Summary

A company providing financial advice was not vicariously liable for a fraud perpetrated by one of its agents. Although the fraud had involved an online portal the agent had had access to in his role as the company's agent, his wrongdoing had been part of a recognisably independent business and not an integral part of the company's business.

Facts

The appellants appealed against a decision granting summary judgment to the respondent, a company providing financial advice, in their claim alleging that the company was liable in negligence following a fraud perpetrated by its agent.

The appellants had been introduced to a property development scheme run by the agent, the business partner of the introducer. The introducer explained that the monies for the investment could be raised by way of remortgage of the appellants' properties, which the agent could arrange. Because he was an agent of the company, the agent had access to an online portal operated by a bank. He used the portal to arrange the remortgages. He put forward false income and employment information, thus obtaining borrowing which could not otherwise have been advanced. Some of the monies were used to pay off the appellants' existing mortgages; the balance was advanced to the agent, misappropriated, and lost in the development scheme. The appellants argued that the company was legally responsible. A master granted the company summary judgment on most bases but refused it in respect of its alleged vicarious liability for the agent's wrongdoing. The company successfully appealed to a judge, who also dismissed the appellants' cross-appeal against the master's decision that the company had not owed them any direct duty of care.

Held

Vicarious liability - The judge had been right to enter summary judgment on the issue of vicarious liability. Even assuming in the appellants' favour that a case of agency was to be analysed pursuant to a unitary modern law of vicarious liability applicable in all cases, the judge had rightly concluded that the appellants could not satisfy the two-stage test for a finding of vicarious liability set out in the relevant authorities, Cox v Ministry of Justice [2016] UKSC 10 and Various Claimants v Institute of the Brothers of the Christian Schools [2012] UKSC 56 applied. The agent had been engaged in a recognisably independent business. His use of the portal had simply been the means by which he was able to obtain funds from the appellants to invest in the scheme. To describe that activity as an integral part of the company's business would be a distortion of the true position. The judge had been aware of the appropriate legal test and had applied it correctly (see paras 67-69 of judgment). Not all the acts and omissions which would be necessary to make the agent personally liable in tort had taken place within the alleged course of his employment or agency; it followed that the company was not vicariously liable for his wrongdoing, Credit Lyonnais Bank Nederland NV (now Generale Bank Nederland NV) v Export Credits Guarantee Department [2000] 1 A.C. 486followed. The appellants had been induced to invest not by the agent, but by the introducer, who had never been the company's employee or agent. The agent had received and misappropriated the remortgage monies pursuant to his recognisably independent business. It was the handing over of the monies to the agent which had caused the loss; they had not suffered loss through the actual remortgaging or their receipt of monies from the bank (para.74). At most, the company had provided the opportunity for the agent to commit the wrongdoing by giving him access to the portal. That was not sufficient to give rise to vicarious liability, absent a holding out of someone in the agent's position as having authority to act for the party sought to be made vicariously liable, Morris v CW Martin & Sons Ltd [1966] 1 Q.B. 716 and Armagas Ltd v Mundogas SA (The Ocean Frost) [1986] A.C. 717 followed, Kooragang Investments Pty v Richardson & Wrench [1982] A.C. 462 applied (para.76).

Duty of care - The appellants' argument that the company had owed them a duty of care lacked merit. The complete absence of any relationship between the company and the appellants and the fact that the company was unaware of the agent's acts made inevitable the conclusion that the second stage of the Caparo Industries Plc v Dickman [1990] 2 A.C. 605 test to establish a duty could not be satisfied, Caparo followed (para.78).

Appeal dismissed