Company Law - parent company liability for injury caused by subsidiaryWatch
Can a parent company be held responsible for acts of its subsidiary!
The English High Court recently considered whether a parent company could be held liable for acts and omissions of one of its subsidiary companies.
The starting point was whether the court could impose a duty of care between the parent and the people of the Niger Delta area. Applying the three-fold test set out in Caparo v Dickman, this would depend on whether there was a proximate relationship between the two, whether the damage was foreseeable, and ultimately, whether it would be fair, just and reasonable in the circumstances to impose such a duty.
The court stated that there would be certain circumstances where it would be appropriate to hold a parent company liable for its subsidiary’s acts and omissions. These were where:-
the parent and subsidiary carry on the same business (in appropriate respects);
the parent, in comparison with the subsidiary, has superior knowledge or expertise;
the parent also has an in-depth knowledge of its subsidiary’s system of work; and/or
the parent knows (or ought to know) that the subsidiary is dependent upon it to ensure that such damage is avoided.
Although not exhaustive, it was noted that the presence of a higher number of these factors would make it more likely that a duty of care would be owed.