There is an interesting decision of the NSW Court of Appeal in Zakka v Elias [2013] NSWCA 119 (13 May 2013) http://www.caselaw.nsw.gov.au/action/PJUDG?jgmtid=164672 which raises the question whether and in what circumstances a solicitor can be held vicariously liable for the actions of one of their employees. 

Mr Elias, a sole practitioner, employed Ms Rahe, a recently admitted graduate, in his practice. In accordance with the relevant admission rules, she had a "restricted practicing certificate" which meant that she was not entitled yet to take on clients herself. Unbeknownst to her employer, she took on as a client a Mr Zakka, a family friend, and acted in arranging a loan of $50,000 to be paid to her brother. The lower court found that this was a breach of her duty as a solicitor to avoid a clear conflict of interest- see the appeal at [47]-[48].

The interesting question for current purposes was whether Mr Elias could be held vicariously liable for the wrong committed by Ms Rahe, his employee. Ward JA addresses the issue from [117] and concludes not, applying a number of the comments from NSW v Lepore [2003] HCA 4 from [126] ff. The trial judge had adopted the language of Gummow and Hayne JJ in that case concerning "pursuit of the employer's interests" and "ostensible authority" and found those criteria not satisfied. Ward JA accepted that it was also necessary to consider matters discussed by Gleeson CJ (as well as Kirby J) in Lepore about "close connection". Her Honour held that there was not a sufficiently close connection- Mr Zakka had directly approached Ms Rahe, she had concealed the fact of her acting for him from Mr Elias and indeed knew that under the conditions of her restricted practicing certificate she was not entitled to take on clients on her own. She was on a "frolic of her own". (See also Emmett JA at [158].)

The outcome seems sensible but I must say something seems odd about the reasoning. I think the main problem is that the question of vicarious liability was being addressed in a situation where it was not clear to me that a tort had been committed! When you analyse what Ms Rahe had done, it was in my view a breach of the implied term of her contract as a solicitor not to enter into a transaction where there was a conflict of interest. At [48] this is described as "Ms Rahe's breach of duty" but I would have thought this was a contractual, not a tortious, duty. As far as I am aware, no-one has ever suggested there can be vicarious liability for breach of a purely contractual duty.

So I think it would have been a simpler way to the desired outcome to strike out the claim for vicarious liability on this basis. As it is, it seems to me that the judgment potentially muddies the waters of the law on vicarious liability even more than they were left after Lepore. For example, if this were a tort, was it "intentional" or not? If not, is it even appropriate to be applying the Lepore test(s)? 

Perhaps the matter could be tested by altering the facts. Suppose that, in pursuit of the identical transaction, Mr Zakka had come into the office in Mr Elias' absence and Ms Rahe in the course of dealing with him caused him some negligent physical injury (left a cord on the floor he tripped over, accidentally poured boiling water over him while making coffee, etc.) Can it really be supposed that a court would not find Mr Elias vicariously liable for physical harm caused by an employed solicitor while consulting a client in his office, however much the transaction concerned went beyond what Ms Rahe was authorised to do? The reason I ask is that it seems to me that the court, in seeking to rule out liability, may have overstated the "lack of connection" between what Ms Rahe was employed to do and the way the harm took place. Better to simply rule out vicarious liability as not applying to this sort of duty.

Regards

Neil