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New Zealand Law Students' Journal |
Last Updated: 27 May 2014
CULPABLE DEMI-GODS:
BEYOND THE HUMAN IN CORPORATE CRIMINAL LAW
AUGUSTINE CHOI*
Introduction
In a branch of law still preoccupied by figures of speech it is surprising that no one has deified the corporation. As metaphors go, it is quite sound.1 A corporation can ‘live’ indefinitely. It takes no corporeal form, save the images created for it. Through its ‘believers’, it can wield enormous power. And on rare occasions, it can deal incredible damage. Yet the ability of corporations to commit crimes in law did not arise contemporaneously to the birth of the concept of ‘the corporation’.2 Corporations were held immune to all criminal offences for both procedural and theoretical reasons until 1842.3 Although corporations can now be held criminally liable, objections based on principle and pragmatism still appear occasionally.4
*. LLB(Hons)/BCom (in progress), The University of Auckland. The author would like to thank Associate Professor Julia Tolmie of The University of Auckland Faculty of Law for the inspiration and guidance.
1 And, one suspects, blasphemous.
2 Corporate criminal law applies to all incorporated bodies, but the main focus has always been on the commercial corporation. Holt CJ is widely quoted for stating “[a] corporation is not indictable, but the particular members of it are.”: Anonymous (1701) 12 Mod 559, 88 ER 1518 (KB).
4 For example, Eliezer Lederman argued that corporate criminal liability challenges “the ideological and normative basis of criminal law and its mode of expression and operation”: Eliezer Lederman “Criminal Law, Perpetrator and Corporation: Rethinking a Complex Triangle” (1985) 76 J Crim L & Criminology 285 at 296. Compare Peter Alldridge’s pragmatic view that a civil regulation regime is “broadly utilitarian[,] more empirically rooted” and preferable to the use of criminal sanctions on corporations: Peter Alldridge Relocating Criminal Law (Ashgate, Aldershot, 2000) at 78–80.
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There is little chance of corporate criminal law disappearing and this article does not re-examine the case for its existence. Yet, the debate of when, and especially how, corporate criminal liability should be imposed continues. This article focuses on the latter debate and argues that a principled method of recognising corporate criminality is possible.
In New Zealand, the general principles of corporate criminal law are found solely in case law and are severely underdeveloped. 5 The fundamental barrier to a set of comprehensive principles lies in the difficulty of identifying a corporate state of mind. Overseas experiences have shown that overreliance on concepts of representative liability does not sufficiently address all aspects of corporate criminality. Each responding to tragic events,6 the United Kingdom and Australia have legislated (to different extents) beyond frameworks dependant on representative liability. For New Zealand, the findings following the Erebus disaster should have been warning enough that reform was needed.7
The available models of corporate criminal liability can be said to belong to two ideologically opposed camps—the “nominalists” and the “realists”. This is more than a mere academic division. The split provides the basis for understanding the inadequacies in New Zealand’s
A similar view is taken in VS Khanna “Corporate Criminal Liability: What Purpose Does It Serve?” (1996) 109 Harv L Rev 1477. Contrast Brent Fisse and John Braithwaite “The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability” [1988] SydLawRw 3; (1988) 11 Syd LR 468 at 474–488; and Tasmania Law Reform Institute Criminal Liability of Organizations (Final Report No 9, April 2007) at 16–25.
6 Richard Matthews Blackstone’s Guide to The Corporate Manslaughter and Corporate Homicide Act 2007 (Oxford University Press, New York, 2008) at [1.32].
Beyond the Human in Corporate Criminal Law 716
corporate criminal law, as well as some revolutionary developments overseas.
The nominalists believe all corporate actions are reducible to the individuals involved.8 “[O]nly individual human beings can qualify as basic moral units and intentional agents” 9 and therefore corporate criminality must be derived from individual fault. Vicarious liability, representative liability and aggregate liability align with nominalist views. In contrast, the realists have a more holistic view of organisations: corporations are capable of creating results that ought to attract criminal liability, even when no individual is at fault.10 The concept of collective liability is a realist’s take.
Despite some obvious faults with the dominant “directing mind and will” model of corporate criminal liability in recent years,11 reform has been sluggish.12 The first half of this article examines the human-centric concepts currently used in New Zealand, concepts that reflect the pre-reform frameworks in other major Commonwealth jurisdictions. The case for reform will become clear as nominalist corporate criminal law is exposed by this article as unprincipled and inadequate.
The second part of this article explores possible reforms that New Zealand could adopt, starting with the aggregation model. That model’s weaknesses then clearly contrast with the strengths of the options under collective liability, such as the “corporate culture” model in the Australian Criminal Code and the “reactive fault” model of Brent Fisse. These models are attractive not only in their extensive coverage of
10 See generally French, above n 9; and Tahnee Woolf “The Criminal Code Act 1995 (Cth) — Towards a Realist Vision of Corporate Criminal Liability” (1997) 21 Crim LJ 257.
12 See Matthews, above n 6, at [1.32]–[1.49]. For example, the English took over two decades from the infamous Herald of Free Enterprise disaster and the subsequent litigation to finally arrive at the reform in the United Kingdom.
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possible circumstances that give rise to criminality. They also accord with widely accepted views of corporate metaphysics.
A. The Current Law
There are three established forms of corporate criminal liability in New Zealand: vicarious, omission-based and representative liability.
1. Vicarious criminal liability
The first form of corporate criminal liability in New Zealand is vicarious liability. Despite the general principle that “[p]rima facie, ... , a master is not to be made criminally responsible for the acts of his servant to which the master is not a party”,13 the criminal law has adopted the tortious concept of respondeat superior since the late 19th century.14 Any individual or corporation may be attributed criminal liability for the acts of their employees or agents, so long as they acted within the scope of their employment or authority.15 This is not to say the actions were the principal’s, rather it is the responsibility that is attributed.
Where it is available, the doctrine acts harshly. Those to whom vicarious liability apply are in effect absolutely liable. No defence, such as absence of fault or due diligence,16 seems to arise automatically.17 The counterbalance is that vicarious criminal liability is only available if the statute expressly or impliedly provides for it.18
17 Except where the statute provides a defence or where the defendant can argue the employee or agent was acting outside the scope of authority or employment: see Jull v Treanor (1896) 14 NZLR 513 (SC) at 516–517.
18 Hill v Martin, above n 15, at 3. See, for example, the enforcement scheme under pt 12 of the Resource Management Act 1991, in particular s 340. At
Beyond the Human in Corporate Criminal Law 718
The justification for the doctrine lies in the context in which it operates. Courts are far more likely to impose vicarious liability for regulatory or quasi-criminal offences.19 In these cases, the availability of vicarious liability facilitates the enforcement of rules protecting the public’s welfare.20 The courts are also likely to institute vicarious responsibility only where the offence is one of strict or absolute liability.21 The restriction avoids the inconsistency of convicting an agent of a mens rea offence only if he or she is at fault, but convicting the principal of that same offence regardless of fault.
