The UK High Court recently considered whether a parent company was liable when an employee of one of its subsidiaries contracted a work-related illness. The decision of the Court should be noted, particularly by corporate groups where health and safety policies are determined centrally.

Protecting members of a corporate group from the liabilities of other members of the group is frequently a cause for concern. A recent UK High Court decision is noteworthy in this regard, particularly in respect of corporate groups where health and safety policies are determined centrally.

In that case, the Court had to determine whether a duty of care was owed by the parent company to the claimant, an employee of a subsidiary company which had ceased to exist. The claimant had developed asbestosis due to exposure to asbestos during his employment with the subsidiary. The parent company argued that, as the subsidiary was a distinct legal entity, liability could not attach to the parent.

The Court applied an established three stage test involving an examination of:

• Forseeability – was it foreseeable to the parent company that the claimant may suffer an asbestos related illness?
• Proximity – how close was the proximity between the parent company and the claimant? and
• Reasonableness – was it fair, just and reasonable for the parent company to owe a duty of care to an employee of a subsidiary company?

The Court clarified that the existence of a duty of care between the claimant and the subsidiary did not preclude another entity being fixed with a duty of care.

On the facts the Court found that the parent company had actual knowledge of the claimant’s working conditions, and that the risk of an asbestos related disease was obvious. In particular, it was noted that the parent company laid down the health and safety policies for the group. On this basis, the Court found that the claimant had established a sufficient degree of proximity between the parent company and himself. Accordingly, the three stage test was satisfied and the parent company was found to owe a duty of care to the claimant and was liable for damages.

The decision is subject to appeal, but is nonetheless noteworthy from an Irish perspective as Irish courts will often review UK precedent in comparable situations. Drawing from the lessons of the case, when preparing group-wide rules and procedures, a parent company should clearly establish where in the group ultimate responsibility and control lies.

Contributed by Ruairí Bourke.

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