When a man who was diagnosed with asbestosis sought compensation from his former employer, he discovered that the company was no longer in existence and its insurance policy had included an exception for asbestosis. However, its parent company was still trading.
He therefore brought a claim against the parent company and, in a ground-breaking decision, was successful in persuading the Court of Appeal that in the particular circumstances of the case the parent company had owed a direct duty of care to him, as an employee of its subsidiary, to provide him with a safe working environment.
The willingness of the Court to look behind the legal structure of a group and act in a way that makes one legal entity (in effect) responsible for the activities of another may cause concern for directors of some companies. However, the Court of Appeal stressed that there is no imposition or assumption of responsibility by reason only that a company is the parent of another company. Whether or not the parent company bears liability for providing a safe system of work to employees of its subsidiary companies will depend on the individual facts. The question that must be answered is whether or not what the parent company did amounted to taking on a direct duty to the subsidiary’s employees. In this case, the parent company had superior knowledge regarding the nature and management of asbestos risks and was directly involved in health and safety matters at its subsidiary. In addition, some directors sat on the boards of both companies.
Whether this decision survives an appeal or its influence ‘spreads’ into other areas of law remains to be seen. In the short run, employees of companies that are or were a subsidiary of another company may have another avenue to obtain compensation for injuries at work or industrial disease such as asbestosis.
If you would like to know more about the issues raised in this article or for other personal injury matters, please contact Mike Sutton, Sydney Mitchell on 0121 698 2200, email pi@sydneymitchell.co.uk or fill in our online enquiry form.
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