Legislation and Case Laws Governing Corporate Criminal Liability in Nigeria

INTRODUCTION

In the past, it was inconceivable that a corporation could be held liable. The
argument generally advanced was that a corporation as an artificial person, has no
physical existence and could therefore not be subjected to the prescribed penalties
attached to offences. Alongside this thinking, there were also those who felt that a
corporation has all the attributes of a natural person and should therefore be capable of
receiving all the punishments attached to all offences including physical punishment.
At present, under the Common law, unlike in the past, corporations are now
criminally liable subject to certain limitations such as assault, manslaughter, murder, and
rape. The present position which makes it possible to hold a corporation criminally liable is a
departure from the past, when corporations were only held criminally liable for acts
of non-feasance under the Common Law although this was later extended to mis-
feasance. Movement from the Common Law rule began with strict liability welfare
offences. In this respect, no mental state was required and the penalty which was
practicable then was a fine which a corporation could easily be made to pay.
Presently, in offences that require the proof of mens rea, corporations are easily
made liable by taking notice of the state of the mind of e.g. the directors who are the alter
ego and directing mind of the corporation. As according to Lord Denning in the case of
Bolton Engineering Co. LTD v. Graham & Sons LTD (1957), it was stated that a corporation
maybe likened to a human body with a brain nerve center which controls what it does and
hands which holds the tools. This is also called an attribution theory.
In other instances, corporations have been vicariously and criminally held liable
for the acts of such junior employees as drivers, clerks or cashiers. This is done through
either the law of agency or labour law which makes the principal liable for the act of its
agent and the master liable for the act of its servant.
The Nigeria Legal system which is fashioned along the same system as the
English legal system, accommodates the position at Common law to the effect that
corporations could be criminally held liable but not for all offences.
Moreover, new insights have been gained largely through the onslaught of legislative
activity, something that has become necessary as legislators try to regulate
very closely socio-economic activities of corporations. While corporate veils were lifted or
pierced in the past to determine liability in civil matters, it is now clear that such conduct as
pollution, tax evasion, production of harmful drugs and offences against other regulatory
laws attract corporate criminal liability. The emerging scenario is one in which the
legislature seeks to mulct (I.e a pecuniary fine) the offending corporation, and at the same
time disposed to subjecting such corporation to more severe punishment than fine. In
recent legislative history in Nigeria, the Failed Bank (Recovery of Debts) and Financial
Malpractices in Bank Act is an example of such law. The law imposes criminal liability on
both the
individual corporate officer and the corporate body.
This article therefore seek to discuss Nigerian laws in relation to the criminal
liability of corporations by focusing its attention on what constitute corporate crimes and
the extent to which corporations could be made criminally liable under Nigerian laws.

CORPORATE CRIMES

Corporate crimes are defined as, illegal acts, omissions or commissions by

corporate organisations themselves as, social or legal entities or by officials or
employees of the corporations acting in accordance with the operative goals or standard,
operating procedures and cultural norms of the organisation, intended to benefit the
corporations themselves.
The review of both the criminal law and corporation law, clearly shows that there is a need
for a mediating factor, if indeed criminal liability is to be imposed on corporations. A
business corporation for that matter or any other corporation stand quite clearly as an
identifiable body in the eyes of the law. Normally speaking since criminal liability is imposed
on corporations as a specie of strict liability, it raises question about the desirability of the
use of the criminal sanctions in securing compliance with certain goals. In the case of TESCO
Super Market v Natrass, Lord Reid put forward one of the conundrums that the law faces in
this area. His lordship stated; It is sometimes argued as it was argued in the present case
that making an employer criminally responsible, even when he had done all that he could to
prevent an offence, affords some additional protection to the public because this will induce
him to do more. But if he has done all he can how can he do more. The punishment can be
mitigated for corporate crime if steps were dully taken to prevent any corporate crime.
Lord Reid’s statement holds the seeds of argument in this area of the law.
