The NSW Supreme Court found that a company operating a childcare centre was vicariously liable for injuries suffered by two children and their mothers following historical sexual abuse committed by a non-paid worker at the childcare centre.
Whether a company operating a childcare centre and its 99% shareholder/sole director were vicariously liable for injuries suffered by two children who attended the centre together with their mothers following acts of historical sexual abuse committed by a non-paid worker.
Little Pigeon Pty Ltd (Little Pigeon) owned a childcare centre which B and D (the pseudonyms for the plaintiffs) attended between 2008 and late 2010. Ms CL (pseudonym) was the 99% shareholder and sole director of Little Pigeon. The perpetrator was Ms CL’s brother, a 1% shareholder in Little Pigeon, and undertook an extensive amount of unpaid work at the centre.
The perpetrator was charged in 2010 with sexual offences involving B and another child (although not D), and both B and D made disclosures about the perpetrator. After he was charged, the perpetrator gave a recorded police interview in which he made numerous admissions about touching children at the centre which included kissing; massaging on the neck, shoulders and back; touching them on the skin under their clothes and inadvertent genital contact. Ultimately, no charges were pursued against the perpetrator.
B and D claimed that the perpetrator was liable for assault in respect to a number of sexual acts committed against them. B and D also claimed that Little Pigeon and Ms CL were both vicariously liable for the perpetrator’s assaults on them as well as being liable (in their own right) in negligence.
A and C (B and D’s mothers respectively) claimed that Little Pigeon and Ms CL were liable in negligence for causing them mental harm (post-traumatic stress disorder and chronic adjustment disorder) as well as breach of contract on account of the failure to ensure their children were safe while under the centre’s control and supervision.
The NSW Supreme Court (Schmidt AJ) found in the plaintiffs’ favour in respect of all causes of action. Damages totalled $2,427,263, apportioned between the plaintiffs.
A large part of the judgment concerned the court’s reasons for its finding that the alleged assaults in fact occurred. This finding turned on the admissibility of certain admissions made by the perpetrator together with evidence led by the plaintiffs to establish that the perpetrator had a tendency for inappropriate sexual conduct with children in his care.
One of the key issues in dispute was whether Little Pigeon and Ms CL were vicariously liable for the assaults committed by the perpetrator. The court answered this question in the plaintiffs’ favour for the following reasons.
Firstly, the court found that the perpetrator was an employee of Little Pigeon and therefore the general rule applied, being that an employer is vicariously liable for the tortious acts of its employee (Hollis v Vabu Pty Ltd (2001) 207 CLR 21). While the perpetrator was not paid for his work, the court was influenced by the following factors:
- The perpetrator was extensively integrated into Little Pigeon’s business, working at the centre for over 12 hours a day Monday to Friday as well as maintenance work on the weekend;
- The perpetrator performed a variety of activities, some of which were required to be performed by an employee under the Children and Young Persons (Care and Protection) Act 1998 (NSW) and Children Services Regulation 2004 (NSW);
- the type of work the perpetrator performed in relation to the children was the type of work which others were also employed to perform;
- Little Pigeon and Ms CL were able to control the perpetrator’s work and the perpetrator was presented to parents, children and other staff as an emanation of Little Pigeon, wearing the same uniform as the other employees and attending some staff meetings;
- the supervision of the perpetrator was no different to other employees even though the Children Services Regulation 2004 (NSW) required volunteers to be accompanied; and
- Little Pigeon had a considerable ability to control the perpetrator’s activities and given the vulnerable children for whom Little Pigeon worked for, vicarious liability would serve an important deterrent effect.
Secondly, even if the perpetrator was not an employee of Little Pigeon, vicarious liability was established pursuant to the principles in Prince Alfred College Incorporated v ADC (2016) 258 CLR 134 and a line of English authorities that supported vicarious liability going beyond the strict relationship of employment when new situations require it; even extending to unpaid volunteers in some situations. The court was persuaded that the perpetrator carried on activities at the centre as an integral part of Little Pigeon for its benefit (rather than for his own benefit) and as a result, vicarious liability ought to apply.
Finally, the court found that the perpetrator’s actions were committed in the course of his employment given that the role he was assigned by Little Pigeon provided him unsupervised close contact with children, which in turn allowed him to achieve intimacy with his young victims. Pursuant to Prince Alfred College, vicarious liability will apply where the employment provides the opportunity and occasion for the relevant acts.
Implications for you
The court’s decision demonstrates the increasingly wide breadth of vicarious liability, particularly in cases such as sexual abuse where a strong public policy influences a departure from the traditional categories of relationship attracting vicarious liability.
The court’s decision reinforces the potential for an unpaid worker or even a volunteer to be classed as an employee in circumstances where the worker effectively exercises the same functions as other paid workers.
The expanding ambit of vicarious liability has been anticipated, given the developments in the area in other Commonwealth jurisdictions, notably England and Wales. However so far as insurers are concerned, it means an increased risk profile for a number of different insureds, particularly in relation to sexual abuse claims.