Identification of Company’s Directing Mind
In a prosecution under the 1968 Act, the court discussed how to identify the directing mind and will of a company, and whether employees remained liable when proper instructions had been given to those in charge of a local store.
Held: ‘In the expression ‘act or default’ in section 23 and in paragraph (a) of section 24(1) the word ‘act’ is wide enough to include any physical act of the other person which is causative of the offence. But the use of the word ‘default’ instead of the neutral expression ‘omission’ connotes a failure to act which constitutes a breach of a legal duty to act. A legal duty to act may arise independently of any contract or it may be a duty owed to another person arising out of a contract with him.’ The defendants were the company in the sense that any offences committed by them in relation to the affairs of the company would be capable of being treated as offences committed by the company itself.
Lord Reid said: ‘Where a limited company is the employer difficult questions do arise in a wide variety of circumstances in deciding which of its officers or servants is to be identified with the company so that his guilt is the guilt of the company.
I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company’s servant or agent. In that case any liability of the company can only be a statutory or vicarious liability.’ and
‘. . . Normally the board of directors, the managing director and perhaps other superior officers of a company carry out the functions of management and speak and act as the company. Their subordinates do not. They carry out orders from above and it can make no difference that they are given some measure of discretion. But the board of directors may delegate some part of their functions of management giving to their delegate full discretion to act independently of instructions from them. I see no difficulty in holding that they have thereby put such a delegate in their place so that within the scope of the delegation he can act as the company. It may not always be easy to draw the line but there are cases in which the line must be drawn. Lennard’s case  AC 705 was one of them.’
Viscount Dilhorne set out the test: ‘a person who is in actual control of the operations of a company or of part of them and who is not responsible to another person in the company for the manner in which he discharges his duties in the sense of being under his orders’
Lord Diplock said: ‘Consumer protection, which is the purpose of statutes of this kind, is achieved only if the occurrence of the prohibited acts or omissions is prevented. It is the deterrent effect of penal provisions which protects the consumer from the loss he would sustain if the offence were committed. If it is committed he does not receive the amount of any fine. As a tax payer he will bear part of the expense of maintaining a convicted offender in prison.
The loss to the consumer is the same whether the acts or omissions result in him being given inaccurate or inadequate information are intended to mislead him, or are due to carelessness or inadvertance. So is the corresponding gain to the other party to the business transaction with the consumer in the course of which those acts or omissions occur. Where, in the way that businesses are now conducted, they are likely to be acts or omissions of employees of that party and subject to his orders, the most effective method of deterrence is to place upon the employer the responsibility of doing everything which lies within his power to prevent his employees from doing anything which will result in the commission of an offence.
This, I apprehend, is the rational and moral justification for creating in the field of consumer protection, as also in the field of public health and safety, offences of ‘strict liability’ for which an employer or principal, in the course of whose business the offences were committed, is criminally liable, notwithstanding that they are due to acts or omissions of his servants or agents which were done without his knowledge or consent or even were contrary to his orders. But this rational and moral justification (and here come words of significance in the present case) does not extend to penalising an employer or principal who has done everything that he can reasonably be expected to do by supervision or inspection, by improvement of his business methods or by exhorting those whom he may be expected to control or influence to prevent the commission of the offence (see Lim Chin Aik v. The Queen (1963) AC 160, 174; Sweet v. Parsley (1970) AC 132, 163). What the employer or principal can reasonably be expected to do to prevent the commission of an offence would depend upon the gravity of the injury which it is sought to prevent and the nature of the business in the course of which such offences are committed. The Trade Descriptions Act 1968 applies to all businesses engaged in the supply of goods and services. If considerations of costs and business practicability did not play a part in determining what employers carrying on such business could reasonably be expected to do to prevent the commission of an offence under the Act, the price to the public of the protection afforded to a minority of consumers might well be an increase in the cost of goods and services to consumers generally.’
