Corporate Attribution in Private Law

Rachel Leow

• Publisher: Hart Publishing
• Year: 2022
• ISBN:
  9781509941360
• Edition: 1
• Topic: Law
• Subtopic: Science & Technology Law
• Index: Law

Looking at key questions of how companies are held accountable under private law, this book presents a succinct and accessible framework for analysing and answering corporate attribution problems in private law. Corporate attribution is the process by which the acts and states of mind of human individuals are treated as those of a company to establish the company's rights, duties, and liabilities. But when and why are acts and states of mind attributed in private law? Drawing on a wide range of material from across the disparate areas of company law, agency law, and the laws of contract, tort, unjust enrichment, and equitable obligations, this book's central argument is that attribution turns on the allocation and delegation of the company's own powers to act. This approach allows for a much greater and clearer understanding of attribution. A further benefit is that it shows attribution to be much more united and coherent than it is commonly thought to be. Looking at corporate attribution across the broad expanse of the common law, this book will be of interest to lawyers across the common law world, including the United Kingdom, Australia, Canada, and Singapore.

1

Introduction

Companies are artificial legal persons. They lack a physical body and a mind of their own. Unable to act or think ‘immaculately’,¹ they must act and think through human persons. The acts and states of mind of those human persons are then regarded as the company’s. This process is known as ‘corporate attribution’. As Lord Walker NPJ explained in Moulin Global Eyecare Trading Ltd v Commissioner of Inland Revenue:

Attribution means, in this context, the process of legal reasoning by which the conduct or state of mind of one or more natural persons (that is, human beings) is treated as that of a non-natural person (that is, a company) for the purpose of determining the company’s legal liability or rights in civil proceedings (in particular, its liability or rights in contract, in tort or for unjust enrichment) or its criminal liability.²

Although attribution has existed for as long as companies have, when and why attribution is available remains highly controversial. For proof, one only needs to examine the voluminous case law, much of it recent. In England and Wales, the House of Lords and Supreme Court have repeatedly grappled with this question over the last decade.³ Judges at first instance and in the Court of Appeal regularly face attribution problems. Nor is this limited to England and Wales; the same phenomenon can be seen across the Commonwealth.⁴ Keeping pace with the profusion of case law is an explosion in academic commentary.⁵ But a succinct and accessible account of when and why acts and states of mind can be attributed in private law is still lacking.

The lack of such an account can be fairly ascribed to the impact of attribution’s leading case, Meridian Global Funds Management Asia Ltd v Securities Commission.⁶ A true landmark, Meridian was the first to develop the terminology of attribution and to identify categories of attribution rules. Today, it is most closely associated with a highly context-specific approach to attribution.⁷ On this view, when and why acts and states of mind are attributed varies; an act or state of mind attributed for one purpose may not be for another. Judicial statements to this effect are not difficult to find. Expressing this point of view most strongly was Lord Hoffmann NPJ in the Hong Kong Court of Final Appeal, who said that:

[The question before the court] suggests that there are uniform common law principles by which one will attribute acts, knowledge, states of mind etc to the company. In my opinion it cannot be too strongly emphasised that there are no such ‘common law principles’. The authorities since Meridian … and in particular the more recent cases of Moulin Global Eyecare Trading Ltd v Commissioner of Inland Revenue (2014) 17 HKCFAR 218 and Bilta (UK) Ltd (in liquidation) and others v Nazir and Ors (No 2) [2016] AC 1 make it clear that in every case the criteria for attribution must be such as will give effect to the purpose and policy of the relevant substantive rule, whether that rule is contained in a statute or the common law.⁸

If these statements are correct, working out attribution rules across private law would be a mammoth task of enormous complexity. Myriad factors might require consideration. Attribution rules could vary depending on the doctrine requiring attribution, the remedy sought, the type of company to whom the act or knowledge is to be attributed, the company’s solvency, and countless other variables. The prospects for producing a succinct and accessible account of attribution in private law appear correspondingly dim.

The book aims to show that attribution is not so complicated or difficult after all. It offers the first ever book-length account of when and why attribution is available in private law. Drawing on a wide range of material from across the disparate areas of company law, agency law, and the laws of contract, tort, unjust enrichment, and equitable obligations, its central argument is that attribution turns on the allocation and delegation of the company’s own powers to act.

I.The Central Argument

Over the past two decades, Meridian has garnered virtually unanimous support. Likewise, the context-specific approach associated with it has been widely endorsed. The picture is one of apparent harmony. But problems surface on closer reflection. While all agree that context is important, what context is relevant? There is little agreement here. While some regard attribution as turning on the source or the type of the right being enforced,⁹ others rely on the purpose and policy of the claim as the key feature for attribution.¹⁰ A third approach considers all features relevant to the factual or legal context.¹¹ Other variants undoubtedly exist. These accounts share a common theme: they regard attribution as turning, either partially or wholly, on features concerning the right being enforced or the claim by which it is enforced. We might call these ‘right-sided’ features.

