LST5CCL : Company and Commercial Law

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Running head: COMPANY LAW
Company Law
Name of the Student
Name of the University
Author Note

COMPANY LAW1
1A
A person of superior position would be held liable for the act or omission of an act done
by his employee under the doctrine of Vicarious Liability. The common law holds the employers
liable for the wrongful act done by his employee, acting in the course of the business. When an
employee commits a tortious act in the course of employment, the employer is held vicariously
liable for the damage or loss caused to a third party by way of a transaction or agreement. The
doctrine of Respondeat Superior guides the rule of vicarious liability of the employer as he
shares a relationship of trust and confidence with his employee. This relationship makes the
employer liable for the negligence committed by the employee, for the employer bears a liability
of care towards the customer or supplier with whom the business deals. Therefore, the employer
has the responsibility to cover for the losses caused to the customers or suppliers arising out of
an unauthorized act, but in the course of employment, irrespective of the fact whether it was
committed in good or bad intention by the employee. The liability of the employer towards the
plaintiff needs to be decided by the court, along with the fact that whether the employee’s act or
omission has affected the plaintiff, giving effect to a cause of action.
The recent landmark judgment of Prince Alfred College Incorporated v ADC [2016]
HCA 37 has shaped the ambiguous approach to vicarious liability of the employer, as previous in
Australia, the legal responsibility of the employer pertaining to his employee’s wrongful act has
not been much clear. In this case, the court discussed the adoption of the right approach
regarding holding an employer liable for the tortious act of his employee, which has arisen in the
course of business. The employee, on the other hand must be aware of his job roles and
responsibility to avoid negligence and mistakes that causes injury to the third party. Additionally,
employees must be aware of their rights and duties, like his job role, his jurisdiction, transactions
to make on behalf of the employer and the business and the business decisions he is eligible to
undertake in absence of the owner or the deciding authority. To hold the employer liable, it must
be found out that whether the employee acted in personal capacity without the authorization of
the employer or acted in the course of business. This factor of acting ‘in the course of business or
employment’ can be judged on the basis of the following test:

COMPANY LAW2
It needs to be ascertained whether the employee was asked to do the act or refrain from
doing the act by the employer itself, that caused damage to the third party; and
It is important to find out whether the unauthorized act of the employee has been done in
the course of business, which was asked t do by the employer.
These factors would help to determine whether the employer would be held liable for the tort of
negligence or negligent misrepresentation committed by the employee. The factor states that the
employer would be held vicariously liable even if the employee has acted without the
authorization of the employer, but it has to be proven that such unauthorized work is done in
such a manner that it seems to be impossible to avoid for executing the normal course of work.
In many cases, an act with criminal liability has also attracted vicarious liability of the employer
as it was acted in the course of the employment and therefore held the employer to pay damages
to the party so injured.
Therefore, the law protects the aggrieved party and the employer cannot defend himself
on the grounds of criminal liability of the case. This restricts the employer from escaping his
responsibilities. The employer would still be held liable for the tortious act of an employee who
has left the organization; as the act was carried out while the employee was in the course of
employment. The employer would be vicariously liable to pay damages to the third party who
has contracted injury or loss because of such wrongful act of the employee. However, it is to be
noted that the employer shall be eligible to bring charges against the employee who has
committed a wrongful act out of negligence or otherwise. Such charges would be brought under
the Employee’s Liability Act 1991. In this matter, it needs to be highlighted that the employee has
acted out of the course of employment or such action is in no way related to the course of
employment.
In this case, Jack, the owner and employer of Michelle would be vicariously liable to
make the payment due to the supplier for the purchase of the gold leaf sheets. Michelle
purchased the sheets, although without authorization of her employer, yet in good intention for
the betterment of the business along with making an impression on the customers. It is evident
that the purchase was done in an unauthorized way, yet it can be claimed by Michelle that it was
closely related with the job role as a Manager, who should consider about the profit and better