In general, vicarious liability poorly reflects the blameworthiness of principals. Whilst the agent or employee’s actions have to be within the scope-of-authority touchstone, there are many possible mitigating circumstances. Agents or employees may act inappropriately through no fault of the corporation or even despite the corporation’s best efforts.22 The attribution of criminal liability can only be justified on policy grounds, and as such has to remain within well-defined boundaries. This article does not propose changing or disposing of this
the time of publication, the Commerce Committee is reviewing submissions on the Commerce (Cartels and Other Matters) Amendment Bill 2011 (341-1). If enacted, it would introduce criminal sanctions to certain cartel behaviour. Despite this, the Bill does not attempt to amend substantively s 90 of the Commerce Act 1986, which governs the Act’s attribution rules. If a corporation is prosecuted under the offence inserted by cl 18, the mens rea element would be satisfied where the prosecution proves that a “director, servant or agent” had the requisite intentionality.
19 Hill v Martin, above n 15, at 4.
20 Tiger Nominees, above n 15, at 718. See Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153 (HL) at 194–195. Lord Diplock in Tesco noted that the strict liability offence was one intended to “give effect to a policy of consumer protection which does have a rational and moral justification”.
21 Tiger Nominees, above n 15, at 720.
22 David Brown and others Brown, Farrier, Neal and Weisbrot’s Criminal Laws: Materials and Commentary on Criminal Law and Process of New South Wales (5th ed, The Federation Press, Sydney, 2011) at 410. However, where the employee or agent did an inappropriate act, but can show that he exercised all reasonable care, he will not be liable for a strict liability offence and neither will the corporation: S M Savill Ltd v Ministry of Transport [1985] NZHC 273; [1986] 1 NZLR 653 (HC).
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important regulatory tool.23
2. Liability for omissions
The second format of corporate criminal liability in New Zealand is omission-based liability. The criminalisation of failures to prevent harm is the exception rather than the rule. However, where there are special reasons for imposing duties to act,24 and those duties are breached, a corporation would be liable just as an individual would be. More importantly, corporations would take primary liability rather than vicarious liability, as the duty to take reasonable care would have been imposed on the corporation.
There has been little controversy with establishing corporate criminal liability through nonfeasance since the early 19th century.25 The model’s simplicity lies in avoiding the “metaphysics of identification”, and therefore unsurprisingly, negligence has been said to be “the true foundation for corporate liability”. 26 Eric Colvin took this as an argument in favour of expanding liability for corporate negligence. He suggested a general duty where corporates are “to guard against their operations causing harm and their structures and resources being used to cause harm”.27 His model would still use the ordinary principles of negligence, but in particular allow for a floating standard of care determined by the resources of the corporation.28
23 See generally Brown and others, above n 22, at 410.. While there is no sign of vicarious liability disappearing, there are concerns as to whether the doctrine protects public welfare. The rationale is that corporations have to take extra care when supervising their employees because of the high risk of criminal stigma. However, the absence of defences generally might provide a disincentive to care as much as society might want—the probability of corrupt individuals may simply be regarded as a sunk cost of operations.
24 See, for example, Health and Safety in Employment Act 1992, pt 2.
25 R v Severn and Wye Railway Co [1815] EngR 518; (1819) 2 B & Ald 646, 106 ER 501 (KB).
26 Anne-Marie Boisvert “Corporate Criminal Liability” (paper presented to the Uniform Law Conference of Canada, August 1999) at [91] <www.ulcc.ca>.
27 See generally Eric Colvin “Corporate Personality and Criminal Liability” (1995) 6 Crim LF 1 at 25–31. Compare Health and Safety in Employment Act, ss 15–16.
28 Colvin, above n 27, at 27.
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The threat of liability for criminal negligence has long played a regulatory role and should continue to do so. Unlike vicarious liability, omission-based liability is less harsh due to the requirement for a lack of reasonable care. Nevertheless, this form of liability takes no account of intentionality, which could be useful in assessing corporate culpability.
3. Representative liability
The third and final form of corporate criminal liability established in New Zealand is representative liability. Proper consideration of how a corporation could be liable for a mens rea offence finally transpired at the start of the 20th century. In contrast to the distinctive vicarious liability position taken in the United States,29 the English solution applied representative liability, which holds a corporation primarily liable,30 instead of vicariously liable.31 This concept was readily accepted with little variation in Australia,32 Canada,33 and New Zealand.34 The minds and acts of certain representatives within the corporate context are said to be those of the corporate. By this fiction, a corporate can have a guilty mind justifying more severe criminal convictions, from assault to manslaughter. It should be noted that representative liability originated from,35 and continues to be used in, civil law.36 The cases
29 “[W]e see no good reason why corporations may not be held responsible for and charged with the knowledge and purposes of their agents ... ”: New York Central & Hudson River Railroad Co v United States 212 US 481 (1909) at 494–495. See generally Edward Diskant “Comparative Corporate Criminal Liability: Exploring the Uniquely American Doctrine Through Comparative Criminal Procedure” (2008) 118 Yale LJ 126.
30 As in, in the corporation’s own right.
32 Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121 at 127; and ABC Developmental Learning Centres Pty Ltd v Wallace [2007] VSCA 138, (2007) 172 A Crim R 269 at [25]–[29]. Note that the position has changed for Commonwealth crimes.
33 Canadian Dredge & Dock Company Ltd v The Queen 1985 CanLII 32 (SCC); [1985] 1 SCR 662.
34 Nordik Industries, above n 5; Linework Ltd v Department of Labour [2001] NZCA 125; [2001] 2 NZLR 639 (CA) at [23].
35 Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 (HL).
36 See, for example, Nationwide News Pty Ltd v Naidu [2007] NSWCA 377, (2008) 71 NSWLR 471. The case involved the attribution of knowledge of
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show a general indifference as to whether the concept is used in civil or in criminal law,37 since the core focus is to deduce “rules to tell one what acts were to count as acts of the company”.38
A common name for representative liability when used in the criminal context is “direct corporate criminal liability”.39 This is a misnomer. The intention of this name is to distinguish this concept from vicarious liability, which has more obvious characteristics of indirectness. Yet despite the name implying representative liability is a form of primary liability, it is still just “a variant form of vicarious responsibility”.40 By their operation, both models necessitate some agent, representative, employee or officer to hold individually the mental elements of an offence. The real difference between vicarious and representative liability is that the latter permits a separate individual to hold the mens rea from whomever commits the actus reus.
The real contrast should be drawn between liability for omissions, and vicarious and representative liability. Because the corporation breaches a personal duty, liability for omissions is a primary liability. The possibility that inactions leading to the breach might be reducible to individual elements within the corporation is irrelevant.
By terming this section representative liability, the author seeks to cover the variations that have been employed to adjust the doctrine enunciated in Tesco Supermarkets Ltd v Nattrass.41 The following section examines this core doctrine of representative criminal theory before moving to the principles in Meridian Global Funds Management Asia Ltd v Securities Commission42 and of aggregation.
harassment to a corporation for the purposes of establishing foreseeability in a claim of negligence.
37 El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4; [1994] 2 All ER 685 (CA) at 695 per Nourse LJ.
38 Meridian, above n 5, at 11.
39 See, for example, Jonathan Clough and Carmel Mulhern The Prosecution of Corporations (Oxford University Press, Melbourne, 2002) at 89.
40 Brent Fisse “Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault, and Sanctions” (1983) 56 S Cal L Rev 1141 at 1187.
