INTRODUCTION

Benyatov is a case exploring the vexed question of employers’ liability where an employee suffers losses as a consequence of simply performing their job. It is of particular note for those with an interest in litigating liabilities attaching to transnational corporations that operate in “risky” regions. However, it is also of wider significance as another chapter in the post-Robinson[1] era in respect of novel, tortious duties of care.

The Court of Appeal decided that the Appellant, Mr Benyatov (hereafter “the Claimant”) was not owed a duty of care and the case is usually considered a guarded rebuff of the overextension of tortious liability. Yet on close examination the decision leaves open certain avenues for prospective Claimants, while providing valuable takeaways for employers.

BACKGROUND               

Mr Benyatov was employed by Credit Suisse (the Respondent / “Defendant” bank) at the material time. It was Mr Benyatov’s case that by performing his role, consulting on privatisation projects in Romania on behalf of his employer between 2005-2006, he was exposed to foreseeable risks that materialised (he was prosecuted and convicted in Romania) which caused him losses (as a result of his conviction he is no longer able to work as a regulated financial professional). Mr Benyatov maintained that his prosecution was politically motivated and unfounded. Credit Suisse had separately investigated his actions, concluding that he had done nothing untoward and covering the legal costs of his unsuccessful criminal defence. It was not until 2013 that he was convicted in Romania and, separately, selected for redundancy at the bank – his employment ending in 2015.

ISSUES  

Whilst separately challenging the legitimacy of his conviction, Mr Benyatov sued his former employer for loss of earnings on two alternative bases in contract and tort. He argued that (a) it was an implied term of his employment contract that the losses he sustained because of the conviction would be indemnified by the bank and (b) that the bank was in breach of a duty to take reasonable care to avoid the risk of his being the subject of criminal investigation, criminal charges, prosecution, conviction, arbitrary detention, and/or imprisonment and that he was entitled to damages arising from that breach.

It is notable that the Claimant relied on four experts speaking to the risks of doing business in Romania and the extent to which these were publicly known and reasonably discoverable. Foreseeability was framed by reference to amber and red flags that the Claimant said should have alerted the bank to the need to take protective measures.  

The Claimant lost at trial. Significantly, the trial judge did not accept that Romania was regarded as a “high risk” country and disagreed that one of the key transactions that the Claimant was involved in was “high risk”. He did not accept that the so-called amber and red flags did in fact put the bank on notice of the need for vigilance. He also concluded the evidence did not indicate that a risk assessment in comparable contexts was common practice across other international companies. Finally, he noted that the Claimant’s personal characteristics did not warrant additional safeguards. 

In respect of the negligence claim, the Claimant contended on appeal:  

1. The judge had wrongly focused on the bank’s subjective knowledge of risk;
2. The judge had failed to consider the bank’s duty through the lens of assumption of responsibility;
3. The judge had failed to take appropriate heed of the “audit duty” in Rihan v Ernst & Young[2]; and
4. The judge’s factual findings and consequent conclusions were insupportable on the evidence (arguing the expert evidence was unanimous and noting the Defendant’s disclosure and witness evidence was lacking).

The bank pursued a limitation defence and in respect of the negligence claim denied that there was a general duty to protect the economic interests of employees and instead sought to limit its duty to the well-established parameters of risks associated with personal and psychiatric injury. Similarly in respect of the contractual indemnity, the bank conceded indemnification for “expenses and liabilities reasonably incurred by him in carrying out his duties as the Defendant’s employee and within the scope of his authority” only.

DECISION

The Claimant’s appeal failed. The Court of Appeal hastily dismissed any suggestion that there was a general indemnity implied into employment contracts for all losses without limit in kind or value (paras 129, 130). Little ink was spilt on the contractual aspect of the claim – it was dismissed as being inconsistent with existing statutory and tortious protections for employees (para 131); an unwelcome stray away from fault-based liability (paras 139-140); and unjustifiable on the basis that neither party had contemplated the risk which materialised when negotiating the contract (para 152).

