Tuesday, July 5th, 2016

Campbell v Gordon [2016] UKSC 38

The Supreme Court today issued its judgment in the case of Campbell v. Gordon [2016] UKSC 38, a case concerning the personal liability of a company director for his part in the failure of an employer company to procure a sufficient employers’ liability insurance policy.

The judgment of the Supreme Court is by majority of 3 to 2, holding that there is no civil right of action by an injured employee against a company director. The split in decision followed a 2 to 1 decision in the Inner House [2015] CSIH 11 to the same effect, and a similar split decision in the Court of Appeal case of Richardson v. Pitt-Stanley [1995] QB 123. In both Campbell and Richardson, the employee had been successful at first instance, and on appeal the dissenting judges gave strong reasons for their disagreement. In the Supreme Court, Lord Toulson and Lady Hale similarly gave powerful reasons for their dissents.

The case has now resolved perceived uncertainty following on Richardson, although by the slimmest majority. It is very unusual to see a question of this nature subject to so many dissents in its litigated history.

The averred facts of the case are that the pursuer, an apprentice joiner, was injured by an unguarded circular saw in his work for a joinery company. The employer company had an employers’ liability insurance policy that excluded cover for injuries caused by certain woodworking equipment. The company went into liquidation and the pursuer sought damages from the sole director of the company, Mr Gordon.

The duty on employers to obtain employers’ liability insurance arises under section 1 of the Employers’ Liability (Compulsory Insurance) Act 1969. Section 5 of that Act creates a criminal offence for an employer to fail to insure an employee. Where the employer is a company, certain officers of the company, including directors, can be deemed to have committed a criminal offence if the failure by the company has been committed with their consent, connivance or facilitated by their neglect.

The 1969 Act does not explicitly create a right of action by an injured employee against a director. The pursuer relied on a line of authority to the effect that if legislation imposes an obligation for the protection of a particular class of individuals, it may create a correlative right of action by an individual who is injured. The majority, reflecting the view of Lord Malcolm in the Inner House, held that this was not enough and that “something more” was required. Lord Carnwath held that the language of section 5 was deliberately chosen to not result in imposition of civil liability for directors.

Lord Toulson, in dissent, held that the substance of section 5 was to place a legal obligation on the relevant company officer not to cause and permit the company to fail to have insurance. He examined the function, substance and effect of the provision, which pointed towards the statute creating the right of action. In forceful criticism of the majority approach, Lord Toulson said that the context of the legislation supported his functional approach to interpretation.

It is unusual to see such trenchantly divergent judgments from the Supreme Court and although the case concerns construction of a discrete statutory provision, it will be of interest to academics and practitioners seeking to identify the correct modern approach.

The pursuer and appellant was represented by Andrew Smith QC and Craig Murray, both of Compass Chambers. The defender and respondent was represented by Roddy Dunlop QC of Axiom Advocates and Richard Pugh of Compass Chambers. A copy of the decision can be found here.

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