A Case For Change In Resolving Institutional Mass Tort Claims

The recent case of Barclays Bank Plc v Various Claimants [2020] UKSC 13 clarified the English law position that a principal cannot be vicariously liable for the acts of an independent contractor. As a result, Barclays ("the bank") avoided any liability for the actions of an independent contractor, Dr Gordon Bates, who was alleged to have abused a number of the bank's future employees during compulsory pre-employment medical examinations. As Dr Bates had died, the Supreme Court's decision meant that the claimants lost any opportunity to recover compensation and seek recognition of the alleged abuse.

Whilst the win-lose paradigm is a key feature of litigation, the facts of Barclays support the view that adversarial litigation will not always be the best way to resolve group litigation. This is the case whether the dispute arises in the specific context of sexual abuse or more broadly in financial services and data breach disputes or other mass-harm cases. This BR Alert considers both the decision in Barclays and the view that thoughtfully designed and implemented redress schemes are often much better suited to the task of balancing the interests of parties in group litigation and will become even more prevalent as an antidote to protracted litigation.

Barclays

The case considered whether the bank should be held vicariously liable for alleged sexual abuse inflicted on former bank employees during medical examinations conducted by Dr Gordon Bates between 1968 and 1984. The examinations were mandated by the bank in order for it to assess the health of a candidate for employment and so the employee could be recommended for life insurance at ordinary rates as required by the bank’s pension scheme.

Vicarious liability is imposed on a principal in respect of the act or omission of a tortfeasor. Although the concept historically applied only to employer and employee relationships, this has over time been extended to relationships where no formal employment contract exists. The key authority on vicarious liability is Catholic Child Welfare Society v Various Claimants [2012] UKSC 56 (often referred to as Christian Brothers), in which the Supreme Court confirmed that in the absence of an employment contract the test for vicarious liability had two stages.

The first stage was the subject of the appeal in Barclays. It required the court to consider whether the relevant relationship was one capable of giving rise to vicarious liability. In Christian Brothers the Supreme Court said that if the principal and tortfeasor “are not bound by a contract of employment, but their relationship has the same incidents, that relationship can properly give rise to vicarious liability on the ground that it is ‘akin to that between an employer and an employee’”. In Barclays, both the High Court and the Court of Appeal had considered that they were bound to scrutinise the role of Dr Bates to consider whether the role he held was "akin to employment" and found unanimously that it was.

Reversing the decision of the Court of Appeal and finding in favour of the bank, the Supreme Court held that the central issue was that Dr Bates was an independent contractor, and that nothing in the recent development of the law of vicarious liability had eroded the position that a principal could not be held liable for the acts of an independent contractor.

No recourse for the claimants in Barclays

Although the claimants had argued that the authorities required the courts in Barclays to “take a more nuanced multi-factorial approach” when considering whether a principal might be vicariously liable, the Supreme Court disagreed. Lady Hale, giving the leading judgment for the Supreme Court, confirmed that once it was clear that a tortfeasor was conducting his own independent business, it was not necessary to adopt the Christian Brothers two-stage test. As Dr Bates was an independent contractor, the bank could not be held vicariously liable for any abuse inflicted by him.

The Supreme Court’s decision is a clear restatement of the law regarding the application of vicarious liability to independent contractors. Incidentally, the Supreme Court also decided WM Morrison Supermarkets plc v Various Claimants the same day in relation to vicarious liability arising out of an employee’s disclosure of employee data. Lord Reed considered the application of vicarious liability to an employee’s actions within their “field of activities”.

When viewed through the lens of claimants seeking justice for alleged serious non-recent sexual abuse, two issues are striking: (i) the claimants had no choice but to attend a medical examination if they wanted to be employed by the bank; and (ii) the appointment of Dr Bates over several years was solely a matter for the bank. It follows that, notwithstanding the bank was not vicariously liable for the abuse, the bank might arguably bear some broader moral responsibility as a result of it directing its future employees for medical examinations with Dr Bates in the first place.

This raises the question of how the bank could have addressed a nuanced issue like this during the course, or even at the end, of contentious litigation. The overriding difficulty is that the UK adversarial system is not generally flexible enough to enable parties to respond to more nuanced issues once litigation has been
commenced.

Redress schemes as an alternative to litigation

Given the very specific circumstances of the Barclays case and the very low prospects of the bank facing similar claims again (and so there being no need to pursue the claim for precedent purposes), one alternative approach for the bank could have been to consider the implementation of a redress scheme for the benefit of the claimants at the outset of the dispute.

Resistance to the use of redress schemes is often caused by a perception that their use is limited to the administration of settlement payments. Redress schemes are therefore often associated with the advanced stages of a litigation process, to be deployed (if at all) after pre-action protocols have been complied with and
usually also after proceedings have commenced. However, redress schemes may be associated with seeking to pay genuine claims off at lower than par value, in the belief that claimants will take partial settlement of their claims over the stress and expense of having to pursue claims at court and in this way reflect the litigation risk.

