DMC Category Rating: Developed

This case note is based on an Article in the November 2005 Edition of the ‘(Re)insurance Bulletin’, published by the Insurance and Reinsurance teams at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website

Background
Viasystems engaged Thermal Transfer to install air conditioning at its factory in South Shields, South Tyneside, in the UK. Thermal Transfer sub-contracted the ducting work to S&P Darwell Ltd (the second defendants) who in turn contracted with CAT Metalwork Services (the third defendants) to provide fitters and fitters' mates on a labour-only basis.

On 28 July 1998, one such fitter, a Mr Megson, was working with his mate, Darren Strang, (both supplied by CAT Metalwork) installing ductwork in the roof space under the supervision of Mr Horsley, a self-employed fitter contracted to the second defendants. Mr Megson sent Darren Strang to fetch some fittings. But instead of returning by a sensible route, Darren crawled through some sections of ducting already in place, causing them to come into contact with the sprinkler system, which resulted in an extensive flood.

It was not in dispute that Viasystems was entitled to recover from Thermal Transfer under its contract. But Viasystems also claimed against the second and third defendants in negligence. The issue was whether it was the second defendant or the third defendant that was vicariously liable to Viasystems for Darren's actions.

Lent, borrowed or transferred employees
The leading relevant authority on vicarious liability for a lent, borrowed or transferred employee is Mersey Docks and Harbour Board v Coggins & Griffiths (Liverpool) Ltd [1947] AC 1. In that case, someone was injured by a negligently driven crane. The driver of the crane, and the crane itself, had been lent by the driver's original employer (the Harbour Board) to a firm of stevedores. The House of Lords held that the Harbour Board retained responsibility for the crane driver's negligence. Although the stevedores had immediate control of the relevant operation, they had no power to direct how the crane driver should control the crane - "entire and absolute control" over the method of performing the work had not been transferred.

The decision emphasised that the issue would depend on the facts of each case. The inquiry, however, should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it. The issue did not depend on who, in strict legal terms, employed the individual, but it was for the original employer to show that the vicarious responsibility was no longer his, and this burden would normally be a heavy one.

In the Viasystems case, the judge at first instance found that the third defendants remained vicariously liable for Darren's actions. Mr Horsley had not been in entire and absolute control of Darren Strang and Darren's employment had not been transferred. The third defendants appealed.

Dual liability?
There was no suggestion that either Mr Horsley or Mr Megson were themselves negligent, nor that they had had any real opportunity to prevent Darren acting on a foolish whim. Vicarious liability, however, does not depend on the fault of the employer.

Which of them was entitled and (assuming they had the opportunity) obliged, to control Darren so as to stop him crawling through the duct? In the Court of Appeal's view, the answer was both. This presupposed that it was possible to find two parties jointly vicariously liable.

The idea that dual liability could not exist in English law is based on an assumption that goes back to the early 19th century, starting with a number of so-called "carriage cases" where carriages and their drivers were lent (with or without horses) by their employer to another. The assumption has not been questioned by an English court for 180 years but, in most cases, the factual circumstances were such that the issue simply never arose. Consequently, there was no authority binding on the Court of Appeal to say that dual vicarious liability was a legal impossibility.

One legal red herring (irrelevance) was the idea that there had to be a transfer of the employment before the temporary employer could be held vicariously liable. But this was not actually the case. Although the nature of the employment was material, it was not necessary to show that the employment had formally been transferred from one to the other.

Judgment
In Lord Justice May's view, the central question was which of the two employers was entitled and, in theory obliged, to control the employee's negligent act so as to prevent it. Lord Justice Rix, however, went further to suggest that the issue of control would not always be wholly determinative. In his view, dual liability should apply where the employee was so much a part of the work, business or organisation of both employers that it was fair in the circumstances to make both employers answer for his negligence.

Contribution
Section 2 of the Civil Liability (Contribution Act) 1978 provides that the amount of contribution "shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage in question". "Responsibility" in this context is wider than strict legal causation and includes blameworthiness. An employer, however, will be held vicariously liable for his employee's actions without any personal fault on his part.

It followed that, if two employers were both vicariously liable for the same negligent action of the employee, contributions between them should be on a 50/50 basis.

Comment
The judgment in this case could have significant impact on employer's liability and public liability policies

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