Chandler v Cape Plc

Hearing dates: 8–9 February 2012

This appeal is brought by Cape plc ("Cape"), the parent company of Mr Chandler's former employer. The principal issue is whether Cape owed a direct duty of care to the employees of its subsidiary to advise on, or ensure, a safe system of work for them. The respondent, Mr Chandler, has recently contracted asbestosis as a result of a short period of employment over fifty years ago with Cape Building Products Ltd ("Cape Products"). That company is no longer in existence. However, its parent company, Cape, formerly the well-known asbestos producer Cape Asbestos plc, is still in existence. On 14 April 2011, Wyn Williams J held that Cape was liable to Mr Chandler on the basis not of any form of vicarious liability or agency or enterprise liability, but on the basis of the common law concept of assumption of responsibility. Cape appeals against that decision.

We understand that this is one of the first cases in which an employee has established at trial liability to him on the part of his employer's parent company, and thus this appeal is of some importance not only to the parties but to other cases.

There is no issue about whether the system of work in this case was unsafe. Mr Chandler worked out of doors loading bricks produced by a brick manufacturing arm of Cape Products. Asbestos was produced on the same site in a factory with open sides, and dust from that factory migrated into the area where Mr Chandler worked. Cape in effect accepts that Cape Products failed in its duty to Mr Chandler. There was, held the judge, "a systemic failure of which [Cape] was well aware." (Judgment, paragraph 73).

Mr Chandler's employment with Cape Products ran from 24 April to 9 October 1959 and from 24 January 1961 to 9 February 1962 (together "the relevant period"). Cape Products was dissolved some years ago. Cape Products carried employer's liability insurance. However, this included an exception for pneumoconiosis. That exception was held by Rix J in Cape plc v Iron Trades Employers Liability Association Ltd [2004] Lloyd's Rep IR 75, to cover asbestosis. Accordingly, there was no point in seeking to have the dissolution of Cape Products set aside so as to be able to enforce rights against its employer's liability policy. There is, therefore, no relevant policy of employer's liability insurance to protect Mr Chandler.

The evidence at trial was sparse and consisted mainly of documentary evidence. There was only one witness who gave oral evidence, namely Dr Kevin Browne. He was 89 years old at the date of the trial. He had been the works doctor at Cape Products from 1974, and from 1978 group medical adviser in succession to a Dr Smither. In those circumstances, this court is substantially in the same position as the judge to the review the evidence. This court does not therefore in the main have to defer to the judge by reason of his having had the advantage, not available to this court, of hearing witnesses. This court is required to be satisfied for itself that the facts justified the imposition of liability.

The facts

The evidence about the relationship of Cape and Cape Products is mainly circumstantial. It can be separated into a number of threads although some of the evidence belongs to more than one thread. The threads may for convenience be labelled as follows:

a) Origins of Cape Products' asbestos business

b) Relationship between Cape and Cape Products

c) Technical assistance given by Cape to Cape Products

d) Contemporary evidence which was said to demonstrate that Cape was involved with the health and safety of employees of Cape Products

e) Evidence as to Cape's involvement in the asbestos business of Cape Products

f) Events subsequent to the relevant period.

(a) Origins of Cape Products' asbestos business:

Cape was involved in the production of asbestos from the nineteenth century and had several factories in the UK. Its principal factory was in Barking, near London. After the Second World War, Cape looked for other factory premises because there was insufficient room at its Barking factory for increased production of a major asbestos product, Pluto board. Cape Products, then known as Uxbridge Flint Brick Company Ltd, had two factories on a single site at Cowley Works, Uxbridge, some 30 miles away. One of these factories had been used for making cement pipes but that use had been terminated and so that factory was empty.

Cape acquired at least a majority of the share capital of Cape Products in 1945, and the outstanding shares in about 1953. Cape installed the necessary plant into the empty factory. A manager was appointed "to manage this plant as a branch of Cape" (see The Cape Asbestos Story produced by Cape Asbestos, 1953, page 71). Production of Asbestolux, a new form of non-combustible asbestos board, started. "In a short time, [Cape Products] was an invaluable feature in Cape's economy" (op. cit. page 72). However, it is noteworthy that at no relevant point in time did Cape cease to be an operating company itself or merely hold the shares in its subsidiaries as if it were an investment holding company.

(b) Relationship between Cape and Cape Products:

Cape started out as a tenant of Cape Products' site. Cape Products modified the empty factory for Cape's use in the production of Asbestolux (board minutes of 20 November 1954). Cape paid a rent and a share of the rates, and there is nothing to suggest that the rent was not fixed at the market rate.

The relationship could have remained one of landlord and tenant on arm's length terms but that did not happen. Slowly but surely, Cape Products became a part of an integrated group of companies headed by Cape:

i) On 20 March 1956, the board of Cape (not that of Cape Products) gave its approval to a separate administration at Uxbridge for dealing with all aspects of the management, production and sales of Asbestolux "in accordance with company policy". On one reading, this is inconsistent with Cape Products being able to be in charge of its own management systems.

ii) At all material times there was one or more directors of Cape on the board of Cape Products.

iii) Furthermore, most of the board meetings of Cape Products for which we have been shown minutes were held at Cape's Head Office in central London, rather than at the Cowley Works.

iv) On 17 July 1956, Cape decided to sell the assets of its asbestos business at Uxbridge to Cape Products and to change the name of Cape Products to its existing name: there could be no other reason for a sale followed by a change of name other than that Cape wished Cape Products to be seen as part of the larger Cape group.

v) Cape's board minutes for 25 April 1961 and 16 May 1961 confirm Cape Products' status as a member of the group. They refer to discussions taking place at Uxbridge for the expansion of Asbestolux production. The board minutes of Cape for 31 October 1961 additionally gave approval for increased Asbestolux production.

The judge noted that Cape Products continued to be a separate company, and thus inferentially that the intention disclosed in The Cape Asbestos Story that it should be a branch of Cape, was never achieved. I agree. Cape could have treated Cape Products as a division or branch without removing its separate legal personality, but it did not so. Cape Products remained the owner of its own assets and handled its own sales and dealings with third parties.

On 26 June 1961, the board of Cape Products agreed to enter a licence with a Japanese company, Nippon Asbestos Company ("Nippon"), for the manufacture and sale of Asbestolux, "without prejudice to approval by the board of the parent company". (Asbestolux appears to have been a generic product, not one protected by intellectual property rights). The board resolution suggests that, where the grant of a licence affected the interests of the group, Cape Products was making corporate decisions with regard to those interests, as well as those of itself as a separate legal entity. It was acting as a company which had been integrated into a larger group of companies.

In turn, the Cape board took an interest in issues relating to the management by subsidiaries of their own business. On 31 July 1962, for instance, Cape's board discussed action proposed to solve a production difficulty at the Uxbridge factory.

(c) Technical assistance:

(i) Know-how:

It would have been very surprising if Cape did not make technical know-how available to Cape Products in view of its long experience in the asbestos industry. There is evidence that it was indeed shared. For instance, the board minutes of Cape Products for 26 June 1961 refer to the mixing of chrysotile fibre into the products of Cape Products "in accordance with agreed group policy". The same minutes refer to a proposal for Cape Products to take over a machine from the Barking factory although it appears this proposal did not come to fruition.

(ii) Product development:

Dr Gaze, a qualified chemist, had been employed by Cape at its Barking factory from the 1940s....