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 p arent companies fo r the tortious ac tivity of their s ubsidiaries d omiciled in

foreign juris dictions. “Pa rent company liabi lity” is thus beco ming a litigiou s avenue

through which v ictims might seek e ective legal redre ss for corporate hum an rights

abuses. In 201 9, the New Zealand Cour t of Appeal (NZCA) endor sed the emerging

jurispru dence on parent co mpany liability i n the James Hardie liti gation. is ar ticle

critically d iscusses the decis ion of the NZCA against th e wider global context of c orporate

impunity for hu man 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 exten sion of tortiou s liability, bu t it does open the door s 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 s een the need to develo p stronger mechanisms of lega l accountabili ty for

corporations operating transnationally.

I. Introduction

Holding mult inational corp orations accountable for compl icity in human r ights

abuses is an i mmense lega l chall enge in the globa lised 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 overarc hing regi me governin g the human r ights obli gations of businesses,

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 mechan ism that may i ncreasin gly be used to pr ovide victi ms of human rights

abuses with eective legal redress.3 Parent company l iabilit y is a form of dire ct,

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 c ompany liabi lity in Jam es Hardie v White (2019), com mentators

deemed it a “corporat e governance wa tershed”, engenderin g new challenge s for

companies op erating with in complex group str uctures.4

This ar ticle critic ally di scusses the t rend of parent compa ny liabil ity, and

the reason ing of the New Zea land Cour t of Appeal (N ZCA) in the Jame s Hardie

proceedi ngs, agai nst the w ider global cont ext of corporat e impunit y for human

rights a buses. It is broken into thr ee substantive sec tions. Section II outl ines some

challen ges with at tributi ng appropriate ac countabi lity to memb ers of a corporate

group, and th e limits of c urrent in itiatives re gulatin g business and hu man rig hts.

Section II I canvasses the key de velopments in parent compa ny liabilit y as a pathway

to corporat e accountabi lity acr oss Austra lia, the Un ited Ki ngdom and Can ada.

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.

Ultimat ely, this ar ticle argues t hat the decision of t he NZCA in James Hardie is

not a dramat ic or surprising ext ension of tort ious 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 a n establi shed area of neg ligence lia bility, and repr esents a posit ive

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 Pape r of the ESCR-Net & F IDH Treaty I nitiative, 2015); and

Liesbeth F H Enneki ng Foreign Di rect Liabilit y and Beyond: Expl oring the role of Tor t 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 W hite [2019] NZSC 3 9, endorsing t he decision in James Hardie Pl c 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-be arers on the world st age, the st ate-centr ism of inter national

law remai ns a hurdle to en forcing int ernationa l obligation s direct ly on private

corporation s.5 The legal lia bility of co mpanies is st ill predom inantl y seen as an

issue for domestic l aw. However, at the domestic level, the co rporate form of ten

“facilit ates the avoidance of appropr iate accountabi lity”.6

A. The Corporate Form

A cornerstone of c orporate law, bot h globally a nd in New Zea land, is t hat a

company has i ts own legal pers onhood.7 This was con f‌irmed in the Uni ted Kingdom

in the semi nal case of S alomon v Salomo n & Co Ltd.8 Under the Salomon princ iple,

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 oc 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 corp orate form is clea rly being abu sed for fraudulent pu rposes, 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 wil ling to l ift the cor porate veil i n commercia l cases in order t o pool

the asset s of related compa nies, par ticula rly where a parent compa ny 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 Oc 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 Re medy” Framewor k 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 eect ive system of dom estic law remedies (Repo rt prepare d for the Oce 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 Susa n Watson “Corpor ate legal p ersonal ity” in Sus an Watson, Lyn ne 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.

10 Watson, above n 9 , at 4.6.3.

11 At 4.6.4.