Professor Sir Gordon Borrie has drawn attention to this as follows:
What seems to worry people about making employers liable vicariously under such
legislation as the Trade Descriptions Act is that the Act imposes criminal sanction and that
there is something basically unjust about making anyone responsible in criminal law for the
sins of their employees. Yet it has long been accepted that in civil law, the employer is
responsible for the torts of his employees
and more significant an employer – trader is strictly liable for the breach of any of the
obligations implied by the Sale of Goods Act even when he has done all he can do to prevent
such breach and the cause is really some act or default of an employee or of some third
party, such as the manufacturer. People do not seem to object to strict liability because
strict liability helps to ensure high standard and responsibility in trading.
Quite clearly, support for strict liability in civil law is well established and articulated.
Nowadays, there is a growing awareness of the need to introduce strict liability in criminal
law. There is a greater reliance and preference to use the criminal law and the stricter
standards embodied therein to safeguard the integrity of trade related agreements. This is
because such preference would enable both private individuals and public officials to take
actions in respect of any infringement.
In support of imposition of strict criminal liability on corporations, the English Law
Commission in one of its Working Papers on the criminal liability of corporations, has agreed
with the principle that corporate bodies should be liable at least in the regulatory field.
The Report reads as follows:
‘The main objective of criminal law is prevention of crime and it is argued that the publicity
attendant upon the prosecution of the company, has a strong deterrent effect, the
prosecution of a company for the omission of an offence symbolises the failure of control by
the company, and it is socially desirable to have the company’s name before the public.
The Law Commission has proposed a special crime of corporate Manslaughter.
A corporation is guilty of corporate killing if:
1. A management failure by the corporation is the cause or one of the causes of a
person’s death; and
2. That failure constitutes conduct falling far below what can reasonably be expected of
the corporation in the circumstances.
In the jurisdiction of the United States of America, structural foundations of corporate
liability are developed differently. A vicarious form of liability applies in fault based crimes as
well as in strict liability cases so that, the company will be liable for any of the Federal
offences its employees commit;
. The American approach is seen as too wide for conventional offences while the English
direct liability scheme is seen as too narrow.

LAWS ON CRIMINAL LIABILITY OF CORPORATIONS IN NIGERIA

In addition to the Common Law, crime laws and the codes are enactments and statutes by
the respective Federal and State legislatures. Examples of such statutes are:
 1. The Dangerous Drug Act,
2. The Consumer Protection Council Act,
3. The Environmental Sanitation Edict of Edo State and;
4. The Failed Banks (Recovery of Debt) and Financial Malpractice in Banks Act.
Today, in Nigeria, there are three main sources of criminal law. The three
sources are:
1. The Common Law of crime,
2. The respective codes, and
3. Statutes such as Laws, and Acts enacted by various state governments and the
Federal Government.
These laws have far reaching effects on the criminal liability of corporate bodies in
Nigeria.
When the Common Law was being developed, no one ever thought that a
corporation could be criminally held liable. This was because the idea of corporation was
relatively new. As time went on and the Common Law was going through some
changes, the need for the imposition of some forms of corporate criminal liability was
gradually being felt. The model of civil liability of corporation at Common Law through the
doctrine of respondeat superior - the doctrine of “respondeat superior” makes a master
liable for the action of his servant - It was very easy to adopt this doctrine under the civil law
to make corporation liable since a corporation can only act through its servants. It had
exerted a considerable pull on the criminal law, since at Common Law, criminal liability
rested on the twin pillars of mens rea and actus reus. Any thought of establishing corporate
criminal liability had to confront the issues of mens rea, and actus reus since a corporation
has no existence of its own let alone a mind of its own. Then there was the issue of
punishment, it could not be punished with
such sanction as imprisonment, which could be imposed at assizes. This led to the
conclusion that there is no criminal offence that a corporation could commit since it had no
physical capacity, and its existence depends entirely on legal fiat. It was therefore
impossible to subject a corporation to some punishments which hitherto were only capable
of being committed by human beings. It could therefore be maintained that a corporation
has no capacity to do anything illegal. If this were assumed to be true, then the corporation
would always be innocent and only the principal officers of the corporations could be
punished for wrong doing. As time went on, under the Common Law of Crime, particularly in
England, it became possible to hold a corporation criminally liable.
