Rude awakening: High Court rules on employer vicarious liability for after-hours conduct in shared staff accommodation

Course or scope of employment?

A food and beverage supervisor, Mr Schokman, resided in shared worker accommodation at a resort in the Whitsunday Islands with colleague and team leader, Mr Hewett. The shared accommodation at Daydream Island Resort and Spa was provided as part of their employment with CCIG Investments Pty Ltd. In the early hours of a morning in late 2016, Mr Hewett returned to the room in an intoxicated state after drinking at the resort bar and drunkenly urinated on Mr Schokman’s face while he laid asleep in his bed, causing him to inhale the urine and choke. The incident caused Mr Schokman to suffer a cataplectic attack.

Mr Schokman’s proceedings against his employer were brought on two alternative bases: firstly, it had breached its duty of care owed to him as an employee, and secondly, it was vicariously liable as employer for the negligent act of Mr Hewitt as its employee. While both claims failed at first instance, the Court of Appeal of the Supreme Court of Queensland allowed the appeal on the basis of vicarious liability. The High Court quashed the decision of the Court of Appeal, concluding that the employer could not be attributed with Mr Hewett’s liability for negligence.

Australian common law has long held that liability should not attach to an employer unless a wrongful act was committed in the course or scope of the employee’s employment;²  a rule which the High Court suggests has endured on account of its objectiveness and rationality.³  While the trial Judge in this case had accepted that the occasion for Mr Hewett’s tort arose out of the requirement to live in shared accommodation, his Honour held that it would not be a fair allocation of the consequences of the risk to impose vicarious liability on the employer for what his Honour described as a ‘drunken misadventure’ with respect to toileting.⁴

In allowing Mr Schokman’s appeal, the Court of Appeal relied on the terms of Mr Hewett's employment to find the requisite connection between Mr Hewett's tortious act and his employment. The Court of Appeal held that the terms of Mr Hewett’s employment required him to take reasonable care that his acts did not adversely affect the health and safety of other persons, an obligation which also governed his occupation of the room he shared with Mr Schokman.⁵  The Court of Appeal found that Mr Hewett was not occupying the room as a stranger, but as an employee, pursuant to and under the obligations of his employment contract.⁶

The High Court’s view

In three separate judgments, the High Court unanimously disagreed with the Court of Appeal’s approach. In a principal joint judgment, Chief Justice Kiefel and Justices Gageler, Gordon and Jagot concluded that:

“Nothing in the present case points to the drunken act in question being authorised, being in any way required by, or being incidental to, the employment. In truth, it had no real connection to it.”⁷

A test of vicarious liability requiring no more than sufficiency of connection must be constrained by the outer limits of the course or scope of employment, and there is a need to undertake analyses in determining the course or scope of employment.⁸ The connection may be considered tenuous where the employment only provides an opportunity for the wrongful act to take place.⁹ In this case, the Plurality found that the most that could be said to arise from the circumstance of shared accommodation was that it created physical proximity between the two employees, which provided an opportunity for Mr Hewett’s drunken act to affect Mr Schokman, but this was not a sufficiently strong connection.¹⁰

Put simply, an act done by an employee when on a frolic of their own will not attract liability.¹¹

In a joint judgment, Justices Edelman and Steward agreed that Mr Hewett's employment duties to take reasonable care that his "acts or omissions do not adversely affect the health and safety of other persons" and not to "attend work having consumed alcohol or drugs" were concerned only with his duties while working for his employer as a restaurant team leader, not with his conduct during his leisure time.¹²

Justices Edelman and Steward offered further insight into the development of vicarious liability under Australian common law, concluding that courts have created an ‘unstable principle’ by using vicarious liability as a broad concept that extends to various different areas of law where liability arises "despite the employer not itself being at fault".¹³  Their Honours warned that, unless these different areas of law are kept distinct, courts may be driven to absurd and distorted reasoning.¹⁴

It is useful to set out how their Honours disentangled the multiple areas of vicarious liability law: the first area of law describes where the acts of another are attributed to a principal (including, for example, an employer) for whom the acts are done with their authority.¹⁵ The second area of law describes the attribution of liability of an employee to an employer based on the wrongful acts of the employee, whether or not those acts were authorised by the employer.¹⁶ However, the employee’s wrongful acts have to be sufficiently or closely connected to the employee’s duties or powers of employment so that they could be said to have been performed in the course of their employment.¹⁷ The third area of law describes a breach of a non-delegable duty.¹⁸

Justice Gleeson agreed that the Court of Appeal erred in finding the employer vicariously liable.¹⁹

Key takeaways for employers

The High Court has reinforced that the circumstances of each particular case will determine whether a wrongful act is committed in the course or scope of employment. A central consideration is the identification of what the employee is actually employed to do, or held out as being employed to do. Courts will consider features of the employment such as authority, power, trust, control and the ability to achieve intimacy (which is relevant in some cases of institutional sexual abuse).²⁰

Employers need to exercise care and caution in clearly defining an employee’s scope of work and communicating expectations with employees.

While a breach of non-delegable duty was not agitated in this case,²¹ employers need to take care where obligations arise from a non-delegable duty of care (for example, the duty to provide a safe system of work).

Employers need to also consider their exposure to potential liability stemming from legislation, such as anti-discrimination legislation, stop-bullying and sexual harassment obligations under the Fair Work Act 2009 (Cth), work health and safety legislation, and workers’ compensation legislation.

If you have any questions regarding the matters raised in this article, please contact the authors.