The Corporation in Action

• Author: J. Anthony VanDuzer
• Profession: Faculty of Law University of Ottawa
• Pages: 195-224

195

CHA PTER 5

THE CORPOR ATION

IN ACTION

A. INTRODUCTION

As discussed in Chapter 3, it is often helpful to think of corporations

as having legal characteristics similar to thos e of natural persons. The

comparison may only be taken so far, of course, and in thi s chapter

we look at one of the most important differences between corporate

and natural persons: the necessit y for corporate persons to act through

human agents. In particular, we w ill look at how corporat ions acting

through agents can be said to enter into contracts and to commit crimes

and torts. The rules governing corporate li ability are fundamentally

important to all of the stakeholders in the corporation because they

determine the legal consequences of the corporation’s behaviour in the

marketplace. Liability r ules also inf‌luence the corporation’s behaviour.

For example, the rules that determine when a corporat ion is bound by

contracts will affect how a corporation sets up its contract-approval

process. The corporation will want to ensure that only those employees

whom it has given authority to enter into contr acts are in a position to

bind the corporation.

The theories of liability developed by the courts over the years have

varied depending on whether the liability sought to be imposed was, on

the one h and, contractua l or, on the other hand, cri minal or tortious.

In imposing contractua l liability, the courts h ave focused on whether

the individual whose actions are alleged to have given rise to corporate

liability was an agent of the corporation with authority to incur liability

THE LAW OF PARTNERSHIPS AND COR PORATIONS196

on behalf of the corporation. By contr ast, to impose liability on a cor-

poration for a crime or a tort, the courts have asked whether the person

could be considered to be the same a s the corporation for the purpose

of the activity alleged to constitute the cri me or the tort. The signif‌i-

cance of these dist inctions will be explained in the following sections.

Recently the Criminal Code of Canada was amended to substan-

tially broaden the circumstances in which corporations may be held

crimina lly responsible.1 The implications of these important amend-

ments will be di scussed as well.

B. LIA BILITY OF CORPOR ATIONS FOR

CRIMES

1) Introduction

Because corporations have “no soul to be damned; no body to be

ki c ke d ,”2 but fundamentally comprise a locus of claims by the vari-

ous stakeholders, as discussed in Chapter 1, the reasons for and conse-

quences of imposing crimi nal liability on corporations a re somewhat

different from those associ ated with imposing such liability on natural

persons. It seems unlikely, for example, that a conviction for a criminal

offence would have the same deterrent effect on a soulless cor poration

as it would have on an individual. Certainly the managers of a cor-

poration will be discouraged f rom causing the corporation to commit

crimes to some extent by the prospect that the corporation for which

they are responsible will be found crimin ally l iable. The deter rent ef-

fect associated with t he prospective d amage to t he corporation’s repu-

tation c aused by a criminal conviction, however, will not be as great

as t he deterrence resulting from the t hreat of personal responsibil ity.

This problem is mitigated to a signif‌icant extent by provisions in the

crimina l law and many reg ulatory statutes that impose liability on the

individuals through whom corporations commit crimes.

To some degree the remedie s used to sanction criminal behaviour

are problemat ic when a corporation i s the offender. Imprisonment of

the corporation itself i s not possible and, if a f‌ine is impo sed on a cor-

poration, its shareholders, employees, and others with f‌inancial claims

1 Criminal Code, R.S.C. 1985, c. C-46, as a mended by An Act to Amend the Criminal

Code (criminal liability of organizatio ns), S.C. 2003, c. 21, s. 2 [Criminal Code].

The amendments were pr oclaimed in force on 31 March 2004.

2 Lord Thurlow, quoted by Glanvil le Williams, in Criminal La w: The General Part,

2d ed. (London: Stevens , 1961) at 856.