31 Augus, 2012
Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution
Chandler v Cape plc [2012] EWCA Civ 525, a decision of the English Court of Appeal addresses the availability of damages for a tort victim from a parent company, in circumstances where the victim suffered industrial injury during employment by a subsidiary company.
David Chandler had been employed by a wholly owned subsidiary company of Cape plc. for over fifty years. In 2007, as a result of exposure to asbestos during that period of employment, Mr Chandler contracted asbestosis. The subsidiary no longer existed in 2007 and had no policy of insurance covering claims for damages for asbestosis (Chandler v Cape plc [2012] EWCA Civ 525, at [1]). Mr Chandler had to then bring a claim against Cape plc, alleging it had owed and breached a duty of care to him. Cape plc denied that it owed a duty of care to the employees of its subsidiary company Wyn Williams J had held that Cape plc owed Mr Chandler a duty of care, applying the threefold test of assumption of responsibility foreseeability, proximity and fairness) as laid down in Caparo Industries Plc v Dickman. (Chandler v Cape plc [2011] EWHC 951, at [72]–[77])
Cape plc had had actual knowledge of the subsidiary employees’ working conditions and the asbestos risk had been obvious. Ibid. at [73]–[74].The court found that Cape plc had significant control over its subsidiary. It had employed a scientific and medical officer to be responsible for health and safety issues and had, in the circumstances, retained responsibility for ensuring that its own employees, and those of subsidiaries, were not harmed. (Ibid.. at [75]). Wyn Williams J however did clarify that the basis of liability was not vicarious liability, and found that Cape plc owed a duty of care to its subsidiary’s employees. (Ibid. at [1]).
Cape plc appealed to the English Court of Appeal, but its appeal was dismissed. Arden LJ (with whom the other judges agreed) concluded that Cape plc had assumed responsibility to Mr Chandler and was thus answerable for the injury which he had suffered.
The decision is significant because it represents the first time that an injured employee of a subsidiary company has established that his employer’s parent company owed him a duty of care. (Chandler v Cape plc, supra at 1, at [2]). In doing so, the court relied on Connelly v Rio Tino Zinc Corporation (1999) CLC 533 and Ngcobo v Thor Chemicals Holdings Ltd v Others (unreported). (Ibid. at [66])
The case is also important in connection with the issue of lifting of the corporate veil. The incorporation of a company casts a veil over the true controllers of the company, a veil through which the law will usually not penetrate as the company has a separate legal personality. Even though Arden LJ agreed with the trial judge’s finding that Cape plc treated its subsidiary in question as a separate legal entity and that the subsidiary had remained the owner of its own assets
and handled its own sales and dealings with third parties (Ibid. at [11]) , she expressly stated that the judgment was not concerned with the piercing of the corporate veil. (Ibid. at [69]–[70]).
However, in practice, this case gives the equivalent effect of imposing liability on a parent company even though it is considered a separate legal entity from its subsidiary. This could have been mainly due to the duty of care imposed – the judges could have been guided by there being evidence of the complainant having developed a disease and the health and safety measures which the court held to be a “systemic failure” (Ibid. at [77]) of what the court felt the Defendant was fully aware
of. These facts brought the case well within the rules of tort. It remains to be seen if the case will have wider implications beyond its facts as a matter of precedence and whether the approach will be adopted by the Singapore courts
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