Commercial analysis of recent Unilever Judgment

Date: Monday, May 22nd, 2017 by Aneesah Atallah Frost.

On 27 February 2017, Laing J handed down judgment in AAA & Ors v Unilever PLC and Unilever Tea Kenya Limited [2017] EWHC 371 holding that the Court did not have jurisdiction to hear personal injury and property damage claims brought by Kenyan nationals against Unilever PLC (‘D1’), a holding company registered in the United Kingdom, and against Unilever Tea Kenya Limited (‘D2’), a trading company registered in Kenya. The claimants were employed by or lived on a tea plantation operated by D2. The injury and damage was alleged to have been carried out by armed criminal third parties on D2’s plantation after the Kenyan Presidential election in 2007.

Strategic Importance

This case has significant implications for international customers of BLM who operate a holding company registered in the UK with subsidiaries registered outside the UK. This case is particularly relevant where employees of the local subsidiary, or occupiers of premises operated by the local subsidiary, bring a claim in the UK for personal injury and/or property damage that occurred in the local jurisdiction, alleging fault on the part of the United Kingdom registered holding company and/or the locally registered trading company. On the facts of this case, at the material time of the alleged injury and damage, 88.2% of D2’s shares were owned by Brooke Bond Limited, a wholly owned subsidiary of D1. The fact that D1 was an indirect parent company registered in a different country was a substantial focus of the assessment whether there was a sufficient relationship of proximity between D1 and D2.

The Pleaded Case

The claimants argued that D1 owed a common law duty of care to them to take all reasonable steps to ensure that they did not suffer personal injury, damage to property or economic loss due to the foreseeable risk of ethnic violence on the plantation operated by D2, particularly during election periods. It was further submitted by the claimants that such a duty was fair, just and reasonable because inter alia D1 knew or ought reasonably to have known of the significant risk of ethnic and political violence on the plantation, and that D1 had or ought reasonably to have had superior expertise, knowledge and resources.

The Judgement

The finding that the Courts of England and Wales have no jurisdiction to hear this claim flowed from the Court’s conclusion that D2 (let alone D1, which was based thousands of miles away) could not have foreseen the loss and damage caused to the claimants by the armed criminal third parties. The argument that it was fair, just and reasonable to impose a duty on D1 as described above was bound to fail because the claimants did not have any features which singled them out for the violent attacks they suffered other than their ethnicity, and since the election was very close, and its outcome was not known until the last moment D1 would have had to arrange (in advance) for D2 to evacuate all the potential victims of post-election violence from the plantation.

The Court applied Chandler v Cape PLC [2012] EWCA Civ 525, in which the Court of Appeal held that a parent company may be responsible for the health and safety of employees of a subsidiary, even though it does not exercise complete control over the operations of the subsidiary, and in particular, where the parent knows that the system of work operated by the subsidiary is unsafe. On the facts of this case, the close geographical links between the parent company and subsidiary (as there were in Chandler) were not present. Moreover, in this case (and unlike Chandler) the risks against which such a duty would require D1 to provide protection were not foreseeable risks of personal injury caused by a dangerous activity. It followed therefore that the claim against D2 did not have a reasonable prospect of success and there was no real issue between the claimants and D1.

The Court nonetheless hinted that in theory a claim against D1 (as the parent of D2) might succeed based on documentation that D1 sought to exercise control over the management of D2 and D2’s various policies. In this case, however, it was simply not enough for the claimants to prove that D1 played a more active role in managing D2’s affairs and was not just a holding company.

Forum Non Conveniens

On the question of jurisdiction, the Court applied the Court of Appeal’s decision in Erste Bank AG (London) v JSC (MV Red October) [2015] EWCA Civ 279. The Court of Appeal held in Red October that the question whether it is reasonable to try a claim in England and Wales is distinct from the question of whether a claimant has a real prospect of success. It must be separately considered by the Court, and it is to be considered in isolation from any claim against the non-domiciled defendants. The question is not whether it is reasonable for the claimant to issue proceedings in England and Wales, but whether it is reasonable for the Court to try the claim.

The Court held that if there was in fact a real issue between the claimants and D1, then it would have been reasonable for the English court to try the claim. D2 would have also been a necessary and proper party to this claim because the claims against D1 and D2 are closely connected. This was because the claims are based on the same core facts and on similar legal principles which would require only one investigation to resolve. However, absent the claim against D1, Kenya would be the correct forum for the claim against D2. This is because the claimants all live in Kenya, the claims all involve personal injuries to the claimants and claims for loss of property in Kenya, the relevant torts were committed in Kenya, and the claimants were employed by or visitors to land owned by a company registered in Kenya.

Analysis

This judgment has affirmed the position that the Court is obliged to assess whether claims against any defendant have arguable merit when determining jurisdiction. The legal importance of this judgment for international customers of BLM includes:

  • That the question of whether it is fair, just and reasonable to pierce the corporate veil and impose a duty on a United Kingdom parent company towards employees of foreign subsidiaries, or occupiers of premises operated by the foreign subsidiaries, on the basis of applying Chandler will be rigorously examined. The Court will critically analyse the factual matrix in resolving this question.
  • The question whether the Courts of England and Wales are the proper place to bring the claim will not arise unless the claim against the United Kingdom parent company has a real prospect of success.
  • Such claims will not have a real prospect of success where it would not be fair, just and reasonable to pierce the corporate veil and impose a duty on the United Kingdom parent company on the basis of applying Chandler.
  • If the claim against the United Kingdom parent company has no real prospect of success, then England and Wales is not the proper place to bring the claim in accordance with paragraph 3.1(3) of Practice Direction 6B. As such, the Courts of England and Wales will not have jurisdiction to hear the claim.
  • The claimant’s recourse is to bring the action against the foreign subsidiary in the foreign jurisdiction but they will not be allowed to join the United Kingdom parent company in these proceedings.

The key commercial lessons relevant to international customers of BLM to reduce potential exposure to similar claims include:

  • Awareness of internal company group documentation which suggest that the United Kingdom parent company exercises control over the management of the foreign subsidiary and of the foreign subsidiary’s various policies.
  • Periodic review of minutes of meetings, risk assessments, safe systems of work, or such other documentation, to identify whether anything contained therein points to an unsafe work practice or dangerous activity undertaken by the foreign subsidiary.

If you might have any queries that concern overseas jurisdictions, our Global Insurance Law Network is composed of like-minded law firms uniquely positioned in key insurance hubs worldwide. Please get in touch with your BLM Partner at your earlier convenience if you would like us to examine your internal company group documentation and conduct an audit to discern whether your business might be at risk of similar claims as those pleaded in this case.

Article prepared exclusively for Global Insurance Law Connect by Zachary Gould-Wilson, BLM London.

Talk to us?

Our vision and focus is to use the strength and depth of our company to help our clients reduce the time and money they spend on managing risk. If you need a global group of legal advisers, delivering a creative, commercial and specialist service, talk to Global Insurance Law Connect today.

 

Contact: +44 (0)20 7029 4238

x