Trinity
Term
[2016] UKSC 38
On appeal from: [2015] CSIH 11
JUDGMENT
Campbell (Appellant) v Gordon (Respondent)
(Scotland)
before
Lady Hale, Deputy
President
Lord Mance
Lord Reed
Lord Carnwath
Lord Toulson
JUDGMENT GIVEN ON
6 July 2016
Heard on 12 April 2016
|
Appellant
Andrew Smith QC
Craig Murray
(Instructed by
Lefevre Litigation)
|
|
Respondent
Roddy Dunlop QC
Richard Pugh
(Instructed by
Harper MacLeod LLP)
|
LORD CARNWATH: (with whom Lord
Mance and Lord Reed agree)
1.
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.
2.
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.
3.
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).
4.
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.
5.
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)
6.
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.
7.
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)
8.
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.”
9.
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.
10.
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.
11.
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.
12.
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
duty of the employer under section 1 of the 1969 Act was imposed for the
benefit of the employees, in the sense indicated by Lord Diplock.
13.
This however is not enough for the appellant. The essential starting
point for Lord Diplock’s formulation is an obligation created by statute,
binding in law on the person sought to be made liable. There is no suggestion
in that or any other authority 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.
14.
Comparison with Monk v Warbey is instructive. The statute in that
case (Road Traffic Act 1930, section 35) provided by subsection (1) that it was
not lawful for any person “to use, or to cause or permit any other person to
use” a motor vehicle on the road unless insured; and by subsection (2) imposed
a criminal penalty on “any person” acting in contravention of the section. It
was held that civil liability was not excluded by the separate provision
creating a criminal offence. Far from supporting Mr Smith’s arguments, this
analogy points in the opposite direction. In that case Parliament dealt
specifically with both the user, and any person causing or permitting the use,
and determined to impose direct responsibility on each. The 1969 Act imposes
direct responsibility only on the employer. The equivalent issue would be
whether that is to be treated as giving rise to civil liability on the employer
for failure to insure, notwithstanding the criminal liability imposed on him by
section 5. That issue (on which there were differences in the courts below)
does not arise in this appeal. However, there is no analogy with the position
of a director or officer. Parliament has recognised that a director or officer
may bear some responsibility for the failure to insure, but has dealt with it,
not by imposing direct responsibility equivalent to that of the company, but by
a specific and closely defined criminal penalty, itself linked to the criminal
liability of the company.
15.
I would accept that the adoption of a particular statutory model is not
necessarily critical. Lord Brodie (para 12) referred to the decision of the
Court of Appeal in Rickless v United Artists Corpn [1988] QB 40, in
which it was held that a provision which on its face “did no more than classify
a specified act as a criminal offence did indeed create civil liability”. The
relevant provision was section 2 of the Dramatic and Musical Performers’ Protection
Act 1958, by which “if a person knowingly … makes a cinematograph film … from …
a dramatic or musical work without the consent in writing of the performers …
he shall be guilty of an offence …” Giving the leading judgment Sir Nicholas
Browne-Wilkinson V-C accepted that the form of the provision pointed against
civil liability:
“although this point is far from
decisive, it is easier to spell out a civil right if Parliament has expressly
stated the act is generally unlawful rather than merely classified it as a
criminal offence.” (p 51G-H)
However, he held that other factors showed an intention to
create civil liability, including the clear purpose of providing protection for
performers, and the need to comply with this country’s obligations under the
relevant international conventions (p 53A). This accordingly was a somewhat
special case. But there was no suggestion that civil liability could be imposed
other than on those made directly responsible by statute for compliance with
the primary obligation.
16.
