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The Attribution of Culpability to Limited Companies

  • G. R. Sullivan

Legally, it is possible to say of a particular company that it is a party to a criminal conspiracy, that it has acted dishonestly or that its conduct in matters of safety is so deficient as to amount to manslaughter. The mechanism which has brought most serious crimes within the competence of companies to commit is, of course, the concept of corporate alter ego or, more precisely, the doctrine of identification. This concept takes the conduct and state of mind of certain high-ranking officials to be the conduct and state of mind of the company itself, so that it may commit directly crimes which are not attributable to a company merely on a basis of vicarious liability.

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1 R. v. I.C.R. Haulage Ltd. [1944] K.B. 551.

2 DP.P. v. Kent and Sussex Contractors [1944] K.B. 146.

3 That an indictment for manslaughter could lie against a company was assumed by the Divisional Court in R v. Coroner for East Kent, ex pane Spooner (1989) 88 Cr.App.R. 10 and decided at trial in R v. P. & O. Ferries (Dover) Ltd. (1991) 93 Cr.App.R. 10 and applied in R. v. O.L.L. Ltd. (10 December 1994, Crown Court).

4 Currently murder could not be charged against a company because of the mandatory penalty and other crimes may require and be confined to human perpetration as is apparently the case for any crime which requires an act of driving: Richmond-on-Thames B.C. v. Pinn & Wheeler Ltd. [1989] R.T.R. 354.

5 An idea made explicit by the Privy Council in Lennard's Carrying Co. Ltd. v. Asiatic Petroleum Ltd. [1915] A.C. 705 and confirmed and elaborated by the House of Lords in Tesco Supermarkets Ltd v. Nattrass [1972] A.C. 153.

6 Wells, C., Corporations and Criminal Liability (Oxford 1993) at pp. 103111; B. Fisse, "Consumer Protection and Corporate Criminal Responsibility", (1971) Adelaide L.R 113.

7 See note 3 above.

8 Involuntary Manslaughter, Law Com. No. 237 (1996), at paras. 8.1–8.77.

9 Ibid., at paras. 7.21; 7.30; 7.31; 7.33; 8.4; 8.8.

10 Meridian Global Funds Management Asia Ltd. v. Securities Commission [1995] 2 A.C. 500, 506–507.

11 Discussed below, at pp. 532–537.

12 Discussion of the intractable difficulties associated with devising suitable sanctions for companies falls beyond the scope of this paper. Suffice it to say that there is an inevitable tension between imposing fines commensurate with effective deterrence and avoiding adverse consequences for corporate employees, creditors and shareholders unimplicated in the wrongdoing. Devices which seek to address this issue such as the "equity" fine, corporate probation etc. are fraught with difficulties of theory and practice. For further discussion and references see Wells, op. cit. note 6 at pp. 31–38 and 146–149. A recent Law Commission recommendation to extend beyond the Health and Safety at Work Act 1974 the power of courts to order a company to take steps to remedy the causes of an offence would add some welcome flexibility without the difficulties involved in a more extensive supervision of companies: Law Com. No. 237 (1996) paras. 8.27–8.76.

13 [1915] A.C. 705.

14 E.g. Gower, L.C.B., Principles of Modern Company Law, 5 edn. (London 1992), at pp. 193194.

15 Recent cases which may be said to extend the scope of vicarious liability in criminal law are discussed at pp. 520–522.

16 At the present time corporate liability for manslaughter would seem to be predicated on identification: R. v. Coroner for East Kent, ex pane Spooner (1989) 88 Cr.App.R. 10; R. v. Stanley and others 19 October 1990 (C.C.C. No. 900160).

17 Salomon v. Salomon [1897] A.C. 22.

18 In particular. Lord Diplock in Tesco Supermarkets Ltd. v. Nattrass [1972J AC. 153 advocated restraint in findings of identification in order to demarcate clearly between what he characterised as direct liability from vicarious liability.

19 As in the recent civil case of EI Ajou v. Dollar Land Holdings pic [1994] 2 All E.R. 685.

20 Contrast El Ajou with the approach of the Court of Appeal in R. v. Redfern [1993] Crim.L.R. 43.

21 Which, of course, would be the position in respect of any individual charged as a principal offender.

22 Which was the case in the P. & O. trial where Turner J. ruled that there was no case for the company to answer because of the lack of any evidence that the risk of open-bow sailings was obvious to those directors sufficiently senior to be identified with P. & O.: R. v. Stanley and others, see note 16 above.

