Imputation (law)
Encyclopedia
In law
, the principle of imputation or attribution underpins the concept that ignorantia juris non excusat
—ignorance
of the law does not excuse. All laws are published and available for study in all developed states
. The content of the law is imputed to all persons who are within the jurisdiction
, no matter how transiently.
This fiction tries to negate the unfairness of someone avoiding liability for an act or omission by simply denying knowledge of the law. The principle also arises in specific areas of law, such as criminal law
and commercial law
, to describe the need for the law
to hold a person liable, even when they may not have known the particular circumstances that caused another person to sustain loss or damage.
, a person must have both committed a prohibited act (the actus reus
, which must be willed: see automatism
) and have had an appropriate mental element (the mens rea
) at the relevant time (see the technical requirement for concurrence
). A key component of the mens rea is any knowledge
that the alleged criminal might have had. For these purposes, knowledge can be both actual and constructive—i.e., the court
can impute knowledge where appropriate.
There is no problem when the alleged criminal actually intended to cause the particular harm. Things are more difficult when the defendant
denies actual knowledge. When evaluating behavior, the legal process assumes the defendant was aware of their immediate physical surroundings and understood practical cause and effect. A mens rea is imputed when a person with reasonable foresight in the same circumstances would have foreseen that the actus reus would occur. This prevents a person from raising a defence based on willful blindness (note that in the United States
, wilful blindness
has a slightly different meaning).
A problem arises when the defendant is a corporation
. By its nature, a fictitious person can only act through the human agency of the natural person
s that it employs. Equally, it has no mind to constitute the mens rea. Hence, the notion of vicarious liability
for companies and other business entities exclusively depends on the ability to impute knowledge.
The test is one of identification. If the natural person who acts can be "identified with the mind of the company" when performing the actions forming the actus reus, all the relevant mental elements will be imputed to the company. This test, sometimes termed the alter ego test, is objective and cannot be distracted by the job title or description formally held by the human agent. This prevents evasion of liability by the simple expedient of naming the real director of affairs as the janitor.
However, not all actions trigger this transference. When acting, the human agent identified as the mind must be promoting the company's interests in some practical way. If they are engaged in an entirely personal activity—e.g., attacking a fellow employee out of anger or stealing from the company—the courts do not impute the relevant mens rea to the company.
In the United States
, the courts use a three-pronged test to determine whether a corporation is vicariously liable for the acts of its employees:
situations, Agents must be allowed some degree of discretion in the conduct of routine transactions. Hence, there is no need to seek specific authorisation for every deal or detail within a deal. But, when the Agent acts with actual or apparent authority, all the Agent's knowledge will be imputed to the Principal
. If Principals were allowed to hide behind their agents' ignorance, mistakes, or failures to communicate, they could achieve better results than if they acted personally. For example, if the particular deal turned out well, the Principal could adopt the transaction—if it turned out badly, the Principal could disavow it. If not for imputation, there would be a perverse incentive
to conduct business through Agents rather than personally. Consequently, the Principal cannot exploit ignorance to advantage by instructing the Agent to withhold key information, or by appointing an Agent known to be secretive.
This rule in favour of imputation relates to the generality of the duties an Agent owes to a Principal, in particular the Agent's duty to communicate material facts to the Principal. Since the purpose of the law is to offer protection to Third Parties who act in good faith
, it is reasonable to allow them to believe that, in most cases, the Agents have fulfilled this duty. After all, the Principal selects the Agents and has the power to control their actions both through express instructions and incentives intended to influence their behaviour which will include laying down routines for how Agents should handle information, and the extent to which Agents will be rewarded for transmitting information of commercial value. The result is a form of strict liability
in which the legal consequences of an Agent's acts or omissions are attributed to a Principal even when the Principal was without fault in appointing or supervising the Agent.
, a corporation
can only act through its employees and agents so it is necessary to decide in which circumstances the law of agency
or vicarious liability will apply to hold the corporation liable in tort for the fraud
s of its directors or senior officers. If liability for the particular tort requires a state of mind, then to be liable, the director or senior officer must have that state of mind and it must be attributed to the company.
In Meridian Global Funds Management Asia Limited v Securities Commission [1995] 2 AC 500, two employees of the company, acting within the scope of their authority but unknown to the directors, used company funds to acquire some shares. The question was whether the company knew, or ought to have known that it had acquired those shares. The Privy Council
held that it did. Whether by virtue of their actual or ostensible authority as agents acting within their authority (see Lloyd v Grace, Smith & Co. [1912] AC 716) or as employees acting in the course of their employment (see Armagas Limited v Mundogas S.A. [1986] 1 AC 717), their acts and omissions and their knowledge could be attributed to the company, and this could give rise to liability as joint tortfeasors where the directors have assumed responsibility on their own behalf and not just on behalf of the company.
So, if a director or officer is expressly authorised represent a particular class on behalf of the company, and makes a fraudulent representation that causes loss to a Third Party, the company is liable, even though the representation was an improper way of doing what he was authorised to do. The extent of authority is a question fact and is significantly more than the fact of an employment that gave the employee the opportunity to carry out the fraud.