Lord Drummond Young gave a number of reasons for extending civil
liability to the directors. A corporate employer could only act through its
officers who accordingly had a duty to ensure so far as possible that the
company fulfils its statutory duties. In that way he thought “it is apparent
that section 1, by itself, has the effect of imposing a duty on the directors”
(para 43). He relied also on the common law rules governing liability of
directors for acts of the company, citing for example the “relevant principle”
as stated by Atkin LJ in Performing Right Society Ltd v Ciryl Theatrical
Syndicate [1924] 1 KB 1, pp 14-15:
“Prima facie a managing director
is not liable for tortious acts done by servants of the company unless he
himself is privy to the acts, that is to say unless he ordered or procured the
acts to be done. … I conceive that express direction is not necessary. If the
directors themselves directed or procured the commission of the [wrongful] act
they would be liable in whatever sense they did so, whether expressly or
impliedly.” (Emphasis added)
“Consent, connivance and facilitation through neglect” were
the criteria for the imposition of criminal liability under section 5 of the
Act; “on general common law principles they are also sufficient to render the
director civilly liable for the company’s breach of section 1” (paras 44-45).
17.
He saw nothing unfair in imposing such liability, given that the
director may have “ignored or deliberately disregarded” the existence of the
statutory duty and so incurred personal liability, and that, if he has relied
on professional advice from an insurance broker, he will have a right of
recourse against the broker (para 46). He criticised the majority for an
approach which frustrated the policy of the Act “through an over-literal
construction” and “an excessively conceptual approach”. In his opinion, the
objectives of the Act demanded that a director who has consented to or who has
been complicit in a breach of the duty to obtain insurance, or who has
facilitated such a breach through neglect, should incur civil liability. “This
substantive point should prevail over structural niceties.” (para 47)
18.
With respect to him, I do not find these observations helpful in
resolving the issue before us, which depends not on general questions of
fairness, but on the interpretation of a particular statutory scheme in its
context. The fact that the company can only act through its officers tells one
nothing about their potential liability to third parties for its acts or
failures. The judgment of Atkin LJ to which he refers affirms the rule
(supported by reference to a statement of Lord Buckmaster in Rainham
Chemical Works v Belvedere Guano Co [1921] 2 AC 465, 476) that directors
are not in general liable for the tortious actions of the company. The scope of
a potential common law claim against a director for ordering or procuring such
a tortious act is not in issue in this case, which turns entirely on alleged
liability under the statute. This requires the court to pay due respect to the
language and structure used by Parliament, rather than to preconceptions of
what its objectives could or should have been.
19.
My view of the provisions is reinforced by a factor which was not
addressed in the courts below or the written cases, but was drawn to our
attention by Mr Dunlop QC for the respondent in the course of oral submissions.
This concerned the statutory background of the wording of section 5. It seems
that provisions in similar form, imposing criminal liability on directors and
other officers for offences by their companies, have a long history. We were
told that a Westlaw search (looking for statutory provisions using all three of
the words “consent”, “connivance” and “neglect”) had disclosed more than 900
examples of this type of formula, all apparently in the context of corporate
offences (although, as Mr Smith pointed out, examples of precisely the same
wording are much rarer). This general picture has been confirmed by a similar
exercise carried out by legal assistants for the court. We have received
nothing from the appellant since the hearing to suggest otherwise.
20.
A typical example is found in the Companies Act 2006 itself. Section
1255 (repeating a provision first introduced in this form in 1981) provides:
“(1) Where an offence under this
Part committed by a body corporate is proved to have been committed with the
consent or connivance of, or to be attributable to any neglect on the part of,
an officer of the body, or a person purporting to act in any such capacity, he
as well as the body corporate is guilty of the offence and liable to be
proceeded against and punished accordingly.”
21.
A much earlier example to which Mr Dunlop referred us (dating from
before the 1969 Act) comes from the Interpretation Act (Northern Ireland) 1954.