41 Tesco, above n 20.
42 Meridian, above n 5.
Beyond the Human in Corporate Criminal Law 722
(a) Identification doctrine
With the identification doctrine, the courts identify those officers or managers who can be viewed as being “directing mind[s] and will of the corporation”.43 These are people who within their individual spheres, rather than act for the company, act as the company.44 Such persons are not alter egos; they are “identified with the company”.45 While the doctrine in Tesco does not require “formal and complete delegation”,46 English courts have drawn the line around those who exercise “management and control in relation to the act or omission in point”.47
Cooke J in Nordik Industries Ltd v Regional Controller of Inland Revenue applied Tesco in New Zealand. He noted that the focus is “not on the status of the actor performing [the offence] but on whether the crime represents a policy decision on the part of those in control of the corporation”. 48 He also added the (obvious) qualification that identification can only extend to matters connected to the business of the company.49 When a corporation is alleged to have committed an offence, the primary question is therefore whether the mental state (and if required of the corporation, the actus reus) can be found in such representatives.
Far from clear is how the doctrine will be applied in each case, and this symbolises the common law’s untidy development of corporate criminal liability. Pushed by a desire to deter and punish corporate criminals50 but restricted “to crude borrowings from individual criminal and civil law”,51 the courts’ solution was implemented without resolving “fundamental questions of responsibility and punishment”.52 Lacking in guidance from any jurisprudence on mainstream organisational
43 Lennard’s, above n 35, at 713 per Viscount Haldane LC.
44 Tesco, above n 20, at 170.
45 At 171.
46 Clough and Mulhern, above n 39, at 91.
47 El Ajou, above n 37, at 696.
48 Nordik Industries, above n 5, at 202.
49 At 203.
50 Brent Fisse Howard’s Criminal Law (5th ed, The Law Book Company, Sydney, 1990) at 594.
51 Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1143–1144.
52 At 1144.
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theories, the common law “breathe[d] life into the corporate form”.53 Performing an “anthropomorphic sleight of hand ... the common law subtly transformed the inanimate ‘corporation’ into a ‘person’ capable of committing criminal delicts and harboring criminal intent”.54
The courts’ choices explain why this doctrine is sometimes called the “organic theory”.55 Many cases have since cited Lord Justice Denning’s personification in H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd:56
A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company, and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such.
In the spirit of such personification, Tesco may be said to be the heart of corporate liability in the major Commonwealth jurisdictions.57 In Tesco, the company had to argue it had “exercised all due diligence” and “took all reasonable precautions”.58 These formed a statutory defence against the offence of wrongly describing goods under the Trade Descriptions Act 1968 (UK).59 The House of Lords held that the company met the
53 Kathleen Brickey “Rethinking Corporate Liability under the Model
Penal Code” (1988) 19 Rutgers LJ 593 at 593.
54 At 593.
55 Either because the corporation, a man-made device, takes an organic form or because the senior manager is seen as an organ of the corporation.
57 Tesco has been applied in
the United Kingdom and New Zealand, in civil and criminal and quasi-criminal
matters: Meridian Global Funds Management Asia Ltd v Securities Commission
[1993] NZCA 664; [1994] 2 NZLR 291 (CA) at 300.
58 Tesco, above n 20, at 168.
59 Trade Descriptions Act 1968 (UK), s 24(1).
Beyond the Human in Corporate Criminal Law 724
defence’s requirements.60 The manager who acted without due diligence was “nothing more than hands” rather than a part of the “brain and nerve centre”.61
The anthropomorphism was the basis for the House of Lords using only certain officers for attribution, rather than all those “whose work is brain work, or who exercise some managerial discretion under the direction of superior officers of the company”. 62 This point of reference inhibits vicarious liability from being extended to all mens rea crimes by a side wind.
The Law Lords’ judgments varyingly define the class of agents who can be labelled “directing minds and wills”. Lord Reid’s judgment focused heavily on the phrase and is the most cited, probably because it gives the greatest room for a flexible interpretation of the doctrine. Lord Reid endorsed an arbitrary drawing of the line when an agent’s relative position in the corporation was ambiguous.63 The other Law Lords, with the exception of Lord Diplock, gave similar, flexible dicta.
Yet, it is Lord Diplock who held the one principled view of the identification doctrine. He restricted identification to those who have been delegated powers by the constitution or the shareholders in meeting.64 If the corporation expressly and precisely specified in its founding documents certain persons whose acts are to be those of the corporation, why should the law deny those persons from being identified with the corporation? Unfortunately, Lord Diplock’s strict view has not gained much traction. It implies that attribution is only possible in situations where there has been some form of delegation in accordance with the board’s constitutional powers.65 Conversely, this goes to show that the identification doctrine at its most certain, and in its most principled form, is in fact very narrow. The judgments of the other Law Lords focused on pragmatism and flexibility, without the
61 H L Bolton, above n 56, at 172.
62 Tesco, above n 20, at 171 per Lord Reid.
63 At 171.
64 Tesco, above n 20, at 199–200 per Lord Diplock.
65 See Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1191.
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greater consistency that a focus on principle would have provided.
Criticisms of Tesco have focused on two aspects of the case. First, it is argued that the case still provides a doctrine of attribution too narrow in scope, and therefore fails to cover many circumstances where corporates are blameworthy. 66 Secondly, despite the conceptual simplicity of the doctrine, it is contested that the line between the “brain” and the “hands” is too arbitrary and uncertain for the criminal law.67
The first criticism concerns the aspect that criminalisation via the identification doctrine is only possible where senior management is involved in the wrongdoing.68 The view is that a corporation should effectively be vicariously liable for mens rea offences, but only when fault can be found in those representatives who exercise substantial corporate functions. Such a view fails to acknowledge “de-centralised corporate structures where considerable power is often vested in middle-ranking managerial officers”.69 An observation has been made that:70
In a large corporation, with many numerous and distinct departments, a high ranking corporate officer or agent may have no authority or involvement in a particular sphere of corporate activity ... . Employees who are in the lower echelon of the corporate hierarchy often exercise more responsibility in the everyday operations of the corporation than the directors or officers.
A concerted effort to retain powers over, but not knowledge of, operations in senior management can make it impossible for a prosecutor to locate a guilty, individual directing mind and will.71 The doctrine has a perverse discriminatory effect against smaller
66 Fisse Howard’s, above n 50, at 601.
68 Fisse Howard’s, above n 50, at 601.
69 Clough and Mulhern, above n 39, at 90.
70 Commonwealth v Beneficial Finance Co 275 NE 2d 33 (Mass 1971) at [48].
71 In doing so, those in the lower echelons become the “devised”, rather than the “devisers”: see Tesco, above n 20, at 180–181 per Lord Morris. In Tesco, the store manager being four tiers from the board of directors was enough for him to be clearly occupying a non-directing position.
Beyond the Human in Corporate Criminal Law 726
corporations. Larger corporations, which need the most regulation,72 avoid liability far more easily.73
Evidencing this effect are the cases showing successful identification and attribution to a corporation, which have predominantly featuredsmall-to-medium-sized corporations rather than large ones.74 Exceptions include The Truculent in which the Third Sea Lord was held to be the directing mind and will of the Crown in relation to systems of navigation on warships.75 Whilst the Admiralty was a large organisation, the success of the litigation against the Admiralty was highly dependent on the Third Sea Lord’s concessions.76 His seniority and responsibilities in the Admiralty meant his fault and privity could be attributed to the Crown.77
Such concessions cannot be assumed as commonplace, especially in criminal prosecutions. Furthermore, most modern corporations are dissimilar to the Admiralty. It had an “outmoded, hierarchical ... structure where power [was] exercised by a very few people at the top”—a structure for which the Tesco principle was designed.78 Where a corporate opposes charges, conviction would be far less likely.
