Campbell v Gordon (Scotland)
| Jurisdiction | Scotland |
| Judge | Lord Carnwath,Lord Mance,Lord Reed,Lord Toulson,Lady Hale |
| Judgment Date | 06 July 2016 |
| Neutral Citation | [2016] UKSC 38 |
| Court | Supreme Court (Scotland) |
| Docket Number | No 2 |
| Date | 06 July 2016 |
[2016] UKSC 38
Lady Hale, Deputy President
Lord Mance
Lord Reed
Lord Carnwath
Lord Toulson
Appellant
Andrew Smith QC Craig Murray (Instructed by Lefevre Litigation)
Respondent
Roddy Dunlop QC Richard Pugh (Instructed by Harper MacLeod LLP)
Heard on 12 April 2016
(with whom Lord Mance and Lord Reed agree)
The appellant, Mr Campbell, was employed by the company (the first respondent) as an apprentice joiner. The second respondent, Mr Gordon, was the sole director of the company and responsible for its day to day operation. On 28 June 2006 the appellant suffered an injury whilst working with an electric circular saw. Although the company had employers' liability insurance policy, the policy (surprisingly for a business of this kind) excluded claims arising from the use of "woodworking machinery" powered by electricity. It therefore excluded any claim arising out of Mr Campbell's accident. The company's failure to have in place appropriate insurance was a breach of its obligations under section 1(1) of the Employers' Liability (Compulsory Insurance) Act 1969.
The company itself went into liquidation in 2009. Mr Campbell now seeks to hold Mr Gordon, as director, liable in damages for the company's failure to provide adequate insurance cover. Mr Gordon himself is recently bankrupt. We were told by Mr Smith QC, appearing for Mr Campbell, that there are discussions with him with a view to obtaining an assignation of any rights he may have against the broker who arranged the inadequate insurance. However, the sole issue for us is whether civil liability attaches to Mr Gordon for that failure.
The claim was upheld by the Lord Ordinary, but dismissed by the Inner House by a majority (Lord Brodie and Lord Malcolm, Lord Drummond Young dissenting). In this respect they arrived at the same conclusion, albeit not by identical reasoning, as the English Court of Appeal in Richardson v Pitt-Stanley [1995] QB 123 (Russell and Stuart-Smith LJJ, Sir John Megaw dissenting).
The foundation of the claim has to be found in the 1969 Act. The primary duty to insure is placed on the employer by section 1, which provides:
"1. Insurance against liability for employees.
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 …"
Section 4 provides for regulations governing the issue of certificates of insurance and their display for the information of employees and production on demand to inspectors duly authorised by the Secretary of State. These also are obligations placed on the employer.
Section 5 which is at the heart of the appeal provides, as amended:
"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." (emphasis added)
On its face that is an unpromising basis for Mr Campbell's present claim. This provision does not in terms impose any duty to insure on a director or other officer as such, let alone any civil liability for failure to do so. The duty rests on the corporate employer. The veil of incorporation is pierced for a limited purpose. It arises only where an offence is committed by the company, and then in defined circumstances imposes equivalent criminal liability on the director or other officer on the basis, not that he is directly responsible, but that he is "deemed to be guilty" of the offence committed by the company.
For the appellant Mr Smith relies on well-established principles governing civil liability in respect of statutory obligations. He accepts that as a general rule, where a statute imposes an obligation and imposes a criminal penalty for failure to comply, there is no civil liability; but that is subject to exceptions, including —
"where upon the true construction of the Act it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation" (per Lord Diplock, Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, at 185)
There are many examples of this exception in practice, dating back more than 100 years, for example (in England) to Groves v Lord Wimborne [1898] 2 QB 402, relating to the Factory and Workshop Act 1878, and in Scotland in Black v Fife Coal Co Ltd, 1912 SC (HL) 33; [1912] AC 149, concerning the Coal Mines Regulation Act 1887. In the latter case, Lord Kinnear said (pp 45 and 165–166):
"We are to consider the scope and purpose of the statute, and in particular for whose benefit it is intended. Now the object of the present statute is plain. It was intended to compel mine owners to make due provision for the safety of the men working in their mines, and the persons for whose benefit all these rules are to be enforced are the persons exposed to danger. But when a duty of this kind is imposed for the benefit of particular persons, there arises at common law a correlative right in those persons who may be injured by its contravention. Therefore I think it is quite impossible to hold that the penalty clause detracts in any way from the prima facie right of the persons for whose benefit the statutory enactment has been passed to enforce the civil liability."
The same principle was applied to a failure to insure, in the context of motor insurance, in Monk v Warbey [1935] 1KB 75. Section 35 of the Road Traffic Act 1930 made it illegal to use or to cause or permit any other person to use a motor vehicle on a road unless there was in force in relation to the user of the vehicle a policy of insurance against third party risks that complied with the requirements of the Act. It was held by the Court of Appeal that, where the owner of a car permitted its use by a person uninsured against third party risks and injury to a third party was caused by the negligent driving of that person, the owner was liable in damages to that third party for breach of his statutory duty to insure. That was followed in Scotland in Houston v Buchanan, 1940 SC (HL) 17, [1940] 2 All ER 17.
Mr Smith submits that Lord Diplock's words are directly applicable to this case. The duty in question was imposed for the protection of employees such as Mr Campbell, and the context is identical to that of the Factories Acts. In its application to the duty to insure, he submits, the case is indistinguishable from Monk v Warbey. As a "cross-check" of the appropriateness of such liability, he relies on the tri-partite test set out by Lord Bridge in Caparo Industries plc v Dickman [1990] AC 605, 617–618 for a duty of care in negligence, including foreseeability, proximity and fairness. He relies also on the statement of Lord Bingham in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32, 67, referring to the "strong policy argument in favour of compensating those who have suffered grave harm, at the expense of their employers who owed them a duty to protect them against that very harm and failed to do so." Mr Smith submits that the contrary conclusion arrived at by the English Court of Appeal in Richardson was based on a flawed analysis, not least the view of Stuart Smith LJ (p 131E-H) that the duty to insure was for the benefit of the employer rather than the employee. He relies on the detailed criticism of that decision by Lord Drummond Young in the Inner House.
In the court below, and in argument before this court, there was some discussion whether Lord Diplock's statement of the exception represented the modern law. Lord Brodie thought that it needed to be seen in the light of more recent judicial statements of high authority, which he read as placing less emphasis on definitive presumptions, and more on the need to ascertain the intention of Parliament in enacting the particular provision (paras 10, 20). He referred in particular to statements by Lord Rodger in Morrison Sports Ltd v Scottish Power UK Plc 2011 SC (UKSC) 1 (at paras 28–29, 41), citing in turn the judgment of Lord Browne-Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 731–732; and by Lord Jauncey in R v Deputy Governor of Parkhurst, Ex p Hague [1992] 1 AC 58, 170H–171A. This view finds some academic support in Professor Stanton's work on Statutory Torts (2003), paras 2-019-2-020.
For my part I find it unnecessary in this appeal to engage in discussion of the extent to which Lord Diplock's formulation has been modified by later authorities. I would only observe that the statements of Lord Browne-Wilkinson and Lord Jauncey referred to by Lord Brodie were made in the context of cases concerning liability of public authorities, which may raise rather different issues. I am content to assume (without deciding) that Lord Diplock's words remain a reliable guide at least in relation to statutory duties imposed for the benefit of employees. I would also proceed on the basis (agreeing in this respect with Sir John Megaw in the Richardson case: p 135C-D) that the...
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