Corporate Criminal Liability in Scotland: The Problems with a Piecemeal Approach

Abstract

This chapter analyzes Scotland’s approach to corporate criminal liability. Through a patchwork of statute and case law, Scots law has struggled to define clearly the conditions under which a corporation – and/or its employees – may be held liable for crime. The chapter first critiques this approach to attribution, before moving on to consider four other issues: the offenses for which a corporation can be held liable in Scotland; the types of corporation which are capable of having criminal liability attributed to them; the range of sentences available to a court once a corporation has been convicted; and procedural concerns, such as the special evidential rules created in order to make the trial of a corporation possible. All of these matters remain, in certain aspects, unclear in Scots law and the paper concludes by making some tentative proposals for reform.

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1 Introduction

The United Kingdom (UK) has three distinct legal systems: England and Wales, Northern Ireland, and Scotland. There are close similarities – and important differences – between the English and Welsh, and Northern Irish systems in most areas,¹ including the criminal law.² Scots criminal law is considerably more distinct,³ although it has been heavily influenced by its nearest neighbor, and in many instances identical criminal legislation applies in both jurisdictions. Further, reference to English case law is frequently made in Scottish practice.⁴ This cross-fertilization is facilitated by the fact that no United Kingdom jurisdiction has a criminal code:⁵ much criminal law is still uncodified common law, which is found in the decisions of courts rather than in legislation.

The approach of English law to corporate criminal liability is covered elsewhere in this book.⁶ This chapter focuses on the approach of Scots law and makes references to variants in English practice, where appropriate.⁷ It argues that Scots law on this issue has been clarified somewhat in recent years, particularly as a result of the decision by the Appeal Court⁸ in Transco plc v. HM Advocate (Transco).⁹ Nevertheless, a number of matters remain unclear. Five problematic areas will be explored:

• the manner in which criminal liability may be ascribed to a corporation;

• the range of offenses that can be committed by a corporate entity;

• the types of corporation capable of assuming criminal liability;

• the sentences available to the courts when punishing a corporation; and

• procedural and evidential issues.

The paper concludes with five (tentative) proposals for reform.

2 Ascribing Criminal Liability to a Corporation

This section describes the haphazard development of corporate liability in Scots criminal law. Because the law is not codified, it is found in a mixture of court decisions and statutes, created by the UK and Scottish Parliaments.¹⁰ The decentralization of the Scottish criminal law-making process has impacted upon the development of the law on corporate criminal liability. As discussed below, the courts have been less willing to impose criminal liability upon corporations for common law offenses and those statutory offenses that require mens rea.¹¹ It will be argued that, where mens rea is required for an offense, Scots law adopts the “identification” model of corporate fault. Consequently, to find a corporation guilty of a crime, the court must find that its “directing mind” committed the criminal act or omission or sanctioned its commission by the corporation’s agents or employees.

Before considering this issue of identification, it is useful to explain two forms of corporate liability in Scotland, which manage to avoid the involvement of a “fiction”: explicit “corporate” liability offense provisions and vicarious liability.

2.1 Explicit Provision for Corporate Liability

First, if an offense is one of strict liability (i.e., it does not require mens rea), the courts may hold a corporation liable without attributing to it the culpability of its agents and employees.¹² In other words, no “fiction” concerning the mens rea of the corporation is involved and no extra difficulty is encountered by the prosecution.¹³

In certain instances, Parliament can also provide for the conviction of a corporation’s senior officers for a strict liability offense. For example, s. 37 of the Health and Safety at Work etc. Act 1974 c. 37 provides that:

Where an offense under any of the relevant statutory provisions committed by a body corporate is proved to have been committed with the consent or connivance of, or to have been attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate or a person who was purporting to act in any such capacity, he as well as the body corporate shall be guilty of that offense and shall be liable to be proceeded against and punished accordingly.

Similar provisions are found in a number of other statutes.¹⁴

2.2 Vicarious Liability for Crime

Second, Parliament can ascribe criminal liability to a corporation through vicarious liability. Clearly, a corporate entity “can only act through its employees or servants.”¹⁵ Through vicarious liability, the actions of an employee or agent are simply attributed to his/her employer (who might be a corporation) if those acts are incidental to his/her employment or agency.

This transfer of liability is, however, problematic in Scots law because there is a presumption against vicarious liability for crime.¹⁶ Nevertheless, as Sir Gerald Gordon QC notes, the legislature may provide expressly for vicarious liability in a statute, or the courts may find vicarious liability to be implicit in the wording of a statute.¹⁷ Hence, “it would seem that the prosecution of personae fictae for… vicarious liability offenses poses no greater problems than are encountered where human beings are prosecuted for such offenses.”¹⁸ Such prosecutions have succeeded against natural persons (usually employers or licensees whose employees have breached the law) in many cases. Where liability is both strict and vicarious, no extra rule of attribution has been required to convict a corporation.¹⁹

2.3 Offenses Requiring Mens Rea

So far, the discussion has concentrated on offenses that do not require mens rea on the part of the accused corporation: in strict liability, a culpable mental state is not an element of the offense; in vicarious liability, it is the employee’s mental state (if relevant) that is important. However, many offenses – both statutory and common law – require proof of fault and the courts have long grappled with the question of whether a corporation may commit them. The Scottish courts have tended to discuss the issue of corporate liability in an incoherent manner.²⁰ This necessitates a detailed examination of the Appeal Court’s jurisprudence.