In respect of the negligence claim the Court of Appeal determined:

1. The trial judge’s reasoning reflected his appreciation of the need to consider the bank’s knowledge objectively (paras 35-37);
2. The concept of “assumption of responsibility” may be a useful tool for considering novel duties of care (para 43) but was not the “universal touchstone” for which the Claimant contended (para 51);
3. The “audit duty” in Rihan had no application because the loss suffered in this case was not foreseeable and the wrongdoing could not be attributed to the Defendant but a third party only (para 60);
4. The trial judge’s factual findings and consequent conclusions were open to him on the evidence (paras 88-89);
5. The claim was time-barred because the Claimant first sustained relevant losses from the time he began to lose bonuses from 2006 – accordingly time for limitation purposes did not start to run post-conviction or post termination of employment (paras 91-92, 97).

Note that the Court of Appeal remained fervently neutral in respect of the decision in Rihan (para 61).

SIGNIFICANCE

There are key three takeaways from the judgment.

First, the trite observation that facts reign supreme. Where, simplistically, the decision in Rihan might be considered a green light for Claimants and Benyatov a red light; both cases exemplify the extent to which the specific factual matrix can either dictate or decimate a duty of care. The employer (or rather quasi-employer) in Rihan was found to have actively adopted the maligned wrongdoing (proactively taking over and signing off on a misleading audit). By contrast, in Benyatov the employer’s conduct was deemed unimpeachable – it was the Romanian authorities only who pursued the allegedly illegitimate prosecution (para 60). Note also, in terms of evidence in support of foreseeability, the Claimant in Rihan did not acquiesce to the alleged wrongdoing, spending significant energy raising internal concerns and refusing to cooperate with the compromised audit. By contrast, in Benyatov, the Claimant cooperated fully and readily with his employment obligations, seemingly unaware of the prosecution risk. This is not to say that any criticism was levelled at Mr Benyatov for acquiescing – but evidence of any concerns he had and/or had raised would have provided much needed evidence of foreseeability of harm.

Second, Benyatov exemplifies the importance (and challenge) of establishing a case of actual and/or constructive knowledge of risk. Mr Benyatov failed in his claim because he could not demonstrate that the risk of his prosecution was foreseeable. Robust and unambiguous expert evidence is key. The Claimant argued unsuccessfully on appeal that the expert evidence as to risk had been misunderstood by the trial judge – inevitably an uphill struggle (see paras 87-88). It is also essential that actual and constructive knowledge is specifically and clearly pleaded (another hurdle for the Claimant in this case – see for example paras 38-39). Obtaining disclosure speaking to risk may also pose a particular challenge, particularly in transnational corporations comprised of multiple entities; where decision making is opaque or where risk assessments are lacking or not specific enough. The Claimant raised concerns in respect of disclosure and witness evidence in this case, although these were not vigorously pursued (paras 80-82).

Finally, it is worth noting that limitation operates as an unwelcome spectre for Claimants in these contexts. Given the protracted and sometimes nebulous nature of the losses sustained in these kinds of cases and the challenge of litigating against current or former employers, claimants such as Mr Benyatov may easily fall at this preliminary hurdle (see paras 90-97 in respect of limitation).

CONCLUDING REMARKS

Benyatov is an instructive case, highlighting some of the key (but not insurmountable) challenges facing Claimants litigating in unchartered territory in the post-Robinson climate.

Early attempts to obtain detailed disclosure and robust, unambiguous expert evidence regarding risk is essential for prospective Claimants seeking to avoid the pitfalls exposed in Benyatov. Equally, employers would be well advised to undertake proportionate and informed risk assessments, taking into account the individual particularities of their employees and keeping abreast of standards across their sector.

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[1] [2018] UKSC 4. See para 55 of the judgment for the Court of Appeal’s comments on the correct approach to novel duties post-Robinson.

[2] [2020] EWHC 901 (QB)

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