Wednesday, 25 April 2012

UK: England and Wales: parent company owed duty of care to subsidiary company employee

The Court of Appeal gave judgment today in Chandler v Cape plc [2012] EWCA Civ 525 and upheld the decision of the trial judge ([2011] EWHC 951 (QB), see hereWord), that a parent company owed a duty of care towards an employee of a subsidiary company. The leading judgment was delivered by Lady Justice Arden (Moses and Macfarlane LJJ concurring); her Ladyship observed:

[69] I would emphatically reject any suggestion that this court is in any way concerned with what is usually referred to as piercing the corporate veil. A subsidiary and its company are separate entities. There is no imposition or assumption of responsibility by reason only that a company is the parent company of another company.

[70] The question is simply whether what the parent company did amounted to taking on a direct duty to the subsidiary's employees.

[80] In summary, this case demonstrates that in appropriate circumstances the law may impose on a parent company responsibility for the health and safety of its subsidiary's employees. Those circumstances include a situation where, as in the present case, (1) the businesses of the parent and subsidiary are in a relevant respect the same; (2) the parent has, or ought to have, superior knowledge on some relevant aspect of health and safety in the particular industry; (3) the subsidiary's system of work is unsafe as the parent company knew, or ought to have known; and (4) the parent knew or ought to have foreseen that the subsidiary or its employees would rely on its using that superior knowledge for the employees' protection. For the purposes of (4) it is not necessary to show that the parent is in the practice of intervening in the health and safety policies of the subsidiary. The court will look at the relationship between the companies more widely. The court may find that element (4) is established where the evidence shows that the parent has a practice of intervening in the trading operations of the subsidiary, for example production and funding issues".

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