23 As in The Lady Gwendolen [1965] P.294.

24 [1972] A.C. 153, 199.

25 El Ajou, see note 19 above.

26 R. v. Redfern, see note 20 above.

27 [1993] 1 W.L.R. 1037. And see too National Rivers Authority v. Alfred McAlpine Homes East Ltd. [1994] 4 All E.R. 286.

28 In the view of Professor Sir John Smith, [1993] Crim.L.R. 626.

29 [1993] 1 W.L.R. 1037, 1042 (Staughton L.J.).

30 [1995] 1 A.C. 456, 474 (Lord Nolan).

31 It will be recalled that civil contempt requires mens rea, can result in imprisonment or unlimited fines, that the criminal standard of proof obtains and that there are the same rights of appeal as apply to criminal contempt. The division of contempt into criminal and civil heads was criticised by the Court of Appeal in Attorney-General v. Newspaper Publishing pic and others [1988] Ch. 333.

32 It has been argued that Pioneer does not decide that a company may be liable for contempt on the basis of vicarious liability as "liability ultimately turned on the wording of the restraining order the companies had allegedly breached, which prohibited each company "whether by itself or by its servants or agents or otherwise' from giving effect to restrictive practice agreements". (C.M.V. Clarkson "Kicking Corporate Bodies and Damning Their Souls" (1996) 59 M.L.R. 557 at p. 564). However, in none of the speeches did anything turn on the wording of the order: the companies' liabilities were resolved in terms of general principle. Besides, the effect of a court order, however worded, is limited by the substantive law. If the House of Lords had decided that the mens rea of contempt was to be established on the basis of identification, then the servants or agents in question would have had to have been sufficiently senior to be identified with the companies or have been directed to act in the manner that they did by someone who was.

33 [1995] 2 A.C. 500.

34 Securities Amendment Act 1988 (New Zealand) s. 20(3) (4).

35 [1995] 2 A.C. 500, 511.

36 Trade Descriptions Act 1968; Merchant Shipping Act 1894.

37 An approach welcomed by Professor L.S. Sealy, [1995] C.L.J. 507.

38 [1995] 2 A.C. 500, 507.

39 Ibid at p. 507.

40 Following Pioneer Concrete, and approving the decision inMoore v. /. Bresler Ltd [1944] 2 All E.R. 515.Ibid., at pp. 511–512.

41 Although Lord Hoffmann was concerned to read down Lennard's Carrying and Tesco Supermarkets v. Nattrass as cases confined to the construction of the statutory provisions at issue in the respective cases, he approved identification as the appropriate rule of attribution for both cases: [1995] 2 A.C. 500, at pp. 508–509.

42 Ibid., at p . 512.

43 See note 20.

44 Smith, J.C. and Hogan, B., Criminal Law (7th edn., London 1992) pp. 170185.

46 [1994] 1 W.L.R. 541.

47 Consequently, in Seabord, the negligence of a chief engineer did not render the company liable for a failure to take all reasonable steps to secure that a vessel was operated in a safe manner contrary to s. 31 of the Merchant Shipping Act 1988. Contrast the approach of the Court of Appeal in R. v. British Steel pic [1995] 1 W.L.R 1356 (discussed at pp. 540–541) where vicarious liability was the rule of attribution for a finding of a corporate failure to provide a reasonably practicable safe system of work under the Health and Safety at Work Act 1974. The deficient supervision of an engineer, one of many employed in a similar capacity by British Steel, inculpated the company. This divergence of approach to very similar questions underlines the unpredictable nature of the judicial discretion involved in resolving corporate liability.

48 Wells, C., Corporations and Criminal Responsibility (Oxford 1993);Fisse, B. and Braithwaite, J.,Corporations, Responsibility and Corporate Society (Cambridge 1993);Clarkson, C.M.V., "Kicking Corporat e Bodies an d Damnin g Their Souls" (1996) 59 M.L.R. 557.

49 French, P., Collective and Corporate Responsibility (New York 1984);Dan-Cohen, M., Rights,Persons and Organisations: A Legal Theory for Bureaucratic Society (California 1986).

