Should employers be financially liable for all losses suffered by an employee?

Legal eyes were focused on the Court of Appeal this month as we eagerly awaited a judgment in Benyatov v Credit Suisse (Securities) Europe Ltd. The hearing was to consider whether the High Court was wrong to dismiss a claimant’s case for career losses following his arrest for following management instructions in his role with the Respondent.

Background

The Court of Appeal has upheld the dismissal of a former banker’s claim for loss of earnings following a criminal conviction in the course of his employment, irrespective of whether there was any fault on the part of the employer.

In 2006, Mr Benyatov (“the Claimant”), was the Managing Director of Credit Suisse (“the Bank”) and was involved in a transaction to acquire a Romanian state-owned electrical company. He was arrested and faced criminal charges in Romania. He was held under house arrest until August 2007 when he returned to England.

The Bank undertook its own investigations and concluded the Claimant had acted with integrity and the reasons for the alleged criminal charges were for political reasons. During the criminal investigations, the Claimant was supported by the Bank who continued to pay him and pay legal fees to conduct his defence. 

In 2013, the Claimant was convicted of criminal charges but as he did not return to Romania, this sentence did not take effect. The Claimant was later made redundant by the Bank.

Due to his conviction in Romania, and the requirement to report such a conviction to the Financial Conduct Authority, the Claimant has since been unable to find alternative employment in his regulated profession.

The Claimant brought a High Court claim against the Bank for damages of circa £66 million to reflect career long loss of earnings. He argued that the Bank had breached its duty of care not to expose him to a risk of criminal duties in the course of his employment and failed to take reasonable care to protect him from the financial losses that had occurred as a result. Alternatively, he claimed the Bank had an implied duty to indemnify him against those losses.

The High Court dismissed the claim on the basis that whilst there is a duty for an employer in certain circumstances to take reasonable care for the employee and to protect them from any consequential loss, it will depend upon the circumstances, the foreseeability of harm and whether it is reasonable to impose that duty. The circumstances of this matter meant that there were no specific reasons that it should be considered high risk. The Claimant failed to demonstrate his situation was reasonably foreseeable by the Bank or that it should have done more to assist him.

In relation to the implied term, the Court found that this term did not extend to allow for recovery of financial losses from being convicted and imprisoned.

The Appeal

The Claimant appealed the High Court’s decision to the Court of Appeal. Following a three day hearing in October 2022, the Court of appeal recently provided their judgment dismissing he Claimant’s appeal.  In relation to the negligence claim, the Court of Appeal held that it needed to consider three factors – foreseeability, proximity and fairness, justice, and reasonableness. The decisive issue was foreseeability as the Bank could not have assumed responsibility for something which was not foreseeable. In relation to the implied term of indemnity, the Court concluded there was no support for a principle that because the Claimant acted on the instruction of another, that they are entitled to be indemnified against all losses in doing so. Additionally, the indemnity should not encompass all losses of any kind suffered by an employee as a result of doing their job.

This case is a reminder that the relationship between the employer and employee, even where there is a disparity between the economic position of the parties, does not justify the employer essentially insuring the employee in respect of any and all harm suffered as a consequence of their work. Employers should, however, not treat this as a get out of jail card in respect of all future losses suffered by Claimants’ and every case should be considered on its own facts.

Recommended reading

A copy of the judgment can be read here https://www.bailii.org/ew/cases/EWCA/Civ/2023/140.html

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.