2.3.1 The Early Decisions

Clydebank Co-operative Society v. Binnie (Clydebank) was the first modern case on corporate criminal liability and is indicative of the Appeal Court’s approach.²¹ There, the charge related to the use of a motorcar as a public service vehicle without an appropriate license.²² The accused company was alleged to have “permitted” this use. The court was clear that, in order to have permitted this infraction, the company itself would have had to have been under a duty of inquiry (i.e., it would have had to be shown that the company ought to have inquired as to the use of the car, based on the facts of which it was aware, and had failed to do so).²³ The company’s awareness was inferred from the objective facts of which its transport manager was aware.²⁴ The Lord Justice-General (Normand) thought “that, when the appellants through their manager had brought home to them knowledge” of the circumstances from which a duty to inquire could arise, their failure to do anything fixed them with liability.²⁵

Although clear that the knowledge of an employee or agent could be “brought home” to the accused company, the court in Clydebank did not elucidate exactly how, when, and why this transfer took place.²⁶ This makes it difficult to tell whether the court simply imposed vicarious liability or whether it took a new approach.²⁷

Subsequent courts have asserted, however, that vicarious liability is not at issue when considering corporate liability for statutory offenses that require mens rea.²⁸ For instance, the trial judge in MacDonald v. Willmae Concrete Co. Ltd. ²⁹ made clear that “knowledge” of the possibility of criminal conduct had to be “brought home” to the accused company before it could be found liable.³⁰ Similarly, in Mackay Brothers v. Gibb (Mackay Brothers),³¹ the court was concerned with whether the knowledge of the company’s garage manager could be imputed to the company. This transfer of knowledge was remarkable in that the court accepted that the garage manager had been wilfully blind, i.e., he had not been aware that the air pressure in the tires of a hire car was too low³² because he had refused to check. The Lord Justice-Clerk (Grant) again suggested that the court was not concerned with vicarious liability: the question was whether knowledge of the defect was “brought home” to the company through the garage manager.³³ Unfortunately, little more was said about why this imputation was possible. The Lord Justice-Clerk reached his decision on the basis that such imputation had been competent in Clydebank.³⁴ Lord Wheatley suggested that the delegation of responsibility meant that the manager’s “knowledge or notional knowledge must be attributed to” his employer.³⁵ Lord Milligan again took a different tack, noting that if knowledge was not transferred to the corporation, the will of Parliament would have been frustrated.³⁶

Vagueness thus reigned and also infected the final case indicative of the court’s early approach: Macnab v. Alexanders of Greenock Limited and Another.³⁷ There, the crucial matter was whether the accused company was to be accorded a statutory defense of “due diligence.”³⁸ The Lord Justice-Clerk (Grant) noted that “[a] body corporate can act only through its officers and servants and it is by reason of their actings – and their actings alone – that an offense can be brought home to the body corporate.”³⁹ The only way of escaping the imputation of such liability was by implementing a policy which disavowed the relevant conduct.⁴⁰ The corporation had not done this and so was held liable.

From these cases, it is clear that the courts required that the mens rea elements of a statutory offense were “brought home” to a corporation through its employees or agents. Not much more than this could be gleaned from the judges’ opinions: was there a requirement, for example, that the employee be of a senior level? Most cases involved those in management positions but nowhere was seniority described as essential. This changed, however, when the Scottish courts adopted the approach taken by the House of Lords in Tesco Supermarkets v. Nattrass (Tesco Supermarkets).⁴¹

2.3.2 The Law Following Tesco Supermarkets

In Tesco Supermarkets, it was held that the “directing mind” test suggested in earlier cases⁴² represented the law of England and Wales. This meant that, before a corporation could be found criminally liable for a statutory offense requiring mens rea, a person of sufficient seniority in the corporation must have possessed the necessary mental state.

Decisions of the House of Lords are not binding on the criminal courts in Scotland: they are merely persuasive. Consequently, it was not inevitable that the “directing mind” test would become part of Scots law. The Appeal Court next considered the Scottish approach in The Readers Digest Association Limited v. Pirie (Readers Digest).⁴³ There, a failure by junior employees to input data into a computer resulted in the accused company issuing unmerited demands for payment.⁴⁴ The question for the court was whether the company had had “reasonable cause” to believe that it was entitled to payment, as this would have negated criminal liability. The court found that the employees’ actions had been counter to the policies and practices of the company, and that this meant that its demands for payment were neither unreasonable nor criminal.⁴⁵

In concluding his opinion in Readers Digest, the Lord Justice-Clerk (Wheatley) noted that:⁴⁶

The facts… clearly show that there was no mens rea on the part of the company, or anyone who could be said to be the “mind” of the company in relation to the dispatch of the demand for payment. The observations of Lord Reid [in Tesco Supermarkets] on the position of a company vis-á-vis its employees, and the limited circumstances in which the “mind” of an employee can be said to be the “mind” of the company… are relevant to this point.

Lord Kissen also found “some assistance” in the decision in Tesco Supermarkets ⁴⁷ but this approach was not adopted by the third judge, Lord Milligan. He utilized something more like the early Scots method outlined above, holding that “constructive knowledge may in certain circumstances be attributed to the management” of a company. However, he did nothing to clarify when attribution would be appropriate.⁴⁸

The majority of the opinions in Readers Digest therefore suggest that the “directing mind” fiction in Tesco had been incorporated into Scots law.⁴⁹ Indeed, in Dean v. John Menzies (Holdings) Ltd. (John Menzies),⁵⁰ Lord Cameron suggested the decision in Tesco Supermarkets, “if technically not binding in this country… [is] necessarily to be treated with the highest respect.”⁵¹ He found “no reason in principle why a different rule of law should operate in Scotland” when company law was the same both there and in England and Wales.⁵² In that same case, Lord Stott adopted something of a compromise between the early Scots approach and the decision in Tesco Supermarkets, holding that the element of “shamelessness” necessary for conviction of the offense charged (“shameless indecency”)⁵³ must be “brought home to a person or persons who may be looked upon as the controlling mind of the company” before a conviction would be competent.⁵⁴ The third judge in John Menzies, Lord Maxwell, was less convinced by the approach adopted in Tesco Supermarkets. He noted that, although “[f]iction has frequently been employed both in England and Scotland to attribute to a corporation human characteristics which it cannot have… the fiction which has been employed is not always the same fiction.”⁵⁵ Furthermore, he argued that the “controlling mind” test in Tesco bore little relation to the test employed in previous Scots cases, such as Clydebank and Mackay Brothers.⁵⁶ Lord Maxwell even doubted that Readers Digest had incorporated the approach in Tesco into Scots law: the decision was reached, he argued, not by the imputation (or not) of “knowledge”, but on the intention of Parliament to not punish companies for the unsanctioned actions of junior employees.⁵⁷

