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 eective 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 eective 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 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 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 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 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 eective system of dom estic law remedies (Report prepared 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 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.