This can be seen in the aftermath of the Herald of Free Enterprise disaster. The corporate operator of the ferry was one of the parties prosecuted. Sheen J found the operator to be at fault and riddled with “the disease of sloppiness”.79 However, the prosecution failed when the judge held that the prosecution needed to prove that an “embodiment of [the]
72 Their scope for harm is greater and therefore deterrence should be aimed at them.
73 Brent Fisse and John Braithwaite Corporations, Crime and Accountability (Cambridge University Press, Cambridge, 1993) at 47.
75 The Truculent [1952] P 1 (HC) at 22.
76 At 20–22.
77 At 22.
78 Clough and Mulhern, above n 39, at 90.
79 Justice Sheen mv Herald of Free Enterprise: Report of Court No 8074 Formal Investigation (Department of Transport (UK), 28 July 1987) at [14.1].
727 The New Zealand Law Students’ Journal (2012) 2 NZLSJ
corporation” had committed manslaughter.80
The second criticism is that the “brain” and the “hands” distinction is too arbitrary and uncertain. An examination of the cases shows that despite the clarity of the Tesco principle, application of it is far more difficult.81 It stands to reason that a corporate should be able to know ex ante who are mere servants and agents, and who are its directing minds and wills. Clearly, the Third Sea Lord was a directing mind. Also clear is that the weighbridge man of the quarry in John Henshall (Quarries) Ltd v Harvey was only “the hands as opposed to the brain”.82 He was not a directing mind “merely because it [was his] duty to perform that particular task”.83 Nonetheless, the growing number of cases with facts close to the margin but without establishing any useful principle or criteria led some to argue that a new model was needed.84
(b) Meridian Global Funds Management Asia Ltd v
Securities
Commission85
Tesco is no longer the sole leading authority for corporate criminal law in New Zealand. The principles of identification it espoused have been adjusted but not overturned. In Meridian Global Funds Management Asia Ltd v Securities Commission, the Privy Council seemed to extend the class of persons in a corporation whose acts and minds could be said to represent the corporation itself. Lord Hoffman disapproved of the way the term “directing mind and will” had been used, finding it to be the cause of “some misunderstanding of the true principle [in Lennard’s]”.86 His judgment reassessed from first principles the basis of “[a]ny proposition about a company”.87 This reasoning led him to state
80 R v P & O European Ferries (Dover) Ltd (1991) 93 Cr App R 72 (Central Criminal Court) at 88–89. Compare The Lady Gwendolen, above n 74, at 345. The Court of Appeal affirmed the lower court’s finding, stating that “all concerned, from the members of the board downwards, were guilty of actual fault”, thus making the ship’s corporate owner civilly liable.
81 See generally R v Andrews-Weatherfoil Ltd [1972] 1 WLR 118 (CA).
82 John Henshall, above n 74, at 241.
83 At 241.
84 Fisse Howard’s, above n 50, at 619–621.
85 Meridian, above n 5.
86 At 11.
87 At 11. Both civil and criminal propositions.
Beyond the Human in Corporate Criminal Law 728
the “rules of attribution”, which he believed have been the true basis behind the cases to that point.
The facts of Meridian are secondary to Lord Hoffman’s analytical framework. Due to corporations being unnatural juristic bodies and the need for corporations to act through humans, the law requires a means of telling which acts and thoughts were to be the acts and thoughts of the corporation. He declared the use of three bases for accomplishing this.
There are, first,the primary rules of attribution, which come from the constitution of the company (and for New Zealand purposes, the Companies Act 1993 also). In those documents, it may be expressly or impliedly stated that certain acts are to be acts of the company.88
Then there are secondary, general rules of attribution come from the general body of law,89 characterised by their equal application to both natural and non-natural persons. These two bases largely reflect Lord Diplock’s narrow, metaphor-less approach in Tesco.90
Nevertheless, a full determination of the rights and liabilities of a company needs a third tier of rules. The third basis, the special rules of attribution, do not locate the attributable acts and mind by reference to the structure of the organisation. Instead, these bespoke rules depend on a careful assessment of the relevant substantive rule of law to see whether and how it was intended to apply to a corporation.91
It is clear that Meridian “was not departing from the identification theory but reaffirming its existence”.92 Like the principles in Tesco, the rules of attribution in Meridian are still used to identify those individuals who act and think as their corporation. Lord Hoffman’s concern was the poor descriptive value of the phrase “directing mind and will”. In light of this, the judgment could be viewed quite narrowly.
Further reasons exist to argue that Lord Hoffman merely intended to
88 At 12.
89 Such as the laws of agency and tort.
90 Tesco, above n 20, at 193–203.
91 Meridian, above n 5, at 12–16.
92 Attorney-General’s Reference (No 2 of 1999) [2000] EWCA Crim 91; [2000] QB 796 (CA) at 816.
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streamline and restate the true nature of the exercise, rather than to realise any major reform.93 First, his Lordship reconciled a string of past decisions with his special rules of attribution. He showed that previous cases based on “directing mind and will” already extended criminal liability to the range of scenarios contemplated by the special rules of attribution. More importantly, he demonstrated that these cases were not wrongly decided even when matched to his principles. In short, “the courts in those cases had fully intended a flexible approach to be adopted”. 94 Secondly, Lord Hoffman only wished to correct a “misunderstanding”, and “to acknowledge that not every [relevant attribution] rule ha[d] to be forced into the same formula”.95 These are not words that exhibited an intention to reform the law.
Where one might correctly say that Meridian represents an expansion of corporate criminal law is in its removal of the “anthropomorphism, ... the very power of the image”96 that comes from the phrase “directing mind and will”. Lord Hoffman’s special rules of attribution no longer chain corporate criminal law to this “touchstone of liability”,97 which prevented corporations from being “unduly exposed to prosecution of offences that are truly criminal”.98
Be that as it may, the law is left with a more extensive and indeterminate range of representatives whose conduct and minds may be attributed to a corporation. In a vehement and slightly cynical objection to the “false syllogistic reasoning”99 in Meridian, Clough and Mulhern argue that the new approach is uncertain, unauthorised and unprincipled,100 where a “rule of attribution may be altered to achieve
93 Jennifer Payne “Who’s minding the company?” (1996) 146 NLJ 1365 at 1366. See also Eilís Ferran “Corporate Attribution and the Directing Mind and Will” (2011) 127 LQR 239 at 245–246.
94 Payne, above n 93, at 1366.
95 Meridian, above n 5, at 11, 15.
96 At 14.
97 SP Robert-Tissot “A fresh insight into the corporate criminal mind: Meridian Global Funds Management Asia Ltd v The Securities Commission” (1996) 17 Co Law 99 at 100.
