Parent company liability for subsidiary’s breaches revisited

In the recent decision of Thompson v The Renwick Group plc [2014] EWCA Civ 635, the Court of Appeal has returned to the subject of parent company liability in negligence for injuries caused to the employee of a subsidiary. Its ruling reiterates that, although such matters are ultimately fact dependent, the imposition of a duty of care in such cases will require a claimant to rely on more than general manifestations of a group identity.

Introduction: the decision in Chandler v Cape

In 2012 the Court of Appeal, in its decision in Chandler v Cape [1], found that a parent company owed a duty of care to an employee of one of its subsidiaries to protect him from personal injuries suffered in the workplace.

That decision was noteworthy as being one of the first times that such a duty has been established under English law. In Chandler, however, the Court of Appeal was clear that the case did not establish any principle to the effect that a parent company will automatically owe a duty of care to parties affected by the conduct of its subsidiaries by virtue of it simply being a parent company.

Instead, whether such a duty would be found to exist depended entirely on whether the degree of the parent’s involvement justified such a result. In Chandler, the Court of Appeal stated that circumstances in which this would be the case included (but were not limited to) where: (i) the business of the parent and subsidiary were in a relevant respect the same; (ii) the parent had, or ought to have had, superior knowledge on some relevant aspect of health and safety in the particular industry; (iii) the subsidiary's system of work was unsafe as the parent company knew, or ought to have known; and (iv) the parent had known or ought to have foreseen that the subsidiary or its employees would rely on its using that superior knowledge for the employee's protection.

In Chandler those conditions were met as, amongst other things, the parent company had maintained control over aspects of the asbestos business carried out by its subsidiary (exposure to asbestos dust having caused the relevant injury to the claimant). For example, the parent employed a group medical adviser and a chief scientist/chemist who dealt with the handling of asbestos on a group-wide basis.

In Thompson, by contrast, the facts relied upon by the claimant were much more general manifestations of a group identity.

Thompson: the facts & the alleged duty of care

The claimant, Mr Thompson, had contracted pleural thickening as a likely result of exposure to asbestos dust whilst moving asbestos that was stored in his employer’s warehouse. The claimant worked for a haulage company, “AW”, which was taken over by “DH” (and from that point the claimant was employed by DH). DH was a subsidiary of the defendant and the defendant, in turn, acted as a holding company.

The claimant sued the defendant plc for compensation as neither AW nor DH were covered by insurance. He claimed that the defendant had been in breach of a direct duty of care owed to him to prevent such injuries.

Before the Court of Appeal, two discrete bases were relied upon by the claimant in support of this argument. First, he relied on the appointment by the defendant of a director to DH who had taken some responsibility for health and safety at DH. Second, the claimant pointed to other factual links between the defendant and DH such as (i) common paperwork being used within the group, (ii) an incident involving the provision of a taxi by the defendant to return the claimant and other colleagues home (iii) the provision of a lorry for the claimant to drive which was in the defendant’s livery and (iv) various other incidents of general co-operation/collaboration between subsidiaries of the defendant (such as drivers from one picking up delivery loads designated for another, and the eventual consolidation of a number of subsidiaries’ activities onto one site).

Before the County Court, the judge found in favour of the claimant’s argument that the relevant duty of care existed; his decision being based on the appointment by the defendant of the director to DH.

Court of Appeal’s decision

The Court of Appeal allowed the defendant's appeal. First, it held that the county court judge had been incorrect to find that the mere appointment of the director by the defendant could, without more, give rise to a duty of care on its part in respect of health and safety matters at DH. In such circumstances the director, when performing his duties at DH, could only be said to be fulfilling that role – not acting on behalf of the parent company. Any other conclusion would effectively be holding that a shareholder would, when exercising its power to appoint a director, owe a duty to others – a proposition which was contrary to authority[2].

As to the other factual links relied upon by the claimant, the Court of Appeal regarded this case as being “far removed” from the situation prevailing in Chandler. Simply put, unlike that case, none of the factors relied upon came close to establishing that the defendant parent company was better placed, due to superior knowledge and expertise on its part as to asbestos risks, to protect the claimant from injury (there was no evidence, for example, that the handling of hazardous substances was in any way an integral part of the defendant’s own business – that being limited to simply holding shares in other companies). Instead, the factors relied upon amounted to no more than evidence that companies in the defendant’s group had operated as a division carrying on a single business, and this fell “far short” of what was required for the imposition of a duty of care[3].

Conclusion

The Court of Appeal’s decision in Thompson is important in further clarifying the boundaries of its decision in Chandler. Specifically, it helps further illustrate the kind of circumstances where the relevant duty of care will likely not exist. Although the point was implicit in Chandler, Thompson ultimately shows that a claimant who relies on more generalised evidence of a group identity or group links is likely to face an uphill battle when it comes to the existence of establishing a duty of care on the part of the parent company. Although, as the Court has made clear in both of the cases discussed, this is a heavily fact dependent enquiry, the trend that emerges is that what is needed is a far more specific connection between the harm suffered and the role played by the parent within the group.

A copy of the judgment is available here.

[1]   [2012] EWCA Civ 525

[2]   [2014] EWCA Civ 635 at paragraphs 24 to 26.

[3]   Ibid at paragraphs 36 to 40.