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Cite as: [2013] 3 All ER 412, [2013] PIQR P13, [2013] 1 WLR 2783, [2013] WLR 2783, [2013] ICR 1069, [2013] WLR(D) 102, [2013] 2 BCLC 58, [2013] EWCA Civ 195, [2013] BCC 381

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		Neutral Citation Number: [2013] EWCA Civ 195
		Case No: B3/2012/1597

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BRIGHTON COUNTY COURT
His Honour Judge Levey

Royal Courts of Justice
Strand, London, WC2A 2LL

14/03/2013

B e f o r e :

LORD JUSTICE WARD
LORD JUSTICE LONGMORE
and
LORD JUSTICE BEATSON
____________________

Between:

	Peter Michael Brumder	Appellant
	- and -
	Motornet Service and Repairs Ltd - and - Aviva Insurance Ltd	First Respondent Second Respondent

____________________

(Transcript of the Handed Down Judgment of
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____________________

Anthony Coleman (instructed by Wannops LLP) for the Appellant
Neil Moody QC (instructed by Greenwoods Solicitors) for the Respondents
Hearing date : 7 February 2013
____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Beatson:

Introduction

The question which falls for decision in this appeal is whether the sole director and shareholder of a company who suffers personal injuries as a result of the breach by the company of an absolute statutory obligation to maintain equipment in efficient working order can bring a claim against the company even though he was in breach of his obligations to the company to exercise reasonable care to enable the company to fulfil that obligation, and the company could only do so vicariously through him.

Mr Peter Brumder, the appellant, is the sole director and shareholder of Motornet Service and Repairs Ltd, a company specialising in servicing vehicles and putting them through their MOT inspections. The company is the first respondent to this appeal. Its insurer, Aviva Insurance Ltd, is the second respondent. On 8 November 2008 Mr Brumder's left ring finger was severed from his hand while he was trying to climb down to ground level from a raised hydraulic ramp in the first respondent's workshop after the compressor in the ramp mechanism failed. An attempt to reattach the finger was unsuccessful. He appeals against the order of His Honour Judge Levey in the Brighton County Court dated 12 June 2012 dismissing his claim for damages for the injuries sustained by him. The learned judge did so "on account of finding that [Mr Brumder] was 100% contributorily negligent".

The judge held:

(a) The first respondent was in breach of its obligation under regulation 5(1) of the Provision and Use of Work Equipment Regulations 1998 SI 1998 No. 2306 ("the 1998 Regulations") to ensure that work equipment "is maintained in an efficient state, in efficient working order and in good repair";

(b) The defect in the compressor was causative of the accident and therefore there was "primary liability" on the part of the first respondent; but

(c) The appellant, who had not given any consideration to health and safety matters in the workshop, including the need to comply with the 1998 Regulations, was responsible for the breach, and 100% contributorily negligent.

In this appeal there is common ground on two matters. The first is that the judge correctly held that the obligation imposed by regulation 5(1) is an absolute and continuing one: see Stark v Post Office [2000] ICR 1013 on the identically worded predecessor to Regulation 5(1) in the 1992 Regulations. The second is that, having made a finding of "primary liability" by the first respondent to the appellant for breach of its duty under regulation 5(1), in the light of Pitts v Hunt [1991] 1 QB 24 and Anderson v Newham CFE [2002] EWCA Civ 505, the finding of "100% contributory negligence" was wrong in principle. This is because, as Beldam LJ stated in Pitts v Hunt at [1991] 1 QB 24 at 48, to hold that a person is "himself entirely responsible for the damage effectively defeats his claim" and because apportionment under section 1(1) of the Law Reform (Contributory Negligence) Act 1945 ("the 1945 Act") presupposes fault on both parties.

The positions of the parties as to what follows, however, differ radically. Mr Coleman, on behalf of the appellant, submitted that the first respondent was liable and there should either have been no apportionment or only a modest deduction for contributory negligence on the part of the appellant. He maintained that the finding of 100% contributory negligence was wrong on the facts, and that the judge was not entitled to conclude that the accident would not have occurred had appropriate health and safety measures, in particular an assessment of the risk and routine inspection of the equipment, been undertaken.

Mr Moody QC (who did not appear below), on behalf of the respondents, relied on the findings made by the judge about the absence of a risk assessment which it was the appellant's responsibility to carry out, the appellant's abrogation of his responsibilities as owner and director of the company for health and safety matters, and the fact that the compressor was not regularly serviced or inspected. He submitted that these had causative potency and showed blameworthiness.

More fundamentally, Mr Moody submitted that the consequence was that the first respondent's breach of statutory duty was wholly caused by and co-extensive with the appellant's own failings. He maintained that it followed from this that the judge was wrong to find the first respondent was primarily liable for breach of Regulation 5(1), the questions of contributory negligence and apportionment did not arise, and the judge should have dismissed the claim. This is one of two alternative grounds for upholding the judge's order in a respondent's notice. The other ground, that the judge should have held that the first respondent did not owe the appellant a duty under the Regulations, is no longer pursued.

