REUTERS | Neil Hall

Conduct of claims alleging employee wrongdoing: is there a duty of care?

The starting point is that a party to litigation is entitled to conduct that litigation in the way it believes will best serve its own interests. But is that always the end point?

The Court of Appeal’s decision in James-Bowen and others v Metropolitan Police Commissioner suggests that where the litigation has important implications for a party’s employees (or quasi-employees), there may be a duty to take account of their interests. In that case, a police commissioner was sued as vicariously liable for the alleged actions of officers in his force. The Court of Appeal held that it was arguable that he owed the officers a duty to take reasonable care not to sacrifice their interests and professional reputations without good reason, and without giving them reasonable warning of what he intended to do. Similar issues could arise in other situations where employee reputations are at stake, whether or not the claim is one of vicarious liability.

The court did not conclude that a duty of care actually arose in this case: it simply decided that the existence of such a duty was arguable and so the claim should not have been struck out. But unless and until there is authoritative guidance on when such a duty may (or may not) arise, employers should be aware of the risks in conducting claims and agreeing terms of settlement which may cause reputational damage. They may find themselves disposing of one claim only to face another from their own employees.

The underlying litigation

A terrorist suspect complained that he had been seriously assaulted in the course of his arrest and detention by the police in December 2003. In July 2007, he brought proceedings for personal injury against the Metropolitan Police Commissioner as the person vicariously liable for torts committed by constables in his force. Although none of the four police officers involved had been joined as defendants to the action, they obviously had a close personal interest in the proceedings.

Shortly after trial began in March 2009, the Commissioner agreed to compromise the claim on terms which admitted all but one of the 22 allegations of gratuitous violence, and which included a public apology. In August 2010, the officers were charged with various criminal offences arising out of the suspect’s arrest, but were acquitted of all charges after a five week hearing.

The present proceedings

In January 2014, the officers brought proceedings against the Commissioner seeking to recover damages for reputational, economic and psychiatric harm suffered as a result of errors in the preparation and conduct of the defence to the original claim.

The essence of the officers’ case was that the Commissioner let them down badly by failing to defend the claim in a robust and efficient manner, and instead undermined their emotional, physical and economic well-being by admitting and asserting publicly that they had behaved in a reprehensible manner, when that was the opposite of the truth.

The claim was formulated in various ways. The relevant one for present purposes was an alleged breach of a duty of care arising at common law from the officers’ quasi-employment relationship with the Commissioner.

The High Court struck out the particulars of claim as disclosing no reasonable grounds for bringing the action and entered judgment for the Commissioner. The officers appealed.

Alleged duty of care

The officers alleged that the Commissioner owed them a duty of care as quasi-employer to take reasonable care to safeguard their health, welfare (economic and professional) and reputational interests.

That duty was said to encompass a duty to take reasonable care in the preparation and conduct of the defence of the action, and in deciding whether to settle the action and on what terms. It was also said to involve keeping the officers informed of progress and giving them notice of the intention to settle in sufficient time to enable them to take independent legal advice.

Court of Appeal decision

The court recognised that, as a general rule, and so long as they comply with any relevant procedural requirements, parties to litigation are entitled to conduct it in whatever way they think best serves their own interests. That includes pressing on with claims that have little prospect of success, or compromising a claim in which they have every chance of success if that serves their broader interests, for example, because the costs of contesting the claim are too great. That was simply a reflection of the fact that everyone is entitled to act in what they consider to be their own interests unless they owes a duty to another person to take account of that person’s interests.

The Commissioner accepted that he owed the officers a duty to take reasonable steps to protect them from reasonably foreseeable physical or psychiatric harm. The question was whether that duty encompassed the conduct of proceedings against him based on their alleged misconduct, and whether it extended to other kinds of harm, in particular economic and reputational harm.

The Court of Appeal said that no case had been drawn to its attention in which the court was asked to consider whether the duty of care between employer and employee extended to the conduct of litigation and, if so, whether it extended to economic or reputational harm. That question was likely to depend to a large extent on the third requirement for a duty of care identified in Caparo v Dickman, namely whether it would be fair, just and reasonable for a duty of care to be imposed in these circumstances. That was likely to involve a question of legal policy, and the court should not strike out a claim on that ground at an early stage unless the position was very clear.

Here the Court of Appeal, disagreeing with the trial judge, concluded that it was arguable that the requirement was satisfied. Although the Commissioner’s primary duty was to protect the interests of the police service, the alleged duty to the officers would not necessarily cut across that primary duty. It was in the interests of the Commissioner and the officers for the defence to be conducted as effectively as possible and a duty of care would not inevitably give rise to any conflict of interest.

The Court of Appeal did agree with the trial judge that the officers had no real prospect of succeeding in their claim for psychiatric harm, as they had not pleaded any facts in support of their contention that it was foreseeable that the officers would suffer such harm in the circumstances. However, the judge was wrong to hold that the claims for reputational and economic loss depended entirely on being able to establish psychiatric harm; it was arguable that such claims could be based on damage to reputations, without the need to establish a claim for personal injury (including psychiatric injury).

Herbert Smith Freehills Maura McIntosh

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