Lord Maxwell’s opinion in John Menzies thus added a layer of uncertainty to the Scottish approach.⁵⁸ As noted above, two judges in that case (Lords Cameron and Stott) accepted that the approach in Tesco was correct, whilst another (Lord Maxwell) doubted that one clear “fiction” was always applied. Lord Cameron was, however, dissenting. So, the majority appears to have reached the conclusion necessary to answer the case (i.e., “Could a company be charged with ‘shameless indecency’?”) without agreeing on how an employee’s shamelessness might be imputed to the company. This left the law in an unsatisfactory state.

It appears from cases after John Menzies that the controlling mind test was nonetheless being applied consistently. For example, in Purcell Meats (Scotland) Ltd. v. McLeod (Purcell Meats) ⁵⁹ the Lord Justice-Clerk (Ross) suggested that a conviction for attempted fraud would only be achieved if the prosecution could prove that: “[T]he persons by whose hands the particular acts were performed were of such a status and at such a level in the company’s employment that it would be open to the sheriff to draw the conclusion that the acts fell to be regarded as acts of the company rather than acts of the individual.”⁶⁰

As Gordon noted in his commentary on this case, the court does not engage with (or even mention) Lord Maxwell’s doubts about Tesco in John Menzies.⁶¹

Similarly, in Docherty v. Stakis Hotels Ltd.; Stakis Hotels Ltd. v. Docherty (Stakis),⁶² it was noted that, to be held criminally liable for the relevant offense,⁶³ the accused corporation would need to be shown to have had control over the management of the business.⁶⁴ Such control had been delegated to a manager and the court was of the opinion that the Crown should have proceeded against him rather than his employer.⁶⁵ This decision, as Gordon noted, did little “to clarify the position of Scots law in relation to the criminal liability of companies.”⁶⁶ Nevertheless, the court does appear to have accepted that the manager was too far removed from the company for his actions to have been imputed – or “brought home” – to it.

Thus, by the time Stakis was decided, Tesco Supermarkets appears already to have been accepted as representing the law of Scotland, Lord Maxwell’s objections in John Menzies notwithstanding.

All the same, as Ross has noted, “it [was] not clear on what basis or at what level… attribution [could] take place. The court [seemed] concerned with the extent to which an employee [had] responsibility for management of the company’s affairs.”⁶⁷

This point was to remain similarly unclear until the decision in Transco.

2.3.3 The Effect of Transco

Transco is the most recent Scottish case to consider corporate criminal liability for common law offenses. Accordingly, it will be discussed further below.⁶⁸ For present purposes, two elements of the decision are noteworthy.

The first is Lord Osborne’s acceptance that the decision in Readers Digest did, in fact, incorporate the decision in Tesco Supermarkets into Scots law, although “it has to be recognized that the matter was not apparently the subject of controversy.”⁶⁹ He was happier to conclude that the identification thesis was part of Scots law by virtue of the decision in Purcell Meats.⁷⁰ Once again, discussion of Lord Maxwell’s doubts in John Menzies is conspicuously absent from Lord Osborne’s judgment and the other judges’ opinions.

Second, the court considered the issue of aggregation, i.e., whether the “accumulation of states of mind of separate individuals at various stages” could be attributed to a corporation for the purposes of establishing the presence of corporate mens rea.⁷¹ This point was dealt with shortly by Lord Hamilton, who found it “wholly inconsistent with the identification theory.”⁷² Aside from pointing out that the English courts had rejected the “aggregation” doctrine, the judge provided no other justification for his stance.⁷³

Transco thus clarified the mode of attribution for offenses that require mens rea in Scotland: a “senior level”⁷⁴ employee or agent of a corporation must possess the requisite mens rea before the corporation can be found criminally responsible for the offense.⁷⁵ An aggregation of individual mental states, none of which is itself mens rea, will not suffice. In short, unless Parliament provides otherwise,⁷⁶ the identification thesis applies to all offenses that can be committed by a corporate entity and for which mens rea is required. This makes the prosecutor’s task exceptionally difficult in relation to all but the smallest corporations and has led to calls for law reform, as discussed at the end of this chapter.⁷⁷

In the meantime, it is useful to explore other areas of uncertainty in the Scots approach, beginning with the range of crimes for which corporations may be prosecuted.

3 Which Crimes May Be Committed by a Corporate Entity?

The Scottish courts have adopted different approaches to statutory and common law crimes that require mens rea. Accordingly, these types of offense will be considered separately.

3.1 Statutory Offenses

Statutory offenses can be dealt with shortly. As noted above, the Scottish courts have long accepted that a corporation can commit a statutory offense, even if it requires the presence of mens rea.⁷⁸ This result is achieved generally through the use of the word “person” in the definition of a crime. The Interpretation Act 1978 provides that “person” should be read to include “a body of persons corporate or unincorporate.”⁷⁹ Hence, statutes enable corporations to be found liable for a wide range of acts and omissions.

Exceptionally, courts may also read a statute as explicitly or impliedly excluding corporate liability.⁸⁰ It has been held, for example, that a statutory offense requiring “control” over a state of affairs cannot be committed by a corporation.⁸¹

3.2 Common Law Offenses

Corporate criminal liability for common law offenses is more problematic, largely because it has only been discussed in three reported cases.⁸² The first case was John Menzies. As discussed above, the accused company was charged with “shameless indecency”⁸³ for stocking indecent magazines in its shops. At trial, the charge was dismissed as incompetent. On appeal by the prosecution,⁸⁴ the majority (Lord Stott and Lord Maxwell) upheld the trial judge’s ruling, whilst Lord Cameron saw no reason, in principle, why a corporation could not commit a common law offense.

