Theories of enterprise liability may be contrasted with those of fault liability. According to the latter, liability to pay damages is justified by, or conditional on, the defendant having been personally at fault in some sense. The former, by contrast, tend to justify the imposition of strict liability or liability regardless of fault. From among the various formulations of enterprise liability to be found in scholarly and judicial writing, two basic principles may be distinguished. The first holds that if an enterprise engages, for its own benefit, in an activity that creates or materially enhances a risk of harm to others, it should pay compensation to those injured if the risk in question materialises. This principle is said to be based on the fairness of reciprocity between burden and benefit. It may also enable loss to be widely and thinly distributed among the many that benefit from the enterprise, might incentivise the enterprise to reduce the degree of its risk creation or enhancement, and might prevent price distortion by ensuring that the true costs of the enterprise's activities are ‘internalised’. The second version of enterprise liability drops the requirement of a countervailing benefit: the enterprise ought to be liable simply if it creates or significantly enhances the risk that the plaintiff would suffer the injury that she did. This principle would cover organisations not seeking financial profit, such as charities, religious organisations or public authorities. Both principles are said to justify liability even if all reasonable precautions were taken by the enterprise.
In recent times, the dominant judicial conception of tort liability at common law has been provided by notions of fault. This is most powerfully illustrated by the inexorable growth of the tort of negligence over the past century. Nonetheless, ideas of enterprise liability have played their part. This is most obvious in the context of statutory compensation schemes supplementing the common law. Examples in England are provided by the enactment of legislation imposing strict liability on employers for industrial accidents and on manufacturers for defective products. Here the line of thought has been that where an enterprise seeks to profit by sending employees into potentially harmful workplaces, or by sending potentially harmful products out into the world, it is both fair and efficient that the enterprise, which stands to benefit by creating the risk, should be held liable to an employee or consumer injured as a result, even if the enterprise had taken all reasonable steps to prevent the injury.
The topic of Douglas Brodie's lucidly-written and thought-provoking book is the influence of enterprise-liability thinking on common-law doctrines. He refers predominantly to the law of the UK, Australia and Canada (although some mention is also made of American, Irish, New Zealand and German law). He focuses on two relationships regulated by the law of tort and contract, namely, that of an enterprise and its employees and that of an enterprise and third parties with whom it or its employees interact. Notions of enterprise liability apply in principle to both types of relationship, potentially influencing the application and development of the relevant common law, because the activities of businesses and other organisations may create or materially enhance risks of harm both to ‘outsider’ third parties and to ‘insider’ employees. Brodie makes both descriptive and normative arguments. He asserts that principles of enterprise liability have already influenced certain doctrines of the common law, and that they justify a significant number of further common-law reforms. The gist appears from the book's final sentence: “It is difficult to predict just how influential enterprise liability will continue to be, but without doubt, the potential for change is huge” (p. 183).
Brodie's key descriptive claims concern the common law of vicarious liability. Although a variety of rationales for this doctrine have been suggested over the years, in two recent decisions – Bazley v Curry (1999) 174 DLR (4th) 45 and Jacobi v Griffiths (1999) 174 DLR (4th) 71 – the Canadian Supreme Court explicitly held that vicarious liability is justified by a principle of enterprise liability. On this basis, a charitable organisation which ran a residential care facility for the treatment of emotionally troubled children was held vicariously liable to a child in its care after he was sexually abused by an employee. The decision was striking, since Common Law courts have tended to be reluctant to impose vicarious liability on employers for the intentional torts of their employees (on the basis that they usually did not amount to ‘improper modes’ of ‘authorised acts’ under the so-called Salmond test). The invocation of enterprise-liability reasoning, by contrast, appeared to sweep away any need for caution where an intentional tort – sexual abuse, assault or theft, for example – was the manifestation of a risk created or materially enhanced by the defendant's enterprise. In chapter 2, Brodie argues that while the High Court of Australia proved reluctant to follow the Canadian lead, the reasoning in Bazley and Jacobi was influential in the UK in Lister v Hesley Hall [2002] 1 AC 215 and Dubai Aluminium v Salaam [2003] 2 AC 366. Subsequent cases have borne this out, including the recent decision of the UK Supreme Court in Catholic Child Welfare Society v Various Claimants [2012] UKSC 56 (see paras 35, 64–88), where vicarious liability was imposed for sexual abuse of schoolboys by lay brothers of the Catholic Church. Although not mentioned by Brodie, the Canadian jurisprudence has also had an impact in my own jurisdiction, South Africa, where the Constitutional Court in K v Minister of Safety and Security 2005 (6) SA 419 (CC) held the state vicariously liable for rapes committed by uniformed, on-duty police officers.