The key question is whether this case falls directly or by analogy within the principle and defence identified in Ginty v Belmont Building Suppliers Ltd [1959] 1 All ER 414 by Pearson J, as he then was, and considered with approval by the House of Lords in Boyle v Kodak [1969] 1 WLR 661, at 666F, 669, 670F, 671 and 672E, to which I will return. At this stage it suffices to refer to the statement of Lord Reid in Boyle v Kodak (at 667) summarising the effect of the authorities. He stated that:

"… [O]nce the [claimant] has established that there was a breach of an enactment which made the employer absolutely liable, and that breach caused the accident, he need do no more. But it is then open to the employer to set up a defence that, in fact, he was not in any way in fault, but that the [claimant] employee was alone to blame."

If that defence applies either directly or analogically in the circumstances of this case, that is the end of the matter and the appeal must be dismissed. If it does not, the question is whether any part of the appellant's damage resulted from his own fault, and, if so, the extent to which the appellant's damages should be reduced under the 1945 Act.

The background and the judge's findings

I first summarise the events on Saturday 8 November 2008, as to which there was no significant dispute. They are dealt with in the judgment at [5] – [6], and [29] – [31]. On that day, Mr Lewis, an experienced mechanic, to whom the appellant had delegated the running of the first respondent's workshop, was carrying out an MOT test on a Ford Transit van. A man who he had arranged to help him was late. The appellant, who was at his other business a few hundred yards up the road, responded to a telephone request by Mr Lewis to assist. After he got to the workshop, the van was raised on a hydraulic ramp to a height of some six feet above ground. The appellant was in the van operating foot and other controls. When this part of the work was completed and Mr Lewis tried to lower the ramp, he was unable to do so because the compressor in the ramp mechanism failed. After some ten to fifteen minutes unsuccessfully attempting to lower the ramp, Mr Lewis brought a step ladder for the appellant to use to climb down to ground level from the van. As the appellant tried to get onto the ladder, he lost his footing and tried to grab a girder. His left ring finger looped over the screw in the girder and held fast, and his weight caused the finger to be torn off: see judgment at [5]. There are no findings that are critical of the appellant's conduct on 8 November, including using the ladder to climb down after the compressor failed.

Soon afterwards, Mr Lewis found that the cause of the failure was that the reset button in the compressor had triggered as a result of a failed fuse and was able to restore power and complete the MOT of the van: judgment [31] and [34]. The van's MOT took seventy minutes, whereas the normal time for an MOT is about forty-five minutes. There was no evidence as to what caused the failure of the fuse: judgment, [35]. The failure of the compressor led directly to the accident: judgment, [53].

I now summarise the material parts of the background. The appellant set up the first respondent company in or about January 2006 with a Mr Hounsome. He contributed his business experience of the motor trade and a significant part of the capital. Mr Hounsome, who was an MOT technician, contributed his workshop expertise: judgment [17]. There had been a problem with the ramp in early 2006, shortly after it had come into service, but there had been no further problems with it between that time and the accident in November 2008. At some stage in 2006, Mr Lewis was taken on to assist in the workshop. The judge found that at that time, the directors, the appellant and Mr Hounsome, had joint responsibility for health and safety: judgment [40]. Mr Hounsome left the company in the early part of 2008.

The appellant delegated the running of the workshop to Mr Lewis, and his management of workshop routines, the MOT side of the business, and workshop matters was minimal: judgment, [23] and [40]. The judge found that the appellant did not delegate the running of the business or the company to Mr Lewis: judgment, [25] and [40]. He also found that the appellant had not discussed health and safety responsibilities with Mr Lewis at all: judgment, [23]. Because the appellant did not devolve the running of the business or the company to Mr Lewis after Mr Hounsome left the company, the judge found that "the responsibility for health and safety…fell upon [him] as the sole director of [the] company": judgment, [40].

The appellant was not aware of the Health and Safety Regulations, did not consider them, did not carry out a risk assessment, and did not consider or seek advice in relation to those issues: judgment, [41], and see also [36] – [37]. The appellant's evidence was that he did not think it was necessary for him to familiarise himself with the Health and Safety Regulations because he thought that was Mr Lewis's responsibility: judgment, [23]. The judge found that, while the appellant could have instructed Mr Lewis to consider health and safety issues and to take on responsibility for administering them within the workshop, and could have instructed him to carry out risk assessments, and indeed assumed that this was Mr Lewis's responsibility, he did not discuss these matters with Mr Lewis: judgment, [40], and see also [23]. He stated (judgment, [40]) that he was not satisfied that, without such a specific conversation, Mr Lewis acquired any responsibility for those issues, and the ultimate responsibility therefore remained with the appellant as the director of the company.

