Introduction

We discussed the concept of vicarious liability in respect of the wrongdoing of someone who is not an employee in our April 2020 newsletter, Will employer be liable for sexual assault by the doctor appointed to examine the employees? Latest development in vicarious liability”.

To recap, an employer may vicariously be liable for an employee’s negligence or other torts. Two elements have to be shown before vicarious liability can be imposed: (1) the relationship between the two parties makes it proper for the law to make one pays for the fault of the other; and (2) there is a sufficient connection between the relationship and the fault committed by the tortfeasor (i.e. the wrongdoer).

In this article, we will discuss the second element of employer’s vicarious liability: whether the wrongdoing was closely connected with the employment relationship in light of employee’s motive behind? The relevant legal principle has recently been discussed by the UK Supreme Court in WM Morrison Supermarkets plc v Various Claimants [2020] UKSC 12.

Background

A group of former and existing employees (the “Claimants”) claimed against the employer, WM Morrison Supermarkets plc (the “Employer”) for the wrongdoing of another employee, Andrew Skelton (“Skelton”). Skelton was a senior auditor in the internal audit team. A few months before Skelton committed the Wrongdoing (as defined below), Skelton was subject to disciplinary proceedings for minor misconduct and received a verbal warning. Because of the disciplinary proceedings, Skelton harboured a grudge against the Employer. Skelton then executed his plan for revenge against the Employer. 

The Employer’s auditors, KPMG, requested the Employer to provide payroll data for annual external audit. Skelton was assigned with the task of collating and transmitting the payroll data to KPMG. He was granted access to the highly confidential and sensitive payroll data of other employees including the personal information and salary of each employee (the “Data”). Skelton copied the Data to his personal USB stick and uploaded the Data to a publicly accessible file-sharing website. Skelton attempted to use various tricks to frame a fellow employee (who was also involved in the disciplinary proceedings) to be the wrongdoer. Skelton’s misconduct was later unveiled, and he was convicted of a number of offences.

Procedural history

The Claimants, whose Data was disclosed to the public, brought proceedings against the Employer for (1) an alleged breach of statutory duty under the UK Data Protection Act, (2) misuse of private information and (3) breach of confidence (collectively referred to as the “Wrongdoing”). The claims were also brought on the basis that the Employer was vicariously liable for Skelton’s Wrongdoing.

UK High Court

The trial judge rejected the contention that the Employer was under a primary liability in any respects but held that the Employer was vicariously liable for Skelton’s Wrongdoing. The trial judge took the view that the Employer had provided Skelton with the Data in order for him to carry out the task assigned to him, and that what had happened thereafter was “a seamless and continuous sequence of events” and was “an unbroken chain”. The disclosure of the Data to someone other than KPMG was not authorised but was nonetheless “closely related” to what he was tasked to do.   

UK Court of Appeal

The Employer appealed to the Court of Appeal (the “CA”) but its appeal was dismissed. The CA considered that the disclosure of the Data to third parties was within the field of activities the Employer assigned to Skelton. The CA adopted what the judge in Mohamud v WM Morrison Supermarkets plc [2016] AC 677 said and ruled that the employee’s motive was irrelevant. Hence, the Employer was vicariously liable for Skelton’s Wrongdoing.

UK Supreme Court

The Employer then further appealed to the Supreme Court, which ruled in favour of the Employer. The Supreme Court held that the Employer was not liable for Skelton’s Wrongdoing. More importantly, Lord Reed in his reasoning (unanimously agreed by other judges) addressed the misunderstandings which have arisen since the decision in Mohamud.

Motive of the wrongdoer as a highly material factor

Lord Reed considered that the lower courts had misunderstood the principles set out in Mohamud. Even though Lord Toulson in Mohamud had stated that “motive is irrelevant”, which when we read in isolation could be misleading, Lord Reed was of the view that Lord Toulson’s analysis in Mohamud actually based on, inter alia, the fact that the wrongdoer was at the material time purporting to act about his employer’s business but not something personal. In other words, motive matters, and hence a close connection between the wrongdoer’s field of activities and the commission of the tort was found. When Lord Toulson said that motive was irrelevant, he was addressing why the wrongdoer (a petrol station attendant who asked a customer to leave and later assaulted the customer) had at the relevant time become violent was unclear. However, Lord Toulson was not suggesting any departure from the established legal principles.

Back to the current case, Lord Reed was of the view that the lower courts misunderstood the legal principles governing vicarious liability in a number of relevant respects, namely:

  1. the disclosure of the Data on the Internet did not form part of Skelton’s functions or field of activities. The disclosure was not an act which Skelton was authorised to do;
  2. although there was a close temporal link and an unbroken chain of causation linking the provision of the Data to Skelton for the purpose of transmitting it to KPMG and his disclosure on the Internet, a temporal or causal connection does not in itself satisfy the close connection test; and
  3. motive matters – whether Skelton was acting on the Employer’s business or for purely personal reasons was highly material.

The question here is whether Skelton’s disclosure of the Data was so closely connected with acts he was authorised to do that, for the purposes of the Employer’s liability to third parties, his wrongful disclosure may fairly and properly be regarded as done by him while acting in the ordinary course of his employment.

The mere fact that Skelton’s employment gave him the opportunity to commit the wrongful act would not be sufficient to warrant the imposition of vicarious liability. There is a distinction between the scenario that an employee was engaged, however misguidedly, in furthering his employer’s business, versus the scenario that the employee is engaged solely in pursuing his own interests. It is abundantly clear that Skelton was not engaged in furthering his employer’s business when he committed the Wrongdoing; instead, he was pursuing a personal vendetta, seeking vengeance for the disciplinary proceedings some months earlier. In light of the circumstances, no such close connection existed. The Employer was not held vicariously liable for Skelton’s Wrongdoing.

Takeaway

WM Morrison Supermarkets plc v Various Claimants is a rare and may also be the first UK case concerning an employer’s potential vicarious liability of its own employee’s wrongdoing that was designed specifically to harm the employer. The UK Supreme Court has now restated that the employee’s motive matters.

English precedents are persuasive and Hong Kong courts have very often sought guidance from them even though they are not binding in Hong Kong. It is therefore (highly) likely that the UK Supreme Court’s decision in Morrison Supermarkets may be adopted by Hong Kong courts in the near future. Although employers may be vicariously liable for negligence or other torts committed by their employees, employers will be glad to know that the employee’s motive is highly relevant. In deciding whether an employer is vicariously liable for the wrongdoing of an employee, the UK position is that the courts should consider whether the employee was acting on the employer’s business or for purely personal reasons. If the employee’s wrongful act cannot be fairly and properly be regarded as done by the employee while acting in the ordinary course of employment, then the employer may not be vicariously liable for the employee’s wrongful act against a third party. We shall keep a close eye on whether Hong Kong courts will follow the UK approach and will write further on this topic if there is any further development.