There is a well-known judicial maxim that “a company has no soul to be damned nor a body to be imprisoned”.

The collapse of roads, bridges or pavements (read “sinkholes”) and the recently concluded Grenfell Tower enquiry in the UK with the publication of its reports open afresh this area in the public sphere. In commercial and securities law there are numerous instances where regulatory penalties and even custodial sentences are provided for, and there is now a growing body of legal and judicial decisions that imposes or imputes liabilities upon a corporation which hitherto were only attributable to a natural person.

In Lennard’s Carrying Company v Asiatic [1915], the House of Lords held that Lennard, the managing director, was “the directing mind and will” of his company and so his knowledge was attributed to the company. Lennard sought to shelter under a defence under the Merchant Shipping Act 1894, which permitted a defence and exemption from liability for injury which is caused without “his actual default or privity”. The company owned a ship that carried benzene which was consigned to Asia Petroleum Co Ltd when the boilers in the ship were in such a condition that the power to navigate was inadequate and the benzene exploded when ship ran aground. The evidence showed that Lennard knew or ought to have known of the unseaworthiness of the ship.

The English judge articulated an alter ego doctrine as being applicable to company law since a company is an artificial abstraction it has no mind of its own or active directing mind and so in each case the question that will be asked is, “who is the directing mind and will?”

In one early case where the legal penalty was confined to imprisonment, the court refused to embark on the trial as no effective order could be made by way of sentence if guilt was found.

However, where a company’s transport manager signed a false statement to procure an increased allocation of petrol under a then rationing scheme in force, a UK divisional court reversed a magistrate court’s finding that a company is not capable of committing an act of deceiving with requisite intent.

In Tesco supermarkets Ltd v Nattrass [1972], a shop manager of a branch of the Tesco chain (which had over 800 branches in the UK) failed to comply with the then trade description legislation. When the company was prosecuted for non-compliance with the law, the court held that the company is not prevented from pleading a defence under the Trade Descriptions Act 1968 that the company took all reasonable precautions and exercised due diligence. The problematic issue for a large corporate group is where management decisions are carried out by subordinates who may or may not be discharging a delegated authority. In any one case, the court will have to draw a line.

In the area of competition law, the DG of Fair Trading v Pioneer Concrete (UK) Ltd [1995], UK case, is instructive. A company was subject to a court order under the Restrictive Trade Practices Act 1976 for being in contravention of laws that prevent agreements that restricted competition. The company argued that it was not the company that was party to the alleged restrictive agreements but that it was the employees who were party to them, going against the express orders of the employer. The House of Lords rejected this privity argument and held that the Act can “only achieve its purpose if it is applied to the actions of individuals within the business organisation who make and give effect to the agreement or arrangements on its behalf”.

In one case, Bank of India v Morris [2005], even an agent who had significance and freedom to act in the context of a particular transaction and had knowledge to such an extent that his actions could be legally attributed to the company that had engaged in fraudulent trading was held liable.

Meridian Global Funds Management Asia Ltd v Securities Commission (NZ) is of interest as well. The Privy Council dealt with an appeal that concerns an interpretation of Section 20 of a New Zealand law that imposes a legal duty on companies to disclose material developments to the Stock Exchange. When the company became a substantial security holder in another company, it was held that the knowledge of two senior investment managers in the company that effected the acquisition was sufficient to ground a legal obligation to make the requisite disclosure. Their knowledge was attributable to the acquiring company, otherwise it would defeat the policy and purpose of the legislation requiring disclosure of substantial shareholdings.

In Moore v I Bressler Ltd [1944], the court upheld a conviction of a company which submitted false tax returns when it was the acts of officers of the company who had prepared the tax returns to disguise their own fraud against the company.

So what about manslaughter or negligence leading to deaths? Can officers of a corporate entity be held liable or responsible in these cases? The Grenfell Tower saga, where over 70 lives were lost as result of events with multiple causes, raises important issues: they concern administrative negligence of the town council, inadequate review of fire safety requirements for buildings and the greed of construction firms, building owners and developers. The unfolding drama of attribution of both civil and criminal liabilities on corporations and decision makers awaits determination, and a morality tale of tragic proportions is birthed. So whether it's the collapse of pavements or the conflagration of tower apartments, legislators, regulators and the administrative bureaucracy need to be cognizant of the evolution of laws for the public good.

Philip TN Koh is an advocate and solicitor of the High Court of Malaya and adjunct professor of Universiti Malaya and the School of Business, Monash Malaysia University. He is the senior partner of Messrs Mah-Kamariah & Philip Koh.