Parent companies have a responsibility for the health and safety of their subsidiaries’ employees, the Court of Appeal has ruled in a groundbreaking case.

The judgment comes after a retired factory worker successfully sued his former employer’s parent company after contracting asbestosis. Cape, which owned the now-defunct Cape Products, had appealed against the decision, arguing that the two companies should be treated as separate entities.

Lady Justice Arden rejected that appeal last Wednesday, concluding there was a ‘direct duty of care’ owed by Cape to the employees of Cape Products.

Arden said the original judgment met the required circumstances needed to prove the parent company could be held responsible. These were:

  • The businesses of the parent and subsidiary were the same.
  • The parent had, or ought to have had, superior knowledge of health and safety.
  • The subsidiary’s systems were unsafe as the parent company knew, or ought to have known.
  • The subsidiary relied on the parent company for health and safety knowledge to protect employees.

‘Cape assumed a duty of care either to advise Cape Products on what steps it had to take in the light of knowledge then available to provide those employees with a safe system of work or to ensure that those steps were taken,’ said Arden. But the judge said her court was not attempting to ‘pierce the corporate veil’ and insisted a subsidiary and its company were still separate entities.

The judgment has been hailed a groundbreaking case with far-reaching ramifications for UK and multinational companies with subsidiaries in developing countries.

Vijay Ganapathy, senior solicitor in Leigh Day’s industrial disease department, who represented the claimant against Cape, said it was no longer possible for companies to ‘hide behind aged legal principles’ that assume parent companies have no responsibility for subsidiaries.

He said: ‘This is of particular relevance in asbestos disease cases as many sufferers face insurmountable challenges in identifying and locating insurers for their former employers.

‘As parent companies are much more likely to survive over the decades it takes for asbestos disease to develop, it should give hope to those now suffering that past negligence will not go unpunished.’