Viasystems (Tyneside) Limited v Thermal Transfer (Northern) Limited & Others - Double Indemnity
Viasystems (Tyneside) Limited v Thermal Transfer (Northern) Limited & Others - Double Indemnity
This case is a milestone in the development of the law relating to vicarious liability, in that the Court of Appeal have now held that in certain circumstances more than one party can be vicariously liable for the negligently acts of an employee.
Facts
The claim arose from a flood at a factory. The Claimant (C) had engaged the First Defendant (D1) to install a new air conditioning system. D1 had sub-contracted the ducting work to the Second Defendant (D2), who had in turn contracted with the Third Defendant (D3) to provide fitters and fitters mates on a labour-only basis.
The flood was caused by the negligence of a fitter’s mate (M), who was an employee of D3 but worked under the supervision of D2’s foreman, and D3’s fitter.
It was agreed that C was entitled to recover in contract from D1, but C also claimed against D2 and D3. D1 also claimed an indemnity from D2 and/or D3. D2 and D3 sought a contribution from each other pursuant to the Civil Liability (Contribution) Act 1978. At first instance the Circuit Judge held that D3 were vicariously liable for the negligence of M. D3 appealed.
Decision
D3’s appeal was allowed.
Though it had been assumed since the early 19th Century that where an employee who had been lent by one employee to another was negligent, only one or other employer could be liable, the foundation for that assumption was uncertain, and dual vicarious liability was in fact legally possible.
On the facts of this case D2 and D3 were both vicariously liable as both D2 and D3 were entitled to control the act which constituted M’s negligence, namely crawling through a section of ducting that caused part of a fire protection sprinkler system to fracture. Liability was therefore apportioned equally between D2 and D3.
Comment
This is a landmark case, and a brave decision, in that it overturns the long-standing assumption, stemming back to Laugher v Pointer (1826) 5 B&C 547 that there could be no dual vicarious liability. Laugher v Pointer was a case concerning who was liable for a coachman who was hired with horses to the owner of a carriage, and in that case Littledale J had said “he is the servant of one or the other and not the servant of one and the other; the law does not recognise a several liability in two principals who are unconnected”.
The Court of Appeal reached their conclusion having reviewed the relevant authorities, in particular the decision of the House of Lords in Mersey Docks and Harbour Board v Coggins & Griffith (Liverpool) Limited [1947] AC1.
In Mersey Docks someone was injured by a negligently-driven crane. The crane and the crane driver had been leant to a firm of stevedores. The stevedores had immediate control over the relevant operation which the crane was performing, but had no power to direct how the crane driver should control the crane. The stevedores and the Harbour Board disputed who was vicariously-liable for the crane driver’s negligence. The House of Lords upheld decisions of lower courts that the Harbour Board, being the crane driver’s general employer, retained responsibility for his negligence. The House of Lords identified six general propositions that were relevant to the identification of the responsible employer. The six principles were approved by May LJ in Viasystems and are worth repeating in full:-
(1) The burden of showing that responsibility does not remain with the general employer is on the general employer and is a heavy one,
(2) By whom is the negligent employee engaged?
(3) Who had immediate direction and control of the relevant work?
(4) The enquiry should concentrate on the relevant negligent act, and then ask whose responsibility it was to prevent it.
(5)A transfer of services can only be effected with the employee’s consent
(6) Responsibility should lie with the master in whose act some degree of fault, though remote, may be found.
Regard was also had to the judgment of LJ Denning (as he then was) in Denham v Midland Employers’ Mutual Assurance Limited [1955] 2 QB 437. This case concerned which of two mutually exclusive employers’ liability policies was liable to pay the deceased employee’s widow. Denning LJ emphasised the primacy of the issue of control, stating (with his usual clarity of expression) that where a temporary employer had the right to control the manner in which a labourer did his work, “then he should be responsible when he did it the wrong way as well as the right way. The right of control carries with it the burden of responsibility”.
Giving the leading judgment in Viasystems, May LJ held that the enquiry should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it. The identity of the employer was not determinative. This was applied to the facts of this case by asking “who was entitled, and in theory, if they had had the opportunity, obliged, so to control M as to stop him crawling through the duct”. The answer was both D2’s employee who was the fitter in charge of M, and D3’s foreman who was in overall control.
May LJ and Rix LJ both considered the significance of the possibility of dual vicarious liability on future claims.
May LJ emphasised that in most situations there would not be dual control, and he doubted whether any of the decided cases would have be decided differently if re-considered afresh. He emphasised the limited circumstances in which there would be a finding of dual control, but suggested that where there was such a finding, it was highly likely that the measure of control would be equal, and thus that liability would be apportioned equally in any contribution proceedings.
Rix LJ explained that the possibility of dual responsibility provided “a coherent solution to the problem of the borrowed employee”. This solution, he said, would be fairer and would enable cases to be settled more easily, in that it made the act of apportionment between defendants easier.
Rix LJ expressed his own thoughts as to the circumstances in which dual vicarious liability may arise. He held that the appropriate circumstances were likely to be where there was a situation of shared control, and “where it is just for both employers to share a dual vicarious liability”. When will it be “just”, one asks? Rix LJ was of the opinion that the facts of Viasystems were such a situation as M was part of D3’s small hired squad, but under the supervision of D2’s foreman. He distanced himself from any suggestion that dual vicarious liability was to be equated solely with control, emphasising that any idea of “fault” was not an issue. He said “one is looking for a situation where the employee in question, at any rate for relevant purposes, is so much a part of the work, business or organisation of both employers that it is just to make both employers answer for his negligence”. He suggested that dual liability was unlikely to arise in the Mersey Docks situation as the employee was using his general employer’s equipment in his general employer’s own sphere of operations, whereas a more likely case was where an employee was contracted out labour using the temporary employer’s equipment and subject to the temporary employer’s directions, or where an employee is seconded for a substantial period of time to the temporary employer.
The circumstances in which dual vicarious liability will exist will no doubt be developed in future case-law, and in the meantime the boundaries are likely to be tested by defendants adding other defendants in cases where the point is arguable. Given that out-sourcing, sub-contracting and the use of agency staff is an integral part of the modern economy, such situations are likely to occur relatively frequently. This is a bold decision that reflects the reality of the modern economy, and this will be an exciting area of law to watch.