Insurance & Benefits
Cases
Zurich Insurance Co. v. Shield Insurance Co. Ltd.
[1988] I.R. 174
S.C. McCarthy J.
“The facts in this matter are fully set out in the judgment of Gannon J. in the High Court. The sole factual issue decided in that court was that Martin Sinnott’s injuries were caused by accident arising out of and in the course of his employment with Quinnsworth. The plaintiff does not challenge any inference of fact duly made by the trial judge but the defendant, by its own notice of appeal, challenges the finding that Martin Sinnott was injured in an accident arising out of his employment.
On the basis of the finding as stated, Gannon J., in a reserved judgment, examined the nature of the cover provided to Quinnsworth by each of the insurers, the plaintiff in a motor insurance policy and the defendant in an employers’ liability policy: he concluded that, since the entire liability for the accident was placed on Edward Durning from whom Quinnsworth were entitled to indemnity for the full amount awarded, and Durning’s claim for indemnity by or contribution from Quinnsworth was rejected, it followed that, whatever line of approach one took, the end result was that the plaintiff must pay all the damages and costs. Since I agree with that conclusion, and it does not rest upon the inference as to the accident arising out of Sinnott’s employment, I express no view upon the latter finding, the nature of which is clearly open to review by this Court of appeal.
So far as relevant, the plaintiff’s policy reads:
“Section 1
Liability to third parties
(1) Indemnity to the insured
(a) The company will indemnify the insured against liability at law for damages and claimant’s costs and expenses and all costs and expenses incurred with its written consent in respect of death of or bodily injury to any person and damage to property where such death injury or damage arises out of an accident caused by or in connection with any motor car described in Endorsement Number 1.
(2) Indemnity to other persons
The company will within the terms of sub-section (1) indemnify (a) any person driving any motor car described in the Endorsement Number 1 on the insured’s order or with the insured’s permission.
Exceptions to Section 1
The company shall not be liable
(d) in respect of death of or bodily injury to any person arising out of and in the course of such person’s employment by the person claiming to be indemnified under this section.
Avoidance of Certain Terms and Right of Recovery.
Nothing in this policy or any endorsement thereon shall affect the right of any person indemnified by this policy or of any other person to recover an amount under or by virtue of the provisions of the law of any territory in which the policy operates relating to the insurance of liability to third parties. BUT the insured shall repay to the company all sums paid by the company which the company would not have been liable to pay but for the provisions of such law.”
The defendant’s policy provided for indemnity by it of Quinnsworth in respect of any liability to pay compensation for injury by accident arising out of and in the course of his employment by the insurer to any employee in the immediate service of the insured.
Martin Sinnott was in the immediate service of the insured and was found by the judge to have sustained personal injury by accident arising out of and in the course of his employment by the insured; that insured (Quinnsworth) was liable to pay compensation for such injury and, therefore, entitled to be indemnified by the defendant in respect of such compensation, in this instance at common law.
Clearly, on these established facts and with the inference drawn by the trial judge, Quinnsworth enjoyed a double indemnity. Where there is double indemnity, and one insurer pays the full amount, ordinarily, he is entitled to recover contribution from the other insurer; where there are but two, then fifty per cent.
…………..
The plaintiff advanced an argument based upon the construction of that part of the policy which I have quoted and, particularly, in exception (d); that exception which, on its face, would exclude cover in respect of Sinnott’s injuries is in clear breach of the prohibited conditions provisions of the Road Traffic Act, 1961, but its effect is avoided by the immediate subsequent provision, by reason of which, perhaps, Quinnsworth may be liable to the Zurich, upon which question I express no view. Suffice it to say that in my judgment it has nothing to do with this case which concerns rights of subrogation and the question of contribution between insurers.
I share the view of the learned trial judge that, however one approaches the alleged right of contribution, the end result must be that Edward Durning must pay and his only right to indemnity lies against the plaintiff; in the result, one happily in accordance with common sense, this action ends where it began, as a Road Traffic Act case covered by motor insurance.
I would dismiss the appeal.
Shinkwin v. Quin-Con Ltd.
[2000] IESC 27; [2001] 1 IR 514; [2001] 2 ILRM 155
S.C. FENNELLY J.
“1. The present appeal concerns one principal issue namely, whether the second defendant was correctly held liable to the plaintiff for serious injuries he sustained in an accident at the factory premises where he was employed by the first defendant. The first defendant was uninsured, had no assets and did not defend the claim. Hence the plaintiffs wish to succeed against the second defendant, the effective sole shareholder and controller of the first defendant. The award was £304,000. The plaintiff lost several fingers in his right hand. Damages are not in issue on the appeal.
2. The plaintiff cross-appeals against the failure of the trial judge to find that he was employed by the second defendant, an issue which does not arise if he succeeds on the principal issue.[*2]
3. The plaintiff was twenty years of age at the date of the accident, the 3rd August 1993. The first defendant had a small factory making trophies near Clogheen, Co. Cork. He originally went to work for the defendants by way of work experience on a FÁS training programme. He began working on assembling trophies but graduated to working on woodworking machines. He was put to work on the machine which caused his injury about eight months before the accident. It was an electric circular saw with a jig which had to be moved or adjusted from time to time. The plaintiff moved the jig while the saw was in motion and while it was inadequately guarded. He had never been instructed to do otherwise. The jig shifted suddenly, as it was stiff. His right hand slipped and came in contact with the saw. He lost the index, middle and ring fingers and part of his thumb
4. The learned trial judge found in favour of the plaintiff as against the first defendant because the machine had no proper guard, or, if it did, the plaintiff was not instructed in its use. It was not seriously contested that, as found by the trial judge, the plaintiff received no training in the use of an admittedly dangerous machine and no warnings as to the dangers that were inherent in the work. In particular he was not warned to stop the circular saw before adjusting the jig.
5. As to the second defendant, the trial judge held:
“The Plaintiff regarded the second named Defendant as his boss. The second named Defendant was in my opinion, or did in my opinion, owe a duty of care to the Plaintiff as manager of the factory premises, and I am satisfied that he failed in that duty in that he failed to provide proper training for the Plaintiff. He failed to warn the Plaintiff of the dangers inherent in the work that he was obliged to do. He failed to ensure that the guard was at all times properly adjusted over the saw and [*3] he failed to ensure that the saw was switched off at all times when the jig was being moved.”
