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6 July 2016
Lady Hale, Lord Mance, Lord Reed, Lord Carnworth, Lord Toulson
The Employers' Liability (Compulsory Insurance) Act 1969 s.1 and s.5 did not give rise to a separate civil liability on the part of company directors and other officers when a director fails to insure or ensure adequate insurance coverage.
The claimant was an apprentice joiner who was injured during the course of his employment. Whilst the company did possess employer’s liability insurance unusually this excluded any claims arising from the use of ‘woodworking machinery’. Failure to have appropriate insurance is a breach of s1 (1) Employers' Liability (Compulsory Insurance) Act 1969.
The company went into liquidation in 2009 and the claimant sought to hold the defendant personally liable as director for the company’s failure to have adequate insurance cover. The question the court had to decide was whether liability attached to defendant for his failure.
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It was held (Lady Hale and Lord Toulson dissenting) that section 5 did not under its proper construction impose a duty to insure on a director or other officer of the company. It therefore could not impose any civil liability for failure to do so. The duty rested on the corporate employer. There were only specific defined circumstances where the corporate veil could be pierced and then it imposed a criminal sanction. The general rule is, where a statute imposes an obligation, and a criminal penalty for failure to comply, there was no civil liability. The simple fact that a company acts through its officers is not enough to impose a liability towards third parties for acts or omissions.
What is more interesting in this case is the dissenting judgment provided by Lady Hale and Lord Toulson which hints towards a change in interpretation in the not too distant future. Lord Toulson advised that the court’s needed to look at the purpose of the legislation –namely that company employees should have protection. A number of dissenting judgments in previous cases hint towards a need to consider the function and substantive effect of deeming provisions contained in legislation. Conventional jurisprudence holds that the court’s function is to ascertain what Parliament intended but too stricter an approach understates the role of the courts when legislation is silent. The courts should have an active role in filling the gaps. For him and Lady Hale it was clear that Parliament’s intention as, and the common law has consistently provided that statutory duties imposed upon employers for the benefit of employees who suffer injury as a result of breach give rise to civil as well as criminal liability.
Sandra De Souza and Amy Wedgwood, Anthony Gold