Vicarious liability - when will an employer be liable for the wrongful acts of an employee?

The recent High Court decision of Prince Alfred College Incorporated v ADC [2016] HCA 37 (PAC) provides guidance on the approach to be taken by courts in determining whether an employer is liable for the wrongful (criminal) acts of an employee. The previous leading case, New South Wales v Lepore [2003] HCA 4 (Lepore), provided no majority view in respect of this issue.

PAC is highly relevant to government departments and agencies, as it specifically concerns the approach to be applied in cases dealing with the abuse of vulnerable persons in educational, residential or care facilities, by persons employed in special positions with respect to these vulnerable persons.

Background

In 1962, ADC was a 12-year-old boarder at Prince Alfred College in Adelaide (College). A senior housemaster and three housemasters, including Dean Bain (Bain), were in charge of the dormitories. Although the housemasters were present during meal times, prefects supervised the day-to-day activities of the junior boys, including showering and lights out. Bain was rostered on a few times a week, was often around during shower time, and told stories to the boys in the dormitory after lights out. The other housemasters did not supervise lights out and did not come into the dormitory. ADC alleged that Bain first molested him when Bain was telling a story during lights out, progressing to being molested in Bain's room, and on one occasion when Bain took him to a house where they spent the night together.

Primary proceeding 

ADC sued the College, arguing (among other things) that it was vicariously liable for Bain's abuse, which had caused him to suffer psychological injury. It was not in dispute that ADC had been abused by Bain, as he had been previously convicted of two counts of indecent assault against ADC. The primary judge dismissed the proceeding, declining to extend the time for ADC to bring proceedings. In respect of the vicarious liability claim, Vanstone J concluded that the sexual abuse was 'so far from being connected to Bain's proper role that it could neither be seen as being an unauthorised mode of performing an authorised act, nor in pursuit of the employer's business, nor in any sense within the course of Bain's employment'.

Appeal to Full Court

ADC appealed to the Full Court of the Supreme Court of South Australia, and was granted an extension of time to bring the proceeding. Each member of the Full Court also found the College to have been vicariously liable, but the approaches taken by the judges differed from that taken by the primary judge and differed as between themselves. Factors considered by the judges included the 'spectrum' of intimacy (in this case, ADC being a 12-year-old boarder with a housemaster exercising quasi-parental authority in respect of 'intimate' matters such as showering and bed), that the College enhanced the risk by allowing Bain access to the children without supervision, and that Bain was in a position of power over ADC, with respect to matters of order and discipline.

Appeal to High Court 

The High Court allowed the appeal by the College on the basis that an extension of time to commence the proceeding should not have been granted by the Full Court, and that the issue of liability should not have been considered by the primary judge (ie after the judge had determined the proceeding was out of time). However, the High Court acknowledged that, since Lepore, lower courts have been left in an uncertain position about the approach that should be taken in vicarious liability cases of this kind, and that there was a need for guidance to reduce the risk of unnecessary appellate processes arising out of the existing uncertainties.

The relevant approach 

The majority judgment held that the fact that a wrongful act is a criminal offence does not preclude the possibility of vicarious liability, it being possible that in the commission of that act, the employee used or took advantage of the position in which the employment placed the employee in relation to the victim.

Their Honours considered therefore that the relevant approach in determining vicarious liability is to consider any special role that the employer has assigned to the employee, and the subsequent relationship between the employee and the victim, with particular regard to the following features:

• Authority;
• Power;
• Trust;
• Control; and
• The ability to achieve intimacy with the victim. 

It was noted that the latter feature may be especially important, it being conceivable that where an employee takes advantage of his or her position in these circumstances, that may suffice to determine that the wrongful act should be regarded as being committed in the course or scope of employment, and as such render the employer vicariously liable. However, their Honours also noted that it was conceivable that while unlawful acts committed in a workplace would attract vicariously liability, some or all of such other unlawful acts committed outside the workplace would not (for example, the offending by Bain which occurred in a house).