Corporate criminal liability became very pronounced with the introduction of strict
Liability offences. These are offences for which the mental state is not required for the
commission of such offences and the penalty (a fine) was such that it could be imposed
upon a corporation. Initially, corporations were prosecuted for acts of non-feasance. The
case for corporate criminal liability was, strongest in such instances, as public duties
imposed upon a corporation by the law. For example, keeping a railroad or bridge in a state
of repairs. Such duties are just as applicable to corporations as individuals, and for such
omissions, no individual corporate employee could be said to be in breach of these duties.
This reasoning led some courts to rule that corporations could not be convicted for mis-
feasance.
However, courts have abandoned the non-feasance mis-feasance distinction on
two grounds. First, the distinction was viewed to be more of a matter of form than of
substance, in that the same offence often could be just as easily characterised as a failure to
do an act like failure to construct a safe bridge as an act, for example, construction of a
bridge in an unsafe manner. It seemed appropriate therefore to punish for mis-feasance
when the mischief aimed at by the penal statute could as easily be produced by a
corporation. It was in such cases that the earliest development of corporate criminal liability
took place. In the case of R v Birmingham & Gloucester Railway Company Ltd, a corporation
was convicted for failing to fulfil a statutory duty imposed upon it. Some years later in R v
North of England Railway Company Ltd, the court held that the distinction between non-
feasance and mis-feasance was unnecessary.
The position in Great Britain today is that, corporations could be held criminally liable under
strict liability offences. However, there are some exceptions in such instances as murder,
rape, bigamy and so on. In the above instances corporations, are assumed to be incapable
of committing the crimes stated above and therefore may also not be capable of receiving
the attached penalties. For example, the penalty for murder is death sentence, since a
corporation has no physical human existence, it might be difficult to subject it to such
punishment as death sentence or imprisonment.
The trend in Nigerian law which is a reflection of the development in England is towards
holding an employer (company) criminally liable for the acts of its employees even though
the company did not know it had taken place.
Crimes created by statute as stated earlier on are usually strict in nature. They do not
require the proof of mens rea in form of intention, recklessness, knowledge or even
negligence. All that is needed is a proof of the actus reus. In great many cases, parliament’s
intention were interpreted by courts to impose strict liability and have in several cases
convicted defendants who lacked the necessary men rea. In the case of Sharras v D Rutzen,
Wright J. Stated that;
there is a presumption that mens rea or evil intention or knowledge of wrongfulness of the
act is an essential ingredient in every offence, but the presumption is liable to be displaced
either by the words of the statute creating the offences or by the subject matter.
In Parker v Alder, the defendant delivered a consignment of milk to a Railway company for
onward transportation. The milk was in a pure and unadulterated condition when it was
delivered to the carriers and the adulteration had been carried out without the knowledge
or consent during transit. Lord Russel, C J. in holding the defendants
liable, stated;
‘Now assuming that the respondent was entirely innocent morally, and had no means of
protecting himself from the adulteration of the milk in the course of the transit, had he
committed an offence against the Act? I think that he has’. When the scope and objects of
these Acts are considered, it will appear that, if he were to be relieved from responsibility a
wide door would be opened for evading the beneficial provisions of this legislation.
However, where the offence is such that proof of mens rea is necessary, how then would a
corporation’s state of mind be determined so as to make the corporation criminally liable?