50 Gilbert, M., On Social Facts (New York 1989).

51 The Criminal Cod e Act 1995 (Commonwealth of Australia) includes a radical scheme in respect of corporate liability. It provides that where mens rea needs t o be proved against a company, it ma y b e established by, "proving that a corporate culture existed within the body corporate that directed, encouraged, tolerated o r led to non-compliance with the relevant provision" (s. 12.3(2)(c)) or by "proving that the body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision" (s. 12(3)(2)(d)). Seemingly, a finding of corporate guilt is not dependent on establishing that any individual associated with the company possessed mens rea for the offence unless "non-compliance with the relevant provision" is taken to imply that at least one associated individual must perpetrate the offence in his or her own right. The test for corporate negligence is unequivocally corporatist providing, inter alia, that negligence may be attributed to a company "if the body corporate's conduct is negligent when viewed as a whole (that is, by aggregating the conduct of any number of its employees, agents or officers)": s. 12(4)(2)(b).

52 The most clear-cut claim to that effect is by Professor Dan-Cohen who argues that "personless" corporations are feasible and that they would be capable of full legal agency: op. cit. note 49, chap. 3.

53 See in particular op. cit. note 48, and B. Fisse and J. Braithwaite, "The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability" (1988) 11 Sydney Law Review 468.

54 Op. cit. note 48, chap. 2.

55 Ibid., at p. 48.

56 Murder (Abolition of Death Penalty) Act 1965.

57 Gross negligence would now be the culpability standard for corporate manslaughter in the light of Adomako [1995] 1 A.C. 171, which supersedes Seymour [1983] 2 A.C. 493.

58 Op. cit. note 48, at pp. 47–50.

59 Wounding with intent to cause grievous bodily harm, malicious wounding and occasioning actual bodily harm, respectively.

60 Concern is frequently expressed about the adequacy of the resources and commitment given to enforcing safety legislation: e.g. Bergman, D., Deaths at Work: Accidents or Corporate Crime? (London 1991) and The Perfect Crime?: How Companies Escape Manslaughter Prosecution (London 1994); Wells, op. cit. note 48, chaps. 1 and 2; Baldwin, R.Rules and Government (Oxford 1995) pp. 125etseq.

61 Discussed in Wells, op. cit. note 48, at pp. 132–133.

62 At present, identification will be the rule of attribution: see note 16 above. When this matter was before the courts the culpability required was based on "CaldwelF recklessness, now displaced by gross negligence since the decision in Adomako [1995] 1 A.C. 171. It is doubtful whether this, of itself will change the rule of attribution employed, given that the kind of recklessness formerly at issue had a very close affinity with negligence. It will be argued below that vicarious liability tempered by a due diligence defence is the appropriate standard for corporate manslaughter, an argument that gains some support from appellate decisions, previously discussed, which have extended, piecemeal, the range of vicarious liability as the applicable rule of attribution. Lord Hoffmann's doubts in Meridian, concerning the propriety of using vicarious liability as the standard in corporate manslaughter suggest caution for any prediction.

63 SullivanG, G.R., "The Particularity of Serious Fraud" in Pressing Problems of Law, ed. Birks, P. (Oxford 1995) 99, at pp. 102103.

64 See note 49 above.

65 In criminal law contexts, the theory has been rejected, see citations at note 16. The Court of Appeal in Wilsher v. Essex Area Health Authority [1987] Q.B. 730 and in Bull v. Devon Area Health Authority [1993] 4 Med. L.R. 116 canvassed the possibility of liability in negligence on the basis of a finding that a system was deficient, a form of direct liability not dependent on proof of negligence on the part of any individual. The trial decision of W.B. Anderson v. Rhodes [1967] 2 All E.R. 850 has been characterised as an example of negligence liability on the basis of aggregation. Figures had been negligently compiled by the company bookkeeper (who was not in a relationship of sufficient proximity with the plaintiff) and passed on to the plaintiff in a non-negligent fashion by a company employee who was in relationship of sufficient proximity to the plaintiff. The criticisms made in the text against aggregation lose some force in civil law contexts but the theory still allows a fabrication rather than a finding of any culpability that may be required.

66 Law Com. No. 237 (1996) para. 8.1–8.77.

67 Ibid, paras. 8.5, 8.34.

68 Paras. 7.21; 7.30; 7.31; 7.33; 8.4; 8.8.

69 Para. 7.33.

70 Paras. 7.32–7.35.

71 Para. 8.3. However in the explication of its proposal for an offence of corporate killing, the Commission employs language which implies the reality of companies as in para. 8.8, where addressing the best basis of attribution it poses the question “in what circumstances can it properly be said, not merely that the conduct of a corporation's agents has caused a death, but that the conduct of the corporation itselfif has done so.” (emphasis in the original).

