Court of Appeal decides whether a parent company owed a duty of care to its subsidiary’s employee – of possible interest to liability insurers

The claimant was negligently exposed to asbestos by his employer in the mid-1970s, which led to him developing diffuse pleural thickening. His employer would now be unable to meet any judgment against it and did not have liability insurance in place at the relevant time. Accordingly, he brought this claim against the parent company of his employer and at first instance the judge found the parent company liable on the basis that it had appointed an individual as a director of the subsidiary and he had been responsible for health and safety matters. The parent company appealed and the Court of Appeal has now held as follows:

  1. The director appointed by the parent company was not acting on behalf of the parent company and the parent company had not assumed a duty of care to the employees of its subsidiary by virtue of this appointment.
  2. It has already been established in Caparo v Dickman [1990] that a duty of care will only be imposed if, in addition to the test of foreseeability of damage and proximity it is also fair, just and reasonable to impose that duty.
  3. Reference was made to the recent case of Chandler v Cape Plc (see Weekly Update 14/12), where the Court of Appeal held that a parent company had been responsible for the health and safety of its subsidiary’s employees. However, the Court of Appeal held that the list of circumstances referred to in the Chandler case had been descriptive only and was not an exhaustive list of the circumstances in which a duty may be imposed.
  4. This case was “far removed” from Chandler. Crucially, the parent company did not carry on the same sort of business as the subsidiary. For the claimant to have a prospect of success it would have to be shown that the parent company carried on either a haulage business (like the subsidiary’s business) or “a business an integral part of which was the warehousing or handling of asbestos or indeed any potentially hazardous substance”. That was because: “what one is looking for here is a situation in which the parent company is better placed, because of its superior knowledge or expertise, to protect the employees of subsidiary companies against the risk of injury and moreover where, because of that feature, it is fair to infer that the subsidiary will rely upon the parent deploying its superior knowledge in order to protect its employees”.

Accordingly, the parent company owed no duty of care to the claimant.