It should be noted that the majority entertained no doubt about the propriety of finding a corporation liable for a statutory offense requiring mens rea.⁸⁵ Their concern related to the need to prove “shameless” conduct. Lord Stott felt that a company could not be “shameless”, nor did he “think it would be sound public policy to introduce an additional element of fiction into an area of law in which… commonsense is not noticeably at a premium.”⁸⁶ As noted above, Lord Maxwell was preoccupied with the claim that there was one “fiction” at work in corporate crime.⁸⁷ He also objected, however, to the vagueness of the charge and the implications of finding a company liable for a common law offense without fair warning that this was a possibility.⁸⁸ Lord Cameron (dissenting) dismissed these doubts as ill-founded.

Although the judges differed over the specific offense of shameless indecency, they all agreed that certain common law offenses could not be committed by a corporation. The clearest example was murder. Lord Cameron suggested that this was due to the mandatory sentence for murder: a sentence of life imprisonment could not be implemented against a corporation.⁸⁹ Lord Stott agreed and suggested that it would not be possible for a corporation to possess “that wicked intent or recklessness of mind necessary to constitute the crime of murder.”⁹⁰ He also doubted that a corporation could commit perjury or reset – though no argument is presented as to why (the point is merely asserted as “self-evident”).⁹¹

So, from Lord Cameron’s perspective, there was nothing to prevent a company from forming mens rea in principle; Lord Stott and Lord Maxwell disagreed. This led Gordon to conclude that the Crown would be unlikely to proceed against companies on common law charges in the future.⁹² The decision in Purcell Meats proved him wrong.

The charge in Purcell Meats was attempted fraud. “Premium” tax stamps on beef carcasses at the accused company’s premises had been removed and replaced with manufactured “exemption” stamps in an attempt to avoid paying tax on the carcasses. The issue on appeal was whether the charge of attempted fraud (a common law offense) was competent, given that the Crown did not name the employees who had changed the stamps in the charge. The court upheld the competency of the charge. Nevertheless, the Crown’s case could only succeed at trial if it could prove that the actions complained of were perpetrated by a suitably senior employee of the company.⁹³

What is striking about the judgment in Purcell Meats is its complete failure to discuss John Menzies (even though the case was cited in argument before the court), as well as its failure to clearly state its reasons.⁹⁴ The lack of a firm answer is perhaps unsurprising: the court in Purcell Meats only considered the competency of the charge, noting, in so doing, the extreme practical difficulties the Crown might encounter in proceeding against a company at trial.⁹⁵ However, the fact remains that the decision still left the state of the law unclear. All that can be gleaned from the decision is that attempted fraud (and, by extension, fraud) can be committed by a company whilst, following John Menzies, shameless indecency (and, presumably, the other examples cited by the majority in that case)⁹⁶ cannot. So, although the court in Purcell Meats did not contradict the earlier decision in John Menzies, it was open to the charge that it “assume[d], rather than decide[d], that it is the law that a company can commit fraud.”⁹⁷ On this view, the law was being developed in a piecemeal, if not inconsistent, manner, which made the extraction of clear principles difficult. This problem was exacerbated by the fact that there are very few Scottish appeals annually.⁹⁸

The court, in fact, had to wait nearly 20 years to re-consider the issue of corporate liability for a common law offense. In Transco, the charge was culpable homicide (the Scottish equivalent of manslaughter). The Crown alleged that, through a series of mistakes, a gas supply to a house – which the accused company had a duty to maintain – had been left in a dangerous state of repair. This caused an explosion, which destroyed a bungalow and killed its four occupants. The court decided that “in appropriate circumstances, a corporate body in Scotland might be convicted of culpable homicide… but only upon the basis of the principle of identification.”⁹⁹ In the event, the Crown failed to satisfy this test (no senior individual offender could be identified) and Transco plc was acquitted. It was, however, found guilty of a statutory offense¹⁰⁰ and fined £15 million. Following this outcome – which was seen as unsatisfactory¹⁰¹ – the law was changed in the manner discussed below.¹⁰²

It is difficult to generalize the Scottish approach to corporate liability for common law offenses from the three decisions discussed above. They do not appear to apply a single principle. All that can be said, with confidence, is that a corporate entity can commit fraud and culpable homicide provided that the conditions for identification are made out by the prosecutor. It is impossible to be sure whether other charges will be competent in relation to corporations. This is deeply regrettable and might, as Mays argues, be a result of a lack of prosecutorial “enthusiasm” for charging corporations with common law offenses.¹⁰³ As noted above, Mays might be guilty of confusing cause and effect: the lack of clarity in the law might be influencing charging practice. Whatever the cause of the unsatisfactory Scottish situation, however, it is clear that corporations do not have fair notice of the crimes for which they may be held liable.¹⁰⁴

3.3 Codifying the Common Law

One final point of note is that a number of traditional common law crimes involving sexual violence have recently been legislated upon in the Sexual Offences (Scotland) Act 2009. When these offenses are committed with the connivance (or as a result of the neglect) of a “relevant individual” in a corporation, that corporation may be proceeded against. “Relevant individuals” are defined as follows:¹⁰⁵

(2) In subsection (1), “relevant individual” means—

• (a) in relation to a body corporate (other than a limited liability partnership)—

  • (i) a director, manager, secretary or other similar officer of the body,

  • (ii) where the affairs of the body are managed by its members, a member,

• (b) in relation to a limited liability partnership, a member,

• (c) in relation to a Scottish partnership, a partner,

• (d) in relation to an unincorporated association other than a Scottish partnership, a person who is concerned in the management or control of the association.

