Parent company liable

Posted: 8th June 2012

Board Room 2A recent judgment of the Court of Appeal will cause concern for groups of companies, especially those which have adopted group structure because the business carried on by a subsidiary presents significant risk.
The case arose when a claim was made for damages by an employee of Cape Building Products Ltd (CPB), a company which was no longer in existence but which had been a subsidiary of Cape plc.
The claimant had contracted asbestosis as a result of exposure to asbestos when employed by CBP. He claimed that Cape plc owed him a direct duty of care to him as an employee of a subsidiary to provide him with a safe working environment.
The Court of Appeal accepted the argument and has ruled that his claim can be brought against the holding company.
This decision clearly has implications in other cases involving an employer's duties to employees. It remains to be seen whether it will be appealed and to what extent (if any) the thinking that a holding company is responsible for the torts (civil wrongs) of its subsidiaries 'creeps' into other areas.
Despite some rather worrying reporting, there may be little reason for the decision - which is based on an unusual set of facts - to cause undue alarm to the directors of parent companies.