by Ross Grantham (*) – Associate Professor, The University of Auckland
Source: COMPANY AND SECURITIES LAW JOURNAL – Volume 19, May 2001, pp.168-180
* I am extremely grateful to Professor Charles Rickett, Professor of Commercial Law, The University of Auckland, and Paul Myburgh, The University of Auckland, for their assistance in the preparation of this paper. The usual caveats apply.
[Note: footnotes have been transferred to endnotes]
[Abstract] Historically, the explanation of how juristic persons such as a corporation could be said to act, know or intend was found entirely in the concepts of the principles of agency. By analysing those natural persons involved in the enterprise as the corporation’s agents, the corporation could be said to act and to have knowledge. The central concern of this paper, however, is with whether there is, in addition to the application of standard agency principles, a further mechanism for attributing actions of natural persons to the corporation that is specific to corporate law. The author’s thesis is that there is indeed a company-specific mechanism for attribution. For the purposes of both the criminal and civil law, responsibility may be attributed to the entity by way of a doctrine variously called “identification”, “alter ego”, “directing mind and will”, and the “organic approach”. The author further considers the scope of the organic approach and in particular the doctrinal relationship predicted by the organic approach between central corporate law doctrines and the general law.
As a matter of jurisprudence, the issue of whether natural persons are, and should be, the central concern of the law is a matter over which great minds have differed and continue to differ. However, at a doctrinal level there is much less room for disagreement with the proposition that the vast majority of legal rules which make up the private law, the rules of contract, torts, restitution and property, were designed with their application to natural persons in mind. Although the common law has since its very beginning known of artificial personality, artificial persons have only been a significant feature of the legal landscape for the last two centuries. By that time, however, the vast bulk of the doctrines and rules comprising the common private law had already been developed. Quite naturally, therefore, in articulating the doctrinal elements of its rules the common law assumed that the principal (if not only) subject of the rules had those characteristics that one normally associates with natural persons. For present purposes, the most important of these characteristics are the capacity for physical action and the possession of intention and knowledge.
The assumptions that underlie the general rules of the common law about the inherent capacities of the subject of the rules pose problems for their application to artificial entities such as registered companies. Although we seem to have an intellectual or emotional need to visualise a company as a living, breathing entity, this tendency toward reification is deeply misleading. As an abstract legal construct, a company has no physical existence and thus no capacity for physical action or the possession of intention or knowledge.
Accordingly, the company lacks those characteristics that are crucial doctrinal elements of the general rules of the common law. It is equally clear, however, that the company’s lack of corporeal substance cannot be allowed to prevent the application to the company of these general rules. Once the company is recognised as a legal person, it is necessary to subject companies to the same legal rules as natural legal persons if the integrity and consistency of the legal system is to be preserved. Accordingly, ways have to be found to integrate the company into the world of natural persons, physical actions and intentions and knowledge.
In very broad terms, the common law’s solution to the company’s artificial nature may be described in terms of “attribution”. To facilitate the application of general common law rules, the actions, knowledge and intentions of those natural persons involved in the enterprise are attributed to the company. In this way, the company can be said legally to have acted or to have had an intention. Of course, attribution does not, and cannot, perfect the company’s metamorphosis into a living entity. The company still does not exist in a corporeal way and the actions or intentions at issue are still those of natural persons. Nevertheless, attribution does create a sufficient analogy with natural persons, so that for the purposes of the vast majority of rules the common law’s assumptions about the capacity for physical action and intention of the subject of the rule are sustained.
Historically, the attribution to a company of rights, duties and liabilities was conceived of entirely in terms of the principles of agency. Thus, for much of the 19th Century the directors were regarded as nothing more than the agents of the shareholders as a group. Prior to 1844, this was entirely appropriate. Although called “companies”, and while having features we would today associate with companies, the joint stock company was in legal terms merely a partnership having no separate legal existence apart from its members. However, even after the Companies Acts of 1844 and, especially, 1862, allowed these large partnerships to incorporate and achieve separate legal status, the courts continued to apply partnership concepts and to explain the basis of the relationship between the directors and the company in terms of agency. One important manifestation of this analysis was the conclusion that the directors, as agents, were subject to the direction of the shareholders as principal.
The balance of power between shareholders and directors has now shifted in the directors’ favour. During the early part of the 20th Century it was established that the directors were not subject to direction by shareholders. This analysis took as its starting point the separateness of the corporate entity from those persons through whom the company must necessarily act. Thus, the right to bind the comp any was conceived of as flowing from the company itself, rather than from a delegation by the members as it does with a partnership. The legal personality of the company was therefore the ultimate source of rights and the articles of association were the mechanism by which the company delegated its authority. An important corollary of the new analysis, recognised in cases such as John Shaw & Sons Ltd v Shaw, Clifton v Mount Morgan Ltd and Howard Smith Ltd v Ampol Petroleum Ltd, was that those to whom the articles had granted rights held them free from encroachment by other groups within the company. The greater freedom that this change afforded directors to manage the company did not, however, necessarily imply a rejection of agency as a doctrinal explanation of the relationship between the company and those natural persons involved in the enterprise. As reflected both in modern corporate legislation and in a vast quantity of case law, for many purposes the actions, knowledge and intention of senior employees and individual directors will be attributed to the company by way of the principle of the law of agency. Thus, for much of the day -to-day operation of a company’s business, agency remains the basis upon which attribution occurs.
An organic approach to attribution
The central concern of this paper is with whether there is, in addition to the application of standard agency principles to the corporate context, a further mechanism for attribution that is specific to company law. The thesis of this paper is that there is indeed a company-specific mechanism for attribution. For the purposes of both the criminal and civil law, responsibility may be attributed to the entity by way of a doctrine variously called “identification”, “alter ego”, “directing mind and will”, and the “organic approach”. The central feature of this approach (which will be referred to here as the organic approach) is that the individual is regarded as the very embodiment of the company itself. The actions, knowledge and intention of the individual are treated as if they were the actions, knowledge and intention of the company itself. The company is thus held responsible for events in the real world by, in essence, deeming the individual’s actions, knowledge and intention to have been those of the company. This approach to attribution differs from agency in three crucial respects.
