Game Changer - A Parent Company Can Now Owe A Direct Duty Of Care To The Employees Of Its Subsidiary

Acquisitions of companies in the industrial sector now merit even more rigorous due diligence from a health and safety perspective, because the buyer may be liable for the historic failings of defunct subsidiaries. In terms of ongoing operations, parent companies should ensure that compliance procedures for health and safety are the duty of the officers of the subsidiaries, whilst making sure that any knowledge on particular risk factors is passed on to them by the parent. Care needs to be taken where companies in a group structure have overlapping businesses.

Mr Chandler was an employee of a subsidiary of Cape PLC between 1959 and 1962, during which time he was exposed to asbestos in the course of his work. After contracting asbestosis in 2002 he brought a claim against Cape PLC, because the subsidiary had been dissolved some years earlier.

The Court of Appeal held that Cape PLC owed a direct duty of care to the employees of its subsidiary.

The Court of Appeal restated the legal principle that parent companies have a separate legal personality and that it is not usually possible to pierce the "corporate veil". The judgment made it clear that the question was not whether the corporate veil should be pierced in this instance, but whether the parent company should be liable in tort.

The Court stressed that the parent's conduct did not have to be out of the ordinary in a parent-subsidiary relationship or amount to absolute control. As long as the parent...

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