Can an employer be vicariously liable for an employee’s criminal actions?

In the recent decision of Prince Alfred College Incorporated v ADC [2016] HCA 37, the High Court of Australia clarified the vicarious liability of employers where their employees commit criminal acts.

Background

A boarder at the Prince Alfred College (PAC) was sexually assaulted multiple times by Bain, a boarding house master employed by PAC, when he was 12 years old in 1962. From the early 1980s, the former boarder suffered symptoms of a psychological injury. In 1997, he decided not to sue PAC, and instead accepted PAC’s offer of payment of his medical and legal fees to date, as well as his son’s school fees. Despite this, the former boarder subsequently commenced legal proceedings against Bain and a settlement was reached in 1999. In 2004 and 2005, the former boarder sought further financial assistance from PAC, which was refused.

In 2008, the former boarder brought proceedings against PAC in the Supreme Court of South Australia alleging PAC was liable for damages to him on three alternative bases:

• PAC breached its non-delegable duty of care owed to him;
• PAC was negligent and breached its duty of care; or
• PAC was vicariously liable for the wrongful acts of Bain.

As the proceedings were brought out of time, an extension was required under the Limitations of Actions Act 1936 (SA) (Act) before the former boarder could proceed with his claim.

Decisions

Initially, the primary judge dismissed the claim. Her Honour found there was no basis for the claim and, even if there was, she would have refused an extension of time on the basis that the effluxion of time was so great it prejudiced PAC’s ability to defend the claim.

On appeal, the Full Court reversed the primary judge’s decision and held that PAC was vicariously liable for Bain’s actions and that an extension of time should have been granted. PAC appealed to the High Court.

Ultimately, the High Court unanimously held that the Full Court erred in holding the former boarder should have been granted an extension of time in which to bring proceedings against PAC.

Clarification of vicarious liability

In allowing the appeal, the High Court held that the correct approach to determining whether PAC was vicariously liable is to consider whether the employee’s role as house master placed him in a ‘special position’ of authority, power, trust or control, or gave him the ability to achieve intimacy with the former boarder. When adopting this approach, the High Court found that it was evident that, due to the effluxion of time and consequential deficiencies in the evidence, PAC could not properly defend itself and therefore an extension of time should not have been allowed.

Important reminder for employers

While PAC avoided liability in this instance because the claim was brought out of time, the outcome may have been very different had the former boarder decided to commence proceedings earlier. Importantly, the High Court clarified the correct approach in determining whether an employer may be vicariously liable for the criminal actions of its employee. Had the proceedings been commenced within the time limits set by the Act (or closer to those time limits), the High Court may have found that PAC had employed Bain in a ‘special position’ and, accordingly, was vicariously liable for Bain’s actions.

This decision is a reminder of the importance of employers conducting detailed background checks and ongoing supervision and monitoring of employees engaged in these ‘special positions’. To avoid liability, any allegations of inappropriate behaviour or conduct of this nature must be taken seriously and fully investigated to determine if such behaviour or conduct has occurred and, if so, what disciplinary action ought to be taken.