Thompson v The Renwick Group Plc

A parent company does not owe a direct duty of care to a subsidiary’s employees merely because it appoints or nominates a director of the subsidiary, or because group companies coordinate their operations. The question is whether the parent’s own conduct satisfies the Caparo requirements of foreseeability, proximity, and fairness, justice and reasonableness.

Relevant indications may include the parent’s involvement in the same business, superior health and safety knowledge, knowledge of an unsafe system, and foreseeable reliance on its expertise. Those indications are illustrative, not exhaustive. Evidence of group branding, shared resources and operational co-ordination, without evidence that the holding company possessed relevant expertise or assumed responsibility for the risk, will not establish the necessary duty.

The claimant alleged that he developed diffuse pleural thickening after exposure to asbestos dust while employed by two subsidiaries within the Renwick group. Neither employer was able to meet a claim and the claimant therefore sued their parent holding company.

On a preliminary issue, the Manchester County Court held that the parent had assumed a duty of care after a director, Mr Rushton, took control of the subsidiary’s daily operations. The parent appealed. The central issue was whether the evidence established that the holding company itself owed a direct duty to protect the subsidiary’s employee from asbestos exposure.

1. Appeal allowed. The County Court’s conclusion that the parent company had assumed a direct duty of care could not stand.

2. The appointment or nomination by a parent shareholder of a director of its subsidiary does not, without more, make the director the parent’s agent when acting as director. In running the subsidiary’s affairs, the director acts pursuant to duties owed to the subsidiary. Any separate duty owed to the parent must arise from a separate office or agreement and cannot detract from the director’s duty to the subsidiary. The judge’s reliance on Mr Rushton’s inferred nomination was therefore legally insufficient: Smith v Fawcett [1942] Ch 304; Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324; Neath Rugby Ltd case [2009] EWCA Civ 291; and Kuwait Asia Bank v National Mutual Life Nominees Ltd [1991] 1 AC 187.

3. A direct parent-company duty to subsidiary employees can arise only where the threefold test in Caparo v Dickman [1990] 2 AC 605 is satisfied. The inquiry is whether the parent’s own acts amount to taking on a direct duty. Chandler v Cape plc [2012] 1 WLR 3111 illustrates, but does not exhaust, circumstances in which that may occur. Its relevant indications include a shared business, the parent’s superior health and safety knowledge, its knowledge of an unsafe system, and foreseeable reliance on its use of that knowledge.

4. The evidence did not establish those features. Renwick Group was shown only to be a holding company. Group-branded paperwork and lorry livery, a taxi arranged from Exeter, shared loads and depots, and later consolidation of sites showed at most operational co-ordination within the group. They did not show that the holding company conducted the hazardous business, possessed superior knowledge of asbestos risks, or had assumed responsibility on which the subsidiary or its employees relied. The evidence therefore fell far short of establishing proximity or a fair, just and reasonable basis for a duty.

• Court of Appeal (Civil Division) Allowed the parent company’s appeal and reversed the preliminary finding that it owed the claimant a direct duty of care: [2014] EWCA Civ 635.
• Manchester County Court On 24 April 2013, His Honour Judge Platts held on a preliminary issue that the parent company had assumed a duty of care in respect of asbestos exposure after 1 April 1976. No reported citation was stated.