First, the organic approach effectively merges for legal purposes the individual and the company into one entity. There is thus only ever a bipartite relationship: the company and the third party. Agency reasoning stands in sharp contrast. Although we might commonly say that the agent stands in the principal’s shoes, that is a loose metaphor that does not accurately convey the true nature of agency. The nature or effect of the agency relationship is not that the agent embodies the principal or stands in his/her shoes. The agent has the authority to affect the principal’s legal position, but the agent and principal remain in law distinct legal subjects. In essence, agency creates a tripartite relationship, between principal, agent and third party. Secondly, the organic approach may be used to attribute responsibility to a company in situations where agency reasoning will not. This in turn reflects the different nature or basis of the responsibility imposed. While on agency reasoning the principal’s liability is derivative or vicarious, on the organic approach liability is direct and personal. The organic approach thus offers an alternative analysis that may justify the imposition of corporate responsibility in situations where vicarious liability is insufficient or inappropriate. As will be discussed below, this has been particularly important in respect of the liability of a company for criminal and civil wrongs. Thirdly, the different doctrinal basis of the organic approach predicts a quite different relationship between the core principles of company law (such as separate personality and limited liability) and the general rules of the common law. In particular, the organic approach seems to predict that the core principles of company law must be understood as modifying the usual incidents and application of the general law, while an agency approach does not.
Early development of the organic approach
The antecedents of the organic approach may be found in the development of corporate criminal liability. As a matter of principle, it would have been quite possible for the law to employ agency concepts and to impose a form of vicarious liability on companies. Indeed, the Federal courts in the United States largely follow this approach. However, for whatever reason, English courts have not been attracted to this approach. As a rule, courts of English extraction are reluctant to construe criminal offences as being intended to apply vicariously. This means that it is not enough, to render the principal guilty, merely to show that the principal’s agent had criminal intent. Proof of the direct actual commission of the offence with the requisite intent by the company itself is necessary. However, as a “soulless abstraction” it is clear that a company cannot form the requisite mens rea of the offence.
Although the utility of seeking to impose criminal liability on companies is not beyond question, a solution to this problem was nevertheless found. From the beginning of the 20th Century the courts began to employ a doctrine of identification to establish corporate mens rea. Under this doctrine, the mens rea of an individual was treated as though it were that of the company itself. Thus, in Tesco Supermarkets Ltd v Nattrass Lord Reid said:
“A corporation … must act through living persons, though not always one or the same person. The person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. His is an embodiment of the company…”
While the development of corporate criminal liability provides good evidence of an organic approach, it is important not to assume that the scope of the organic approach will necessarily be the same outside the criminal context. In the context of corporate criminal liability the need to facilitate corporate liability impacts heavily upon the scope of the rule. Thus, in the criminal context the law may identify a relatively low level employee as the embodiment of the company. This reflects the need not to circumscribe unduly the operation of the criminal law or to encourage the directors to turn a blind eye to employee wrongdoing. However, in other contexts, where this policy might not apply or might not apply with such force, the scope of the organic approach may be more constrained.
The organic approach is also used as a mechanism for the imposition of responsibility on companies in the cognate area of civil wrongs. Although the law’s willingness to accept vicarious liability for civil wrongdoing means it need not be widely invoked, “identification” has been used in respect of torts where vicarious liability was not possible because of the need to show personal fault on the part of the company. Most famously, the organic approach was used in Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd to prevent the defendant relying on a defence to claims for damage to cargo contained in the Merchant Shipping Act 1894. This Act provided that a shipowner would only be liable for loss to cargo if the owner was actually at fault. In this case, the loss was caused by a fire, which in turn was due to poor maintenance of the vessel. The House of Lords held that the actions of the employee responsible for maintaining the ship were to be treated as those of the ship –owning company itself. The company was thus “actually” at fault and the defence was accordingly not available.
The organic approach has also been used to facilitate the imposition of liability for equitable wrongs. In El Ajou v Dollar Land Holdings plc the defendant company was sued in respect of funds it acquired from the plaintiff for value as a result of misappropriation by the plaintiff’s employees. The liability of the defendant company turned on whether it knew of the misappropriation. The defendant’s chairman was aware of the fraud, but he had not acquired that knowledge while acting on behalf of the company. The English Court of Appeal held that the chairman’s knowledge could not be imputed to the company under ordinary agency principles. However, as the chairman was to be identified with the company, his knowledge was therefore its knowledge. Hoffmann LJ said:
“It is well known that Viscount Haldane LC derived the concept of the ‘directing mind’ from German law … which distinguishes between agents and organs of the company. A German company with limited liability (GmbH) is required by law to appoint one or more directors… They are the company’s organs and for legal purposes represent the company. The knowledge of any one director, however obtained, is knowledge of the company.”
A wider organic approach?
The existence of an organic approach is generally accepted by the leading text writers in the context of corporate criminal liability. However, the idea that the organic approach may apply generally in the civil law is somewhat more contentious. The source of this scepticism lies principally in the view that the organic approach is merely an interpretive device developed to assist in the application of criminal and regulatory statutory provisions to companies. Despite such scepticism, however, there is clear evidence of a much wider conception of the organic approach that is not limited to the sphere of corporate criminal liability.
Perhaps the oldest evidence of an organic approach in the civil law relates to the affixing of the company’s seal. In jurisdictions such as Australia that retain the use of a seal as a means of executing a document, the seal is regarded as an act of the company itself rather than the act of the company’s agent. Thus, the authors of Ford’s Principles of Corporations Law say: “The affixing of the seal is taken to be a corporate act which has an effect similar to the signature of an individual who is a party to a document …. The document is taken to be executed by the company itself in contrast to one exe cuted by another person as agent for the company.”
A much more important source of evidence, however, may be found in the modern conception of the board of directors. Historically directors were treated as co-agents authorised to act by quorum. However, more recently the board has been treated as an organ of the company itself, which acts as the company and not merely as its agent. In some jurisdictions this conclusion is mandated by statute. In England, for example, s 35A (1) of the Companies Act 1985 provides: “In favour of a person dealing with a company in good faith, the power of the board of directors to bind the company, or authorise others to do so, shall be deemed free of any limitation under the company’s constitution.” In Gower’s Principles of Modern Company Law, it is stated that the effect of this provision is that:
“A company’s liability to third parties no longer depends solely in principles of agency … Section 35A, though it does not use the word ‘organ’ has, in effect, recognised that the board of directors is not a mere agent of the company but an organic part of it so that third parties can treat acts of the board as acts of the company itself.”
In other jurisdictions, such as Canada and New Zealand, while there is no provision equivalent to s 35A(1), the relevant companies statute directly invests the board with the power and right to manage the affairs of the company. According to the New Zealand Law Commission, the purpose of such provision is to confer on the board “an original statutory jurisdiction to manage”. As has been noted in the context of the Canada Business Corporations Act 1985, it is problematic to try and conceive of the board as an agent or delegate when its power to manage the company is a direct grant of power from the State, not a grant from the company.
