Updates and background for this project (Digest)
I. INTRODUCTION
3.1 The unsatisfactory state of the law relating to employees' liability, particularly as a result of the decision in Lister v Romford Ice,1 has led to reforms in England and other Australian jurisdictions. In New South Wales, the Employees' Liability (Indemnification of Employer) Act 1982, as interpreted by the High Court,2 has abolished the rule in Lister v Romford Ice but the extent of reforms in other jurisdictions is still relevant to the question whether change should be taken beyond that effected by the 1982 Act. To provide a broader perspective, there is also brief discussion of the law governing employees' liability in a number of European countries.
II. TASMANIA
3.2 In Tasmania, an employer is required by statute to take out and maintain insurance which, amongst other things indemnifies each employee in respect of liability incurred by the employee for:
... personal injury by accident, or disease, suffered by any worker that arises out of, and in the course of, the employment of that worker with him. (Workers' Compensation Act 1927 (Tas) s 34(1)(b)).
The effect of this provision is that where an employee negligently injures another employee in an accident which arises in the course of employment the negligent employee will be indemnified by the insurance which the employer is required to effect. The provision was inserted in the Workers' Compensation Act 1927 (Tas) in 1973.3
3.3 The main shortcoming of this statutory provision is that the negligent employee is assured of protection only where personal injury is caused to another worker. Where the injured person is a stranger, there is no statutory requirement that the employee be indemnified in respect of the liability. A further problem is that although there is not specific provision in the Act for a judgment against a negligent employee in favour of the insurer who has indemnified the employee, a trial judge has been known to make an order to this effect.4 If this was a regular practice, it would effectively destroy any protection that a negligent employee would appear to have under the legislation.
III. SOUTH AUSTRALIA
3.4 In 1972, the South Australian Parliament amended the Wrongs Act 1936 with the introduction of a section which provides as follows:
3.5 In the course of the second reading speech, the Attorney General, the Hon L J King, outlined the reason for introducing the section.
Its purpose is to abrogate a rule under which an employer who is vicariously liable for the tort of his employee can claim indemnity from the employee in respect of that liability. This indemnity may be claimed on the basis of an express or implied term in the contract of employment or pursuant to the provisions of the Wrongs Act for contribution between tortfeasors. A prudent employer can always protect himself by insurance where there is any real likelihood of liability arising by reason of the acts or omissions of those engaged in his employment. There can be no justification for continuing this right of indemnity which is of such dubious value to an employer that it is rarely enforced but which may in isolated cases cause considerable hardship to an employee.6
3.6 It appears that s 27c has not been the subject of judicial interpretation in any reported judgment of the Supreme Court of South Australia. This may be the direct result of the section's having effectively deterred employers from seeking recovery from employees. Despite this lack of judicial interpretation there is a significant difference between it and the Employee's Liability (Indemnification of Employer) Act 1982, which is obvious from its terms.
3.7 Unlike the New South Wales Act, the South Australian legislation provides that the employer is liable to indemnify the employee in respect of liability incurred by the employee. This liability to indemnify, which is the reverse of Lister v Romford Ice, does not arise if the employee is otherwise entitled to indemnity. This proviso means that where the employee has effected insurance in respect of the liability, the employee must seek indemnity from the insurer and not the employer. Moreover, where proceedings are brought against the employer by the injured person, and the employee is entitled to be indemnified by a contract of insurance, the employer is to be subrogated to the rights of the employee under the policy of insurance.7 This right is not affected by the Insurance Contracts Act 1984 (Cth) (para 2.39), which applies only to insurers who attempt to be subrogated to the rights of the employer against the employee.
IV. NORTHERN TERRITORY
3.8 In 1980, the Northern Territory Law Review Committee published a report concerning the rule in Lister v Romford Ice.8 Although the report does not discuss the various ways in which an employee may be liable to an employer for the consequences of the employee's tortious act or omission, the final recommendation is expressed in broad terms:
. . . in the whole of the circumstances, a workman should not be in the position whereby damages paid by his employer can be recovered against him.9
3.9 The Law Reform (Miscellaneous Provisions) Act 1984 (NT), implementing the recommendation of the Committee, was passed by Parliament on 7 June 1984 and received Royal Assent on 12 July 1984. The Act is in terms almost identical to s 27c of the Wrongs Act 1936 (SA). Apart from differences of terminology, the Northern Territory legislation also contains a transitional provision to the effect that the Act applies:
to all torts whether committed before or after the commencement of this Act but nothing in this Act requires an employer to repay an amount of money to his employee or former employee which was paid before, in relation to a tort committed before, the commencement of this Act.10
3.10 During the second reading speech, the Attorney-General, the Hon J M Robertson did not specifically mention the rule in Lister v Romford Ice but referred generally to the liability of an employee to reimburse the employer.