72 Law Com. No . 237 at p. 137 (abridged from draft bill).

73 At para. 8.4 the Commission envisages juries finding whether a risk, “was or should have been obvious to any individual or group of individuals within the company who were or should have been responsible for taking safety measures, in deciding whether the company's conduct fell below the required standard.”

74 See above at pp. 528–529.

75 See note 68 above.

76 Above at p. 529.

77 See note 71 above.

78 Wells, op. cit., note 48, at p. 88.

79 The Philosophy of Right (translated by T.M. Knox), especially at pp. 279–283.

80 R. Scruton, "Corporate Persons" (1989) Proceedings of the Aristotelian Society (Supplementary Series) 239.

81 Lord Haldane's judgment in Lennard's Carrying offers no theoretical account, however brief, of the nature of companies.

82 Given vivid expression by Lord Denning in Bolton (Engineering) Co. Ltd. v. Graham & Sons [1957] 1 Q.B. 159, 172.

83 Fundamental Legal Conceptions (Yale 1919) at pp. 198200; 220 el seq.; "Definition and Theory in Jurisprudence" (1954) 70 L.Q.R. 37.

84 It will be recalled that Hohfeld barely acknowledged any separate legal existence inhering in companies, regarding references to companies as, essentially, a shorthand account of legal relationships between individuals, a view cogently attacked by Hart who allowed companies a reality but a purely legal one. The Hohfeldian view retains currency for scholars who would reduce companies to a "nexus of contracts" as in Easterbrook, F. and Fischel, D., The Economic Structure of Corporate Law (Harvard, 1991) chap. 1.

85 Op. cit. note 10.

86 New York, 1984.

87 French at p. 31.

88 Ibid, pp. 35–62.

89 California 1986.

90 A very similar theory is offered by G. Teubner, ‘The Essence of a Legal Person’ (1988) 36 Am. J. Comp. L . 130.

91 Dan-Cohen, chaps. 1 and 2.

92 Ibid, chap. 3.

93 For a view that French offers merely a semantic account of the agency of companies rather than a substantive account see G. Ouyang and R. Shiner, "Organisations and Agency" (1995) 1 Legal Theory 283. His semantic account, they argue, means n o more than that sentences which ascribe intentionality to a company as in "company x intends to diversify its range of products", have a semantic truth value. As the authors maintain, this is an inadequate basis for a finding of full moral agency. They acknowledge however that other commentators take French to be offering the foundations for a substantive account of moral agency (at p. 301). Fo r this commentator, French is making the claim that the structures of decision-making typical of many companies generate a distinctively corporate intentionality, an intentionality as much part of the natural world as human intentionality. This claim is criticised below at pp. 535–537.

94 See J.W.N. Watkins, "Historical Explanation in the Social Sciences" (1957–58) 8 British Journal for the Philosophy of Science 104.

95 The Poverty of Hisloricism (London 1957).

96 It may be thought that the example requires too much of a suspension of disbelief. Yet to put the arguments we are testing in their strongest form, we must imagine a world, however unlikely, where AI systems develop and change in ways not anticipated by their programmers and in a manner which eludes detection.

97 Dennet, D.C. in "Intentional Systems" in Brainstorms: Philosophical Essays on Mind and Psychology, (Cambridge Mass. 1978) and The Intentional Stance (Cambridge Mass. 1987) maintains that it is possible in principle to attribute intentional states to AI systems even while accepting that those systems lack consciousness or any other "mental" attributes. By contrast, Searle, J.R. in Intemionality: an Essay in the Philosophy of Mind (Cambridge 1983) claims that intentionality loses coherence as a category of experience if we divorce it from consciousness. He argues persuasively that to ascribe intentionality to a non-conscious system omits its representational character and suppresses the fact that an intentional state presents its object in a particular way to a centre of consciousness.

98 For an elaboration of this position see P. Arenella, "Convicting the Morally Blameless: Reassessing the Relationship between Legal and Moral Accountability" (1992) 39 U.C.L.A. L. Rev. 1511. Of course, for human agents the lack of empathy, contrition etc. may be characterised as part of the very badness that is to be condemned but such reasoning has no application to impersonal entities. See, too, Wolf, S., "The Legal and Moral Responsibility of Organisations" in Pennock and Chapman (eds.) Criminal Justice (New York 1985) at pp. 276279. For a contrary view see Clarkson, op cit. note 48 at pp. 566–567. Inter alia, he rejects emotional capacity as a predicate for culpability because it would exclude negligence as a basis of criminal liability. While it may be that findings of negligence may appropriately be made against psychopathic individuals, nonetheless negligence is exclusively a human failing. If it is to be said that something has happened because of negligence, then at least one individual, whether or not identifiable, must have been at fault. For Clarkson companies can act negligently in their own right as they are "something more than simply the sum of their human components", a position he takes for reasons similar to those put forward by French.

