The English Electric Company Ltd v Alstom UK

Whether a company was the true employer is determined by assessing all the evidence and drawing proper inferences on the balance of probabilities. Corporate restructuring, asset transfers, company accounts, payroll arrangements, admissions and employment records may be considered together. References to a subsidiary in employment or tax documents do not necessarily establish that it was the employer, particularly where the subsidiary operated as a management company or agent for its parent. A company may also act as an agent for an identified principal in relation to employment, even where documents describe the agent as the employer. An indemnity covering liabilities transferred with a business may consequently be engaged by the parent company’s liability to an employee.

Associated Electrical Industries Ltd admitted liability for exposing Mr Critchley to asbestos while he worked in its turbine business and paid compensation of £850,672.45. The English Electric Company Ltd had later assumed liabilities arising from completed and uncompleted contracts. Alstom UK subsequently acquired the turbine business and agreed to indemnify English Electric against relevant liabilities.

The dispute concerned whether Mr Critchley had been employed by AEI or by its subsidiary, AEI (Manchester) Ltd. The court considered inconsistent employment and tax records, the companies’ restructuring, company accounts, the parties’ admissions and the subsidiary’s management and agency functions. If AEI was liable, Alstom accepted that its indemnity was engaged.

1. Employer. On the balance of probabilities, AEI was Mr Critchley’s true employer. The court assessed the evidence in the round. Significant weight was given to Mr Critchley’s own understanding that AEI employed him and to AEI’s admission of employment, made with knowledge of the likely asbestos liability.
2. Corporate structure and accounts. The 1959 restructuring transferred the subsidiaries’ businesses, assets and intended employee contracts to AEI. AEIM thereafter operated principally as a management company. Its accounts showed that it had ceased trading, had no meaningful operating assets or payroll costs, and carried out operations on behalf of AEI. The more natural commercial inference was that AEIM’s relevant costs were charged directly to AEI, rather than that AEIM traded with employees of its own.
3. Documentary inconsistencies. Documents naming AEIM, including facing cards, deduction cards, advertisements, apprenticeship records and HMRC schedules, were not conclusive. Some were capable of referring to AEI’s Manchester operation or to AEIM’s managerial role. The absence of comparable documents identifying AEI in Alstom’s incomplete search reduced the weight of the material relied upon by Alstom.
4. Agency alternative. Even if AEIM could be regarded as the employer in some documentary or practical sense, it could still have acted as AEI’s agent. The power of attorney and AEIM’s accounts supported that possibility. AEI was not necessarily an undisclosed principal, and could remain liable to Mr Critchley.
5. The maxim omnia praesumuntur contra spoliatorem was applicable in principle because relevant documents had been transferred and not retained, but the court reached its conclusions without relying on it. AEI was liable to Mr Critchley, so the Alstom indemnity operated and English Electric succeeded.

The judgment described an earlier related decision concerning another mesothelioma victim, Oliver, in which Alstom’s construction of the English Electric indemnity was rejected at first instance and on appeal. That earlier litigation was not an appeal in the present proceedings.