Quite apart from such statutory provisions, however, there is now a “widely accepted” view that, as a matter of general principle, the board is properly to be regarded as an organ of the company. Crucial in this respect is the decision in Meridian Global Funds Management Asia Ltd v Securities Commission, where Lord Hoffmann, speaking for the Privy Council, seemed to envisage that decisions of the board and shareholders in general meeting are generally to be regarded as decisions of the company and not merely of its agents.
Lord Hoffmann began in Meridian by stressing the abstract nature of the company and the fact that a company can only act via natural persons. Accordingly, in his Lordship’s view, “any proposition about a company necessarily involves reference to set of rules to tell one what acts were to count as acts of the company”. His Lordship described these rules as “rules of attribution” and identified three categories of rule.
Taking these in reverse order, the third category of rules of attribution is what Lord Hoffmann called “special rules” of attribution. A special rule of attribution is one which the court must fashion in particular circumstances where no other rule of attribution applies, but where it is nevertheless clear that companies were intended to be subject to the substantive rule in question. The special rules of attribution are thus part of the process of interpreting particular substantive rules, especially statutory rules, and rest on a determination of public policy that even if the substantive rules do not in their terms provide for companies, it is nevertheless appropriate for the courts to so extend them. Thus, for example, if a court decides that the rules on perjury must apply to companies, even though by the terms of these rules it is not clear how perjury is to apply to a company, the court must make up a (special) rule to facilitate application of the rules of perjury to companies.
The second category of rules of attribution is rules of general application. This category includes rules such as those of agency and vicarious liability. These rules are “general” because they apply to natural persons and companies alike. However, while, as Lord Hoffmann noted, the rules of general application have an important role in the day -to-day operation of the company, it is the first category of rules of attribution, the primary rules, that is of greatest interest for present purposes. Lord Hoffmann said:
“The company’s primary rules of attribution will generally be found in its constitution, typically the articles of association, and will say things such as ‘for the purpose of appointing members of the board, a majority vote of the shareholders shall be a decision of the company’ or ‘the decisions of the board in managing the company’s business shall be the decisions of the company.’ There are also primary rules of attribution that are not expressly stated in the articles but implied by company law, such as ‘the unanimous decision of all the shareholders in a solvent company about anything which the company under its memorandum of association has power to do shall be the decision of the company: see Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd  Ch 258’.”
In considering the nature and import of the primary rules of attribution, three points can be made. First, the primary rules are not limited in their scope merely to the criminal law or to tortious liability. There is nothing in his Lord Hoffmann’s comments to suggest he sees them limited to any particular context. Of course, in a practical sense the scope of the primary rules are limited in relation to large companies. In large companies most operational decisions are taken by senior management, with relatively few decisions being by way of formal board resolution or resolution of shareholders. However, this is a practical limitation that does not apply to all companies. Indeed, in the case of the so -called one-person company, the opposite conclusion would seem to be true. Where there is a sole director and shareholder, the primary rules taken on a much greater significance, as arguably the sole director does everything as the board or organ.
Secondly, the primary rules cannot be rules of agency. Lord Hoffmann himself said that the rules of agency were in the category of general rules — the second category of rule. The rules relating to decisions of the board and general meeting, however, are in the category of primary rules. The clear inference from this categorisation is that his Lordship saw the primary rules of attribution and the rules of agency as being of different types. It may also be that in labelling the categories “primary” and “general”, Lord Hoffmann’s taxonomy implies a hierarchy of rule of attribution, in which agency (as a general rule) is subordinated to the primary rules.
Thirdly, in the three examples of primary rules that Lord Hoffmann gives, the decision reached is described as “a decision of the company”. This is not language that would usually be employed to describe the effect of an exercise of authority by an agent. As mentioned above, a decision by an agent may bind or affect the principal, but would not usually be described as a decision “of the principal”. This language is, however, entirely consistent with the organic approach.
As I have suggested elsewhere, and as a number of leading commentators on company law have also concluded, the primary rules of attribution identified by Lord Hoffmann reflect or recognise an organic approach. That is, a decision of the board or of the shareholders in general meeting is ipso facto an act of the company itself and binds the company, not through the notions of authority which underpin agency, but by virtue of the decision in question being, in the eyes of the law, the company’s own act or decision.
A summary of the development and status of the organic approach can now be offered. The principle of attribution that regards the individuals involved in the management of the company as the very embodiment of the company emerged out of the doctrinal difficulties presented by the corporation’s abstract nature to the application of the rules of the criminal law and of the law of civil wrongs to corporations. Where direct personal fault or intention was required, attribution through the concept of agency was inadequate. The solution was to treat the actions, intention and knowledge of an individual as though they were those of the company. In recent years the organic approach has been conceived of more broadly. In some jurisdictions this has been promoted by statute, but this may merely reflect a more general principle that decisions of the board are decisions of the company itself. Although the reasons for extending the organic approach to attribution beyond the sphere of wrongs have not been clearly articulated, the justification seems to lie in a combination of two factors. First, the recognition that the company is a discrete legal entity. For a period following the introduction of incorporation by registration, the courts continued to regard the company as merely an association of individuals. Accordingly, it was the shareholders as individuals who were the ultimate authority and the directors could be nothing other than as their agents. However, once the implications of incorporation for the separation of the company from its shareholders and directors was fully realised following Salomon v A Salomon & Co Ltd, it followed that those natural persons who (inevitably) act as the board and general meeting could not be treated as doing so in their individual capacities. The powers that the board and general meeting exercise are powers that belong to the company, and thus cannot be exercised consistently with the company’s separate identity by the individuals in that capacity. Just as the individual who is for the time being the Sovereign does not exercise the Sovereign’s powers as that individual, the individuals who are the board do not exercise the board’s powers as individuals. Secondly, the conviction that the board ought to be free from interference in the management of the company. This was achieved by rejecting the conception of the board as a mere agent (whether of the company or of the shareholders), and seeing the board instead as the possessor of original authority, held not as individuals but as an organ of the company.
The scope and nature of the organic approach
The application of the organic approach to the private law of obligations is still nascent and gives rise to almost as many questions as it answers. The task now, therefore, is to address the questions raised by the organic approach. In particular, there are two aspects of the approach that require early consideration. The first is the scope of the approach, and in particular, the issue when an individual will be treated as an “organ”. The second is the effect of the organic approach on the personal liability of the individual for the acts thereby attributed to the company.
