VOLUME
4:2
DECEMBER 2017
132-389
  • CONTEXT AND PURPOSE IN CORPORATE ATTRIBUTION: CAN THE “DIRECTING MIND” BE LAID TO REST?

    Stefan HC Lo
Abstract

The seminal judgment of Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission in 1995 did much to clarify the law on corporate attribution. In doing so, the case highlighted the problems of anthropomorphism and in focusing on the “directing mind and will” concept. Notwithstanding Lord Hoffmann’s warnings on the dangers of the imagery employed in that concept, courts continue to rely on the “directing mind and will” concept. However, as forewarned, the continuing use of the idea of the directing mind has led to legal confusion and fallacious reasoning, as demonstrated by recent judicial decisions. This article argues that the directing mind and will concept (together with the identification theory) should be dispensed with entirely in the context of corporate attribution.

Keywords
companies; attribution; directing mind and will; identification theory; alter ego; illegality
Click here to read extracts of the article
Introduction

Up until the Privy Council decision in Meridian Global Funds Management Asia Ltd v Securities Commission1 in 1995, the concept of the directing mind and will of a company played a central role in questions of attribution of conduct or states of mind to a company under English common law. Under this doctrine, individuals who may be regarded as the directing mind and will of a company are identified as the company itself, and accordingly the conduct or mental state of such individuals may be attributed to the company on the basis that those individuals and the company are the one and the same. The directing mind doctrine was important in providing the juridical mechanism for imposing direct liability (as opposed to vicarious liability) on a company for civil or criminal wrongs. In addition, the doctrine was also sometimes adopted for determining the company’s mental state or knowledge for other purposes.

The rules of corporate attribution were re-framed in the seminal judgment of Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission. Lord Hoffmann’s judgment was groundbreaking in at least two respects. First, it provided the doctrinal framework centred on the three categories of rules of attribution (primary, general and special). Second, it moved the analysis away from the anthropomorphism (namely, the attribution of human characteristics to a non-human entity — “companies” in the present context) that underpins the directing mind and will doctrine. As Lord Hoffmann emphasised, any rule that determines what acts or states of mind of individuals may count as the acts or states of mind of a company are simply “rules of attribution”. Accordingly, it is unnecessary to characterise a company as having the attributes of a human being, whether for determining the liabilities of a company or for ascertaining the state of mind of a company in other contexts.

The re-formulated approach to corporate attribution in Meridian Global Funds Management Asia Ltd v Securities Commission was generally welcomed, although some commentators expressed the concern that in-roads into the directing mind theory could lead to confusion. Notwithstanding such concerns, Meridian Global Funds Management Asia Ltd v Securities Commission is regarded as the leading modern authority on corporate attribution, as confirmed recently by the UK Supreme Court and by the Court of Final Appeal in Hong Kong. The Meridian Global Funds Management Asia Ltd v Securities Commission approach has been adopted widely in civil cases, but it appears that the directing mind and will doctrine still holds sway in criminal cases where mens rea needs to be established and also still retains some influence even in the civil sphere.