This is of general application to all corporate offences created by subsequent
statutes in Northern Ireland. Section 20(2) provides:
“Where an offence under any
enactment passed after the commencement of this Act has been committed by a
body corporate the liability of whose members is limited, then notwithstanding
and without prejudice to the liability of that body, any person who at the time
of such commission was a director, general manager, secretary or other similar
officer of that body or was purporting to act in any such capacity shall,
subject to sub-section (3), be liable to be prosecuted as if he had personally
committed that offence and shall, if on such prosecution it is proved to the
satisfaction of the court that he consented to, or connived at, or did not
exercise all such reasonable diligence as he ought in the circumstances to have
exercised to prevent the offence, having regard to the nature of his
functions in that capacity and to all the circumstances, be liable to the like
conviction and punishment as if he had personally been guilty of that
offence.” (emphasis added)
22.
There are differences of wording between the three statutes. The 1954
statute talks not of “neglect”, as in the 1969 Act and the Companies Act, but
of failure to “exercise reasonable diligence”. On the other hand the reference
to liability “as if he had personally been guilty” seems to anticipate the
language of “deemed” criminal liability in the 1969 Act, but is not replicated
in the Companies Act. However, the general pattern is the same in these and in
the other examples to which we have been referred. In spite of the apparent
frequency of the use of this formula, the researches of counsel and our own
legal assistants have not disclosed any reported authority in which its
significance or meaning has been considered, nor any previous suggestion that
it might be treated as giving rise to civil liability.
23.
I would be reluctant to attach too much weight to a point which has
emerged so late in the day. Without more substantial research it is impossible
to know to what extent this formula has been used in comparable contexts
involving protection of employees. However, to my mind it tends to confirm the
view that the language of section 5 was deliberately chosen and is intended to
mean what it says. The formula is specifically directed at criminal liability,
and as far as we know has always been used in that context. Where Parliament
has used such a well-established formula, it is particularly difficult to infer
an intention to impose by implication a more general liability of which there
is no hint in its actual language.
24.
For all these reasons, I would agree with the conclusion reached by the
majority of the Inner House and dismiss the appeal.
LORD TOULSON:
(dissenting) (with whom Lady Hale agrees)
25.
The issue before the court is a) whether Mr Gordon breached a statutory
provision intended for the protection of a particular class including Mr
Campbell and b) if so, whether Mr Gordon should be held liable for Mr
Campbell’s resulting loss.
26.
Lord Carnwath has set out sections 1 and 5 of the 1969 Act. The object
of the Act is that a company’s employees should have the protection, 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. Failure by the company to arrange and maintain such insurance
carries a penal sanction. But 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. In order to
bring such persons within the pool, the drafter has used the device of a
“deeming” provision. The form of the drafting device is that a director,
manager, secretary or other officer of the company who consents to, connives at
or by neglect facilitates, a failure to maintain the requisite insurance is
“deemed” to be guilty of the same offence as the company. The effect in substance
is to place on such an officer a legal obligation not to cause or permit
the company to be without the required insurance by consent, connivance or
neglect, on pain of a criminal penalty. To say that the imposition of criminal
responsibility for a specified act (or omission) carries with it a legal
obligation not to act (or omit to act) in such a way is to state the obvious.
The two are opposite sides of the same coin.
27.
The language of deeming involves artificiality. In addressing sub-issue
a), the court has a choice whether to adopt a formalistic approach or to look
through the artificiality and consider the function, substance and effect of
the provision in real terms. The answer to the question “What does it really
do?” is that the provision is a concise means of extending statutory
responsibility for seeing that the company is properly insured to the company’s
appropriate officer(s), backed by a penal sanction.
28.
As an alternative, the drafter might have used words such as “It shall
be illegal for any director, manager, secretary or other officer of a
corporation which is an employer carrying on business in the United Kingdom to
consent to, connive at or by neglect facilitate a failure by the corporation to
insure (etc), and any such person shall be liable on summary conviction (etc)”.
This would have been longer but the practical result would have been the same:
the director or officer would have been liable to a criminal penalty for his
wrongful act or omission, imposed for the protection of employees.
29.