In Panorama Developments (Guildford) Limited v Fidelis Furnishing Fabrics Limited [1971] 2 QB 711, a company secretary fraudulently hired cars for his own use without the managing director knowing. A company secretary routinely enters into contracts in the company's name and has administrative responsibilities that would give apparent authority to hire cars. Hence, the company was liable.
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, the principle of imputation or attribution underpins the concept that ignorantia juris non excusat
Ignorantia juris non excusat
Ignorantia juris non excusat or ignorantia legis neminem excusat is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely because he or she was unaware of its content...
—ignorance
Ignorance
Ignorance is a state of being uninformed . The word ignorant is an adjective describing a person in the state of being unaware and is often used as an insult...
of the law does not excuse. All laws are published and available for study in all developed states
State (polity)
A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
. The content of the law is imputed to all persons who are within the jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...
, no matter how transiently.
This fiction tries to negate the unfairness of someone avoiding liability for an act or omission by simply denying knowledge of the law. The principle also arises in specific areas of law, such as criminal law
Criminal law
Criminal law, is the body of law that relates to crime. It might be defined as the body of rules that defines conduct that is not allowed because it is held to threaten, harm or endanger the safety and welfare of people, and that sets out the punishment to be imposed on people who do not obey...
and commercial law
Commercial law
Commercial law is the body of law that governs business and commercial transactions...
, to describe the need for the law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
to hold a person liable, even when they may not have known the particular circumstances that caused another person to sustain loss or damage.
Corporate liability
To incur liability for a crimeCrime
Crime is the breach of rules or laws for which some governing authority can ultimately prescribe a conviction...
, a person must have both committed a prohibited act (the actus reus
Actus reus
Actus reus, sometimes called the external element or the objective element of a crime, is the Latin term for the "guilty act" which, when proved beyond a reasonable doubt in combination with the mens rea, "guilty mind", produces criminal liability in the common law-based criminal law jurisdictions...
, which must be willed: see automatism
Automatism (law)
-Definition:Automatism is a rarely used criminal defence. It is one of the mental condition defences that relate to the mental state of the defendant. Automatism can be seen variously as lack of voluntariness, lack of culpability or excuse...
) and have had an appropriate mental element (the mens rea
Mens rea
Mens rea is Latin for "guilty mind". In criminal law, it is viewed as one of the necessary elements of a crime. The standard common law test of criminal liability is usually expressed in the Latin phrase, actus non facit reum nisi mens sit rea, which means "the act does not make a person guilty...
) at the relevant time (see the technical requirement for concurrence
Concurrence
In Western jurisprudence, concurrence is the apparent need to prove the simultaneous occurrence of both actus reus and mens rea , to constitute a crime; except in crimes of strict liability...
). A key component of the mens rea is any knowledge
Knowledge
Knowledge is a familiarity with someone or something unknown, which can include information, facts, descriptions, or skills acquired through experience or education. It can refer to the theoretical or practical understanding of a subject...
that the alleged criminal might have had. For these purposes, knowledge can be both actual and constructive—i.e., the court
Court
A court is a form of tribunal, often a governmental institution, with the authority to adjudicate legal disputes between parties and carry out the administration of justice in civil, criminal, and administrative matters in accordance with the rule of law...
can impute knowledge where appropriate.
There is no problem when the alleged criminal actually intended to cause the particular harm. Things are more difficult when the defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
denies actual knowledge. When evaluating behavior, the legal process assumes the defendant was aware of their immediate physical surroundings and understood practical cause and effect. A mens rea is imputed when a person with reasonable foresight in the same circumstances would have foreseen that the actus reus would occur. This prevents a person from raising a defence based on willful blindness (note that in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, wilful blindness
Willful blindness
Willful blindness is a term used in law to when an individual seeks to avoid civil or criminal liability for a wrongful act by intentionally putting himself in a position where he will be unaware of facts which would render him liable.For example, in a number of cases,...
has a slightly different meaning).
A problem arises when the defendant is a corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
. By its nature, a fictitious person can only act through the human agency of the natural person
Natural person
Variously, in jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner...
s that it employs. Equally, it has no mind to constitute the mens rea. Hence, the notion of vicarious liability
Vicarious 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...
for companies and other business entities exclusively depends on the ability to impute knowledge.
The test is one of identification. If the natural person who acts can be "identified with the mind of the company" when performing the actions forming the actus reus, all the relevant mental elements will be imputed to the company. This test, sometimes termed the alter ego test, is objective and cannot be distracted by the job title or description formally held by the human agent. This prevents evasion of liability by the simple expedient of naming the real director of affairs as the janitor.
However, not all actions trigger this transference. When acting, the human agent identified as the mind must be promoting the company's interests in some practical way. If they are engaged in an entirely personal activity—e.g., attacking a fellow employee out of anger or stealing from the company—the courts do not impute the relevant mens rea to the company.
In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, the courts use a three-pronged test to determine whether a corporation is vicariously liable for the acts of its employees:
- The employee must have acted within the scope of employment.
- The employee must have acted, at least partly, to benefit the corporation.