98 Clough and Mulhern, above n 39, at 101.
99 At 104.
100 At 97–104.
Beyond the Human in Corporate Criminal Law 730
the purpose of the legislation; that is, to secure a conviction”.101
Despite this criticism, judicial reception of Meridian has been largely positive.102 However, the delineation between the principle in Meridian and the identification doctrine as it stood in Tesco is insignificant. One cannot ignore the fact that representative liability misses the significance of corporate cultures103 and fails to deal with system errors. Being so, it is an unsatisfactory means of establishing corporate culpability.
B. Possible Reform
1. Aggregation of Subjective Fault Elements
A simple solution seemingly lies in aggregating the knowledge of various individuals of the corporation and attributing that aggregated mental state to the corporation. If implemented, this would create the highly artificial situation where “a dishonest corporate intent, held by none of the individuals, may be inferred”. 104 This solution would broaden the net of corporate criminal liability by effectively widening the concept and application of vicarious liability for organisations. It would undoubtedly reduce the risk of evasion by corporations with diffused management operations.105
101 At 101.
102 Linework, above n 34, at [24] and [47]; and KR v Royal & Sun Alliance plc [2006] EWCA Civ 1454, [2007] 1 All ER (Comm) 161. In the latter case, child abuse committed by the chief executive was attributed to the corporation. See generally Susan Watson and Chris Nicoll “Meridian Attribution and Insurance Contracts” (2007) 123 LQR 531.
103 CMV Clarkson “Kicking Corporate Bodies and Damning Their Souls” (1996) 59 MLR 557 at 566; and Fisse and Braithwaite “The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability”, above n 4, at 478–479.
104 MacQuarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 (VSC) at 160–161 per Ashley AJA.
105 Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1189. See generally Henry Amoroso “Organizational Ethos and Corporate Criminal Liability” (1995) 17 Campbell L Rev 47. Amoroso discusses the give and take of expanding corporate criminal liability and reducing incentives for self-regulation.
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Aggregation, while pragmatic, is generally prohibited under the criminal law.106 Still, the idea of aggregation has successfully found its way into various aspects of criminal law. For instance, the Australian Criminal Code uses aggregation in attributing physical elements of an offence and negligence to a corporation. Aggregating to find mental states may nevertheless be justified where:107
(a) knowledge had been “contrivedly or artificially kept in a disaggregated form”;108
(a) knowledge was held by several individuals involved in different aspects of one transaction;109 or
(a) someone was specifically responsible for aggregating the knowledge of various employees, even if they failed to do so.
There may also be room for the idea in regulatory offences, as discussed by Asher J in Progressive Enterprises Ltd v Commerce Commission in relation to a claim under the Fair Trading Act 1986, s 17.110 Without knowing that the relevant competition had closed, staff of Progressive continued to supply goods promoting that competition. Importantly, the offers were being made without the knowledge of senior management, who only knew of the promotion’s completion. To succeed in the prosecution, the Commission had to prove Progressive
106 Clough and Mulhern, above n 39, at 106; Z Ltd v A-Z [1982] QB 558 (CA) at 581 (in relation to knowledge required for contempt of court); Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133, (2005) 146 FCR 292 at [178]–[179]; The Mayor, Councillors and Burgesses of the Borough of Stratford v J H Ashman (NP) Ltd [1960] NZLR 503 (CA) at 520– 521 (concerns fraud by a corporation where one agent supplied the information and another made the misrepresentation); MacQuarie Bank, above n 104, at 144–145 and 160–161; Armstrong v Strain [1952] 1 KB 232 (CA) at 246 per Birkett J citing trial judge Devlin J; and Progressive Enterprises Ltd v Commerce Commission [2008] NZHC 2143; (2008) 12 TCLR 284 (HC) at [86]–[87].
107 The caveat being that only minds which are individually attributable to the corporation should be aggregated. Clough and Mulhern, above n 39, at 107 and 107, n 285. Contrast New York Central & Hudson River Railroad Co, above n 29: where all individuals are potentially attributable minds.
108 Radio Rentals Ltd, above n 106, at [179].
109 At [179].
110 Progressive Enterprises Ltd, above n 106.
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had, in connection with the supply of goods, offered prizes with the intention of not providing them. No single natural person held the complete mens rea required.111
The Commission argued for the aggregation of the mental states of Progressive’s employees. If the aggregated state were then attributed to Progressive, it could be said to have had the requisite mens rea. In a decision against the Commission, Asher J accepted the general importance of interpreting the Fair Trading Act with a view to protecting consumers.112 However, the availability of aggregation would have to be made explicit by the legislature.113 The improper use of aggregation would ultimately result in unjustifiably damaging goodwill.114
There are, of course, benefits to aggregation. Where it is implemented, the risk of aggregation of mental states could provide corporations with a strong incentive to organise regulatory compliance.115 Used in this sense, aggregation would not so much be a tool punishing corporate criminal fault, than a tool of regulation. In no framework should aggregation be considered an easy cure to the maladies of the identification doctrine and be generally available, even for regulatory offences. The proposition must be kept well-confined, as it “bears no necessary connection to corporate blameworthiness”.116
2. Collective Liability
None of the models discussed so far have shaken off the root that is personal criminal liability. This is evidenced by the continuing attribution of individual acts and mental states to corporate entities. While many have argued that corporates lack the capacity for mental states, this is true only to the biological extent that corporations cannot have a human mental state.117 A better view is that “[c]orporations
111 The Commission’s dilemma is aptly summarised by Asher J: Progressive Enterprises Ltd, above n 106, at [58].
112 At [67].
113 At [87].
114 At [87].
115 At [87].
116 Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1189.
117 Fisse and Braithwaite Corporations, Crime and Accountability, above n 73, at 26.
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exhibit their own special kind of intentionality, namely corporate policy.”118
This section first considers reformative models already legislated, which take into account this realist, “corporate intentionality” concept. It then contemplates the more theoretical and much discussed “reactive fault” model of Brent Fisse, which could provide an additional way forward for corporate criminal law in New Zealand.
(a) Corporate Manslaughter and Corporate Homicide Act
2007
(UK)
The United Kingdom has adopted a management fault model dealing specifically with corporate manslaughter. Liability arises by the gross negligence of senior management in managing or organising the corporation’s activities. 119 The major change is that the Corporate Manslaughter and Corporate Homicide Act 2007 (UK) defines the identification to be made; it does away with the common law prerequisite that an individual, attributable as the mind of the company, be found culpable.120
While there are signs of collective liability being recognised, the Act does little more than allow some aggregation and clarify the membership of directing minds. As a result, the Act adds little to discussion, due to both its specificity to homicide and the continued focus on a senior group of individuals as capable of embodying the corporate mind.
(b) Criminal Code Act 1995 (Cth)
The second model considered here is far more ambitious in scale. Part
118 Fisse and Braithwaite “The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability”, above n 4, at 483.
119 Corporate Manslaughter and Corporate Homicide Act 2007 (UK), s 1(3).
120 Section 1(4)(c). See also R v Kite, Stoddart and OLL Ltd Crown Court Winchester, 8 December 1994 at 18 as cited in Ann Ridley and Louise Dunford “Corporate Killing — Legislating for Unlawful Death?” (1997) 26 ILJ 99 at 106–107. This case followed the Lyme Bay tragedy in 1993, and represents the English common law position as well as the only corporate manslaughter conviction under the common law.