99 English law does not accept moral blamelessness or indeed moral credit as an answer to a criminal charge even for serious offences: Yip Chiu-cheung v. R.; [1995] 1 A.C. 111 (PC), approved by the House of Lords in R. v. Kingston [1994] 2 A.C. 355. All that is required is a match between the offence specification and the defendant's conduct and state of mind, subject to recognised defences. On that approach, it could be said that there is only a contingent relationship between mens rea and moral culpability and no legal objection to convicting subjects incapable of moral response. It is submitted that the stance taken on this matter by English law is unprincipled: G.R. Sullivan "Making Excuses" in Simester, A and Smith, A.T.H., eds., Harm and Culpability (Oxford 1996) 131, at pp. 148151. Be that as it may, the argument in the text is that personless companies should be excluded from the criminal law as a morally irresponsible class by way of analogy with infants and the insane. Yip Chiu-cheung concerned a person, not before the court, who had acted irreproachably but who was assumed to be guilty of a serious offence. Unlike an infant or personless company, however, he was a responsible person.

100 Gellner, E., "Holism versus Individualism" in Broadbeck, M., ed.,Readings in the Philosophy of the Social Sciences (New York 1968) at p. 258.

101 New York, 1995.

102 Searle, pp. 23–29.

103 Ibid., at p. 23.

104 Ibid, chap. 2.

105 An analogy may be drawn with the "common-purpose" requirement in riot which makes what otherwise would be the offence of violent disorder into the more serious offence: see now Public Order Act 1986, s. 1.

106 Op. cit. notes 51, 72.

107 [1995] 1 W.L.R. 1356.

108 Ibid., at p. 1363H.

109 Ibid., at pp. 1362–1363.

110 Ibid., at p. 1364. Steyn L.J. stated that he would have favoured a "substantial" fine.

111 Johnson v. Youden [1950] 1 K.B. 544.

112 Cf. p. 531 above, and notes 66–73.

113 Law Com. No. 237 para. 8.6.

114 For sceptical accounts of the present efficacy of regulation in matters of corporate safety see the works cited in note 60.

115 M. V. Herald of Free Enterprise: Report of Court No. 8074, Department of Transport. (The Sheen

116 As is the position in U.S. Federal law: Standard Oil Company of Texas v. United States (1962) 307 F. 2D. 120.

117 Slovic, P. and Fisckkoff, B., "How Safe is Safe Enough" in Dowie, J. and Lefrere, P. eds., Risk and Chance (Milton Keynes 1980) pp. 121148. Slovic and Fisckkoff report a consistent exaggeration ex post facto of what could have been anticipated in foresight. Not all inquiries display this tendency. In his findings on the Hixton railway crossing disaster, E.B. Gibbens Q.C. declined "to criticise anyone unfavourably for having failed to foresee a danger when many intelligent minds and experienced and talented people have conscientiously considered the same problem before the danger manifested itself, yet failed to appreciate it": Inquiry into the Disaster at Hixton railway crossing (Cmnd. 3706) para. 184.

118 Law Com. No. 237, paras. 7.28–7.31.

119 See above at pp. 532–537.

120 See above at p. 531.

121 Op. cit., paras. 8.10–8.34.

122 The Commission was, of course, using this case law as a guide to corporate liability for any deaths causally related to the company's activities and not merely the work related deaths of its employees.

123 Smith v. Baker and Sons [1891] A.C. 325; Wilsons and Clyde Coal Company Limited v. English [1938] A.C. 57.

124 Vicarious liability is the term explicitly used in the case-law, e.g. Speed v. Thomas Swift and Co. Ltd. [1943] K.B. 557; Mcdermid v. Nash Dredging and Reclamation Co. Ltd. [1987] A.C. 906.

125 Op. cit.

126 Op. cit.

127 Op. cit., at para. 8.50.

* Senior Lecturer in Law, University of Durham. I am much indebted to Tom Allen, Carl Emery, Harvey Teff and Colin Warbrick.

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