The scope of the organic approach
Logically, there must be limits to the circumstances in which it is appropriate to attribute the actions and knowledge of an individual or group of individuals to the company. It seems quite improbable, for instance, that the organic approach should ride roughshod over the internal allocation of power between board and general meeting, especially where that allocation is provided for by statute. In the law of agency, the extent of an agent’s power is defined by the concepts of actual and ostensible authority. However, once it is accepted that the organic approach is distinct from agency and thus does not necessarily employ the same doctrinal tools, a question arises as to how one is to define when an individual is an organ. This is a very difficult issue that has not had the benefit of judicial illumination. It is, therefore, not possible at this stage to articulate with any certainty an authoritative answer to this question. However, three points can usefully be made.
The first is that the individuals must at least have been purporting to act in their capacity as officers of the company. It seems quite improbable that the actions of an individual on the weekend at a social function, for example, should be treated as being those of the company of which he is a director or senior employee. A closely related proposition is that attribution will not be appropriate where the individual in question was seeking to injure the company. This is perhaps what counsel in Meridian was suggesting when he argued that attribution “does not apply where the acts sought to be attributed to the company are exclusively for the benefit of the individual concerned and contrary to the interests of the company”. While the Privy Council said in a case that “the fact that [the employee] did the deal for a corrupt purpose… cannot in their Lordships’ view affect the attribution of knowledge…”, it is unlikely that their Lordships intended to suggest that even in the case of fraud directed at the company attribution is appropriate. Although the employee was acting for his own benefit, their Lordships did not seem to accept counsel’s characterisation of the employee’s intentions as being also to injure the company and thus they cannot be taken to have rejected counsel’s proposition as a matter of general principle.
The second point is that it must be the case that the primary rules of attribution in the company’s constitution will prima facie identify when decisions of the board and general meeting will be those of the company. It is thus likely that it is only in respect of matters confided to them by the company’s constitution that they will be regarded as an organ. This is not to suggest, however, that the tests for defining the scope of authority in agency and for determining when an individual is an organ can be assimilated. Although in El Ajou, Hoffmann LJ said that “whether a person is an organ or not depends upon the extent of the powers which in law he has express or implied authority to exercise on behalf of the company”, his Lordship’s comments cannot be understood as equating the tests. First, it is increasingly the case that the powers of the board to manage are being extended by statute beyond the scope of the authority conferred by the company’s constitution. In Australia, this is manifested in the extension of efficacy of transactions entered into by directors beyond their authority by ss 128 and 129 of the Corporations Law. In England, as already mentioned, s 35A(1) of the Companies Act 1985 constitutes the board as the company’s organ regardless of whether the board acted beyond the powers granted it by the constitution. The effect of these provisions is that the extent of the board’s powers to affect the company’s legal position is no longer a function simply of the authority conferred by the constitution. Secondly, Hoffmann LJ’s comments in El Ajou must be seen against the fact that the Court of Appeal held that the chairman was an organ of the company for the purposes of establishing the company’s knowledge, even though it was held that the knowledge was not gained within the scope of his authority as an agent. Thirdly, it is clear from those cases dealing with the “special rules of attribution” that the appropriateness of attribution is not to be determined solely by the extent of the authority conferred. In Meridian, for example, the brokers whose knowledge was attributed did not have authority.
The third point is that the organic approach is subject to policy considerations that can both expand and limit the scope of the approach. This is well illustrated by the operation of the organic approach in the criminal law. As mentioned earlier, for the purposes of corporate criminal liability, even a lowly employee may be identified as the company. This reflects a need not to exempt companies from the scope of the criminal law, nor to encourage senior management to turn a blind eye to wrongdoing by employees. Equally, however, the policy imperatives underlying the criminal law may result in a limitation of the scope of the organic approach. This is clearly evidenced in those cases that have involved criminal prosecutions of directors for theft from the company. In such cases, it has been contended that there is no theft because, as the director is the embodiment of the company, the company must have consented to the taking. In a number of cases, including R v Roffel, this proposition was accepted. However, in R v Gomez, the House of Lords held that there was no consent. While the unlawful actions of the director would be attributed to the company in respect of claims against the company by third parties, the director’s actions would not be treated as those of the company so as to afford a defence to a claim by the company. While the refusal to attribute to the company the directors’ knowledge of a conspiracy to steal from the company seems intuitively correct, it is important to identify a principled basis for this conclusion. In Gomez, Lord Browne-Wilkinson appeared to suggest that the logic of the contention, that if the individual was the company the company must have consented, was at fault. This, with respect, cannot be correct. If the director would in the normal course of events be treated as the company, and if the mere fact of his dishonesty does not preclude that (as his Lordship accepts it does not), it must follow, in the absence of some superadded limitation, that the director’s consent is the company’s consent. That the director’s consent will not be attributed to the company is thus better understood as a policy limitation that in such circumstances the actions and knowledge of the director should not be treated as those of the company.
Is the attribution of the individual’s acts exclusive?
The doctrinal effect of the organic approach is to say that, when person X did act A, X was not X but Z; or more precisely, that when acting within the scope of the primary rules of attribution, the director’s actions are treated in law as the actions of the company for the purposes of both specific corporate law rules and general law rules ascribing rights and liabilities to the company. This raises an important question. In treating the director’s actions as those of the company, does this in and of itself exclude the normal presumption that the individual director is responsible for his or her own acts? The rule in agency is that irrespective of whether the responsibility is imputed to the principal, the agent remains liable for his or her own wrongful conduct. The doctrinal basis of the organic approach, however, suggests that where this approach is applied it does exclude the personal responsibility of the director.
This issue has really only been addressed in the context of the personal liability of company directors for torts committed in the course of their duties as director. In Trevor Ivory Ltd v Anderson, the director of a very closely held company was sued in respect of negligent advice given as part of the company’s business. As is now famously known, spraying weed killer on raspberries is not conducive to good crop growth. The New Zealand Court of Appeal held that Mr Trevor Ivory was not personally liable, even though it was he who composed the negligent advice. Hardie Boys J reached this conclusion on the basis that for the purposes of ascribing liability in tort, the company was to be regarded as the tortfeasor, not Mr Trevor Ivory personally.
More recently in Standard Chartered Bank v Pakistan Shipping Corp (No 2), the English Court of Appeal held that a director who had made fraudulent misrepresentations on behalf of the company was not personally liable. The misrepresentations were to be regarded as those of the company. Evans LJ said:
“The representations giving rise to liability in deceit were made by the company, notwithstanding that they were contained in letters signed by [the director] on behalf of the company, as he did. Even where the director makes the false statement, and the requisite knowledge of its falsity and the intention that it shall be acted upon are both his, nevertheless the fact remains that for the purposes of civil liability (the position in criminal law may be different) the statement is attributed to the company. The question then arises whether in such a case the director is free from personal liability.”