The central argument of this book is that attribution turns not on ‘right-sided’ features, but on the allocation and delegation of the company’s powers to act. Justifications must fit the thing to be justified. True of other subjects of justification, this is equally true for attribution. Reasons for attribution must fit attribution’s form. Attribution involves treating this act or knowledge of this individual as that of this company. It thus concerns the connection between act or knowledge, individual, and the company. Reasons given for attribution must fit this form, connecting act or knowledge, individual, and company in a single normative sequence. This explains why accounts focusing on ‘right-sided’ features miss the mark: these right-sided features are external to the connection between act or knowledge, individual, and the company. They do not fit attribution’s form. Equally, the same objection can be made to accounts which regard attribution as turning on who the least-cost-avoider is.¹² Concerned with improving economic efficiency, they too do not fit attribution’s form.

This connection is found in the company’s allocation and delegation to human individuals of its own powers to act. As a legal person, the company comes into existence with its own powers. Those powers can be allocated to different groups or individuals through the company’s constitution. Most commonly, powers to act are allocated to the board of directors and shareholders in general meeting. These groups, or others allocated the company’s powers, can then delegate those powers throughout the corporate hierarchy to chief officers, managers, and rank-and-file employees. When these allocated or delegated powers are exercised, the company’s own powers to act are exercised. The company acts personally. This involves no legal fiction, only the application of ordinary legal concepts.

On this account, the attribution of acts thus turns on four questions: (i) does the company have the power to act? (ii) was the power allocated or delegated to the person doing the act? (iii) was the power exercised within its scope? (iv) was the power properly exercised? A similar analysis applies to the attribution of knowledge. The attribution of knowledge turns on whether the knowledge-holder was allocated or delegated the company’s powers and that the knowledge was material to those powers.

The account presented here is an interpretive one. Like other interpretive accounts, it ‘aim[s] to enhance understanding of the law … by revealing an intelligible order in the law, so far as such an order exists’.¹³ This intelligible order is to be found by showing how features of the law are best explained.¹⁴ In line with interpretive theories generally, the account here has good fit with the current law, is largely transparent in reflecting the reasoning of judges for reaching their conclusions, and provides a normatively attractive account of the doctrine.

II.Advantages

This account offers important advantages; three are focused on here.

First, it provides a simple, user-friendly framework which can be used to analyse and answer difficult attribution problems. As the many recent attribution cases indicate, courts often face difficulty in deciding whether acts or knowledge can be attributed. As Jackson LJ said about the key decision of Bilta (UK) Ltd (in liquidation) v Nazir,¹⁵ ‘[t]he length and multiplicity of the different analyses in those passages do not make life easy for practitioners and judges dealing with attribution issues on a day-to-day basis’.¹⁶ The same is true of attribution more generally. Many questions remain unanswered. Can acts be attributed to establish negligent driving? Battery? When is knowledge attributed to establish defences against a company? When are acts attributed in restitutionary claims?

The account presented here provides these answers, and the framework to at least make a start on others. The attribution of acts turns on the company’s powers to act, their allocation and delegation, scope, and proper exercise. The attribution of knowledge likewise turns on whether that knowledge was material to the powers allocated or delegated to the knowledge-holder. Conversely, if attribution turns on context, with attendant difficulties as to what context means, these questions become even more difficult to answer.

Second, it presents a non-fictional account of attribution. As shown in Chapter 2, it is often assumed that attribution is only a fictional deeming process, necessitated by the prior legal fiction of the company.¹⁷ In other words, attribution merely involves artificially treating acts and mental states as the company’s though they are not.¹⁸ But if only a deeming rule, attribution possesses no natural limits. In tort law, Robert Stevens once recognised this problem:

[W]hilst some sort of rules for the attribution of acts are essential, this does not tell us what the detailed content of those rules ought to be … What is the correct approach? How many players should a team of footballers contain? Five? Eight? Eleven? Twenty? It is important to know who counts as a member of the team, but there are different ways in which rational rules can be formulated. Whilst some answers may be demonstrably wrong (eg one-a-side, 90-a-side), there may be no single demonstrably right answer.¹⁹

But the approaches taken to attribution have been remarkably consistent over decades and across common law jurisdictions. This suggests a shared common intuition that there are right answers to attribution. The account advanced here presents a way to vindicate that intuition.

This account also suggests that attribution has deeper normative significance. In line with recent valuable new work on group agency, it suggests that attributed acts are largely intentional acts done by companies as agents, used here in a philosophical sense to refer to beings with capacity for action. This is important as capacity to act as an agent is often regarded as a necessary precondition to holding the actor responsible for the act, whether morally or otherwise.

Third, the very possibility of formulating an account of when and why attribution is available suggests that attribution is more unified than commonly thought to be. At first sight, attribution appears highly disparate. Doctrines governing it appear loosely dispersed across far-flung islands of company law, agency law, and the law of obligation, with little to bridge the gap between them. But this image is inaccurate. Although applying to many different areas, attribution has its own internal logic. United by the central idea of the allocation and delegation of the company’s own powers, the rules of attribution form a coherent body across different areas of private law. Attribution’s unity has importance going beyond mere conceptual tidiness. It might suggest that attribution in other contexts might work similarly. The account here may thus have insights for corporate ...