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Parent company not liable for asbestos related disease sustained by employee of subsidiary

Thompson v Renwick Group Plc
Court of Appeal
13 May 2014

David Olive reviews this Court of Appeal decision following the appeal by a parent company against a first instance decision that it was liable to the employee of a subsidiary in relation to asbestos related disease sustained by the employee in the course of his employment.

Background

The claimant was employed by two companies between 1969 and 1978.  The employing companies were acquired by the defendant’s subsidiary in 1975.  During the course of his employment as a labourer and subsequently a driver, the claimant was exposed to asbestos dust and as a result he developed diffuse pleural thickening.  The claimant’s employers did not have employers’ liability insurance.  The claimant therefore brought an action directly against the defendant, as the ultimate parent company, alleging they owed a duty of care to the claimant and as a result of breach of that duty the claimant had been negligently exposed to asbestos.

The basis of the claimant’s claim was that shortly after the acquisition of the subsidiaries, the defendant appointed a new director who, the judge at first instance concluded, had taken control of the daily operation of the business that employed the claimant.  This was held to be sufficient to give rise to a duty of care from the defendant to the claimant.

Court of Appeal findings

The Court of Appeal had to consider, firstly, whether the defendant as a parent company had assumed a duty of care to the employees of the subsidiary, by virtue of the appointing of the director with responsibility for health and safety matters.  Secondly, if not, whether the totality of the evidence was nevertheless sufficient to justify the imposition of a duty of care on the parent company to protect the subsidiary companies’ employees from the risks of asbestos exposure.

The Court of Appeal answered the first question in the negative considering it insupportable that the defendant had assumed a duty of care simply by appointing a director to run the affairs of the subsidiary.  The director was performing his duties on behalf of the subsidiary that employed the claimant.  There was no evidence of any relationship between the director and the defendant beyond his inferred nomination as a director of the subsidiary.

It was then necessary for the court to consider, in the alternative, whether the facts could justify the imposition of a duty of care from the defendant to the claimant on the 3-fold test laid down by the House of Lords in Caparo Industries Plc v Dickman (1990).  For this to apply there needed to be a risk of foreseeable injury, a relationship of proximity between the parties and it should be fair, just and reasonable to impose liability.

Reference was made to the Court of Appeal decision in Chandler v Cape Plc (2012) in which the Caparo test had been satisfied and where the existence of a duty between a parent company and the employee of a subsidiary was established.  In the Chandler case, the claimant had been negligently exposed to asbestos whilst in the employ of a subsidiary of Cape.  On the facts in that case, the court was satisfied that the parent had actual knowledge of the subsidiary’s working practices and that the escape of asbestos was foreseeably dangerous.  Furthermore, the parent had appointed a group doctor and health and safety advisor to look after health and safety matters for the Group as a whole.  There was evidence of the parent intervening in the running of the subsidiary.  It could have advised on precautionary measures to be taken to protect employees from asbestos exposure.    In the circumstances, there was a direct duty of care owed by the parent to the employees of the subsidiary.

The court was satisfied in the Thompson case that these crucial factors were not present.  There was some evidence of collaboration and sharing of resources by companies in the Group, as might be expected.  However, there was no evidence that the defendant was any more than a holding company of the claimant’s direct employer. The defendant had no superior knowledge or expertise that would have enabled it to protect the employees of subsidiary companies against the risk of asbestos injury.  The mere sharing of resources between different companies in the Group did not mean that the legal personality of the subsidiary as separate from that of the parent was not retained and respected.

Comment

The case demonstrates the importance of establishing who owes a duty of care to employees in such cases.  The direct employer will always owe a duty.  The circumstances in which a parent company may also owe a duty may be limited and the test in Caparo will need to be established.  Neither the Chandler nor the Thompson cases involved any question of piercing the corporate veil.  The case is a reminder that a parent company is only a shareholder.  Unless the acts or omissions of the parent satisfy the proximity test, for instance where there is a large measure of control over a subsidiary, a duty of care will not be established.

Contact

 For further information, please contact David Olive, Associate, at david.olive@dwf.co.uk or on 0161 604 1547

By David Olive

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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