The English Court of Appeal has recently overturned a first instance ruling which found that a parent company was liable to the former employee of one of its subsidiaries for his negligent exposure to asbestos.

In David Thompson v The Renwick Group plc [1], the Court of Appeal was asked to consider whether Mr Thompson, who had been employed by two (now defunct) subsidiaries of the defendant, was owed a duty of care by the defendant in respect of his negligent exposure.

Mr Thompson's employment by the two subsidiaries occurred during a period when the defendant was acquiring three haulage businesses, one of which was Mr Thompson's first employer (Arthur Wood & Co (Transport) Ltd) and the second of which (David Hall & Sons Ltd) was a company which, being owned by the defendant, acquired Arthur Wood in 1975. At the time of Arthur Wood's acquisition, Mr Thompson's employment was transferred to David Hall.  The judge at first instance found that a director of David Hall (who had a small shareholding in the defendant), Mr Rushton, took control of the daily operation of the David Hall business, including the running of the Arthur Wood depot where the claimant sometimes worked.  There was slight evidence relating to a particular occasion that Mr Rushton had concerned himself with health and safety matters at the Arthur Wood depot.

At first instance, the judge found that the defendant had, through Mr Rushton, taken control of the daily business of David Hall, by this time the employer of Mr Thompson, to a sufficient extent to give rise to a duty of care owed by the defendant to the claimant in respect of his exposure to asbestos during the course of his employment with David Hall. 

In giving its judgment, the Court of Appeal first considered whether a parent company can be found to have "assumed a duty of care to employees of its subsidiary in health and safety matters by virtue of that parent company having appointed an individual as director of its subsidiary company with responsibility for health and safety matters".  The Court of Appeal held that the "answer to this question is plainly no".  The Court found that the only duty Mr Rushton had was to David Hall, the company of which he was a director.  The Court cited established authority in support of its finding that Mr Rushton acted "pursuant to his fiduciary duty owed to David Hall & Sons Ltd and pursuant to no other duty".  The Court went on:  "It follows that the basis upon which the judge determined that [the defendant] owed a duty of care to [the claimant] is unsupportable…there is simply no basis upon which it can be concluded that in running the affairs of David Hall & Sons Ltd, if he did, Mr Rushton was acting on behalf of the Renwick Group Limited.   He was…running on behalf of David Hall & Sons Ltd itself and on no-one else's behalf."

The Court then considered the submission on behalf of Mr Thompson that the "totality of the evidence found by the trial judge is nevertheless sufficient to justify the imposition of a duty of care on the parent company to protect the subsidiary company's employees from the risk of injury arising out of exposure to asbestos at work."  In making this assessment, the Court referred to its decision in the case of Chandler v Cape plc [2] where, on the particular facts of the case, the Court found that a parent company did owe a duty of care to the employee of its (now defunct subsidiary). 

Consistent with its previous decision, the Court applied the same legal test as was cited in Chandler in assessing whether a duty of care was owed by the Renwick Group to Mr Thompson.  In doing so, the Court noted that the decision in Chandler had been dependent on a very particular factual matrix, but that "the facts there however are far removed from those which are under consideration in this appeal".  Having analysed the facts of Mr Thompson's case, the Court concluded that the "findings of the judge [at first instance] on the intermingling of the businesses [of the subsidiaries], the interchangeable use of depots and the shared use of resources amount to no more than a finding that these companies were operating as a division of the group carrying on a single business.  That does not mean that the legal personality of the subsidiaries separate from that of their ultimate parent was not retained and respected."

This is an important judgment by the Court of Appeal, particularly in light of the concerns that its decision inChandler prompted on the part of multinational organisations as to their potential liability for the historic activities of their subsidiaries (and former subsidiaries) in the use of asbestos.  While there was a concern that theChandler decision would "open the floodgates", this decision provides reassurance that a careful and critical approach will be taken by the Courts and that Chandlerwas not necessarily the watershed that some believed it to be.  This is because the decision in Mr Thompson's case shows that the English Courts will analyse the facts of each claim carefully, and that in determining whether a duty exists on the part of a parent to an employee of its subsidiary, the Court will not go beyond the bounds of the established law of negligence.