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2.5 of the Schedule to the Criminal Code Act 1995 (Cth) (the Commonwealth Code) provides general principles of corporate criminal responsibility applicable to all crimes.121 Significantly, the Part, titled “Corporate criminal responsibility”, acknowledges the influence of corporate collective power by introducing the idea of ”corporate culture” as an indicator of corporate fault.
The drafters opted for a comprehensive statement of general principles. The Commonwealth Code covers adjustments to both physical and fault elements when dealing with corporations. But the drafters did not seek to reinvent the wheel: their intention was to “develop a scheme of corporate criminal responsibility which as nearly as possible, adapted personal criminal responsibility to fit the modern corporation”.122 This evidences their pragmatism and indicates that fundamental criminal law principles were to remain.123
An essential caveat is the lack of case law relating to corporate criminal responsibility in Part 2.5. Few Australian jurisdictions have adopted the Australian Model Criminal Code,124 with only the Commonwealth adopting Chapter Two in its entirety (“General principles of criminal responsibility”). The absence of any reported, substantive use in the 17 years since enactment is an unfortunate indictment of the model.125 Further, it complicates any attempt to gauge the likely effect of reforming New Zealand’s criminal law based on this model.
121 Criminal Code (Cth), s 12.1(1) [Commonwealth Code]. The Commonwealth Code is contained in the Schedule of the Criminal Code Act 1995 (Cth), and given effect by s 3 of that Act.
122 Criminal Law Officers Committee of the Standing Committee of Attorneys-General Model Criminal Code Chapters 1 and 2: General Principles of Criminal Responsibility: Report (December 1992) <www.scag.gov.au> at 109 [Consolidated Final Report].
123 Like the criminal standard of proof and presumption of innocence: Woolf, above n 10, at 259.
124 Of non-Commonwealth jurisdictions, only the Northern Territories and Australian Capital Territory have adopted the Model Criminal Code’s notion of ‘corporate culture’: Criminal Code of the Northern Territory of Australia (NT), s 43BM(2); and Criminal Code 2002 (ACT), s 51(2).
125 See generally Law Council of Australia Effectiveness of Chapter Two of the Model Criminal Code (19 December 2008). There are general concerns surrounding the implementation of Chapter 2 of the Model Criminal Code.
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The references here will be made to the Commonwealth Code. That jurisdiction has made the fewest attempts to detract from the Model Criminal Code’s general principles,126 and it is the code that has been the most debated.
(i) Actus reus in Part 2.5
The Commonwealth Code mandates the attribution of any act “committed by an employee, agent or officer of a body corporate acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority” to the body corporate.127 Actions of those hierarchically below the directing minds and wills may be attributed, the test being essentially consistent with the one taken for vicarious liability.
Unsurprisingly, the section has drawn criticism. Colvin notes that requiring any act to be “committed by an individual acting within the actual or apparent scope of her employment or authority” represents an “unnecessary restriction”.128 Prosecutions of larger corporations would likely concern more than one person’s actions. Woolf supports Colvin’s alternative approach of attributing physical elements caused or encouraged by the corporation’s culture,129 as one way of lifting the Commonwealth Code towards being “truly ‘realist’”.130
This is neither necessary nor workable. The focus of any reform should be on corporate mental states, as that is the main weakness in the current law. By Colvin’s approach, reform would indirectly weaken the important touchstone of “authorisation or permission” discussed below.
(ii) Subjective fault elements in Part 2.5
If “directing mind and will” is Tesco’s phrase preventing the
126 Commonwealth Acts sometimes expressly exclude the application of Part 2.5 of the Commonwealth Code, for example: Competition and Consumer Act 2010 (Cth), s 6AA(2).
127 Commonwealth Code, s 12.2.
128 Colvin, above n 27, at 30–31 (emphasis added).
129 Defined in the Commonwealth Code, s 12.3(6).
130 Woolf, above n 10, at 260–261.
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overextension of vicarious liability, “authorisation or permission” is the Commonwealth Code’s. 131 Where a subjective fault element (be it intention, recklessness or knowledge) is required by an offence, a court may attribute the element to the corporation if it “expressly, tacitly or impliedly authorised or permitted the commission of the offence”.132 Implicit here is that prior to finding fault on the corporation’s part per s 12.3(1), there must be proof that some human agent had committed the offence.133 Whether this is the tragic flaw to the realist ambitions of the Code, rendering it “too conservative”,134 will be discussed below.
Section 12.3(2) illustrates how “authorisation or permission”135 can occur. One possibility is where key personnel 136 “intentionally, knowingly or recklessly engaged in the relevant conduct” or “expressly, tacitly or impliedly authorised or permitted the commission of the offence”.137 If either is made out, then s 12.3(1) operates to attribute the required fault element(s) to the body corporate.138
131 See Commonwealth Code, s 12.3. Compare Pamela Bucy “Corporate Ethos: A Standard for Imposing Corporate Criminal Liability” (1991) 75 Minn L Rev 1095. Bucy talks of the corporate ethos giving encouragement in respect of the offence.
132 Commonwealth Code, s 12.3(1). See Commonwealth Attorney-General’s Department The Commonwealth Criminal Code: A Guide for Practitioners (March 2002) at 308–311 [Guidelines]. See also Colvin, above n 27, at 38–42. The Code does not differentiate between the three fault elements’ implied order of culpability. This leaves the issue open as to when, for example, culpable homicide will be murder or manslaughter (accepting of course that this question is irrelevant to New Zealand until s 158 of the Crimes Act 1961 is amended). Any New Zealand reform adopting a similar codified structure should keep the equal treatment, which seems to work for most offences. Nonetheless, reform should differentiate, for more problematic provisions, when the various fault elements would be made out. Colvin enunciates an excellent way of accomplishing this.
133 See Guidelines, above n 132, at 319, n 380.
134 Colvin, above n 27, at 41.
135 No real distinction has been drawn between these two words.
136 Under the Code, these key personnel would be either boards of directors or high managerial agents.
137 Commonwealth Code, ss 12.3(2)(a) and 12.3(2)(b).
138 See also s 12.3(5); and Guidelines, above n 132, at 317. The exception is recklessness. Where recklessness is not listed as a fault element in the
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In using “high managerial agents” as one type of key personnel, the drafters acknowledge the flexibility of the “directing mind and will”. The term allows a court to examine the substance of an agent’s position in a corporation. The concept covers those “with duties of such responsibility that his or her conduct may fairly be assumed to represent the body corporate’s policy”.139 In some ways, this term is wider than even the principle in Meridian. Whether someone is a high managerial agent does not depend on interpretation of a substantive rule, nor does it have to be someone with policy-making authority.140
Sections 12.3(2)(c) and 12.3(2)(d) contain the boldest application of the realist theories. The other way of finding “authorisation or permission” is by proving that either: (a) there was a corporate culture of noncompliance with the relevant provision; or (b) there lacked a corporate culture of compliance with the relevant provision.
Corporate culture is broadly defined as “an attitude, policy, rule, course of conduct or practice existing within the body corporate generally or in the relevant part of the body corporate”.141 The Commonwealth Code further assists the operation of ss 12.3(2)(c) and 12.3(2)(d) with two factors in s 12.3(4). A court should consider whether a high managerial agent had given authority to commit an offence similar to the one alleged. Also relevant is whether the employee, agent or officer reasonably believed that authorisation or permission would have been provided.