Lord Diplock, Lord Reid, Viscount Dilhorne
 CLY 10538,  AC 153,  2 WLR 1166,  2 All ER 127,  UKHL 1
England and Wales
Cited – Lennard’s Carrying Company Limited v Asiatic Petroleum Company Limited HL 1915
The House was asked as to when the acts of an individual became those of his employer under section 502 (‘any loss or damage happening without (the ship owner’s) actual fault or privity’).
Held: Viscount Haldane LC said: ‘It must be upon the . .
Considered – Regina v British Steel Plc CACD 31-Dec-1994
British Steel employed two sub-contractors to work in moving a steel tower under their supervision. One platform fell on one of the sub-contractors, killing him. British Steel claimed they had delegated their responsibilities under the Act, and were . .
Cited – MCI Worldcom International Inc v Primus Telecommunications Inc ComC 25-Sep-2003
The claimant sought judgment, and the defendant leave to amend its defence. The question was whether the proposed defence had any reasonable prospect of success.
Held: The misrepresentation alleged was made by the claimant’s in-house . .
Cited – Express Ltd v The Environment Agency QBD 15-Jul-2004
The dairy appealed its conviction for allowing cream to enter a brook from the land of its customer.
Held: Polluting matter did not need to be itself noxious or poisonous, it was enough that it stained or tinted the water as did cream. Though . .
Cited – Mahonia Limited v JP Morgan Chase Bankwest Lb Ag QBD 3-Aug-2004
The Claimant claimed on a letter of credit issued by the Defendant on behalf of Enron Ltd, who asserted it was not liable to pay there having been unlawful behaviour by Enron Ltd. Swap agreements had been entered into, and the defendant said the . .
Cited – Attorney-General’s Reference (No. 2 of 1982) CACD 1984
Two men were charged with theft from a company which they wholly owned and controlled. The court considered the actions of company directors in dishonestly appropriating the property of the company, and whether since the title to the goods was . .
Cited – Director of Public Prosecutions v Gomez HL 3-Dec-1992
The defendant worked as a shop assistant. He had persuaded the manager to accept in payment for goods, two cheques which he knew to be stolen. The CA had decided that since the ownership of the goods was transferred on the sale, no appropriation of . .
Cited – Majrowski v Guy’s and St Thomas’ NHS Trust CA 16-Mar-2005
The claimant had sought damages against his employer, saying that they had failed in their duty to him under the 1997 Act in failing to prevent harassment by a manager. He appealed a strike out of his claim.
Held: The appeal succeeded. The . .
Cited – KR and others v Royal and Sun Alliance Plc CA 3-Nov-2006
The insurer appealed findings of liability under the 1930 Act. Claims had been made for damages for child abuse in a residential home, whom they insured. The home had become insolvent, and the claimants had pursued the insurer.
Held: The . .
Cited – Ferguson v British Gas Trading Ltd CA 10-Feb-2009
Harassment to Criminal Level needed to Convict
The claimant had been a customer of the defendant, but had moved to another supplier. She was then subjected to a constant stream of threatening letters which she could not stop despite re-assurances and complaints. The defendant now appealed . .
Cited – Jetivia Sa and Another v Bilta (UK) Ltd and Others SC 22-Apr-2015
The liquidators of Bilta had brought proceedings against former directors and the appellant alleging that they were party to an unlawful means conspiracy which had damaged the company by engaging in a carousel fraud with carbon credits. On the . .
Cited – A Ltd and Othersi, Regina v CACD 28-Jul-2016
The Serious Fraud Office appealed against rulings on the admission of evidence after its exclusion under section 78.
Held: The appeal was allowed. The appeal had been brought within time and could proceed. Police and Criminal Evidence Act . .
Cited – Lincolnshire County Council v Safeway Stores Plc Admn 19-Apr-1999
Appeal against conviction for selling food after sell by date. . .
Cited – X v Kuoni Travel Ltd SC 24-Jul-2019
The claimant had been raped by a member of staff at the hotel in Sri Lanka booked through the respondent travel company. She now appealed from dismissal of the claim.
Held: Questions were referred to the ECJ, namely: ‘(1) Where there has been . .
Lists of cited by and citing cases may be incomplete.
Crime, Company, Consumer
Updated: 17 April 2022; Ref: scu.186448