The judge found that the process in relation to health and safety within this workshop was a reactive one rather than a proactive one anticipating difficulties. He stated that maintenance of the ramp and compressor was also reactive although there were some items in the workshop which VOSA, the agency which runs MOTs, required to be inspected and maintained regularly, and which were so inspected and maintained. There was no maintenance contract for the compressor, and no regular inspections or servicing was carried out on it: judgment, [36].

As to whether he should pierce or lift the corporate veil because the company was wholly owned by the appellant who was its sole director, the judge referred to Stark v Post Office [2000] ICR 1013, Ben Hashem v Shayif [2008] EWHC 2380 (Fam), Banjee v Parkside Hotels, Central London County Court, 19 December 2006, and Perry v West Midlands Precision Engineering Ltd, Court of Appeal, 4 November 1998. He concluded (judgment, [53]) that this was not a case where he should disregard the fact that the respondent company was a separate entity and dismiss the claim because the appellant was the director and it was his fault.

The judge accepted Mr Coleman's submissions (judgment, [49] and [54]) that "once there is a failure effectively there is an absolute obligation". He also accepted Mr Coleman's submissions as to the process for the court. He stated he should first consider primary liability, and then consider the question of blame. As it was plain that the compressor did malfunction, he stated there was primary liability by the first respondent to the appellant.

As to whether the appellant was contributorily negligent, the judge found (judgment, [55] and [56]) that there had been no risk assessment, that it was the appellant's responsibility to carry out such an assessment, and (judgment, [58]) that the compressor was not regularly serviced or inspected. He stated:

"This was an event which had happened before, albeit in 2006, the ramp had been stuck in the air and so this was something he was aware of indeed it is pleaded in the statement of claim that it is foreseeable and so it would have been entirely within [the appellant's] ability had he thought about it to consider a safe way of getting out of the cab of a vehicle stuck on the ramp." (judgment, [57])

He also referred to the fact that he did not know what the defect actually was. He stated that:

"… therefore I am not satisfied that it is a defect that could not have been detected. There is no evidence that this was the case, and that therefore is a responsibility that falls upon the [appellant's] shoulders." (judgment, [58])

The judge concluded (judgment, [59]) that the appellant:-

(1) "abrogated his responsibilities as owner and director of this company";

(2) "… paid no attention to health and safety issues. He made no attempt to do so and in my view his approach was…cavalier as far as health and safety issues were concerned. He simply disregarded them…"; and

(3) "[I]n those circumstances, given that I cannot be satisfied that a defect in the compressor would not have been revealed on regular inspection, given that there was no attempt at any stage to consider the risk of a vehicle being stuck on the ramp, in those circumstances I am satisfied that the claimant was responsible for the breach of the Regulations ultimately, and I therefore make a finding of 100% contributory negligence, and the claim is therefore dismissed."

Discussion

There is no challenge to the judge's findings that the appellant, as a director, should have been but was not aware of his duties and responsibilities in relation to health and safety matters, and in particular the need to comply with statutory regulations including Regulation 5(1) of the 1998 Regulations. The health and safety measures considered by the judge were a risk assessment following the 2006 incident and routine inspection and maintenance of work equipment. There is also no challenge to the judge's findings that the appellant had not considered health and safety matters at any time between the setting up of the business in January 2006 and the accident in November 2008, and that, had he complied with his duties and responsibilities as to health and safety matters, he would have addressed the need for maintenance and servicing of all work equipment within the workshop, including the ramp and the compressor, and a risk assessment would have been prepared regarding the use and operation of the ramp and the compressor.

Mr Coleman, however, submitted that, in the light of the size of the company, the appellant was not obliged to carry out repeated risk assessments after Mr Hounsome left or (see Management of Health and Safety Regulations 1999 SI 1999 No. 3242, Regulations 3(6) and 5) record the arrangements for planning, controlling and reviewing preventive and protective measures. He was not a mechanic and was entitled to assume that the measures put in place by Mr Hounson before he left were adequate.

Mr Coleman also submitted that, in the light of the evidence, the judge was not entitled to conclude (judgment [57] – [59], set out at [17] – [18] above) that the accident would not have occurred had the health and safety measures identified been implemented. In his grounds and written submissions he contended that, in concluding that the accident would not have occurred, the judge had effectively reversed the burden of proof.

Mr Coleman maintained that in concluding, in the absence of evidence from the respondents, that he was not satisfied that the defect with the compressor would not have been apparent on routine service or inspection, and could not be detected, the judge effectively found that the accident would not have occurred had the health and safety measures been implemented when, on the evidence before him, the overwhelming likelihood was that the accident would have happened in any event. He also argued that the judge ought to have attached considerable weight to the fact that the appellant is not, and has never professed to be, a mechanic or have any experience or qualifications in vehicle repair and MOT testing, or that Mr Lewis was not perfectly capable and competent in the day-to-day running of the workshop.

