Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd
Encyclopedia
Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 is a famous decision by the House of Lords
on the ability to impose liability upon a corporation. The decision expands upon the earlier decision in Salomon v Salomon & Co. [1897] AC 22 and first introduced the "alter ego
" theory of corporate liability.
, a joint venture of the Shell and Royal Dutch oil companies. The ship sank and the cargo was lost due to the negligent acts of Mr Lennard in violation of the Merchant Shipping Act 1894. Asiatic sued the company for negligence
under the Act. At issue was whether the guilty acts of a director
would be imposed upon the corporation.
Viscount Haldane
explained the "directing mind" principle of corporate liability:
In considering the case of Mr Lennard himself he stated:
, however, that only applied to employees of the company, which excluded the act of the directors. After the Lennard case, the alter ego theory has become the most powerful method of imposing liability on a corporation. It has proved to be particularly effective for imposing criminal liability.
Judicial functions of the House of Lords
The House of Lords, in addition to having a legislative function, historically also had a judicial function. It functioned as a court of first instance for the trials of peers, for impeachment cases, and as a court of last resort within the United Kingdom. In the latter case the House's...
on the ability to impose liability upon a corporation. The decision expands upon the earlier decision in Salomon v Salomon & Co. [1897] AC 22 and first introduced the "alter ego
Alter ego
An alter ego is a second self, which is believe to be distinct from a person's normal or original personality. The term was coined in the early nineteenth century when dissociative identity disorder was first described by psychologists...
" theory of corporate liability.
Facts
A ship owned by Lennard's Carrying Co was transporting some goods to the Asiatic Petroleum CompanyAsiatic Petroleum Company
Asiatic Petroleum Company was a joint venture between the Shell and Royal Dutch oil companies founded in 1903. It operated in Asia in the early twentieth century. The corporate headquarters were on The Bund in Shanghai, China. The division tested the limits of corporate liability in the Lennard's...
, a joint venture of the Shell and Royal Dutch oil companies. The ship sank and the cargo was lost due to the negligent acts of Mr Lennard in violation of the Merchant Shipping Act 1894. Asiatic sued the company for negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
under the Act. At issue was whether the guilty acts of a director
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
would be imposed upon the corporation.
Judgment
The House of Lords held that liability could be imposed on a corporation for the acts of the directors by virtue that the directors are the controlling minds of the company.Viscount Haldane
Richard Haldane, 1st Viscount Haldane
Richard Burdon Haldane, 1st Viscount Haldane KT, OM, PC, KC, FRS, FBA, FSA , was an influential British Liberal Imperialist and later Labour politician, lawyer and philosopher. He was Secretary of State for War between 1905 and 1912 during which time the "Haldane Reforms" were implemented...
explained the "directing mind" principle of corporate liability:
In considering the case of Mr Lennard himself he stated:
Significance
Prior to this case the primary means of imposing liability on a corporation was through vicarious liabilityVicarious liability
Vicarious liability is a form of strict, secondary liability that arises under the common law doctrine of agency – respondeat superior – the responsibility of the superior for the acts of their subordinate, or, in a broader sense, the responsibility of any third party that had the "right, ability...
, however, that only applied to employees of the company, which excluded the act of the directors. After the Lennard case, the alter ego theory has become the most powerful method of imposing liability on a corporation. It has proved to be particularly effective for imposing criminal liability.