Date: Tue, 7 Mar 2006 17:40:17 +0800

From: Kumaralingam Amirthalingam

Subject: VL and punitive damages

Following the earlier discussion below, colleagues may be interested in this recent New South Wales Supreme Court decision on vicarious liability and contribution: State of NSW v Wayne Eade [2006] NSWSC 84.

Eady was a policeman who had forced an accused in a drug investigation to confess to supplying heroin by threatening to "load up" the accused with additional heroin and thereby expose to a much graver offence. The accused was imprisoned for 34 days and served an additional 10 months periodic detention. Later he sought legal advice and was successful in getting his conviction quashed by the Court of Criminal Appeal on the ground that he had been threatened into signing the confession. The accused then sued Eady, another officer and the State of New South Wales as the employer. The State settled the claim; a significant portion of the damages constituted exemplary damages, for which, on the authority of NSW v Bryant [2005] NSWCA 393, the State was vicariously liable.

The State then sued Eady for contribution, which it was entitled to do under s 9E(b) of the Law Reform (Vicarious Liability) Act 1983. The potential obstacle was the Employee's Liability Act 1991 s 3(1) (a) which stated that "the employee is not liable to indemnify, or pay any contribution to, the employer in respect of the liability incurred by the employer." This Act applied to the Police Service, as determined by earlier cases. Section 5 of the Employee's Liability Act provided an exception: where the conduct of the employee "was serious and wilful misconduct" or if the tort was disconnected with the employment, the employer could seek contribution.

In this case, the court held that the employee's conduct in threatening the accused, the wrongful arrest and the malicious prosecution were all "serious and wilful misconduct." There was no inconsistency in holding that the employee's conduct was within the course of employment for the purposes of vicarious liability, thereby imposing liability on the employer, while at the same time holding that the employee's conduct was serious and wilful under the Employee's Liability Act, thereby enabling the employer to avoid liability and transfer it back to the employee. The court further held that the State was guilty of systemic weaknesses in the way the Police Force conducted itself and thus apportioned liability at 20/80.

Eady declined to defend the action and declared that, following his termination from the NSW Police Force and subsequent divorce, he had no assets. Presumably, most police officers would not be able to compensate the State to the tune of $286,828.80 (80% of $358,536) and therefore such contribution actions would be moot. Unless the police officer was really crooked and had that kind of money, in which case you wonder if the State can in good conscience receive such "assets"!

cheers

Kumar

___________________________
Kumaralingam Amirthalingam
Associate Professor
Director, International Programmes
Faculty of Law
13 Law Link
National University of Singapore
SINGAPORE 117590
Tel: +65 6516 1518
Fax: +65 6779 0979

-----Original Message-----
From: Neil Foster
Sent: Tuesday, December 06, 2005 8:05 AM
Subject: Re: ODG: VL and punitive damages

Dear Jason and other colleagues;

Two recent decisions in NSW indicate that "exemplary" damages (which I think is the category our courts use for "punitive" damages designed to "teach a wrongdoer that tort does not pay" as Lord Diplock put it in Cassell & Co Ltd v Broome) can be awarded against an employer where the employer is vicariously liable. Both cases involved the police, but the general logic would not seem to be restricted to them. See for an example the trial decision in Houda v State of NSW [2005] NSWSC 1053 (25 October 2005) where a solicitor had been "roughed up" and falsely arrested after annoying a police officer; the award of exemplary damages is at paras [503]-[508]. More recently and with much greater consideration of the legal issues involved see the Court of Appeal decision in New South Wales v Bryant [2005] NSWCA 393 (16 November 2005) where Basten JA gives an excellent and carefully reasoned discussion of why vicarious liability includes liability to pay exemplary damages based on the behaviour of the employee.

Vicarious liability for the actions of a police officer needed to be imposed under s 8 of the NSW Law Reform (Vicarious Liability) Act 1983 which makes the Crown vicariously liable for the torts of those "in the service of the Crown", which under s 6 specifically includes police officers. To some extent his Honour's judgement (see [10]-[15]) depended on distinguishing the terms of the 1983 Act from the judgement of Kitto J in Darling Island Stevedoring and Lighterage Co Ltd v Long (1956-57) 97 CLR 36. That is, because the 1983 Act was clear that the State was liable for the "torts" of the officer rather than the "actions" of the officers, it was not possible to argue that it implemented the so-called "master's tort" theory represented by the judgement of Kitto J in that case. It seems fairly clear however that in a very polite and restrained way (Robert Stevens would be proud of him!) Basten JA was tip-toing around the clash of views represented by the judgements of Fullagar J and Kitto J in the Darling Island case. It would be nice if the High Court would revisit the area and make it clear once and for all that the "servant's tort" theory is the one that courts apply these days.

In any event, UK colleagues may be interested to note that Basten JA at [29]-[30] also comments on some English decisions and legislation which he says support the view that an employer can be fixed with liability for exemplary damages, and in [7] distinguishes or refuses to follow some comments of Lord Scott of Foscote in Kuddus [2002] 2 AC 122 at 162.

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