The Inner House of the Court of Session has held that a company director will not be held personally liable for failing to obtain compulsory employers’ liability insurance. 

Background

Mr Campbell, an apprentice joiner, injured his hand during the course of his employment and planned to raise an action against his employer for damages on the grounds of its negligence. However, by the time the claim was to be raised, the company was insolvent. It was established that the company did not have employers’ liability insurance in place. This insurance is compulsory under the Employers’ Liability (Compulsory Insurance) Act 1969 – which also imposes criminal liability on directors and other officers who fail to obtain such insurance. 
 
Mr Campbell raised his claim jointly against the company and Peter Gordon, the sole director, on the basis that Mr Gordon had breached his duties under the 1969 Act. Mr Campbell argued that the failure to insure the company against injury claims brought by employees rendered Mr Gordon personally liable.

The Court’s decision

Lords Malcolm and Brodie decided that where a criminal sanction exists in legislation, civil liability does not necessarily arise. This follows a trend in recent case law to resist calls to impose civil liability for breach of a statutory duty where Parliament has not explicitly expressed such an intention. Lord Brodie  expressed doubts about the justice of a situation where a director of a small business could be liable to an employee, though his own pockets may be no deeper than that of the employee and his responsibility is not for causing the injury, but for failing to insure against it happening.
 
It is worth noting that Lord Drummond Young disagreed; he was of the view that the 1969 Act did impose civil liability upon any director who failed to insure in accordance with the Act. He gave a number of reasons for reaching this conclusion, including the fact that the Act was designed to benefit employees who might be injured at work in such a way as to become entitled to compensation. The purpose of the legislation would be frustrated if civil liability under the Act did not extend to directors, as well as the employing company. 

Given the split decision, it is possible that the matter will be appealed to the Supreme Court.

Comment

This decision, as it stands, does not, however, mean that directors can ignore their statutory duties: the criminal sanctions imposed on directors and officers by the Act include a fine of £2,500 per day for each day of non-insurance.

Campbell v Peter Gordon Joiners Limited (in Liquidation).