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Lord Nicholls said,

22. [Policy] dictates that liability for agents should not be strictly confined to acts done with the employer’s authority. Negligence can be expected to occur from time to time. Everyone makes mistakes at times. Additionally, it is a fact of life, and therefore to be expected by those who carry on businesses, that sometimes their agents may exceed the bounds of their authority or even defy express instructions. It is fair to allocate risk of losses thus arising to the businesses rather than leave those wronged with the sole remedy, of doubtful value, against the individual employee who committed the wrong. To this end, the law has given the concept of “ordinary course of employment” an extended scope.

23. If, then, authority is not the touchstone, what is? Lord Denning MR once said that on this question the cases are baffling…Perhaps the best general answer is that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm’s business or the employee’s employment. …

24. In these formulations the phrases “may fairly and properly be regarded”, “can be said” and “can fairly be regarded” betoken a value judgment by the court. The conclusion is a conclusion of law, based on primary facts, rather than a simple question of fact.

25. This “close connection” test focuses attention in the right direction. But it affords no guidance on the type or degree of connection which will normally be regarded as sufficiently close to prompt the legal conclusion that the risk of the wrongful act occurring, and any loss flowing from the wrongful act, should fall on the firm or employer rather than the third party who was wronged. It provides no clear assistance on when…an incident is to be regarded as sufficiently work-related, as distinct from personal…: This leaves open how to recognise the one from the other.

26.  This lack of precision is inevitable, given the infinite range of circumstances where the issue arises. The crucial feature or features, either producing or negativing vicarious liability, vary widely from one case or type of case to the next. Essentially the court makes an evaluative judgment in each case, having regard to all the circumstances and, importantly, having regard also to the assistance provided by previous court decisions. In this field the latter form of assistance is particularly valuable.

Edited for ease of reading.

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