6. Counsel for the second defendant says that the fact he is virtually the sole owner of the business is not relevant. It does not impose a duty of care. The duty to provide a safe system and a safe place of work is an obligation imposed directly in law on the first defendant as employer of the plaintiff. The decision, if allowed to stand, would open the door too wide and establish a new category or basis of liability for factory managers. A fellow employee is admittedly liable personally for any direct negligent act which causes injury in the work place. However, this case is different. The second defendant must be regarded merely in the guise of manager. The faults attributed to him are mere acts of omission. Persons in such positions do not attract personal liability. He relied on the judgment of Barron J in the High Court in Sweeney v Duggan [1991] 2 I. R. and of this Court on appeal [1997] 2 I. R. 531.
7. Counsel for the plaintiff relies on the principle established in Donoghue v Stevenson [1932] AC 562 that everybody owes a duty to exercise reasonable care not to cause injury to any person who should be regarded as his neighbour, i.e. anybody to whom he is in such a relationship of proximity that it is reasonably foreseeable that that other person may suffer injury as a result of his negligent acts. The first defendant was not merely the sole effective shareholder of the plaintiff’s employer. He was also the effective and only manager. Counsel laid special emphasis on the complete control exercised by the second defendant over the factory which was the plaintiffs workplace and the plaintiff. He drew attention to the following passage from the judgment of Gannon J in Tulsk Co-operative Livestock Mart Limited v Ulster Bank Limited [unreported 13th May 1983] [*4]
“In every case in which a claim for damages is founded in negligence it is essential to examine the circumstances which bring the parties into relation with each other and in which the risks of reasonably foreseeable harm can be identified, and the extent to which each or either has control of the circumstances, with a view to determining what duty of care, if any, may exist, the nature and extent of the duty, and whether and to what extent there may have been a breach of duty of care….”
8. In order to resolve this argument, I would take two points at opposite ends of a spectrum. On the one hand, a person might be the sole effective and controlling shareholder in a business run by a company but have no involvement in its day to day operations. He would have control of the company but not of the manner in which it conducted its operations. It is clear that such a person would not, without more, be responsible to employees injured by the negligent acts of the company and, in particular, the failure of the company to ensure that there was a safe system of work in operation in its factories. That would disregard the separate legal character of the company, the principle of limited liability and the rule in Salomon v Salomon [1897] AC 22. Counsel for the plaintiff does not suggest otherwise.
9. On the other hand, any employee owes to his fellow employees a duty to exercise at least such care in the performance of his work that he does not cause direct injury to his fellow workers. An example, mentioned in the course of argument was the careless dropping of a hammer by one worker on the foot of another.
10. The second defendant, it seems, falls between these two stools. He is the effective sole shareholder and effective day to day manager. I would reduce the issue to this: did he involve himself so closely in the operation of the factory and, in particular, in [*5] the supervision of the plaintiff as to make himself personally liable for any of the acts of negligence which injured the plaintiff?
11. The evidence discloses that the plaintiff dealt personally with the second defendant from the beginning. It is true that the latter’s two sons were more physically active on the factory floor. The second defendant was often absent from the premises. Nonetheless, it was the second defendant who, about eight months before the accident approached the plaintiff about using all the machines. He was always in and out of the machine area if the shop was busy, saw the plaintiff using the machine and the difficulties he had in moving the jig. He worked with the plaintiff on the machine on at least one occasion. He repeatedly warned the employees, on his own evidence, that there was no insurance and was aware of a history of accidents that made it impossible to get insurance. He gave instructions about not playing football for the same reason. All of these factors, even though partially disputed by the plaintiff, demonstrate the intimate involvement of the second defendant in the management of the factory and supervision of the plaintiff, in particular, and his consciousness of the danger of accidents. It is in this context that his concession, in cross-examination, that he was in undisputed control of the factory becomes significant.
McCarthy J in Ward v McMaster [1988] 337 at page 349 declared his unwillingness to “dilute the words of Lord Wilberforce….”. We are here concerned only with the first stage of the two stage test adopted by Lord Wilberforce in the passage from Anns v Merton London Borough [1987]728 at 752: [*6]
“First, one has to ask whether, as between the alleged wrongdoer and the person who has suffered the damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter……”
12. The criterion of “control” which is proposed in this case is not an addition to the test for the existence of proximity. The open textured language of Lord Wilberforce leaves wide scope for argument as to the character of “proximity or neighbourhood”. Clearly it involves more than a mere test of foreseeability of damage. The assessment of the relevance of control as well as its nature and degree will depend on the circumstances. O’Dalaigh C.J. in Purtill v Athlone U.D.C. [1968] I.R. 205 at 213 noted that “the defendants employees were in charge and control of the detonators..” which caused injury to the plaintiff in that case. In my opinion some assessment of the element of control, in the sense of “control of the circumstances,” mentioned by Gannon J in the Tulsk case, is a useful guide to the decision as to the existence of a duty of care. A person cannot be held liable for matters which are outside his control. He will not be, as the defendant in Ward v McMaster was not, in control of the plaintiff’s independent actions and should be responsible in law only for matters which are within his own control.
13. In my view, the second defendant, on the particular facts of this case, placed himself in a relationship of proximity to the plaintiff. He had personally taken on a young and untrained person to work in a factory managed by him and personally put him to work upon a potentially dangerous machine over which he exercised control to the extent of giving some [*7] though completely inadequate instructions to the workers. He was bound to take appropriate steps to warn the plaintiff of such obvious dangers as failing to stop the circular saw from revolving while adjusting the jig or to ensure that it was guarded. In his supervision and instruction of the plaintiff, he failed to do these things and was consequently negligent.
14. I do not think the decision in Sweeney is relevant, despite its superficial resemblance to the present case. The plaintiff was also the victim of an accident at the hands of an uninsured corporate employer operating, in that case, a quarry. He obtained a judgment against the company but this was unsatisfied and he was left to prove in the liquidation. He tried to fix the defendant, Duggan, with liability in a separate action on the basis that he was the principal shareholder as well as the quarry manager. The principal basis of the claim, however, was that Duggan should have seen to it that the company was insured. His failure to do so caused damage to the plaintiff, but the claim sounded in economic loss. Insofar as the claim was made for damages for personal injury it was statute barred. It emerges clearly from the judgment of Murphy J on the appeal that the claim failed because the defendant, Duggan, could not be under a greater obligation to the plaintiff in respect of insurance than was the company, which was his employer. The plaintiff failed to establish that such a term should be implied into his contract of employment. Hence, his claim also failed against Duggan.
