Parent firm liable in “historic”
asbestos case
In a judgement that could have far-reaching
ramifications for UK companies with subsidiaries, the Court of Appeal has ruled
in favour of an asbestosis sufferer, who sought damages against the parent
company of his former employer.
The Court upheld a decision by the High Court in April last year, which ruled
that Cape plc, as the parent company, was liable for the activities of its
subsidiary, Cape Building Products Ltd. The appeal judgment, handed down last
week (25 April), could have significant consequences for companies in the UK
with domestic-based subsidiaries, as well as multi-national companies
headquartered in the UK with subsidiaries in developing countries, where their
operations have greater potential to cause direct harm to workers, the local
environment, and consumers.
The case centered around David Chandler, 71, who was employed by Cape Building
Products Limited (formerly Uxbridge Flint Brick Company), between 1959 and
1961, during which period he suffered heavy asbestos exposure. Diagnosed with
asbestosis in 2007, he was unable to pursue a claim against Cape Building
Products, owing to an ‘asbestosis exclusion clause’ in its insurance policy. Mr
Chandler’s lawyers, Leigh Day & Co, instead decided to pursue his claim
against Cape plc.
In their judgement, the Appeal Court judges stressed: “There is no imposition
or assumption of responsibility by reason only that a company is the parent
company of another company. The question is simply whether what the parent
company did amounted to taking on a direct duty to the subsidiary’s employees.”
Leigh Day & Co provided evidence that the parent company was directly
involved in, and knew about, the health and safety effects from asbestos
exposure on workers at Cape Building Products Ltd. The law firm pointed out
that Cape plc employed group medical and safety officers, who oversaw health
and safety at its subsidiaries, and that it had close involvement with
governmental organisations concerned with asbestos safety.
The Appeal Court also found it significant that the boards of both parent and
subsidiary companies shared directors.
Based on such evidence, the Court found that Cape plc “assumed a duty of care
either to advise Cape Building Products on what steps it had to take, in the
light of knowledge then available, to provide those employees with a safe
system of work, or to ensure that those steps were taken”.
The judgement concluded: “In summary, this case demonstrates that in
appropriate circumstances the law may impose on a parent company responsibility
for the health and safety of its subsidiary’s employees.
“Those circumstances include a situation where, as in the present case, the
businesses of the parent and subsidiary are in a relevant respect the same; the
parent has, or ought to have, superior knowledge on some relevant aspect of
health and safety in the particular industry; the subsidiary’s system of work
is unsafe as the parent company knew, or ought to have known; and the parent
knew, or ought to have foreseen, that the subsidiary or its employees would
rely on its using that superior knowledge for the employees’ protection.”
Following the ruling, Vijay Ganapathy, senior solicitor at Leigh Day, said:
“This historic judgment gives hope to thousands of victims, not just of
industrial disease, but also those injured or who have been denied justice in
the past through the complexity – and sometimes cruelly contrived nature – of
corporate structuring.
“It’s no longer an excuse for parent companies to hide behind an aged legal
principle in circumstances where they know that workers are at risk, but still
chose to do nothing to help them. This is of particular relevance in
asbestos-disease cases, as many sufferers face insurmountable challenges in
identifying and locating insurers for their former employers.”
