Legal Aspects of Business Assignment (Faculty: Dr. C.L.

Bansal)

Group# 8
Roll No. 25NMP08 25NMP19 25NMP30 25NMP41 25NMP52 12EM08 Name Ankit Mittal Kaushik Kochhar Om Prakash Simerdeep Singh Ghulani Ram Awtar Anand Naresh Kumar Gupta

Vicarious Liabilities

Table of Contents
Executive Summary ....................................................................................................... 2 Introduction .................................................................................................................... 2 Employment Status ........................................................................................................ 3 Nature of Employment Test ................................................................................... 3 Control Test ........................................................................................................... 3 Integral part of business Test ................................................................................. 4 Other Tests ............................................................................................................. 4 Course of Employment .................................................................................................. 5 Authorised Acts ..................................................................................................... 5 Wrongful Modes of doing Authorised Acts........................................................... 5 Lister v Romford Ice principle ....................................................................................... 6 Primary Responsibility................................................................................................... 6 References ...................................................................................................................... 9

Executive Summary Introduction

The word tort has a purely technical legal meaning a legal wrong for which the law provides a remedy. The word tort is derived from the latin tortus meaning twisted. From where it came to mean wrong and it is still so used in French: Jai tort I am wrong. The law of tort has been used for many centuries to protect personal interests such as property, reputation, body etc. It ensures justice is done by looking into the claimant's need for compensation, which is paid by the defendant who has committed a breach of duty. The general rule in tort law is that liability is personal, i.e., liability is generally linked to a breach of ones own duty and a person is liable for the wrongs committed by him only. However, in certain scenarios, the law makes one person being liable for the harm caused by another, because of some legally relevant relationship between the two. This is known as the doctrine of vicarious liability. The law of torts as administered in India in modern times is the English law as found suitable to Indian conditions and as modified by the Acts of the Indian Legislature. Its origin in linked with the establishment of British Courts is India. The application of the English law in India as rules of justice, equity and good conscience has, therefore, been a selective application. Further, in applying the English law on a particular point, the Indian courts are not restricted to the common law. The English law consists both of common law and statute law and the Indian courts can see as to how far a rule of common law has been modified or abrogated by statute law of England. If the new rules of English Statute law replacing or modifying the common law are more in consonance with justice, equity and good conscience, it is open to the courts is India to reject the outmoded rules of common law and to apply the new rules. It is on this reasoning that the principles of the English statute, the Law reform (Contributory Negligence) Act, 1945, have been applied in India although there is still no corresponding Act enacted by Parliament in India. The law imposes considerable burdens upon employers both in relation to torts committed by their employees, and in respect of duties owed by employers to their employees. The nature of the duties of employers varies according to the circumstances, and in some instances employers will be liable irrespective of any fault of their own, while in others it is necessary to prove fault on the part of the employer.

This rule appears to be particularly harsh, as it is a direct contradiction of the fault principle, and it was originally based on the legal fiction that employers have control over their employees and order them to do the tortious acts in question, but more recently it has been recognized that the rule has a more pragmatic basis, which is that employers, as opposed to employees, can best afford to bear the cost of compensating injured third parties. Large companies usually insure against this type of liability, or are their own insurers. A distinct advantage of vicarious liability to plaintiffs is the fact that even if the particular individual who committed the tor is unidentifiable or cannot be traced, it will usually be possible to identify the employer, and if that employer is a corporation it will be possible to bring an action even if the employeetortfeasor has fled the jurisdiction to escape legal action. Employers are said to be vicariously liable for the torts of their employees which are committed during the course of employment. In effect this means that employers will be liable to third parties with whom they have usually had no direct contact in situations when they cannot be said to have any personal blame, merely because they have employed someone who has committed a tort. Two fundamental questions must be asked to establish liability 1. Was the person who committed the tort an employee? 2. Was the employee acting in the course of employment when the relevant tort was committed?