Three points stand to be noted. First, it is clear that this definition adheres to the identification principle: the individuals involved must be of a senior level. Second, special provision is made for the imposition of a fine if a corporation is convicted of offenses, such as rape, for which imprisonment is the normal sanction.¹⁰⁶ It is unclear, however, how this fine is to be calculated. Third, now that rape is a “statutory” crime, it remains to be seen whether the courts will take a different approach to the possibility of its commission by bodies corporate. If the legislation pertaining to sexual offenses represents something of a trend, and more areas of the common law are codified in due course, these questions ought to be addressed.

At present, then, it is unclear which crimes may be committed by a corporate actor. Fortunately, the law is surer of which types of corporate actor may be prosecuted.

4 Which Types of Corporate Entity May Be Prosecuted?

4.1 Provisions in the Criminal Procedure (Scotland) Act 1995

The Criminal Procedure (Scotland) Act 1995 (CPS Act) determines which corporate entities can be prosecuted under Scots law. Proceedings on indictment, which occur before a judge and a jury, can be commenced against a “body corporate.”¹⁰⁷ Summary proceedings can occur against a “partnership, association, body corporate or body of trustees.”¹⁰⁸

The parties referred to in these provisions are clearly different. The point has never arisen directly but it was “tentatively” suggested in Aitkenhead v. Fraser (Aitkenhead) ¹⁰⁹ that a trust could be tried on indictment.¹¹⁰ If this suggestion represents the true position with regard to trusts, it is submitted that there is no reason in principle why an unincorporated partnership or association might not also be tried upon indictment.¹¹¹

4.2 Corporations and Separate Legal Personality

The Scottish courts have considered briefly the matter of separate legal personality. Companies incorporated under the Companies Act 2006 (and its predecessors) are treated as having separate personality. Accordingly, in most situations, the courts can simply assume that a prosecution against a company is competent.

The position of entities without separate legal personality is more complicated. In Aitkenhead, the Appeal Court considered the issue of whether the Crown should name trustees in a charge and, if so, in which capacity. Trusts are peculiar organizations as they have no separate legal personality independent of their trustees.¹¹² The court reasoned that, “[t]he word ‘corporate’ [in the CPS Act] clearly does not refer to separate legal personality.” ¹¹³ As a consequence, to prosecute a trust, the Crown must name each of the trustees in their capacity as trustees in the charges.¹¹⁴ In short, unless legislation provides otherwise, trusts are not exempt from criminal liability simply by virtue of the fact that they lack separate legal personality.¹¹⁵ The same must be true, it is submitted, for unincorporated associations.

For collectives that do have separate legal personality (such as companies and partnerships under Scots law),¹¹⁶ a further question is whether they can be prosecuted after their dissolution. This question was considered in Balmer v. HM Advocate.¹¹⁷ The charge against a dissolved partnership was held to be incompetent as the partnership’s separate personality ceased when it was dissolved. If the Crown was to have any recourse, it was against the individual partners.¹¹⁸ This decision may make the prosecutor’s case more difficult to establish¹¹⁹ but it appears sensible: once a corporate entity no longer exists, it cannot be fined and the denunciatory effect of a conviction is lost. This raises a point concerning the possible punishments that may be imposed upon corporations, the subject of the next section.

5 What Penalties Can Be Imposed Upon Corporations?

Three main forms of penalty will be considered here: imprisonment, fines, and publicity orders.

5.1 Imprisonment

It was noted in the above discussion of common law offenses that murder carries with it a mandatory life sentence.¹²⁰ It will be remembered that this led the judges in John Menzies to conclude that the offense could not be committed by a body corporate.¹²¹ A separate issue arises in relation to other offenses. This is because a life sentence, although potentially available in relation to any common law crime (and some statutory offenses),¹²² is not mandated. It is unclear how the court will treat corporations convicted of these offenses, but they will presumably impose a monetary fine. This is because it is only in relation to the offense of corporate homicide (discussed below) that alternative sanctions are presently available.¹²³

5.2 Fines

As noted above, Transco plc was fined £15 million for a health and safety offense, which had caused the deaths of four people. It is unclear whether this fine is equivalent to the length of imprisonment that would have been imposed upon an individual who caused a similar harm in a similar manner.

It was also pointed out above that the courts will, in the future, have to impose fines on corporations for certain sexual offenses because imprisonment is not an option.¹²⁴ Guidance on how to carry out this calculation may have to be given by the Appeal Court in due course, especially as the level of fine involved is unlimited in some offenses (e.g., rape).¹²⁵ At present, no such guidance exists.¹²⁶

One potential difficulty with resorting to fines to punish a “corporation” (construed widely) is, of course, that such measures might be inappropriate where they might impact upon the provision of public services (hospital trusts, local councils, etc). This is a problem, which has not been discussed hitherto in the Scottish context.¹²⁷ It does, however, raise the issue of alternative sanctions, which might be imposed upon a corporation.

5.3 Remedial and Publicity Orders

Following the failure by the Crown to gain a conviction against Transco plc for culpable homicide (and a number of similar incidents in England and Wales),¹²⁸ the Corporate Manslaughter and Corporate Homicide Act 2007 c. 19 (CMCH Act) was passed. This introduced two new measures, which are relevant to sentencing.

First, the court may impose an order that forces the corporation to remedy:¹²⁹

• (a) the breach [in relation to which the prosecution took place];

• (b) any matter that appears to the court to have resulted from the relevant breach and to have been a cause of the death;

• (c) any deficiency, as regards health and safety matters, in the organization’s policies, systems or practices of which the relevant breach appears to the court to be an indication.

