The agreement incorrectly stated a date which would have terminated the secure tenancy after five not six months. It was also common ground at the trial that there was nothing to justify the piercing of the corporate veil in this case (see Judgment, paragraph 66). BAILII, ‘Chandler v cape Plc [2012] EWCA civ 525 (25 april 2012)’ (2012) accessed 20 December 2016 Cases. In the first letter, dated 26 October 1961, Dr Smither wrote to Dr R Owen of HM Factory Inspectorate at the Ministry of Labour to the following effect: The second letter is the reply of Dr Owen dated on 6 November 1961 addressed to Dr Smither at Cape: This reply prompted a further letter from Dr Smither dated 7 November 1961. 9 Thompson v Renwick Group Plc [2014] EWCA Civ 635, [2015] BCC 855. Neutral citation number [2019] UKSC 20. To help you navigate and control risk in a challenging legal landscape, we have collated a range of key advice and guidance. Accordingly the cases on this appeal of each party are most easily understood by setting out all of their arguments together on the law and the facts. The recent decision in Chandler v Cape plc (2) was, in the words of Lady Justice Arden of the Court of Appeal, "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". There was a works doctor and nurse there. Mr Chandler worked for an asbestos manufacturer Cape Building Products Ltd which was a wholly owned subsidiary of Cape PLC between 1959 and 1962. Dr Smither's letter and the inspector's reply both show that there was some understanding even in 1961 of a connection or potential connection between dust exposure and the development of asbestosis. There were also common directors but every director has an independent responsibility for running the company and so the mere fact that there were common directors does not, on Mr Stuart-Smith's submission, imply a watering down of the subsidiary's obligations to its employees. The case concerned health and safety matters, but the Added to those factors was the role played by Dr Smither. His witness statement, in conjunction with the other evidence, naturally led the judge to find that Dr Gaze was group chief scientist and that he worked in the group laboratory. Dr Smither was doing research into the link between asbestos dust and asbestosis and related diseases. Finally, I must deal with Mr Stuart-Smith's submission that the judge had gone beyond Cape's concession in the pleadings (above, paragraph 34). The evidence subsequent to the relevant period does not show that Dr Smither must necessarily have had a role in relation to safety, or that Cape must necessarily have been involved in Cape Products' affairs, in the relevant period. Michael Hutchinson; On 25 April, the Court of Appeal handed down an historic ruling concerning the liability of parent companies to an employee of one of its subsidiaries. He found that there had been an assumption of responsibility for the reasons set out in paragraphs 72 to 77 of this judgment: The grounds of appeal are (1) that the judge applied the wrong test for the imposition of liability on a parent company; (2) that the judge failed to identify the scope of the duty of care which he found; (3) that the judge wrongly made specific findings of fact and on occasions wrongly reversed the onus of proof and (4) that the judge misunderstood a concession made in the pleadings. The question is simply whether what the parent company did amounted to taking on a direct duty to the subsidiary's employees. Moreover, as Mr Weir submits, the judge's findings regarding Dr Smither are not disputed. However, Mr Sim's evidence states that Cape took considerable steps to ensure that the method of working with asbestos was as safe as possible. According to the judge, he was succeeded in 1957 by Dr W. H. Smither, but that date is challenged on this appeal. More about our Environment & Climate Change capabilities. 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. Vedanta Resources PLC and another (Appellants) v Lungowe and others (Respondents) Judgment date. There is no issue about whether the system of work in this case was unsafe. A subsidiary and its company are separate entities. Chandler v Cape: Piercing the Corporate Veil: Lessons in Corporate Governance Introduction On 25 April, the Court of Appeal handed down an historic ruling concerning the liability of parent companies to an employee of one of its subsidiaries. For these reasons I would dismiss the appeal. Moreover, while I have reached my conclusion in my own words and following my own route, it turns out that, in all essential respects, my reasoning follows the analysis of the judge in paragraphs 61 and 72 to 75 of his judgment. Thus the court has to be satisfied that there was relevant control of the subsidiary's business. In these circumstances, there was, in my judgment, a direct duty of care owed by Cape to the employees of Cape Products. Thus the judge records at the end of paragraph 73 of his judgment that "this was no failure in day to day management, this was a systemic failure of which the defendant was fully aware.". In those circumstances, this court is substantially in the same position as the judge to the review the evidence. Chandler v Cape plc EWCA Civ 525 