Court of Appeal April 2012
Mr Chandler had been employed by Cape Building Products Limited (“Cape Products”), for two short periods between 1959 and 1962. Cape Products was a wholly owned subsidiary of Cape plc (“Cape”) and manufactured incombustible asbestos.
In 2007 Mr Chandler discovered he had contracted asbestosis due to exposure to asbestos dust whilst loading bricks for another arm of Cape Products adjacent to the asbestos works as part of his employment.
By that time Cape Products no longer existed and had no policy of insurance that would indemnify it against claims for asbestosis.
Mr Chandler issued proceedings against Cape on the basis that Cape and Cape Products were joint tortfeasors that were jointly and severally liable to pay him damages.
The judge held that Cape owed a duty of care to Mr Chandler on the basis of the common law concept of assumption of responsibility. Cape appealed against the decision.
The Court of Appeal dismissed Cape’s appeal on the basis that the company owed a direct duty of care to the employees of Cape Products. Cape had omitted to advise on precautionary measures to control asbestos dust in spite of its knowledge about the risks and management of asbestos.
There is no automatic assumption of responsibility for a subsidiary’s employees on the part of the parent. It was, however, recognised that, in appropriate circumstances, the law could impose on a parent company responsibility for the health and safety of its subsidiary’s employees, including a situation where, as in the present case:
The court stated that it is not necessary to show the parent is in the practice of intervening in the health and safety policies of the subsidiary; it will look at the wider relationship between the companies.
In Cape’s case, in addition to its knowledge of asbestos and its management, it had knowledge of the production facility and exercised control over Cape Product’s capital spending.
The recognition of this extension of the duty of care principle is something that is likely to impact on parent companies within the construction industry.
Where there is evidence to show that the parent has a history of intervening in the trading operations of a subsidiary, construction industry parent companies should:
Although health and safety was the focus in this case, parent companies should be wary of possible wider application of the assumption of responsibility where a subsidiary owes a duty of care to a third party. For example, in the context of design or where pollutants or contaminants are handled. In such a scenario these same considerations would also be relevant.
Andrew Weston is a senior associate in the construction and engineering team at international law firm Taylor Wessing