The proof of a corporation’s state of mind becomes more difficult since a corporation does
not have a physical existence like a natural person. Again, where it is possible to ascribe the
state of mind of any of its employee to a corporation, another problem also faced is, who
among the employees of a corporation is to be regarded as acting on behalf of the
corporation so, as to make such employee’s act, the act of the corporation. This is because,
some of the employees, are so low in rank, that their acts in relations to their schedule of
duty can never bind the corporation. These problems have to some extent been partially
resolved by courts both in England and Nigeria. In Mousell Brothers v London and West
Railway Company, the court held that the defendant company was liable for an offence of
giving false account with intent to avoid payment of tolls on the ground that this was an
offence of vicarious responsibility.
The liability was not based on the principle of imputation of mens rea. Here the offence was
actually committed by a junior officer and the position is that a master is vicariously liable
for the act of his servant.
In Nigeria, corporate criminal liability is a recent development and as a result, cases are
quite few. However, in Ogbuagu v Police, the appellant was the proprietor and publisher of
a Newspaper in Jos, Northern Nigeria. When leaving Jos, he instructed the man he left in
charge not to publish the paper while he was away. The man, however, published the paper,
which contained a seditious libel in one issue. In allowing the appeal against conviction by
the lower court, the Appeal Court stated that; When the proprietor tells the servant not to
publish the paper, I cannot see why the proprietor should be answerable for an issue of a
paper published by a disobedient servant.
Here the court refused to impute the state of mind of the employee to the proprietor of the
newspaper.
However, in R.v African Press, a case with nearly the same facts as Ogbuagu, the article was
written by and under the responsibility of the editor and the court held both the defendant
company and the editor jointly liable since the article was written by and under the
responsibility of the editor.
In R v I C R Haulage Company Ltd, Stable J.C. emphasised this point when he said that,
whether in any particular case there is evidence to show to a jury that the criminal act of an
agent including his state of mind, intention and knowledge or belief is the act of the
company… must depend on the nature of the charge, the relative position of the officer or
agent and the relevant facts and circumstances of the case. In this particular case, a
company was criminally held liable for conspiracy to defraud through its managing director.
In Inspector General of Police v Mandilas and Karaberis and Anor, the court jointly held
liable the company and its manager for the offence of stealing. In his judgment, Thomas J.
relied on the general principle that a corporation acts through its agents and that once such
agents act within the scope of their employment, the principal, which is the corporation
would be held vicariously and criminally liable.
One aspect, that baffled the writer was that (the company) employer of the second accused
was given a fine of four hundred thousand naira only, while the second accused (employee)
of the first accused defendant company was sentenced to one year imprisonment with hard
labour.
The Penal Code of the American Law Institute makes it clear that a corporation should only
be punished or held criminally liable for conduct authorised, performed, or recklessly
tolerated by its Board of Directors or by a high managerial agent acting in behalf of the
corporation within the scope of his office or employment. “A high managerial agent” is
defined as “an officer of a corporation, or an agent, having duties of such responsibility that
his conduct may fairly be assumed to represent the policy of the corporation”. Towards this
end, the court has held that a company will be liable for the acts of its controlling officers
even where the officer acted to defraud the company itself.

CRIMINAL LIABILITY OF CORPORATIONS UNDER STATUTE

Statutory offences are usually strict. Strict liability is the term used to describe the
imposition of criminal liability without proof of fault on the part of the defendant. It has
been said that to punish a defendant for the commission of a strict liability offence is, per se
unjust. The argument could be faulted. There is need for strict liability offences particularly
with respect to welfare offences and more so when corporations are now involved in profit
making activities. In Sweet v Parsely, the court held that; imposition of strict liability maybe
more justifiable where the defendant (company) is engaging in a profit making activity
which creates hazards for the public. This should be the position, particularly where it
becomes difficult to identify a particular officer whose acts could be regarded as the acts of
the Company.
