Update: personal injury

Getting around the corporate veil

In Chandler v Cape Plc [2011] EWHC 951 (QB), a parent company, Cape plc (D), was held to owe a duty of care to employees of one of its subsidiaries. In the first decision of its kind in the UK, Justice Wyn Williams confirmed that it is not necessary to pierce the corporate veil, and, where the circumstances exist, a duty of care can be found to exist directly against a parent company.

Mr Chandler (C) was employed by one of D's subsidiary in the late 50s and early 60s. This subsidiary was called Uxbridge Flint Brick Company Limited (U) which had changed its name to Cape Building Products Limited during the time C was employed. While U operated as a separate legal entity, there was evidence to show D's direct involvement in its affairs and, in particular, on matters of health and safety.

C worked on a site that had two factories; one making bricks and the other manufacturing asbestos insulation boards (D had in fact installed and directly operated the asbestos factory previously but then sold it to U before C commenced his employment). C worked in the brick making business and was exposed to asbestos dust blown over to his work area from the other factory. He sustained considerable asbestos exposure as a result and in 2007 was diagnosed with asbestosis.

C was unable to sue U as it had ceased trading and had no assets. In addition, U had no EL insurance policy with cover for asbestosis sufferers. Therefore, the claim was solely advanced against D and the main issue for the court was to determine whether it had assumed responsibility for the health and safety of its subsidiary's employees and whether such involvement satisfied the three-stage test as set out in Caparo Industries v Dickman [1992] 2 AC 605 which requires: (1) that the damage is foreseeable; (2) a relationship of proximity between D and C; and (3) that it is 'fair, just and reasonable' to impose such a duty.

Mr Justice Wyn Williams found D should have foreseen the risk as it had actual knowledge of C's working conditions. It had installed and operated the asbestos factory previously and the risk of injury from asbestos was 'obvious'. He considered there was a relationship of proximity because he found, among others, that D determined the health and safety policy of U, it employed 'group' medical and safety officers found to have responsibility for workers at all the subsidiaries and in any case ultimately had the power to intervene. Finally, it was 'fair, just and reasonable' to hold D liable because, by the late 1950s, the damage from asbestos was clear. As such, he found for C and ordered D liable for £120,000 in damages.

When discussing the liability of parent companies, Mr Justice Wyn Williams confirmed that it was not always and solely a person's employer who could owe an employee a duty of care. Connolly v The Ritz Corporation Plc & Others QBD (4 December 1998) confirmed a duty was possible in relation to parent companies and further stated that both the parent and subsidiary employer could have coexisting duties of care provided the Caparo test is made out.

It is therefore not necessary to pierce the corporate veil to establish tortious liability against a parent company. The long history of authorities in this area illustrate how difficult it is to prove a 'sham' company. Therefore, if the evidence of relevant control is there, it is possible to hold a parent liable, and, while Connolly indicates such cases would be unusual, there are many situations where parents exercise considerable control over subsidiary operations previously safe in the knowledge that the corporate veil will completely protect them.

This is therefore enlightening for claimants as it provides a potential new avenue for seeking damages particularly given the problems many face in identifying live defendants and EL insurers.

Dangers of expert shopping

The case of Edwards-Tubb v JD Weatherspoon PLC [2011] EWCA Civ 136 confirms that a previously undisclosed expert's report will not be protected by privilege if the party later seeks permission to rely on a different expert.

The claimant (E) disclosed the identity of the expert he proposed to instruct in a list of nominated experts in the letter before action. The defendant (W) did not object to any of these, but, when the claim was subsequently issued, E sought to rely on a different expert's report.

W, while conceding it had no direct right to disclosure, submitted an application that this report be disclosed as a condition precedent to granting E permission to rely on the new report.

Lord Justice Hughes gave the leading judgment and affirmed the importance of privilege as a substantive right in law. However, he considered there were circumstances where it would be necessary to waive it. It was noted previous authorities supported disclosure in such cases as the price to pay in exchange for permission to rely on a new expert's evidence. E conceded this, but claimed this was confined to parties changing experts after issue of proceedings.

