent cases Mohamud and Cox v Ministry of Justice, set out the relevant two-stage test for imposing vicarious liability on employers:

1. Whether there was a relationship between defendant and wrongdoer.
2. Whether there was a sufficiently close connection between that relationship and the wrongdoer’s actions to make it just that the defendant be responsible for harm suffered by the claimant as a result of those actions for reasons of social justice.

Technical arguments regarding employment status will not bar the imposition of vicarious liability.

The court recognised that the MD was the “directing mind and will” of the defendant.  Objectively, it was clear he had “authority to issue instructions to more junior employees and generally had a wide remit”.

The lower court was found to be incorrect in finding that there was insufficient connection between the MD’s field of activities and his actions; “despite the time and the place, [the MD] was purporting to act as managing director”. The suggestion that the incident arose from “a group of drunken revellers whose conversation had turned to work” was dismissed. The MD was seeking to assert his authority at the relevant time and there was no personal background to his assault of the claimant. Accordingly, the Court of Appeal allowed the appeal.

This case has once again made very clear that the circumstances of incidents, such as assault, are highly relevant when considering the imposition of the regime. It is an insufficient defence for employers to simply state that an incident occurred outside of the wrongdoer’s traditional place of work or outside their working hours.

The Court of Appeal accepted there was a “temporal gap between the party and subsequent drinks”. While it was agreed that the drinking was separate from the party, the discussion was found to be “naturally an assertion of or a re-assertion of [the MD’s] managerial role”. Lady Justice Asplin differentiated this incident from the example given in the High Court of a “social round of golf between colleagues during which conversation turns to work”.

The appeal was granted due to the very particular circumstances and the appeal judges highlighted that limited parallels can therefore be drawn.

However, it is clear that where senior employees are granted the authority to act in a non-traditional manner and/or setting, this could result in a “sufficient connection” being found. The MD acted in a manner consistent with his power and this resulted in a vicarious liability being established.

The boundaries of vicarious liability have been extended considerably recently. This is partly to acknowledge that traditional models of employment are changing (for example with the gig economy models such as Uber) but also because of a number of situations involving victims of assault where, but for a change in the law, victims may not have found redress.

The most significant recent extensions came in Barclays and Armes, which allowed potentially large categories to claim. These could include those having suffered damage as a result of the negligent action of a contractor appointed by the “employer” and those who were abused by foster carers, contractors or volunteers. These decisions mean that others in factually related situations may be able to claim compensation. The law has not necessarily stopped moving and continued expansion of liability seems most likely.

The issue of recoveries against offenders and negligent employees/contractors will become a bigger issue as the number of settled claims rise. Insurers and policyholders will need to work closely together when considering recoveries and potential reputational risks arising from the process.

 

Contributed by Judith Martin, partner, Clyde & Co