Barclays
Barclays

1         INTRODUCTION

The Supreme Court has recently given judgment in Barclays Bank plc v Various Claimants [2020] UKSC 13 (‘Barclays Bank’).  The case raised a single significant issue: has the ‘rule’ that there is no vicarious liability for the torts of an independent contractor (the ‘independent contractor rule’) survived the changes in the law on vicarious liability in Cox v Ministry of Justice [2016] UKSC 10 (‘Cox’) and Mohamud v WM Morrison Supermarkets? [2016] UKSC 11 (‘Mohamud’).  The Supreme Court unanimously held that it had.  We describe the position before Barclays Bank, explain the decisions at each level, and offer a brief evaluation of the Supreme Court’s decision, which we think should be welcomed.

2         THE POSITION BEFORE BARCLAYS BANK

2.1         Vicarious Liability

Whether the defendant is liable for the tortfeasor’s tort is assessed in two stages.  First, the relationship between the defendant and the tortfeasor must be capable of giving rise to vicarious liability, being traditionally a relationship of employment and more recently a relationship sufficiently similar to a relationship of employment to justify the imposition of vicarious liability (see Barclays Bank [1] per Baroness Hale PSC).  Secondly, the tort must relate in a certain way to the relationship between the defendant and the tortfeasor.  Barclays Bank deals only with the first.

The law on vicarious liability has been ‘on the move’ (see Various Claimants v Catholic Child Welfare Society [2012] UKSC 56 [19] per Lord Phillips PSC).  At the first stage, in Cox and a number of cases preceding it, the Supreme Court recast the first requirement as being centrally focused on whether the tortfeasor’s activity was an integral part of the defendant’s business, and in particular whether by engaging the tortfeasor the defendant created or increased the risk of his tort.  At the second stage, in Mohamud, the Supreme Court again emphasised the importance of ‘risk creation’ (see [45] per Lord Toulson JSC), but did not effect a change in the law (see [17] per Lord Reed JSC).

2.2        The Independent Contractor Rule

The orthodox view is that, whatever may otherwise be said about the expansion of vicarious liability, it has never extended to the torts of a party who is genuinely the defendant’s independent contractor.  As Lord Sumption JSC, giving the judgment of the unanimous Supreme Court in Woodland v Essex CC [2013] UKSC 66 (‘Woodland’) in 2013 (pre Cox/Mohamud), explained, the rule is based on the fundamental tort principle that liability is not ordinarily imposed for things which others do or fail to do (see Woodland [3]–[5] per Lord Sumption JSC).  This principle is, of course, also clearly detectable in the attitude taken by the courts to the imposition of a duty of care in respect the acts or omissions of third parties.

Where, exceptionally, a claimant seeks to displace that principle, they must show not vicarious liability but primary liability for breach of a non-delegable duty: a duty not just to be careful but to procure that others take reasonable care (see Woodland [5] per Lord Sumption JSC).  The claimant did not argue for such a duty in Barclays Bank.

3         THE DECISIONS IN BARCLAYS BANK

3.1         The Facts of Barclays Bank

The late Dr Graham Bates was a doctor engaged by the defendant Barclays Bank (the ‘Bank’) to carry out medical assessments for employees and prospective employees of the Bank.  These assessments were a requirement of employment and continued employment at the Bank.  The Bank told Dr Bates what to assess in his (often young and female) patients, including asking him to report on any ‘abnormalities’ in their genito-urinary system (see Court of Appeal decision at [17]).  The Bank paid a set fee for each examination (see [14]) and the examinations were conducted in a consulting room in Dr Bates’s own home (see [6]).  Some years after his death, the police conducted an inquiry into allegations that Dr Bates had systematically sexually assaulted the candidates and concluded that, had he been alive, there would have been sufficient evidence to pursue a criminal prosecution (see [8]).

3.2        The Judgment at First Instance

Over a hundred of his alleged victims brought a claim for damages for assault against the Bank (see Barclays Bank plc v Various Claimants [2017] EWHC 1929 [1]).  The substance of their claim was that the Bank was vicariously liable for any proved assaults.  Nicola Davies J held that vicarious liability was established (see [47]).  The Bank appealed that preliminary finding.

3.3        The Judgment in the Court of Appeal

The Court of Appeal dismissed the appeal.  Lord Justice Irwin gave the only reasoned judgment, with Sir Brian Leveson P and McCombe LJ agreeing.  They held that the fact that Dr Bates was an independent contractor no longer gave the final answer to whether the Bank could be liable for his alleged assaults (see Barclays Bank plc v Various Claimants [2018] EWCA Civ 1670 [44]).  It held that the comment in Woodland that vicarious liability had never been extended to the torts of ‘true’ independent contractors had not survived the Supreme Court’s decisions in Cox (see [46]).  Acknowledging the argument that a ‘bright line’ independent contractor rule would improve the certainty of the law, it held itself bound by Cox (see [61]).  The Court of Appeal conducted the Cox/Mohamud assessment and concluded in short order that Nicola Davies J was correct to find that vicarious liability was established for the reasons she gave (see [58]–[59].  The Bank appealed again.

