Litigation & Crime

Rights and Liabilities

A company has the rights and obligations of a natural person. It can take legal action and be the subject of legal action. It can sue and be sued for civil wrongs, breach of contract and other legal duties. The company is liable because the acts and omissions of its directors and senior staff are attributed to it. They are deemed to be the acts of the company itself. In addition, those parties and others may act as an agent of the company, and thereby make the company liable as their principal.

The acts and omission of its directors and senior management are readily attributed to the company. This board of directors are most commonly the controllers. The courts impute the mind of the controllers to the company itself.  The particular circumstances may be such that the company is controlled by a particular party such as a managing director or the shareholders in general meeting, in which case the court may attribute his or their acts and omissions to the company.

A company may sue and be sued for most types of loss and damage.  However, there are certain types of loss, which of their nature can accrue only to an individual, such as personal injury.


Vicarious Liability

Apart from attribution as acts or omissions of the company itself, companies may be rendered liable for breaches of contract and civil wrongs, which are undertaken by their agents on their behalf.  A company is liable as principal on the contracts and civil obligations of its agents when they act on behalf of the company.  Its directors and employees will usually have various degrees of authority to act on behalf of the company.

The company may be vicariously liable for the torts / civil wrongs of its employees and others under its control. This liability arises when they act in the course of their employment/role, in accordance with ordinary principles of tort / civil wrong liability.  The general principle of vicarious liability applies in respects of employees and for other persons under the broad control of the company.

Companies may be liable vicariously, even where the action taken is outside their corporate powers.  Employees and directors do not generally have authority to commit a civil wrong on the company’s behalf.  However, the company is likely to be liable for their wrongs,committedd within the scope of their employment/ role, on the basis of vicarious liability.


Corporate Loss

The shareholders of a company do not generally have a right of legal action in respect of a tort/ civil wrong (e.g. negligent advice, detention of goods) committed in respect of the company. They are usually owed no duty in negligence by reason of loss incurred by the company, which thereby affects the value of their shares.  This is so, notwithstanding that the third party may foreseeably cause loss/damage to the value of their shareholding.

The company, rather than the shareholders, may have a legal right of action. The company may sue third-parties for breach of duty to it.  The shareholders’ interest is indirect, through their shareholding in the company.

Third parties may owe a separate duty of care to shareholders or to a shareholder in highly exceptional circumstances, where a duty is specifically undertaken. The undertaking may be express or implied. However, the courts lean heavily against such a finding and the strong presumption is that any claim or right of action lies with the company.


Constitutional Rights

The courts have held that companies do not enjoy the same range of constitutional rights as individuals.  The wording of some constitutional guarantees contemplates that the beneficiary of the protection is an individual / natural person.  This has been held to be the case in relation to the equality of individuals as “human persons” and to the right to hold property as a natural right, by virtue of a “person’s rational being”. Other constitutional guarantees have been held, on their wording, to apply to companies.

Later decisions have taken a broader approach. The courts appear now, to be more inclined to extend the protection of the Constitution to companies, where possible.  It remains the case however that certain rights which are protected by the Constitution are individual rights and do not extend to corporates.


Security for Costs

Because companies may have little or no assets, it is possible for a defendant to apply to the court for security for legal costs, where he /it is sued by a company. Security for costs may be ordered where it can be shown that the company will be unable to pay the costs if the defendant is successful in its defence.

Where a company is a claimant in legal proceedings, the court having jurisdiction, may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant, if successful in its defence, require security to be given for those costs. It may stay all proceedings until security is given. There are special requirements for security for costs in the case of an insolvent company.

The jurisdiction is exercised with an element of discretion.  The courts lean against granting security for costs, as they wish to ensure that the company’s right of access to the courts, which is a constitutional right, is upheld.  The defendant who seeks security must show that he has a prospective defence.  Security for costs will not generally be ordered where the defendant appears to have caused the company’s limited financial capacity.


Crimes

A company can be convicted of many crimes and of most regulatory offences.  Companies cannot be incarcerated but may be fined.  Some crimes are inherently incapable of being committed by a company, due to their personal nature.

In the case of most classic crimes against the person, property and public order, the directors and employees will usually be capable of committing the crime or at least being an accessory to it, by the terms of the crime itself.