The language of what was an ex tempore judgment could have been clearer, and Mr Moody accepted that the judge did not make an unequivocal finding that, had the compressor been regularly inspected, the defect in it would have been revealed. He, however, submitted there was a clear finding at paragraphs [57] and [58] (set out at [17] above) that, in the light of the 2006 incident, had the appellant thought about it, he had the ability to consider a safe way of getting out of a vehicle stuck in an elevated position on the ramp and would have done so. I accept this submission. There may indeed have been no need for "repeated" risk assessments. But I have concluded that, since in 2006 the ramp had been stuck in the air, a matter which the judge found the appellant was aware of and had pleaded was a foreseeable event, the judge was entitled to conclude that there should have been an assessment which covered inter alia the risk of another failure of the equipment leaving a person stranded on the raised ramp, and, had there been one, the accident would not have occurred.

The question whether the appellant's damage resulted from his own fault is relevant both to the defence identified in Ginty v Belmont Building Suppliers Ltd. [1959] 1 All ER 414 and Boyle v Kodak [1969] 1 WLR 661, to which I referred at [8] above, and to the question of apportionment under the 1945 Act. As to the defence, it applies where the act or omission of the claimant himself has the legal result that the defendant is in breach of a statutory duty. Ginty v Belmont and Boyle v Kodak both involved the Building (Safety, Health and Welfare) Regulations 1948 ("the 1948 Building Regulations"). Those Regulations were held to impose an absolute duty on both employer and employee to comply with their requirements so that in those cases both employer and employee were in breach of duty under the same Regulations: see [1959] 1 All ER at 420I, and [1969] 1 WLR at 665. The question is whether the principle underlying the defence to the employer's liability under statutory regulations applies directly or analogically to provide a defence where the claimant is in breach of a duty, but not the same duty as the defendant has breached.

Ginty v Belmont concerned the prohibition from working on asbestos roofs without using boards, which bound both employers and employees. Belmont was to strip an asbestos roof at a factory owned by Pirelli and replace it with new sheeting. Belmont's instructions to its employees including Mr Ginty were that they were not to work on roofs without boards. The ladders and boards for the job were to be supplied by Pirelli, but the responsibility under the regulations for providing them remained with Belmont. Pirelli's employees told Belmont's men who had come to do the job that the roof was unsafe, showed them a variety of boards, and told them to help themselves to what they wanted. The next day the men were seen working on the roof without boards and Pirelli's employees left two boards where the men working on the roof could see them. The men knew of the prohibition in the regulations but did not use the boards. Several days later Mr Ginty fell through the roof, and was seriously injured. It was held that, although both he and Belmont were in breach of their duties under the 1948 Building Regulations, he was not entitled to recover damages because the fault was his, and there was no fault on the part of Belmont which went beyond or was independent of his own omission.

Pearson J stated (at 423) that "[t]he actual wrongful act was the [claimant's] wrongful act, but in one aspect it constitutes a breach by himself and in another aspect it constitutes a breach by his employer". In such a case he stated that "the important and fundamental question…is not whether there was a delegation, but…whose fault was it?" He stated (at 424) that "if one finds that the immediate and direct cause of the accident was some wrongful act of the man, that is not decisive", and one had to inquire:

"whether the fault of the employer under the statutory regulations consists of, and is co-extensive with, the wrongful act of the employee. If there is some fault on the part of the employer which goes beyond, or is independent of the wrongful act of the employee, and was a cause of the accident, the employer has some liability."

In Boyle v Kodak a man who was going up a ladder to lash it to the top of an oil storage tank fell from a height of some 20 feet. Regulation 29(4) of the 1948 Building Regulations provided that "every ladder shall so far as practicable be securely fixed so that it can move neither from its top nor from its bottom points of rest". As the injured man could have lashed the ladder to the rail at the top of the tank by using a staircase running round the outside of the tank rather than mounting the ladder before it had been fixed, there was a breach of that provision.

I have set out at [8] the passage from Lord Reid's speech summarising the effect of the authorities. Earlier (at 665-6), he stated:

"The doctrine of absolute liability, which was invented by the courts, can lead to absurd results when coupled with the employer's vicarious liability. It would be absurd if, notwithstanding the employer having done all he could reasonably be expected to do to ensure compliance, a workman, who deliberately disobeyed his employer's orders and thereby put the employer in breach of a regulation, could claim damages for injury caused to him solely by his own wrongdoing. So the courts have quite properly introduced a qualification of the employer's absolute liability. A principle of law has been established that, although in general the employer is under absolute liability in respect of such a breach, the employer may have a defence to an action against him by an employee who is also in breach."

Lord Diplock (at 672) stated:

"The employer's duty to comply with the requirements of the Regulation differs from that of his employee. The employer, at any rate when he is a Corporation, must needs perform his duty vicariously through his officers, servants, agents or contractors; but he does not thereby rid himself of his duty. He remains vicariously responsible for any failure by any one of them to do whatever was necessary to ensure that the requirements of the Regulations were complied with; and among those for whose failure he is prima facie vicariously liable is any employee who is himself under a concurrent statutory duty to comply with those requirements. The employee's duty, on the other hand, is in respect of and is limited to his own acts or omissions. He is not vicariously liable for those of anyone else."