A further consideration is that liability insurers, who by virtue of policy claims control clauses have a significant role in the defence of group litigation against institutions, often mistakenly consider that the use of a redress scheme by a defendant institution on its own amounts to an admission of liability to those who might not accept payment. Insurers are therefore often reluctant to engage with schemes for fear of triggering greater liability.

Instead, redress schemes can be thoughtfully developed to operate as self-contained dispute resolution schemes designed to fulfil several objectives common to litigating parties, in particular to: (i) resolve multi-party claims promptly through an approach approved by all stakeholders, underpinned by legal principles and
tailored to the parties' specific intended outcomes; (ii) where it is appropriate to do so, provide restitution at lower than ordinary legal cost than disaggregative proceedings; (iii) provide consistency in the treatment of similarly injured claimants; (iv) provide certainty, thereby contributing to a greater sense of closure by group litigants; and (v) import a broader sense of discretion to enable the parties to achieve a result that is fair, just and reasonable.

The early adoption of a redress scheme can create a number of opportunities for parties to resolve group litigation at a much earlier stage and with better prospects of achieving the parties’ strategic aims than court litigation or ad-hoc settlement. However, scheme adoption is limited by the current lack of an interface with the
civil procedure rules. There are a number of ways that this might be improved. One option would be to develop the civil procedure rules to give courts a regular jurisdiction to approve or comment on private redress schemes. Another is the institution of a statutory scheme to handle particular categories of group claims. A third
approach, which could operate alongside the above options, would be to introduce changes to the rules on the recovery of legal costs, so that parties to group litigation can be made subject to cost consequences in the event that they fail to engage with a redress scheme where appropriate without significant cost risk.

IICSA and a national redress scheme

One area where redress schemes are currently being given significant consideration is in response to child sexual abuse, as part of the Independent Inquiry into Child Sexual Abuse (“IICSA”). IICSA has a broad remit to consider the resolution of claims arising out of institutional and organisational failures to protect children from
sexual abuse. The Barclays decision comes at a time when IICSA is considering whether a national redress scheme should be established with statutory authority to provide a more suitable forum for resolving non-recent sexual abuse claims.

In September 2019, IICSA’s Accountability and Reparations investigation identified a number of concerns that survivors of abuse had experienced with the civil justice system. The issues ranged from complaints of defendants running technical and often unmeritorious limitation arguments designed to slow down the litigation process and force settlement discussions, to dissatisfaction with the amount of compensation available, to the length of time it took to resolve proceedings.

In recognition of these issues, there has been a growing acceptance by claimant and defendant lawyers alike that group litigation procedures in sexual abuse claims are not fit for purpose. As a result, at the beginning of this year IICSA broadened its investigation to consider the “potential for a redress scheme to offer accountability and reparation to victims and survivors of child sexual abuse” at a national level.

During the investigation hearing, at which Brown Rudnick LLP gave evidence, there was general support for a national redress scheme although an acceptance that there are substantial issues to be resolved if a scheme is recommended. One of the significant issues is the form such a scheme might take. One option available to
IICSA is the institution of a national child sex abuse dispute resolution scheme by primary legislation to the effect that any child sex abuse claim, in whatever sector, can be brought by a survivor for independent adjudication, with claims assessed on a fair, just and equitable basis. The scheme could be funded by institutional defendants and supported by a central government fund, to provide recourse for claimants where there is no extant defendant to pursue.

The concept of using a dispute resolution framework as an alternative to civil litigation is not entirely novel. For example, the British Banking Resolution Service ("BBRS") has recently been established by a number of UK banks to handle complaints for small and medium sized enterprises ("SME") that fall outside of the jurisdiction of the Financial Ombudsman Service. That scheme has enabled member banks to design and tailor a dispute resolution service to meet the different needs of a broad range of SME customers.

There is therefore no question that redress schemes are a valuable tool for early consideration by litigants facing mass claims as a proactive alternative to litigation. Such schemes need not be limited to use by regulatory bodies or only possible where an entire industry has adopted the method for limited circumstances.

Conclusion

Redress schemes have a much larger role to play in resolving group litigation claims. In particular the flexibility of schemes to respond to nuanced and novel situations through the early engagement of stakeholders places them at a distinct advantage to the traditional civil claims process. The BBRS has adopted a novel scheme
approach and IICSA is currently undertaking a complex assessment to consider whether a national redress scheme could operate as a viable alternative to litigating non-recent sexual abuse claims. The outcome in cases such as Barclays, where a win-lose paradigm masks the complexity of the underlying facts, supports the
position that a more nuanced response can be better achieved through a scheme approach.

Whilst IICSA will be interested to identify a pathway by which a national scheme can be established by engagement with all stakeholders, there is no doubt that it has the opportunity to make very significant recommendations to enhance the status of redress schemes to resolve claims of sexual abuse. Other industries and sectors will stand to benefit where changes are recommended that begin to develop mechanisms to increase the interface that schemes have with the civil procedure rules.

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