Hitch Advisory

In the recent appeal case of CCIG Investments Pty Limited v Schokman [2023] HCA 21 (CCIG Investments Pty Limited v Schokman), the Australian High Court shed light on the complexities of employer liability and set clear guidelines for when an employer can be held liable for an employee’s wrongful act occurring outside of work hours.

The case revolved around Mr Schokman, an employee of a resort in the Whitsunday Islands off the coast of Queensland. As Mr Schokman slept, he was unexpectedly awakened by Mr Hewett, who was in a semi-conscious state, urinating on him. This unexpected act caused Mr Schokman to choke and suffer a subsequent cataplectic attack, characterised by sudden muscle weakness triggered by the distressing situation.

The central question was whether the employer could be held responsible for the actions of their employee.

What is ‘vicarious liability’

Vicarious liability is a legal concept that holds employers responsible for their employee’s wrongful acts, whether they occur within the workplace or are connected to the employee’s job. This can include incidents at work functions like Christmas parties, work-related conferences, and even during work-related travel. In such cases, the employer can be held accountable for the actions of their employees.

The Decision

The High Court overturned the previous ruling and held that CCIG Investments Pty Ltd, the employer, could not be held vicariously liable for Mr Hewett’s actions. They stressed the importance of a strong connection between Mr Hewett’s wrongful act and his employment is needed for vicarious liability to apply.

Different Perspectives

While all the judges agreed on the outcome, they provided different perspectives on the reasoning and factors to consider in determining employer liability. These are summarised below:

• (i). Kiefel CJ, Gageler, Gordon, and Jagot JJ: The majority opinion focused on the need for a close link between the employee’s wrongful act and their job responsibilities for vicarious liability to apply.
• (ii). Edelman and Steward JJ: These judges highlighted the historical confusion surrounding the concept of vicarious liability and called for a coherent understanding of its different applications.
• (iii). Gleeson J: Gleeson J. agreed with the majority, emphasising the importance of the course of employment and the distinction between an “occasion” and an “opportunity” in determining employer liability.

Key takeaways

 The test for vicarious liability, as established in the case of Prince Alfred College Inc v ADC [2016] HCA 37, has been upheld. This means that for an employer to be held liable for an employee’s wrongful act, the act must have occurred within the course and/or scope of the employee’s employment.

• Establishing vicarious liability goes beyond the mere fact that the employment provided an opportunity for the incident to occur. The employer’s liability is contingent on a stronger connection between the employee’s wrongful act and the scope of their employment.
• Significant emphasis is to be placed on identifying the specific tasks an employee was hired to perform and how those tasks were represented to others. This plays a central role in determining whether an act falls within the course and/or scope of employment” for the purpose of vicarious liability.
• To establish an act as falling within the course and/or scope of employment, certain factors must be considered, such as the employee’s authority, power, trust, control, and the potential to establish intimacy with the victim. These elements play a crucial role in determining the scope of an employee’s actions for the purpose of vicarious liability.

 How does this impact your business?

CCIG Investments Pty Ltd v Schokman offers valuable lessons for both employers and employees. For employers, it emphasises the importance of having clear employment contracts and guidelines in place. Employers should make sure that their employees understand what is expected of them during work hours and what actions are not permitted.

Whereas employees should be aware of their responsibilities and act responsibly both on and off the job. While employers are generally not held liable for an employee’s actions outside of work, it is always important to maintain professionalism and uphold the values of the workplace.

What should you do, and how can we help?

Practical tips for employers to reduce their liability:

• Clear Policies: Develop comprehensive policies that outline expected behaviour and conduct both during work hours and in employer-provided accommodations. Make sure all employees are aware of these policies.
• Training Sessions: Conduct regular training sessions to educate employees about the policies and the potential consequences of violating them.
• Alcohol and Substance Use Policies: Implement and enforce clear policies regarding alcohol and substance use during work hours and in company-provided accommodations.
• Accommodation Agreements: Include specific terms in accommodation agreements outlining expected conduct and use of provided facilities.

CCIG Investments Pty v. Schokman serves as a navigational beacon for employers and when they may be held vicariously liable for the actions of an employee. The Court will have regard to an employee’s role and scope of employment to determine liability. Moreover, in certain cases, the court may also consider any special role assigned to the employee. This ruling provides clarity on the factors that influence employer liability and highlights the importance of a thorough assessment of the employment context when determining accountability for employee actions.

At Hitch Advisory, we’re here to help employers stay ahead of the curve. We offer comprehensive support, from reviewing current employment agreements and policies to preparing future contracts and internal documents that incorporate the new changes. By partnering with us, employers can feel confident that they’re creating a fair and compliant workplace that prioritises the needs of their employees.

In July, the NSW Court of Appeal delivered judgement in Willis Australia Ltd v AMP Capital Investors Ltd [2023] NSCA 158 in which the Court upheld Willis Australia Ltd (Willis) appeal against the initial Supreme Court decision in favour of AMP Capital Investors Ltd (AMP).

