Lloyd's Maritime and Commercial Law Quarterly
NEGLIGENCE AND THE CORPORATE VEIL: PARENT COMPANIES’ DUTY OF CARE TO THEIR SUBSIDIARIES’ EMPLOYEES
William Day*
Chandler v Cape
Thompson v Renwick Group
With the doctrine of piercing the corporate veil now narrowly confined following the decision of the Supreme Court in Prest v Petrodel Resources Ltd,1 litigants must now lean more heavily on orthodox private law principles in order to establish shareholder and director liability. The issue of whether a parent company owes a direct duty of care to employees of a subsidiary is a classic case in point. The Court of Appeal has considered this issue twice in recent years, in Chandler v Cape Plc
2 and Thompson v The Renwick Group Plc.3 The decisions merit attention together.
The basic narrative in both cases is similar. In Chandler, the claimant in question had been a bricklayer for around 18 months, had been exposed to asbestos and, consequently, suffered from asbestosis. This was a clear breach of the subsidiary’s duty of care to the claimant. But the subsidiary had long since been wound up. The claimant therefore sought to establish that the parent company owed him a direct duty of care.4 In Thompson, the claimant handled significant amounts of asbestos during his nine-year employment as a labourer with two subsidiaries in the same group. As a result he had suffered from an acute respiratory condition, together with an increased risk of mesothelioma and cancer. He, too, sought to establish that the parent company owed him a direct duty of care because the subsidiaries were not worth “powder and shot” and had deficient insurance coverage.5
In Chander, Arden LJ considered there to be a duty of care on the parent company with respect to the health and safety of its subsidiary’s employees. In this regard, her Ladyship summarised four relevant indicia.6 First, the parent and subsidiary’s businesses were the same. Secondly, the parent had, or ought to have had, “superior knowledge” on relevant health and safety issues in the industry. Thirdly, the parent knew, or ought to have known, that the employees of the subsidiary were working in “unsafe” conditions. Fourthly, and finally, the parent knew, or ought to have known, that the subsidiary and its employees
* Trainee Solicitor, Allen & Overy LLP. This note represents the view of its author and not necessarily those of Allen & Overy LLP.
1. [2013] UKSC 34; [2013] 2 AC 415.
2. [2012] EWCA Civ 525; [2012] 1 WLR 3111.
3. [2014] EWCA Civ 635.
4. [2012] EWCA Civ 525, [1].
5. [2014] EWCA Civ 635, [1–2].
6. [2012] EWCA Civ 525, [80].
CASE AND COMMENT
455