From: Neil Foster <Neil.Foster@newcastle.edu.au>
To: Gerard Sadlier <gerard.sadlier@gmail.com>
CC: obligations@uwo.ca
Date: 16/05/2013 04:11:09 UTC
Subject: **SPAM?** Re: ODG: Vicarious Liability of Head Solicitor for actions of Employed Solicitor
Dear Gerard;
Thanks for your very helpful comments. I concede that there is a difficulty here in saying that there was a contractual duty, as you are right to point out that Ms R seems to have agreed to carry out the transaction for no charge. No doubt others will be aware more than I am of the cases governing situations where a solicitor undertakes to act as such for free; clearly the solicitor would impliedly agree to act in accordance with proper professional standards (and I see that this opinion was offered by an expert called on professional standards at [36]). This seems to be one of those "borderline" cases like some of the cases on negligent misrepresentation, where there has been a voluntary assumption of an obligation to behave in a certain way which is "almost" contractual.
The comparison with Lloyd v Grace, Smith is of course apt, although of course the major difference in that case was that the client there had approached the firm generally, and was dealt with by a clerk who clearly had authority to deal with conveyancing transactions.
If we are dealing, then, with a tort of "voluntary assumption of responsibility" of some sort, is it appropriate to discuss vicarious liability? I am not aware that any of the major cases on this area (eg Hedley Byrne or MLC v Evatt) discuss the question, though presumably in those cases someone has spoken on behalf of a company. It seems that the courts assume the normal principles of contractual liability apply (in these "quasi-contractual" cases): if an employee who has apparent authority to speak on behalf of the company, says something, it will be a case of "personal liability" of the company, as the company can only speak through its employees. So here perhaps the most satisfactory way to deny Mr E's liability would be to analyse the case in terms of whether or not Ms R had ostensible authority, as you say. And it seems likely that she did not, due to circumstances in which the relationship of solicitor and client was entered into. I would still like to suggest that "vicarious liability" is not the appropriate way to carry out the analysis, and perhaps this again is another pointer to the odd nature of the "voluntary assumption" cases.
You seem to be, though probably are not, suggesting that all cases of vicarious liability are cases  where "a principle is responsible for the acts of
an agent which are within the scope of the agents ostensible (though
not actual) authority".
I think this cannot be right, for ordinary cases of personal injury by carelessness of the employee, harming a third person. I think it would be stretching the concept of the "scope of ostensible authority" too far to say that an employed delivery driver has "ostensible authority" to run down a pedestrian. There may be some financial harm cases where the analysis works, but at the moment I would not be persuaded that it is a general principle.
Regards
Neil

On 16/05/2013, at 2:16 AM, Gerard Sadlier wrote:

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

http://works.bepress.com/neil_foster/

http://simeonnetwork.org/testimonies/119/Neil_Foster









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

http://works.bepress.com/neil_foster/

http://simeonnetwork.org/testimonies/119/Neil_Foster