Malcolm Dowden considers the liability of a parent company
A parent company is not responsible for acts or omissions of its subsidiary simply by virtue of its status as parent. 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. It is more likely to do so if the subsidiary has been dissolved, has limited financial strength, and/or does not have insurance cover in relation to the relevant type of damage or injury.
Duty of care test
Caparo Industries v Dickman [1990] 1 All ER 568 established a three stage test to establish a duty of care:
- Damage should be foreseeable;
- The relationship between the