In Evans LJ’s view, the answer to this question was that the director was indeed free from personal liability. Applying Williams v Natural Life Health Foods Ltd, his Lordship said: “The House of Lords judgment is based on the pre-eminence given to the separate legal personality of the company ….”
While the answer given by Evans LJ in Standard Chartered Bank to the question whether attribution pursuant to the organic approach is exclusive is both unambiguous and consistent with a growing body of Commonwealth authority, it remains to consider whether this conclusion can be justified as a matter of principle. I suggest that it can. What these cases recognise, and in the case of Standard Chartered Bank explicitly so, is that when applying rules of general application (such as those of contract and tort) company law doctrines, or at least the core doctrines thereof (which include separate personality, limited liability and the primary rules of attribution), must be accorded primacy to the extent that they preclude the normal incidents or consequences of those general rules. While such a claim may seem imperialistic, such primacy is inherent in the very nature and function of company law rules.
It is vital to remember that the company is in fact merely a set of rules. The company is not an artefact that exists in the “real world”. What exists are those natural persons who manage and operate the business. It is they who enter into contracts, operate machinery and drive trucks, not the intellectual construct that we call a company. The rules that constitute “the company”, such as the primary rules of attribution, exist to provide different legal consequences for the actions and decisions of these individuals when they are performed within the ambit of company law rules as compared to the consequences of those actions when performed outside the ambit of these rules. The central function of company law is thus to modify the application of general principles of law, such as those of the law of contract, torts and restitution, such that they apply to these natural persons in a manner different from that when applied to them outside of the corporate sphere. Thus, although left to its own internal logic and imperatives the law of torts may identify the individual director as the tortfeasor, the company law regime modifies the normal consequences of the director’s actions. The responsibility for, and the legal consequences of, the tortious conduct are no longer sheeted home to the director personally. To refuse to accept that the general principles of law are modified in this way is thus to deny the company any meaningful existence and to frustrate the central purposes for which the State recognises the corporate form. The State recognises the corporate form to allow individuals to trade without the possibility of creditors having recourse to their assets other than those committed to the conduct of the business.
There will of course be situations where the attribution of the individual’s acts to the company will not preclude the personal liability of the individual. The application of the criminal law to companies is a good example. The corporate form does not exist to facilitate non-recourse trading with respect to the criminal law. Consequently, company law does not purport to preclude the personal liability of the individual whose criminal acts are treated as those of the company. It may also be that, in time, the present acceptance that the corporate form provides non-recourse trading in respect of tortious liability will be rejected as a false step.
The important point, however, is that the law cannot retain the personal liability of the individual merely because the individual would otherwise be excused a liability. The permission that the State (and most States) has granted to individuals to adopt an alter ego might be questionable on a moral and social level, but the fact remains that this permission has been granted and the protection of the individual from civil liability is a necessary and intended consequence of granting that permission.
Company law has a reputation as a “technical and dull” subject that is increasingly dominated by statutory prescription and in which the only real intellectual interest lies in the insights offered by economic and political theories. This misrepresents, or certainly underrepresents, company law as a subject of doctrinal interest.
There are many issues in company law that are of genuine doctrinal interest and which moreover cannot adequately be dealt with simply by “looking up a section of the Corporations Law”. The legal mechanisms by which rights, duties and responsibilities are attributed to the company is one such issue. Despite our best endeavours at anthropomorphism, the abstract juristic concept which is the company cannot be the subject of rules in precisely the same way as natural persons are the subject of these rules. The differences between legal and natural persons mean that the doctrinal constructs that are used in respect of natural persons will not suffice for companies. A principled and coherent account of the company as a legal actor involves not only theorising about the nature of the firm, but also asking much broader questions about the nature of criminal and private law obligations and about how we apply rules designed for a living, breathing being to a soulless abstraction
 Hart, The Concept of Law (Oxford University Press, Oxford, 1961), p 199; Dworkin, Law’s Empire (Harvard University Press, Cambridge, 1986), p 93; Kelsen, General Theory of Law and State (Harvard University Press, Cambridge, 1945), p 95; Finnis, “The Priority of Persons” in Horder (ed), Oxford Essays in Jurisprudence, Fourth Series (Oxford University Press, Oxford, 2000), p 1.
 In English law, the earliest corporations (corporate bodies created by Royal Charter or Act of Parliament) were cities and local boroughs, ecclesiastical bodies and educational bodies (such as the colleges of Oxford and Cambridge). Later, corporate status was granted to trading bodies such as the East India Company and the Hudson’s Bay Company. Generally, see Halsbury’s Laws of England (4th ed, Butterworths, London, 1979), Vol 9 and Sealy, “Perception and Policy in Company Law Reform” in Feldman and Meisel (eds), Corporate and Commercial Law: Modern Developments (Lloyd’s of London Press, London, 1996), pp 11-13.
 This paper will concentrate on registered companies. However, the issues with which it deals are not unique or limited to registered companies. They arise with equal force in respect of all of the types of corporate entity known to the law, such as, for example, universities and what might be called public corporations like the Crown (Pace Lord Donaldson MR in M v Home Office  QB 270 at 300) Thus, in Equiticorp Industries Group Ltd. (in statutory management) v Crown (No 47)  2 NZLR 481 (HC), a central issue was whether the Crown could be said to have known of the illegal nature of the transaction by virtue of what its employees knew. The issues surrounding “public” corporations are of interest in their own right and deserve separate treatment. The present discussion will however focus on registered companies.
 Meridian Global Funds Management Asia Ltd v Securities Commission  2 AC 500 at 507 per Lord Hoffmann: “[t]here is in fact no such thing as the company as such, no ding an sich…”
 This is a central argument in favour of imposing criminal liability on companies. It also represents the policy justification for the rejection of the logic that as a consequence of the doctrine of ultra vires a company could not commit a criminal or a tortious act: see Anonymous Case (No 935) (1701) 88 ER 518.
 This is the term favoured by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission  2 AC 500 at 507.
 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd  2 QB 480 at 491 per Willmer LJ.
 Davies, Gower’s Principles of Modern Company Law (6th ed, Sweet & Maxwell, London, 1997), p 183.
 Although the creation of freely transferable shares was prohibited by the Bubble Act 1720, this did not prevent the creation of “companies” with shares that were, at least in substance if not formally, freely transferable. Joint stock companies also had a board of directors and constitution recognisable as such even today: see Du Bois, The English Business Company after the Bubble Act 1720-1800 (New York Commonwealth Fund, New York, 1938) p 291.