As to the position of an employer who is sued by an employee where the non-compliance with statutory duty was also a breach of the statutory duty by the employee himself, Lord Diplock stated:

"The plaintiff establishes a prima facie cause of action against his employer by proving the fact of non-compliance with the requirement of the Regulation and that he suffered injury as a result. He need prove no more…[I]f the employer can prove that the only act or default of anyone which caused or contributed to the non-compliance was the act or default of the plaintiff himself, he establishes a good defence…To say 'You are liable to me for my own wrongdoing' is neither good morals nor good law." (672-673)

The court has taken a strict approach to the availability of the defence. The onus is on the employer to prove that he did all he could to ensure compliance with the duty. Only if the employer does, will he have a defence against the injured employee whose act or omission put the employer in breach of the Regulation. In Boyle v Kodak the employer had not given the workman an order forbidding him from using the ladder before it was lashed, and it was held that the defence was not available. In Anderson v Newham CFE [2002] EWCA Civ 505 at [11] Sedley LJ stated that Boyle v Kodak showed how high a standard of proof was required to shift the entire blame to the employee.

As to what is required, Lord Reid stated ([1969] 1 WLR at 667) that it is not necessary for the employer to lead evidence in order to set up the defence. An employer may be able to prove that he was not in any way at fault, but the employee was alone to blame from the evidence put before the court by the employee. If evidence has not been given, however, the employer "cannot complain if…the most favourable inferences are drawn from [the employee's] evidence of which it is reasonably capable". In Boyle v Kodak the failure of the employer to instruct the employee not to use the ladder before it was lashed was fatal to the defence. There was no evidence entitling the finder of fact to conclude that the employee would have disobeyed any instructions not to use the ladder before it was lashed. It was inferred that, had the employer given such instructions, the employee would have obeyed them.

Mr Coleman pointed to the fact that in Ginty's case and Boyle v Kodak both the employer and the employee were in breach of duty under the same Regulations, whereas in the present case the duty under Regulation 5(1) of the 1998 Regulations lay only on the first respondent company and not on the appellant. Despite that distinction, he accepted that, if the breach of Regulation 5(1) of the 1998 Regulations had been the sole cause of the appellant's accident and the entire fault lay with him, the principle in Boyle v Kodak meant that the appellant would not be entitled to claim. He was right to do so. Although most of the cases are ones in which both the employer and the employee are under the same statutory duty, but the only reason the employer is in breach of the duty is because of the actions of the employee, there are examples of an employer escaping liability where the duty the employee has breached is different from and in some sense independent of the duty the employer has breached: see e.g Sherman v Nymboida Collieries Pty (1963-64) 109 CLR 580 per Windeyer J at 590 – 591 (the act of the employee was the immediate cause of the accident).

Mr Coleman, however, submitted that, on the facts of the present case, the principle in Boyle v Kodak could not be applied. First, the appellant could not be said to have been the sole cause of his accident because, in the light of the absolute nature of liability under Regulation 5(1), there is no necessary connotation of fault or blameworthiness on the part of any particular individual.

Secondly, Mr Coleman did not accept that the appellant was the alter ego of the company or, absent an assumption of responsibility by him, that he was subject to the duty contained in Regulation 5(1).

Thirdly, the evidence all pointed to the fault in the compressor having occurred for the first time on, and not before, 8 November 2008, in which case no earlier inspection of the compressor would have revealed any problem. Mr Coleman submitted that the burden rested on the respondents to adduce evidence to prove the contrary, which they did not do. He argued that the judge attached insufficient weight to the fact that there had been no problem with the ramp since the incident in early 2006 and to Mr Lewis's unchallenged evidence about his checking of the compressor, and in particular the oil and water levels in it. His evidence was that he checked it every three weeks or so, and there had been no previous problems with it. He stated that, had he seen a problem, he would have dealt with it, and the appellant would readily have authorised any replacement or repair that he recommended. Mr Coleman also submitted that the judge attached insufficient weight to Mr Lewis's unchallenged evidence that the likely cause of the compressor failing was the size and weight of the Ford Transit Van at the time of the accident.

The question whether this defence does not apply in circumstances when the person who is injured and the defendant are not both in breach of duty under the same Regulations, or where the person who is injured has not disobeyed express instructions by the employer, which disobedience puts the employer in breach of the duty under the Regulations which is then relied on in the claim against the employer, depends on the principle underlying the defence. A number of explanations and justifications were considered by Pearson J in Ginty v Belmont Building Suppliers Ltd. He rejected (at 425) the theory that the performance of the employer's statutory duty had been delegated to the employee, and indicated that he considered that it was unsound to explain the defence as founded on the principle ex turpi causa non oritur actio (no action may be founded on illegal or immoral conduct).

