Warren Gordon looks at vicarious liability being applied to two employers equally, while Jonathan Ross reports on how lawyers’ success fees are affecting legal bills

Whose fault is it anyway?

The message In an important decision, the Court of Appeal decided that there may be circumstances where more than one unconnected employer is responsible for the negligent actions of an employee.

The Case Viasystems (Tyneside) v Thermal Transfer (Northern), S&P Darwell and T Hall and C Day trading as Cat Metalwork Services (10 October 2005), the Court of Appeal had to decide an issue of vicarious liability.

In 1998 Viasystems engaged Thermal Transfer to install air conditioning in its factory in South Shields. Thermal Transfer subcontracted the ducting work to S&P Darwell, which in turn contracted with Cat Metalwork to provide fitters and fitters’ mates to carry out the work. One fitter, a Mr Megson, and his mate, employed by Cat Metalwork, were installing the ductwork under the instruction or supervision of another fitter, Mr Horsley, who was contracted to S&P Darwell.

The men were working in a roof space. Access was provided by crawling boards using the roof purlins. The fitters’ mate was sent to get some fittings. He crawled through some sections of ducting which moved and damaged the fire protection sprinkler system, which flooded the factory, causing extensive and expensive damage. It was agreed that Viasystems could recover in contract from Thermal Transfer.

While the fitters’ mate was obviously negligent, the issue in this case was whether S&P Darwell or Cat Metalwork should be vicariously liable for the fitters’ mate’s actions. Vicarious liability occurs where one person is liable for the actions of another – for example, an employer’s liability for the actions of his employee. As one of the Court of Appeal judges said, vicarious liability is a device to redistribute the incidence of loss from an employee who is personally at fault to a solvent, insured employer who is not personally at fault.

In the first instance at the county court, Cat Metalwork was found to be liable and it appealed against that decision. The Court of Appeal considered whether both S&P Darwell and Cat Metalwork should be vicariously liable for the actions of the fitters’ mate.

This was an interesting approach as the courts had previously never countenanced holding both a ‘general’ and a ‘temporary’ employer vicariously liable for an employee’s negligence. In this case, Cat Metalwork was the general employer, while S&P Darwell, through Horsley’s supervision of the fitters’ mate, was the temporary employer.

The court focused on the relevant negligent act, in this case, the actions of the fitters’ mate, and asked whose responsibility it was to prevent it. Who was entitled, and perhaps in theory obliged, to give orders as to how the work should or should not be done?

The Court of Appeal decided that both Megson, as fitter in charge of his mate and employed by Hall & Day, and Horsley, the foreman contracted to S&P Darwell, were obliged to stop the mate’s actions. On that basis, to the extent permissible in law, both Hall & Day and S&P Darwell were vicariously liable for the actions of the fitters’ mate.

The court analysed the long-standing assumption that it is not legally permissible for two separate employers to be vicariously liable for the actions of an employee. In a modern context, the court held that dual vicarious liability is a legal possibility. So in this case, where both Hall & Day and S&P Darwell through their respective employee/ contractor were obliged to control the mate’s negligent act so as to prevent it, but failed to do so, they were both held vicariously liable for the mate’s actions.

Warren Gordon is a professional support lawyer at Olswang

Summing up: Viasystems v Thermal Transfer

  • Viasystems sued the employers of a fitter’s mate after he negligently caused flooding to its factory during ducting work.
  • Viasystems had engaged Thermal Systems to carry out the work, which had in turn subcontracted it to a second company S&P Darwell, which in turn engaged Cat Metalwork to provide the fitters.
  • The court had to decide which of the employers was liable for the actions of the employee.
  • It held that both S&P Darwell and Cat Metalwork were liable. This is an important decision since it means there can be dual vicarious liability, whereas previously this was not possible.
  • Everything to lose

    The message The introduction of conditional fee arrangements has resulted in both unsuccessful and successful defendants being liable for costs in proceedings and being held to ransom by claimants of little means.

    The Case In Naomi Campbell v MGN (20 October 2005) the House of Lords considered whether it was unfair for the unsuccessful defendant to have to pay a success fee of more than £250,000 to Ms Campbell’s solicitors and counsel on top of their normal costs. The judgment highlights how the new costs regime introduced by the Access to Justice Act 1999 can be exploited by certain claimants to the substantial cost of wealthy defendants.

    Ms Campbell sued the publishers of the Daily Mirror for breach of confidence in relation to the treatment she was receiving for her drugs addiction. She won in the first instance, but lost in the Court of Appeal and then won again in the House of Lords. Until to the last stage, she had been funding the proceedings herself but, in relation to the appeal to the House of Lords, she entered into a conditional fee arrangement (CFA) with her advisers.

    CFAs were introduced as part of the phasing-out of legal aid to allow litigants to pursue claims they would not otherwise be able to afford. They are mainly used in relation to personal injury and road accident claims but they are now commonly used in property claims, even when the claimant can afford to fund the litigation. A defendant will be notified if the claim is being funded in this way.

    Under a CFA, a lawyer is able to charge, or not charge, fees dependent on the outcome of the case. Claimants pursue claims on a ‘no win, no fee’ basis. In the event the claim succeeds, the claimant’s solicitors and barristers will be entitled to a success fee of up to 100% on top of their normal charges so as to compensate them for the risk they took that the claim might fail and they would get nothing. Unsuccessful defendants are liable to pay the success fee, as well as the claimant’s normal costs, although they can argue over the amount of these fees.

    Despite the fact that Ms Campbell only recovered damages of £3,500, her lawyers claim costs of more than £1m, including costs of around £600,000 in relation to the appeal to the House of Lords. This includes success fees of £250,000 paid to her solicitors and barristers.

    MGN disputed liability for having to pay any part of the success fees on the basis this would render it liable to pay totally disproportionate costs and Ms Campbell did not need to enter a CFA as she could have funded the costs herself. They failed on both grounds. First, the House of Lords held that it was clearly open to parliament to have decided that it was appropriate for access to justice to be funded in this way and the recovery of success fees was not open to challenge under the European Convention on Human Rights.

    Second, it held that the claimant’s financial position was not to be taken into account when determining whether a success fee was payable as CFAs were open to everyone, regardless of their means.

    The House of Lords did express concern that CFAs could be used to blackmail defendants into having to settle because of the substantial costs for which they would be liable if they lost. Furthermore, claimants with no real means could pursue unmeritorious claims and force defendants to pay substantial sums because, even if the claim failed, the defendant would incur considerable irrecoverable costs above what it would cost to settle.

    It may well be that further legislation is required to correct the current imbalance that CFAs create in favour of claimants.

    Jonathan Ross is head of property litigation at Forsters

    Summing up: Naomi Campbell v MGN

    • The House of Lords ruled on conditional fee arrangements, which are now becoming a common feature in property cases.
    • It held that MGN must pay Naomi Campbell’s legal bills of more than £1m, which includes a £250,000 success fee charged by her lawyer, despite the fact that Ms Campbell only won damages of £3,500.
    • It also held that the claimant’s financial position should not be taken into account when deciding whether it could benefit from conditional fee arrangements.

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