 Sealy, “Perception and Policy in Company Law Reform” in Feldman and Meisel (eds), Corporate and Commercial Law: Modern Developments (Lloyd’s of London Press, London, 1996) pp 11-13; Davies, Gower’s Principles of Modern Company Law (6th ed, Sweet & Maxwell, London, 1997), p 31; Lobban, “Corporate Identity and Limited Liability in France and England 1825-67” (1996) 25 Anglo -American LR 397 at 401. It is of course true that there were differences between ordinary partnerships and the large joint stock form (see Ireland, “The Triumph of the Company Legal Form 1856-1914” in Adams (ed), Essays for Clive Schmitthoff (Professional Books, Abingdon, 1985), p 32). The difficulty for the courts was to find a legal structure between an incorporated entity and a partnership, without the assistance of Parliament.
 The Joint Stock Companies Act of 1844 had two closely related, but very modest, objectives. The first was to overcome the procedural difficulties surrounding the joint stock company’s lack of legal identity. This was achieved by granting separate legal existence to any venture that complied with the statutory machinery in the Companies Act. Secondly, the reforms sought to restore the validity of the basic premise of partnership law: the personal relationship between the partners. This was achieved by limiting the size of partnerships and companies. Partnerships were limited to a few partners, thus forcing the large joint stock ventures to take on corporate form. Companies, on the other hand, could not be established with too few members. Apart, however, from regularising the position of the joint stock company, the reforms that began in 1844 seemed to have relatively little impact.
 Thus, the leading academic work on company law in this period was Lindley, Treatise on the Law of Partnership, including its Application to Companies (Sweet & Maxwell, London, 1860), and even as late as 1916 the courts were still invoking partnership principles to resolve company law problems: Re Yenidje Tabacco Ltd  2 Ch 426 (CA).
 Ford, Austin, and Ramsay, Ford’s Principles of Corporations Law (9th ed. Butterworths, Sydney, 1999), p 207.
 Isle of Wight Railway v Tahourdin (1883) 25 Ch D 320 (CA), Marshall’s Valve Gear v Manning Wardle & Co  1 Ch 267.
 This seems to be the result of the courts’ embracing the long-standing commercial belief that it was inappropriate for shareholders to have direct control over the day-to-day management of the company: see Ford, Austin, and Ramsay, Ford’s Principles of Corporations Law (9th ed, Butterworths, Sydney, 1999), p207; Grantham, “The Doctrinal Basis of the Rights of Company Shareholders”  CLJ 554 at 564-566.
 John Shaw & Sons Ltd v Shaw  2 KB 113, 134 per Greer LJ; Ford, Austin, and Ramsay, ibid, p 204.
 See, for example, Brennan J’s description in Northside Developments Ltd v Registrar-General (1990) 170 CLR 146 at 172, of the source and delegation of power within the company. As Ford, Austin and Ramsay (ibid, p221) note, on this approach “company law vests in certain groups of people an original authority to commit the company or delegate to others…. The relationship between the board and general meeting is not hierarchical. According to the organic approach, whatever may have been the case in the past, the power to bind the modern company is divided between the board and the general meeting … ”
  2 KB 113 at 134. For a recent example of how entrenched this view is, see the decision of the Supreme Court of New South Wales in NRMA v Parker (1986) NSWLR 517.
(1940) 40 SR (NSW) 31.
  AC 821 at 837 (PC).
 See, for example, ss 128 and 129 of the Corporations Law.
 Leading examples are Hely Hutchinson v Brayhead Ltd  1 QB 549 and Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146.
 The organic approach to attribution is not necessarily inconsistent with the nexus of contracts theory of the company (on this theory generally , see Easterbrook and Fischel, The Economic Structure of Corporate Law (Harvard University Press, Cambridge, 1991) and Cheffins, Company Law: Theory Structure and Operation (Clarendon, Oxford, 1997)). While that theory describes the relationship between shareholders and directors in terms of “agency”, it is not crucial to the operation of the nexus theory that the only mechanism for attribution be agency in a strict legal sense. “Agency” for the purposes of the nexus theory means simply that the directors are not acting on their own account (Jensen and Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” (1976) 3 J of Fin Econ 305 at 308-310). The nexus theory is otherwise silent on the legal form this “agency” takes.
 Generally see, Reynolds, Bowstead and Reynolds on Agency (16th ed, Sweet & Maxwell, London, 1996) pp 1-3, and especially para 1-022, where the author draws a distinction between agents and organs. A more accurate description is that the agent has power or authority to affect the principal’s legal rights vis-à-vis third parties.
 Reynolds, ibid, p 8, refers to the internal and external aspects of agency. While the paradigm case of agency involves both aspects, the concept of agency will also embrace situations where there is only the internal aspect (eg, the undisclosed principal doctrine).
 Generally, see Davies, Gower’s Principles of Modern Company Law (6th ed, Sweet & Maxwell, London, 1997) pp 229-233.
 New York Central & Hudson Railroad Co v United States, 212 US 48 at 493 -494 (1909); Bucy, “Corporate Ethos: A Standard for Imposing Corporate Criminal Liability” (1991) 75 Minnesota LR 1095 at 1102 -1105; Khanna, “Corporate Criminal Liability: What Purpose Does it Serve?” (1996) 109 Harvard LR 1477 at 1482-1486.
 Odyssey Re (London) Ltd: Alexander Howden Holdings Ltd v Oic Run-Off Ltd , (unreported, English Court of Appeal, 13 March 2000), p 101 per Brooke LJ. See also Ford, Austin, and Ramsay, Ford’s Principles of Corporations Law (9th ed., Butterworths, Sydney, 1999), p 683; Davies, Gower’s Principles of Modern Company Law (6th ed, Sweet & Maxwell, London, 1997), p 229. This is not to say, however, that Parliament may not indicate that a particular provision is to apply vicariously: R v Australasian Films Ltd (1921) 29 CLR 195.
 A company has “no soul to be damned and no body to be kicked”: Edward, First Baron Thurlow, quoted in Coffee, “‘No Soul to Damn: No Body to Kick’: An Unscandalized Inquiry into the Problem of Corporate Punishment” (1981) 79 Michigan LR 386.
 See, for example, Khanna, “Corporate Criminal Liability: What Purpose Does it Serve?” (1996) 109 Harvard LR 1477; Sullivan, “The Attribution of Culpability to Limited Companies”  CLJ 515; Clarkson, “Kicking Corporate Bodies and Damning Their Souls” (1996) 59 MLR 557; Fisse and Braithwaite, “The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability” (1988) Sydney LR 468.
