The claimants were employees and former employees of Unilever Tea Kenya Limited (UTKL), or residents living on a tea plantation that was run by UTKL. They sought to bring a claim against Unilever and its Kenyan subsidiary, UTKL (the defendants).
The claimants argued that they were the victims of inter-tribal violence during the 2007 Kenyan presidential elections, during which mobs came onto UTKL’s tea plantations. From this, the claimants argued that both defendants owed them a duty of care under the law of tort to take effective steps to protect them from this violence, which was breached. However, for the claimants to sue UTKL in England, they needed to show that they had a good arguable claim against Unilever.
The initial court decision made two key rulings.
(i) The court held that the claimants had no arguable claim against either of the defendants. This was because no duty of care was owed by either of these companies under the three-part test for a duty of care that was established in Caparo Industries Plc v Dickman 1990. Caparo set out that: (a) damage must be reasonably foreseeable as a result of the defendant’s conduct; (b) the parties must be in a relationship of proximity; and (c) it must be fair, just and reasonable to impose liability. Here, the court held that (a) was not fulfilled and that (c) was not fulfilled because such a duty would effectively require Unilever to act as a surrogate police force which was not fair, just and reasonable. However, it is important to note that the court held that (b) was fulfilled: there was sufficient proximity.
(ii) The court held that if (i) was wrong and there was indeed a viable claim, England would be the proper forum in which to hear the claim.
The Court of Appeal
In the Court of Appeal, the claimants appealed against the ruling that there was no duty of care (part (i)). Meanwhile, the defendants appealed against the ruling that the appropriate forum would be England if there was a viable claim (part (ii)).
The Court of Appeal emphasised how a parent company only has a duty of care in relation to an activity of its subsidiary if the law of tort requirements are satisfied in the particular case. The Court noted that in practice, this might occur when: the parent company has taken over the management of the relevant activity of the subsidiary in place of, or jointly with, the subsidiary’s own management; or where the parent company has given relevant advice to the subsidiary about how it should manage a particular risk.
Here, the Court of Appeal rejected the claimants’ appeal. In fact, the Court of Appeal held that even (b) of the Caparo test was not fulfilled: there was not sufficient proximity. This was because UTKL’s affairs were conducted by the management of UTKL and UTKL did not receive relevant advice in relation to the matter. In practice, this meant that the Court of Appeal left any potential complaint to be heard by the Kenyan courts.
The Supreme Court
In July 2019, the Supreme Court rejected the application of the claimants to appeal the Court of Appeal’s decision. Two developments make this conclusion somewhat surprising.
Firstly, the Supreme Court granted permission to the claimants to appeal the Court of Appeal’s decision in Okpabi v Royal Dutch Shell and the Shell Petroleum Development Company of Nigeria 2018. In this case, the Court of Appeal had held that there was no real prospect of a duty of care being owed by a parent company in respect of its Nigerian subsidiary’s oil pipeline operations in Nigeria which were alleged to have caused environmental damage. The Court of Appeal viewed it as crucial that the subsidiary retained autonomy when it came to imposing group standards, policies and practices – the parent company merely expected the subsidiary to apply these. The Court of Appeal also noted that reporting requirements that exist between a subsidiary and a parent company do not imply the existence of control.
Secondly, in Lungowe v Vedanta 2019, the Supreme Court held that a duty of care owed by a parent company was arguable, such that jurisdiction was established. In this case, the Supreme Court emphasised that whether a parent company owes a duty of care is a fact-specific analysis. Lord Briggs also gave several examples of where a duty of care might arise, including where the parent company: conducts a group’s business so that they are carried on as if they were a single commercial undertaking; issues group guidelines about minimising the environmental impact of inherently dangerous activities, that contains systemic errors which, when implemented by a subsidiary, then causes harm to third parties; takes active steps, by training, supervision and enforcement, to see that group-wide policies are implemented by relevant subsidiaries; and publishes materials in which it holds itself out as exercising a degree of supervision and control of its subsidiaries, even if it does not in fact do so.
Numerous conclusions can be drawn from this discussion. Firstly, Vedanta shows that sometimes, an alleged duty of care may be sufficiently arguable to gain jurisdiction in the English courts. Secondly, while a parent company might seek to prevent subsidiaries from causing harm or loss to third parties, imposing and enforcing such measures may help to establish proximity under the Caparo test, potentially leading to liability. Finally, the lack of clarity in this area of law creates challenges for victims and companies.
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