Parent liable for subsidiary

The CA is scheduled to hear the defendant's appeal in Chandler v Cape Plc [2011] EWHC 951 (QB) (an asbestosis case) on the 7 or 8 February 2012. The CA is likely to provide guidance on the circumstances in which a parent company will be held to owe a duty of care to an employee of a subsidiary company. At first instance, Chandler showed how such a duty might arise: where the defendant controls or has overall responsibility for the measures adopted by the employer to protect its employees against a foreseeable risk of harm.

In determining whether Cape Plc owed a duty of care to employees of its subsidiary, the Court applied the three-stage test established in Caparo Industries v Dickman which asks whether:-

the damages were reasonably foreseeable;
the relationship between claimant and defendant was one of proximity; and
owing such a duty would be fair, just and reasonable.

The following three factors weighed in favour of the Court's finding that the relationship between the parent company and the employees of its subsidiary satisfied the proximity element of the Caparo test:-

Group officers. Having group officers with responsibility for the relevant issue in relation to all employees within the group of companies. In the case at hand, Cape Plc employed a scientific officer and a medical officer who were responsible for health and safety issues relating to all employees within the group.

Centrally dictated policy. Having a centrally stipulated policy in relation to the relevant issue that applies to all group companies. Insofar as the group's core business impacted upon health and safety, it was Cape Plc, not Cape Products, which dictated policy in relation to health and safety issues.

Retaining overall group-wide responsibility. It is not necessary to show that the parent company controlled all activities of the subsidiary. It is sufficient to establish that the parent company either controlled or retained overall responsibility for the measures adopted by its subsidiary to protect its employees against foreseeable harm.

In the case at hand, the Court found that Cape Plc retained overall responsibility for ensuring that its own employees and those of its subsidiaries were not exposed to risk of harm as "[A]t any stage it could have intervened and Cape Products would have bowed to its intervention".

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