Employment Status
Employers or masters will only be liable for the torts of their employees or servants as they are called in law. They will not usually be liable for the torts of their independent contractors (subject to certain exceptions). It is therefore necessary to establish the status of the person who committed the wrongful act. Various tests for establishing an individuals employment status have been developed through the cases. Nature of Employment Test What was the nature of the contract by which the employment was established? One accepted view is that people who have a contract of service are employees and those who have a contract for services are independent contractors. A contract may specify that the person doing the work is an independent contractor, or that the contract is a contract for services, but this is not conclusive and it is open to the court to consider as a matter of fact, the precise nature of employment (Ready Mix Concrete (South East) Ltd v Minister of Pensions and National Insurance (1968)). Control Test How much control did the employer have over the manner in which the work was carried out? If the employer is able to tell the person engaged to do a particular job how the work should be done, the contract will usually be an ordinary employment contract and the person doing the work will be a servant rather than an independent contractor.

For example, a transport company which employs truck drivers to transport goods from one end of the country to the other. It is highly unlikely that senior management in the companys headquarters have the knowledge, skill and experience required to drive a goods laden truck from Chennai to Lucknow. Yet, in law it is likely that the trucks driver is an employee if he is paid a regular salary by the company and contributes to the companys pension scheme. The control test is too simple as a means of assessing contractual status for the purpose of vicarious liability. It is out-dated and partially helpful. As suggested by Atiyah (Vicarious Liability), reference to control means of when and where the work is carried out, rather than how it is performed. Integral part of business Test This test was proposed by Lord Denning in Stevenson Jordan and Harrison Ltd v McDonald and Evans (1969). Under a contract of service, a man is employed as part of the business, whereas under a contract for services, his work, although done for the business is not integrated into it but is only accessory to it. With this approach, there are difficulties categorizing part time employees as part of business or as an accessory to it. While they may be treated, by the business, as part of it, they may not necessarily regard themselves as totally committed to it. Income out of such employment may be considered by them as supplement to their main income, and most would regards themselves as independent contractors. Several tests have been proposed under this approach Who owns the tools? Is the worker paid a wage or a lump-sum for the job? Was the worker in business on his own account? Who had the power to hire and fire the employee? Other Tests Situations may arise where a person is the servant of one employer but is lent to another for a particular job, the question may arise as to who is the employer at the time of an accident. In general the first employer will be treated as the employer for the purposes of vicarious liability. The original employer bears the burden of proving that responsibility for the torts of the employee has shifted to the second employer, and statements in the contract of hire are not to be treated as conclusive on this matter. There are some cases in which cars have been driven by someone other than the owner for a purpose in which the owner has an interest. The question then arises as to whether the owner of the vehicle could be vicariously liable for the negligence of the driver. In Britt v Galmoye (1928), the driver of a car was allowed, for this own convenience, to borrow a vehicle from its owner. The owner was not vicariously liable for his negligent driving. By contrast, in Ormrod v Crossville Motor Services Ltd (1953), the owner of a car asked someone to drive the vehicle to Monte Carlo, where he planned to join him for

a holiday. As there was a join purpose here, the owner was vicariously liable when the driver had an accident. It seems that in such cases, there must be an interest in the venture which is common to both the owner and the driver of a vehicle, before there will be vicarious liability. This is straying rather a long way from the notion of employment, but the courts do appear to be prepared to take those steps.

Course of Employment
A master will only be liable for torts which the employee commits in the course of employment. Although this is a question of fact in each case, there is little consistency in the decisions, and once again the only sensible conclusion must be that the judges are influenced by considerations of policy which fall outside the facts and are seldom discussed. It is therefore extremely difficult to state the law simply. There are two lines of cases, those cases in which acts of employees are held to be within the scope of employment, and those which outside it. Examining each line of cases in an attempt to elicit general principles is futile, but appears that an employer will usually be liable for wrongful acts which are actually authorised by him, and for acts which are wrongful ways of doing something authorised by the employer, even if the acts themselves were expressly forbidden by the employer. Authorised Acts If an employer expressly authorises an unlawful act he will be primarily liable. The position is more difficult in cases in which the employer is said to have authorised a wrongful act by implication. This implied authority approach seems to have lost currency, but it was accepted in the early years of 20th century and it was even then probably little more than a means of justifying the outcome which the courts desired. Wrongful Modes of doing Authorised Acts Generally, If the person who is injured was performing some act which contributed to, or provided some benefit to the business of the employer, there will be vicarious liability (Rose v Plenty). If the employer derives no benefit from the forbidden act (Twine v Beans Express), there will be no vicarious liability. Employers will not usually be liable for deliberate criminal acts of employees which also give rise to civil liability. However, if the criminal act is part and parcel of the employment the employer may be liable. If the employment involved the employee being entrusted with particular goods, then any theft or mishandling of the goods by the employee will give rise to vicarious liability. However, employers are not usually liable for assaults committed by their employees. The position in relation to crime per se is that employers will not be normally be prosecuted for the crimes of their employees, unless the employee was instructed to commit the crime in question, or committed it under duress.