In his dissenting judgment in Richardson v Pitt-Stanley [1995] QB
123, 135, Sir John Megaw made a similar point. He said:
“With great respect, I find it difficult to believe that
the parliamentary draftsman would have intended to make provision that there
should be no civil right or remedy by using the formula of section 1 of the
Employers’ Liability (Compulsory Insurance) Act 1969, ‘shall insure’, followed
by section 5 ‘shall be guilty of an offence’; as contrasted with the formula of
declaring an act or omission to be unlawful and then separately providing a
criminal penalty for the breach.”
I agree.
30.
The approach which commends itself to the majority concentrates on the
form of the language. It is argued that the structure of the Act is such that
the only duty created by it is explicitly placed on the company by section
1(1), and that the mechanism by which a director or other officer of the
company is deemed to be guilty of a breach of that duty is consistent with and
supports that proposition. I have set out the alternative approach, which looks
at the function and substantive effect of the deeming provision in real terms.
The choice between a formal approach and a functional approach in the
interpretation and application of statutory language is an aspect of the choice
between formalism and realism which has been a fruitful subject since as long
ago as the publication of Holmes’s The Common Law in 1881. In deciding which
approach is preferable, the context matters. The 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. I cannot improve
on Lord Drummond Young’s pithy statement, in his dissenting opinion in this
case, that in the context of legislation aimed at employee protection the
formalist approach is “excessively conceptual; it focuses on differences of
structure that do not reflect the basic objectives of the statute” (para 47).
31.
If, however, a formalist approach is preferred, there should be no half
measure about it. On the formalist approach, the director in the eyes of the
law is himself guilty of committing an offence under sections 1 and 5. The
language of the Act does not impose an accessory liability on the director. It
would be unnecessary for that purpose. Rather, it explicitly deems him to be
himself guilty of the offence of failing to insure and maintain insurance, etc.
As a matter of insurance law, it is of course the insurer who insures and
someone else (usually the insured) who procures the insurance, but the meaning
of “shall insure, and maintain insurance” in section 1 is clear enough. The
effect of the deeming provision is that in the eye of the law the director is
guilty as a principal of failing to insure and maintain the necessary
insurance. Logic and justice would not permit the director to say that his
criminal liability is in substance and reality a form of accessory liability,
if one is living in formality land, for, as I have stressed, on the formalist’s
approach the director is in law guilty as a principal of failing to insure.
32.
On either approach Mr Gordon breached a statutory provision intended for
the protection of a particular class, employees, of which Mr Campbell was a
member, but I prefer the former approach for the reasons which I have given.
33.
As to sub-issue b), legislation for the protection of employees began in
the Victorian age. From the outset the courts have consistently held that
breaches of provisions in that class of legislation are actionable at the suit
of an employee who suffers from the breach. This was established in Groves v
Lord Wimborne [1898] 2 QB 402, a case under the Factory and Workshop Act
1878. Rigby LJ said at pp 414-415:
“The provisions of section 5 are
intended for the protection from injury of a particular class of persons, who
come within the mischief of the Act. The plaintiff is one of those persons, the
possibility of injury to whom through neglect to fence machinery the section
contemplates. That being so, the only question seems to be whether the provisions
of the Act with regard to the imposition of fines for neglect of the duty
created by the section reasonably lead to the conclusion that the Legislature
intended that such fines should be the only remedy for breach of that duty. I
think that, when those provisions are examined, it is impossible to arrive at
that conclusion. The maximum fine that can be imposed in any case, however
serious the injury may be, is one of £100. It seems monstrous to suppose that
it was intended that in the case of death or severe mutilation arising through
a breach of the statutory duty, the compensation to the workman or his family
should never exceed £100. Again, section 82 does not provide that the fine
imposed under it shall necessarily go to the workman if he be injured, or to
his family if he be killed; but only that the Secretary of State may, if he
thinks fit, order that the fine or part of it shall do so.
…
Looking at the purview of the
whole Act, I cannot think it reasonable to suppose that the Legislature
intended the penalty imposed by section 82 to be the only remedy for injury
occasioned by breach of the absolute statutory duty created by the Act.”