is a decision of the Court of Appeal which 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. To briefly recapture the facts of the case (see for further detail our Dr Gaze, a qualified chemist, had been employed by Cape at its Barking factory from the 1940s. Judgment … For the purposes of (4) it is not necessary to show that the parent is in the practice of intervening in the health and safety policies of the subsidiary. He and his team had been responsible for developing brake linings made from moulded white asbestos. I do not find this to be surprising, as what is complained of is not the taking of any particular step but an. Judgment (PDF) Press summary (PDF) Accessible versions. There is no evidence that what went wrong here was that Cape Products failed to maintain some dust extraction machines in the asbestos factory and in any event it is difficult to see how such machines could have avoided the escape of dust given the open sides of the factory. He was 89 years old at the date of the trial. The story in a case called Chandler v Cape PLC went like this. Mr Hodgson stated that Dr Gaze was Chief Chemist at the Barking laboratory while he was there. Chandler v Cape plc [2012] EWCA Civ 525 Practical Law Resource ID 9-519-3697 (Approx. That exception was held by Rix J in. He submits that the second part of the concession comes into play only if Cape is held to be under the relevant duty. He was also (if this label makes any difference) the group medical adviser of Cape. Cited – Mundy v Hook CA 18-Jul-1997 The court was asked whether an agreement was an assured shorthold tenancy agreement with the 1988 Act. This was written from his medical practice but the words "Cape (West Ham)" (ie Barking) have been added by someone in manuscript. One of these factories had been used for making cement pipes but that use had been terminated and so that factory was empty. Mr Weir relies on the minutes of the meeting of the Asbestos Research Council held at the London offices of Cape on 11 September 1957. There was a works safety committee. There was an omission to advise on precautionary measures even though it was it was doing research and that research had not established (nor could it establish) that the asbestosis and related diseases were not caused by asbestos dust. That is, there was no imposition or assumption of responsibility to the employee by reason only that the defendant was the parent company: parent companies have a separate legal personality and it should, as a rule, not be possible to “pierce the corporate veil”. In due course, it required Cape to purchase this business. 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"). This court is required to be satisfied for itself that the facts justified the imposition of liability. In particular, in the case of M&A transactions involving the sale or purchase of a subsidiary entity, parties will need to think about contingent and residual liability issues arising for parent companies. 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. The court does not have to find that the relevant party has voluntarily assumed responsibility (see also on this point, Likewise, it has been held on two occasions that it is arguable that a parent company may owe a duty of care to employees of subsidiaries: see. Cape was entitled in law to organise its operations so that they were carried out by the members of its group. (a) Origins of Cape Products' asbestos business: (b) Relationship between Cape and Cape Products: ii) At all material times there was one or more directors of Cape on the board of Cape Products. There was also a report on health and safety produced by Dr Smither in 1962 following a visit to South Africa. Dr Smither is shown as a medical officer and as a representative of Cape. 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. Dr Smither was also a member of an industry-led expert body, the Asbestos Research Council, set up in the 1950s to lead research into the health and safety issues arising from asbestos. In Chandler v Cape plc [2012] EWCA Civ 525, the claimant contracted asbestosis through exposure to asbestos dust during the course of his employment with Cape Building Products Ltd. The letter stated: Although none of these letters bear any statement as to the capacity in which Dr Smither was acting, they demonstrate that he visited Cape Products' factory to discuss a particular case of asbestosis (it is not clear whether the employee was employed in the asbestos production or brick making side of Cape Products' business). As the judge observed, the problem was systemic. There is an important exchange of letters between Dr Smither and Dr R Owen of HM Factory Inspectorate at the Ministry of Labour. The judge accepted that this evidence is many years after the relevant period. Cape Products was dissolved some years ago. Whichever way it is formulated, the injury to Mr Chandler was the result. Cape concedes that the system of work at Cape Products was defective. 