This proposition was rejected primarily because E instructed the expert after the protocol was engaged and had instructed the first expert 'for the purpose of proceedings' (CPR 35.2(1)). Therefore, there was no distinction between the instruction of an expert pre or post-issue. Furthermore, it was appropriate for the court to exercise control under CPR part 35 to discourage parties from 'expert shopping' and to ensure it received all the information relevant to the case. As such, it was considered appropriate to order disclosure.

While many may consider this decision restricted to fast-track cases, the Court of Appeal specifically commented that the spirit of these rules are expected to be observed in larger-value claims. Therefore, parties, both defendant and claimant, need to be aware that the price of instructing a new expert may lead to the disclosure of a previous expert's report, and, while privilege remains a fundamental principle of law, this will not always protect your client.

Withdrawal of an admission of liability

Woodland v Stopford and Others [2011] EWCA CIV 266 highlights the dangers of relying on an admission of liability.

Annie Woodland (W) suffered serious brain injury during a school swimming lesson when aged ten. How she was injured was unclear. She got into difficulties during the lesson and may have been submerged in water for some time before being rescued. She therefore ceased to breathe and needed resuscitation. Her injury left her permanently disabled.

There were three defendants (D) in this claim: a teacher (S) arranged by the school to provide the swimming lesson; a lifeguard (M) engaged by S; and the Swimming Teacher's Association (STA), a professional organisation of whom S was a member.

Two HSE reports were commissioned. The second one concluded that W was in trouble for about one to one and a half minutes during which time she should have been rescued. This therefore pointed to failures in the 'life guarding systems'.

Some four years later (there was no explanation for this delay) the second HSE report was forwarded to the claim handlers and, in November 2007, they conceded liability in full (it is understood this admission was not made on behalf of M). The claim handlers then passed the case to solicitors (Z) who assured they would not go behind the admission. However, they later did just that without providing any reasons.

Proceedings were issued and judgment sought, but D responded by applying for an order to withdraw the admission.

Judge Holman considered the matter at first instance and went through the criteria listed in CPR 14 PD 7.2. First, he noted there was no new evidence and that the only grounds for seeking to withdraw the admission was because Z had reappraised the claim. In relation to the next criteria and the conduct of the parties, he noted Z withdrew their admission despite providing previous assurances to the contrary. However, this was offset by W's solicitors not fully cooperating in providing documents.

In relation to W's prejudice, Judge Holman confirmed the passing of time created difficulties in obtaining evidence but much of this was not due to D as W's solicitors delayed in disclosing the second HSE report. In any case, some of the witnesses including S and M were still contactable. In contrast, it was clear D were prejudiced due to the potential damage to their professional reputation and from being deprived of the opportunity to defend the claim.

Going further down the list, Judge Holman did not consider this to be too late an application, and, turning to the prospects of success, he noted there were some deficiencies in the second HSE report which were open to 'serious' challenge.

Finally, he considered it was not in the interests of the administration of justice to let an admission stand when there was evidence supporting D's case. In addition, M was not bound by the previous admission and so this would be highly prejudicial to her. All together, these factors were not outweighed by the greater expense, delay and encroachment on court resources in allowing the claim to continue.

At appeal, it was considered Judge Holman had not erred in his approach. W relied on American Reliable Insurance Company v Willis Ltd [2008] EWHC 2677, which suggested the grounds of withdrawal and question of whether there was any new evidence was a factor in the practice direction carrying greater weight which should not have been ignored.

However, the appeal court disagreed and considered American Reliable Insurance restricted to its unusual facts. It affirmed there is no hierarchy within the practice direction. In addition, there is a wide discretion as to how these are to be applied and it was not open to the Court of Appeal to go behind Judge Holman's reasoning. The appeal was therefore dismissed. This case therefore affirms that an admission of liability is no guarantee of a favourable outcome. The best course of action in many cases may be to not delay in issuing proceedings and thereafter obtaining judgment to protect the claimant's position.

In addition, it is noted that this is a particularly tragic case involving a ten-year-old girl who suffered brain injury which left her unable to live independently and handicapped in the labour market. While expressing deep sympathy for W and her family's predicament, the court felt bound by the CPR. Unfortunately, the devastating effect on the family of reopening the liability case is not a relevant consideration in such cases.