Also, if it is considered appropriate,¹³⁰ a court may make a publicity order, which places the corporation under an obligation to advertise: “(a) the fact that it has been convicted of the offense; (b) specified particulars of the offense; (c) the amount of any fine imposed; (d) the terms of any remedial order made.”¹³¹

Breaching a remedial or publicity order is a separate offense, which must be tried on indictment.¹³² These orders are, therefore, clearly meant to be taken seriously and perhaps represent an attempt to reproduce the stigma of conviction for natural persons. These provisions only came into force recently, so their full impact is yet to be felt in Scotland. They are, however, certainly a step in the right direction in that they break the traditional tendency towards monetary fines as punishment for corporate crime, even where such measures are inappropriate.

Before considering which other reforms of Scots law’s approach to corporate criminal liability might be desirable, it is necessary to consider briefly a final area of uncertainty: the procedural matters attendant upon the prosecution of a corporation.

6 Procedural Matters

There are a number of procedural matters that contribute to a lack of clarity in the Scottish approach to corporate criminal liability.

6.1 Responsibility for the Prosecution of Crime in Scotland

First, it should be noted that prosecution for crime rests almost exclusively with the state in Scotland. The Lord Advocate – a member of the Scottish Government¹³³ – heads the Crown Office and Procurator Fiscal Service (COPFS), an umbrella organization comprised of regional offices. Although technically competent, private prosecutions are extremely rare;¹³⁴ effectively all prosecutions in Scotland are brought by the COPFS.

COPFS prosecutes in the “public interest” and has ultimate discretion to proceed or abandon a prosecution¹³⁵ (or, as the case may be, accept or reject a guilty plea).¹³⁶ This has impacted upon the development of the law on corporate liability: if the Crown does not proceed against a corporation in relation to a certain offense, the crime cannot be committed by a corporation in practice. The COPFS does not provide detailed reasons for its decisions, nor are its decisions subject to judicial review. In consequence, a layer of uncertainty is added to the law, particularly with regard to common law offenses.¹³⁷ On October 2, 2008, a specific COPFS division was set up to investigate and, if required, prosecute alleged breaches of health and safety law.¹³⁸ This might make the prosecution of such offenses more consistent in Scotland but it is unlikely that the COPFS will publish explicit guidance on its approach.

6.2 Jurisdictional Issues

Second, there are questions about the jurisdiction of Scottish courts over corporate crime. The jurisdiction of United Kingdom courts over crime is generally territorial.¹³⁹ Nationality jurisdiction may be asserted only where it has been specifically created by statute.¹⁴⁰ Parliament has created nationality-based jurisdiction for only a few statutory offenses,¹⁴¹ without any consistent use of terminology.¹⁴² Frequently-used terms, such as “a British subject”,¹⁴³ are unlikely to include non-natural persons. The principal (and perhaps only) exception is the phrase “a United Kingdom person”;¹⁴⁴ however, relatively few statutory offenses can be committed by “a United Kingdom person” outside the UK.¹⁴⁵ The term has been used only in a small number of recent statutes concerned with national security.

As for the statutory offenses of corporate manslaughter and corporate homicide, s. 28 of the CMCH Act provides as follows:

• (1) Subject to subsection (2), this Act extends to England and Wales, Scotland and Northern Ireland.

• (2) An amendment made by this Act extends to the same part or parts of the United Kingdom as the provision to which it relates.

• (3) Section 1 applies if the harm resulting in death is sustained in the United Kingdom or—

  • (a) within the seaward limits of the territorial sea adjacent to the United Kingdom;

  • (b) on a ship registered under Part 2 of the Merchant Shipping Act 1995 (c. 21);

  • (c) on a British-controlled aircraft as defined in section 92 of the Civil Aviation Act 1982 (c. 16);

  • (d) on a British-controlled hovercraft within the meaning of that section as applied in relation to hovercraft by virtue of provision made under the Hovercraft Act 1968 (c. 59);

  • (e) in any place to which an Order in Council under section 10(1) of the Petroleum Act 1998 (c. 17) applies (criminal jurisdiction in relation to offshore activities).

• (4) For the purposes of subsection (3)(b) to (d) harm sustained on a ship, aircraft or hovercraft includes harm sustained by a person who—

  • (a) is then no longer on board the ship, aircraft or hovercraft in consequence of the wrecking of it or of some other mishap affecting it or occurring on it, and

  • (b) sustains the harm in consequence of that event.

It will be noted that it is not essential that the death itself occurs in the United Kingdom, only that the harm that results in it does. This is consistent with the general English approach to jurisdiction over homicide.¹⁴⁶ What is not consistent, however, is the fact that the legislation does not cover harms inflicted outside of the UK that result in death occurring within its borders. It is generally thought that the UK courts would have jurisdiction over homicide committed in such circumstances.¹⁴⁷ That said, the apparent lack of prosecutions on these facts may mean that the difference is purely academic.

When the bill was passing through the Westminster Parliament, the Home Affairs and Work and Pensions Committees raised some concern about its territorial application. It suggested that “in principle it should be possible to prosecute a company for corporate manslaughter when the grossly negligent management failure has occurred in England or Wales irrespective of where a death occurred.”¹⁴⁸ That position was rejected by the government.¹⁴⁹

6.3 Rights of the Accused

Third, the question of how human rights protections apply in the context of a corporate body being prosecuted has yet to be considered by the Scottish courts. It has been noted in the context of corporate homicide, however, that “if corporations are to be treated as severely as individuals, they must also be entitled to the same protections as individuals.”¹⁵⁰ There are, of course, counter-arguments and these are discussed briefly below.¹⁵¹

6.4 Evidential Matters

Fourth, and connected to the issues discussed above, there is the matter of special evidential rules relating to the prosecution of a corporation in Scots law.

6.4.1 Admissions by Corporation Officers

Clearly, for the purposes of prosecution, corporations must be able to enter pleas and challenge the charges against them. Express provisions on corporate appearances feature in the CPS Act, which states that:¹⁵²

• (4) A partnership, association, body corporate or body of trustees may, for the purpose of—

  • (a) stating objections to the competency or relevancy of the complaint or proceedings;

  • (b) tendering a plea of guilty or not guilty;

  • (c) making a statement in mitigation of sentence,

appear by a representative.

