Lister v Romford Ice and Cold Storage Co Ltd

An employee impliedly undertakes to exercise reasonable care and skill in performing contractual duties. A negligent employee is therefore liable in contract for loss directly caused to the employer, including damages and costs which the employer must pay to a third party through vicarious liability.

The employer’s insurance does not, without an express or properly implied term, relieve the employee of that liability. Neither compulsory third-party motor insurance nor the employer’s decision to insure implies that the employee will receive the benefit of the policy, be indemnified against personal negligence, or be immune from recovery proceedings. A previous judgment and its satisfaction may provide prima facie evidence of the employer’s resulting loss.

In Lister v Romford Ice and Cold Storage Co Ltd, a lorry driver negligently reversed into his father, who was acting as his mate. The father recovered £1,600 and costs from the employer, whose liability was wholly vicarious. The employer’s insurers then caused proceedings to be brought in the employer’s name against the driver for indemnity, contribution or damages for breach of his employment contract.

Ormerod J awarded the employer a complete contribution under the Law Reform (Married Women and Tortfeasors) Act 1935. The Court of Appeal dismissed the driver’s appeal by a majority: Birkett and Romer LJJ formed the majority and Denning LJ dissented. Its decision was reported at [1956] Q.B. 180.

The central questions were whether the driver owed his employer a contractual duty of care and whether compulsory motor insurance, the policies actually obtained, or the employment relationship implied a term protecting him from personal liability.

1. Disposition. The House dismissed the appeal by a majority of three to two and affirmed the Court of Appeal’s orders. Viscount Simonds, Lord Morton of Henryton and Lord Tucker formed the majority. Lord Radcliffe and Lord Somervell of Harrow dissented.

2. Contractual duty of care. All five Law Lords agreed that a servant impliedly undertakes to exercise reasonable care and skill in performing the work for which he is employed. Per Viscount Simonds, the servant’s obligation encompasses both possessing and exercising the necessary skill. A negligent performance may found an action in contract even though the same conduct also constitutes a tort.

3. Recoverable loss. Per Viscount Simonds, Lord Morton and Lord Tucker, the employer’s liability to the injured third party arose directly from the servant’s negligent breach. Damages and costs paid because of the employer’s vicarious liability were therefore not too remote and were recoverable as contractual damages. Viscount Simonds and Lord Morton also accepted that the prior judgment and its satisfaction were at least prima facie evidence of the amount of the employer’s loss.

4. No protective implied term. Per Viscount Simonds, Lord Morton and Lord Tucker, no term could be implied requiring the employer to indemnify the driver against civil liability, give him the benefit of the employer’s insurance, or refrain from recovering losses caused by his negligence. The proposed terms were neither necessary nor sufficiently precise and obvious. Some formulations were so broad that they would substantially nullify the servant’s established duty of care. Insurance obtained at the employer’s expense did not itself diminish the employer’s rights or prevent the insurer from exercising subrogated rights.

5. Compulsory insurance. The majority accepted that an employer must not require a servant to act unlawfully. The Road Traffic Act 1930 consequently required the statutorily prescribed insurance to be in force where applicable. Per Viscount Simonds, Lord Morton and Lord Tucker, however, the Act did not require an employer to insure the driver personally against every consequence of his negligence. It therefore supplied no basis for the wider implied indemnity asserted.

6. Alternative contribution claim. Viscount Simonds and Lord Morton considered that a complete contribution could also properly be awarded under the Law Reform (Married Women and Tortfeasors) Act 1935. That alternative route was unnecessary to the majority’s contractual conclusion and did not command a separately expressed majority of the House.

7. Dissent. Lord Radcliffe and Lord Somervell would have allowed the appeal. Although they accepted the driver’s contractual duty of care, they considered that the compulsory-insurance setting and the practical character of motor employment implied an obligation on the employer to provide insurance protecting the driver’s resources. In their view, recovery against the driver was inconsistent with that obligation.

1. House of Lords: In Lister v Romford Ice and Cold Storage Co Ltd, reported at [1957] AC 555 and [1956] UKHL 6, the appeal was dismissed by a majority of three to two and the Court of Appeal’s orders were affirmed.
2. Court of Appeal: The driver’s appeal was dismissed by Birkett and Romer LJJ, with Denning LJ dissenting. The decision was reported at [1956] Q.B. 180.
3. High Court: Ormerod J found the driver negligent and awarded the employer a complete contribution under section 6(2) of the Law Reform (Married Women and Tortfeasors) Act 1935. No report citation is stated.