Holding company liability for health and safety
Good Company July 2014 edition
- Transparency and trust: seeing the way to reform
- Service of English legal proceedings on overseas directors
- Personal guarantees by directors
- Raising money under false pretences
- Holding company liability for health and safety
- Proper purpose test for access to register of members
- When not to be a de facto director
The Court of Appeal has recently overturned a County Court decision and confirmed that a group holding company was not liable to an employee of one of its subsidiaries who had contracted asbestosis.
David Thompson was exposed to asbestos dust at work in the mid-1970s. He was employed by two companies in the Renwick group during this time, but neither had sufficient assets to be worth suing and neither had responsive liability insurance. He therefore sought to claim damages from the holding company, The Renwick Group plc.
In order for his claim to be successful, he had to establish that the holding company owed a direct duty of care to the employees of its subsidiaries in health and safety matters.
The Court quickly dismissed the idea that a holding company can be held to have assumed such a duty simply by appointing an individual as director of the subsidiary with responsibility for health and safety. In carrying out his role, the director would not be acting on behalf of the holding company but pursuant to the fiduciary duty he would owe as a director of the subsidiary.
So Mr Thompson would have to find other evidence to show that the holding company had taken on a direct duty of care to him.
In 2012, the Court of Appeal found that Cape plc had taken on such a duty to its subsidiaries' employees in circumstances where:
- the businesses of the holding company and subsidiary were in a relevant respect the same;
- the holding company had, or ought to have, superior knowledge on some relevant aspect of health and safety in the particular industry;
- the subsidiary’s system of work was unsafe as the holding company knew, or ought to have known; and
- the holding company knew or ought to have foreseen that the subsidiary or its employees would rely on its using that superior knowledge for the employees’ protection (where, for example, the holding company has a practice of intervening in the trading operations of the subsidiary).
However, the Court of Appeal thought the facts in Mr Thompson's case against The Renwick Group were very different. In order for him to have any prospect of succeeding in his claim, he would have to show that the holding company was engaged in a business involving the warehousing or handling of asbestos or another potentially hazardous substance. In fact, there was no evidence that the holding company had carried on any business at all, apart from that of holding shares in other companies.
Mr Thompson sought to rely on the use of the Renwick name on paperwork used by the subsidiary and in the livery on the lorry he drove for the subsidiary, but there was no evidence that the full name of the holding company was used, rather than just "Renwick" or the name of another group subsidiary.
Mr Thompson also pointed to co-ordination of operations between subsidiaries in the group, but the Court of Appeal thought this fell far short of demonstrating that the holding company had assumed control of operations in such a manner that it had assumed a duty to the employees of the subsidiaries. The intermingling of the businesses of the subsidiaries, the interchangeable use of depots and the shared use of resources meant only that the subsidiaries were operating as a division of the group carrying on a single business.
The decision will come as a relief for holding companies who have been wondering how far the Cape decision might be taken. It is now clear that a holding company which does nothing but hold shares in group companies will not be found to have assumed a direct duty of care to the employees of its subsidiaries. The impact of the Cape decision will be limited to situations where the holding company itself is engaged in a relevant business and has superior knowledge, and it is therefore fair to infer that the subsidiaries will rely on the holding company deploying its superior knowledge in order to protect their employees from risk of injury.
Danielle Harris is a senior associate and professional support lawyer in the corporate group of Fieldfisher in London.