Having clearly explained the influence of Bazely, Brodie then proceeds in the remaining eleven chapters of the book “to assess the merits of the specific reforms that have occurred” and “to consider what further developments are likely and the ways in which different jurisdictions may respond” (p. 1), as well as “to explore a number of questions that the decision [in Bazely] triggers” (p. 15). The analysis and normative arguments that follow are of significant value, simply because several legal systems have explicitly incorporated principles of enterprise liability into their common law and, as Peter Cane has observed, a genuine commitment to such principles “would justify the imposition of strict liability in a wide range of situations in which it is currently not imposed” (The Anatomy of Tort Law (1997), p. 46 n. 16). How wholehearted should these legal systems' commitment be? What further changes to their bodies of common law ought their courts to make? To what extent, and in which contexts, should strict enterprise liability displace or supplement fault liability? Brodie advances a series of discrete arguments that, together, sketch the outlines of a compendious answer to these questions. In sum, he approves principles of enterprise liability and supports a variety of fundamental common-law reforms on this basis. The following overview may help to give a sense of Brodie's arguments.
In chapter 3, he argues for greater forensic use of empirical evidence to establish the true risks of harm generated by or ‘characteristic of’ different types of enterprise, which should be understood to include ‘generic risks’ such as the risk of harassment in the workplace. Chapter 4 criticises English and Canadian decisions holding that the relevant risk, in the context of claims for vicarious liability, are those generated by the specific tasks of the tortfeasor-employee; instead, empirical evidence suggests that the relevant risk ought to be those generated by the whole enterprise. Chapter 5 considers the problem of company groups, arguing that principles of enterprise liability support courts lifting the corporate veil more easily where a risk-generating enterprise is a single economic unit spread across several interconnected companies. The issue of the ‘borrowed employee’ is confronted in chapter 6, which critically assesses Viasystems v Thermal Transfer [2005] IRLR 983, suggesting that it ought to be easier to impose vicarious liability on temporary employers wielding merely factual control over an employee. In this regard, Brodie may welcome subsequent developments in Catholic Child Welfare Society (above). Chapter 7 argues, with impeccable logic, that principles of enterprise liability justify holding employers vicariously liable for the torts of independent contractors that fall within the enterprise, while the less radical approach of stretching the concept of employment is criticised as insufficient. Again, the author might approve the finding in Catholic Child Welfare Society (above) that vicarious liability is now applicable to relationships ‘akin to employment’.
The remaining chapters focus on the employer-employee relationship, considering how enterprise liability ought to influence employment contracts. Chapter 8 calls for the abolition of the employer's right of indemnity against a tortfeasor employee – an approach adopted in Germany. Chapter 9 criticises disparate treatment of liability for psychiatric harm, compared to physical injury, suffered as a result of work-generated risks. In chapter 10, Brodie contends that damages for injury to feelings should be available in the event of an employer's breach of contract, for example where an employee is summarily dismissed in bad faith. Chapter 11 argues that principles of enterprise liability provide a contemporary justification of the employer's non-delegable duty to ensure that reasonable care is taken for employee safety which, in turn, should have implications for multi-employer activity, ‘disguised employment’, and even for the employees of subcontractors. The penultimate chapter places the suggested reforms of the internal legal relations in an employing organisation in the context of other significant changes that have recently been judicially imposed on the content of the employment contract.
It is impossible to do justice to all of Brodie's arguments within the compass of a book review. A variety of more or less discrete issues are raised, calling for detailed consideration in several legal systems. The book is an impressive work of comparative legal scholarship, ranging fluently across judicial and legislative efforts in a number of jurisdictions. It is also a paradigmatic example of ‘principled’ doctrinal scholarship, mercilessly pursuing the logical implications of embracing principles of enterprise liability as an appropriate basis for developing the common law. Where enterprise-liability thinking appears to justify radical reform, Brodie does not shy away from recommending it. In this regard, however, the book's strength may also be its weakness. Little emphasis is given to the well-known considerations militating against radical judicial law-reform, even though we are here confronted with a classic instance of what Joseph Raz called the dilemma of ‘partial reform’ (The Authority of Law (1979), p. 197–201). In addition, the book provides little theoretical defence of enterprise-liability principles, but instead relies solely on the formulation adopted in Bazely (pp. 11–15) and repeatedly invokes deterrence and compensation as tort law's goals (e.g., pp. 56 and 91). It seems unlikely that those who subscribe to tort theories emphasising corrective justice or the protection of rights will accept unreservedly the normative assumptions driving Brodie's project. Finally, the book does not explain in detail how judges are to confront the inevitable doctrinal challenges that enterprise liability will generate. To give one example, how is a court to distinguish between (i) merely providing an opportunity for an employee to commit a tort (no liability), (ii) creating or materially increasing the risk of harm (strict liability), and (iii) negligent risk-creation (fault liability)? To be wholly convincing, the book ought to have grasped these nettles.
From another perspective, however, addressing all possible counterarguments and incorporating all necessary qualifications may, in the end, have watered down the book's argument to its detriment. The great strength of Enterprise Liability and the Common Law is its clear-eyed account of the implications of a firm commitment to enterprise liability, as opposed to fault liability. Upon reading it, one is compelled to ask oneself just how firm that commitment ought to be.
