High Court issues new judgment on parent company liability

In AAA and others v Unilever PLC and Unilever Tea Kenya Limited [2017] EWHC 371, the High Court struck out claims against two Unilever group companies concerning alleged liability in negligence for acts of violence committed by third parties against employees and local residents on a Kenyan tea plantation during largescale disorder following the 2007 Kenyan Presidential election. In doing so, the Court considered the circumstances in which a UK registered company may face liability for actions largely attributable to a foreign-registered subsidiary.

The claims were brought against UK-registered Unilever PLC (UPLC), a holding company for the Unilever group, and its Kenyan-registered subsidiary, Unilever Tea Kenya Limited (UTKL).

Both claims were struck out because they were, in the Court's assessment, "bound to fail."

Key points arising from the judgment include:

• A reminder of the difficulties that will face claimants seeking to bring proceedings against foreign-registered companies in the English Courts, where there is no clear factual or legal nexus with England & Wales. The English Courts must be ‘the proper place’ to bring any such claim. This is unlikely to be the case, in respect of claims against a foreign-registered defendant, where the claimants reside outside the jurisdiction and much or all of the relevant fact pattern (for instance, the location of the alleged wrongdoing and of any damage) is also outside England & Wales. However, the Court has some discretion still to allow a claim when it is in the interests of justice to do so (for instance, due to the absence of possible means of redress elsewhere). These difficulties may increase the temptation for claimants to target proceedings against a UK-registered parent company.
• A warning that UK-registered companies may face proceedings in the English Courts for acts that occur overseas, even where these primarily concern a foreign-registered subsidiary. The success (or otherwise) of these proceedings will largely depend on the specific facts and, for claims pleaded in negligence, whether these disclose a valid duty of care.

In order to establish the claim against UPLC, the Claimants sought to rely on the existence of a duty of care owed to them in negligence by UPLC. In seeking to establish that such a duty of care would be fair, just and reasonable (as required in order to satisfy the “Caparo” test), the Claimants relied upon the Court of Appeal judgment in Chandler v Cape [2012] 1 WLR 3111 (which deemed that a parent company could owe a duty of care in negligence due to its "assumption of responsibility" for the acts of a subsidiary).

While the Court found that it was not reasonably foreseeable by UPLC (or UTKL) that violence of the type and with the results seen would be likely to occur, it found that Chandler v Cape could potentially apply in similar circumstances in order to give rise to a duty of care owed by a parent company for the actions of a subsidiary. This finding raises the prospect that such a claim against a UK-registered parent company, relating to the operations of a foreign subsidiary, could succeed on other facts.

The judgment relies heavily upon other recent case law (in particular, Lungowe v Vedanta Resources Plc [2016] EWHC 975 (TCC) and Okpabi v Royal Dutch Shell [2017] EWHC 89 (TCC)). However, it is an important restatement of the current law concerning such claims.

The judgment also serves as a timely reminder of the continuing trend for non-UK claimants to seek to enforce alleged human rights and environmental abuses around the world using the English Courts.

While it will remain attractive for many businesses to conduct their foreign operations using UK-registered companies, it is important to balance this against the increased risk of litigation that it may bring, particularly to manufacturing, extractive and other resource-based industry, and to conduct appropriate risk audits and adopt other measures in effective mitigation. This case is also a warning that a decision to incorporate a local entity outside England & Wales will not necessarily prevent its actions from being subjected to the scrutiny of the English Courts. Finally, it is a valid reminder of the need for business to adopt appropriate safeguards against a UK-registered parent company being held liable for the possible failings of local subsidiaries around the world.

The Claimants have been given permission to appeal this judgment.