The minority judgment accepted that the relevant approach described in the majority judgment will now be applied in Australia, but noted that it does not and cannot prescribe an absolute rule, and that applications of the approach must and will develop case by case.

Andrea Robinson
Principal Solicitor

Anna English
Managing Principal Solicitor

A civil penalty is not a criminal sentence by any other name

Regulators' speaking roles in civil penalty determinations restored by the High Court

Last week, the High Court delivered an important judgment for regulators in civil penalty proceedings.  In Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; CFMEU and Director, Fair Work Building Industry Inspectorate, the High Court unanimously held that Courts are not precluded from considering and, if appropriate, imposing civil penalties that are agreed between the parties. 

What's new about that?  Isn't that the way it always works?

Not exactly.  In May this year, the Full Court of the Federal Court significantly constrained the ability of Courts (and potentially Tribunals) to consider and give effect to agreements between regulators and other parties about the suitable penalty for a regulatory breach.  

As many of our State clients would know (and as the High Court has now said is sound practice) in a multitude of regulatory proceedings - from breaches of employment awards to director’s duties – regulators as diverse as the Fair Work Ombudsman to ASIC had often reached agreement with an accused on a form of civil penalty.  That agreement was then proposed to the courts who, if it was considered appropriate, imposed the agreed penalty.  Trial times were shortened and, among other things, the regulators’ resources could be put to other uses, such as monitoring compliance. 

With the Full Court’s decision, however, this longstanding practice was held to be unlawful.  For the Full Court, the task of ordering a civil penalty was very much like imposing a criminal sentence.  As a result, it applied the principle in Barbaro, which prohibits a criminal prosecutor from making submissions as to the appropriate sentencing range or ultimate sentencing outcome, to the civil penalty context.  At the heart of the Court's concern was the idea that by agreeing on a penalty, parties may 'bind the Court' to make their preferred order and undermine its role in determining an appropriate penalty. 

Since May, then, real questions have existed in many jurisdictions about the lawfulness of regulators’ speaking roles in any civil penalty determination.  Were regulators to be like prosecutors – silent and dispassionate? Or, alternatively -  invested, knowledgeable, agencies with a range of unlawful conduct expertly in their sights?  

High Court Decision

On appeal, the High Court determined unanimously that, in civil penalty proceedings, courts are not precluded from considering and, if appropriate, imposing penalties that are agreed between the parties.   While the High Court noted that there was some similarity between the task of imposing civil and criminal penalties – the tasks are, it said, fundamentally of a different character.  The Court rejected any attempt to apply Barbaro to civil penalty proceedings.  Moreover, the Court held that a court is not bound by the penalty suggested by the parties, reiterating that it must ask 'whether their proposal can be accepted as fixing an appropriate amount'.  The judgments also spend considerable time endorsing the traditional model of regulator agreement and regulators' speaking role when proposing the terms and quantum of a penalty, stating:

• there is important public policy involved in promoting predictability of outcome in civil proceedings;
• the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcomes for regulators and wrongdoers; and
• it must be accepted that judges will do their duty, as they have been sworn to do, and reject any agreed penalty submission if not satisfied that what is proposed is appropriate.

For advice on regulatory proceedings and civil penalties, now the silence has been lifted, contact:

Greg Elms

Managing Principal Solicitor

8684 0414

greg.elms@vgso.vic.gov.au 

Janine Hebiton

Managing Principal Solicitor

8684 0450

janine.hebiton@vgso.vic.gov.au

Tweets aren't cheap

This case illustrates the great care that must be taken when drafting short, sharp publications intended for dissemination on either social or traditional media platforms.

In Hockey v Fairfax Media Publications Pty Limited, handed down on 30 June 2015, Justice White of the Federal Court of Australia found that Fairfax Media had defamed Federal Treasurer Joe Hockey and awarded him $200,000 in damages. The judgment makes for interesting reading.

The case concerned articles, tweets and a poster published by the Sydney Morning Herald (SMH), The Age and The Canberra Times. The articles stated that Mr Hockey was providing 'privileged access' to a 'select group' in return for donations to the Liberal Party. The tweets and poster acted as sign-posts to the articles through use of the phrase 'Treasurer for Sale' and similar.

