Assumption of Responsibility in Corporate Groups: Chandler v Cape plc

DOIhttp://doi.org/10.1111/1468-2230.12026
Published date01 May 2013
Date01 May 2013
and not theoretical and illusory’.89 All these fundamental considerations were lost
in a few unfortunate lines in Ahmad. Although this decision of the Fourth
Section has become final, the Grand Chamber will hopefully set the record
straight on a future occasion.
Assumption of Responsibility in Corporate Groups:
Chandler vCape plc
Martin Petrin*
In Chandler vCape plc, the Court of Appeal imposed for the first time liability on a company for
a breach of its duty of care to an employee of its subsidiary. In doing so, the court laid out a
new four-part test for ascertaining a parent company’s responsibility for the health and safety
of individuals employed by group companies. Although liability of parent companies may be
justified under the right circumstances, the court’s approach in Chandler is problematic in a
number of ways and raises more questions than it answers.
INTRODUCTION
In Chandler vCape plc1(Chandler) the Court of Appeal broadened the concept of
assumption of responsibility and devised a novel test to hold a parent company
liable for injuries sustained by one of its subsidiary’s employees. Although the
facts and underlying claims of this case are not an unfamiliar occurrence in more
recent English law, the courts have previously not had the opportunity to
directly address and decide whether a parent company owes a direct duty of care
relating to the health and safety of group company employees.2Chandler is
situated at the hazy intersection of company and tort law, where bedrock
principles such as limited liability, separate corporate personality, and traditional
principles of negligence collide. The comment concludes that while a parent
company should not be free from liability to subsidiary employees, the court in
Chandler failed to develop a proper legal framework for determining such
liability.
89 See Hirsi Jamaa vItaly n 72 above at [175]; Mamatkulov and Askarov vTurkey (2005) 41 EHRR
25 at [101], [121] and [125].
*University of Leicester, School of Law. The author wishes to thank Dr Daniel Attenborough,
Professor Alan Dignam, Dr David Mangan, Professor Paula Giliker, Lord Justice Stuart-Smith,
Professor Christian Witting and the anonymous referee for their insightful comments.
2 See ibid at [40], stating that ‘it appears that there is no reported case of a direct duty of care on the
part of a parent company’.
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Martin Petrin
© 2013 The Authors. The Modern Law Review © 2013 The Modern Law Review Limited. 603
(2013) 76(3) MLR 589–619
BACKGROUND – THE LAW PRE-CHANDLER
Cape plc (Cape), an industrial services provider and previous manufacturer of
asbestos products, has the dubious honour of being an integral player in the law
of parent company liability for tort victims. Following a period of judicial
intervention,3the landmark case of Adams vCape Industries plc4(Adams) made it
clear that parent companies would rarely be held liable for actions of their
subsidiaries by ‘piercing’ the corporate veil.5Thus, in order to bypass the
difficulties associated with veil piercing, claimants after Adams began to initiate
claims against parent companies on the basis that the parent owed them a direct
duty of care.
In Connelly vRTZ Corp plc,6an employee of an English parent company’s
foreign subsidiary sued the parent in the High Court in England. Yet Connelly’s
procedural posture only required the court to decide whether the claim was
time-barred and whether the pleading should be struck out as disclosing no
reasonable cause of action. The court refused to strike out the case but found that
it was statute-limited. Commenting on the substance of the claim and why it
represented an arguable legal position, Wright J suggested that ‘in appropriate
circumstances’ a parent company may owe a duty to safeguard the health of a
subsidiary’s employees.7
Similarly, in another case involving Cape as a defendant, Lubbe vCape plc8
(Lubbe), a group of claimants brought actions against Cape in England, claiming
damages for asbestos-related personal injury and death that they had suffered as
employees or neighbours of Cape’s South African subsidiaries. The claimants
alleged that Cape had breached a duty towards them by failing to ensure that its
subsidiaries adopt proper working practices and safety precautions.9In contrast to
its decision in Adams, the House of Lords now allowed the claims against Cape
3 See A. Dignam and J. Lowry, Company Law (Oxford: OUP, 7th ed, 2012) 35–36.
4 [1990] 2 WLR 657, which largely preserved the position in Salomon vA Salomon & Co Ltd [1897]
AC 22 (Salomon).
5 Under Adams and related cases, veil piercing is possible based on statute or contract, where a
corporate structure is merely a ‘facade’ or ‘sham’, or where the subsidiary acts as the parent’s agent.
See Dignam and Lowry, n 3 above, 31–43; P. Davies, Gower and Davies’ Principles of Modern
Company Law (London: Sweet & Maxwell, 9th ed, 2012) 207–223; D. Kershaw, Company Law in
Context (Oxford: OUP, 2nd ed, 2012) 46–77. See also the recent case of VTB Capital Plc v
Nutritek International Corp [2013] UKSC 5 (holding that a ‘puppeteer’ company that exercises
control over a ‘puppet’ company cannot be made a party to a contract between the claimant and
the puppet company).
7ibid, 537. In addition, similar claims were brought in a number of unreported cases. These claims,
however, were either refused on conflict of laws grounds or settled between the parties without
a court decision addressing the question of parent company liability. See Durham vT&Nplc(nyr
CA 1 May 1995); Ngcobo vThor Chemicals Holdings Ltd (nyr TLR 10 November 1995); Sithole
vThor Chemicals Holdings Ltd (nyr CA 3 February 1999) The Times 15 February 1999.
See also ‘Trafigura reaches global settlement’ The Guardian 16 September 2009 at http://
www.guardian.co.uk/world/2009/sep/16/trafigura-toxic-dump-global-settlement (last visited
18 June 2012).
9ibid, 1550–1551.
Assumption of Responsibility in Corporate Groups
© 2013 The Authors. The Modern Law Review © 2013 The Modern Law Review Limited.
604 (2013) 76(3) MLR 589–619

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