15. Here the plaintiff makes his claim directly in negligence against the second defendant, not as employer or as shareholder but as a person who had placed himself by his own actions in such a relationship to the plaintiff as to call upon himself the obligation to exercise care. [*8]
16. It is not necessary, on the facts of the present case to express an opinion on the issue raised in the argument as to the potential exposure generally of factory managers to personal liability. Counsel for the defendant points to the serious implications, inter alia, for insurance and industrial relations of such liability. It may, however, be relevant to observe that there has never been any doubt as to the right of the employer to be indemnified by an employee who, in the course of his employment, negligently causes injury to another. (See McCarthy J in Sinnott v Quinnsworth [1984] ILRM 523 at 537) . Counsel for the plaintiff was prepared, if necessary, to cross that bridge. In the event, I find it unnecessary to do so, because of the special facts of the case.
17. In the light of what I have said, it is unnecessary also to decide whether, as the plaintiff asks, the plaintiff was employed by the second defendant. I would dismiss the appeal.”
Reid v Rush and Tompkins Group Plc
[1989] EWCA Civ 10 [1989] 3 All ER 228 [1990] WLR 212
CA GIBSON LJ
This is an appeal by the plaintiff from an order striking out his statement of claim and dismissing his action on the ground that he had pleaded no reasonable cause of action. Leave to appeal was given by the judge.
The Implied Term to Provide Insurance Cover
For my part, I have no doubt that the concession made by Mr. Smith with reference to contractual implied terms was rightly made. I can see no basis in the facts pleaded for holding that the defendants gave an implied undertaking to insure the plaintiff against the risk of uncompensated injury caused to him, while acting in the course of his employment, by third party drivers in Ethiopia. Such a term could not be implied by law under the test of “necessity”, as applicable to all such contracts of employment; nor could it be implied as a term which the parties must have agreed: see Liverpool City Council v. Erwin [1977] A.C.239, and per Lloyd L.J. in The Maira [1988] 2 Lloyds L.R.126 at page 135. As to treating such a term as implied by law, the arguments in favour of a social policy, which would require employers to provide some level of personal accident insurance for the benefit of men and women working overseas, and for their dependants, are obvious but there appears to me to be no way in which the court could “embody this policy in the law without the assistance of the legislature”: see Lord Bridge in D. & F. Estates v. Church Commissioners at page 389E. Further, as to treating such a term as one which the parties must have agreed, it seems to me unarguable that the parties would have agreed that any of the various obligations as to the provision of personal accident insurance, as put forward by the plaintiff, was a part of the contract. The written contract contained, as I have said, a number of detailed terms dealing with the economic welfare of the plaintiff, such as provision of retirement benefits and of medical services, and it is impossible to suppose that the defendants would have acknowledged as obviously included within the contract additional terms with reference to provision by them of personal accident insurance. As to an implied term to the effect that the defendants would inform the plaintiff as to the existence of the special risk and advise the plaintiff to obtain for himself suitable personal accident insurance, I will deal with that part of the case when I come to examine the plaintiff’s case based upon an implied assumption of responsibility by the defendants on the principle contained in the Hedley Byrne case.
The Ordinary Duty of Care of Master to Servant
It is first necessary to examine the plaintiff’s claim, which Mr. Smith has acknowledged to be a claim for pure economic loss as against the defendants, with reference to the ordinary duty of care owed by a master to his servant. The duty has for very many years always been referred to in terms of the physical safety and well-being of the servant: see Smith v. Baker [1891] A.C.325 and Wilsons and Clyde Coal Co. v. English [1938] A.C.57. No case has been cited in which it has been held to extend to protect the servant from economic loss. In Deyong v. Sherburn [1946] 1 K.B. 236, where the plaintiff’s clothing was stolen from the dressing room provided for his use at a theatre, the County Court Judge held that the defendant had been negligent in failing to provide a lock on the dressing room door, but he held also that the defendant was not under a duty to protect the plaintiff’s clothing from theft. His decision was upheld by this court (Lord Greene, du Parcq and Tucker L.JJ.) on the ground that there was no relevant implied term of the contract and no duty at law to provide such a system of work as would protect his servant’s clothing from theft. A safe system of work as required by the law was for the protection of the personal safety of the workmen: per due Parcq L.J. at page 232. Edwards v. West Herts Hospital Management Committee [1957] 1 W.L.R. 415 was a decision of this court to the same effect.
Further, the master is free to employ a servant upon work which will expose the servant to unavoidable risk of injury or death, such as service at sea. “There are some kinds of work in which danger is necessarily inherent, where precautions such as would ensure safety to the workmen are either impossible, or would only be attainable at an expense altogether incommensurate with the end to be accomplished.
In all such cases—in the absence of express stipulation to the contrary, the risk is held to be with [the workman] and not with the employer”: Smith v. Baker [1891] A.C.325 at 356 per Lord Watson.
The law, however, requires the master to use all reasonable care to diminish any danger, if he cannot eliminate it: Glyn Jones J. [1955] 1 All E.R. 833 at 836; and, if he cannot effectively eliminate it so that significant risk remains, he may be required to give to the servant such information which he has to help the servant to evaluate properly the benefit of the job against the risk: see per Devlin L.J. in Withers v. Perry Chain Co. Ltd. [1961] 1 WLR 1314 at 1320. The point was expressed more firmly some twentyfour years later by this court (Lawton, Fox and Robert Goff L.JJ.) in White v. Holbrook Precision Castings Ltd. [1985] I.R.L.R.215 where, in upholding the dismissal of the plaintiff’s claim on the facts, it was held that an employer had a duty to tell a prospective employee about the risks he would expose himself to if he took the job but the risks referred to were those to physical safety or well-being. Lawton L.J. said at page 218:
“Generally speaking, if a job has risks to health and safety which are not common knowledge but of which an employer knows or ought to know and against which he cannot guard by taking precautions, then he should tell anyone to whom he is offering a job what those risks are if, on the information then available to him, knowledge of those risks would be likely to affect the decision of a sensible, level-headed prospective employee about accepting the offer.”