Lister v Romford Ice principle

There is a term implied at common law into contracts of employment that an employee will exercise all reasonable care and skill during the course of employment. An employee who is negligent is in breach of such a term and theoretically, the employer who has been held vicariously liable for the tort could seek an indemnity from the employee to make good the loss. In Lister v Romford Ice & Cold Storage Co Ltd (1957), a father was injured by his son, who was employed by the respondents. The employers were vicariously liable for the son's negligence and met the father's claim. Exercising their right of subrogation under the contract of insurance, the employers sued the son. The House of Lords held that the son was liable to indemnify the employer and consequently the insurers. This situation can clearly cause problems for relations between employers and employees, and as a consequence of the difficulties which have been predicted, Insurers have entered into a gentleman's agreement not to enforce their rights in such circumstances in the future if there is no wilful misconduct or collusion between the employer and employee.

Primary Responsibility
Employers may, in certain circumstances, be liable in tort in their own right. This is termed 'primary liability'. If an employer discovers and condones the tort of an independent contractor, he may be liable for that tort. Such liability would be primary rather than vicarious. Of course, primary liability may also arise if the contractor was acting as the agent of the employer or on his explicit instructions. Primary liability also extends to exceptional situations in which the duty on the employer is so onerous that it cannot be delegated to anyone else. The circumstances in which such duties arise are listed below: By statute Statutes sometimes place non-delegable duties upon employers, and such duties are those statutory duties whi.ch are absolute in character. Duties to take care as well as duties which create strict liability can be non-delegable (Darlillg v Allorney Gelleral (1950). At common law It is possible to find a number of situations in which common law treats certain duties as non-delegable. Ultra hazardous activities Those activities which are inherenUy dangerous in character carry special responsibility for the person who ordered them to be undertaken Examples of

such activities include: a photographer used a magnesium flash lamp close to curtains in a cinema (Honeywill & Stein v lArkin Bros Ltd (1934 a contractor tried to thaw water-pipes in an attic with a blow-lamp (Balfour v Barty-King (1957). Torts of strict liability [f the tort which is committed is one of strict liability, the employer is not able to delegate responsibility for it. For example, Rylands v Fletcher (1866) the duty to prevent the escape of dangerous things coUected on land cannot be delegated. 11,e contractor who caused the escape of water which flooded into neighbouring mines was not liable to the plaintiff. The landowner who employed him was liable. Activities on or adjoining a highway II work is carried out on or adjoining the highway, there is a risk that the to rt of highway nuisance could be committed. The duties on the employer ca nnot be delegated to an independent contractor. For example, Holliday v National Telephone Company (1899) a contractor employed by the defendants caused an explosion on the highway which injured a passer-by. The employer, a telephone company engaged in laying wires, was liable. But note that the employer is not liable if the work is carried out close to, but not adjoining the highway (Salisbury v Woodland (1970)).
Activities in public places

The principle that activities on or adjoining highways attract non-delegable duties probably also applies to activities ca rried out in public places such as railway stations (Picka rd v Smith (1861)). Miscellaneous cases Although the duty not to commit private nuisance can usually be delegated, it is possible to find isolated examples of duties in private nuisance which are nondelegable, for example, the duty not to allow support for adjoining property to be withdrawn (Bower v Peate (1876)).
Bailments

