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Seeman, David --- "The law on vicarious liability: recent developments" [2017] PrecedentAULA 73; (2017) 143 Precedent 38

THE LAW ON VICARIOUS LIABILITY

RECENT DEVELOPMENTS

By David Seeman

Recent decisions in Australian courts have considered some of the central issues that frequently arise in institutional abuse claims.

The question as to the proper approach to vicarious liability in sexual abuse cases was clarified by the High Court of Australia in Prince Alfred College Inc v ADC (Prince Alfred College).^[1] The content of the duty owed by a government agency to a child who was being abused was decided by the New South Wales (NSW) Court of Appeal in DC v State of New South Wales (DC).^[2] In Erlich v Leifer & Ors (Erlich),^[3] the Supreme Court of Victoria confirmed that a school could be directly liable for the abuse by a senior employee while not negligently causing the said abuse. In Hand v Morris & State of Victoria (Hand),^[4] the Supreme Court of Victoria applied the principles in Malec v JC Hutton (Malec)^[5] to a claim for damages by a man who had been abused as a child and later went to work full-time in the public service. This article provides a summary of these cases, and some practical advice for practitioners in the preparation and analysis of sexual abuse claims.

VICARIOUS LIABILITY

Torts committed in the course of an employee’s employment will be attributable to the employer. The question of whether or not abuse was committed in the course of one’s employment is not concerned with the fault of the employer.

The courts have struggled to identify a coherent basis for identifying when and in what circumstances an employer should be vicariously liable for sexual abuse. The High Court in Prince Alfred College provided a unified approach; however, it did not define the precise boundaries of when sexual abuse will be regarded as having occurred in the course of employment. This question still requires a case-by-case analysis and it is still a speculative exercise which depends on a detailed understanding of the evidence.

The High Court did not decide Prince Alfred College on its merits. The Court held that it was inappropriate for the trial judge to have determined liability given the findings made in relation to the limitation of actions defence but noted that guidance is needed given the uncertainty since the High Court’s decision in State of NSW v Lepore (Lepore).^[6]

On vicarious liability, the Court said that:

‘[T]he fact that employment affords an opportunity for the commission of a wrongful act is not of itself a sufficient reason to attract vicarious liability ... the role given to the employee and the nature of the employee’s responsibilities may justify the conclusion that the employment not only provided an opportunity but also was the occasion for the commission of the wrongful act. By way of example, it may be sufficient to hold an employer vicariously liable for a criminal act committed by an employee where, in the commission of that act, the employee used or took advantage of the position in which the employment placed the employee vis-à-vis the victim.

Consequently, in cases of this kind, the relevant approach is to consider any special role that the employer has assigned to the employee and the position in which the employee is thereby placed vis-à-vis the victim. In determining whether the apparent performance of such a role may be said to give the “occasion” for the wrongful act, particular features may be taken into account. They include authority, power, trust, control and the ability to achieve intimacy with the victim. The latter feature may be especially important. Where, in such circumstances, the employee takes advantage of his or her position with respect to the victim, that may suffice to determine that the wrongful act should be regarded as committed in the course or scope of employment and as such render the employer vicariously liable.’^[7]

In Prince Alfred College, the plaintiff was a boarder at the College. He was abused in 1962 when aged 12 – this was not disputed. The abuser was Dean Bain, a housemaster who was in charge of three dormitories and was present during meals. There was a factual dispute about the precise nature of Bain’s role within the school.

The trial judge rejected the plaintiff’s case.^[8] With regards to vicarious liability, her Honour held that she was unable to make findings given the state of the evidence.^[9] At the same time, the trial judge ruled that she would not have extended time. On appeal the plaintiff was successful. While each appellate judge approached liability differently, each of them found that vicarious liability was made out.

The High Court did not rule on the merits of the case, given that it found against the plaintiff on the limitations issue.. However, as extracted above, an analysis of the relationship between the perpetrator and survivor of abuse needs to be construed in the context of the perpetrator’s role within the institution – is there authority, power, trust, control and an ability to achieve intimacy with the victim? The question of the perpetrator’s formal role within an institution needs to be identified, but also their actual role. A formal job description will not determine this question. The actual role that the employee played within the institution, and the manner in which the role was executed, is vital.

Solicitors acting for plaintiffs should turn their minds to these issues early on in litigation. Evidence should be obtained from any lay witnesses who can assist in understanding the perpetrator’s role, as well as the plaintiff. Detailed instructions should be obtained from the plaintiff in relation to the link between the abuse and the role of the perpetrator within the institution. Sometimes the link is subtle, and often the plaintiff will not appreciate the importance of this broader context.