The position is, accordingly, that although the duty of a master to his servant may extend to warning him of unavoidable risks of physical injury, it has hitherto riot been extended to the taking of reasonable care to protect the servant from economic loss. Apart from the cases of Deyong v. Sherburn and Edwards v. West Herts Hospital Management Committee, which were mentioned in argument, we were not deferred to any case in which the court has considered and rejected any such claim and no doubt the reason for that is not only the limitation of the duty, as stated, to personal safety but also the fact that it must be rare for any matter of economic loss to have been arguably caused by a breach of duty of the master without it being a breach of contract. If a servant is to have a claim in tort against his employer in respect of economic loss it must be based upon some special factor in the circumstances or in the relationship between them which justifies the extension of the scope of the duty to cover such a claim or upon a separate principle of the law of tort which imposes such a duty.
The Ordinary Risk of Suffering Uncompensated Injury
The defendants, apart from submitting that the law leaves to employees the responsibility for deciding whether they need personal accident insurance, have not contended that the special risk is not sufficiently special or unusual to provide an arguable case for the plaintiff if he can surmount the legal barriers which, on the defendants’ submissions, justify striking out his claim. The defendants recognise, rightly in my view, that assessment of the nature and extent of the risk, for the purposes of the plaintiff’s case, must be made, if the case is to proceed, when the evidence is before the court. It was for that reason that detailed submissions were not made by either side as to the extent of the risk in this country of suffering injury which may go uncompensated. Nevertheless, before considering the points °f law raised in the submissions before the court, it is useful to describe, and to put into context, the special risk upon which the plaintiff’s case depends.
It is, of course, not the case under the law of this country that in respect of all injuries, caused by the fault of another, a claimant will be able actually to recover the compensation which the law would award in respect of his injuries. The person responsible may have no money. For some 50 years the law has dealt with one of the most common causes of serious injury by requirement of compulsory third party insurance in respect of the use on the public roads of a motor vehicle. Effective cover, in the event of the driver in breach of the law having no insurance cover, was provided by means of the Motor Insurers Bureau agreement in 1946, and was extended to the case of the untraced driver in 1969. A description of the terms and of the wording of the M.I.B. agreements can be found at Chapter 17 of Charles-worth and Percy on Negligence, 7th Edition, 1983. Effective cover, however, is by no means complete even for traffic accidents: a pedestrian or a cyclist may be solely to blame for an accident in which a driver or other persons are seriously hurt and there is no compulsory insurance or scheme like that of the M.I.B. to cover such accidents. Further the M.I.B. is riot liable where the accident occurred in some place which was not a public road: see Buchanan v. M.I.B. [1955] 1 All E.R.607.
As to accidents which a servant may suffer in the course of his employment as a result of the fault of the master, or of a fellow servant, actual recovery of the compensation to which the servant was in law entitled was for many years not certain because the master might have no money and no insurance to cover his liability. Compulsory insurance against liability to employees was required by the Employers Liability (Compulsory Insurance) Act 1969 – the Act came into force on 1st January 1972 – but the requirement applies only to “liability for bodily injury or disease sustained by his employees and arising out of and in the course of their employment in Great Britain”. Insurance for liability for “injury or disease suffered or contracted outside Great Britain” is only compulsory when required by regulations. According to Halsbury’s Statutes 4th Edition, Volume 16, the Act has been applied to employers of persons working on or from off-shore installations in designated areas of the continental shelf and territorial waters by regulations S.I. 1975/1289 under the Mineral Workings (Off-Shore Installations) Act 1971. Failure to ensure as required by the Act is a criminal offence: see section 5. There is, however, no scheme equivalent to that of the M.I.B. to ensure recovery of compensation by a servant in respect of injury suffered in this country if, in breach of law, the employer has failed to take out insurance cover.
Next, it is to be noted that the insurance required by the 1969 Act applies only to liability to employees. Liability to members of the public is, I think, usually covered by a public liability policy in the case of responsible employers whose activities expose members of the public to risk of injury but the law imposes no statutory duty to have such insurance cover and serious injury might be suffered without compensation by a servant in the course of his employment as a result of the wrongdoing of a third party not concerned with the use of a motor vehicle on a public road.
……
From this limited survey it can be seen that in a number of cases it is possible for someone to suffer personal injury in this country, caused by the wrongdoing of another, for which the victim may well not recover the compensation which the law would award. Further, in respect of injury suffered or disease contracted outside this country by a person normally resident here, or employed abroad by an employer based in this country, there is in general no protection of compulsory employers’ insurance and, in respect of the special claims of injury arising from road accidents or criminal activity, there is no protection from any statutory scheme such as the M.I.B. or the C.I.C.B.
…….
The Plaintiff’s Case on Implied Term
The next submission, based upon the two cases of Tai Hing Cotton Mill Ltd. and Greater Nottingham Corporation Society Ltd. was that, since there was between the parties the contract of employment, the plaintiff can only recover damages for economic loss if a term in that contract so provides and not in tort. It is necessary first to determine whether there was any implied term in the contract of employment to the effect that the defendants would give to the plaintiff all necessary advice relating to the special risk and would advise the plaintiff that he should himself obtain appropriate insurance cover. The alleged implied assumption of responsibility gave rise, it is alleged, to a similar duty.
