Campbell v Gordon

The Supreme Court considered whether a director could be held civilly liable to an injured employee for the employer company’s failure to obtain the compulsory employers' liability insurance required by the Employers' Liability (Compulsory Insurance) Act 1969 (sections 1 and 5). The majority held that section 5 is a deeming provision directed to criminal liability for corporate offences and related individual criminal liability and does not, without more, create or authorise a civil cause of action against directors for the company's statutory failure to insure. The majority gave weight to the language and long usage of similar deeming clauses and to the absence of explicit statutory provision for civil liability of officers. Two members dissented, preferring a functional approach: they would have treated the deeming device as imposing a substantive duty on specified officers and, applying established authorities that statutory duties for the protection of employees ordinarily give rise to civil liability, would have allowed the appeal.

Background and parties: The appellant, an apprentice joiner injured at work in 2006, sued the company director (the respondent) seeking damages because the employer’s liability insurance excluded liability arising from the machine that caused the injury. The company was in liquidation and the director bankrupt. The claim alleged civil liability of the director for the company’s breach of the statutory duty to insure.

Nature of the claim: The appellant sought to hold the director personally liable in damages for the company’s failure to have adequate employers’ liability insurance under the Employers' Liability (Compulsory Insurance) Act 1969.

Procedural posture: The Lord Ordinary upheld the claim; the Inner House reversed by majority ([2015] CSIH 11) (two judges dissenting). The matter was then before the Supreme Court on appeal.

Issues framed:

• whether the statutory duty in section 1 of the 1969 Act and the deeming provision in section 5 were imposed for the protection of employees such that breach could give rise to a civil right of action;
• whether section 5, which deems certain officers guilty of the company’s offence where committed with their consent, connivance or neglect, could properly be treated as imposing civil liability on directors as well as criminal liability.

Reasoning and outcome: The majority (Lord Carnwath, Lord Mance and Lord Reed) assumed that the statutory duty was intended to benefit employees but held that the statutory architecture and the long history of similarly worded deeming provisions pointed to a limited purpose: to attach criminal liability to officers in defined circumstances. They found no authority for extending civil liability indirectly to officers for breaches imposed on the company, absent express or implied statutory language to that effect. The majority considered authorities such as Monk v Warbey and Richardson v Pitt-Stanley and relied on the distinction between provisions that directly impose duties on individuals and those that deem officers criminally liable for corporate offences. They also noted the pervasive historical use of the "consent, connivance or neglect" formula in corporate criminal provisions, with no reported authority construing that wording as creating civil liability.

Two dissenting members (Lord Toulson and Lady Hale) preferred a functional approach. They regarded the deeming provision as substantively extending responsibility to specified officers, and they applied established principles (Groves v Lord Wimborne and subsequent authorities) that where a statutory duty is imposed for the protection of a particular class (employees), breach will ordinarily give rise to civil liability unless the statute clearly indicates the contrary. They would have allowed the appeal and sent the case to proof.

Wider context: The judgment addresses the tension between formal statutory drafting (deeming criminal liability) and the common-law development that statutory duties for employee protection commonly give rise to civil remedies. The majority emphasised respect for statutory language and historic patterns of drafting; the dissent emphasised substantive effect and the remedial purpose of the legislation.

Appeal dismissed. The majority held that section 5 of the Employers' Liability (Compulsory Insurance) Act 1969 is a deeming provision directed to criminal liability for corporate offences and related individual criminal liability and does not, without more, create a civil cause of action against directors for the company’s failure to insure. The court emphasised the statutory language and longstanding use of the deeming formula; dissenting justices would have construed the provision functionally to permit civil liability.

On appeal from: [2015] CSIH 11. The claim was upheld by the Lord Ordinary, reversed by the Inner House by majority (Lord Brodie and Lord Malcolm; Lord Drummond Young dissenting), and then dismissed by the Supreme Court (majority).