The core aim of these two paragraphs is to provide an expression of corporate intentionality “which as nearly as possible, adapted personal criminal responsibility to fit the modern corporation”.142 The Model Criminal Code Officers Committee143 accepted the notion that some
offence, a finding of recklessness on the part of the board of directors or a high managerial agent would be insufficient for an attribution of knowledge or intention.
139 Commonwealth Code, s 12.3(6).
140 See David Goetz Bill C-45: An Act to Amend the Criminal Code (Criminal Liability of Organizations) (Library of Parliament (Can), LS-457E, 3 July 2003) at 8.
141 Commonwealth Code, s 12.3(6).
142 Consolidated Final Report, above n 122, at 109.
143 The Committee had drafted the Model Criminal Code that was adopted by
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evidence of corporate culture—like policies and standing orders—are authoritative because “they have emerged from the decision making process recognised as authoritative within the corporation”.144 The notion takes into account “organizational pressures and prevailing mindset that may have encouraged the commission of the offence”.145 This authorisation bears similarity to an individual’s mind directing an individual’s acts. As a result, it provides the “close analogy”146 suitable for use around provisions drafted primarily for human criminals.
The compromise of including old nominalist concepts arguably betrays the realist potential of the Criminal Code. The compromise is unnecessary as the corporate culture provisions are, subject to narrowing judicial interpretation in the future, generally wider than rules under the old concepts. It has been stated that the purpose of ss 12.3(2)(a) and 12.3(2)(b) is to assist the prosecution of smaller corporations and to criminalise one-off defaults.147 The value of these two arguments is dubious.
With smaller corporations, a faulty corporate culture should be easier to prove than intent or recklessness on the part of a high managerial agent or board. These corporations tend to have more centralised corporate knowledge and command structures. Due to their size, their managerial agents would be more involved in operations. As a matter of evidence, the mere actions of such agents could sufficiently reveal a poor corporate culture. This would allow a prosecutor to avoid having first to prove subjective fault on the part of a managerial agent. These mere actions might be the implementation of illegal policies demonstrating relevant non-compliance, or it might be the commission of the offence. The context of the offending may evidence “an attitude, policy, rule, ... or practice” that led to the non-compliance with the relevant provision.
The other argument is that the compromise is necessary to encompass one-off defaults, where prima facie there would have been no ongoing
the Commonwealth of Australia.
144 Stewart Field and Nico Jörg “Corporate Liability and Manslaughter: should we be going Dutch” [1991] Crim LR 156 at 159.
145 Boisvert, above n 26, at [90].
146 Consolidated Final Report, above n 122, at 109.
147 Woolf, above n 10, at 262.
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authorisation of the conduct.148 This justification is unprincipled and unnecessary. If the reasonable assumption is made that one-off defaults contrary to the general culture of a corporation are largely the creation of rogue employees, individual liability would be more suitable. Where the defaults are the result of a poor corporate culture of non-compliance—a “disease of sloppiness”—a corporate would still be held responsible by the corporate culture provisions.
The difficulty of proving fault by the corporate culture route is unlikely to be greater without what Woolf has described as the “more traditional provisions”.149 Without them though, an implementation of the Part 2.5 model would have greater theoretical integrity.
Hinted earlier, an inconspicuous constraint on the Code exists in connection with crimes requiring subjective fault.150 As for physical elements, attribution of fault elements to the corporate first requires “the commission of the offence”. Accordingly, an employee, agent or officer needs to have had the offence’s required fault elements.151
Although the requirement provides an additional hurdle to a prosecutor, The Commonwealth Criminal Code: A Guide for Practitioners suggests that it should not prove significant in practice. There is no specified order in which the various elements have to be proved. A prosecutor in demonstrating corporate culture may prove contemporaneously the fault element required of the individual. This is because “the policies, standing orders, regulations and institutionalised practices of corporations are evidence of corporate aims, intentions and knowledge of individuals within the corporation”.152 Such individuals
148 Consolidated Final Report, above n 122, at 113.
149 Woolf, above n 10, at 262.
150 See above n 132 and accompanying text; and Colvin, above n 27, at 41. But see Consolidated Final Report, above n 122; Woolf, above n 10; and Alan Rose “1995 Australian Criminal Code Act: Corporate Criminal Provisions” (1995) 6 Crim LF 129. Curiously, these sources make little mention of the phrase “the commission of the offence”, and the latter two seem to discuss the Commonwealth Code on the assumption that the phrase refers only to the actus reus of the offence.
151 Commonwealth Code, s 12.3(1). See Guidelines, above n 132, at 319 and 319, n 380.
152 Field and Jörg, above n 144, at 159.
Beyond the Human in Corporate Criminal Law 740
committed the physical elements of the offence because of the culture that surrounded them.
In fact, the constraint is useful in promoting the idea that the framework convicts corporations for granting “authorisation or permission” for an offence. The framework does not criminalise the mere coincidence of an actus reus and a deficient corporate culture when there is no causal nexus. Judges and juries need not come to grips with the metaphysics of corporations.153 Their role would only be to question whether an agent who committed an offence felt they were authorised or permitted to do so; this view is supported by the express relevant factors in s 12.3(4).
(iii) Negligence in Part 2.5
While the same basic principles apply for corporate negligence and general negligence,154 the Commonwealth Code expressly allows the “aggregat[ion] [of] the conduct of any number of employees, agents or officers” when making out a gross departure from reasonable care.155 Consequently, there is no requirement for gross negligence on the part of any individual person. Unlike the aggregation of subjective fault elements, aggregation in s 12.4—available where no individual is sufficiently negligent 156—has a reasonable basis. Failures “to guard against a widespread pattern of negligence by [a corporation’s] individual representatives”157 would demonstrate serious breaches of care.
No real controversy has surrounded this section. Its express provision for aggregation, and the allowance of management or system failure,158 would sit well with any reform to New Zealand’s corporate criminal law.
153 Guidelines, above n 132, at 309. An “insurmountable” challenge would exist if Colvin’s view is taken that a fault element should be attributable even where no individual possesses the element: at 309.
154 Commonwealth Code, ss 5.5 and 12.4(1).
155 Section 12.4(2).
156 Section 12.4(2)(b).
157 Colvin, above n 27, at 27.
158 Commonwealth Code, s 12.4(3).
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(c) “Reactive corporate fault”
Driving Fisse’s advocacy of “reactive corporate fault” is the quest to reflect corporate blameworthiness in corporate criminal law and to make corporations more accountable. The defining feature of the concept is the assessment of culpability arising after the commission of the actus reus.159 Despite its current limited status in practice, this concept should be seriously considered in a reform of New Zealand’s general corporate criminal law.
The idea is concerned with fault located in “the performance of the corporate defendant in reaction to the occurrence of the actus reus of the offense”.160 A serious problem Fisse identifies is the difficulty of finding proactive fault from a corporation’s express and implied culture,161 in terms of cost and evidence. It should be noted that criminalisation of reactive fault is not a matter of retroactive punishment. An offence would be made out only if the reaction is proven to be inadequate when the timeframe set by a court or regulator expires. What is unintended would remain blameless. What would invoke culpability would be a failure to learn from past mistakes.