As will be apparent, these provisions are extremely limited and, if a representative does not appear, the court may, in certain circumstances, proceed to trial in the corporation’s absence.¹⁵³

An issue connected to this is whether a corporation’s officers can be compelled to give evidence against it at trial. This question has never come up before the Scottish courts but it is possible that the position in England and Wales would be replicated (as noted above, the courts have been keen to apply the same law to corporations in both jurisdictions). In Penn-Texas Corp v. Murat Anstalt and Others, Willmer LJ argued that:¹⁵⁴

I do not see how it is possible to take the evidence of a limited company, whether by its proper officer or otherwise. If the proper officer attends for examination, it is he who goes into the witness-box; it is he who takes the oath; it is he who is liable to be prosecuted for perjury; it is he, in short, who is the witness. I do not think it helps to say that when interrogatories are answered by the proper officer of a company, his answers are the company’s answers and bind the company. I do not think that touches the question whether an officer can go into the witness-box and give oral evidence which can be said to be that of the company. The answers given by him would be his answers, based upon his own memory and knowledge; and though any admission by him would no doubt be binding on the company, the evidence would still be his evidence and not that of the company.

Similarly, in Scotland, admissions by a corporation’s senior management can be admissions of the company.¹⁵⁵ The corporate officer would not, however, be the corporation for the purposes of giving evidence. He/she would, therefore, presumably be a compellable witness for the prosecution. Despite this, it might be possible for the corporate officer to avoid answering questions that might incriminate the corporation (rather than the officer herself). This point was raised, but not decided, before in the House of Lords in Rio Tinto Zinc Corporation and Others v. Westinghouse Electric Corporation.¹⁵⁶ It has yet to trouble the Scottish courts.

6.4.2 Business Documents

A second, separate evidential matter is the use of documentary evidence. Under general principles of evidence law in Scotland, documents are hearsay and so inadmissible to prove the truth of their content. An exception is made for business documents in Schedule 8 of the CPS Act. These will be admissible if the following conditions are met:¹⁵⁷

• (a) the document was created or received in the course of, or for the purposes of, a business or undertaking or in pursuance of the functions of the holder of a paid or unpaid office;

• (b) the document is, or at any time was, kept by a business or undertaking or by or on behalf of the holder of such an office; and

• (c) the statement was made on the basis of information supplied by a person (whether or not the maker of the statement) who had, or may reasonably be supposed to have had, personal knowledge of the matters dealt with in it.

The exception does not apply to documents that were not received in the course of business¹⁵⁸ and documents that contain statements that concern the accused person and are exculpatory.¹⁵⁹ The latter may be admitted for the limited purposes of proving that the statement was made (i.e., not to prove the truth of its contents) so long as the first and second criteria above are satisfied.

As Ross and Chalmers note, a difficulty of admitting business documents arises because there may be no opportunity to cross-examine the maker of the statement.¹⁶⁰ To this end, the CPS Act provides that a number of other pieces of evidence are to be admitted to test the accuracy of statements in documentary evidence.¹⁶¹

7 Reform

It is submitted that problems with Scotland’s approach to corporate criminal liability arise from the outsourcing of certain matters to the courts. Appeals are inevitably rare in a relatively small jurisdiction, such as Scotland¹⁶² and this makes the development of the law time-consuming and piecemeal. The following proposals for reform concentrate on this issue.

7.1 Attributing Criminal Liability to a Corporation

Writing in 2000, Mays argued that the area of corporate criminal liability in “Scots law is underdeveloped, at times incoherent, and relatively ineffective. It is a poor base on when prosecutors may so act, which is, accordingly, a matter of prosecutorial discretion. To date, scepticism, as well as inertia, has blocked reform.”¹⁶³

Mays’ main argument concerns the lack of a clear basis for allocating liability to a corporation,¹⁶⁴ a problem, which has been largely remedied post-Transco. Nevertheless, Mays identifies the difficulties inherent in the identification thesis: “[it] can be rejected as an overly restricted basis on which to attempt to limit the corporate personnel through whom liability can flow.”¹⁶⁵ Furthermore, by its very nature, the identification thesis makes it most difficult to prosecute the companies that tend to be the most apt candidates for public condemnation.¹⁶⁶ These problems are still inherent in the Scottish approach.¹⁶⁷

Mays therefore proposed that the activities of the corporation be looked at as a whole:¹⁶⁸

A body corporate will be held to have exhibited corporate fault where… its policies, procedures, or practices, or systems (or any combination thereof) are considered to have expressly or impliedly authorized or permitted the commission of an offense, or… it has failed to take reasonable precautions or to exercise due diligence to prevent the commission of the offense.

This standard would be applied in both statutory and common law offenses and the corporation would have a “due diligence” defense.¹⁶⁹

Mays’ proposals are perhaps more applicable to large organizations, in which it is often nigh on impossible to establish the culpability of a “directing mind.”¹⁷⁰ As a means of overcoming this difficulty, Mays’ proposals have much to commend them, though there is more to be said for the argument that the aggregation of employees’ knowledge as another possible basis for ascribing culpability to a corporation.¹⁷¹ Furthermore, his proposals also beg the questions “What are ‘reasonable precautions’?” and “What constitutes ‘due diligence’?”¹⁷²

One way of approaching these questions is to give a jury explicit factors to consider in determining whether a corporation was at fault. This is the approach adopted in the CMCH Act, which provides that:¹⁷³

An organization to which this section applies is guilty of an offense if the way in which its activities are managed or organized: (a) causes a person’s death; and (b) amounts to a gross breach of a relevant duty of care owed by the organization to the deceased.

If a duty of care is found to have existed,¹⁷⁴ the jury must establish whether or not it was “grossly” breached by the corporation.¹⁷⁵ In reaching this conclusion:¹⁷⁶

• (2) The jury must consider whether the evidence shows that the organization failed to comply with any health and safety legislation that relates to the alleged breach, and if so:

  • (a) how serious that failure was;

  • (b) how much of a risk of death it posed.