Mr Hockey sued the papers' corporate arm, Fairfax, for defamation in three proceedings, which were heard together.  He asserted that the publications contained defamatory imputations (e.g. accusations or meanings), including that he had acted corruptly (the relevant imputations).

Did the publications contain the relevant imputations?

Fairfax conceded that the relevant imputations would be defamatory, but denied that the articles, tweets and poster conveyed them. The contest between the parties turned on this point.

In determining whether the articles, tweets and poster conveyed the relevant imputations, Justice White adopted the customary 'reasonable person test' as his starting position. His Honour queried whether the 'ordinary, reasonable reader would have understood the matters complained of in the defamatory senses pleaded' and, in doing so, made several handy comments about the nature and disposition of our hypothetical friend (see paragraphs 63 - 73 for more on this).

Ultimately, his Honour concluded that the ordinary, reasonable person would not have understood the articles to have conveyed the relevant imputations about Mr Hockey, but would have understood two of the tweets and the poster to have done so.

The key distinction between the articles, tweets and posters, in his Honour's judgment was the context that the authors of the articles were able to provide in drafting them. His Honour found that individual passages of the articles, when read in isolation, could be understood as conveying a defamatory imputation.  When the articles were read as a whole, however, his Honour found that those passages were 'cured' - that the ordinary, reasonable reader, after reading the articles in full, would arrive at a more nuanced conclusion that did not defame Mr Hockey. 

The tweets and posters were a different story. Without the benefit of context, Justice White found that two of the tweets and the poster were undoubtedly defamatory. His Honour did not consider that the hyperlinks contained within the two relevant tweets provided sufficient context since, on the evidence, a substantial number of people viewed the tweets without clicking on them. The third tweet that contained an embedded version of the article was, however, deemed to contain sufficient context and, for that reason, was not regarded as defamatory.

Defence of qualified privilege did not apply

The statutory defence of qualified privilege, and the extended form of qualified privilege recognised in Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 were found not to apply because, in his Honour's view, the publications were not reasonable, and appeared to have been motivated by an improper motive that would prevent the defence from succeeding.

His Honour considered the application of the defences to each of the articles, tweets and posters. Mr Hockey conceded, as part of this consideration, that the subject matter of the articles, tweets and poster was a matter of public interest, and that imputations contained in the publications were conveyed in the course of providing the public with information on that subject. The application of qualified privilege therefore centred on the third element of the defence - whether, in all of the circumstances, Fairfax's conduct was reasonable.

His Honour considered a range of factors, some from statute and others from common law (see paragraphs 227 - 230 for more on this), as part of this enquiry. Ultimately, his Honour  concluded that Fairfax had not acted reasonably in publishing the articles, tweets or poster. 

The most relevant consideration in respect of the articles was the steps Fairfax had taken to obtain a response from Mr Hockey before publishing them - steps which, in his Honour's view, were inadequate. The most relevant consideration in respect of the tweets and poster was the availability of alternative, non-defamatory modes of expressing the same point -  that Fairfax could have used words like 'Hockey: donations and access. Herald investigation', or other non-defamatory phrases, without losing effect.

His Honour also considered whether, in the event qualified privilege were deemed to apply, it would be vitiated by the presence of an improper motive by  Fairfax. The issue of an improper motive arose from several emails and texts sent between Fairfax editors and journalists, which included an instruction that the story be 'nailed to a cross'.  His Honour concluded, on the basis of this exchange, that the articles, tweets and poster had been actuated by SMH editor-in-chief, Darren Goodsir's, personal animus towards Mr Hockey, and that qualified privilege would therefore have been defeated, if it had applied.

To refresh your memory on best practice for members of the VPS on social media see our previous blog When is it ok for a public servant to tweet political opinions?

