Hawley v Luminar Leisure Ltd & Ors

An employee supplied to another organisation may become its temporary deemed employee for vicarious liability. The general employer bears a heavy burden of establishing the transfer. The court focuses on the tortious act, who was entitled and obliged to control it, and whose business bore the relevant risk.

Dual vicarious liability is legally possible. It may arise where control is shared or the employee is sufficiently integrated into both organisations to make shared liability just. It does not arise where control and responsibility have effectively transferred to one organisation.

Under liability insurance, whether bodily injury is accidental or fortuitous is ordinarily assessed from the assured’s perspective. An employee’s intention is not automatically attributed to a corporate assured.

A door supervisor employed by ASE Security Services Ltd punched the claimant while working at a nightclub operated by Luminar Leisure Ltd, causing permanent and serious brain damage. ASE subsequently entered liquidation but held public liability insurance covering liability arising from accidental bodily injury.

Wilkie J, in [2005] EWHC 5 (QB), held Luminar vicariously liable as the supervisor’s temporary deemed employer. He assessed ASE’s contribution to Luminar at nil, declined to set aside the default judgment against ASE, and declared that ASE’s insurer was liable under the policy.

Luminar and the insurer appealed. The principal issues were whether responsibility for the supervisor had transferred to Luminar, whether both companies could be vicariously liable, whether ASE should contribute, whether the default judgment should be set aside, and whether deliberately inflicted injury was accidental under ASE’s liability policy.

1. The appeals were dismissed. The court upheld all the conclusions of Wilkie J.

2. The burden of showing that responsibility had passed from a general employer to a temporary employer was heavy. The inquiry focused on the relevant tortious act and on who was entitled and obliged to control it. Luminar exercised detailed control over the door supervisors’ duties and manner of performance. Its manager controlled admissions, deployment, responses to troublesome customers and the permissible use of force. The supervisor was also presented to the public as Luminar staff and had become embedded in its organisation. The finding that Luminar was his temporary deemed employer was therefore open to the judge.

3. Dual vicarious liability was legally possible under Viasystems, but inappropriate on these facts. ASE retained the formal incidents of employment, including payment and dismissal, but lacked immediate or effective control over the relevant conduct. Control and responsibility had effectively and substantially transferred to Luminar. The supervisor was no longer recognisable in practice as ASE’s employee for the work concerned.

4. Under sections 1(1) and 2 of the Civil Liability (Contribution) Act 1978, contribution had to be just and equitable in light of responsibility for the damage. Luminar stood in the shoes of the tortfeasor notwithstanding its own absence of fault. ASE’s failure to investigate the supervisor when recruiting him was remote from the assault and had a negligible causative effect. The nil contribution was upheld.

5. The default judgment against ASE remained in force. The contribution finding concerned only the allocation between defendants. No proper application to set aside had been made, and the liability trial had proceeded on the basis that ASE’s liability to the claimant was established. Reopening it would not have served the interests of justice.

6. The public liability cover extended to ASE’s liability for the assault. Insurance policies are construed in their linguistic and commercial context. The policy insured a security business against liability arising from its employees’ activities and distinguished ASE from those employees. Whether injury was accidental or fortuitous therefore fell to be assessed from ASE’s perspective. The employee’s deliberate state of mind was not attributed to ASE merely because ASE was vicariously liable. The injury was accidental from ASE’s perspective, so the declaration under section 1(1) of the Third Parties (Rights Against Insurers) Act 1930 was upheld.

• Court of Appeal (Civil Division): In [2006] EWCA Civ 18, dismissed Luminar’s and the insurer’s appeals and upheld all the judge’s material conclusions.
• High Court: Wilkie J, in [2005] EWHC 5 (QB), held Luminar vicariously liable, assessed ASE’s contribution at nil, declined to set aside the default judgment against ASE, and declared that the insurer was liable under the policy.
• Earlier proceedings: Master Foster entered default judgment against ASE after it failed to serve a defence.