Thompson v The Renwick Group (2014)

Parent companies will draw comfort from this Court of Appeal decision which sets a high threshold before parent companies will be found liable for the actions of their subsidiaries, especially where the parent and subsidiary operate in different sectors or areas from each other and the parent is only partly involved in the running of the subsidiary.

The claimant (Thompson) was negligently exposed to asbestos by his employer in the mid-1970s, which led to  him developing diffuse pleural thickening. His employer was unable to meet judgment against it and did not have liability insurance in place at the relevant time. Accordingly, Thompson claimed against the parent company of his employer (The Renwick Group) and at first instance, the judge found the parent company liable on the basis that it had appointed an individual as a director of the subsidiary and that that individual had been responsible for health and safety matters.

In contrast, the Court of Appeal held that the director appointed by the parent company was not acting on its behalf and the parent company had not assumed a duty of care to the employees of its subsidiary by virtue of this appointment. Nor should such a duty of care be imposed on the parent company. In relation to whether The Renwick Group had assumed a duty of care to Thompson, the Court held that it did not assume such a duty because by running the day-to-day operation of the new subsidiary, the new director was not acting on behalf of the parent group. Rather, he was acting pursuant to his fiduciary duty which he owed to the subsidiary.

As to whether liability could be imposed on the parent company, it held that a duty would only be imposed if the threefold test in Caparo Industries Plc v Dickman (1990) was satisfied i.e. the test of foreseeability of damage, proximity and whether it was fair, just and reasonable to impose a duty upon one party for the benefit of another. The Court referred to Chandler v Cape Plc (2012), which did find a parent company responsible for the health and safety of its subsidiary’s employees. Chandler stressed that the key question was whether what the parent company did amounted to taking on a direct duty to the subsidiary’s employees.

The Court of Appeal held this case was “far removed” from Chandler. There was no evidence that The Renwick Group at any time carried on any business at all apart from that of holding shares in other companies, let alone a haulage business or, as would be required, a business an integral part of which was the warehousing or handling of asbestos or any potentially hazardous substance.

The Court remarked that: “what one is looking for here is a situation in which the parent company is better placed, because of its superior knowledge or expertise, to protect the employees of subsidiary companies against the risk of injury and moreover where, because of that feature, it is fair to infer that the subsidiary will rely upon the parent deploying its superior knowledge in order to protect its employees from risk of injury”.

Here, however, there was no basis upon which it could be asserted that The Renwick Group had, or should have had, any knowledge of the hazards of handling raw asbestos superior to that which the subsidiary could be expected to have. The evidence fell far short of what was required for the imposition of a duty of care on The Renwick Group.