If you would like advice about this case, or about defamation law and its application to you,  please  contact:

Will Yates 

Solicitor

Dianna Gleeson

Managing Principal Solicitor

Should I stay or should I go (ahead)? Staying civil proceedings when they threaten a fair trial

In the recent case of Commissioner of the Australian Federal Police v Zhao, the High Court granted a stay of civil forfeiture (asset confiscation) proceedings to protect a defendant's right to a fair trial in related criminal proceedings. The Court's decision contributes to a body of law that addresses the question how a court should respond when the conduct of civil, disciplinary or inquisitorial proceedings threatens to prejudice the fair conduct of criminal proceedings.

The facts

On 2 July 2013 Mr Xin Jing was charged with offences against the Commonwealth Criminal Code. Shortly after the charges were laid, the Commissioner of the Australian Federal Police commenced proceedings in the County Court of Victoria seeking an order that the family home of Mr Jing and his wife, Ms Qing Zhao, be forfeited under the Proceeds of Crime Act 2002 (Cth) on the grounds that the property represented proceeds of the offences with which Mr Jing was charged.
Mr Jing and Ms Zhao sought an order that the forfeiture proceedings be stayed until the charges against Mr Jing had finally been determined. They argued that defending the forfeiture proceedings would require Mr Jing either to give evidence that might be used against in him in the criminal proceedings or to divulge the details of his defence before the conclusion of the prosecution's case. Mr Jing and Ms Zhao said that to allow the forfeiture proceedings to continue would rob Mr Jing of his right to silence.
The application for a stay of the forfeiture proceedings was refused in the County Court. However, an appeal to the Court of Appeal was successful. The AFP Commissioner then appealed to the High Court.

The High Court's Decision

The High Court determined unanimously that the Commissioner's appeal should be dismissed. In reaching its decision, the Court first noted that the continuation of the forfeiture proceedings would expose Mr Jing to a risk of prejudice in his defence of the criminal proceedings. The Court then held that the interests of justice would not be served by 'requiring the second respondent to defend the forfeiture proceedings or pursue the exclusion proceedings before his criminal proceedings are finalised, especially since the Commissioner will suffer no relevant prejudice from a delay in the continuation of the forfeiture proceedings.'

Relevance of the decision

Zhao builds on a series of recent decisions, including X7 v Australian Crime Commission and Lee v The Queen, in which the High Court has considered the means by which courts may ensure that the conduct of civil, disciplinary or inquisitorial proceedings does not prejudice the interests of an accused in pending criminal proceedings, either by requiring the accused to divulge his or her defence ahead of time or by requiring the accused to provide information that is likely to be incriminating. The cases show that courts have a range of means of ensuring that the fair conduct of criminal proceedings is not prejudiced by the conduct of other proceedings, such as:

• A stay order like the one in Zhao may be made by a superior court in its supervisory jurisdiction or may be made by an inferior court in the exercise of its implied powers. A superior court also has inherent jurisdiction to restrain contempt; this jurisdiction extends to making an order restraining a body with investigative powers (such as a disciplinary board) from seeking to compel a person charged with an offence from answering questions that relate to pending criminal proceedings.
• Where a statutory provision confers investigative powers on an office holder, a court will be reluctant to interpret the provision in a manner that empowers the office holder to compel the production of information that relates to pending criminal proceedings. It is only where clear and unambiguous terms are employed that a statute will be interpreted to require the production of information in breach of an accused's right to silence.
• Even where a provision empowers a statutory office holder to compel a person to provide information that may implicate him or her in the commission of an offence, the information will generally be held to be subject either to 'use immunity' or 'derivative use immunity'. Use immunity prevents information obtained by an investigator pursuant to his or her compulsive powers from being used directly in criminal proceedings. Derivative use immunity prevents evidence found or discovered as a result of the giving of information to an investigator from being admitted.

Finally, where an accused has been required by an investigating body to provide information in breach of his or her right to silence, improper provision of that information to prosecuting authorities may require any subsequent conviction to be quashed.

For queries relating to any of the issues identified in this blog, please contact:

Jonathan Bayly
Principal Solicitor
jonathan.bayly@vgso.vic.gov.au

Rodney McInnes
Principal Solicitor
rodney.mcinnes@vgso.vic.gov.au