Liability of parent companies

The case involved claims made on behalf of victims of oil pollution in Nigeria against the English holding company of the Shell Group. The High Court held that there was no duty of care to the claimants.

In general, the facts of each case will determine whether or not a parent company is liable in tort for acts or omissions of other companies in the same group. The court is likely to carry out an inquiry into what part the parent company played "... in controlling the operations of the group, what its directors and employees knew, or ought to have known, what action was taken and not taken, whether the parent owed a duty of care to employees of the group companies overseas and whether, if so, that duty was broken”.

In carrying out such an inquiry the court will look at the documentary evidence likely to be held at the offices of the parent company, including minutes of meetings, reports by directors and employees, and correspondence.

The Court of Appeal in Chandler v Cape plc held that a parent company could be liable in appropriate circumstances to employees of a subsidiary. Those circumstances include the following:

  1. The business of the parent and the subsidiary are in all relevant respects the same

  2. The subsidiary’s system of work is unsafe and the parent knew, or ought to have known

In the Shell case the claimants brought proceedings in England against both the Nigerian subsidiary and the ultimate holding company. The judge considered the Shell Group corporate structure. It was held that there was no connection between the English jurisdiction, and the claims.

In summary, this case is a reminder to any directors of parent companies within the groups to ensure that they take a diligent and intelligent interest in the information available, and to apply an enquiring mind to the responsibilities placed upon him or her.

For help and advice on dispute resolution issues, please contact David Patterson.

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