Pearson J identified three explanations which he considered justified the defence. The first is the common law principle that a person cannot derive any advantage from his own wrong which, in this context, meant that a person cannot by his own wrongful act impose on his employer the liability to pay damages to him.

The second, which Pearson J considered is closely allied to the first, is the effect of a claimant's own negligence at common law; that is before the passing of the 1945 Act. At common law, if an accident was caused wholly or in part by a person's own negligence he was barred from recovering anything. Pearson J stated that, on the facts of Ginty's case, the accident was caused wholly by one wrongful act which constituted, in one aspect, a breach of obligation by the employee, and in another aspect a breach of obligation by his employer. Although one could say that the accident was wholly caused by the fault of the employee, one could also say that the accident was wholly caused by the fault of the employer. That, he considered, took such a case outside the scope of the 1945 Act and required the consideration of common law principles to see what the position is. He stated "if one does that, the common law principle is still valid to this extent, that, if the accident is wholly caused by the [claimant's] own fault, he is disentitled to recover".

The third justification is the need to avoid circuity of action, which would arise because if the employee was entitled to recover damages from his employer, the employer would reply that the employee owed a duty to his employer, and was therefore entitled to recover damages against the employee which would be equal in amount to the damages which the employee was supposedly entitled to recover. Pearson J described circuity as existing where the employee is entitled to recover damages for breach of the statutory obligation against the employer but the employer is entitled to recover an equal sum in damages from the employee for (in that case) breach of contract. He stated that "if that were the position, the litigation would go round in a circle, and for that reason there is, in my view, a valid plea of circuity of action".

Ginty's case and Boyle v Kodak concerned an employee claimant, and not a claimant who is the employer company's director, let alone its sole director and shareholder. In the circumstances of the present case, moreover, as the corporate first respondent who is sued can only act through its sole director, the appellant, there is no question of the director/claimant disobeying the company's instruction. The fact is that the director's acts and omissions constitute the company's breach of its duty under the Regulations. Can the Ginty/ Boyle v Kodak defence apply in this situation, and, if it can, how is it to be explained?

The policy reasons for the absolute duty on employers in the regulations are to relieve injured employees from the need to show fault, and therefore to protect them, as the weaker party in the relationship, and to encourage high standards of compliance by those responsible for the performance of the company's duty. The position of an employee vis a vis his employer is also a reason for a strict approach to the scope of the defence and (see [31] – [32]) for drawing as favourable an inference as is possible in favour of the employee. That does not apply to a director/claimant who is the only person through whom the company can act. Those considerations are strong pointers to the defence applying in the case of a director/claimant in the circumstances of this case.

Mr Coleman focussed on the absolute nature of the first respondent's duty under the 1998 Regulations and (notwithstanding the concession I have referred to at [33]) the fact that the duty lay only on the first respondent and not on the appellant. His submission that the defence cannot apply where the liability of the corporate defendant is absolute because there is no necessary connotation of fault or blameworthiness on the part of any particular individual ignores the fact that, while there is no "necessary" connotation of fault or blameworthiness on the director/claimant, that person's conduct may involve a breach of the director's duty to exercise reasonable care in relation to the corporate first respondent's statutory obligations under the Regulations. His submission, if accepted, treats the director/claimant's conduct in the same way, whether or not he is in breach of duty, and however egregious the breach.

Mr Coleman's reference to the need for an assumption of personal responsibility by a director and its absence in this case has similarities to the requirement discussed inter alia in Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 and Standard Chartered Bank v Pakistan National Shipping Corp. (No. 2) [2002] UKHL 43 at [21] – [22] per Lord Hoffmann. Those cases and the requirement, however, concern what would be needed to make a director personally liable to a third party, not to the company itself. In the present case, even if the appellant is not personally obliged under regulation 5(1) of the 1998 Regulations, he is under other duties to the first respondent in his capacity as its director. If a director/claimant is not in breach of a relevant duty to the defendant company, I do not consider that the company can invoke the Ginty/ Boyle v Kodak defence. But, what if he is in breach of a relevant duty to the defendant company?

In this context the most likely candidate for a relevant duty is the one I have mentioned; the appellant's duty to the first respondent to exercise reasonable care, skill and diligence in relation to the first respondent's statutory obligations including those under the 1998 Regulations. The duty of a director to exercise reasonable care, skill and diligence was developed at common law but is now contained in section 174 of the Companies Act 2006 ("the 2006 Act"). Although originally framed in highly subjective terms (see Re City Equitable Fire Insurance [1925] Ch 407 at 427 per Romer J) it had become more objective: see, for example, Re D'Jan of London Ltd [1994] 1 BCLC 561.