The leading authority on the criminal liability of corporations is the case of Griffith v
Studebaker. Here the court held that an employer can be vicariously liable in respect of
strict liability offences committed by an employee during the course of his employment
provided the wording of the statute is appropriate. In this instant case, an employee of the
defendant company had taken a number of prospective purchasers for a trial run in one of
the company’s cars. The company was charged with using the vehicle contrary to the Road
Vehicles (Trade Licenses) Regulations 1922, on the ground that more than
two passengers were carried on the trial run. The court held the company liable for using
the vehicle through its employee. As the offence was one of strict liability, there was no
jurisprudential difficulty, in holding the company liable as the principal offender and the
employee liable as an aider and abettor.
Liability of the employer for the criminal acts of the employee depends on how the courts
choose to construe the statute in question and in particular, whether the offence is
regarded as one of strict liability or one requiring full mens rea. In Police v
Adamu Yahaya, the court held that once a vehicle is being used to carry smuggled goods,
the mens rea of the owner is immaterial because the statute regulating custom and excise is
a strict liability one.
In Nigeria, statutes have been specifically enacted in addition to the Nigerian Criminal Code
and Penal Code which have provisions for corporate criminal liability. Such statutes include
the Food and Drug Act, Standard Organisation of Nigeria Act (SON),
Weight and Measures Act, the Companies and Allied Matters Act, the Consumer Protection
Council Decree, the Federal Environmental Protection Agency Act, the Failed Bank (Recovery
of Debts) and Financial Malpractice in Banks Decree, Environmental and Sanitation Edict and
a host of other statutes. These statutes were enacted to promote the social, economic and
well-being of the citizens.
The Consumer Protection Council Act seeks to safeguard the consumer from the hands of
unscrupulous and exploitative companies, firms, trade associations and individuals. It is
intended to encourage the adoption of adequate and appropriate measures to ensure that
products are safe.
The Act in Section 9(2) states that;
‘It shall be the duty of the manufacturer or distributor of a product, on becoming aware
after such a product has been placed on the market of any unforeseen hazard arising from
the use of the product to notify immediately the general public of such risk or danger and
cause to be withdrawn from the market such product’.
The Act also states that;
‘Any person who violates the provision of the above sub-section of this section is guilty of an
offence and liable on conviction to N50,000.00 fine or imprisonment for five years or both’.
Another Act that provides for corporate liability is the Failed Bank (Recovery of Debts) and
Financial Malpractices in Bank Act. The Act seeks to instil sanity into the banking industry by
making it punishable for the bank or any financial institution and any of its staffs who
contributed in any manner to the collapse of the financial institutions.
An early case decided under this provision, was the Federal Republic of Nigeria v Dr.
Nwochie Odogwu and Capital Merchant Bank No.1 (1997), In this case the managing
director of Capital Merchant Bank, was also the promoter of the Bank in its formative stage.
He floated other sham companies to which he granted unsecured loans which he later
diverted to his personal purse. Within a short time, the bank went into liquidation and all
the depositors lost their money. Both the bank and its managing director were charged
before the Failed Bank Tribunal. The managing director, was sentenced to 18 years jail term
and ordered to refund N76 million Naira, with a fine of N35,000.00 while the bank itself was
discharged and acquitted.
It would seem from this judgement that the tribunal simply lifted the veil of incorporation
to find out who was behind the mask. It accordingly dealt with the natural person behind
the mask instead of chasing the ghost by holding the bank criminally liable for an act that
was masterminded by its employee for his own benefit. This kind of judgment, although is in
the best interest of the public seems to have done away with the principle of distinct
corporate entity. In Public Finance Securities Ltd. v Jefia, the court stated that; The court will
lift the veil of incorporation of any company to find out who was behind the fraudulent and
improper conduct of the company.
This will be necessary where the canopy of legal entity is used to defeat public convenience,
justify wrong, perpetuate and protect fraud and crime. Also where a company was involved
in reckless and fraudulent trading activity tainted with fraud, the court can pears the veil of
incorporation.
