Parent company not to blame for health and safety breach by subsidiary
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Parent company not to blame for health and safety breach by subsidiary
Those dealing with health and safety cases may recall a well publicised case a couple of years ago in which a parent company was found to owe a duty of care to ensure the safety of the employees of its subsidiary (Chandler v Cape). The reason it was so talked about at the time was the decision drove a coach and horses through the principle that a parent company and its subsidiary are separate legal entities.
Recently, the Court of Appeal has had to look again at the issue. The case involved a 60-year-old man, Mr Thompson, who was suffering from pleural thickening caused by exposure to asbestos between 1969-1978. During that period, he was employed by two companies, both of which were subsidiaries of The Renwick Group plc (Renwicks). When Mr Thompson decided to bring a personal injury claim, he found that neither of the subsidiaries were insured, so he brought his claim against their parent company, Renwicks.
The court started by confirming that a duty of care will only be imposed where there is foreseeable damage and proximity between the parties, and it is fair, just and reasonable to impose a duty of a given scope upon the one party for the benefit of another. It then referred to Chandler v Cape and the circumstances in which a court might find a parent company responsible for the health and safety of its subsidiary’s employees:
- The business of the parent and subsidiary are in a relevant respect the same
- The parent company has or ought to have, superior knowledge on some relevant aspect of health and safety in the particular industry
- The subsidiary’s system of work is unsafe as the parent company knew, or ought to have known; and
- The parent knew or ought to have foreseen that the subsidiary or its employees would rely on it using that superior knowledge for the employee’s protection.
The court acknowledged that these points only illustrated a scenario in which the duty might be imposed. The implication of this is that there may be other situations when a parent company might be found to owe a duty of care.
However, in Mr Thompson’s case, his claim did not get beyond the first Chandler point as the court found there was no evidence that Renwicks carried out any business apart from holding shares in the other companies. The court went on to say that factual evidence of the intermingling of the businesses and the interchangeable and shared use of resources merely reflected the division of the group carrying on a single business. That did not mean that “the legal personality of the subsidiaries separate from that of their ultimate parent was not retained and respected.” Nor did appointing a director to its subsidiary impose a duty of care on Renwicks which was a separate argument run by Mr Thompson’s lawyers.
Comment
This case demonstrates that the courts will continue to look carefully at the facts of each case before imposing a duty of care for the employees of one company on another, which is good news for companies. However, companies in a group structure should be alive to how health and safety is dealt with within the group, so that they don’t inadvertently create a Chandler type situation.