Fisse delineated three methods of implementing the concept of reactive fault into corporate criminal law. The first is to add duties to a wide range of existing substantive offences. These might specify particular corrective actions to take following an eventuated actus reus . Failure to meet the standard would be reactive fault sufficient to be an equivalent of whatever mens rea is required of a human offender.162 Alternatively, there can be a “general offence of reactive noncompliance” pertinent to any offence.163 Finally, specific offences of reactive noncompliance can be created for statutes that already allow orders for corrective measures.164
159 See Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1200.
160 At 1195 (emphasis in original). See Fisse Howard’s, above n 50, at 607.
161 Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1191–1192; and Fisse Howard’s, above n 50, at 591.
162 Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1203–1204.
163 At 1204.
164 Such specific offences exist already in New Zealand: for example, Resource Management Act 1991, s 338(1)(b); and Hazardous Substances and New
Beyond the Human in Corporate Criminal Law 742
In practice,165 Fisse’s framework would use a court or regulator to give a corporation notice that it has committed the actus reus of an offence. The infringer would then be required to create and implement “a convincing and responsive program of preventive or remedial action” within a specified timeframe.166 Failure to satisfy the court or regulator with an adequate response would be reactive corporate fault.167
The strength of this approach over representative liability, which looks at proactive fault, is twofold. First, the concept eases the process of proving corporate blameworthiness. By putting the whole corporation on notice and telling it to enact a reactive strategy, the corporation’s policies and culture are exposed to scrutiny. 168 In contrast to representative fault, inadequate action by a corporation in such circumstances is a far truer exhibition of corporate blameworthiness. Reactive liability is similar to liability for negligence except that the “duty” is bespoke. A court or regulator would mandate a reaction suiting the particular circumstances.
Secondly, criminalisation of reactive fault is consistent with public expectations. The public analyses not only lead-ups to offending and the offending itself, but also corporate responses to offending.169 Peter French notes that people place high moral value on behavioural adjustments that are reactions to “character weaknesses, bad habits, and ways of acting that have previously produced untoward events”.170 French’s “Principle of Responsive Adjustment” sheds new light on Air
Organisms Act 1996, s 109(1)(f).
165 See Fisse and Braithwaite Corporations, Crime and Accountability, above n 10, at 140–157. An extensive framework called the ‘Accountability Model’ was espoused.
166 Fisse and Braithwaite Corporations, Crime and Accountability, above n 10, at 49; Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1204–1206.
167 Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1196–1197.
168 At 1206.
169 At 1198. See Thomas Donaldson “‘Ethical blowback’: the missing piece in the corporate governance puzzle — the risks to a company which fails to understand and respect its social contract” (2007) 7 CG 534. Donaldson describes the social phenomenon where unethical corporate behaviour can lead to severe repercussion from all sections of society. In this sense, a social ‘reactive fault’ model exists already.
170 French, above n 9, at 156.
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New Zealand’s reprehensibility in the aftermath of the Erebus disaster. He argues that the company was blameworthy not so much because of its faults preceding the event, or even because of its alleged “orchestrated litany of lies”171 to the Royal Commission. Rather, Air New Zealand’s greatest fault was its reproachable defence of old policies and procedures. These had been identified as “the single effective cause of the crash”. 172 One penalty specified in Fisse’s Accountability Model, expanding on John Coffee’s idea of a public presentence report, is the use of adverse publicity by the court.173 Such a punishment recognises French’s observation and could be used to rally rational public resentment against intentional non-compliance by a corporation. The implementation of reactive fault liability would justify more of these powerful devices for corporate regulators.
One of the weaknesses hypothesised is the seeming leniency towards corporations, which appears to give them a “free bite at the apple of crime”.174 On its own, the concept is entirely forward-looking from the event. It presumes that the actions of the corporation up to that point were unintentional. The fear would be that corporations could deliberately commit an offence, ostensibly for a commercial gain, and enjoy that advantage while reactive compliance is assessed.
However, this fear would be misplaced. The reactive fault model can be appended to a proactive fault framework because it concerns an entirely different time period. The model would not prevent incrimination by proactive fault on the basis of “corporate culture” in s 12.3(2) of the Criminal Code Act, and breaches of duty. Further, the model would allow for civil penalties such as injunctions and damages to be imposed before a court or regulator even begins to assess corporate reaction.175
Fisse’s model markedly favours a realist means of identifying corporate fault. Subject to any appending framework, corporations would only be convicted if they were truly blameworthy.
171 Mahon, above n 7, at [377].
172 At [399].
173 Fisse and Braithwaite Corporations, Crime and Accountability, above n 10, at 156 and 166.
174 Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1209.
175 At 1210. See also Fisse and Braithwaite Corporations, Crime and Accountability, above n 10, at 141.
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Conclusion
As discussed, New Zealand’s corporate criminal law based on Meridian and Tesco are vulnerable to circumvention and are inconsistent with a realistic view of corporations. Despite the initial possibility that Meridian may have spelt the end of the directing mind and will theory in corporate criminal law,176 Tesco is still often cited with that case. The metaphor is, as Lord Cooke surmised, “[a] kind of anthropomorphism ... very hard to eradicate”.177
To make matters more disappointing, the slow embrace of the Model Criminal Code in Australia by litigants, judiciaries and legislatures alike adds doubt as to whether a realist system in New Zealand would ever be successful. But the current state of the law is less than satisfactory. Reform should consider criminalising both proactive and reactive fault as part of an effective framework of regulating corporate behaviour.
Part 2.5 of the Commonwealth Code should form the template of New Zealand’s general corporate criminal law. In particular, proactive fault provisions should draw on the Code’s use of corporate culture, negligence and the touchstone of “authorisation and permission”. However, allowance should be made for vicarious liability as it exists currently. Reform should also recognise Lord Hoffman’s primary rules of attribution as a means of identifying corporate fault. Even without fully including reactive fault concepts, these changes would rationally alleviate some of the current difficulties associated with convicting corporations.
Precisely how a broad reactive fault model could be implemented remains an open question. French refrains from an implementable prototype, and Fisse and Braithwaite concede that their Accountability Model still requires significant empirical research. 178 The author suspects that the philosophical and procedural complexities would
176 RJ Wickins and CA Ong “Confusion Worse Confounded: The End of the Directing Mind Theory?” [1997] JBL 524 at 550.
177 Robin Cooke “A Real Thing: Salomon v A Salomon & Co Ltd [1897] AC 22, 33, per Lord Halsbury LC” in Turning Points of the Common Law (Sweet & Maxwell, London, 1997) 1 at 26–27.
178 Fisse and Braithwaite Corporations, Crime and Accountability, above n 10, at 237.
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make the model a difficult sell by any legislature.
So far, the concept of reactive fault is mainly seen as a social phenomenon.179 Yet, New Zealand has incorporated the concept in some statutes already. A few courts and officials have powers to issue enforcement and compliance orders, the breach of which are offences under the relevant Acts.180 And, where a corporation wishes mitigate a sentence, it might demonstrate a sudden energy for regulatory compliance. 181 There is no doubt that the principles of corporate criminal liability have to look beyond the human to achieve the ideal of criminalising true corporate fault. Only by accepting a realist paradigm could a wide enough net of criminal liability be cast, justly, on the demigods of society.
179 See above n 169.
180 See above n 164.
181 Fisse “Reconstructing Corporate Criminal Law”, above n 40, at 1195–1196 and 1195, n 253.
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