Chandler v Cape plc Case No: B3/2011/1272
A landmark judgment of the UK Court of Appeal today (25 April 2012) sets a legal
precedent for holding multinational parent companies accountable under the law
of negligence and constitutes a further breakthrough in the series of cases
brought by London law firm Leigh Day & Co.
David Chandler, 71 was employed by Cape Building Products Limited, a subsidiary
of Cape PLC, between 1959 and 1961 where he suffered heavy asbestos exposure.
He was diagnosed with asbestosis in 2007. Unable to pursue a claim against Cape
Building Products, due to an 'asbestosis exclusion clause' in its insurance policy,
Mr Chandler pursued the claim instead against Cape PLC.
The Court of Appeal was upholding a decision by the High Court in April 2011 to
find Cape PLC liable as the parent company. The Court noted: “We understand
that this is one of the first cases in which an employee has established at trial
liability to him on the part of his employer’s parent company, and thus this appeal
is of some importance not only to the parties but to other cases.”
Mr Chandler alleged that Cape plc owed him a duty of care inter alia because it
employed the individuals, in particular the group Chief Medical Officer,
responsible for overseeing health and safety at the subsidiary. The Court stated
that: “An essential issue was ”whether Cape was proved to have assumed
responsibility for the safety of the employees of its subsidiary, Cape Products, so
as to give rise to a relevant duty of care owed by Cape to Mr Chandler to prevent
the exposure of which he complained” .
The court specifically referred to earlier cases brought by Leigh Day & Co along
similar lines: in Connelly v Rio Tinto (a claim by throat cancer victim employed at
the Rossing uranium mine) and Ngcobo v Thor Chemicals (a claim by 21 South
African workers poisoned by mercury, settled in 1997) the court held that it was
arguable that a parent company may owe a duty of care to employees and in
Lubbe v Cape plc (a claim by 7,500 South African asbestos miners, settled in 2003)
the House of Lords had expressly contemplated that determination of the
existence of a duty of care by a parent company.
Regarding Cape plc’s contention that imposing liability would require a lifting of
the corporate veil, the court:
“….emphatically reject[ed] any suggestion that this court is in any way concerned
with what is usually referred to as piercing the corporate veil. A subsidiary and its
company are separate entities. There is no imposition or assumption of
responsibility by reason only that a company is the parent company of another
company. The question is simply whether what the parent company did
amounted to taking on a direct duty to the subsidiary’s employees”
The court held that it was “appropriate to find that Cape assumed a duty of care
either to advise Cape Products on what steps it had to take in the light of
knowledge then available to provide those employees with a safe system of work
or to ensure that those steps were taken”.
The court concluded that “….in appropriate circumstances the law may impose on
a parent company responsibility for the health and safety of its subsidiary’s
employees. Those circumstances include a situation where, as in the present
case, (1) the businesses of the parent and subsidiary are in a relevant respect the
same; (2) the parent has, or ought to have, superior knowledge on some relevant
aspect of health and safety in the particular industry; (3) the subsidiary’s system
of work is unsafe as the parent company knew, or ought to have known; and (4)
the parent knew or ought to have foreseen that the subsidiary or its employees
would rely on its using that superior knowledge for the employees’ protection.
For the purposes of (4) it is not necessary to show that the parent is in the
practice of intervening in the health and safety policies of the subsidiary. The
court will look at the relationship between the companies more widely. The court
may find that element (4) is established where the evidence shows that the
parent has a practice of intervening in the trading operations of the subsidiary, for
example production and funding issues.”
As a result of this ruling there can be no principled legal objection, under UK law,
to the imposition of a legal duty of care on a multinational parent company. But
whether or not such a duty should be imposed will depend on the facts and
consequently there will be instances where the degree of involvement and
control by the parent warrant its imposition and other instances where it does
not.