The reference to the “purview of the whole Act” came from
the speech of Lord Cairns LC in Atkinson v Newcastle and Gateshead
Waterworks Co (1877) 2 Ex D 441, 448. The maximum fine for an offence under
the 1969 Act was originally £200. An offence is committed on any day that a
company is not insured in accordance with the Act.
34.
Groves v Lord Wimborne was approved by the House of Lords in Butler
(or Black) v Fife Coal Co Ltd [1912] AC 149. Lord Kinnear said at 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.”
This passage was cited as a statement of general principle
by Lord Simonds and Lord Normand in Cutler v Wandsworth Stadium Ltd
[1949] AC 398, 407-408, 413-414, and by Lord Diplock in Lonrho Ltd v Shell
Petroleum Co Ltd (No 2) [1982] AC 173, 185.
35.
As Lord Kinnear’s statement indicates, the cause of action is at common
law (except in cases where a statute expressly creates a civil right of
action). The cause of action which was held to exist in Groves v Lord
Wimborne was created by the court. It was founded on a statute but it was
the court that determined that breach of the provisions of the Act should be
actionable at the suit of the injured party for whose protection the provisions
were intended. The conventional jurisprudence is that the court’s function is
to ascertain as a matter of interpretation whether Parliament intended that
there should be civil liability, but that understates the role of the courts in
cases where the legislation is silent on the point. In such cases “the judges
face hieroglyphs without a Rosetta Stone”, to borrow a metaphor of Judge
Richard Posner writing extra-judicially (Divergent Paths - The Academy and the
Judiciary, Harvard University Press, 2016, p 172). Judge Posner candidly and
correctly states that the judges’ role in such cases is the active role of
filling gaps left by the legislature.
36.
The courts use a combination of methods for this purpose. They examine
the whole purview of the legislation and they employ default rules, with which
parliamentary drafters may be taken to be familiar. Lord Du Parcq spelt this
out in Cutler v Wandsworth Stadium Ltd [1949] AC 410-411. After a plea
that Parliament should reveal its intention in plain words, he said:
“… Parliament must be taken to
have known that if it preferred to avoid the crudity of a blunt statement and
to leave its intention in that regard to be inferred by the courts, the
‘general rule’ would prevail unless the ‘scope and language’ of the Act
established the exception. It cannot be supposed that the draftsman is blind to
the principles which the courts have laid down for their own guidance when it
becomes necessary for them to fill in such gaps as Parliament may choose to
leave in its enactments.”
37.
The default rules were summarised by Lord Diplock in Lonrho Ltd v
Shell Petroleum Co Ltd (No 2) [1982] AC 173, 185:
“The sanctions Order thus creates
a statutory prohibition upon the doing of certain classes of acts and provides
the means of enforcing the prohibition by prosecution for a criminal offence
which is subject to heavy penalties including imprisonment. So one starts with
the presumption laid down originally by Lord Tenterden CJ in Doe d Murray v
Bridges (1831) 1 B & Ad 847, 859, where he spoke of the ‘general rule’
that ‘where an Act creates an obligation, and enforces the performance in a
specified manner … that performance cannot be enforced in any other manner’ - a
statement that has frequently been cited with approval ever since, including on
several occasions in speeches in this House. Where the only manner of enforcing
performance for which the Act provides is prosecution for the criminal offence
of failure to perform the statutory obligation or for contravening the
statutory prohibition which the Act creates, there are two classes of exception
to this general rule.
The first is 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. As Lord Kinnear put
it in Butler (or Black) v Fife Coal Co Ltd …” (I have cited the passage
which followed.)
38.
In his opinion in the present case Lord Brodie said (at para 10) that
statements of Lord Kinnear and Lord Diplock are “not the modern law”. For this
(to my mind startling) proposition, Lord Brodie relied on the speech of Lord
Jauncey in R v Deputy Governor of Parkhurst, Ex p Hague [1992 1 AC 58,
170-171, and a passage in the speech of Lord Browne-Wilkinson in X (Minors)
v Bedfordshire County Council [1995] 2 AC 633, 731, cited by Lord Rodger in
Morrison Sports Ltd v Scottish Power UK plc 2011 SC (UKSC) 1, para 28,
in a judgment with which the other members of the court (including Lady Hale)
agreed.
