Corporate Veil Will Not Be Pierced

A recent Court of Appeal judgment held that a parent company should not be held responsible for Heath & Safety failing in its subsidiaries.

Background

David Thompson v Renwick Group Plc [2014] EWCA Civ 635 considers Chandler v Cape plc [2012] EWCA Civ 525, a Court of Appeal case which caused immense concern to companies. In Chandler, it was held that a parent company owed a direct duty of care to an employee of one of its subsidiaries contrary to the basic principle that parent companies have a separate legal personality and it should not be possible to 'pierce the corporate veil'. In Thompson the Court of Appeal took a different view based on the facts.

Mr Thompson had been employed by two companies between 1969 and 1970. His work involved the handling of raw asbestos. In 1975, the two companies were acquired by a subsidiary of Renwick Group plc and a new director took over the running of the depot where Mr Thompson worked. As a result of his exposure to asbestos, Mr Thompson developed pleural thickening. His employers did not have liability insurance and no financial means to be able to meet any award for damages.

Mr Thompson brought proceedings against Renwick Group Plc (the parent company). At first instance, the judge agreed that Renwick Group Plc, through the new director, had taken control of the daily operation of the business to a sufficient extent to give rise to a duty of care to Mr Thompson.

The Appeal

On appeal it was held that, by appointing the director of the subsidiary to run the day-to-day operations with responsibility for health and safety, Renwick Group Plc had not assumed a duty of care to Mr Thompson. The Court clarified that a duty of care would only be imposed if the test of foreseeability of the damage and proximity was satisfied and if it was fair, just and reasonable to impose a duty.

The critical question in Chandler was whether...