Facts
The Claimant contracted with the First Defendant to install air
conditioning in the Claimant's factory. The First Defendant
subcontracted the work to the Second Defendant, Darwell. Darwell
engaged the Third Defendant, CAT, to provide labourers, namely
fitters and fitters' mates.
On the day in question CAT provided a fitter, Mr Megson, and a
fitter's mate, Mr Strang. The pair were working under the
instruction or supervision of Mr Horsley who had been engaged by
Darwell. At the relevant time all three men were working in a roof
space. Mr Megson needed some fittings and instructed Mr Strang to
go and get these. Mr Strang did so. However, instead of returning
via the crawling boards, which were being used for access, Mr
Strang took a short cut. He crawled through some sections of the
ducting which had been installed. This caused the fire protection
sprinkler system to activate, causing extensive damage. Mr Strang
was found to have been negligent.
The question for the court was whether Darwell or CAT should be
held vicariously liable for Mr Strang's negligence.
Judgment
The decision at first instance was based on the assumption that
vicarious liability is an entire liability, i.e. two distinct legal
entities could not be vicariously liable for the same act. This
assumption was based on a case dating back as far as 1826.
The assumption has implicitly been applied in numerous cases in
which an employee of a company (Company A) has been hired or
seconded to work for another company (Company B). In such cases,
although there is no legal transfer of the individual's employment,
the law has in some instances been prepared to treat the individual
as an employee of Company B such that Company B has been found
vicariously liable for the individual's negligence. However, the
assumption was that liability had to attach to either Company A or
Company B, it could not attach to both. Against this assumption, it
is not difficult to see why the question of who should be held
vicariously liable was so contentious. Mr Strang was working
closely with Mr Megson, and did as he was instructed by Mr Megson
(except when it came to taking the fateful shortcut), so there were
strong arguments that CAT should be liable. Equally, the pair were
working under the overall supervision of Mr Horsley who checked on
them from time to time and who gave them general instructions on
what they were to do, and who was responsible for health and safety
on the site. The judge at first instance found that CAT were
liable.
The Court of Appeal approached the question from the standpoint
that the long standing assumption that dual vicarious liability
could not exist was not binding in the Court of Appeal. Much of the
judgment is taken up by an examination of previous authorities, the
extent to which they were founded on the assumption and the extent
to which any authorities would bind the Court of Appeal. May LJ and
Rix LJ concluded that they were entitled to find that dual
vicarious liability could indeed exist. The proper approach is to
look at the negligent act and to ask who was entitled (and,
possibly, theoretically obliged) to give orders about how the work
should or should not be done? The alternative approach of
establishing which party was in "entire and absolute control" was
inappropriate. In many instances a person will not be in the
"entire and absolute control" of one single party. A person may
perform his functions at the direction of more than one party.
On this basis the Court of Appeal found that both Mr Megson and
Mr Horsley were entitled to give Mr Strang instructions about what
he did and how he did it. Weighing their respective "shares" of
responsibility, the Court found that each should contribute
equally, i.e. 50%.
Commentary
In a classic outsourcing scenario the customer will look to pass
all responsibility for a particular function to the supplier.
Indeed, the classic model has at its core the principle that the
customer will have no involvement in performance of the function in
question. In theory these classic outsourcing scenarios should be
unaffected by the ruling. But there are plenty of situations – call
them outsourcing or subcontracting or whatever - in which
responsibility is less clear cut.
SMEs will commonly outsource some elements of their IT functions
to different suppliers and retain other elements to be performed in
house. In reality the relevant personnel will work together as a
team, and often a particular team member may find that he receives
instructions and direction from person employed by the organisation
in which he is working. Another example is business process
outsourcing where routine processes may be carried out by the
supplier's employees but the customer may retain responsibility for
overseeing some aspects of the process. Any such scenario where a
worker may take instructions from two separate "employers" can give
rise to the possibility of dual liability.
This case highlights the need to consider what liabilities could
arise if an individual supplied pursuant to an outsourcing or other
services contract performs negligently. In particular, customers
should consider whether they are really passing all responsibility
to the supplier. If in practice the customer will retain a degree
of operational involvement, it is important to consider how
potential liabilities should be provided for, for example by
indemnities.
