Campbell v Gordon

A statutory obligation can support a civil claim for breach of statutory duty only against a person on whom the statute places that obligation. A person cannot be made indirectly liable for another person’s statutory breach unless the legislation expressly or impliedly permits that result.

Under the Employers’ Liability (Compulsory Insurance) Act 1969, the duty to maintain insurance rests on the employer. Section 5 makes a director or other officer criminally liable in defined circumstances for the company’s offence. It does not impose the employer’s primary duty on that officer or create personal civil liability for the uninsured loss. The fact that the legislation protects employees does not overcome this distinction.

The appellant was injured while employed as an apprentice joiner by a company whose insurance excluded claims arising from electrically powered woodworking machinery. The company thereby breached section 1(1) of the Employers’ Liability (Compulsory Insurance) Act 1969 and later entered liquidation.

The appellant sought damages from the respondent, the company’s sole director, for the failure to obtain adequate insurance. The Lord Ordinary upheld the claim. By a majority, the Inner House allowed the director’s appeal and dismissed the claim: [2015] CSIH 11.

The Supreme Court had to decide whether section 5 of the 1969 Act, which deems an officer guilty of the company’s offence where consent, connivance or neglect is established, also makes the officer civilly liable for the employee’s uninsured loss.

1. By a majority, the appeal was dismissed. Lord Carnwath, with whom Lord Mance and Lord Reed agreed, held that the 1969 Act did not make the respondent director personally liable in damages.

2. Section 1 places the duty to insure on the corporate employer. Section 5 does not impose that duty on a director or other officer. It pierces the corporate veil only for the limited purpose of imposing defined criminal liability where the company has committed an offence and the officer has consented, connived or facilitated the offence through neglect.

3. The principle concerning civil liability for breach of a statutory duty imposed for the protection of a particular class begins with an obligation legally binding on the defendant. It provides no basis for imposing indirect liability for an obligation which the statute places on someone else. Looking through a company to its officers requires express or implied statutory justification.

4. The majority was prepared to assume that section 1 was enacted for employees’ benefit and that the traditional employee-protection principle remained applicable. That did not answer the distinct question whether a director was subject to the statutory obligation.

5. Monk v Warbey was materially different. The road traffic legislation there imposed direct responsibility both on a vehicle user and on anyone causing or permitting its uninsured use. By contrast, the 1969 Act imposes the primary insurance obligation only on the employer.

6. The common-law rule concerning a director who orders or procures a company’s tort did not assist. The claim depended entirely on the statutory scheme rather than on an independently established tort by the director.

7. The longstanding use of provisions imposing criminal liability on corporate officers for consent, connivance or neglect reinforced the construction. That established formula is directed to criminal liability and gives no indication of an implied, more general civil liability.

8. Dissenting: Lord Toulson, with whom Lady Hale agreed, would have allowed the appeal and sent the case to proof. They regarded section 5 as substantively imposing an obligation on relevant officers and considered that employee-protection legislation ordinarily creates a civil remedy for breach unless its language clearly indicates otherwise.

1. United Kingdom Supreme Court: By a majority, dismissed the appeal and affirmed the Inner House’s dismissal of the claim: [2016] UKSC 38.
2. Inner House of the Court of Session: By a majority, allowed the director’s appeal and dismissed the claim; Lord Drummond Young dissented: [2015] CSIH 11.
3. Lord Ordinary: Upheld the employee’s claim against the director.