In my judgment it is impossible to hold on the facts pleaded that an implied term arose on the particular relationship of this plaintiff to these defendants as his employers. The only facts are the offer and acceptance of the employment and the defendants’ knowledge both of the circumstances in which the plaintiff would in Ethiopia be exposed to the special risk and of the plaintiff’s ignorance of that risk. If the parties had been asked what the position was with reference to the risk of the plaintiff suffering injury in the course of his employment by the negligence of another driver, for whom the defendants were not responsible, and from whom the plaintiff could recover no damages, it is impossible to be confident, on the facts pleaded, that either side would have answered that the defendants had undertaken a duty to deal specifically with the matter, whether by advice or otherwise. Both parties must have expected and intended that the plaintiff and the defendants would respectively perform the express terms set out in the contract and would comply with any other obligations arising out of their mutual relationship as master and servant. As in Lister v. Romford Ice and Cold Storage Co. Ltd. [1957] A.C.555, according to the view of the majority, Lord Simonds, Lord Morton and Lord Tucker, the term on which the plaintiff in this case claims to rely cannot, in my judgment, be implied as a term agreed between the two individuals, and, if it is to be implied at all, must be implied by law. That means that it is to be implied in any contract of employment where the master engages the servant to work abroad in a country where, in doing his work, the servant will face a special risk of the nature relied on in this case and the servant is to the knowledge of the master ignorant of that risk. It is clear, I think, that a new term can be implied by law into contracts of employment: the case of Lister v. Romford Ice is an example of differing opinions held by judges as to whether a new term should cm the facts be held to arise by law; and the majority in the House of Lords gave reasons to explain why on the evidence in that case the term then contended for could not be accepted. It is, however, impossible, in my judgment, to imply in this case a term as a matter of law in the form contended for, namely a specific duty to advise the plaintiff to obtain specific insurance cover. Such a duty seems to me inappropriate for incorporation by law into all contracts of employment in the circumstances alleged. The length of time during which the servant will work abroad and the nature of his work may vary greatly between one job and another and hence the extent to which the servant would be exposed to the special risk. Further, having regard to the many different ways in which a servant working abroad may run the risk of uncompensated injury caused by the wrongdoing of a third party, apart from a traffic accident, it seems to me impossible to formulate the detailed terms in which the law could incorporate into the general relationship of master and servant a contractual obligation to the effect necessary to cover the plaintiff’s claim. I have considered whether the implied term could be limited to the risk from injuries in a traffic accident, but then the question is raised whether the obligation should arise upon any difference between the total protection provided in this country by compulsory third party insurance and the M.I.B. scheme, on the one hand, and such protection as exists in the foreign country, on the other hand, or only upon the total absence of the protection provided in this country. I have also considered whether the term could be expressed as follows: “an employer who takes a person into his employment in this country for work to be done in a foreign country shall take reasonable care to provide sufficient information and warning to that servant with reference to any risk of suffering uncompensated injury in the course of his employment in the foreign country, caused through the fault of a third party, which risk would not be suffered in this country and of which a reasonable person would require to be informed before accepting such employment”. For my part I am unable to accept that the court could properly incorporate such a term by law into contracts of employment. It seems to me that it would require of employers, many of whom may have no such resources of advice or experience as may be available to these defendants, and who may employ only one or two servants, to discover much information about foreign legal and social systems in order to decide whether such a term requires action on their part. The usefulness °f the principle contended for seems to me, in social terms, to be plain enough; but to incorporate the duty by law into contracts of employment would, in my view, require, if it were to work fairly, exemptions and limitation which can only properly be achieved by legislation.
Voluntary Assumption of Responsibility
The next question is whether, in the absence of a special term implied on the facts between these parties, or of a term implied by law, the alleged specific duty to inform and advise can be held arguably to have arisen by reason of an “assumption of responsibility” by the defendants. In my judgment on the bare facts alleged it cannot. To explain that conclusion it is necessary to begin with the decision in Hedley Byrne. In that case the only relationship between the parties lay in the request for the service of the gratuitous provision of a financial reference by the bank and the giving of that reference. If there was to be a duty of care in the giving of the reference it was necessary to state what it was in the relationship which gave rise to a sufficient proximity to justify imposition of a duty. At page 525 Lord Devlin said:
“It would be surprising if the sort of problem that is created by the facts of this case had never until recently arisen in English law. As a problem it is a by-product of the doctrine of consideration. If the respondents had made a nominal charge for the reference, the problem would not exist. If it were possible in English law to construct a contract without consideration, the problem would move at once out of the first and general phase into the particular; and the question would be, not whether on the facts of the case there was a special relationship, but whether on the facts of the case there was a contract.”
That indicates to me that where the only relationship between the parties is the contract between them, and some acts in performance of that contract which are not said themselves to give rise to any separate assumption of responsibility (as in this case), any duty must be found in the terms of the contract or as arising out of the relationship created by the contract. Later, in words which have been frequently quoted, Lord Devlin said:
“I have had the advantage of reading all the opinions prepared by your Lordships and of studying the terms which your Lordships framed by way of definition of the sort of relationship which gives rise to a responsibility towards those who act upon information or advice and so creates a duty of care towards them. I do not understand any of your Lordships to hold that it is a responsibility imposed by law upon certain types of persons or in certain sorts of situations. It is a responsibility that is generally accepted or undertaken, either generally where a general relationship, such as that of solicitor and client or banker and customer, is created, or specifically in relation to a particular transaction.”
Those defendants, on the facts alleged, entered into the general relationship of master and servant. In my judgment, the special circumstances in which, and the special purpose for which, that agreement was made, either do or do not justify the extension of the scope of a general duty owed by a master to his servant, whether by implied term or under the general duty, so as to include the duty asserted. If they do, the law will impose the duty and proceed to inquire whether it was broken. The concept of “voluntary assumption of responsibility” as used in Hedley Byrne seems to me to refer to an act by a defendant whereby he voluntarily does something, which affects the plaintiff, and it is such an act that a reasonable man would recognise that in the circumstances he is required to perform it with due care. The defendant’s knowledge, actual or implied, that the plaintiff is relying upon him to act with such care is a vital, and in many circumstances indispensable, factor. Where there is a contract between the parties, and any “voluntary assumption of responsibility” occurred, if at all, at the time of making and by reason of the contract, it seems unreal to me to try to separate a duty of care arising from the relationship created by the contract from one “voluntarily assumed” but not specifically assumed by a term of the contract itself. There was at no time any reference by either side to the special risk or to what might be done with reference to it. For these reasons, I conclude that this plaintiff has no reasonable cause of action based upon voluntary assumption of responsibility.
The General Duty of the Defendants as Employers
It remains then to consider whether any of the duties asserted by the plaintiff could be held in the circumstances to fall within the scope of the duty owed by a master to his servant.
As to the duty to provide personal accident insurance at the expense of the defendants for the plaintiff, it is in my judgment impossible to hold that the scope of the duty in tort could extend so far. The legislation has not in general extended even the duty of compulsory employer’s liability insurance in respect of employment out of this country. It has not been suggested that the master is required to provide personal accident insurance in those cases where in this country his servant is exposed to the risk of suffering injury in the course of his employment through the fault of a third party who cannot pay. The common law cannot in my judgment devise such a duty which the legislature has not thought fit to impose and it could not be just or reasonable for the court to impose it.
