The concept of corporate criminal liability has been problematic since its inception and the subjection of companies1 to the criminal law eternally difficult. Questions as to how the law should respond when deaths, injuries or other wrongs are caused through corporate activity have recently received greater attention as a result of tragedies such as the Zeebrugge ferry disaster, the high number of deaths and injuries in the workplace, concerns about corporate pollution, and the accompanying realisation as to the impact corporations can have on our everyday lives. Despite public calls for corporations to be brought within the full scope of the criminal law2 the various theories and mechanisms according to which a company may be held to have committed a criminal offence continue to be debated by academic lawyers, social theorists and legislatures. The essential problem with prosecuting a company stems from the dissimilarities between a natural person and a corporation. The criminal law was developed to punish and deter the wrongdoing of individual moral persons, whereas a company is traditionally and authoritatively said to be a 'fictitious' or 'abstract' entity, incapable of physical action, knowledge or intention.3 Commonwealth jurisdictions4 have traditionally approached this difficulty through a 'nominalist'5 perspective, that is, by treating the corporation as a mere collection of individuals and locating its criminal culpability derivatively through the culpability of individual actors. The two widely accepted common law bases of corporate responsibility — vicarious liability (whereby the corporation is held liable for the conduct of all its officers, employees or agents acting within the scope of their employment or authority) and the 'identification approach' (under which the actions and mental state of certain individual actors are treated as the company's own) - both proceed from the nominalist conception of the 'company' as a fiction, unable to be conceived of as blameworthy in itself. These two models of liability have been criticized as failing to adequately capture the reality of criminal wrongdoing by the modern corporation. The requirement to first find a criminally culpable individual in order to impute liability to the company poses practical problems and, it is submitted, takes the wrong approach to the question. Commentators have suggested alternative mechanisms of liability, and in the United Kingdom and Australia corporate criminal liability has been a prominent item on the agenda for law reform. The alternative models tend to be based on what have been termed 'holistic'6 theories of corporate criminal liability, which focus on the organisational conduct and fault of the corporation as a whole in order to satisfy the requirements of the criminal law.7 The idea is that corporate blame can be found in the procedures, operating systems or culture of a company. The most radical model of liability is that found in Part 2.5 of the Australian Criminal Code Act 1995, which came into force in all states in December 2001. Based on 'realist'8 theories of the company as a unique entity having an existence independent of its members, the Code enables Australian courts to examine a company's corporate policy and culture and its organisational structure in order to find genuine (as opposed to derivative) corporate fault. This paper will review the historical development of corporate criminal liability and the dominance in the common law of the two traditional models of responsibility, before turning towards a discussion of organisational liability and an examination of the alternative proposals. The argument to be made favours the Australian Criminal Code model as the best available mechanism for the imposition of corporate criminal liability, with particular support for the idea that truly corporate mens rea can be found in criminogenic corporate cultures, and need not be reliant on the culpability of individual actors.
II. Historical Development
A corporation has long been recognized as a legal person - a single entity, distinct and separate from all the individuals who compose it.9 As a consequence of its legal personality, a company has the capacity to enter into transactions with other persons, to hold property, to sue and be sued, and, if the jurisdiction so allows,10 to incur criminal liability. Today, corporations are charged with and convicted of statutory offences under a wide range of legislation. The New Zealand Crimes Act 1961, with certain exceptions, imposes liability on 'persons'. Section 29 of the Interpretation Act 1999 and s 2 of the Crimes Act 1961 define 'person' so as to include a corporation sole and also a body of persons, whether corporate or unincorporate. Anumber of other statutes contain provisions which deal specifically with the liability or punishment of corporations.11
There was a time, however, when it was believed that a corporation could not be indicted for a crime at all. The first recorded consideration of the issue appears to be in Suttons Hospital Case.12 The writing of Blackstone in 1768 gives similar evidence of the reasoning behind this theory:
An aggregate corporation... cannot appear in person, being ... invisible, and existing only in intendment and consideration of law. It can neither maintain, or be made defendant to, an action of battery or such like personal injuries; for a corporation can neither beat, nor be beaten, in it's [sic] body politic. Neither is it capable of suffering a traitor's or felon's punishment, for it is not liable to corporal penalties, nor to attainder, forfeiture, or corruption of blood ... Neither can it be committed to prison; for its existence being ideal, no man can apprehend or arrest it... Neither can a corporation be excommunicated; for it has no soul.13
A further problem with prosecuting a corporation was that a corporation, as a creature of the law, could only do such acts as it was legally empowered to do, so that any crime would therefore necessarily be ultra vires. A company was, under this analysis, legally incapable of committing a wrongful act. All of these objections have since been overcome either by legislation or by the courts.