In most cases when prosecution knows that a corporate body has committed a crime jointly
with some of its employees, and since in most cases, the corporation cannot be subjected to
the same punishment as its workers, it would rather prefer not to charge such corporate
body or charge it with a lesser offence or charge its officers alone because of the difficulty in
subjecting such corporate body to certain punishments like jail term or death sentence. This
position is very unfair as it encourages individual criminal liability, instead of corporate
liability thus enabling the corporation that benefited from the whole transaction to escape
punishment. No wonder it was stated by Bierce C. A. that; “a corporation is an ingenious
device for obtaining individual profit without individual responsibility”. From the discussion
so far, it is evident that corporate bodies are now held criminal liable both under the
Common Law, or codes and statutes. In so many instances, where they have been held
liable, they were fined even when there is provision for a jail term. This stand conflicts with
the principle which bestow on a corporate body the attributes of a natural person with
corresponding powers, benefits and liabilities.
One other issue is whether corporations could be liable for all types of crime.
The issue as to whether a corporate body could be liable for certain offences like
manslaughter came up in Spooner and Others; Exparte Rohan and Another. In October,
1987 an application was made for leave to apply for judicial review against the decision of
the Coroner for East Kent made on the 18th and 19th of September, 1987 in the course of
an inquest into the death of 188 people arising out of the capsize on 6th May, 1987 of the
Herald of Free Enterprise.
In hearing the application for judicial review, Lord Justice Bingham said that, he was
prepared tentatively to accept that a corporate body was capable of being found guilty of
manslaughter. The court, however, refused to grant the application for judicial review
because no substantial case had been made against named Directors of the
company.
From the decision in this case, there seem to be a tentative acceptance of
corporate criminal liability for a serious crime such as manslaughter.
In R v Corry Brothers Ltd, the Directors of a company decided to create a fence around a
power house belonging to the company to prevent pilfering from it.
Accordingly, a wire was erected and charged with electric current on the instruction of the
power engineer of the company. Soon after, on the same day, the deceased accidentally
stumbled on the fence and died. The company was then charged with the
offence of manslaughter. The court, however, held that the company could not be held
guilty of manslaughter or for the offence of setting traps with intent to inflict grievous bodily
harm. This judgment seems to have done away with the alter ego principle, which makes
the act or intention of some highly placed officers of the company (e.g directors) the acts
and intentions of the company. However, in Granite Construction Company v
Superior Court in a charge of manslaughter, the corporation argued that as an economically
motivated entity, it could be liable only for property crimes. The court responded that this
argument is unsuccessful. It overlooks the substantial indirect economic benefit that may
accrue to corporation through crimes against the person. To get these economic benefits,
corporate management may short cut expensive safety precautions, respond forcibly to
strikes or engage in criminal anti competition behaviour.
In conclusion, the criminal liability of corporations in Nigeria is an often neglected or
forgotten aspect of the law, even in many of those cases where its consideration is
ordinarily required. The reason for this anomaly is essentially two-fold. Firstly, the concept
of distinct corporate personality remains a fiction to most Nigerians. At least in practical
terms, even lawyers and members of the business community do not readily conceive the
concept as going so far as a limited liability company being criminally liable. And as a matter
of fact, the emphatic judicial affirmation of the concept is of relatively recent origin. Even
then, the leading Nigerian text on criminal law states that its “exact extent is a matter of
some doubt” and “await(s) clear definition”. The second reason is that those crimes for
which corporations are most likely to be liable, in the main, are necessarily white-collar in
nature. It is a self-evident fact that the attitude of organs of the state to the prevention and
prosecution of white-collar offences is generally lukewarm. The pervasive corruption of the
Nigerian society, a veritable point of agreement amongst analysts of diverse persuasions
and disciplines, is to a considerable extent both the offspring as well as a manifestation of
this cavalier attitude to white-collar crime. The result has been the danger of the law on
corporate criminal liability falling into desuetude.