No direct liability in tort for UK parent company. Third ‘anchor defendant’ decision in the Court of Appeal.

 

AAA v Unilever [2018] EWCA Civ 1532 is the third Court of Appeal decision in the trio of anchor defendant cases (the others being Lungowe v Vedanta and Okpabi v Royal Dutch Shell) that came before the courts last year raising the issue of when a parent company owes a duty of care to persons affected by the activities of its overseas subsidiary. The claimants were workers on a tea plantation in Kenyan who had suffered from criminal acts following the violence that followed the 2007 elections, which was on tribal lines. The issue was whether the parent company and the subsidiary owed a duty of care to people on the estate to protect them from unlawful violence. The claimants conceded that Kenyan law applied but it was accepted that English law was very persuasive in Kenya and Kenyan law would follow English law on the imposition of a duty of care on the parent company. Elizabeth Laing J admitted the possibility of a duty of care being owed by the parent company but the claim foundered on the issue of foreseeability of the type of harm suffered by the claimants.

Last week the Court of Appeal dismissed the claimant’s appeal on the grounds that there was no arguable case that the parent company owed a duty of care to the claimants. Sales LJ, giving the judgment of the Court, held that a parent company could owe a direct duty of care to those affected by the activities of its subsidiary in two situations: (i) where the parent has in substance taken over the management of the relevant activity of the subsidiary in place of, or jointly with, the subsidiary’s own management; or (ii) where the parent has given relevant advice to the subsidiary about how it should manage a particular risk.

The appellants accepted that they could not say that their claim was within the first category as the management of the affairs of Unilever’s Kenyan subsidiary, UTKL, was conducted by the management of UTKL. Instead, they sought to bring their claim within the second category, relying upon advice which they say was given by Unilever to UTKL in relation to the management of risk in respect of political unrest and violence in Kenya.  However, the witness evidence and the documentary evidence, showed that UTKL did not receive relevant advice from Unilever in relation to such matters, and that UTKL understood that it was responsible itself for devising its own risk management policy and for handling the severe crisis which arose in late 2007, and that it did so.

So far, the three anchor defendant cases on whether a parent company owes a duty of care in respect of the activities of its subsidiary company have seen two decisions against the claimants, and one Vedanta v Lungowe in their favour. In Vedanta  permission to appeal to the Supreme Court was granted on 23 March 2018, and in Okpabi the claimants have stated their intent to apply for permission to appeal to the Supreme Court. We are likely to see a lot more on this question in the coming months.

 

 

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Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to seven editions (soon to be eight) and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

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