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". [New search] This evidence was consistent with the case that the judge had found throughout the relevant period of employment. The threads may for convenience be labelled as follows: Cape was involved in the production of asbestos from the nineteenth century and had several factories in the UK. The medical adviser reported to the board. At a board meeting on 1 November 1966 the board discussed a problem that had arisen in Northern Ireland over sales there. In 2007 Mr Chandler discovered he had contracted asbestosis from exposure to asbestos dust. Cape in effect accepts that Cape Products failed in its duty to Mr Chandler. 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"). It was not possible to call a number of witnesses but this is not a case where an adverse inference should be drawn because of that. Contract lawyers from Linklaters. In this case, the claimant, Mr Chandler, was employed by a subsidiary of Cape plc for just over 18 months from 1959 to 1962. There was no evidence produced by Cape Products. Cape moreover had superior knowledge about the asbestos business. In Chandler v Cape the claimant had also contracted an asbestos-related disease while working for a subsidiary of the parent company. The works doctor was not a party to the correspondence although reference is made to him. As stated at paragraph 10 of the witness statement, the laboratory had to be moved. In turn, the Cape board took an interest in issues relating to the management by subsidiaries of their own business. On Mr Stuart-Smith's submission, the judge should have concluded that responsibility for health and safety at Uxbridge remained with the management at Uxbridge. Mr Sim also stated that Cape produced detailed instructions before the Asbestos Regulations were introduced in l969. Mr Weir rejects the suggestion that the judge reversed the burden of proof. This, on Cape's admission, was a case of blatant exposure. The judge found that he was appointed group chief chemist (Judgment, paragraph 61). They related to (1) the role of Dr Smither, (2) the role of Dr Gaze, (3) the exchange of correspondence between Dr Smither and the factory inspector, (4) the fact that Cape Products had acquired its asbestos business from Cape and (5) that, when it suited it Cape intervened in the management of Cape Products' business. (Asbestolux appears to have been a generic product, not one protected by intellectual property rights). The background to this application can be found in Weekly Updates 14/12, 18/16, 26/16 and 30/17 (Chandler v Cape Plc and Cape Distribution v Cape International). In my judgment, what Cape accepted was that Cape Products had breached its duty to its employee and that if it, Cape, had assumed a duty to Cape Products' employees to advise on, or to ensure, that they had a safe system of work, that system of work was in fact rendered an unsafe one in a way which triggered its liability by reason of the migration of asbestos dust. There are no documents evidencing communications because there were no such communications and there should have been. Thus the imposition of liability on Cape was wrong. It is convenient to deal with this ground first, since Mr Owen QC, for the appellant, realistically accepts Indeed, all the people concerned in the management of Cape Products are now deceased. Mr Stuart-Smith submits that in any event the judge fails to identify the scope of the duty of care owed by Cape for the health and safety of employees. Dr Smither attended a meeting on behalf of Cape at Cape's premises on 11 September 1957 and became its chairman in due course. The judge relied on Cape's board minutes of a meeting on 27 November 1964 which confirm that by that date at least Dr Smither, described as group medical adviser, was seeking to do research on the lung function of employees including those at Cape Products. They refer to discussions taking place at Uxbridge for the expansion of Asbestolux production. So it was not difficult to see what the judge has drawn from the document. Whether or not he was formally appointed group medical adviser in the relevant period, it is clear that he was engaged on research, based on empirical research done at Cape and its asbestos-producing subsidiaries, about the relationship between asbestos production and asbestosis. As Dr Browne had explained in his evidence in the 1994 proceedings, a person removed from dust exposure had a better prognosis. . Mr Stuart-Smith accepts that if the parent company were to take over the entirety of the subsidiary's operations, then a duty of care would be owed. In common with other group companies, Cape Products employed its own works doctor and had its own works safety committee on which workers were represented. The judge should not, in any event, have used the material for the period 1962-70. The Court of Appeal stressed that the duty of care from a parent company to subsidiary employees did not exist automatically and only arose in particular circumstances. There is evidence that it was indeed shared. It can be separated into a number of threads although some of the evidence belongs to more than one thread. Chandler v Cape: Piercing the Corporate Veil: Lessons in Corporate Governance; Authors. Cape's board minutes show that Cape approved the separate administration of Cape Products' operations "in accordance with company policy" of Cape. The effect of the change was that the