The need for this present amendment arises because there are some doubts about an employee's position when he commits a wrongful act. The common law seems to provide that, if the employer required it, the employee would have to reimburse him - or, more likely, the employer's insurer - for any damages paid to the victim. This is clearly an inequitable situation and has been criticised by judges and other legal authorities. Very few employees could afford to pay back large damages sums and, in fact, most employers would have taken out insurance in the reasonable belief that it would cover their employees' tortious acts.11
The Act received the full support of the Opposition, on the basis that it was aimed at removing an anomaly in the law, rather than providing any sudden and extreme disruption to the law.
V. ENGLAND
3.11 Following the decision in Lister v Romford Ice, the Minister of Labour appointed an inter-departmental committee to study the implications of the case. The committee did not recommend legislative intervention to reverse the decision but stated that it was preferable for insurers to agree not to exploit their legal rights against negligent employees. Members of the British Insurance Association subsequently entered into a "gentleman's agreement'' in the following terms:
Employers' Liability Insurers agree that they will not institute a claim against the employee of an insured employer in respect of the death of or injury to a fellow-employee unless the weight of evidence clearly indicates (i) collusion or (ii) wilful misconduct on the part of the employee against whom a claim is made.13
3.12 The agreement only applies to insurers. Employers are therefore still free to bring proceedings against employees for breach of an implied term in the contract of employment to exercise reasonable care. Secondly, the agreement only prevents legal proceedings being commenced by the insurer when death or injury occurs to a fellow-employee of the negligent employee. Consequently, where an employee injures a person who is not a fellow-employee, the insurer is not prevented by the agreement from bringing proceedings against the employee. One commentator has doubted "whether on general grounds, this rather peculiar method of law reform should be encouraged".14 A more direct and effective way of dealing with subrogation is that contemplated in the Insurance Contracts Act 1984 (Cth) (para 2.39).
VI. OTHER EUROPEAN COUNTRIES
3.13 In the Federal Republic of Germany, the courts have limited the liability of employees by the development of what is termed "employee's right of immunity". The rule is flexible and may operate in a variety of circumstances.
A court may hold that the employer, after having indemnified the victim, will be barred from recovering from the employee or will be awarded only a part of his costs. The employee after having paid the third party may claim full or partial indemnity from his employer. The employee may also ask the employer to relieve him wholly or in part from any claims that may be raised against him by the injured person.15
The rule does not apply if the conduct of the employee was grossly negligent, if the injured person was a co-employee, or if the employee's liability was covered by insurance.
3.14 Austria has codified what is essentially the West German court practice in the Law on the Liability of Employees of 23 April 1965. Where the injured person brings an action for damages against the employee who has committed what is termed an "excusable mistake", the employee may claim complete reimbursement from the employer of any damages the employee has had to pay. Where the action is brought against the employer no reimbursement from the employee may be claimed in cases of “excusable mistake".16
3.15 Under both Norwegian and Swedish legislation, liability of the employee has become the exception rather than the rule. Only in cases of intentional acts or gross negligence will the employee be liable. The employee may rely on the rule in an action by either the employer or the injured party.17
FOOTNOTES
1. [1957] AC 555.
2. In McGrath v Fairfield Municipal Council (1985) 59 ALR 18; 59 ALJR 655.
3. Workers’ Compensation (Alternative Remedies) Act 1973 (Tas).
4. CCH Australian Workers' Compensation Guide para 53-440.
5. Statutes Amendment (Miscellaneous Provisions) Act 1972, s 17.
6. South Australian Parliamentary Debates, 8 March 1972 at 3705.
7. Section 27c(1)(b)
8. Northern Territory Law Review Committee, Report Relating to Abolition of the Rule in Lister v Romford Ice and Cold Storage Co Ltd (4th report 1980).
9. Id at 7.
10. Law Reform (Miscellaneous Provisions) Amendment Act 1984 (NT) s 3.
11. Northern Territory Parliamentary Debates, 29 February 1984 at 90.
12. G Gardiner "Lister v Romford Ice and Cold Storage Co Ltd - Report of the Inter-Departmental Committee” (1959) 22 Modern Law Review 652.
13. Quoted in Morris v Ford Motor Co Ltd [1973] QB 792 at 799 per Lord Denning MR.
14. Gardiner note 12 at 656.
15. G Eorsi "Private and Governmental Liability for the Torts of Employees and Organs" in International Encyclopedia of Comparative Law XI Torts (1983) paras 4-116.
16. Ibid.
17. Id para 118.
