Chandler v Cape Plc

A parent company does not owe a subsidiary’s employees a duty of care merely because of its shareholding or ordinary group control. A direct duty may, however, arise where the parent has assumed responsibility for their health and safety.

Relevant circumstances include the parent’s superior knowledge of the particular risk, its knowledge of an unsafe system of work, the similarity of the businesses, and its knowledge or reasonable foresight that the subsidiary or employees will rely on that knowledge. The duty may be to advise on necessary precautions or to ensure they are taken. It does not require the parent to implement safety measures day to day.

The claimant contracted asbestosis after working for Cape Building Products Ltd at its Uxbridge works in 1959 to 1962. Asbestos dust escaped from an open-sided asbestos factory and migrated into the area in which he loaded bricks. His employer had been dissolved and its employer’s liability insurance did not respond.

The claimant sued the employer’s parent, Cape plc, alleging a direct duty of care. Wyn Williams J held that Cape had assumed responsibility for the health and safety of Cape Products’ employees and was liable: [2011] EWHC 951 (QB). Cape appealed. The central issue was whether its relationship, knowledge and conduct gave rise to a direct duty to advise on, or ensure, a safe system of work.

1. Appeal dismissed. Arden LJ, with whom Moses and McFarlane LJJ agreed, held that Cape owed the claimant a direct duty of care and that the unsafe system of work triggered that duty.
2. The case did not concern piercing the corporate veil. Parent and subsidiary remained separate legal entities, and parenthood alone creates no duty. The question was whether the parent’s conduct amounted to taking on a direct duty to the subsidiary’s employees.
3. The court treated the issue as one of proximity and fairness within the duty-of-care analysis in Caparo Industries plc v Dickman [1990] 2 AC 605, informed by the established exception for a relationship giving rise to an imposition or assumption of responsibility. Assumption is a legal conclusion and need not be voluntary.
4. There was no rule that the claimant had to show features outside the usual incidents of a parent-subsidiary relationship, nor that the parent had absolute control of the subsidiary. Group arrangements vary. A parent may assume only a limited, high-level responsibility for advice or strategy rather than every aspect of workplace safety.
5. On the facts, Cape had superior knowledge of asbestos risks and of the Uxbridge operation. It had introduced the asbestos business at the site, retained material control over aspects of its operation, employed medical and scientific personnel with group responsibilities, and knew of the systemic escape of dust. It was not responsible for day-to-day implementation, but its duty was to advise Cape Products on measures needed for a safe system of work or to ensure that those measures were taken.
6. The court identified four relevant circumstances: materially similar parent and subsidiary businesses; the parent’s superior relevant health-and-safety knowledge; the parent’s knowledge, actual or constructive, that the subsidiary’s system was unsafe; and knowledge or reasonable foresight that the subsidiary or its employees would rely on the parent’s use of that knowledge. A practice of intervening in trading operations may establish the final circumstance even without regular intervention in health-and-safety policy.
7. Later events could not themselves create responsibility, and the subsidiary’s subsequent dissolution was irrelevant. They could nevertheless confirm or clarify what was occurring during the relevant period. The trial judge had not reversed the legal burden of proof; the evidence justified an evidential inference of a group health-and-safety policy unless Cape displaced it.

• Court of Appeal (Civil Division): Cape’s appeal was dismissed. The court upheld the finding that it owed the claimant a direct duty of care: [2012] EWCA Civ 525 .
• High Court (Queen’s Bench Division): Wyn Williams J held that Cape had assumed responsibility for the health and safety of employees of its subsidiary and that the claimant succeeded: [2011] EWHC 951 (QB).