Is a parent company liable for the acts or omissions of its subsidiary?

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Published on LexisPSL on 30/07/2018

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • Is a parent company liable for the acts or omissions of its subsidiary?
  • AAA v Unilever plc

A parent company is not responsible for the acts or omissions of its subsidiary simply by virtue of its status as parent. Each subsidiary has separate corporate responsibility and any intention to pierce the corporate veil must be clearly and unequivocally expressed in the statute.

However, a parent company can be fixed with liability if its knowledge of, and ability to, intervene in the affairs of the subsidiary are sufficient to create a duty of care towards any person suffering damage or injury due to the subsidiary's acts or omissions. Crucially, if a parent company has 'superior knowledge' about the nature and management of particular risks, and is aware of a 'systemic failure' on the part of its subsidiary, then the court may be willing to find a duty of care.

Such circumstances may arise where the parent company:

  1. has taken direct responsibility for devising a health and safety policy the adequacy of which is the subject of the claim, or

  2. controls the operations which give rise to the claim

Establishing liability in this area initially requires consideration of the landmark case of Caparo which sets down the three stage test (of foreseeability, proximity and reasonableness) to establish a duty of care, then followed by consideration of mass tort cases such as Chandler and Lungowe which relate to claims against a parent company for the actions or

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