39.
Those three cases were far removed from the area of legislation for the
protection of employees. In the passage from X (Minors) v Bedfordshire
County Council, cited in Morrison Sports Ltd v Scottish Power UK plc,
by Lord Rodger, Lord Browne-Wilkinson began by describing the principles for
determining whether a statutory breach gives rise to a cause of action as well
established. He went on to refer to the trilogy of Groves v Lord Wimborne,
Cutler v Wandsworth Stadium Ltd and Lonrho Ltd v Shell Petroleum Co
Ltd (No 2). He did not suggest that he considered those cases to be “not
the modern law”; quite the opposite. Had he intended to depart from long
standing authority, including decisions of the House of Lords, there can be no
doubt that he would have said so. Lord Brown-Wilkinson referred to R v
Deputy Governor of Parkhurst Prison, Ex p Hague, but only to give it as an
example of legislation which was treated not as being passed for the benefit of a
particular class of persons (those serving prison sentences), but for the
benefit of society in general. It provides an illustration of the need for a
purview of the whole legislation in question in order to determine whether it
is to be regarded as passed for the intended benefit of a particular class.
40.
Lord Brodie and Lord Malcolm each cited Lord Jauncey’s statement in the Parkhurst
case, at pp 170-171, that “The fact that a particular provision was
intended to protect certain individuals is not of itself sufficient to confer
private law rights of action upon them, something more is required to show that
the legislature intended such conferment.” But that sentence should not be
taken in isolation. It needs to be understood in its context. The claim in that
case was brought by a prisoner who had been deprived for a time of rights of
association, by an order of the deputy governor which was held to be in breach
of rules under the Prison Act 1952. In addressing the question whether the
breach entitled the claimant to damages, the House of Lords held that it was
necessary to consider not only the benefit of the rule to the claimant, but the
wider purpose of the legislative scheme. In the paragraph immediately following
the words quoted above, Lord Jauncey described the objects of the legislation
as “far removed from those of legislation such as the factories and coal mines
Acts whose prime concern is to protect the health and safety of those who
work therein” (emphasis added). In the present case the Act has no purpose
other than the protection of employees.
41.
The principles summarised by Lord Diplock in Lonrho Ltd v Shell
Petroleum Co Ltd (No 2) are no more than general principles or default
rules, but they have stood the test of time and I would hold that they continue
to be the law unless and until the Supreme Court makes a conscious decision
otherwise. In particular, where legislation is passed for the protection of
employees, in accordance with Lord Diplock’s first exception, a breach will
ordinarily give rise to a potential cause of action, unless the language of the
legislation points clearly in the opposite direction.
42.
In this case the legislation was plainly intended for the protection of
employees and I do not consider that the form of the language employed by the
drafter takes the case in relation to Mr Gordon outside Lord Diplock’s first
exception. I would allow the appeal.
LADY HALE:
43.
The question for this court is whether in 1969, when Parliament passed
the sections 1 and 5 of the Employers’ Liability (Compulsory Insurance) Act, it
was intended that breach of those sections should give rise, not only to
criminal liability, but also to civil liability towards an employee who had
been injured by the employer’s breach of duty towards him and who, because of
the failure to insure, would otherwise not receive the compensation for his
injuries to which he was entitled. In my view, it is absolutely plain that
Parliament did intend there to be such civil liability.
44.
Parliament is presumed to legislate in the knowledge of the current
state of the law when it is doing so. In 1969, the law had been clearly laid
down in Groves v Lord Wimborne [1898] 2 QB 402, approved by the House of
Lords in Butler (or Black) v Fife Coal Co Ltd [1912] AC 149, and again
in Cutler v Wandsworth Stadium Ltd [1949] AC 398. Statutory duties
imposed upon employers for the benefit of employees who suffer injury as a
result of their breach give rise to civil as well as criminal liability, absent
a clear statutory intent to the contrary. That is still the law. Parliament
understood this when it passed the Health and Safety at Work etc Act 1974, section
47 of which made clear which breaches did not give rise to civil liability, and
amended it in 2013, further to restrict the extent of civil liability.
