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Corporate Liability Towards Tort Victims in the Personal Injury Context

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Corporate Liability Towards Tort Victims in the Personal Injury Context QUEEN MARY UNIVERSITY OF LONDON Corporate Liability Towards Tort Victims in the Personal Injury Context Xue Feng Submitted in partial fulfilment of the requirements of the Degree of Doctor of Philosophy June 2017 1 Statement of Originality I, Xue Feng, confirm that the research included within this thesis is my own work or that where it has been carried out in collaboration with, or supported by others, that this is duly acknowledged below and my contribution indicated. Previously published material is also acknowledged below. I attest that I have exercised reasonable care to ensure that the work is original, and does not to the best of my knowledge break any UK law, infringe any third party’s copyright or other Intellectual Property Right, or contain any confidential material. I accept that the College has the right to use plagiarism detection software to check the electronic version of the thesis. I confirm that this thesis has not been previously submitted for the award of a degree by this or any other university. The copyright of this thesis rests with the author and no quotation from it or information derived from it may be published without the prior written consent of the author. Signature: Date: 2 Abstract This thesis examines approaches to establishing liability in corporate groups. It considers the problem that arises when an insolvent subsidiary’s tort creditors suffer personal injury, and try to pursue recourse against other group companies – especially the parent company. Courts have tried to provide answers regarding the parent company’s liability for the torts of their subsidiaries, but have had limited success. The thesis reveals difficulty in extending liability to the parent company by way of insolvency law provisions, and by piercing the corporate veil. It recounts the hesitation of the courts in broadening their perspective beyond individual companies, so as to take the group itself as the responsible entity. The thesis points, furthermore, to shortcomings in proposals for a new rule of unlimited pro rata liability. Motivated by the inadequacy of current solutions to this pressing group problem, the thesis explores alternative tort law remedies under an approach suggested by the Supreme Court in the leading cases of VTB Capital Plc v Nutritek International Corp and others and Prest v Petrodel Resources Ltd. Chapter III discusses the role of tort of negligence in establishing the parent company’s liability. The work analyses case law decisions on how to widen the application of negligence in the corporate group context, and compares UK law with relevant United States’ and Australian case law. Since this group problem involves multiple legal entities, Chapters IV and V evaluate the possibility of using the doctrine of joint tortfeasance and/or the theory of vicarious liability in establishing the parent company’s liability for its subsidiary company’s torts. These two doctrines’ extensions in corporate tort cases are seldom discussed in the literature. To conclude, tort law solutions, especially the doctrines of tort of negligence and joint tortfeasance based on participations are recommended to be further developed for corporate tort problems. 3 Table of Contents Statement of Originality ............................................................................. 2 Abstract ....................................................................................................... 3 Table of Contents ........................................................................................ 4 Acknowledgements .................................................................................... 7 Table of Abbreviations ................................................................................ 8 Table of Cases ............................................................................................. 9 Table of Legislation .................................................................................. 20 Chapter 1 Introduction ............................................................................. 22 1.1 The scope of the work (Introduction to the central problem) ................................ 23 1.2 The rationales for the work ..................................................................................................... 28 1.2.1 The disadvantageous position of tort creditors ................................................... 28 1.2.2 The role of principles of limited liability and separate legal personality in corporate tort problems ............................................................................................................... 31 1.2.3 The approaches to establishing tort liability of corporate groups are seldom discussed in the literature ......................................................................................... 41 1.3 The development of the work ................................................................................................ 44 Chapter 2 Assessment of the unlimited liability regime, statutory protections, and the doctrine of piercing the corporate veil ................ 47 2.1 Introduction ..................................................................................................................................... 47 2.2 Evaluation of the pro rata unlimited liability regime ................................................... 48 2.3 Evaluation of statutory protections in the insolvency law for corporate tort creditors .................................................................................................................................................... 53 2.4 Evaluation of the doctrine of piercing the corporate veil as a redress for corporate tort creditors ...................................................................................................................... 61 2.4.1 Assessment of the “single economic unit” argument ....................................... 63 2.4.2 Assessment of the “fraud and façade” argument .............................................. 68 2.4.3 Assessment of arguments of “impropriety”, “agency” and “interests of 4 justice” .................................................................................................................................................. 75 2.4.3.1 Impropriety .................................................................................................................... 75 2.4.3.2 Agency ............................................................................................................................ 80 2.4.3.3 The interests of justice ........................................................................................... 82 2.4.4 Limitations of the extension of the doctrine of piercing the corporate veil .................................................................................................................................................................. 86 2.5 Conclusion ....................................................................................................................................... 92 Chapter 3 Corporate group’s negligence liability .................................. 96 3.1 Introduction ..................................................................................................................................... 96 3.2 Assessment of the application of tort of negligence in English case law .... 104 3.2.1 Application of tort of negligence in early examples and Chandler v Cape plc ........................................................................................................................................................ 105 3.2.2 Comparisons and evaluations .................................................................................. 125 3.2.2.1 Problems around the “assumption of responsibility” ........................... 127 3.2.2.2 Problems around the concept of “control” ................................................. 132 3.2.2.3 Limitations of the “four-part test” .................................................................... 143 3.3 Application of tort of negligence in other countries ................................................. 147 3.3.1 Australian cases ............................................................................................................... 147 3.3.2 United States’ cases ...................................................................................................... 158 3.3.3 Comparisons ...................................................................................................................... 166 3.4 Conclusion .................................................................................................................................... 169 Chapter 4 Parent company’s joint liability in tort ................................ 171 4.1 Introduction .................................................................................................................................. 171 4.2 Doctrine of joint tortfeasance .............................................................................................. 177 4.2.1 Concerted action ............................................................................................................. 180 4.2.2 Procurement ...................................................................................................................... 197 4.2.3 Authorisation .....................................................................................................................
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