The appellant was employed by a company which failed to buy appropriate employers’ liability insurance, in breach of its obligation under the Scottish Employers’ Liability (Compulsory Insurance) Act 1969. As a result the employee was unable to claim under the policy following a workplace accident. The company went into liquidation and the employee sought to claim damages against a director of the company for the company’s failure to provide adequate insurance cover. By a majority of 3:2, the Supreme Court has now rejected that claim.
The employee had sought to draw an analogy with Monk v Warbey , in which the Court of Appeal held a car owner (who had allowed an uninsured driver to use the car) liable in damages to a third party for breach of his statutory duty to insure. That argument was dismissed by the Supreme Court because: “there is no basis in the caselaw for looking through the corporate veil to the directors or other individuals through whom the company acts. That can only be done if expressly or impliedly justified by the statute”. Section 5 of the Act did not impose a duty to insure on a director or other officer nor any civil liability for failure to do so. The section was concerned with criminal liability and the appeal was dismissed.
Whilst the case was specifically concerned with the Scottish 1969 Act, it does demonstrate the court’s reticence to pierce the ‘corporate veil’ and find directors personally liable for the actions of the company in the absence of specific statutory provisions. However, given the dissenting views, it may well be the case that this issue is reexamined.