In criminal matters, the courts look at the intention and minds of the directors or the other controllers of the company. The acts and omission of its directors and senior management are attributed to the company. This may be the board of directors or the members in general meeting. The intentions and mind of the controllers are attributed to the company itself.  Issues of interpretation of the circumstances may arise as to whether the acts or omissions of employees and other personnel may be attributed to the company.

In principle, a company may be convicted of offences which require fault, negligence and gross negligence.  There have been a number of high-profile prosecutions in the UK for corporate manslaughter, which followed from serious health and safety failures resulting in workplace and other fatalities. Following a lack of success in several prosecutions, the subject is dealt with by statute in that jurisdiction. The area is controversial. Corporate manslaughter has been the subject of a Law Reform Commission report in Ireland.


Regulatory Offences

There are many thousand regulatory offences, which support particular statutory schemes. Liability is usually “strict” and applies regardless of fault. Doing the forbidden thing is enough. There is no “mental” element.  A company may be readily convicted of committing most such offences.

In the case of most regulatory legislation, the legislation which creates the offence provides that any director, officer or manager who consents to, participates in, ratifies or approves the particular act, may be prosecuted for the offence.  A company cannot be used as a shield from criminal liability.

The directors or others who consent to, connive at or approve the offence, are typically guilty of a separate offence.  Where an offence is committed by the company, each of them and the company may be prosecuted separately.  Each may be independently guilty of a separate offence. Each may be prosecuted independently or in conjunction with the company. The wording of the particular statutes varies and will govern the position.


Suit and Enforcement

A document may be served on a company by leaving it at or sending it by (ordinary) post to the registered office of the company. If no notice of the situation of the registered office has been given, it may be served by delivering it to the Companies Registration Office.

Any document left or sent by post to the place for the time being recorded by the CRO as the location of the registered office, is deemed to be so left or sent by post, notwithstanding that the situation of the registered office may have changed. Documents served on CRO itself are entered on the register.

A company may not be represented legally in court by its officers. They are separate persons, and the courts have not accepted that the company is attributed to them in this context, for the purpose of the general provision, by which a person may represent himself. The company must in effect, appoint a solicitor to represent it in court.


Enforcement

A company is subject to most of the general provisions for the enforcement of judgments. There are some mechanisms which operate in person, which cannot apply. Accordingly, there are some other mechanisms of enforcement, which are designed to aid enforcement against corporate bodies.

A judgment or order against a company which has been wilfully disobeyed, may by leave of the court, be enforced by sequestration against the company’s assets, attachment against directors and other officers and sequestration against the property of the company, directors and officers.

An application for attachment against directors or other officers or sequestration against property, may not be made unless the judgment or order to which the application relates has an endorsement indicating that the liability of such persons or their property to attachment and sequestration, should the judgment be disobeyed by the company.


References and Sources

Primary References

 

Companies Act 2014 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)     Courtney

Keane on Company Law 5th Ed. (2016) Hutchinson

Other Irish Sources

Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury

Introduction to Irish Company Law    4th Ed. (2015) Callanan

Bloomsbury’s Guide to the Companies Act 2015      Courtney & Ors

Company Law in Ireland 2nd Ed. (2015) Thuillier

Pre-2014 Legislation Editions

Modern Irish Company Law   2nd Ed. (2001) Ellis

Cases & Materials Company Law 2nd Ed. (1998) Forde

Company Law 4th Ed. (2008)  Forde & Kennedy

Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy

Companies Acts 1963-2012   (2012)  MacCann & Courtney

Constitutional Rights of Companies   (2007)  O’Neill

Court Applications Under the Companies Act (2013) Samad

Shorter Guides

Company Law – Nutshell 3rd Ed. (2013) McConville

Questions & Answers on Company Law (2008)        McGrath, N & Murphy

Make That Grade Irish Company Law 5th Ed. (2015) Murphy

Company Law BELR Series (2015)   O’Mahony

UK Sources

Companies Act 2006 (UK) (Legilsation.gov.uk)

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington

Company Law in Context 2nd Ed. (2012) D Kershaw

Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam

Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington

 

UK Practitioners Services

Tolley’s Company Law Handbook

Palmer’s Company Law