As to the alleged duty to inform and advise, however, the answer seems to me to be less clear. It would be an extension of the scope of the duty of a master to his servant and the question is whether the law could regard such an extension as a necessary piece of gradual development, that is to say an extension made “incrementally and by analogy with established categories (of negligence)”: see per Brennan J. in Shire of Sutherland v. Heyman [1985] 59 A.L.J.R. 564, High Court of Australia: cited by Lord Keith in Yeun Kun Yeu at page 191D. There are a number of factors which support the view that such an extension of the scope of an employer’s duty might properly be made if the court were free to take that course. Firstly, the plaintiff’s claim is for financial loss but it is loss related to and arising out of personal injury suffered in the course of the plaintiff’s employment. Secondly, the duty might be regarded as analagous to that stated by Lawton L.J. in White v. Holbrook Castings cited above: namely to tell a prospective employee about unavoidable risks of the employment of which the servant is not aware, even though the duty goes outside the risk of physical injury arising from the employer’s own operations, which the law requires the employer to know about, and extends to matters of law governing compensation for a wrong done by others. Thirdly, an employer who recruits in this country a number of people to do work abroad might reasonably be required by the law to discover the existence of any special risk, even of this nature, to which his servants will be exposed in their work for him and to give information about it to them. Fourthly, many men and women, particularly those with dependants, who would be willing to spend some time in employment overseas, would regard it as of great importance to be told of the existence of the special risk so as to be able to consider how much it would be sensible to spend in some form of personal accident insurance cover. Finally, the existence of some capacity of the common law to develop, so as to recognise changes which have taken place in the expectations of the people who make up our society, is not in doubt: see the dissenting speech of Lord Radcliffe in Lister v. Romford Ice at page 591. The question is whether the development which the court is asked to make is justified by the material before the court and is one within the powers of the court.
In my judgment, if the question was whether the giving of a warning about the special risk was something which a reasonable employer, with knowledge of the existence of the risk and of his servant’s ignorance of it, would think it necessary to give to the servant, then I would hold that the plaintiff had alleged a reasonable case for persuading the court on a trial that such an employer would think it necessary. But that answer is not sufficient. There is clear authority that it is not open to the court to hold that a duty of care exists in negligence at common law, notwithstanding the fact that loss to the plaintiff is foreseeable if the duty is not performed, in ”a factual situation in which the existence of such a duty had repeatedly been held not to exist”: see per Lord Brandon in Lee and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [1986] A.C.785. As pointed out earlier in this judgment, the absence of a duty upon an employer, under the general duty of a master to his servant, to protect his servant from economic loss, caused through the wrongdoing of a person for whom the employer is not responsible, has not been repeatedly the subject of the decisions of the court; but it has been stated on at least two occasions (see the theft of property cases cited above) and, I am sure, assumed on countless other occasions that the duty of the master is, in the absence of a contractual term, express or implied, limited to the protection of the servant against physical harm or disease. In La Banque Financiere this court refused to impose a duty of care in circumstances in which so to do would “cut across all the principles of our law of contract relating to the effect of silence in the course of pre-contractual negotiations”. To impose the duty alleged in this case would be contrary, in my judgment, to the accepted principles of our law relating to the general duty of a master to his servant.
I have had much difficulty in concluding that the general duty at common law upon a master to take care for the protection of his servant’s physical well being cannot be extended by decision of the courts to include protection for the financial well being of his servant in special circumstances where the foreseeable financial loss arises from foreseeable physical injury suffered in the course of the employment and the duty claimed would extend only to a warning of a special risk. If this view be right the only way in which an employer’s general duty of care – and I emphasise that I am referring only to the general duty of care which arises out of the relationship – will be capable of extension to cover financial loss will be by legislation, or by a contractual term, express or implied on the particular facts, or by a term which the court is able to say must be implied by law. At this point consideration must be given to Mr. Aylen’s submission based on Tai Hinq to the effect that a duty in tort cannot be imposed to enlarge the duties assumed, whether expressly or impliedly or by rule of law, under the contract of employment. That case was concerned with the mutual responsibilities of banker and customer and might be thought to be remote from the responsibilities between master and servant. The judgment of their Lordships in the Privy Council was delivered by Lord Scarman who, at page 107B, said this:
“Their Lordships do not believe that there is anything to the advantage of the laws development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question will be what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to where the liability arises from contract or tort, e.g. in the limitation of action.”
Lord Scarman was referring to the “right” to determine obligations and was not dealing with the probable capacity of a party to procure changes in the contract. Their Lordships, however, clearly thought that the principle could be applicable to master and servant. Lord Scarman continued at page 107 to cite a passage from the speech of Lord Radcliffe in Lister v. Romford Ice, to which I have referred above in support of the proposition that new implied terms are capable of being implied by law into the contract between master and servant. Lord Scarman said:
“Their Lordships respectfully agree with some wise words of Lord Radcliffe ….. after indicating that there are cases in which a duty arising out of the relationship between employer and employee could be analysed as contractual or tortious Lord Radcliffe said, at [1957] A.C. page 587:
‘Since in any event the duty in question is one which exists by imputation or implication of law and not by virtue of any express negotiation between the parties, I should be inclined to say that there is no real distinction between the two possible sources of obligation. But it is certainly, I think, as much contractual as tortious. Since in modern times the relationship between master and servant, between employer and employed, is inherently one of contract, it seems to me entirely correct to attribute the duties which arise from that relationship to implied contract’.”
It therefore seems to me that, on the facts alleged, it is not open to this court to extend the duty of care owed by these defendants to the plaintiff by imposing a duty in tort which, if I am right, is not contained in any express or implied term of the contract.
