Kids Klub Pty Ltd ("Kids Klub") is an early education childcare centre based in Camperdown, Sydney. On 1 February 2019, three staff members of Kids Klub were caring for 15 children: Alice, Eloise and Steven (a casual employee). At approximately 2:30pm that day, Alice went for a bathroom break, leaving the children in the care of Eloise and Steven. At about the same time,3 year old Owen pushed a 90cm square foam cube approximately 12 metres to the playground fence, climbed up and over the fence and wandered off into the neighbourhood. The two employees had a clear and uninterrupted view of the position from which the foam cube was pushed to the playground fence. When Alice returned from her bathroom break, a head count revealed that Owen was missing.

Kids Klub started a search during which time Owen's mother, Gemma, came to take him home. At about 2.45 pm, he was brought back by a member of the community who found him in a nearby street. He did not appear distressed and seemed completely oblivious to the crisis he had caused. Unfortunately for Kid's Klub, Steven, who was out searching for Owen, drove the company's van around the local neighbourhood and collided (through his own negligence) with a bicycle rider (Mary) who suffered serious injuries. Steven had been directed by his manager not to use the company's van without prior permission, because only authorised work trips were covered by the company's insurance policy. Steven did not ask for permission, but he thought that this was an urgent situation, so he just took the van, even though this was not part of his role as a casual staff member. Only full-time staff were permitted to use the company's van and they had to finish a safe driving course before gaining permission to use the van.

Mary is suing Kid's Klub for $500,000 for Steven's negligent driving. Steven is technically employed by KWork Pty Ltd, a wholly owned subsidiary of Kids Klub that employs workers at the various Kid's Klub childcare centres. KWork also provides casual workers for primary schools and other day care facilities that are not owned by Kid's Klub. It shares the same directors as the Kid's Klub board. All dividends from KWork profits are paid to Kid's Klub, as the sole shareholder of KWork. Owen's escape from the childcare centre has received local media attention and Owen's mother has launched legal action against Kids Klub, alleging that the company and its staff were negligent in supervising Owen. Gemma also complained to the Department of Human Services ("DHS"), who conducted an investigation of the incident and decided to prosecute Kids Klub for breaching (the fictitious) Sections 8 of the Children's Protection Act 2000 (Cth) (the "Protection Act"), which provide:

Section 8 Protection of Children from Hazards

(1) The proprietor of a children's service must ensure that every reasonable precaution is taken to protect children being cared for or educated by the service from any hazard likely to cause injury. Maximum penalty: 50 penalty units

(2) A staff member of a children's service must ensure that every reasonable precaution is taken to protect a child in the care of that staff member from any hazard likely to cause injury. Maximum Penalty: 5 penalty units

The purpose of the Protection Act was referred to in the Second Reading Speech for the introduction of the legislation, where it was noted:

"The government is cognisant of increasing community demands for children's services where parents can be confident that their children will receive quality care in a safe environment...it is paramount that there is in place a legislative framework that ensures the safety and wellbeing of those children."

You have been recently appointed as the general counsel for Kid's Klub, after working for several years in a private law firm. The Kid's Klub directors have come to you for advice. They argue that it is solely the employee's fault that Owen escaped, not Kid's Klub and that the company should not be liable for Steven's unauthorised use of the company's van.

(a) The directors would like advice from you as to whether Kid's Klub can be prosecuted as they believe that they have taken all reasonable precautions to ensure the safety of the children under its care.

(b) Advise the directors as to whether Kid's Klub is liable for Steven's negligence, with reference to case law. In your answer assume that Steven has been negligent and only advise on whether the Kids Klub is liable to Mary for Steven's conduct.