Case Alert - [2018] EWCA Civ 191

Court of Appeal holds that parent company did not owe duty to claimants

The claimants sought to bring an action against the English parent company of a Nigerian subsidiary which had allegedly caused environmental damage in Nigeria. Fraser J held that the English courts had no jurisdiction over that claim because there was no arguable case that the parent company owed the claimants a duty of care. The Court of Appeal, by a majority of 2:1, has now rejected the appeal from that decision.

Caparo Industries Plc v Dickman [1990] laid down a three-stage test for establishing a duty of care: foreseeability, proximity and reasonableness. The main issue in this case was proximity. Simon LJ said that "It is … important to distinguish between a parent company which controls, or shares control of, the material operations on the one hand, and a parent company which issues mandatory policies and standards which are intended to apply throughout a group of companies in order to ensure conformity with particular standards. The issuing of mandatory policies plainly cannot mean that a parent has taken control of the operations of a subsidiary (and, necessarily, every subsidiary) such as to give rise to a duty of care in favour of any person or class of persons affected by the policies".

It was concluded that the parent company did not have a sufficient degree of control to establish the necessary degree of proximity here. There was standardisation of policies and practices across all the operation and in all the countries in which the group operated and, crucially, "the detailed policies and practices do not seem to have been tailored specifically for [the subsidiary]".

Simon LJ also criticised the large number of witness statements and exhibits before the judge and on the appeal. He said that "I am firmly of the view that steps must be taken by courts to control and limit what is placed before the Court in the future…The parties should not be allowed to file large quantities of material, much of which is unlikely to resolve the central issue, without the leave of the court".