The problem of a company appearing in court was eventually solved by the practice of having a representative enter a plea on behalf of the company.14 Although a company may not be physically punished, put to death, or imprisoned, legislation now enables a court to sentence the offender to pay a fine instead of imprisonment in almost all cases.15 For policy reasons the courts have demonstrated a willingness to read down mandatory penalties in order that a company will not be exempt from prosecution or conviction. In Police v Purser Asphalts and Contractors Ltd16 the High Court held that a mandatory penalty of disqualification from driving applied to natural persons only, and this did not prevent a company from liability for carelessly using a motor vehicle.17 Following this case the general principle is stated as being that where legislation expressly mandates a particular penalty which is applicable only to natural persons, a company may still be prosecuted, provided at least one other penalty (suitable to companies) is available.18 The offences of murder and treason, which carry mandatory penalties of life imprisonment, are likely to be exceptions. The ultra vires doctrine, seems to have been ignored in both the law of crime and tort19 and to apply to only in the law of contract and property.20
And, after a hesitant beginning, the courts have overcome the corporation's lack of mental and physical faculties by imputing the acts, knowledge, and intention of its directors, employees and agents to the body corporate. Leading texts describe this process of ascribing human attributes to a company as entirely necessary for the criminal law to work. The actions and intentions constituting the actus reus and mens rea of the crime must, it is said, be those of a natural person, as a company cannot as a company per se itself commit the constitutive elements of the crime.21 Thus the liability of a company for wrongs under the traditional common law approaches will always be derivative rather than original. Before considering the two ways in which a company may be held to be criminally liable it is proposed to briefly trace the development of the law of corporate criminal liability through certain significant decisions. The formative period in the development of corporate liability for crime was from about 1870 to 1930.22 The earliest decisions were confined to prosecutions for nuisance in cases of non-feasance. There was seen to be no great objection in holding a corporation liable where a statute imposed a duty upon a corporation (or other person) to act and no action was taken.23 In 1842 in Birmingham and Gloucester Rly Co24 a corporation was convicted for failing to fulfill a statutory duty to remove a bridge which it had erected over a road.
Four years later, the ability to prosecute a company was extended to crimes of misfeasance. The growth of vicarious liability in tort made the imposition of criminal liability in cases of misfeasance possible. Leigh writes that despite authoritative opinion that the body of law relating to vicarious liability had no application to corporations, 'this view failed to survive the appearance in significant numbers, of railway, canal and other bodies corporate. ... The growing familiarity of the body corporate in the ordinary life of the community made it necessary to fit the corporation within some framework of liability'.25 The corporation was therefore seen to be responsible for the acts of its agents and employees and in Great North of England Railway Co26 a company was convicted for cutting through and obstructing a highway and thereby causing a public nuisance. Lord Denman CJ stated that a corporation could not be guilty of treason, felony, offences against the person or perjury, as these offences derived their character from the guilty mind of the offender and in any event were violations of the social duty belonging to natural persons:
[A corporation] which as such, has no such duties, cannot be guilty in these cases: but they may be guilty as a body corporate of commanding acts to be done to the nuisance of the community at large.27
In the latter half of the nineteenth century as corporate activity burgeoned into most fields of enterprise the (English) legislature naturally made corporations subject to public welfare statutes regulating their conduct.28 Serious argument over the issue only arose when it was desired to hold corporations vicariously liable as an employer/master for regulatory offences which involved mens rea.29 Developments in the law of tort which enabled a corporation to be vicariously liable for torts committed by servants which involved some form of malice,30 as well as the enactment of the Interpretation Act 1889, which provided that the expression 'person' shall 'unless the contrary intention appears, include abody corporate',31 combined to extend liability for offences involving mens rea in respect of which employers were vicariously criminally liable, to corporations. It was first held that a company could be convicted of an offence of absolute liability (selling an article of food not up to quality) in Pearks Bunston, and Tee Ltd v Houghton.32 The courts went further in Chuter v Freeth and Pocock Ltd33 where it was held that a company could be vicariously liable for giving a warranty through its agents and through them 'believe' (or not believe) that the statements contained in it were true. Twenty years later it was confirmed in New Zealand that where the commission of an act prima facie imports an offence, a company can be convicted even though proof of absence of mens rea is a defence (i.e. a strict liability offence).34 At this stage corporate criminal liability did not, however, extend to 'truly' criminal offences of which mens rea was a necessary ingredient. Although the courts and the legislature had accepted that a corporation could be vicariously criminally liable for the acts of its agents and employees in the certain exceptional cases,35 before a corporation could in some way be said to have a 'mind' and the ability to act personally rather than by procuration, it could not be made amenable to the full ambit of the criminal law.
