''Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd''

915 Year 915 ( CMXV) was a common year starting on Sunday (link will display the full calendar) of the Julian calendar. Events By place Europe * Summer – Battle of Garigliano: The Christian League, personally led by Pope John X, lays s ...

AC 705 is a famous decision by the

House of Lords The House of Lords, also known as the House of Peers, is the upper house of the Parliament of the United Kingdom. Membership is by appointment, heredity or official function. Like the House of Commons, it meets in the Palace of Westminst ...

on the ability to impose liability upon a

corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...

. The decision expands upon the earlier decision in '' Salomon v Salomon & Co.'' 897AC 22 and first introduced the "

alter ego An alter ego (Latin for "other I", "doppelgänger") means an alternate self, which is believed to be distinct from a person's normal or true original personality. Finding one's alter ego will require finding one's other self, one with a different ...

" theory of corporate liability.

Facts

A ship owned by Lennard's Carrying Co was transporting some goods on a voyage from

Novorossiysk Novorossiysk ( rus, Новоросси́йск, p=nəvərɐˈsʲijsk; ady, ЦIэмэз, translit=Chəməz, p=t͡sʼɜmɜz) is a city in Krasnodar Krai, Russia. It is one of the largest ports on the Black Sea. It is one of the few cities hono ...

to the

Asiatic Petroleum Company Asiatic Petroleum Company (APC) 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 ...

, a joint venture of the Shell and Royal Dutch oil companies. The ship sank and the cargo was lost. The judge found that the director, Mr Lennard, did know or should have known about defects in the ship, which led its boiler to catch fire, and ultimately sink the ship. There was an exemption from liability in section 502 of the Merchant Shipping Act 1894, stating that a ship owner would not be liable for losses if an event happened without 'actual fault or privity'. Asiatic Petroleum Co Ltd sued Mr Lennard's company for

negligence Negligence (Lat. ''negligentia'') is a failure to exercise appropriate and/or ethical ruled care expected to be exercised amongst specified circumstances. The area of tort law known as ''negligence'' involves harm caused by failing to act as ...

under the Act. At issue was whether the guilty acts of a director would be imposed upon the corporation. Lennard's Carrying Co Ltd argued that it was not liable and could be exempt under section 502.

Judgment

The House of Lords held that liability could be imposed on a corporation for the acts of the directors because there is a rebuttable presumption the directors are the controlling minds of the company. Here Mr Lennard did not rebut the presumption.

Viscount Haldane A viscount ( , for male) or viscountess (, for female) is a title used in certain European countries for a noble of varying status. In many countries a viscount, and its historical equivalents, was a non-hereditary, administrative or judicial ...

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 liability Vicarious liability is a form of a 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 re ...

, but that applied only to

employee Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any ot ...

s of the company, which excluded 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.

References

External links

Full case text
{{Shell oil 1915 in case law House of Lords cases United Kingdom company case law 1915 in British law Shell plc