3.4        The Judgment of the Supreme Court

3.4.1         The Independent Contractor Rule

The Supreme Court unanimously allowed the appeal.  Baroness Hale PSC, delivering the judgment of the court, affirmed the independent contractor rule (see [27]), tracing its survival with care through the Cox decision (see [21]–[22]).  The court confirmed the ‘classic distinction between employment and relationships akin or analogous to employment, on the one hand, and the relationship with an independent contractor, on the other hand’ (see [24]).  Where the tortfeasor is the defendant’s independent contractor, there is no question of vicarious liability and it is unnecessary to apply the Cox/Mohamud approach (see [27]).  The Supreme Court concluded that Dr Bates had been ‘in business on his own account’ and therefore was an independent contractor, comparing him to contractors engaged by the Bank to audit the books and clean the windows (see [28]).  The court emphasised that he was not paid a retainer and was free to refuse work as offered.  The Supreme Court speculated that Dr Bates had carried medical liability insurance, although as they were correct to concede, it is possible, perhaps probable, that such a policy would not have covered deliberate sexual abuse of his patients.

3.4.2         Alignment of Vicarious Liability with Employment Law

The Supreme Court acknowledged the attraction of the view that a person who was an employee for the purposes of vicarious liability would also be an employee for the purposes of employment law (see [29].  That would mean that a person who employs a ‘worker’ within the meaning of the Employment Rights Act 1996 s 230(3)(a) (those who work under a contract of employment) would potentially be vicariously liable for their torts, and that a ‘worker’ within the meaning of s 230(3)(b) (those who contract to do work for someone otherwise than as a client for the worker’s business) would be an independent contractor for whom no one can be vicariously liable.  Although the Supreme Court described the division as helpful, it declined to assimilate the concepts, regarding it as ‘going too far down the road to tidiness’.

4         COMMENTARY ON BARCLAYS BANK

4.1         The Independent Contractor Rule

We think that the survival of the independent contractor rule is to be welcomed. 

The Court of Appeal was right to accept that the rule creates certainty for parties and their insurers as to who is answerable for whose torts (see [61]).  In a category of litigation dominated by disputes between insurers, parties are likely to prefer to pay an increased premium when beginning relationships such as those between the Bank and Dr Bates than to be exposed to unliquidated and uncertain liability for another business’s deliberate torts.  But the Court of Appeal were wrong to describe certainty as the rule’s only attraction.

The animating principle of the Cox decision is a concern with the substance of employment and quasi-employment relationships over their form or label, particularly in view of changes in the labour market.  But the Court of Appeal took that concern too far by treating the distinction between those in an employment-analogous relationship and independent contractors as a distinction of form rather than substance.  We agree with the Supreme Court that the distinction is fundamental.  A doctor paid to conduct medical assessments as part of their business is no more meaningfully integrated into the business of a bank than a taxi-cab is integrated into the business of a sales travelling executive.  The taxi driver has a different relationship with a prospective claimant than does a doctor conducting an invasive exam, but that relationship is in principle irrelevant.  The right focus is on the relationship between the defendant and the tortfeasor, not the tortfeasor and the claimant.

Despite powerful criticism (see e.g., Stevens, Torts and Rights (Oxford 2007) 258–259), the orthodoxy is that vicarious liability is justified by a cluster of reasons.  Chief among them is the argument that an enterprise which introduces risks into the world in order to benefit from them should compensate those harmed by the materialisation of such risks, even if it was not their fault that the risks materialised in any particular case (see Mohamud at [40] per Lord Toulson JSC).  The Bank’s business clearly benefitted from engaging an independent contractor, in the same way that the sales executive’s business benefits from reaching a critical meeting on time.  But the Bank was not the enterprise which should have answered for the deliberate torts of another enterprise, being Dr Bates.  It did not introduce the risk of Dr Bates’s activities into the world merely by becoming one of his clients, although of course they exposed their particular employees and prospective employees to the risk. 

Accepting the significance of the distinction between independent contractors and those close to employees does not necessarily involve elevating form over substance.  Dr Bates was ‘in business on his own account … with a portfolio of … clients’ (see Barclays Bank at [28] per Baroness Hale PSC).  He was not, objectively, an employee or in a relationship with the Bank analogous to employment.  He was entitled to refuse work on terms the Bank offered from time to time, just like an auditor or a window cleaner.  If the substance of his relationship with the Bank had been different, labelling him an ‘independent contractor’ would have made no difference.

While deep pockets and insurance are no longer of independent significance in justifying vicarious liability (see Cox at [20] per Lord Reed JSC), it is difficult not to be influenced by the suggestion of counsel for the Bank in oral argument that, had the claims been brought before the distribution of Dr Bates’s estate, at least some could have been satisfied (see Barclays Bank at [5] per Baroness Hale PSC).  While the Bank had deeper pockets, it was not as if no claim brought against Dr Bates directly could have ever been worth bringing.  The Supreme Court was right to be cautious about speculating about his insurance position, but it is also possible that some claims could have been met by claiming on any policy.

4.2        Alignment of Vicarious Liability with Employment Law

We agree with the Supreme Court that it would be unnecessary and possibly undesirable to assimilate fully the concepts of the independent contractor in employment law and vicarious liability.  They were developed in different contexts and for different purposes and it would not be surprising or incoherent if they occasionally reached different results.

5         CONCLUSION

With respect, the Court of Appeal seems to have fallen into the error which so often follows after an appellate decision makes substantial changes to the law.  The court treated the Cox decision as having razed the existing principles of vicarious liability and begun building from scratch.  While Cox changed the approach to assessing whether a tortfeasor’s relationship with the defendant is sufficiently similar to employment, it never suggested (and indeed disclaimed) the possibility that one independent enterprise could become vicariously liable for the intentional torts of another merely by contracting with them.  The decision in Barclays Bank is to be welcomed.