James Hardie and the Development of Parent Company Liability: New Zealand as a Forum for Transnational Human Rights Litigation?
Author | Talia Siataga |
Position | LLB, BA, LLM(1st Class) International Law and Politics, University of Canterbury |
Pages | 77-108 |
77
JAMES HARDIE AND THE DEVELOPMENT
OF PARENT COMPANY LIABILITY:
NEW ZEALAND AS A FORUM FOR
TRANSNATIONAL HUMAN RIGHTS
LITIGATION?
Talia Siataga*
Abstract
Recent juri sprudence in the United Ki ngdom and Canada has recog nised the possible
liability of parent companies for the tortious activity of their subsidiaries domiciled in
foreign jurisdictions. “Parent company liability” is thus becoming a litigious avenue
through which victims might seek eective legal redress for corporate human rights
abuses. In 2019, the New Zealand Court of Appeal (NZCA) endorsed the emerging
jurisprudence on parent company liability in the James Hardie litigation. is article
critically d iscusses the decis ion of the NZCA against th e wider global context of c orporate
impunity for human rights abus es. It examines the recent case law a cross Australia, the
United Kingdom an d Canada and the role of inte rnal corporate str uctures and policie s as
evidence of a prox imate relationship be tween the parent and subs idiary. It then criti cally
discusses three key policy concerns with the endorsement of parent company liability in
New Zealand. Ultim ately, this articl e concludes that the N ZCA decision do es not represent
a dramatic extension of tortious liability, but it does open the doors to a novel form of
transnatio nal human rights liti gation on New Zealand shores . Overall, the recogni tion of
parent company li ability reconcile s tort law with the field of ‘b usiness and human ri ghts’,
which has long seen the need to develo p stronger mechanisms of legal accountabili ty for
corporations operating transnationally.
I. Introduction
Holding mult inational corp orations accountable for compl icity in human r ights
abuses is an immense legal challenge in the globalised world.1 In the absence of
1 Peter Utt ing “The S trugg le for Corporat e Account abilit y” 39 Dev Ch ange 6; and Ce dric Ry ngaert ,
“Accountabi lity of Mult inational C orporations for Hu man Right s Abuses” (2018) 14 Ut recht Law
Rev iew.
* LLB, BA , LLM(1st Cla ss) Internat ional Law and Po litics, Unive rsity of Cant erbury.
78[Vol 28, 2021]
any overarching regime governing the human rights obligationsofbusinesses,
human ri ghts defenders have frequent ly turned to the law of t ort in search of lega l
remedies.2 The emerging ju risprudence of “ parent company l iabilit y” is one such tor t
law mechanism that may increasingly be used to provide victi ms of human rights
abuses with eective legal redress.3 Parent company liability is a form of direct,
rather tha n vicarious, l iability for wron gdoing. However, its application i n common
law juris dictions is not withou t controversy. After the Ne w Zealand Supreme Cour t
endorsed parent company liability in James Hardie v White (2019), commentators
deemed it a “corporate governance watershed”, engendering new challenges for
companies op erating with in complex group str uctures.4
This article critically discusses the trend of parent company liability, and
the reasoning of the New Zealand Court of Appeal (NZCA) in the James Hardie
proceedings, against the wider global context of corporate impunity for human
rights a buses. It is broken into thr ee substantive sec tions. Section II outl ines some
challenges with attributing appropriate accountability to members of a corporate
group, and the limits of current initiatives regulating business and human rights.
Section II I canvasses the key de velopments in parent compa ny liabilit y as a pathway
to corporate accountability across Australia, the United Kingdom and Canada.
Section V I then explains a nd critically d iscusses the James Hardie proceedings and
three key pol icy concerns that may a rise with the endorsement of p arent company
liabil ity in New Zeala nd.
Ultimately, this article argues that the decision of t he NZCA in James Hardie is
not a dramat ic or surprising extension of tortious liabil ity, nor does it undermine
the principle s of separate lega l personalit y and limi ted liabil ity. Rather, the decision
was based on an established area of negligence liability, and represents a positive
development for the fut ure of human rig hts litigation i n New Zealand.