 For a useful description of this development see Odyssey Re (London) Ltd: Alexander Howden Holdings Ltd v Oic Run-Off Ltd, unreported, English Court of Appeal, 13 March 2000, pp 101-104 per Brooke LJ.
 The English Court of Appeal in Attorney-General’s Reference (No. 2)  3 WLR. 195, has recently confirmed that the identification doctrine requires that there be a single person who has committed all of the requisite elements of the offence. Increasingly, however, legislatures are creating specific “corporate” crimes under which it is permitted to aggregate the actions of a number of individuals to satisfy the elements. Thus, the Victorian draft Crimes (Corporate Manslaughter) Bill provides in ss 14A and 14B for “organisational” liability. This approach, which has been advocated for some time by academics (eg Fisse and Braithwaite, “The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability” (1988) 11 Sydney LR 468), recognises that through its permissive culture or lack of internal policies, it can meaningfully be said that the company itself is guilty of this offence.
  AC 153 at 170. See also DPP v Kent & Sussex Contractors Ltd  KB 146; R v ICR Haulage Ltd  KB 551 (CCA); Lloyd v David Syme & Co Ltd  AC 350 at 366 (PC).
 In Admiralty v Owners of the Steamship Divina (The Truculent)  P 1, the Third Sea Lord was held to be the embodiment of the Crown. See also Meridian Global Funds Management Asia Ltd v Securities Commission  2 AC 500.
 Civil wrongs are cognate in the sense that many of the conceptual difficulties in imposing criminal liability (such as finding the requisite intention) also arise in the context of liability for civil wrongs. However, as Brooke LJ noted in Odyssey Re (London) Ltd: Alexander Howden Holdings Ltd v Oic Run-Off Ltd, unreported, English Court of Appeal, 13 March 2000, p 101, there are also significant differences.
  AC 705. See also Admiralty v Owners of the Steamship Divina (The Truculent)  P 1; The Lady Gewndolen  P 294.
  2 All ER 685 (CA). See also  BCLC 735 at 760 per Millett J.
 Ibid, p 705.
 Compare, Cooke, “Corporate Identity” (1998) 16 Co & Sec LJ 160, who rejects the view that Viscount Haldane LC derived the concept from German law.
 See, Davies, Gower’s Principles of Modern Company Law (6th ed, Sweet & Maxwell, London, 1997), pp 229-233; Ford, Austin, and Ramsay, Ford’s Principles of Corporations Law (9th ed, Butterworths, Sydney, 1999), Ch 16. See also Reynolds, Bowstead and Reynolds on Agency (16th ed, Sweet & Maxwell, London, 1996), para 1-022: “it may be necessary to make a distinction between ‘mere’ agents of a company, and agents so centrally concerned with its operation, or with the relevant part of its operations, that their acts may be deemed to be not those of the agent but rather those of the company itself.”
 See, for a recent example, Watts, “The Company’s Alter Ego— An Impostor in Private Law” (2000) 116 LQR 525.
 Northside Developments Pty Ltd v Registrar-General (1990) 176 CLR 146, 156 and 160.
 Ford, Austin, and Ramsay, Ford’s Principles of Corporations Law (9th ed, Butterworths, Sydney, 1999), p 639.
 Ridley v Plymouth Stonehouse and Devenport, Grinding and Baking Co (1848) 2 Exch 711; Northern Counties Securities v Jackson & Steeple Ltd  1 WLR 1133; Halsbury’s Laws of England (4th ed, Butterworths, London, 1979) Vol 1(2), para 31.
 Davies, Gower’s Principles of Modern Company Law (6th ed, Sweet & Maxwell, London, 1997), p 232. See also Ferran, Company Law and Corporate Finance (Clarendon, Oxford, 1999), p 83.
 In New Zealand, s 128 of the Companies Act 1993 (NZ); in Canada, s 102 of the Business Corporations Act 1985 (Canada).
 New Zealand Law Commission, Company Law Reform and Restatement (NZLC R9, Wellington, 1989), para 161.
 Ziegel, Daniels, Johnston and MacIntosh, Cases and Materials on Partnership and Canadian Business Corporations (2nd ed, Carswell, Toronto, 1989), Vol 1, p 389. See also Welling, Corporate Law in Canada (2nd ed, Butterworths, Toronto, 1991), p 318.
 Ford, Austin and Ramsay, Ford’s Principles of Corporations Law (9th ed, Butterworths, Sydney, 1999), p 204.
  2 AC 500.
 Ibid, p 506.
 This was confirmed recently by Dyson J in McNicholas Construction Co Ltd v Customs and Excise Commissioners  STC 553.
 Odyssey Re (London) Ltd: Alexander Howden Holdings Ltd v Oic Run-Off Ltd , (unreported, English Court of Appeal, 13 March 2000); cf, Smorgan v FCT (1976) 13 ALR 481 at 487-488.
  2 AC 500 at 506.
 AWA Ltd v Daniels (Deloitte Haskins & Sells) (1992) 7 ACSR 759 at 832 -833 per Rogers J; Dairy Containers Ltd v NZI Bank Ltd  2 NZLR 30 at 79-80 per Thomas J.
 The relationship between the three categories of rules of attribution, and in particular between agency and the other rules of attribution is problematic. The view I expressed in “Corporate Knowledge: Identification or Attribution?” (1996) 59 MLR 737, may on further reflection not be sustainable.
 Grantham, “Corporate Knowledge: Identification or Attribution?” (1996) 59 MLR 737.
 Birds et al, Boyle and Birds’ Company Law (4th ed, Jordans, Bristol, 2000), p 34; Ferran, Company Law and Corporate Finance (Clarendon, Oxford, 1999), p 83.
 See also Reynolds, Bowstead and Reynolds on Agency (16th ed, Sweet & Maxwell, London, 1996), para 1-022.
  AC 22 (HL).
 Ford, Austin and Ramsay, Ford’s Principles of Corporations Law (9th ed, Butterworths, Sydney, 1999), p 204.
 Compare, Companies Act 1985 (UK), s 35A (1).
 The New Zealand Companies Act 1993, s128, provides: “The business and affairs of the company must be managed by, or under the direction or supervision, of the board of the company.”
 Worthington, “Corporate Governance: Remedying and Ratifying Directors’ Breaches” (2000) 116 LQR 638 at 644 -645; Ferran, “The Reform of the Law on Corporate Capacity and Directors’ and Officers’ Authority: Part 2” (1992) 13 Company Lawyer 177.