Duties of bailees who are paid for their trouble (bailees for reward) cannot be delegated (Palon v British Steam Olrpet Cleaning Company LId (1977))
Certain

common law duties Implied terms exist in contracts of employment to the effect that the employer will have due regard for the health and safety of all employees (fo/lllstone v Bloomsbury Health Authority (1991)), The duty of employer.; to provide safe equipment has been re-inforced by statute, and is non

delegable. The Employers' Liability (Defective Equipment) Act 1969, s 1, provides that employers are liable for defects in equipment provided by them which cause personal injuries to employees, even if the fault involved acts attributable to some third party. It should be noted that an action under the Consumer Protection Act 1987 is not precluded by the existence of the 1969 Act, and remedies under the later Act are more likely to be available to workers, since it does not require proof of fault. Duty to employ competent staff Employers must ensure that the staff whom they employ are competent to undertake the tasks which they are required to perform, and must train them to to use any equipment in the correct manner. This even extends to ensuring that known trouble-makers and practical jokers are disciplined or dismissed. In Hudson v Ridge Manufacturing Co Ltd (1957), the company's notorious practical joker injured another employee in the course 01 one 01 his pranks, and the employer was liable lor the injury. However, in Smitlt v Crossley Bros Ltd (1951), it was held that a single isolated prank did not attract liability lor the employer. Duty to provide proper plant and equipment There is a duty at common law imposed upon all employers to ensure that any equipment provided lor the use 01 employees is 01 a safe slandard. This also includes a duty to ensure that the equipment is properly maintained However, employers are not liable il the employees, once properly trained, do not make adequate use of the equipment supplied. In Parkinson v Lyle Shipping Co Lid (1964), an employee was injured when he tried to light a boiler. His action failed because the lault did not lie with the equipment but with himself Duty to provide a safe work-place eps to ensure that places of work are sale. This duty applies even though the employee may not be working at the time on the employer'S own premises. In such circumstances it may not be practical for the employer to take as much care of the employee as could be taken on 'home' premises. In Wilson v Tyneside Window Cleaning Company (1958), an employee was injured while cleaning windows on a client's premises. It was held that the employer had done all that was reasonable in the circumstances to ensure the safety of the employee. Employers would not normally be expected to inspect every place in which their workers are to be deployed.

Employers are, however, expected to provide proper tools and equipment for use on other people's premises, and satisfactory instructions and training if necessary.

An overview The common law duties are important Irom the employment law perspective, but one lactor which complicates tIUs area of law is that it is in terspersed with statutory provisions, breaches of which may give rise to an action for breach of statu tory duty. statutory duty are of greater assistance to employees than ordinary negligence actions because the burden of proof is reversed once the statutory duty is established. At one time employees stood little chance of succeeding in suing their employers for injury even if they were prepared to risk losing their jobs by doing so. Many who were seriously injured in the days when conditions in some factories were extremely dangerous, were thrown on the mercy of relatives or the poor law. Before the advent of trade unions and employment protection legislation, there were few people with the means for, or interest in d,ampioning the cause of workers. Employers were protected from legal action by the doctrine of 'common employment' ( not abolished by statute until 1948) wruch prevented an employee whose injury was caused by a fellow worker from succeeding in an action against the employer (Priestly v Fowler (1837). The defences of valenti non fit injllria and contributory negligence often meant that employees had little chance of success, Judges during U,e twentieth century slowly modified these hurdles which had been created in a different social and economic climate, by introducing the notion of the nondelegable duties of employers discussed above, and by refusing to allow the defence of common employment to apply to breach of statutory duty (Groves v Wimborne (1898)). TI,e defence of volellli 11011 fit illjllria was also modified when the House of Lords ruled U,at any consent had to be given freely in Smith v Baker & SOliS (1891). The carelessness of employees has also been treated with considerable leniency by the courts when considering the issue of contributory negligence. Employers, with the exception of very large employers who Are permitted to act as their own insurers are required to take (Employers' Liability (Compulsory Insurance) Act 1969). nus means that injured employees have better protection, through insurance, than many other accident victims. Injured employees have the option of tort actions if the industrial injuries system is inadequate to provide the necessary compensation, and some 12% resort to these. So

there is considerable support, both from the state and from the tort system, which has tended to lean in favour of injured employees, to mitigate their previous harsh treatment. 1n;s has re-inforced the conclusion that they are in a better position than other accident victims. References 1. Cooke, John (2005). Law of Tort. 2. http://www.lexuniverse.com/torts/india/Vicarious-Liability-&-Rules-Of-StrictAnd-Absolute-Liability.html 3. http://indiacorplaw.blogspot.in/2010/05/vicarious-liability-for-companys.html 4. http://www.legalserviceindia.com/articles/torts_s.htm