i-law

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


CASE AND COMMENT

455

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, click Log In button.

Copyright © 2024 Maritime Insights & Intelligence Limited. Maritime Insights & Intelligence Limited is registered in England and Wales with company number 13831625 and address 5th Floor, 10 St Bride Street, London, EC4A 4AD, United Kingdom. Lloyd's List Intelligence is a trading name of Maritime Insights & Intelligence Limited.

Lloyd's is the registered trademark of the Society Incorporated by the Lloyd's Act 1871 by the name of Lloyd's.