Dear Colleagues;
In Campbell v Gordon (Scotland) [2016] UKSC 38 (6 July 2016) http://www.bailii.org/uk/cases/UKSC/2016/38.html the
UK Supreme Court was divided 3-2 in a case dealing with the question as to whether a statutory provision imposed civil liability, for the purposes of the tort action for breach of statutory duty (BSD).
Mr Campbell was injured at work. His company was not properly insured to cover the damages award, and went bankrupt without making payment. Mr Gordon was the director of the company. The company had committed a breach of a statute in being relevantly uninsured.
Under s 5 the legislation provided that where the company was guilty, then:
Mr Campbell was suing Mr Gordon as civilly liable for the failure to insure, based on his criminal liability for the company’s failure.
Those who follow BSD law will recall that an almost identical claim was made in an English case in Richardson v Pitt-Stanley
[1995] ICR 303, where the claim failed by a 2-1 decision in the Court of Appeal. At that time the majority held that the relevant legislation was passed in the interest of the company, and hence could not be relied on by
the worker! There was a blistering dissent by Sir John Megaw.
At the earlier stage of
Campbell, [2015] CSIH 11 (3 Feb 2015),
the claim failed by 2-1 again but at least the
Court of Session Inner House agreed with Sir John Megaw that the purpose of the law was to protect injured workers who might lose the benefit of a tort claim due to lack of insurance.
But the claim still failed, and here in the Supreme Court it failed again according to the majority (Lord Carnwath for himself and Lords Mance and Reed.) The reason was that they focussed on the form in which the obligation was expressed.
There was no actual “duty” directly imposed on a director, there was simply “deemed” criminal liability in case the company breached the Act. Hence it could not be said that Parliament had intended to impose a civilly actionable duty (see eg [6] where this
is summarised). Some important things worth noting about the majority decision, though:
- There was some argument that the “presumption” referred to by Lord Diplock in Lonrho v Shell (No 2), where his Lordship said that where an obligation is imposed “for the benefit or protection of a particular class of individuals” it will usually be actionable, should be rejected. But Lord Carnwath at [12] declines to rule on this point. He simply feels that in a case where the form of the statute does not impose a duty, there can be no civil action. Lord Ziplock’s approach is left in place for the moment, and supported by Lord Toulson at paras [37]-[38] in the minority.
- In particular Lord Carnwath accepts, on the authority of the “Pink Panther” case of
Rickless v United Artists, that it will not be an automatic bar to civil liability that a provision is framed simply in terms of a criminal offence, without further imposing an explicit “duty”. In other words, his Lordship seems to accept that the following
two formulations might create a civil liability:
- X shall do Y;
- X shall not do Z, penalty $Q; (which clearly imposes a direct obligation on X)
- But what his Lordship sees as not creating an actionable duty is the form “A Pty Ltd shall not do Z, and if they do B is deemed to be also guilty of the same offence”. It is the lack of “direct responsibility” for the behaviour which was fatal to the claim here.
For the minority (and I agree) this is a “formalistic” approach which ignores the substance of the obligation- see Lord Toulson at [27]. The effect of the provision is exactly the same as if it had said “It shall be illegal for the director”
to allow the company to be uninsured, followed by the same penalty. The court should have looked at the form, not the substance, and held that the director did indeed have a duty, and the worker deprived of the benefit of compensation should have been able
to enforce his “correlative right” (to use the helpful phrase quoted by both majority and minority from
Butler v Fife – see paras [8], [34]). Lady Hale agreed. Both she and Lord Toulson reaffirmed the principles in this area spelled out in
Lonrho, X v Bedfordshire, Pankhurst and Morrison (see [45]).
Indeed, Lord Toulson makes a subsidiary argument, that even if a “formalistic” approach is to be adopted, then since s 5 requires us to “deem” the director to be guilty of the primary offence, then the court should deem him to have
breached the duty imposed by the legislation- see [31].
There is one other odd feature of the majority decision I would like to comment on. Lord Carnwath brings it in at the end as an additional reason to deny BSD liability here, from para [19], though he says
it wasn’t raised by the parties at the lower levels. This is that apparently provisions using these words and imposing deemed liability on company officers are widely used in other legislation – maybe 900 examples. His Lordship never says so explicitly, but
the implication seems to be a sort of “floodgates” argument that if s 5 here creates civil liability, so will all the others.
With respect, this is not so. Every BSD claim where not supported by prior precedent requires separate consideration of the legislation, and all these Acts will be different and require their own interpretation.
It also odd that he seems to suggest that all the combined resources of counsel for the parties and the court’s researchers “have not disclosed any reported authority in which its {sc, “this formula”) significance and meaning has been considered”. Odd because
s 37 of the Health and Safety at Work etc Act 1974 (UK) contains such a formula, and its interpretation was considered in the Scottish decisions of
Armour v J Skeen (Procurator Fiscal, Glasgow) [1977] IRLR 310, and Wotherspoon
v HM Advocate [1978] JC 74 and in England in
R v P [2007] EWCA Crim 1937. To be clear, none of these cases involved the question of civil liability for breach of s 37, but they do discuss the interpretation of a provision
using the words “consent, connive” etc. This last argument is particularly unconvincing.
Finally, I can’t help noting that while the “limited class” requirement for civil actionability is formally supported here (see eg Lady Hale in passing
at [47]), the case did not involve any debate on that point, it being accepted by all that “workers” can be regarded as such a limited class. Those interested in critique of the limited class rule can
find it in a paper I presented in Brisbane at the end of last year, linked here: https://works.bepress.com/neil_foster/98/ .
Regards
Neil
ASSOCIATE PROFESSOR NEIL FOSTER
Newcastle Law School
LLB/LLB(Hons) Program Convenor
O: MC177, McMullin Building
T: +61 2 4921 7430
E: neil.foster@newcastle.edu.au
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LLB/LLB(Hons) Program Convenor
O: MC177, McMullin Building
T: +61 2 4921 7430
E: neil.foster@newcastle.edu.au
W: http://www.newcastle.edu.au/profile/neil-foster
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