The termination of tiresome legislation

Future Bills that require a duty to insure, and create a criminal offence for non-compliance, should expressly indicate whether or not a civil remedy is also created, argues Alec Samuels

A very common feature of modern life is that A takes out insurance to cover his liability to B and for the benefit of B. The employer insures the employee under the Employers' Liability (Compulsory Insurance) Act 1969. The owner-driver insures himself and third parties under the Road Traffic Act 1988 part VI subsection 143-162. The landlord insures the block of flats both for his own benefit and the benefit of the tenants under an obligation in the lease and under the Landlord and Tenant Act 1985 section 30A and schedule. Life today is about the assessment of risk and protection against risk, and provided that everybody fulfils their obligations the system works reasonably well.

But suppose that A does not fulfil the insurance obligation to B. A does not insure at all, or the cover is not comprehensive, or excludes certain risks, or the cover is undervalue and inadequate. The problems begin. If B is vigilant and spots the breach of obligation he can complain and if necessary take remedial action.

The statue provides for a criminal penalty for the criminal offence: does that mean that a civil action for damages is or is not available by reason of the breach and criminal offence? The employer is usually an incorporated company. If the company goes into liquidation can the directors and senior people in the company, for it was they who actually did not fulfil the insurance obligation, be made liable?

Most unfortunately, the statute creates the criminal offence but usually says nothing about whether or not the offence, the illegal or unlawful act, also creates a right and remedy of civil action. When asked about the matter in parliament the minister lamely says that the judges must decide on a sort of case by case method. The judges may find that the statute requiring insurance is for the benefit or protection of a class of persons, the claimant falls within that class, he has suffered injury or loss, he has a civil remedy; or they may not.

Some judges take a somewhat traditional formalistic black-letter law interpretative approach to the wording of the section, as did Lords Carnwath, Mance, and Reed in Campbell v Peter Gordon Joiners Ltd [2016] UKSC 38, [2016] 3 WLR 294, paras 1-24, others take a conceptual functional parliamentary intent social justice approach, as did Lord Toulson and Lady Hale paras 25-49. Campbell reviews all the case law.

Many industrial workers face serious risk of serious injury and even death, e.g. factory workers, construction workers, miners, power station workers, and farm workers. The Factories Acts and the Health and Safety at Work Act 1974 would seem to have been enacted to provide a measure of protection for such vulnerable workers. Though the Health and Safety at Work Act 1974 section 47 as amended and the regulations thereunder do expressly state when an action for civil proceedings may and may not be permitted.

A public sector employer might be expected to exercise a high degree of care and to be particularly concerned to protect the employee, though the risks to which the employee may be exposed are likely to be equally serious in whichever sector, public or private.

The employer must issue a certificate of insurance section 4, display that certificate, and permit inspection by the employees and by the government inspector. It behoves the relevant professional bodies and trade unions to ensure that the employer fully complies.

Suppose the company employer did not insure or did not cover the risk that has materialised, what about the directors? Can the corporate veil be pierced? They are criminally liable if the offence has been committed with their consent or connivance of, or attributed to or facilitated by their neglect of the Companies Act 2006 section 1255(1), and accordingly are or are deemed to be guilty of an offence.

The Supreme Court in Campbell (by majority 3:2) held that on these words, especially 'deeming', no civil liability attached to them. The minority held that the directors were the people in default and the employees were the people in need of protection, and the employees should have had a remedy.

Limited liability for the employing company may be a vital protection for those engaging in business and a helpful protection for the personal assets of the directors and investors. Though employees and pensioned former employees may find themselves in trouble when the company becomes insolvent, as in the recent BHS collapse. The lending banks often take a guarantee or a charge over the personal assets of the directors.

Uninsured driving, which is alarmingly widespread, is in practical terms largely in the hands of the police. In order to protect the public, the Motor Insurers Bureau (MIB) provides a civil remedy, a scheme financed by a levy on all the lawfully insured drivers.

The tenant, or the tenants' association, is entitled within 21 days to a written summary indicating the risks covered, the amount insured and the name of the insurer, or a copy of the policy, and is always entitled to inspect and copy; and there is a right of challenge. As a last resort the matter may be taken to the property tribunal.

A fire broke out in a meter belonging to the electricity company and several properties were damaged. The relevant legislation created a criminal offence for breach of safety rules, but did not create a civil remedy (see Morrison Sports Ltd v Scottish Power UK plc [2010] UKSC 37, [2010] 1 WLR 1934, paras 28-29 and 40). The duty was to the general public, not to certain private individuals.

The claimants were abused children who claimed damages from the local authority for failing to fulfil the statutory duty to protect them. The House of Lords held that whereas as a matter of statutory construction it might be possible to find that parliament had intended to provide an enforceable private remedy for a limited class of persons, in this case the law was intended for the welfare of the public at large, the benefit of society generally, and not for the claimants (X (Minors) v Bedfordshire County Council [1995] 2 AC 633, pp 731C-732B).

Two serving prisoners were each segregated, denied association, allegedly a breach of the prison rules. They claimed damages. The House of Lords held that in any event they had no cause of action, as the Prison Rules were concerned with administration and management and did not give rise to a private civil remedy (R v Deputy Governor or Parkhurst Prison [1992] 1 AC 58).

If the insured person himself is insolvent then statutory provision is made for any benefits received under the policy to be transferred to a third party (Third Parties (Rights against Insurers) Acts 1930 and 2010).

Reform

It is high time that our legislators got to grips with the problem. Every Bill which purports to require A to confer a benefit upon B, as in a duty to insure, and creates a criminal offence for non-compliance, should expressly indicate whether or not a civil remedy is also created, as the case may be; or at the very least indicate the material factors that the judge should take into account in resolving the issue.

This way over a century of tiresome litigation could be terminated. All those involved in the legislative process, the draftsmen, the legislators, the lawyers, particularly the retired law lords, in the House of Lords, the parliamentary committees, the relevant professionals, trade unions and lobbyists, and anyone else with influence, should make a clear specific point about the problem as the Bill goes through parliament.

Alec Samuels is a barrister and former reader at Southampton University