The Court of Appeal has upheld a finding that an employer was not under a duty of care to protect an employee from criminal conviction in the performance of their role. In Benyatov v Credit Suisse (Securities) Europe Ltd, the court also confirmed that there is no implied duty to indemnify an employee for losses resulting from such a conviction.
Mr Benyatov was employed as a banker for Credit Suisse from 1997 until June 2015. In November 2006, while working in Romania on a project that related to the privatisation of a state-owned electricity company, Mr Benyatov was arrested and charged with "economic or commercial espionage" and the "initiation and establishment of an organised criminal group".
Mr Benyatov maintained that he had committed no crimes and that his arrest was politically motivated. After independently investigating the allegations, Credit Suisse also found no wrongdoing and proceeded to fully support Mr Benyatov throughout the criminal proceedings. Nevertheless, in December 2013, Mr Benyatov was convicted by a Romanian court and sentenced to 10 years’ imprisonment. On appeal, his conviction was overturned but substituted with a different charge that reduced his sentence to four and a half years.
In line with their regulatory obligations, Credit Suisse notified the Financial Conduct Authority (FCA) of Mr Benyatov’s convictions. However, after being provisionally selected for redundancy in October 2013, Mr Benyatov was on garden leave at the time of his conviction and was not partaking in any regulated activities. The FCA therefore withheld taking any action regarding his registration.
When Mr Benyatov was officially made redundant in 2015, his conviction barred him from working as a regulated financial professional.
Mr Benyatov brought proceedings in the High Court claiming career loss of earnings of around £66m, claiming that:
- Credit Suisse had breached its duty of care not to expose him to a risk of criminal conviction in the performance of his duties and failed to take reasonable care to protect him from the resulting financial losses (i.e. a negligence claim), and
- There was an implied contractual duty for Credit Suisse to indemnify him for his resulting losses.
After both claims were dismissed by the High Court, Mr Benyatov appealed to the Court of Appeal.
Court of Appeal judgment
The negligence claim
In considering Mr Benyatov’s negligence claim, the Court of Appeal confirmed that a duty of care had not been established. Provided with evidence on the particular risks involved in Mr Benyatov’s transactions in Romania, the court concluded that his risk of conviction had not been reasonably foreseeable. Romania was not deemed a high-risk country at the time of his arrest, and there were no features specific to Mr Benyatov or his work that increased the risk to him. Credit Suisse had no actual or constructive knowledge of the criminal conviction risk to Mr Benyatov. Accordingly, there was no duty of care and, therefore, no breach.
In any event, the court confirmed that Mr Benyatov’s negligence claim was time-barred, as he had not issued his claim until January 2018, more than six years after his arrest, detention and being charged with a criminal offence.
Contractual indemnity claim
Mr Benyatov asserted that there was an indemnity for all losses suffered while properly carrying out his role for Credit Suisse. The central issue was whether the forms of harm covered by a general or implied indemnity extend to lost earnings triggered by the acts of a third party, even where there was no fault on the employer.
The Court of Appeal concluded that there was no authority for a general principal that an employer should indemnify an employee against all losses suffered in the performance of their duties. Imposing such a duty would, the court said, inflict an unreasonable and unfair burden on employers, creating liability in “an extraordinarily wide range of circumstances”, such as where an employee is injured by a negligent driver on their way to work.
Although the employer was not liable in this case for the economic loss suffered by an employee in the performance of their duties, it may be possible to imply an indemnity where an employer had actual or constructive knowledge of significant risk of economic harm to their employee.