• (3) The jury may also:

  • (a) consider the extent to which the evidence shows that there were attitudes, policies, systems or accepted practices within the organization that were likely to have encouraged any such failure as is mentioned in subsection (2), or to have produced tolerance of it;

  • (b) have regard to any health and safety guidance that relates to the alleged breach.

    • (4) This section does not prevent the jury from having regard to any other matters they consider relevant.

    • (5) In this section “health and safety guidance” means any code, guidance, manual or similar publication that is concerned with health and safety matters and is made or issued (under a statutory provision or otherwise) by an authority responsible for the enforcement of any health and safety legislation.

Such guidance is useful, as the jury is unlikely to be familiar with the inner workings of corporations, especially large multi-nationals.¹⁷⁷ The 2007 Act does, however, recognize that it cannot provide a complete list of relevant factors. For this reason, it allows the jury (perhaps optimistically) to have “regard to any other matters they consider relevant.”¹⁷⁸

7.2 The Range of Offenses That Corporations Can Commit

Nowhere is the problem of piecemeal law-making more apparent than in relation to the question “Which common law offenses might be committed by a corporation?” Mays suggests that legal impossibility should be the only factor that makes a crime incapable of commission by a corporation. He thus excludes (without explaining clearly why) the following offenses from his proposals: perjury, murder, rape, sodomy, bigamy, indecent exposure, incest, assault, clandestine injury to women,¹⁷⁹ and lewd and libidinous conduct.¹⁸⁰

As already mentioned, some of these offenses (most notably rape) have been put on a statutory footing and the legislature has not seen fit to exempt corporations from liability for their commission.¹⁸¹ This seems fair. Why should a company not be held liable for rape or murder if its policies endorsed such action?¹⁸² The problem is, of course, what it means to “implicitly” allow an action to take place: if it is a matter of anything which is not prohibited being allowed, the point of corporate liability is lost.¹⁸³ Surely the relevant corporate policy’s wording must be such so as to allow the inference that certain criminal conduct is permissible.

7.3 The Types of Corporate Entity That Can Be Convicted of Crimes

It was noted above that it is still unclear which corporate entities can be prosecuted on indictment. This should be remedied to avoid uncertainty. Surely, as trusts and associations are employers and carry out a wide range of activities through their agents and employees, they should be capable of being prosecuted for the same range of crimes as other corporate entities.¹⁸⁴

7.4 Punishing Corporations

Imprisonment is not an option for corporations. Nevertheless, as Ross argues, “it should not be impossible to devise an equivalent penalty for a corporation, whether dissolution or suspension from the Register of Companies or confiscation of assets, to deal with those situations where the crime of murder could be brought home to a corporation.”¹⁸⁵ In fact, a number of jurisdictions have taken such steps¹⁸⁶ and the Scottish Government should consider seriously their implementation.¹⁸⁷

There is, however, a need for caution. As Clark and Langsford argue: “[d]espite the fact that [a] company may morally deserve to be punished, heavy financial sanctions may cause bankruptcy. In essence, therefore, society cuts off its nose to spite its face.”¹⁸⁸ They note further that a remedial order might, in fact, turn into an opportunity for a corporation to improve its image by projecting a picture of corporate social responsibility.¹⁸⁹ In imagining suitable punishments for corporations, these matters should be borne in mind. What is certain is that some sentencing guidance should be given, particularly where the offense provides for a wide range of punishments (e.g., an unlimited fine).

7.5 Procedural Matters

Scots law lacks clarity concerning the rights of corporations that are charged with criminal offenses. In particular, Scottish lawmakers are yet to take a clear position on the question of whether the protections accorded to natural persons (e.g., the privilege against self-incrimination, the right to counsel, and the presumption of innocence) are available to corporate actors. As noted above, it appears logical to apply the same protections in both instances: the consequences of criminal conviction can be severe. Furthermore, these protections seem particularly important in relation to small corporations, where it might be very difficult to distinguish between the corporation and the agent/employee’s interests.¹⁹⁰ Nevertheless, it might be wondered, as Pieth and Ivory note in their chapter, “whether such rights are unnecessary – even inappropriate – in litigation against such potentially powerful inhuman actor[s].”¹⁹¹

Additionally, in giving evidence in the trial of a corporation, it is unclear whether, and if so which, corporate officers, agents, and employees may refuse to answer questions that might incriminate the corporation. It appears strange, however, to hold that they might claim a protection for their employer/principal if they are not themselves incriminated by the answer. In other words, if the answer simply does not incriminate the witness, then it seems bizarre to grant her immunity from answering the question on the basis of the privilege against self-incrimination. Nevertheless, the extension of the corporation’s rights to its agents and employees has been endorsed elsewhere.¹⁹² Space precludes a more thorough examination of the arguments of principle and policy at stake but it is unlikely – given the widespread public consciousness of corporate wrongdoing and the rise of human rights litigation – that the Scottish courts can avoid direct consideration of this issue for too much longer.

8 Conclusions

Alan Norrie has pointed out that the common law did not grow up with the idea of corporate liability in mind.¹⁹³ This has resulted in a bifurcated approach in Scotland: where the legislature has been clear about corporate liability, the Crown’s task is simple; where statutory wording is ambiguous or the commission of a common law offense is alleged, gaining a conviction is complicated by the “directing mind fiction”, which makes it easy to proceed against small corporations but harder large organizations. Where the courts have been allowed to develop the law, the result has been a patchwork of decisions each of which fails to engage earlier authorities or discuss the core matters of principle (and policy) in suitable depth. If uniformity is desirable – which is certainly a defensible thesis – then the Scottish Parliament (and, if necessary, the UK Parliament) would do well to pass legislation to bring coherence to the Scottish approach to corporate criminal liability law.