William Campbell Again (first) Peter Gordon Joiners Limited And Derek Forsyth, The Liquidator Thereof; And (second) Peter Gordon

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 11

PD672/09

Lord Brodie

Lord Drummond Young

Lord Malcolm

OPINION OF LORD BRODIE

in the cause

by

WILLIAM CAMPBELL

Pursuer and respondent;

against

(FIRST) PETER GORDON JOINERS LIMITED and DEREK FORSYTH, the liquidator thereof; and (SECOND) PETER GORDON

Defenders and reclaimers:

Act: Smith QC and Murray; Lefevre Litigation

Alt: Pugh; Harper Macleod LLP (Second Defender and reclaimer)

3 February 2015

Introduction
[1] In this action the pursuer and present respondent seeks damages against two defenders. The first defender is his former employer, Peter Gordon Joiners Limited, a company now in insolvent liquidation. The second defender and reclaimer is Peter Gordon who is the sole director of the first defender.

[2] The respective defenders are sued on distinct bases. The pursuer avers that on 28 June 2006 when working in the course of his employment with the first defender as an apprentice joiner, he sustained injury to his left hand when using an unguarded electrical circular saw. He ascribes the accident and therefore his injuries to fault and negligence and breach of duties under the Provision and Use of Work Equipment Regulations 1998 on the part of the first defender. The pursuer’s action against the first defender is accordingly for damages as reparation for personal injury caused by negligence and breach of statutory duty. The pursuer’s claim against the second defender arises from the facts that the first defender is insolvent and, contrary to the provisions of section 1 of the Employers’ Liability (Compulsory Insurance) Act 1969, was not insured against the risk of becoming liable to the pursuer by reason of the circumstances of the pursuer’s accident. Founding on sections 1 and 5 of the 1969 Act the pursuer sues the second defender in respect of a breach of what is averred to have been a duty to arrange proper and adequate insurance and the consequent loss to the pursuer of the benefit which would have otherwise accrued to him in the event of him obtaining an award of damages against the first defender, by virtue of the Third Parties (Rights against Insurers) Act 1930.

[3] The second defender disputes the pursuer’s averments both in relation to the circumstances of the accident, which he alleges was the pursuer’s fault, and as to whether the second defender was responsible for the admitted lack of insurance cover. Mr Pugh, who appeared on behalf of the second defender stressed that this was not a case where there had been no employers’ liability insurance whatsoever. Rather, there was insurance in place but it excluded the risk of liability arising out of the use of electrically powered woodworking machinery such as the circular saw which had caused the pursuer’s injuries. This is all as may be but, for present purposes it must be assumed that the pursuer’s averments are true.

Proceedings before the Lord Ordinary
[4] The case came before the Lord Ordinary for debate on the procedure roll. The pursuer sought to have his whole averments remitted to proof. The second defender submitted that the case as pled against him should be dismissed as irrelevant. The second defender enjoyed partial success. The case of breach of duty to arrange proper and adequate insurance was pled by the pursuer on the basis of negligence at common law and, alternatively, a breach of statutory duty imposed by the 1969 Act. The Lord Ordinary dismissed the common law case. No issue is taken with that part of the Lord Ordinary’s decision. However, he held that the pursuer had pled a relevant case based upon the argument that the 1969 Act allows a director to be held civilly liable for breach of his qualified statutory duty not to permit the employer company to carry on its business without having in place an approved insurance policy with an authorised insurer insuring the employer against liability for bodily injury or disease sustained by employees in the course of their employment. It is against that decision that the second defender reclaims.

Employers’ Liability (Compulsory Insurance) Act 1969

[5] The Employers’ Liability (Compulsory Insurance) Act 1969 provides, inter alia, as follows:

“1.- Insurance against liability for employees.

(1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain.

2 - Employees to be covered.

(1) For the purposes of this Act the term ‘employee’ means an individual who has entered into or works under a contract of service or apprenticeship with an employer whether by way of manual labour, clerical work or otherwise, whether such contract is expressed or implied, oral or in writing.

…

3.- Employers exempted from insurance.

(1) This Act shall not require any insurance to be effected by –

(a) any such authority as is mentioned in subsection (2) below; or

(b) any body corporate established by or under any enactment for the carrying on of any industry or part of an industry, or of any undertaking, under national ownership or control; or

(c) in relation to any such cases as may be specified in the regulations, any employer exempted by regulations.

…

4.- Certificates of insurance.

(1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act and for the surrender in such circumstances as may be so prescribed of certificates so issued.

(2) Where a certificate of insurance is required to be issued to an employer in accordance with regulations under subsection (1) above, the employer (subject to any provision made by the regulations as to the surrender of the certificate) shall during the currency of the insurance and such further period (if any) as may be provided by regulations –

(a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees;

(b) produce the certificate of insurance or a copy thereof on demand to any inspector duly authorised by the Secretary of State for the purposes of this Act and produce or send the certificate or a copy thereof to such other person, at such place and in such circumstances as may be prescribed by regulations;

(c) permit the policy of insurance or a copy thereof to be inspected by such persons and in such circumstances as may be so prescribed.

…

5. Penalty for failure to insure.

An employer who on any day is not insured in accordance with this Act when required to be so shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale; and where an offence under this section committed by a corporation has been committed with the consent or connivance of, or facilitated by any neglect on the part of, any director, manager, secretary or other officer of the corporation, he, as well as the corporation shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.”

The reasoning of the Lord Ordinary

[6] For the Lord Ordinary the issue was one of statutory interpretation. It was not in dispute that the question whether a statutory duty gives rise to a civil right of action was to be answered by considering the whole of the relevant Act and the circumstances in which it was enacted. Certain features had been identified by the authorities as pointing one way or the other. For example, if a statutory duty is prescribed but no remedy by way of penalty or otherwise for its breach is imposed, it can be assumed that a right of civil action accrues to the person who is injured by the breach. But where an Act creates an obligation and enforces its performance in a specified manner, it may generally be taken that performance cannot be enforced in any other manner. That general rule is, however, subject to exceptions one of which is that where the particular obligation or prohibition posed by the statute can be seen to have been imposed for the benefit or protection of a particular class of individuals then the statute may be taken to have created a correlative right in those persons who may be injured by its contravention. On the other hand, if a statute is intended to establish a regulatory system for the benefit of the public at large, that may point the other way. In the present case section 5 of the 1969 Act imposed a substantial criminal penalty in the event of an employer breaching the obligation to insure imposed by section 1. However, to the Lord Ordinary, it was obvious that the purpose of section 1 was to protect employees from being left without any remedy in the event that they established liability against their employer but were prevented from recovering directly by reason of the employer’s insolvency. That was a strong indication that section 1 gave rise to a civil right of action at the suit of an affected employee in the event of breach. The Lord Ordinary recognised that there was no mention of officers of a corporate employer in section 1 of the 1969 Act. However, that did not mean that such persons could not be held civilly liable in the event that an employer company was uninsured. It was clear from section 5 that if the corporate employer’s failure to maintain the relevant insurance is committed through the fault of any director, manager, secretary or other officer, then they, as well as...