In Chandler v Cape plc, the Court of Appeal has decided that a parent company owed a duty of care to an employee of one of its subsidiaries who had contracted asbestosis in the workplace. This is the first case of its kind in which a parent company has been found liable to an employee of its subsidiary.
Mr Chandler was an employee of Cape Building Products Ltd ("CBP") (a wholly owned subsidiary of Cape plc ("Cape")) between 1959 and 1962. During this time, Cape and CBP were involved in the production of asbestos in the factory at which Mr Chandler worked. In 2007, Mr Chandler discovered that he had contracted asbestosis as a consequence of his employment at CBP. However, CBP had been dissolved and Mr Chandler brought a claim against Cape on the basis that it should be held jointly and severally liable.
The matter in dispute was the relationship between the parties and whether Cape owed Mr Chandler a duty of care for his health and safety; it was accepted by Cape that if a duty of care existed, it was in breach of that duty.
At first instance, the High Court found in favour of Mr Chandler, and in particular found that the relationship between Cape and CBP was sufficiently close that a duty of care could be imposed on Cape for CBP's shortcomings. In assessing this proximity, the Court looked at the facts of the relationship between the two companies, such as there being a director of Cape on the board of CBP and Cape sharing technical know-how and product development with CBP. However, the primary factor was that Cape had appointed a group medical advisor, who became an international authority on asbestosis, and a scientific officer whose responsibilities extended to health and safety issues. As such, it was deemed that Cape retained overall responsibility, and dictated policy, for health and safety issues at CBP. Whilst CBP was responsible for implementing Cape's policies, Cape would have been able to intervene at any point.
On appeal, the Court of Appeal upheld the decision of the High Court. The Court held that Cape had superior knowledge to CBP of both the asbestos business and the scientific link with asbestosis, by virtue of its medical and scientific officers. The issue at the factory at which Mr Chandler worked was not the implementation of policy by CBP, but the systemic shortcomings of the health and safety policies themselves. As Cape set the health and safety policies for the whole group, and it was aware of the working conditions and the risk that an employee exposed to such conditions would contract asbestosis, the Court held that a duty of care was owed by Cape to the employees of CBP. Whether Cape's duty was to advise CBP on the steps it should have taken to ensure employees' safety, or to ensure that those steps were taken, was in one sense not important; injury to Mr Chandler was the result in failing to do either.
This decision shows that in certain circumstances, a parent company can be held liable to the employees of a subsidiary. However, the Court emphasised that it was not concerned with piercing the corporate veil and that there was no assumption of responsibility solely by virtue of the fact that one company is the parent of another. Despite this caveat, it is quite possible that the reasoning from this case could be extended to other claims and to other claimants, and could potentially leave parent companies at risk of liability for the actions or omissions of their subsidiaries.