For example, in Erlich, the perpetrator of the abuse was the principal of an Ultra Orthodox Jewish girls’ school and ‘held the preeminent position of power’.^[10] The students were effectively closed off from the rest of the world,^[11] and were naïve concerning matters of sex. The school community was incredibly tight-knit. For these and other reasons, Rush J found that the teacher-student relationship between Leifer and the plaintiff was invested with a high degree of intimacy, which was used to commit that abuse.^[12] His Honour, quoting Lepore, held that the ‘connection between the sexual assaults and the employment’ was such ‘to make it just to treat such contact as occurring in the course of employment’.^[13]

DIRECT LIABILITY

In Erlich, the plaintiff ran an alternate argument to vicarious liability based upon the principles enunciated in Nationwide News v Naidu (Nationwide).^[14]

In Nationwide, the plaintiff was employed by a security company and was placed at Nationwide News to provide security services. The plaintiff alleged that he was the victim of severe bullying by an employee of Nationwide News, a Mr Chaloner. Mr Chaloner was Nationwide News’ Fire and Safety Officer.

Beazley JA found that, given Mr Chaloner’s position and responsibilities, he was in fact the ‘mind and will’ of the defendant in so far as the management of its security requirements was concerned.^[15] Even though he reported to someone more senior, he had a high level of seniority which put him in charge of security operations.^[16] Additionally, and within his ‘appropriate sphere’ he was the embodiment of the company.^[17] Nationwide has gained support from the Victorian Court of Appeal in Christian Youth Camps Ltd v Cobaw Community Health Services Ltd.^[18]

The plaintiff in Erlich was 28-years-old at the time of trial. The abuse had occurred when she was aged between 15 and 18 years, while a student at the school.^[19] She was raised in the Ultra Orthodox Adass Jewish community. She attended the community school from kindergarten through to Year 12.^[20] The plaintiff claimed that she was sexually abused by the principal of the school (the first defendant) between 2003 and 2006.^[21] The abuse occurred on school grounds, at Leifer’s home and on school camps.^[22] The abuse occurred as frequently as two to three times per week.^[23]

In Erlich, the plaintiff pleaded that Leifer was, ‘by virtue of her position and responsibilities within’ the school, she ‘was in fact the mind and will’ of the school so far as management of its teaching, counselling for students and teachers, and formal or informal mentorship was concerned, and was an ‘embodiment’ of the school.^[24]

The argument, in short, was that just like the bullying in Nationwide, the acts of the first defendant principal were in fact the acts of the school by virtue of her position as principal. The evidence was that the first defendant was the most senior person at the school on a day-to-day basis. Only the Board was arguably more senior, but they did not have day-to-day involvement with the school.

Rush J in Erlich embarked on a detailed analysis of the law of attribution. He noted that Nationwide provides a framework for determining when the conduct of a natural person should be attributed to a company.^[25] The question was whether (and if so, in what way), the policy and content of the common law rule of negligence requires that conduct of Leifer be directly attributed to the school.^[26] His Honour noted that the principle objects of the law of torts are to:

• deter wrongdoing;

• compensate losses from contravention of socially accepted values; and

• distribute losses among those in the community best able to afford them.^[27]

In accordance with these principles, the school was found directly, rather than vicariously, liable for the acts of Leifer. It is important to note that the outer limits of this rule – that is, whose acts as a general rule will be so attributable to a company – did not need to be determined in this case. This is a difficult and seemingly unresolved question.

DUTY OF CARE – WHAT DOES THE REASONABLE EXERCISE OF STATUTORY POWERS ENTAIL?

In DC, the appellants were sisters who were abused by their stepfather over many years. In April 1983, one of the sisters complained to the Department of Youth and Community Services (a government department) about the abuse. The appellants contended that the Department breached its duty of care to them by not reporting the abuse to the police, and had it done so, further abuse would have been prevented. Under the Child Welfare Act 1939 (NSW), notification to the Director required the Director to investigate the allegations. Where the Director was satisfied that abuse had occurred, they had a discretion as to whether to report the abuse to police. The defendant conceded that it had the power to report the matter to police but disputed that its duty of care required a report to police.

The defendant at first instance was successful on the basis that the trial judge found that, on balance, no abuse occurred after the first report of abuse. The trial judge did, however, find that the scope of the defendant’s duty included a duty to report abuse to the police.

On appeal, the plaintiff challenged the Court’s findings in relation to the abuse, and the defendant challenged the trial judge’s findings in relation to the content of duty.