asbestos operations at Uxbridge became the responsibility of Cape Products, and on Mr Stuart-Smith's submission, no one else. It was due to dust in the atmosphere in the part of the Cowley Works in which Mr Chandler worked and which was not used for asbestos production. The evidence also showed that as at the date of its evidence it had a group manual which provided for regular medical checkups for employees having regular contact with asbestos and asbestos products, and other employees at the discretion of the manager. But there is a live issue as to the adequacy of the judge’s direction on this aspect. The Court of Appeal has now upheld the High Court decision confirming that the holding company owes a direct duty of care to the employees of its subsidiary. On 31 July 1962, for instance, Cape's board discussed action proposed to solve a production difficulty at the Uxbridge factory. Mr Stuart-Smith submits that the fact that Cape is the parent company involves certain levels of control. (Chandler v Cape plc, supra at 1, at [2]). The case of Chandler v Cape7 provides four descriptive factors that may indicate the presence of a duty of care owed by the parent company, which 3 (B) Depending on the facts, a parent company may be liable for the operations of its subsidiary. Before Judges Coburn and Lisa. The subsidiary went into liquidation. According to Dr Browne, Dr Gaze's responsibility extended to health and safety issues raised by research and development. 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. Chandler claimed that Cape should compensate him because it had undertaken responsibility for health and safety in … Mr Weir submits that this is a case about weaving strands of evidence together in order to ascertain what the position was as between parent and subsidiary with regard to the former's responsibility for the health and safety of employees. He died of mesothelioma in 1982. These were attended by representatives of a number of companies in this field, including Cape. Mr Chandler’s estate brought a claim against Cape plc alleging it had owed (and breached) a duty of care to Mr Chandler. The Court of Appeal stated that Cape plc assumed responsibility to Mr Chandler and owed a direct duty of care to Mr Chandler which it breached. 9 Thompson v Renwick Group Plc [2014] EWCA Civ 635, [2015] BCC 855. 3 (B) Depending on the facts, a parent company may be liable for the operations of its subsidiary. This was because: (i) the parent company and subsidiary had relatively similar businesses; (ii) the parent company knew (or ought to have known) that the subsidiary’s system of work was unsafe; and (iii) the parent company knew (or ought to have foreseen) that the subsidiary or its employees would rely on its using that superior knowledge the employee’s protection. Accordingly, the judge was able to draw inferences from the fact that Dr Gaze was chief chemist scientist. A recent Court of Appeal in Chandler v Cape plc [2012] EWCA Civ 525 decision has found that a parent company owed a duty of care to its subsidiary employees. Its principal factory was in Barking, near London. Cape Products carried on its own research and development of its products. Cape were collecting data and they must have done something with it. ____________________, Mr Jeremy Stuart-Smith QC & Mr Charles Feeny (instructed by Greenwoods Solicitors) for the Appellant He submits that the fact that Cape is the parent company of Mr Chandler's employer does not of itself give rise to duties to protect the respondent from injury at work. Cape started out as a tenant of Cape Products' site. 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. As the judge held, working on past performance and viewing the matter realistically, Cape could, and did on other matters, give Cape Products instructions as to how it was to operate with which, so far as we know, it duly complied. 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. But there is a live issue as to the adequacy of the judge’s direction on this aspect. The court has first to say what the duty was before there can be any "causing or permitting" of any breach. [Buy ICLR report: [2012] ICR 1293] Mr Weir submits that the letters to and from Dr Smither have to be seen in the context of all the other evidence. The case results in case law catching up with the group/subsidiary corporate structures that are now relatively common. The background to this application can be found in Weekly Updates 14/12, 18/16, 26/16 and 30/17 (Chandler v Cape Plc and Cape Distribution v Cape … Mr Chandler worked out of doors loading bricks produced by a brick manufacturing arm 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. Before I make my own assessment as to whether there was an assumption of responsibility in this case, I need to address a number of discrete arguments put by Mr Stuart-Smith: Mr Stuart-Smith submits that it is significant that there is no evidence that Cape had any responsibility for devising or implementing operational policies and that there is no complaint about any specific advice that Dr Smither gave and no evidence that Cape dictated Cape Products' policy on health and safety. 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