Dear Neil,

Thank you very much for circulating this decision. Having read the
case, I must say that I think it was rightly decided, essentially for
the reasons which Ward JA gives.

On the question of vicarious liability, the crucial finding is surely
the conclusion which can be extracted from the reasoning at paras
118-125 that the client Mr. Z knew perfectly well that Ms. R was not
acting on behalf of her employee but was acting on her own account as
a favour. That finding distinguishes the case from the superficially
similar decision in Lloyd v Grace, Smith & Co (1912) AC 732, where the
clark was held out by the firm as transacting the relevant business
and purported to do so on behalf of the firm.

Regarding your view that the duty of care was contractual, I think
that R's duty of care was either tortious only or owed in both
contract and tort.

I think the court treated it as tortious - see at para 57, where the
issues on appeal are set out and the court refers to Ms. R's torts.

Indeed, there might have been some difficulty in finding consideration
to support a contract, if the point was relevant, since Ms. R
apparently acted for nothing - see the extract from her evidence at
para 25.

Finally, I would note that in Lloyd, above, the HL dealt with a breach
of duties owed in both contract and tort as properly forming the
subject of a claim for vicarious liability. See per Gleeson CJ in
State of NSW v Lepore [2003] HCA 4 at para 44.

For myself, I cannot see a difference between a claim for vicarious
liability and a claim that a principle is responsible for the acts of
an agent which are within the scope of the agents ostensible (though
not actual) authority - where a claim for breach of contract would be
uncontravertial.

No doubt, I am missing something?

I would be interested in any comments which listers may have,
particularly regarding the difference between vicarious liability and
the law of agency regarding ostensible authority.

Kind regards

Ger

On 5/15/13, Neil Foster <Neil.Foster@newcastle.edu.au> wrote:
> Dear Colleagues;
> 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
>
> Neil Foster
> Associate Professor in Law,
> Newcastle Law School;
> Faculty of Business & Law
> University of Newcastle
> Callaghan NSW 2308
> AUSTRALIA
> Room MC177,
> McMullin Building
> ph 02 4921 7430
> fax 02 4921 6931
>
> http://www.newcastle.edu.au/staff/profile/neil.foster.html
>
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