In what circumstances can the acts of human individuals be attributed to companies?

Published on October 20, 2022

The general rule is that companies are only responsible for the actions of individuals in circumstances where the individuals acted as the duly appointed representative of the company. An extract from minutes of a meeting of directions of a company usually indicate that the representative had been authorised to act in a certain fashion.

It is however also possible that a company may attract liability for the acts of individuals even without the said authorization or decision by a board of directors. In terms of the directing mind or alter ego (not to be confused with the alter ego concept in the Law of Trusts) doctrine the acts of human individual are attributed to a corporation as being its acts and therefore conduct for which it is directly responsible.

The doctrine at first glance seems simple, but the application thereof in practice proved to be not that easy.

In the matter between CAN (In liquidation) vs. MTN 2010(3)S.A 382 (SCA) counsel on behalf of CAN argued that as a matter of law the persons who have the management and control in relation to the act in question are the directing mind and will of the company. The directing mind, according to the argument, need not be one person or a body-knowledge of more than one can be combined to comprise a piece of information that is regarded as knowledge of the company. Various authorities were referred to in this regard.

Counsel for MTN, on the other hand, relying largely on the same authorities, argued that not only a director of a company but any natural person who has management and central in relation to the act or omission in question can be said to be the directing mind of a company. Both sides therefore relied on the management and control of the issue in question of an individual or group as the deciding factor to establish liability.

The court however ruled that:

In Each case the courts strives to determine whether it is the company which has spoken or acted to a particular effect through the voice or conduct of a human agency and is thereby to be held to the consequences, or whether that agency was engaged in an activity which cannot fairly be attributed to the company. Each case raises different facts and the eventual conclusion must depend upon inference and probability in the absence of adoption of the statements of conduct as the company's own

(Paragraph 31)

The above test as explained by the Court, only assisted legal practitioners to a limited extent to establish whether a company was liable for the acts of an individual.

…acts of the directory mind will be attributed to the company only when the action taken by the so-called directing mind

• Was within the field of the company’s operations assigned to him / her
• Was by design or result partly for the benefit of the company.

(NB! These allegations must be pleaded)

Even if the above is established, the question whether the doctrine should apply still depends on the context, as described by the Court in the CAN – matter paragraph 31 (supra).

COMMENT.

The test for establishing liability in terms of the directing mind doctrine is narrow and dependable on specific circumstances and not that easy to proof.

C.M. Weiss
Practicing Consultant