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Date: Fri, 17 Jan 2003 10:01:20 -0500 From: Jason Neyers Subject: Dubai Aluminium v. Salaam
Dear Colleagues, Here is a discussion started by Andrew Dickinson that I thought some of you might find interesting. His letter is first, followed by my response. ---------- Jason I hope that you don't mind my troubling you about this case, on which you wrote a short comment for the ODG on 9 December last, referring to Lord Nicholls comments on Morris v. Martin and Lloyd v. Grace, Smith & Co. You suggested that Lord Nicholls favoured the view that Morris and Lloyd are instances of personal rather than vicarious liability, and agreed with this view. I am not sure that I concur. As regards Morris, he instances this as an example of a case where an employer undertakes a responsibility to a third party and then entrusts the discharge of that responsibility to the dishonest agent. Although one could see this as supporting the personal liability of the employer (based on his assumption of responsibility), it seems to me that it is very much in line with the reasoning of the House of Lords in Lister v. Hedley Hall [2002] 1 AC 215, justifying vicarious liability. As regards Lloyd, Lord Nicholls cited this as the classic instance of a case where the wronged party is defrauded by an employee/agent acting within the scope of his apparent authority (relying on the employer's representation establishing that authority). Again, it seems to me that this is consistent with a vicarious liability analysis (the employer being estopped from denying that the employee/agent did the tortious acts within the scope of his employment/authority), but the mere existence of apparent authority to perform certain acts cannot support a finding of personal liability on the part of the employer unless (a) the agent's acts are treated as acts of the principal, and (b) the agent's requisite knowledge/intention is imputed to the principal. Element (a) was recently considered by the House of Lords in Standard Chartered v. PNSC [2002] 3 WLR 1547, but element (b) leads one into an area of considerable uncertainty. In particular, in the area of claims for fraud, the so-called rule in Re Hampshire Land [1896] 2 Ch. 743, appears to prevent imputation of an agent's knowledge to his principal where the agent has acted fraudulently (or in breach of duty) towards his principal. If, for example, the principal cannot be fixed with knowledge of the falsity of a representation made by his agent then he cannot be liable in deceit, although he can be vicariously liable for his agent's deceit (see, e.g., Kwei Tek Chao v. British Shippers [1954] 2 QB 459). I apologise for the length of this e-mail, but would welcome your thoughts. I have not posted this to the ODG, because of the lapse in time and my hesitation about whether I have understood your view and that of Lord Nicholls correctly, but please feel free to forward it if you think that it will contribute to a debate. Kind
regards --------------------- Dear Andrew, Thanks for your message. The cursory argument that I made was not based on a strict reading of legal authority, some of which I consider mistaken. My argument goes something like this. It can almost never be in the course of employment for someone to commit a malicious wrong (I say almost to cover situations involving military/spy situations of which I know nothing and situations of "friction" such as bouncers, bodyguards etc.). Therefore, there cannot be vicarious liability for most intentional torts as opposed to mere negligence. The counter argument says: but then you cannot explain the cases of Morris v. Martin and Lloyd v. Grace, Smith & Co. so you must be wrong. My counter is that those cases are cases of personal fault rather than vicarious liability an argument Lord Nicholls seemed to support. You seem to be willing to say that Morris could be seen as a case of personal fault but mention that the Lister case indicates that it is also vicarious. My problem with Lister is that it is merely attempting to reconcile Morris. It proceeds on the following logic: given that we have vicarious liability and given that Morris is said to be included, what statement of the law can we come up with which brings them together. As such, I don't think Lister is strong authority. In fact, I think the liability in Lister and Bazley v. Curry is also personal based on some sort of non-delegable duty analysis or state actor /state act attribution analysis (a la Meridian Global Funds Management Asia Ltd. v. Securities Commission, [1995] 3 W.L.R. 413). I anxiously await to see if the High Court of Australia will agree with me (they have a case similar to Lister/Bazley on reserve where non-delegable duty, as well as vicarious liability, seems to be a major issue). I think that the Lloyd case is also a case of personal liability on a unilateral contract / warranty analysis. I will promise that my agent is trustworthy if you deposit your money with him. Thus, the fraud does not need to be imputed to anybody in order for the defrauded party to sue the principal. Your estoppel analysis also provides another avenue for recovery if one accepts that detrimental reliance can lead to damages (as in Walton Stores, s. 90 or the argument of Seavey see "Reliance on Gratuitous Promises"). On the detrimental reliance argument, the defrauded party could say: "I relied on your statement that this agent had authority and was trustworthy and have now lost my money. Please make good my loss." Thus, if Morris and Grace are not vicarious but rather personal liability cases, the law does not have to be bent to say that committing a malicious wrong is in the course of one's employment (absent special circumstances). The question might then be asked why do I care? The argument here is beyond the scope of an e-mail but is linked to my search for a justification of vicarious liability that actually explains the limitations placed on its operation and which does not create tensions with other areas of the law (i.e. is coherent). In my opinion the current hodge-podge of reasons (control, master's benefit, revenge, care and choice, identification, evidence, risk creation, indulgence, danger, deterrence, satisfaction of claims, and loss distribution) does not actually accomplish these tasks. The theory that I'm working on (see a nascent form in in "Canadian Corporate Law, Veil-Piercing and The Private Law Model Corporation") is that the ultimate responsibility of any principal for the acts of his agent/employee stems from the principal's promise to indemnify his agent/employee for harms incurred in the course of their employment (contra the 3-2 split in Lister v. Romford). I hope that this helps explain my position and my support of Lord Nicholls. Jason
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