45.
Quite apart from the fact that we are concerned with the Parliamentary
intention in 1969, it is quite wrong to suggest (as the majority in the lower
House did) that a “trilogy” of more recent cases have changed the law as it has
long been understood to be. The traditional understanding was reaffirmed in the
House of Lords by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2)
[1982] AC 173, 185. It was reaffirmed yet again in the House of Lords by
Lord Browne-Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 732 one of the “trilogy”. The other two are R v Deputy Governor of
Parkhurst Prison, Ex p Hague [1992] 1 AC 58 and Morrison Sports Ltd v
Scottish Power UK plc 2011 SC (UKSC) 1, [2010] UKSC 37 In none of the three is there any
suggestion that the approach of the courts to deciding whether the breach of a
statutory duty gives rise to civil liability in damages has changed. In X v
Bedfordshire, the principles applicable were said to be “well-established”,
albeit difficult to apply (p 731).
46.
Those difficulties arise in novel situations rather than in
well-established situations like this. In X v Bedfordshire, Lord
Browne-Wilkinson stressed that in no previous case “had [it] been held that
statutory provisions establishing a regulatory system or a scheme of social
welfare for the benefit of the public at large” gave rise to a right of action
for damages (p 731). Although individuals might in fact be protected, the
legislation was for the benefit of society in general and not just a particular
class. The cases where civil liability had been imposed were very limited and
specific “as opposed to general administrative functions imposed on public
bodies and involving the exercise of administrative discretions” (p 732). Cutler,
being concerned with the regulation of betting at dog races, was an example of
such a scheme, which did not give rise to civil liability. Hague, being
concerned with the management of prisons, was another.
47.
Something more should be said about Morrisons Sports, as it is a
recent decision of this court, to which I was a party. It was concerned with
whether there was civil liability for breach of the Electricity Supply
Regulations, made in 1988 but to be treated as if made under the power in
section 29 of the Electricity Act 1989. Section 29(3) provided that the
Regulations might impose criminal penalties for their contravention; but it also
provided that “nothing in this subsection shall affect any liability of any
such person to pay compensation in respect of any damage or injury which may
have been caused by the contravention”. Much of the judgment is devoted to
explaining why the view of the Inner House that this wording was apt to impose
civil liability, as opposed to acknowledging it if it existed, was untenable.
When Lord Rodger (with whom the other members of the court agreed) turned to
whether the regulations did indeed impose civil liability for breach, he cited
the above passage from the speech of Lord Browne Wilkinson in X v
Bedfordshire, which referred to, and cast no doubt upon, the law on
employers’ liability as decided in Groves v Lord Wimborne. There is no
suggestion in Morrisons Sports that that is no longer the law. The
judgment goes on to look at the overall legislative scheme for regulating the
supply of electricity. While this clearly contemplated that there might be
civil liability, it did not expressly provide for it. “Looked at as a whole …
the scheme of the legislation, with its carefully worked-out provisions for
various forms of enforcement on behalf of the public, points against
individuals having a private right of action for damages …” (para 37). It was
also difficult to identify any limited class of the public for whose protection
the Regulations were intended (para 38). In short, this was a general
regulatory scheme intended for the benefit of the whole population.
48.
The difference between that case and this could hardly be greater. This
is a very specific statutory duty imposed upon employers, and also imposed upon
specified officers where the employer is a limited company. There can be no
difference in substance between imposing criminal liability for failing to do
something and imposing a duty to do it. The purpose 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.
49.
For these reasons, as well as for the fuller reasons given by Lord
Toulson, I would allow this appeal and let the case go to proof.
