This case is to be read with Mohamud.
Lord Reed said,

1. “The law of vicarious liability is on the move.” So Lord Phillips said, in…Various Claimants v Catholic Child Welfare Society [2012] UKSC 56; [2013] 2 AC 1 (“the Christian Brothers case”), para 19. It has not yet come to a stop. This appeal, and the companion appeal in Mohamud v WM Morrison Supermarkets plc [2016] UKSC 11, provide an opportunity to take stock of where it has got to so far.

2. The scope of vicarious liability depends upon the answers to two questions.
First, what sort of relationship has to exist between an individual and a defendant before the defendant can be made vicariously liable in tort for the conduct of that individual?
Secondly, in what manner does the conduct of that individual have to be related to that relationship, in order for vicarious liability to be imposed on the defendant?
Although the answers to those questions are inter-connected, the present appeal is concerned with the first question, and approaches it principally in the light of the judgment in the Christian Brothers case, where the same issue was considered. The appeal in the case of Mohamud is concerned with the second question, and approaches it principally in the light of the historical development of this branch of the law. As will appear, the present judgment also seeks to relate the approach adopted to the first question to ideas which have long been present in the law. The two judgments are intended to be complementary.

3. The first question arises in this case in relation to a public authority performing statutory functions for the public benefit, on the one hand, and an individual whose activities form part of the means by which the authority performs its functions, on the other hand. Specifically, the question is whether the prison service, which is an executive agency of the appellant, the Ministry of Justice, is vicariously liable for the act of a prisoner in the course of his work in a prison kitchen, where the act is negligent and causes injury to a member of the prison staff.

15. Vicarious liability in tort is imposed upon a person in respect of the act or omission of another individual, because of his relationship with that individual, and the connection between that relationship and the act or omission in question. Leaving aside other areas of the law where vicarious liability can operate, such as partnership and agency (with which this judgment is not concerned), the relationship is classically one of employment, and the connection is that the employee committed the act or omission in the course of his employment: that is to say, within the field of activities assigned to him…, or, in the course of his job, considered broadly. That aspect of vicarious liability is fully considered by Lord Toulson in the case of Mohamud.

He then set out passages from the Christian Brothers case [appearing elsewhere under this tag] and continued,

20. The five factors which Lord Phillips mentioned in para 35 are not all equally significant. The first – that the defendant is more likely than the tortfeasor to have the means to compensate the victim, and can be expected to have insured against vicarious liability – did not feature in the remainder of the judgment, and is unlikely to be of independent significance in most cases. It is, of course, true that where an individual is employed under a contract of employment, his employer is likely to have a deeper pocket, and can in any event be expected to have insured against vicarious liability. Neither of these, however, is a principled justification for imposing vicarious liability. The mere possession of wealth is not in itself any ground for imposing liability. As for insurance, employers insure themselves because they are liable: they are not liable because they have insured themselves. On the other hand, given the infinite variety of circumstances in which the question of vicarious liability might arise, it cannot be ruled out that there might be circumstances in which the absence or unavailability of insurance, or other means of meeting a potential liability, might be a relevant consideration.
21. The fifth of the factors – that the tortfeasor will, to a greater or lesser degree, have been under the control of the defendant – no longer has the significance that it was sometimes considered to have in the past, as Lord Phillips immediately made clear. As he explained at para 36, the ability to direct how an individual did his work was sometimes regarded as an important test of the existence of a relationship of master and servant, and came to be treated at times as the test for the imposition of vicarious liability.
But it is not realistic in modern life to look for a right to direct how an employee should perform his duties as a necessary element in the relationship between employer and employee; nor indeed was it in times gone by, if one thinks for example of the degree of control which the owner of a ship could have exercised over the master while the ship was at sea.
Accordingly, as Lord Phillips stated, the significance of control is that the defendant can direct what the tortfeasor does, not how he does it. So understood, it is a factor which is unlikely to be of independent significance in most cases. On the other hand, the absence of even that vestigial degree of control would be liable to negative the imposition of vicarious liability.

