Campbell v Gordon [2016] UKSC 38.

Today the Supreme Court handed down judgment in the case of Campbell v Gordon (a video of Lord Carnwath’s lead judgment can be found here). Gordon was the sole director of Peter Gordon Joiners Ltd (‘the company’). Campbell, an employee of the company, injured himself whilst working with an electric saw. Whilst the company did have employers’ liability issuance, the policy in question excluded any claims arising from the use of ‘woodworking machinery’ powered by electricity. Accordingly, no claim could be made. The company’s failure to have in place appropriate insurance was a breach of s 1(1) of the Employers’ Liability (Compulsory Insurance) Act 1969.

The company went into liquidation in 2009, so Campbell could not commence proceedings against it. Instead, he argued that Gordon should be personally liable for his failure to obtain appropriate insurance cover. At first instance, Campbell’s claim succeeded, but was later dismissed by the Inner House. Campbell appealed to the Supreme Court.

Campbell’s appeal was dismissed by a majority of three to two. Lord Carnwath, whose leading judgment Lords Mance and Reed agreed with, started by noting that a breach of s 1(1) was, according to s 5, a criminal offence, but did not provide for any civil liability. He went on to state that ‘[t]he language of s 5 ‘was deliberately chosen and is intended to mean what it says. The formula is specifically directed at criminal liability.’ Accordingly, it did not appear that civil liability could be imposed upon Gordon. However, Lord Carnwath also noted that authority did exist for the imposition of civil liability in cases where statute imposed criminal liability only. In such cases, the starting point is to look at the statutory obligation itself and who it intends to make liable. It was clear that the obligation in s 1(1) was placed on the company. Lord Carnwath stated ‘there is no suggestion that … a person can be made indirectly liable for breach of an obligation imposed by statute on someone else. It is no different where the obligation is imposed on a company. There is no basis in the case law 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.’ As the 1969 Act imposes direct responsibility upon the employer only, no civil liability fell on Gordon.

The dissenting judgments of Lord Toulson and Lady Hale are worth noting. Lord Toulson stated that the purpose of the 1969 Act was to protect the employees ‘in the event of suffering an illness or injury arising out of their employment for which the company is liable, of the liability being covered by insurance up to a specified sum’ and that ‘the pool of those bearing legal responsibility for seeing that such protection is in place is not confined to the company itself. It extends to the company’s relevant officer or officers.’ Lady Hale was of the opinion that it was the intention of Parliament that breach of s 1(1) of the 1969 Act should give rise to civil liability towards the injured employee. She stated that the purpose of the 1969 Act was to ‘protect a very specific class of people, namely employees who might be injured by the employer’s breach of duty (whether arising by statute or at common law). The protection intended was that they should be compensated for their injuries even if, for whatever reason, the employer was unable to do so. Failure to insure means that the employee is denied the very thing that the legislation is intended to provide for him.’

This case is ultimately one about statutory interpretation. It is clear that, in interpreting the 1969 Act, the majority adopted a very different approach from Lord Toulson and Lady Hale. The majority adopted a literal approach to interpreting the 1969 Act, whereas Lord Toulson and Lady Hale adopted a much more purposive approach (Lord Toulson referred to it as a ‘functional’ approach) that focussed on the context of the Act. Lord Toulson did not deny the validity of a literal interpretation, but felt that ‘[t]he present context is legislation for the protection of a vulnerable group, a company’s employees. In that context I regard the functional approach as more appropriate.’

One thought on “Campbell v Gordon [2016] UKSC 38.

  1. Pingback: Summary of updates (4-10 July 2016) | Company Law and Corporate Governance

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