The vicarious liability of an agent is an issue which has not been analysed in much depth by the Scottish courts. Some argue that there is no such thing as vicarious liability in agency: merely that the agent is treated as an employee and the established rules relating to employment applied to an agent (P. S. Atiyah, Vicarious Liability, (1967), p.100). This approach arguably fails to take into account the role of the agent’s authority in assessing the principal’s liability. The recent case of Skandinavska Enskilda Banken A.B. (Publ.) v Asia Pacific Breweries (Singpore) Pte Ltd and anor  S.G.C.A 22, decided by the Court of Appeal of Singapore, contains extremely useful analysis of the policy factors underlying vicarious liability (available here: http://www.singaporelawwatch.sg/remweb/legal/ln2/rss/judgment/12453.html?utm_source=rss%20subscription&utm_medium=rss
More significantly, the court applied the “sufficient connection” test for vicarious liability developed in the leading English House of Lords case of Lister v Hesley Hall Ltd ( UKHL 22,  1 A.C. 215)
in a commercial context. The court recognised that there may be very different policy factors underlying a decision in a commercial as opposed to a domestic or private situation (Lister was a case which concerned the employer’s vicarious liability where an employee had sexually abused vulnerable children in his care.)
Skandinavska also contains very useful analysis of apparent authority in agency, and comments on the difficult case of First Energy v Hungarian International Bank  2 Lloyd’s Reps 194). The apparent authority angle is not discussed here, but may appear in this blog in the future.
In Skandinavska, the Court of Appeal identified the two main policy reasons underlying vicarious liability as, firstly, effective compensation for the victim and deterrence of future harm (para 76). Crucially, the Court suggested that in some factual contexts the person best placed to prevent the tort may be the victim himself or a third party (para 81). They opened the door for other policy reasons to be relevant to the determination of vicarious liability, not all of which could be identified outside the facts of a particular case (para 81). They suggested that the following was an accurate representation of the law (taken from Bokhary P.J. in Ming An Insurance Co (/HK) Ltd v Ritz-Carlton Ltd  3 H.K.L.R.D. 844 at para , approved by the Singapore Court of Appeal at para 81):
“By “close connection” is meant a connection between the employee’s unauthorised tortious act and his employment which is so close as to make it fair and just to hold his employer vicariously liable….[V]icarious liability [is imposed] when, but only when, it would be fair and just to do so.”
The difference in factual context, i.e. a commercial as opposed to a domestic or private situation was noted (at para 88):
“…the case of a commercial fraud perpetrated by an employee of a trading company against international banks which could have prevented the fraud by taking basic precautions presents quite a different situation.”
The court then analysed the agent’s authority on the facts of the specific case, which was extremely limited in financial matters. As such they held that it would not be reasonable for the principal to have expected the agent to carry out the fraud in question, in fact, the sequence of events was “entirely unforeseeable” (para 91). The Court decided to let the loss caused by the agent's fraudulent act fall on the third party who had purported to contract with the agent on behalf of the principal/employer, and not the principal as the agent's employer. The Court made the following comment about the role of banks (para 93):
“Banks play a vital role in the economic life of a community as deposit-taking institutions and suppliers of investment capital for the economy. There is, therefore, a greater need for banks, (as compared to trading companies such as APBS) to act responsibly and not take undue risks with their depositors’ funds so that the public will have confidence in the banking system.”
As a Singapore case, Skandinavska is, of course, persuasive rather than binding. The Court of Appeal’s approach must surely be correct: vicarious liability ought to take into account the realities of the commercial situation. These may be very different from those which applied in Lister, where the harm caused was physical rather than financial, and the victim of the delictual conduct a vulnerable person.