24. Lord Phillips’s analysis in the Christian Brothers case wove together these related ideas so as to develop a modern theory of vicarious liability.
The result of this approach is that a relationship other than one of employment is in principle capable of giving rise to vicarious liability where harm is wrongfully done by an individual who carries on activities as an integral part of the business activities carried on by a defendant and for its benefit (rather than his activities being entirely attributable to the conduct of a recognisably independent business of his own or of a third party), and where the commission of the wrongful act is a risk created by the defendant by assigning those activities to the individual in question.

29. It is important, however, to understand that the general approach which Lord Phillips described is not confined to some special category of cases, such as the sexual abuse of children. It is intended to provide a basis for identifying the circumstances in which vicarious liability may in principle be imposed outside relationships of employment.
By focusing upon the business activities carried on by the defendant and their attendant risks, it directs attention to the issues which are likely to be relevant in the context of modern workplaces, where workers may in reality be part of the workforce of an organisation without having a contract of employment with it, and also reflects prevailing ideas about the responsibility of businesses for the risks which are created by their activities.
It results in an extension of the scope of vicarious liability beyond the responsibility of an employer for the acts and omissions of its employees in the course of their employment, but not to the extent of imposing such liability where a tortfeasor’s activities are entirely attributable to the conduct of a recognisably independent business of his own or of a third party.
An important consequence of that extension is to enable the law to maintain previous levels of protection for the victims of torts, notwithstanding changes in the legal relationships between enterprises and members of their workforces which may be motivated by factors which have nothing to do with the nature of the enterprises’ activities or the attendant risks.

30. It is also important not to be misled by a narrow focus on semantics: for example, by words such as “business”, “benefit”, and “enterprise”. The defendant need not be carrying on activities of a commercial nature: that is apparent not only from the cases of E and the Christian Brothers, but also from the long-established application of vicarious liability to public authorities and hospitals.
It need not therefore be a business or enterprise in any ordinary sense. Nor need the benefit which it derives from the tortfeasor’s activities take the form of a profit.
It is sufficient that there is a defendant which is carrying on activities in the furtherance of its own interests.
The individual for whose conduct it may be vicariously liable must carry on activities assigned to him by the defendant as an integral part of its operation and for its benefit. The defendant must, by assigning those activities to him, have created a risk of his committing the tort. As the cases… show, a wide range of circumstances can satisfy those requirements.

31. The other lesson to be drawn from the cases…is that defendants cannot avoid vicarious liability on the basis of technical arguments about the employment status of the individual who committed the tort. As Professor John Bell noted in his article, “The Basis of Vicarious Liability” [2013] CLJ 17, what weighed with the courts in E and the Christian Brothers case was that the abusers were placed by the organisations in question, as part of their mission, in a position in which they committed a tort whose commission was a risk inherent in the activities assigned to them.

40… it was argued that it was always necessary to ask the broader question whether it would be fair, just and reasonable to impose vicarious liability. In that regard, reliance was placed on the fact that the prison service acts for the benefit of the public, and on the fact that any liability would have to be met out of scarce public funds. It was also argued that there was no justification for imposing vicarious liability on the prison service in addition to its common law duty of care towards [the C laimant], and its various statutory duties.

41. I do not consider that it is always necessary to ask the broader question. The criteria for the imposition of vicarious liability…are designed, …to ensure that it is imposed where it is fair, just and reasonable to do so. That was the whole point of seeking to align the criteria with the various policy justifications for its imposition.
As I have explained, the criteria may be capable of refinement in particular contexts.
But in cases where the criteria are satisfied, it should not generally be necessary to re-assess the fairness, justice and reasonableness of the result in the particular case. Such an exercise, if carried out routinely, would be liable to lead to uncertainty and inconsistency.

42. At the same time, the criteria are not to be applied mechanically or slavishly…. Where a case concerns circumstances which have not previously been the subject of an authoritative judicial decision, it may be valuable to stand back and consider whether the imposition of vicarious liability would be fair, just and reasonable.
The present appeal is such a case. On considering the matter, however, I do not regard the conclusion which I have reached as unreasonable or unjust. Those adjectives might more aptly describe a situation in which [the Claimant’s] ability to obtain compensation for the injury she suffered at work depended entirely on whether the member of the catering team who dropped the bag of rice on her back happened to be a prisoner or a civilian member of staff.
For the prison service to be liable to compensate a victim of negligence by a member of the prison catering team appears to me to be just and reasonable whether the negligent member of the team is a civilian or a prisoner.

Edited for ease of reading.