The definition in section 174(2) of the 2006 Act builds on the formulation in section 214(4) of the Insolvency Act 1986 which Hoffmann LJ stated in Re D'Jan of London Ltd. accurately stated the common law duty. It is in two parts. The first part, in section 174(2)(a), is that a director must exercise the care, skill and diligence that would be exercised by a reasonably diligent person with "the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company". This objective test sets the floor. The second part of the definition, in section 174(2)(b), will displace it where the particular director under consideration has greater knowledge, skill and experience than may reasonably be expected.

Where, as is the position of the appellant, a director/claimant has paid no attention whatsoever to health and safety issues, and has abrogated his responsibilities as owner and director of the company for them, he will be in breach of his duty qua director under section 174(2)(a) of the 2006 Act. The fact that the appellant was not a mechanic, or skilled in operating a workshop and that there were other people who were more closely involved in the setting up and day-to-day running of the workshop do not, given the findings of the judge, mean that he can satisfy the standard required in section 174.

The consequence of this is that the appellant is a wrongdoer and falls within the first of Pearson J's explanations or justifications for the defence; the common law principle that a person cannot derive any advantage from his own wrong. The common sense proposition in Lord Diplock's speech in Boyle v Kodak that "to say 'You are liable to me for my own wrongdoing' is neither good morals nor good law" appears to me to be applicable where the director/claimant has paid no attention whatsoever to health and safety issues, and in the judge's words (judgment, [59]) had "abrogated his responsibilities as owner and director" of the company. I do not consider that it lies in the mouth of a claimant who is the defendant's sole director and shareholder, and through whom the company must act, to assert that the company has not proved that it has done all it could to ensure compliance when it is only through the claimant director's acts that the company can act.

As a general rule the remedy for breach of a director's duty of care is compensation for the harm caused to the company by the director's negligence. That would have been the position in this case had the person injured been an employee or another person, for example a visitor who was assisting Mr Lewis. The harm to the company would in principle be the damages payable to the injured person and the company would in principle be able to recover that sum from the defaulting director. Here, the injured person was also the director. Although the company's duty is absolute, whereas the director's is to exercise reasonable care, skill and diligence, the damages payable by the director to the company will be the sum which the injured director/claimant would in principle be able to recover from the company.

Unless there is a particular policy reason which precludes the company from suing the director, the employer would be entitled to recover damages against the director in the sum which the director was supposedly entitled to recover against the employer. In Safeway Stores Ltd v Twigger [2010] EWCA Civ 1472 [2011] Bus LR 1629 this Court held that the policy of the Competition Act 1998 to impose a personal sanction on a firm which could not be passed on to individuals precluded the company seeking an indemnity from directors whose actions caused the company to be subjected to a regulatory sanction under the Act.^[1]

There is in my judgment no such precluding policy in the situation before us and no reason for protecting a director who, like the appellant in this case, has made no efforts in respect of the company's health and safety duties, in a situation where it is only that person who is able to act on behalf of the company. Whether or not there could be a valid plea of circuity of action, and whether or not this situation is provided for by provisions for set-off and counterclaim, in this situation, if the director/claimant was entitled to sue, it would not be inaccurate to describe the litigation, as Pearson J did in the passage set out at [40] as going "round in a circle".

Does according the company the Ginty/ Boyle v Kodak defence involve an impermissible piercing or lifting of the corporate veil? Where the corporate veil is to be pierced or lifted, it is generally necessary (see VTB Capital plc v Nutritec International Corp [2013] UKSC 5 per Lord Neuberger P. at [118] ff) "to show both control of the company by the wrongdoer(s) and impropriety, that is, (mis)use of the company by them as a device or façade to conceal their wrongdoing … at the time of the relevant transaction(s)". Those requirements are not present in this case. But the proposition in paragraph [48] does not involve piercing or lifting the corporate veil.

It is true that it is the attribution of the omissions of the director who is the only person who can act for the company which puts the company in breach of its absolute obligation under regulation 5(1) of the 1998 Regulations. But the breach that is relevant for the purposes of the proposition in [48] above is breach of the different and personal duty the director owes to the company qua director under section 174 of the 2006 Act. Here the director is not personally liable for breach of the absolute obligation in regulation 5(1). He is personally liable for his breach of the qualified duty to exercise reasonable care now contained in section 174. The position is similar to that in Lee v Lee's Air Farming Ltd [1961] AC 12 where it was stated (at 26) that it is a logical consequence of the decision in Salomon v Salomon & Co [1897] AC 22 that one person may function in dual capacities and thus, in that case, as agent for the company, negotiate a contract for services between the company and himself. The decision in Ben Hashem v Shayif [2008] EWHC 2380 (Fam) referred to by the judge and that in Petrodel Resources Ltd v Prest and others [2012] EWCA Civ 1395 in our bundle of authorities, both of which concerned whether a sole or controlling shareholder had an interest in property and shares held by the company, are not in point.

