Dear Colleagues;

The UK Supreme Court has handed down a decision in litigation relating to a possible duty of care in negligence owed by a UK-based parent company to residents of Nigeria detrimentally affected by the operations there of a subsidiary company: see Okpabi & Ors v Royal Dutch Shell Plc & Anor [2021] UKSC 3 (12 Feb 2021) http://www.bailii.org/uk/cases/UKSC/2021/3.html  .

The Royal Dutch Shell company (RDS) is being sued by local people for negligence relating to the actions of its subsidiary The Shell Petroleum Development Company of Nigeria Ltd (“SPDC”) in negligently causing oil spills.

An earlier decision of the UKSC had set out the general principles governing this sort of action: Lungowe v Vedanta Resources plc [2019] UKSC 20; [2020] AC 1045 . One of the findings there was that actions seeking to hold a head company liable for torts of a subsidiary are not “novel claims” requiring the application of a “Caparo” analysis-

 

25. In the light of this court’s decision in Vedanta, it is clear that this is not the correct approach because “the liability of parent companies in relation to the activities of their subsidiaries is not, of itself, a distinct category of liability in common law negligence” - per Lord Briggs at para 49. It raises no novel issues of law and is to be determined on ordinary, general principles of the law of tort regarding the imposition of a duty of care. In the context of parent/subsidiary relationships, whether a duty of care arises: 

“… depends on the extent to which, and the way in which, the parent availed itself of the opportunity to take over, intervene in, control, supervise or advise the management of the relevant operations (including land use) of the subsidiary.” (para 49) 

 

Another matter touched on in Vedanta was that a judge or an appellate court asked to decide a preliminary question of jurisdiction in such a case should not end up conducting a “mini-trial” of the full issues, and should instead confine itself to accepting the claims made by the claimant (unless they are clearly outrageous) and consider whether on those claims a duty might be found in a full trial. Here the majority of the UKSC (LORD HAMBLEN, with whom Lord Hodge, Lady Black and Lord Briggs agree) say that the CA in Okpabi made just that mistake by striking the claim out after a detailed consideration of the evidence. Instead, they should have reviewed the pleadings and allowed the claim to proceed if it was arguable.

 

[107] The result is that instead of focusing on the pleaded case and whether that discloses an arguable claim, the court is drawn into an evaluation of the weight of the evidence and the exercise of a judgment based on that evidence. That is not its task at this interlocutory stage. The factual averments made in support of the claim should be accepted unless, exceptionally, they are demonstrably untrue or unsupportable. 

 

Here (see [153]) the claims were not demonstrably untrue or supportable, and hence the trial of the action should have been allowed to proceed. The matter was sent back for a full hearing.

 

An unusual feature of the decision was that it was one of 4, not 5, judges; this was explained in a concluding note:

 

[161] After the hearing of the appeal but before this judgment was handed down, Lord Kitchin fell ill and it was uncertain when he would return to work. With the agreement of the parties, the presiding judge, Lord Hodge, gave a direction under section 43(3) of the Constitutional Reform Act 2005 that the court was still duly constituted by the remaining four Justices, all of whom are permanent judges.

 

Regards

Neil