2 Su rya Deva Scope of the Leg ally Binding Instrume nt to Address Human Rights Vio lations Related
to Business Activities (A Working Paper of the ESCR-Net & FIDH Treaty I nitiative, 2015); and
Liesbeth FH Enneking Foreign Direct Liability and Beyond: Exploring the role of Tort Law in
Promoting International Corporate Social Responsibility and Accountability (Eleven Int ernational
Publish ing, The Hag ue, 2012).
3 Elizabet h Brumby “Pa rent compa ny liabi lity in ex tract ive indust ries: A new fr ontier for busi ness
and huma n rights” (2018) 3 6 C&SLJ 185 at 185.
4 James Hardie Plc v White[2019] NZSC 39, endorsing t he decision in James Hardie Plc v White
[2018] NZCA 5 80; and Simpson Gr ierson “The Jame s Hardie Lit igation: A Cor porate Govern ance
Watershed Lo oming” (2019) La wFuel .
James Hardie and the Development of Parent Company Liability:
New Zealand as a Forum for Transnational Human Rights Litigation?
79
II. The Global Context: Governing
Multinationals and Human Rights
Though mult inationa l corporations (M NCs), or “corporate group s”, have emerged
as new duty-bearers on the world stage, the state-centrism of international
law remains a hurdle to enforcing international obligations directly on private
corporations.5 The legal liability of companies is still predominantly seen as an
issue for domestic law. However, at the domestic level, the corporate form often
“facilit ates the avoidance of appropr iate accountabi lity”.6
A. The Corporate Form
A cornerstone of corporate law, both globally and in New Zealand, is that a
company has i ts own legal pers onhood.7 This was con firmed in the Uni ted Kingdom
in the seminal case of Salomon v Salomon & Co Ltd.8 Under the Salomon principle,
the law trea ts a company as a disti nct legal person, capa ble of holding many of the
rights a nd bearin g some of the duties of natu ral persons. E ssentially, ther e is a “veil”
between the s hareholders and company oc ers, and the company car rying on the
business.
However, this veil doe s not allow companies t o be used for “sham” tra nsactions.9
Where the corporate form is clearly being abused for fraudulent purposes, judges
have been wil ling to peer beh ind the corporate vei l or even to ignore it altoge ther.10
This is ter med “lifting” or “ piercing” the veil.11 In New Zea land and abroad, Cour ts
have been willing to lift the corporate veil in commercial cases in order to pool
the assets of related companies, particularly where a parent company owns most
5 Sur ya Deva “Acting Ext raterritoria lly to Tame Multi national Corpor ations for Human Rig hts
Violation s: Who should ‘B ell the Cat’ ?” (2004) 5 Melb J I nt Law 37–49; a nd John Gera rd Ruggie Ju st
Business: Multinational Corporations and Human Rights (WW Norton, New York, 2013) a t xx. Also
called Mu ltinational E nterprises (MNE s), Transnationa l Corporations (TNC s) and “Corporate
Groups”. They are s omewhat interch angeable. Th is Article h as opted for the t erms “MNCs” and
“Corporate Groups”.
6 Oc e of the High Commis sioner of Human Right s Guiding Principles on Business and Human
Rights: Imple menting the United Nations “ Protect, Respect and Remedy” Framework UN Doc HR/
PUB/11/04 (201 1) at 30. See also: Corp orate liability fo r gross human rights a buses: towards a fairer
and more eective system of dom estic law remedies (Report prepared for the Oce of the H igh
Commiss ioner of Human R ights, Indepe ndent Expert St udy, commission ed May 2013) at 1.
7 Compa nies Act 1993 , s 15.
8 Salomon v Sa lomon & Co Ltd [1896] UK HL 1, [1897] AC 22 .
9 Susan Watson “Corporate legal personality” in Susan Watson, Lynne Taylor (eds) Corporate
Law in New Zealand (Thomson Reuters, Welli ngton, New Zeal and, 2018) at 4.6–4 .7; and Jones v
Lipman [1962] 1 W LR 832 at 836 per Russ ell J.
10Watson, above n 9 , at 4.6.3.
11At 4.6.4.
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