This, in one sense, is an extreme case. I have suggested that, where a director cannot be said to be in breach of his duty under section 174, the position would (absent breach of another relevant duty) be different. What of a situation in which a director/claimant has made efforts to ensure the company complies with its health and safety obligations but the company nevertheless is found to have breached them and the director suffers injury? Whether the director will be in breach of his duty under section 174 of the 2006 Act is an intensely fact-specific question to which it is not necessary to give an answer in this case.

I observe only that the statutory formulation in section 174 of the 2006 Act recognises that there will be variations between different types of directors and between different types and sizes of company. Directors are permitted to engage in substantial delegation of management functions to non-Board employees, just as they were at common law: see Re City Equitable at page 429. Directors are not, however, permitted to escape from being in a position to guide and monitor management and from "the duty to supervise the discharge of the delegated functions": Re Barings plc (No. 5) [2000] BCLC 433, 489 approved by the Court of Appeal at 536, and Equitable Life Assurance Society v Bowley [2003] EWHC 2263 (Comm) at [41]. In the latter case Langley J stated that the law as to the extent to which non-executive directors may be able to rely on the executive directors and other professionals to perform their duties is in a state of development and is "fact sensitive". One factor may (see Gower & Davies, Principles of Modern Company Law (8^th ed), at §16-34) be "the quality of the internal controls". In this case, where there was no attempt by the appellant to enable the company to fulfil its health and safety obligations, even by expressly delegating them (subject to appropriate supervision) to Mr Lewis, such considerations are not applicable.

For these reasons I have concluded that the first respondent was entitled to rely on the Ginty/Boyle v. Kodak defence. There is therefore no need to consider the extent of fault and the question of apportionment under the 1945 Act. I have stated at [23] that the judge was entitled to find that there should have been an assessment which covered inter alia the risk of another failure of the equipment leaving a person stranded on the raised ramp, and, had there been one, the accident would not have occurred. Had it been necessary to consider apportionment, for the reason underlying that finding the appellant was predominantly to blame for the accident.

The Respondent's Notice should be upheld and the claim dismissed, albeit as a result of different reasoning to that of the judge.

Lord Justice Longmore:

On the findings of the judge, when the accident to the claimant occurred, the claimant was the sole director and shareholder of the defendant company and was the person through whom the company discharged its health and safety obligations. The claimant nevertheless had a "cavalier" approach to health and safety and had made no arrangements for risk assessments or for regular inspection and maintenance of either the ramp (which was itself still under warranty) or the compressor in which the fault was found to have been. In these circumstances can the director who was responsible for the fulfilment of the company's (absolute) obligations as to maintenance, successfully sue the company as his employer for breach of that (absolute) obligation?

To my mind the answer to that question is No. In Boyle v Kodak [1969] 1 WLR 661 Lord Reid pointed out that the doctrine of absolute liability can lead to absurd results when coupled with the employer's vicarious liability. He continued (page 665 H):-

"It would be absurd if, notwithstanding the employer having done all he could reasonably be expected to do to ensure compliance, a workman, who deliberately disobeyed his employer's orders and thereby put the employer in breach of a regulation, could claim damages for injury caused to him solely by his own wrongdoing. So the courts have quite properly introduced a qualification of the employer's absolute liability. A principle of law has been established that, although in general the employer is under absolute liability in respect of such a breach, the employer may have a defence to an action against him by an employee who is also in breach."

He then referred to Mainwaring v Billington [1952] 2 All ER 747 and quoted Morris LJ in this court as saying (inter alia):-

"I would deem it incongruous and irrational if, on the facts as found by the learned judge, the plaintiff could, in effect, successfully say to his employer: 'Because of my disregard of your reasonable instructions I have brought about the position that you are in breach of statutory obligations, and so I claim damages from you because of such breach'."

The present case does not concern disobedience to express instructions but rather a failure to have regard to one of the most important duties a director has to perform viz, to look after the health and safety of the company employees. No instructions to that effect are necessary; every director must be aware of that duty.

The Provision and Use of Work Equipment Regulations 1998 impose an absolute obligation that machinery in the workplace is to be adequately maintained. I understand the policy behind the imposition of the absolute obligation primarily to be, as Beatson LJ has explained, to protect the weaker party in the employer/employee relationship but also to encourage the highest standards of compliance on the part of the directors and others responsible for the performance of the company's absolute obligation. If the very director responsible for performing the company's obligation can himself sue the company for breach of that obligation, that policy will be significantly undermined.

For these reasons I agree that the Respondents' Notice should be upheld and that the claim should be dismissed.

Lord Justice Ward:

I agree.

Note 1 Rolls & Stone v Moore Stevens [2009] UKHL 39 is different because it concerned the ability of a one man company to sue a third party, an auditor who failed to spot a letter of credit fraud by the company’s controlling director. It is also more complicated because of the insolvency of the company. A majority held the controller’s fraud was to be attributed to the company and was the company’s fraud and applied the ex turpi principle to bar the company from recovering compensation from the consequences of its own illegal conduct [Back]