The Supreme Court had initially held that Willis was liable for the losses incurred by AMP on the basis that an option to renew was a conditional contract and AMP had validly waived the performance of the other conditions not fulfilled by Willis on the basis that they were for the sole benefit of AMP.

Background

Willis entered a Lease with AMP with an initial Term of six (6) years expiring on 30 September 2020.  The Lease contained two (2) further Options to Renew as follows:

1. An Option to Renew the existing Lease for the premises for a further four (4) year term (First Option); and
2. An additional option for the Tenant to take a lease for the remainder of the level the premises was located on for a four (4) year term (Second Option).

In late 2019, Willis served AMP with two notices in writing (satisfying some, but not all contractual conditions outlined in the Lease) advising that they intended to exercise both options.

In August 2020, Willis sought to withdraw its notice for the Second Option to which AMP responded stating that the exercise of the Second Option was an irrevocable offer, and Willis therefore could not withdraw their notice.

Issues

1. Whether, on the proper construction of the Lease, an option to renew the Lease with the expanded space was exercised only when all five conditions specified in the clause were satisfied or alternatively, whether the option to renew was exercised (and a binding agreement to proceed to a formal lease arose) when there was compliance with merely three of the five conditions outlined in the relevant clause.
2. Whether the option to renew should be characterised as an irrevocable offer or, alternatively, as a conditional contract.

Decision

In rendering its decision, the Court held in favour of Willis, overturning the initial decision of the Supreme Court in favour of AMP. The Court’s primary reasoning for their decision being that when ‘exercising’ the Second Option, Willis had only satisfied three of the five stipulated conditions in the clause. Despite AMP’s assertion that they could waive some of the conditions, the Court found that the language of both the clause and the Lease did not support AMP’s interpretation, and the conditions needed to be met for the exercise of the option to be valid.

Regarding the issue of whether an option to renew should be characterised as an irrevocable offer or a conditional contract, the Court decided it was not necessary to make a definitive ruling on this matter in this case. This was on the basis that the reading of the clause and the Lease were sufficient to demonstrate that Willis did not properly exercise the Second Option and therefore were not bound to proceed with the Lease.

So, what does this mean?

Overall, the case highlights the importance of carefully interpreting and fulfilling the conditions specified in the Lease when exercising an option to renew for both landlords and tenants, as in the event of any dispute the Court will consider the specific language and context of the Lease when determining the validity of any exercise of an option.

Specifically, the case highlights the importance for landlords to ensure that when they accept a tenants notice to exercise that they also review the terms of the Lease to ensure that they receive every other condition outlined in the clause. Otherwise, there may be the ability for the tenant to withdraw their notice in the same manner as Willis in this case. Equally, tenants need to exercise caution when it comes to exercising their option to renew to ensure that they have not missed a condition specified in the relevant clause, which would give the landlord the potential ability to invalidate the exercising of the option.

Why is the ACCC looking at the childcare sector?

Following on from last year’s election, the Albanese Government has focused their attention on trying to address the rising cost of childcare in Australia. The Treasurer has tasked the Australian Competition & Consumer Commission (ACCC) to inquire into 4 different childcare services – centre-based day care, family day care, outside school hours care and in home care. Relevantly, the recipients of all these services are eligible for the government’s childcare subsidy.

The ACCC has released their interim report which found that centre-based day care and outside school hours care make up 97% of all childcare services in Australia. The number of these services has increased since 2018, while the numbers of family day care and in home care services have decreased.

Further, the number of approved childcare places has increased by 17% between 2018 and 2022 however this has not been consistent across all service types nor all geographic regions.

Importantly, ACCC preliminary findings suggest that “The positive association between areas of socio-economic advantage and price…suggest that prices are often set by providers having regard to the parent and guardian cohort’s capacity (or willingness) to pay rather than the level of competition.”

What does this mean?

In short, the report suggests that one will pay more on average if they send their children to childcare centres located in more affluent suburbs than those that aren’t. Surprisingly, between 2018 and 2022, childcare fees increased across all services between 20% to 32%. In nominal terms, this represents an increase for centre-based day care of about $21 per day and family day care $16 per day.

The rate of childcare fee increases has been faster than inflation and wage increases.

After taking into account government subsidies, the report found that out-of-pocket expenses still increased by 7% when using centre-based day care services, 15.8% for family day care and 12.3% for outside school hours care. In home care experienced a decrease of 10.5% due to a change in subsidy entitlements in early 2019 but increased 15.7% from September 2019 to December 2022.

What’s next?

The ACCC continues to consult with childcare providers “to obtain detailed cost information to better understand the drivers of childcare prices and how the local markets for childcare services operate.” It is expected that the ACCC will issue a consultation paper in September 2023 which will include draft findings and recommendations and will call on all parties to put forward submissions in response to it. Once the ACCC has considered all submissions then they will provide their final report to the Treasurer by 31 December 2023.

If you are considering or are interested in putting forward a submission to the ACCC on this subject but don’t know how then please contact us and we can assist.

For more information you can refer to the Childcare inquiry interim report June 2023 by clicking here.