  2 AC 500 at 503 (Michael Beloff QC).
 Ibid, p 511.
 Grantham, “Illegal Transactions and the Powers of the Company Directors” (1999) 115 LQR 296 at 322.
 Moreover, as discussed below, those cases dealing with theft from the company by a director are consistent with the proposition that attribution is not appropriate in cases of fraud directed against the company.
  2 All ER 685 at 705.
 In Americano’s Ltd v State Insurance (1999) 6 NZBLC 102,892 at 102,908, Young J said that in deciding whether to attribute the actions of shareholders to the company the court must take into account of consequences of doing so, including the effect on the innocent participants in the company.
 But note that in R v McDonnell  1 QB 233 it was held that a director qua individual could conspire with himself qua company.
  VR 511 (CA).
 See also Nordik Industries Ltd v IRC  1 NZLR 194 (HC); R v McHugh (1989) 88 Cr App R 385 (CCA).
  AC 442.
 This approach has been followed by the English Court of Appeal in R v Rozeik  1 WLR 159.
  AC 442 at 496-497.
 Reynolds, Bowstead and Reynolds on Agency (16th ed, Sweet & Maxwell, 1996), p 635.
 See also Microsoft Corp v Auschina Polaris Pty Ltd (1996) ALR 111 (Fed Ct); King v Milpurrurru (1995) 136 ALR 327 (Fed Ct); Farrar, “The Personal Liability of Directors for Corporate Torts” (1997) 9 Bond LR 102; ADGA Systems International Ltd v Valcom Ltd (1999) 168 DLR (4th) 351 (Ont CA); Scotia McLeod Inc v Peoples Jewellers Ltd (1995) 129 DLR (4th) 711 (Ont CA); Feasby, “Corporate Agents’ Liability in Tort: A Comment on ADGA Systems International Ltd v Volvo Ltd” (1999) 32 Can Bar Rev 291.
  2 NZLR 517.
 Cooke P reached the same conclusion but on the basis of the principle of limited liability. As Lord Steyn pointed out in Williams v Natural Life Health Foods Ltd  1 WLR 830, 834-835, limited liability is irrelevant.
  1 Lloyd’s Rep 218 (CA).
 Ibid, p 230.
  1 WLR 830.
 2000] 1 Lloyd’s Rep 218 at 230. This was cited with approval by Rimer J in MCA Records Inc v Charley Records Ltd , Chancery, 22 March 2000.
 See n 77 above.
 Farrar, “The Personal Liability of Directors for Corporate Torts” (1997) 9 Bond LR 102, says: “Directors are often treated as the mind and will of the company. If one follows the logic of this through, it entails that they are not personally liable since their act is the corporate act.”
 Meridian Global Funds Management Asia Ltd v Securities Commission  2 AC 500 at 506 -507 (PC).
 Hart, “Definition and Theory in Jurisprudence” (1954) 70 LQR 37 at 53.
 Watts, “The Company’s Alter Ego — An Impostor in Private Law” (2000) 116 LQR 525, suggests that we ought not to treat incorporated and unincorporated businesses differently. While the law should be applied consistently to all legal subjects, the consequences for the individual of the application of the law must differ according to whether the individual conducts the enterprise in an unincorporated or incorporated form. If the consequences for the individual of trading in an incorporated form are not different from those when trading in an unincorporated form, there would not seem to be much point in the use of corporate form.
 There is, therefore, in my view, a hierarchy of rules, at least as between the core doctrines of company law and the general principles of the common law. This hierarchy is a necessary consequence once it is accepted, first, that the company is not a “thing” and that, as such, the law remains concerned with the actions of natural persons; and secondly, that the central function of the core doctrines of company law is to modify the way the general principles of the common law apply to these natural persons.
 It may be, however, that different consequences will attach to different torts. Thus, for example, the courts are less likely to attribute intentional torts to the company: Trevor Ivory Ltd v Anderson  2 NZLR 517 at 524 per Cooke P; but cf Standard Chartered Bank v Pakistan Shipping Corp (No 2)  1 Lloyd’s Rep 218.
 As Thomas J did in Dairy Containers Ltd v NZI Bank Ltd  2 NZLR 30, in respect of an attempt to hold a parent company vicariously liable for the acts of its employee undertaken while acting as a director of a subsidiary company.
 Goddard, “Corporate Personality — Limited Recourse and its Limits” in Grantham and Rickett (eds), Corporate Personality in the 20th Century (Hart, Oxford, 1998), Ch 2; Easterbrook and Fischel, The Economic Structure of Corporate Law (Harvard University Press, Cambridge, 1991); Hansmann and Kraakman, “The Essential Role of Organizational Law”, New York University, Center for Law and Business, Working Paper No. CLB-00-006.
 There is a substantial body of literature which questions the appropriateness of limited liability in respect of tortious liability: Thompson, “Unpacking Limited Liability: Direct and Vicarious Liability of Corporate Participants for Torts of the Enterprise” (1994) 47 Vanderbilt LR 1; Alexander, “Unlimited Shareholder Liability Through a Procedural Lens” (1992) 106 Harvard LR 387; Hansmann and Kraakman, “Toward Unlimited Shareholder Liability for Corporate Torts” (1991) 100 Yale LJ 1879; Lebron, “Limited Liability, Tort Victims, and Creditors” (1991) 91 Columbia LR 1565.
 The use of the corporate form, and the non-recourse basis upon which the individual thus trades, does bring with it a degree of moral hazard. There is an incentive, especially where the company is on the verge of insolvency, to trade on in the hope of rescuing the company. If the attempt fails, it is not the funds of the shareholders or directors that are lost: Grantham, “The Judicial Extension of Directors’ Duties to Creditors”  JBL 1 at 3.
 One of the major tasks of the law is to legitimate the wealth held by companies: Stokes, “Company Law and Legal Theory” in Twining (ed), Legal Theory and Common Law (Blackwell, Oxford, 1986), pp 156-157; Parkinson, Corporate Power and Responsibility: Issues in the Theory of Company Law (Clarendon, Oxford, 1993), pp 33-40.
 Bierce, The Devil’s Dictionary (Dover, New York, 1961), defined the corporation as: “An ingenious device for obtaining profit without individual responsibility”. Although intended to be pejorative, this is a remarkably accurate description.
 Gower, Principles of Modern Company Law, (Stevens, London, 1954), Preface.
 Compare, Cheffins, “Using Theory to Study Law: A Company Perspective”  CLJ 197.