- It must be reasonable to impute the employee's acts and intentions to the corporation.
Joint principals
A standard example of imputation arises through the principle of joint endeavour. Where two or more people embark on a joint exercise, they are equally liable for everything that happens during the execution of their plan. For this purpose, joint principals are treated as knowing everything that happens, whether they were present or not. The requisite mens rea formed by one is imputed to the others to enable a conviction. For example, suppose that a gang conspire to rob a bank. One remains outside in the car to ensure a quick escape. If the others kill a guard inside the bank, the driver is jointly liable for the homicide.Agency
In the majority of agencyAgency (law)
The law of agency is an area of commercial law dealing with a contractual or quasi-contractual, or non-contractual set of relationships when a person, called the agent, is authorized to act on behalf of another to create a legal relationship with a third party...
situations, Agents must be allowed some degree of discretion in the conduct of routine transactions. Hence, there is no need to seek specific authorisation for every deal or detail within a deal. But, when the Agent acts with actual or apparent authority, all the Agent's knowledge will be imputed to the Principal
Principal (law)
In commercial law, a principal is a person, legal or natural, who authorizes an agent to act to create one or more legal relationships with a third party...
. If Principals were allowed to hide behind their agents' ignorance, mistakes, or failures to communicate, they could achieve better results than if they acted personally. For example, if the particular deal turned out well, the Principal could adopt the transaction—if it turned out badly, the Principal could disavow it. If not for imputation, there would be a perverse incentive
Perverse incentive
A perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers. Perverse incentives are a type of unintended consequences.- Examples :...
to conduct business through Agents rather than personally. Consequently, the Principal cannot exploit ignorance to advantage by instructing the Agent to withhold key information, or by appointing an Agent known to be secretive.
This rule in favour of imputation relates to the generality of the duties an Agent owes to a Principal, in particular the Agent's duty to communicate material facts to the Principal. Since the purpose of the law is to offer protection to Third Parties who act in good faith
Good faith
In philosophy, the concept of Good faith—Latin bona fides “good faith”, bona fide “in good faith”—denotes sincere, honest intention or belief, regardless of the outcome of an action; the opposed concepts are bad faith, mala fides and perfidy...
, it is reasonable to allow them to believe that, in most cases, the Agents have fulfilled this duty. After all, the Principal selects the Agents and has the power to control their actions both through express instructions and incentives intended to influence their behaviour which will include laying down routines for how Agents should handle information, and the extent to which Agents will be rewarded for transmitting information of commercial value. The result is a form of strict liability
Strict liability
In law, strict liability is a standard for liability which may exist in either a criminal or civil context. A rule specifying strict liability makes a person legally responsible for the damage and loss caused by his or her acts and omissions regardless of culpability...
in which the legal consequences of an Agent's acts or omissions are attributed to a Principal even when the Principal was without fault in appointing or supervising the Agent.
The liability of corporations in tort
In English lawEnglish law
English law is the legal system of England and Wales, and is the basis of common law legal systems used in most Commonwealth countries and the United States except Louisiana...
, a corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
can only act through its employees and agents so it is necessary to decide in which circumstances the law of agency
Agency (law)
The law of agency is an area of commercial law dealing with a contractual or quasi-contractual, or non-contractual set of relationships when a person, called the agent, is authorized to act on behalf of another to create a legal relationship with a third party...
or vicarious liability will apply to hold the corporation liable in tort for the fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
s of its directors or senior officers. If liability for the particular tort requires a state of mind, then to be liable, the director or senior officer must have that state of mind and it must be attributed to the company.
In Meridian Global Funds Management Asia Limited v Securities Commission [1995] 2 AC 500, two employees of the company, acting within the scope of their authority but unknown to the directors, used company funds to acquire some shares. The question was whether the company knew, or ought to have known that it had acquired those shares. The Privy Council
Privy council
A privy council is a body that advises the head of state of a nation, typically, but not always, in the context of a monarchic government. The word "privy" means "private" or "secret"; thus, a privy council was originally a committee of the monarch's closest advisors to give confidential advice on...
held that it did. Whether by virtue of their actual or ostensible authority as agents acting within their authority (see Lloyd v Grace, Smith & Co. [1912] AC 716) or as employees acting in the course of their employment (see Armagas Limited v Mundogas S.A. [1986] 1 AC 717), their acts and omissions and their knowledge could be attributed to the company, and this could give rise to liability as joint tortfeasors where the directors have assumed responsibility on their own behalf and not just on behalf of the company.
So, if a director or officer is expressly authorised represent a particular class on behalf of the company, and makes a fraudulent representation that causes loss to a Third Party, the company is liable, even though the representation was an improper way of doing what he was authorised to do. The extent of authority is a question fact and is significantly more than the fact of an employment that gave the employee the opportunity to carry out the fraud.
In Panorama Developments (Guildford) Limited v Fidelis Furnishing Fabrics Limited [1971] 2 QB 711, a company secretary fraudulently hired cars for his own use without the managing director knowing. A company secretary routinely enters into contracts in the company's name and has administrative responsibilities that would give apparent authority to hire cars. Hence, the company was liable.