325: Beware serious liabilities for seconded staff – even if they are not your own

The Court of Appeal has confirmed in Natwest Markets Plc v Bilta (UK) Ltd and others that the company which employed two traders, and the group company to which they were seconded, could share vicarious liability for their fraudulent trading.

This case concerned a large and complicated VAT fraud. One of the issues involved potential dishonesty and fraudulent trading by two carbon credit traders who were employed originally by an indirect subsidiary of the Royal Bank of Scotland Plc (RBS) called RBS Sempra Energy Europe Ltd (RBS SEEL), but were subsequently seconded to RBS. The High Court found that both companies shared dual vicarious liability for the wrongdoing of the individual traders.

RBS SEEL appealed this decision in the Court of Appeal, arguing that the secondment of the traders was so effective and complete that only RBS should be held responsible for their wrongdoing. The Court of Appeal disagreed, finding that the traders were so much a part of the work, business and organisation of both RBS and RBS SEEL that it was just to make both employers liable. For example, the traders remained RBS SEEL employees; RBS SEEL paid their salaries; they were located in RBS SEEL offices; and they were managed by RBS SEEL employees. On the other hand, trading took place on RBS’ behalf; the traders were acting as RBS’ representatives and in its name; and the business was portrayed to the world as being that of RBS. Taking all these factors into account, it was clear that the traders had not transferred exclusively to RBS. It was therefore just to make both employers vicariously liable.

The extent of vicarious liability will always depend on the precise facts and circumstances in each case. This decision confirms that it is possible to have joint liability where an employee is temporarily loaned to or hired by another organisation if they are integral to the business and organisation of both employers. The Court of Appeal also noted that there will only rarely be a complete shift in liability from the actual employer to the company to which the employee is seconded.