Uninsured employer company – director liable?

The Supreme Court issued its decision in Campbell v Peter Gordon Joiners Ltd [2016] UKSC 38 in July, confirming that a pursuer cannot rely on the provisions of the Employers’ Liability (Compulsory Insurance) Act 1969 to claim against a director of an employer company. The pursuer, a joiner, had raised an action for damages against his former employers following an accident at work. The second defender was the sole director of the company. The claim against the second defender was based on both breach of common law duties and breach of a duty to arrange proper and adequate insurance, on the basis of ss 1 and 5 of the 1969 Act.

At first instance, Lord Glennie held that there was a relevant case against the second defender, based on the argument that the Act allowed a director to be held liable in civil law for breach of his qualified statutory duty not to permit the employer company to carry on business without having an approved insurance policy in place. The second defender appealed, arguing that no civil liability attached to him for any breach of the 1969 Act – the obligation created by the Act was imposed on the employer and not, where the employer was a corporate body, on the directors. The Inner House agreed and overturned Lord Glennie’s decision by a 2-1 majority.

The pursuer then appealed to the Supreme Court, where the appeal was dismissed and the Inner House’s decision upheld. The second defender’s failure, as director of the company, to provide adequate insurance, did not make him liable personally to the pursuer. There was no authority for the suggestion that a person could be indirectly liable for breach of an obligation imposed on another by statute, and it was only possible to pierce the corporate veil in order to impose liability on a director through whom a company acted, if this was expressly or impliedly justified by the relevant statute.