It is often the case that a plaintiff has been injured due to the negligence by a company that operates within a corporate group. It is frequently difficult in such cases to determine which company should be sued for compensation. Should a subsidiary company within the group be sued and, if so which one? Or should the parent company be sued? Perhaps more than one company within the group should be sued.
The difficult issues that can arise in this regard can be illustrated by way of an example. Suppose that a plaintiff suffers injuries due to the negligence of his or her employer. The plaintiff’s employer may be a subsidiary company within a corporate group. In these circumstances, the subsidiary company will be the proper defendant. However, it is possible that the parent company might be liable too where, for example, the parent company was closely involved with the way in which the subsidiary company in question carried on its business. Although the parent company is a separate individual in the eyes of the law, the parent might owe a duty of care directly to the employee, in addition to the duty of care owed by the subsidiary. If the parent owes a duty of care, the plaintiff may be able to pursue both companies.
The possibility that a claim might lie against more than one entity within a corporate group can be very important where, for example, the most obvious company to sue lacks insurance cover, is insolvent or has been deregistered. Where this is the case, the issue that is under consideration is of considerable significance.
If a plaintiff can sue more than one company within a corporate group, it does not follow, of course, that the plaintiff can recover double compensation. That is not allowed. It is very well established that double recovery is impermissible. The foregoing matters are of interest not because they open the door to the possibility of obtaining double compensation – they do not – but because it means that the plaintiff may have a better chance of obtaining redress from at least one defendant than may initially appear to be the case.
Where a plaintiff has rights good against more than one company within the same corporate group, the plaintiff will (subject to certain exceptions) be able to obtain and enforce the judgment against the company of his or her choosing. Where this happens, it is then a matter between the companies to iron things out among themselves pursuant to what is known as the law of contribution. Ordinarily, the plaintiff has no interest in that process.