Brumder v Motornet Services and Repairs Ltd [2013] EWCA Civ 195

Court: Court of Appeal

Tag: Duty to exercise reasonable care, skill and diligence (s.174 Companies Act)

Facts: The appellant was the sole director and shareholder of Motornet Service and Repairs Ltd, a company specializing in motor vehicle servicing. The appellant sustained a severe injury when a ramp mechanism in the compressor failed at work. He sought to claim damages from his own company, while Aviva Insurance was the second respondent.

Issue: Whether a sole director and shareholder who suffers personal injury can claim damages from the company when he has breached his own director's duties, and whether the company could only act vicariously through him.

Held: The appellant director was found to have breached his duty under section 174 of the Companies Act 2006 by failing to exercise reasonable care, skill, and diligence. However, no damages were recoverable.

Key Judicial Statement: Beatson LJ remarked: “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… 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.”

💡Leveluplaw: Directors cannot recover damages from their own company for personal injuries caused by breaches of their director's duties. The principle of not benefiting from one's own wrongdoing applies, particularly when the director's breach directly impacts the company.