A group of 218 Kenyans sued the English holding company of a subsidiary company in Kenya for which the plaintiffs worked, for failing to protect them against political violence that erupted in Kenya after the 2007 presidential election. The English court held that there was no arguable case against the holding company that it owed a duty of care to the employees of the Kenyan subsidiary.
The court held that, on the facts of a particular case, a parent company may, on the grounds of having greater scope to intervene in the affairs of its subsidiary than another third party might have, be liable for failing to take steps to prevent foreseeable harm.
These cases will usually fall into two basic types:
- where the parent has in substance taken over the management of the subsidiary or of the relevant activity of the subsidiary in place of or jointly with the subsidiary’s own management; or
- where the parent has given relevant advice to the subsidiary about how to manage the particular risk which gives rise to the action. An example is where a parent requires its subsidiaries to manufacture a product in a particular way, and actively enforces that requirement, which turns out to be harmful to health.
In the present matter the evidence was that the local Kenyan tea estate company did not receive advice from the holding company in relation to the management of the risks arising from political unrest and violence in Kenya in 2007. The evidence was that the local company devised its own risk management policy for handling the severe crisis in 2007 without reference to the holding company. The attempt to sue the holding company was dismissed.
This case shows that a holding company can be responsible for the delicts of a subsidiary if it effectively runs that company or, if in relation to particular events, it takes control of those events or advises the subsidiary how to deal with them. The documents of the two companies will reveal when this is the case.