Chandler v Cape plc
appears to be the first reported case in the UK dealing squarely
with the question of a parent company’s tort law duty of care to an employee of its
subsidiary company. Where an employee of a subsidiary company suffers injury
as a result of an unsafe workplace, liability in negligence under the common law
prima facie rests with the subsidiary company and not with a parent company
because each company in a corporate group is a separate legal entity even if the
group operates as a single economic unit.
However, a shareholder can be held
liable in tort where he is personally involved in the conduct constituting a tort.
on this basis that the Court of Appeal in Chandler v Capeconsidered that a parent
company can be liable in negligence in respect of its own acts or omissions in its
involvement in the activities of its subsidiary.
This article will examine some relevant Australian judicial decisions which
were not referred to by the Court of Appeal in Chandler v Cape. The Australian
decisions and Chandler v Capediverge in certain respects, and it is not clear
whether the UK Court of Appeal would have been swayed by the reasoning of the
Australian judges had the Australian cases been considered. Through a comparison
of the UK and Australian cases, this article assesses whether Chandler v Cape
provides a welcome development in the law. Some concerns have been raised
by commentators as to the appropriateness of imposing a duty of care on parent
companies in light of the company law doctrines of limited liability and separate
However, the present writer’s view is that Chandler v Capeis to be lauded
as it seeks to ensure that corporate controllers who are responsible for wrongful
or negligent conduct do not escape liability.
While the present writer disagrees with the narrow basis on which the Australian
courts imposed a duty of care on a parent company for torts of its subsidiaries, an
analysis of the Australian reasoning is helpful in isolating the relevant legal issues
and identifying the doctrinal basis for such liability.