That conclusion, if correct, must dispose of this appeal and it is not necessary to decide whether, if that last obstacle could have been surmounted, the plaintiff would have demonstrated an arguable case for showing that it would be just and reasonable to impose the new duty necessary for the plaintiff’s case. There are, I think, substantial difficulties when consideration is given to the current legislation to which I have already referred. In a number of contexts Parliament has legislated to protect people in this country from the risks of uncompensated injury. Compulsory employer’s liability insurance has been imposed. Save for certain limited exceptions that duty does not apply to employment out of this country. Even in the limited and modest terms of a duty to warn it might be difficult to impose by judicial decision a duty on employers in respect of their servants working abroad, which relates to loss through injuries suffered where the employer is not responsible, having regard to the fact that Parliament has not imposed an obligation to ensure even in respect of injuries for which the employer would be liable. But on that issue I think that a decision would have been better made on the evidence after trial. In the result, for the reasons which I have given, I would dismiss this appeal;”
Romford Ice & Cold Storage Co v Lister
[1956] UKHL 6 [1957] AC 555
HL Viscount Simmonds
“There has, I think, been some confusion in the course of the case between two wholly separate torts, (a) the tort for which the Appellant and, vicariously, the Respondents might be made liable to Lister senior and in respect of which the Respondents could claim contribution under the Act of 1935, and (b) the tort for which the Appellant might be made liable to the Respondents in respect of his breach of the common law duty of care. But I do not think that this now affects the issue, for, as I shall try to show, the deciding factor, whatever the cause of action, is whether or not certain terms are to be implied in the contract of service between the Appellant and the Respondents.
The Appellant appealed to the Court of Appeal.
……
It will be convenient to discuss first the question which divided the Court of Appeal, namely, what, if any, were the terms to be implied in the contract of service between the parties.
It is, in my opinion, clear that it was an implied term of the contract that the Appellant would perform his duties with proper care. The proposition of law stated by Willes, J. in Harmer v. Cornelius, 5 C.B.N.S. 236 at p. 246, has never been questioned: ” When a skilled labourer “, he said,
” artizan, or artist is employed, there is on his part an implied warranty that he is of skill reasonably competent to the task he undertakes—Spondes peritiam artis. Thus, if an apothecary, a watchmaker or an attorney be ” employed for reward they each impliedly undertake to possess and exercise ” reasonable skill in their several arts. . . . An express promise or express ” representation in the particular case is not necessary “. I see no ground for excluding from, and every ground for including in, this category a servant who is employed to drive a lorry which driven without care may become an engine of destruction and involve his master in very grave liability. Nor can I see any valid reason for saying that a distinction is to be made between possessing skill and exercising it. No such distinction is made in the cited case: on the contrary. ” possess” and ” exercise” are there conjoined. Of what advantage to the employer is his servant’s undertaking that he possesses skill unless he undertakes also to use it? I have spoken of using skill rather than using care, for ” skill” is the word used in the cited case, but this embraces care. For even in so-called unskilled operations an exercise of care is necessary to the proper performance of duty.
I have already said that it does not appear to me to make any difference to the determination of any substantive issue in this case whether the Respondents’ cause of action lay in tort or breach of contract. But in deference to Lord Justice Denning I think it right to say that I concur in what I understand to be the unanimous opinion of your Lordships that the servant owes a contractual duty of care to his master, and that the breach of that duty founds an action for damages for breach of contract, and that this (apart from any defence) is such a case. It is trite law that a single act of negligence may give rise to a claim either in tort or for breach of a term express or implied in a contract. Of this the negligence of a servant in performance of his duty is a clear example.
I conclude, then, the first stage of the argument by saying that the Appellant was under a contractual obligation of care in the performance of his duty, that he committed a breach of it, that the Respondents thereby suffered damage and they are entitled to recover that damage from him, unless it is shown either that the damage is too remote or that there is some other intervening factor which precludes the recovery. I should note in passing that it was urged on behalf of the Appellant that the Respondents had not proved the quantum of damage suffered by them by proving only that judgment had been given against them and that they had paid or were liable to pay the amount of the judgment and costs. This plea could not be sustained.
It appears to me to be against reason and authority: see, for example, Green v. New River Co. 4 Term Rep. 589.
What, then, is to deprive the Respondents of their remedy? I do not think it can be said that the damages are too remote, for the injury to a third party and the ensuing liability of a master are events which the exercise of proper care is intended to avert. It is upon the implication of some implied term that the Appellant must rely, and to this question I now turn.
My Lords, I cannot but be aware that any decision upon this question which has divided learned Judges in the Courts below and upon which your Lordships are also divided, in opinion may have far-reaching consequences, and I have myself had great difficulty in reaching a conclusion.
I will refer first to the implied terms pleaded in the reamended Defence, for at the end of the day the argument for the Appellant was founded not upon them but upon the original pleas, or at least upon something very like them: the amended pleas can be shortly disposed of. As to paragraph 7. A, the valid answer was made, in general, that the Appellant was not required by the Respondents to do anything unlawful, and, in particular, that the Road Traffic Act, 1930, does not require that a policy of assurance shall be taken out which provides the driver of a vehicle with an indemnity against all the consequences of his own negligence. And as to paragraph 7. B, it was answered that a policy taken out by the Respondents in fact covered the Appellant against third party claims but that it was not
For the real question becomes, not what terms can be implied in a contract between two individuals who are assumed to be making a bargain in regard to a particular transaction or course of business; we have to take a wider view, for we are concerned with a general question, which, if not correctly described as a question of status, yet can only be answered by considering the relation in which the drivers of motor vehicles and their employers generally stand to each other. Just as the duty of care, rightly regarded as a contractual obligation, is imposed on the servant, or the duty not to disclose confidential information (see Robb v. Green [1895] 2 Q.B. 315), or the duty not to betray secret processes (see Amber Size and Chemical Company, Limited v. Menzel [1913] 2 Ch. 239), just as the duty is imposed on the master not to require his servant to do any illegal act, just so the question must be asked and answered whether in the world in which we live today it is a necessary condition of the relation of master and man that the master should, to use a broad colloquialism, look after the whole matter of insurance. If I were to try to apply the familiar tests where the question is whether a term should be implied in a particular contract in order to give it what is called business efficacy, I should lose myself in the attempt to formulate it with the necessary precision. The necessarily vague evidence given by the parties and the fact that the action is brought without the assent of the employers shows at least ex post facto how they regarded the position.
But this is not conclusive; for, as I have said, the solution of the problem does not rest on the implication of a term in a particular contract of service but upon more general considerations.