By a majority, the NSW Court of Appeal held^[28] that there was abuse after the complaints, and that the duty of care owed to the appellants was a duty to exercise statutory powers to take all reasonable steps in the circumstances of the appellants’ case to protect them from the risk of further physical and sexual abuse, and notification of the abuse to the police was required in order to satisfy the duty.^[29] The defendant appealed to the High Court; however, special leave was revoked.^[30]

DC is an important decision because it highlights the importance of notice of abuse and the effect that such notice has on the expectations of a government agency in the exercise of its discretion. It is important to note that in DC, the government department did in fact act upon the complaint – it carried out an investigation, placed the children away from the home and instigated proceedings in the Children’s Court. This was not enough in the circumstances.

DAMAGES – PECUNIARY LOSS

Claims arising out of sexual abuse are often brought many decades after the abuse. The plaintiff’s work history (or lack of work history) is capable of retrospective analysis, and their legal representatives are tasked with assessing what may have occurred but for the abuse as a child. This is of course an inherently speculative and impressionistic exercise. It may be tempting to dismiss a plaintiff’s entitlement to pecuniary loss damages simply because they have in fact had a productive work history or, alternatively, because the plaintiff may have had a difficult and abusive upbringing prior to the claimed abuse and never demonstrated a capacity to earn. Great caution should be exercised before a pecuniary loss claim is abandoned.

In cases where plaintiffs are injured at a young age, it is especially important to consider the concept of ’loss of earning capacity’. In such cases, loss of earning capacity:

‘does not depend on calculating the income from a particular career which is no longer possible, but in calculating the damage to a capacity to carry on various careers. It is an estimation of possibilities, not proof of probabilities.’^[31]

In Malec, Brennan and Dawson JJ said that:

‘the ascertainment of earning capacity involves an evaluation of possibilities, not establishing a fact as a matter of history.’^[32]

What does this mean for practitioners? A plaintiff does not need to prove that, had they not been injured as a child that they would have gone on and engaged in some specific career path and earned more money. That is not the test. The plaintiff needs to prove, on the balance of probabilities, that they would have exercised their capacity to earn at a higher level than what they have in fact has been able to, by reason of their injury.

Hand is a good illustration of the principles, because Mr Hand had worked full-time for his entire working life after suffering a brain injury at a young age, after the abuse. The case was put on the basis that as a result of his brain injury he was always going to enter the public service. However, over the course of his long career working at Centrelink, he had never been able to progress beyond the APS4 level (a relatively low level within the service). On balance, and with reference to statistical analysis of the spread of employees across the Commonwealth public service, it was accepted that had he not been abused as a child (which caused an anxiety disorder), he would have progressed beyond APS4.

In cases where plaintiffs have been injured at a very young age, and there is an absence of evidence enabling any precision as to loss of earning capacity, an argument may be mounted that the plaintiff is entitled to claim losses calculated with reference to average weekly earnings.^[33]

David Seeman is a Barrister at the Victorian Bar. He practises in common law, appearing and advising in public liability claims, sexual abuse claims, Workcover and TAC matters. PHONE (03) 9225 6321 EMAIL ds@vicbar.com.au.

^[1] [2016] HCA 37.

^[2] [2016] NSWCA 198.

^[3] [2015] VSC 499.

^[4] [2017] VSC 437.

^[5] (1990) 169 CLR 638.

^[6] [2003] HCA 4; (2003) 212 CLR 511.

^[7] [2016] HCA 37, at [80]-[81].

^[8] A,DC v Prince Alfred College [2015] SASC 12.

^[9] Ibid, [233].

^[10] [2015] VSC 499 at [32].

^[11] Ibid, [126].

^[12] Ibid, [128]

^[13] Ibid, [128] quoting Lepore at [74].

^[14] [2007] NSWCA 377; (2007) 71 NSWLR 471.

^[15] Ibid, [236].

^[16] Ibid, [235].

^[17] Ibid, [236].

^[18] [2014] VSCA 75; (2004) 308 ALR 615.

^[19] The plaintiff became a teacher at the defendant school after Year 12. Abuse also occurred while the plaintiff was a teacher at the school. The abuse while a teacher was not the subject of the claim.

^[20] [2015] VSC 499 at [1].

^[21] Ibid, [2].

^[22] Ibid, [69].

^[23] Ibid, [68].

^[24] Ibid, [7] and [117].

^[25] Ibid, [86].

^[26] Ibid, [90].

^[27] Ibid, quoting Hawkins v Clayton and Others Trading as Clayton Utz & Co (1986) 5 NSWLR 109 at [211].

^[28] [2016] NSWCA 198, at [373].

^[29] Ibid, [275]-[276].

^[30] New South Wales v DC [2017] HCA 22.

^[31] State of NSW v Moss [2000] NSWCA 133 at [71].

^[32] (1990) 169 CLR 638, 639.

^[33] B v Reineker [2015] NSWSC 949 (20 July 2015) and TB v State of New South Wales and Quinn; DC v State of New South Wales and Quinn [2015] NSWSC 575.