Employers may owe duty of care to employees in conduct and settlement of claims

The Court of Appeal has ruled that a Police Commissioner, who was sued for vicarious liability for the actions of police officers, might arguably owe a duty of care to those officers in relation to the conduct of the litigation, not to sacrifice their interests and professional reputation without good reason and reasonable warning: James-Bowen v Commissioner of Police for the Metropolis [2016] EWCA Civ 1217.

This decision has potential implications for any organisation facing claims that it is vicariously liable for an employee's conduct, particularly where fraud or other serious wrongdoing is alleged. If such a duty is found to exist, it could affect how employers conduct the defence and settlement of such claims. The present decision, however, is merely that such a duty is arguable, not that it exists.

The Court of Appeal also found that it was arguable that the officers could pursue claims for economic loss resulting from their loss of reputation and consequential damage to their careers, without needing to establish psychiatric harm (a claim which the court said had no prospect of success on the facts as pleaded). Accordingly, these claims would be allowed to go to trial.

Background

A terrorist suspect complained that he had been seriously assaulted in the course of his arrest and detention by the police, and brought a personal injury claim against the Commissioner as vicariously liable for the actions of the relevant officers.

The Commissioner agreed to compromise the claim on terms which admitted most of the allegations and which included a public apology. The officers were subsequently charged with criminal offences arising out of the suspect's arrest, but were acquitted.

They then brought proceedings against the Commissioner claiming damages for reputational, economic and psychiatric harm, on the basis that the Commissioner's admission of liability and public apology branded them as abusive thugs, which resulted in their being required to undergo the stress of a criminal trial and damage to their prospects of promotion.

The officers formulated their claim in three ways (ignoring a fourth which was not pursued): breach of a retainer to protect their interests; breach of a duty of care arising at common law from the relationship between themselves and the Commissioner corresponding to a relationship of employer and employee; and breach of duty based on an assumption by the Commissioner of a responsibility to protect their interests.

The High Court struck out the claim. The officers appealed.

Decision

The Court of Appeal overturned the strike-out order, finding that the claim for economic and reputational harm based on a breach of a duty of care arising out of the quasi-employment relationship should be allowed to go to trial. (Moore-Bick LJ gave the leading judgment, with which Longmore and Patten LJJ agreed.)

The starting point was that a party to litigation is entitled, provided it complies with any relevant procedural requirements, to conduct the litigation in whatever way it thinks best serves its own interests, including to press on with a claim that has little prospect of success, or to compromise proceedings which have every chance of success - unless the party owes a duty to another person to take account of that person's interests.

Here the Commissioner accepted that he owed the officers a duty to take reasonable steps to protect them from reasonably foreseeable physical or psychiatric harm. The question was whether that emcompassed the conduct of proceedings against him based on their alleged misconduct, and if so whether it extended to other kinds of harm, in particular economic or reputational harm.

These questions were, the court said, likely to depend to a large extent on the third requirement of the classic test identified in Caparo v Dickman as to when a duty of care arises, namely that it would be fair, just and reasonable for a duty of care to be imposed in these circumstances. (The first two requirements are reasonable foreseeability of harm and a relationship of proximity.) That was likely to involve a question of legal policy, and the court should not strike out a claim on that ground at an early stage unless the position was very clear.

Here the judge had held that to impose this sort of duty on the Commissioner would be inconsistent with his duty to conduct the proceedings in the best interests of the Metropolitan Police Service, and by extension the public, and so it would not be fair, just and reasonable to do so. The Court of Appeal agreed that the Commissioner's primary duty was to the police service, but did not think the alleged duty necessarily cut across that. It was, the court held, arguable that he also owed a duty to the officers to take reasonable care not to sacrifice their interests and professional reputations without good reason and without giving them reasonable warning of what he intended to do.

The court did however reject arguments that there was an implied retainer between the claimants and the Commissioner's lawyers. Assurances given by the lawyers that they were acting in the claimants' interests and would protect them were simply an informal recognition of the parties' shared interest in defeating the claim. Further, on the facts, the Commissioner had not expressly assumed responsibility to protect their interests.

Note: This decision was overturned on appeal. See our post on the Supreme Court decision here.