Holding Parent Companies Accountable: The Continuing Retreat from Chandler

This post has been contributed by Mr Chris Riley , Module Convenor for Company law .

The case of AAA v Unilever [2018] EWCA Civ 1532 seems to be continuing the trend of recent UK decisions restricting when a parent company will owe a duty of care to those injured by its subsidiary.  Remember that in Chandler v Cape plc [2012], the court of appeal held that a parent company could owe a duty of care, albeit on certain conditions.  But subsequent cases have interpreted these conditions in an increasingly strict way, and the Unilever case continues this trend.

Young female teapicker in RwandaFollowing a contested election in Kenya in 2007, armed gangs rampaged through the plantation owned by Unilever’s Kenyan subsidiary, attacking employees and their families.  Those victims brought proceedings in tort against both the local subsidiary which owned the plantation, and the parent company, Unilever plc.  They claimed that Unilever itself owed them a duty of care, alongside the duty owed by the subsidiary, and that the parent had breached the duty it owed to them by failing to take appropriate steps to ensure their safety.

The court of appeal rejected the claim against the parent.  The court held that the parent would ordinarily owe a duty only if one or other of the following two conditions were met, namely:

  • If the parent controlled those operations of the subsidiary which led to the claimants’ injuries
  • If the parent had advised the subsidiary how to manage the risks to the claimants.

In Unilever, the court found that neither condition was satisfied.  The parent did not exercise control over its subsidiary.  Rather, it treated it as a separate entity, responsible for its own operations.  And the parent had not itself designed or advised on the subsidiary’s safety procedures, including those dealing with civil unrest and violence.  Those procedures had been drawn up independently, by the Kenyan subsidiary, with its greater knowledge of the local situation in Kenya.

So, the claimants in this case will have to sue Unilever’s Kenyan subsidiary for their injuries.  This would be pointless if that subsidiary were insolvent, but it seems that it is not.  Why, then, had the victims chosen to sue the parent company, Unilever, in the first place?  One reason was probably to do with what’s usually called ‘forum shopping’.  The claimants, by suing Unilever, hoped to be able to bring their action in the English courts.  By restricting the claimants to an action against the (Kenyan) subsidiary, the English court is also ensuring that proceedings will have to be brought in Kenya.

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