The final stage of development was the extension of corporate liability to offences requiring affirmative proof of mens rea. The notion that a corporation could be 'directly' liable for committing a truly criminal offence emerged in three 1944 cases, which have been described by Welsh as 'revolutionary' in their effect.36 In Director of Public Prosecutions v Kent and Sussex Contractors Ltd37 it was held that a company could be charged with the offence of furnishing false information 'with intent to deceive' when the company's transport manager sent in certain returns he knew to be false. The justices found that the offence included a mental element, that a corporation could not entertain criminal intent, and that this meant the company could not be made criminally liable for the offence. This finding was reversed by a Divisional Court where Lord Caldecote said:
The real point which we have to decide ... is ... whether a company is capable of an act of will or a state of mind, so as to be able to form an intention to deceive or to have knowledge of the truth or falsity of a statement ... Although the directors or general manager of a company are its agents, they are something more. A company is incapable of acting or speaking or even of thinking except insofar as its officers have acted, spoken or thought ... The officers are the company for this purpose.38
This reasoning was approved in the subsequent case of R v ICR Haulage Co Ltd39 where the company was convicted of common law conspiracy to defraud. The conspiratorial intent of its managing director was imputed to the company. DPP v Kent and Sussex Contractors was treated as authority for the proposition that a state of mind could be attributed to a company. Stable J stated that the court was not deciding that in every case where an agent of a limited company acting in its business commits a crime the company is automatically to be held criminally responsible. Whether the state of mind and actions of a corporate agent are to be imputed to the corporation 'must depend on the nature of the charge, the relative position of the officer or agent, and the other facts and circumstances of the case'. 40 In the third case, Moore v I Bresler Ltd,41 it was held that a company could be convicted for making false tax returns with intent to deceive when the returns were made by agents acting within the scope of their authority — even though the agents intended to defraud the company itself. These decisions represented a radical change in the attitude of the courts towards the liability of companies for crime; in each case the corporation was held criminally liable for offences committed by human agents, in circumstances where, had the master or employer been a natural person, it could not have been convicted.42 These were clearly not cases of vicarious liability but a kind of personal liability of the company itself. The three 1944 decisions were once criticized as putting the law of corporate criminal liability into a state of confusion in that it was not clear on what basis personal corporate liability was to be distinguished from vicarious liability.43 Moore v Bresler Ltd particularly concerned commentators as the guilty acts were not, as in the other two decisions, performed or authorized by directors of the company, but by seemingly lesser agents (a general manager and a sales manager). The decision was said to result in an 'undue extension of corporate liability by blurring the distinction in law of the agents of the corporation and the legal persona itself'.44 The difference between the vicarious and the so-called personal liability of a corporation was to be further consolidated in subsequent cases — although it will be seen that to some extent the distinction remains blurred. It suffices to say at this point that the cases are generally regarded as establishing that a form of corporate criminal liability existed according to which the company itself was identified with the acts of certain officers, rather than being simply accountable for the transgressions of its employees.