By Richard Lumby BA (Hons); G Dip (Law); BDMA Ins Tech, liability technical and audit manager, Sedgwick International UK
The recent decision in Steven Kennedy v Sheldon Inns Ltd (t/a The Kings Arms)  involving an altercation at a pub has added to the library of decisions regarding vicarious liability.
There is little doubt the insurance industry has contributed to a seemingly never-ending exploration of the complex issue of vicarious liability. For anyone suffering personal injury or damage to property, the first port of call is often the business or organisation the tortfeasor works for. This is on the premise they hold the necessary insurance to handle the outcome and are responsible for their employee’s, or deemed employee’s, actions. However, most claims practitioners familiar with the principle of vicarious liability will be aware the mechanics and considerations are far more complex than they appear.
The first hurdle is the ‘employment’ test, with a traditional view that control is the main factor. However, a series of cases has seen the judiciary introduce a five stage test (see below). This was laid down by the Supreme Court in Catholic Child Welfare Society and others v Various Claimants 2012 – also known as the ‘Christian Brothers case’. Although the sensitive facts of the decision are not the primary focus here, the judgment opened the door to relationships that are ‘akin to employment’ as satisfying the stage 2 test:
- The employer is more likely to have the means to compensate the victim than the employee and can be expected to have insured against that liability.
- The tort will have been committed as a result of an activity being taken by the employee on behalf of the employer.
- The employee’s activity is likely to be part of the business activity of the employer.
- The employer, by employing the employee to carry on the activity will have created the risk of the tort committed by the employee.
- The employee will, to a greater or lesser degree, have been under the control of the employer.
These tests were explored further in the significant case of Barclays Bank Plc v Various Claimants  in which 126 claimants sought damages on the basis of alleged sexual assault by the late Dr. Gordon Bates during medical examinations as part of the application process for employment with the bank, or as existing employees. The claimants argued that vicarious liability should apply in respect of the wider statutory category of ‘worker’ as required by the Employment Rights Act 1996, section 230(3)(b). However, the Supreme Court failed to find a relationship of employment between Barclays Bank Plc and Dr. Bates. In essence, Dr. Bates was considered a contractor and deemed not to have a relationship with the bank that was akin to that of an employee. Therefore, the appeal by the bank was allowed.
Another landmark judgment was handed down in WM Morrisons Supermarkets PLC v Various Claimants  in which an employee leaked customer data in an attempt to discredit another employee. An action was brought against Morrisons, under the Data Protection Act, claiming they were vicariously liable for the employee releasing the data. However, the Supreme Court disagreed; although his employment gave him access to the data, the act of intentional release of customer data was not sufficiently close to his employment duties to confer liability on Morrisons.
Steven Kennedy v Sheldon Inns Ltd
Fast forward two and a half years and the court were again asked to consider the limits of stage 2 in the case of Steven Kennedy v Sheldon Inns Ltd (t/a The Kings Arms) . This first instance decision handed down on 30 November 2022 examined the relationships between the defendant, Sheldon Inns Ltd (SIL), a leasehold owner of a public house, their contract manager, Mrs. Sally Johnstone, who ran the venue and her husband, Mr. Andrew Johnstone, who assaulted the claimant, Mr. Kennedy.
On 24 March 2018, Mr. Kennedy visited The Kings Arms as a customer. Later that evening there was an altercation between him and Mr. Johnstone which resulted in Mr. Kennedy leaving the premises. There was then a further altercation outside where Mr. Johnstone forcefully shoved Mr. Kennedy, who fell backwards onto the pavement — sustaining a serious head injury. The incident was captured on closed-circuit television (CCTV) showing Mr. Johnstone committing the tort of assault.
Mr. Kennedy brought a claim for damages for personal injury and loss against SIL on the grounds they were vicariously liable for the tortious acts of Mrs. and/or Mr. Johnstone. He didn’t allege that SIL owed him a personal duty of care. The issues in this case were whether any tort was committed by Mrs. Johnstone and whether SIL was vicariously liable for any tort committed.
In addressing these points, the judge accepted SIL’s submission that Mrs. Johnstone hadn’t committed any tort for which it could be vicariously liable. The judge also stated the contract for management services between SIL and Mrs. Johnstone didn’t authorise her to do anything on behalf of SIL, merely sell their ‘wet goods’ as supplied by Star Pubs. There was no inference she would act as their servant or agent. She had autonomy over the hours she worked and people she employed. Therefore, there was no case the employment test had been satisfied.
Although Mr. and Mrs. Johnstone were husband and wife, there was no express or implied contract between them for Mr. Johnstone to provide his services at the pub. However, the court did accept there was an informal arrangement whereby he assisted his wife with her business. There was also no direct or indirect contractual relationship between Mr. Johnstone and SIL so, applying the principles laid down in the ‘Christian Brothers case’, he wasn’t an employee. Therefore, the case was dismissed.
We’ve seen employment cases such as Uber v Alam & Others 2021 find independent contractors to be employees. However, the Kennedy v SIL case reaffirms the view that a court won’t always find an employer/employee relationship unless the terms of the agreement allow one party significant control over another. It’s also a reminder that not all management contracts are what they say they are. The claimant failed to successfully argue vicarious liability across any of the relationships considered in this case.
My colleague, Paul Squires believes that we were fortunate to have two decisions in 2020 covering the two main areas of vicarious liability — in Barclays, when an independent contractor can be considered an employee of their contracting employer, and in Morrisons, when an employee is engaged in a frolic of their own. Whilst the area remains fact sensitive, it appears that a settled position is emerging, and Kennedy is a welcome restatement.
The decision will hopefully calm the nerves of companies operating in the service sector, as well as their respective insurers, where outsourced management contracts are often the norm. It’s a further example of the courts reluctance to impose a finding of vicarious liability for the actions of contractors, or where there are legitimate concerns an employment relationship doesn’t exist. What’s important is a thorough investigation of the circumstances of each case, including the intricacies of the various relationships, given that each will be case and fact specific.
Special thanks to Paul Squires, director, Sedgwick International UK, for his valuable contributions to this blog.