My Lords, undoubtedly there are formidable obstacles in the path of the Appellant, and they were formidably presented by counsel for the Respondents. First, it is urged that it must be irrelevant to the right of the master to sue his servant for breach of duty that the master is insured against its consequences: as a general proposition it has not, I think, been questioned for nearly two hundred years that in determining the rights inter se of A and B the fact that one or other of them is insured is to be disregarded: see, for example, Mason v. Sainsbury, 3 Douglas 61. And this general proposition, no doubt, applies if A. is a master and B. his man.
But its application to a case or class of case must yield to an express or implied term to the contrary, and, as the question is whether that term should be implied, I am not constrained by an assertion of the general proposition to deny the possible exception. Yet I cannot wholly ignore a principle so widely applicable as that a man insures at his own expense for his own benefit and does not thereby suffer any derogation of his rights against another man.
Next—and here I recur to a difficulty already indicated—if it has become part of the common law of England that as between the employer and driver of a motor vehicle it is the duty of the former to look after the whole matter of insurance (an expression which I have used compendiously to describe the plea as finally submitted), must not that duty be more precisely defined? It may be answered that in other relationships duties are imposed by law which can only be stated in general terms. Partners owe a duty of faithfulness to each other; what that duty involves in any particular case can only be determined in the light of all its circumstances. Other examples in other branches of the law may occur to your Lordships where a general duty is presented and its scope falls to be determined partly by the general custom of the country which is the basis of the law and partly perhaps by equitable considerations. But even so, the determination must rest on evidence of the custom or on such broad equitable considerations as have from early times guided a Court of Equity.
In the area in which this appeal is brought there is no evidence to guide your Lordships. The single fact that since the Road Traffic Act of 1930 came into force a measure of insurance against third party risk is compulsory affords no ground for an assumption that an employer will take out a policy which covers more than the Act requires; for instance, a risk of injury to third parties not on the road but in private premises. There is in fact no assumption that can legitimately be made what policy will be taken out and what its terms and qualifications may be. I am unable to satisfy myself that with such a background there can be implied in the relationship of employer and driver any such terms as I have indicated. And though, as I have said, I feel the force of the argument as presented by Lord Justice Denning, I must point out that at least in his view the indemnity of the driver was conditional on a policy which covered the risk having in fact been taken out. It may be that this was because his mind was directed to a case where such a policy was taken out and that he would have gone on to say that there was a further implication that the employer would take out a policy whether required by law to do so or not. But here we are in the realm of speculation. Is it certain that, if the imaginary driver had said to his employer: ” Of course you will indemnify me against any damage that I may do however gross my negligence may be “, the employer would have said: ” Yes, of course! ” For myself I cannot answer confidently that he would have said so or ought to have said so. It may well be that if such a discussion had taken place it might have ended in some agreement between them or in the driver not entering the service of that employer.
That I do not know. But I do know that I am ever driven further from an assured certainty what is the term which the law imports into the contract of service between the employer and the driver of a motor vehicle.
Another argument was at this stage adduced which appeared to me to have some weight. For just as it was urged that a term could not be implied unless it could be defined with precision, so its existence was denied if it could not be shown when it came to birth. Here, it was said, was a duty alleged to arise out of the relation of master and servant in this special sphere of employment which was imposed by the common law. When, then, did it first arise? Not, surely, when the first country squire exchanged his carriage and horses for a motor car or the first haulage contractor bought a motor lorry. Was it when the practice of insurance against third party risk became so common that it was to be expected of the reasonable man or was it only when the Act of 1930 made compulsory and therefore universal what had previously been reasonable and usual?
Then, again, the familiar argument was heard asking where the line is to be drawn. The driver of a motor car is not the only man in charge of an engine which, if carelessly used, may endanger and injure third parties. The man in charge of a crane was given as an example. If he, by his negligence, injures a third party who then makes his employer vicariously liable, is he entitled to assume that his employer has covered himself by insurance and will indemnify him however gross and reprehensible his negligence? And does this depend on the extent to which insurance against third party risks prevails and is known to prevail in any particular form of employment? Does it depend on the fact that there are fewer cranes than cars and that the master is less likely to drive a crane than a car?
It was contended, too, that a term should not be implied by law of which the social consequences would be harmful. The common law demands that the servant should exercise his proper skill and care in the performance of his duty: the graver the consequences of any dereliction, the more important it is that the sanction which the law imposes should be maintained.
That sanction is that he should be liable in damages to his master: other sanctions there may be, dismissal perhaps and loss of character and difficulty of getting fresh employment, but an action for damages, whether for tort or for breach of contract, has, even if rarely used, for centuries been avail-able to the master, and now to grant the servant immunity from such an action would tend to create a feeling of irresponsibility in a class of persons from whom, perhaps more than any other, constant vigilance is owed to the community. This was, I think, an aspect of the case which made a special appeal to Lord Justice Romer. It cannot be disregarded.
Finally, it was urged that the implication of the suggested term in the contract between employer and driver would have the effect of denying to the insurer the right of subrogation given to him either expressly by the policy of insurance or by the implication of law. This would no doubt be the result. But I do not attach much importance to this. For if the implied term is imposed by law, not in respect of a particular contract but as a legal incident of this kind of contract, the insurer may be assumed to know it as well as anyone else. It may surprise him, but he should study the law.
My Lords, I have come to the conclusion that the considerations which I have discussed do not permit me to imply a term such as is pleaded in any of the alternative forms adopted in the original and amended Defence or advanced in argument at the bar, and that the appeal so far as it is founded on an implied term in the contract of service must fail.
I do not find it necessary to discuss at any length the alternative claim under the Act of 1935. If under the first head of claim the Respondents can recover damages for breach of contract, they can do no more. I will only say that I see no reason to doubt that under the Act, and probably apart from the Act (see Pearson v. Skelton, 1 M. & W. 504, Adamson v. Jarvis, 4 Bing. 66), the Respondents would be entitled to recover contribution from the Appellant to the extent of 100 per cent. Ryan v. Fildes and Others [1938] 3 A.E.R. 517, was, I think, rightly decided. But, if the Respondents cannot recover damages for breach of contract, they are, in my opinion, precluded from obtaining contribution from the Appellant; if they claim under the Act, by its express language (see section 6(1) (b)) and. if they claim apart from the Act, by the principles upon which the rule in Merryweather v. Nixan (8 T.R. 186) has been consistently applied.
In the result, the appeal, in my opinion, cannot succeed and must be dismissed.”