Factual and Procedural Background
Company A owns and operates hundreds of self-service supermarkets. In September 1969 a nationwide promotion offered “flash packs” of a laundry detergent at 1s. below the normal price. A poster in a branch located in The City advertised the cut price, but, owing to staff error, only normally-priced packs were on the shelves when a customer attempted to buy the product on 26 September 1969. After being charged the higher price, the customer complained to weights-and-measures authorities. Company A was prosecuted before local magistrates for giving a misleading price indication contrary to section 11(2) of the Trade Descriptions Act 1968 (“the Act”), convicted, and fined.
Relying on section 24(1) of the Act, Company A argued that the offence was due to the act or default of “another person” (the store manager) and that it had taken all reasonable precautions and exercised all due diligence. The magistrates accepted the diligence finding but nevertheless convicted on the ground that the manager was not “another person.” A Divisional Court upheld the conviction on different reasoning, holding that, although the manager was “another person,” the company’s statutory duty had been “delegated” to him and his failure was tantamount to the company’s own default. Company A appealed to the House of Lords.
Legal Issues Presented
- Whether a corporate defendant may invoke the statutory defence in section 24(1) when the immediate cause of the offence is the act or default of a store manager.
- The proper construction of section 24(1)(b): does “he took all reasonable precautions and exercised all due diligence” refer solely to the defendant company’s own systems and conduct, or does it also require proof that every managerial employee acted with due diligence?
- Whether earlier authorities that limited the availability of similar statutory defences were correctly decided.
Arguments of the Parties
Appellant’s Arguments (Company A)
- The store manager is “another person” within section 24(1)(a); his fault should not be attributed to the company.
- The company designed and enforced a comprehensive compliance system; that satisfies the due-diligence limb of section 24(1)(b).
- Previous decisions restricting the defence (e.g., the Hammett line of cases and Series v. Poole) were erroneously decided and should be over-ruled.
Respondent’s Arguments
- Because the company delegated supervisory functions to the store manager, his default is inseparable from the company’s own obligations.
- The defence in section 24(1) is unavailable if any managerial employee fails to exercise due diligence.
- The reasoning in Series v. Poole correctly states the law and compels dismissal of the appeal.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|
| Lennard’s Carrying Co. v. Asiatic Petroleum Co. [1915] A.C. 705 | Identification doctrine: determining when an individual’s mind is the mind of the company. | Used to confine personal identification to those who constitute the company’s “directing mind and will,” not ordinary store managers. |
| Bolton (Engineering) Co. v. Graham & Sons [1957] 1 Q.B. 159 | Metaphor of the company’s “brain and hands.” | Cited to illustrate that only top management may be identified with the company itself. |
| R.C. Hammett Ltd. v. Crabb (1931) 95 J.P. 180 | Early treatment of “due diligence” defence. | Held not inconsistent with allowing the defence where actual offender alone was at fault. |
| R.C. Hammett Ltd. v. L.C.C. (1933) 97 J.P. 105 | Suggested a wider attribution of fault. | Declared unsatisfactory and over-ruled insofar as it required diligence by every managerial employee. |
| Series v. Poole [1969] 1 Q.B. 676 | Delegation theory: employer liable if “alter-ego” fails. | Expressly over-ruled; House held the delegation reasoning misconstrued statutory language. |
| Director of Public Prosecutions v. Kent & Sussex Contractors [1944] K.B. 146 | Corporate criminal liability via identification. | Explained but limited to cases where the guilty individual is part of the directing mind. |
| Coppen v. Moore (No. 2) [1898] 2 Q.B. 306 | Employer’s vicarious criminal liability for servants’ acts. | Reaffirmed that liability is rebuttable where a statutory defence is established. |
| Mousell Bros. v. L.&N.W. Railway [1917] 2 K.B. 836 | Absolute offences and absence of mens rea. | Cited to show the policy behind strict-liability provisions. |
| Sweet v. Parsley [1970] A.C. 132 | Presumption of mens rea and strict-liability policy considerations. | Relied on to justify limiting strict liability to cases where the defendant is blameworthy. |
| Lim Chin Aik v. The Queen [1963] A.C. 160 | Purpose of strict-liability offences. | Referenced in policy analysis of consumer protection. |
Court's Reasoning and Analysis
Judge Reid (with whom Judges Morris, Dilhorne, Pearson and Diplock agreed) delivered the leading analysis. The House first reviewed the statutory language. Section 11(2) creates an offence of strict liability, but expressly makes it “subject to” section 24. Under section 24(1)(a) Company A had to show the offence was due to “the act or default of another person,” and under section 24(1)(b) that it had taken “all reasonable precautions and exercised all due diligence.”
On paragraph (a) the House held that a store manager is plainly “another person.” Identification of an individual with the company is limited to those who embody its directing mind, such as directors or senior executives. A branch manager who must obey higher instructions is not within that category.
Turning to paragraph (b), the House rejected the “delegation theory” adopted below and in earlier cases. The words “he took all reasonable precautions …” refer to the defendant alone; Parliament did not intend to make employers criminally liable for every managerial shortcoming once they have instituted and enforced an adequate compliance system. The magistrates found as a fact that Company A had:
- Created a comprehensive pricing-control system, including written procedures, training, and multi-layer supervision.
- Provided adequate staffing and oversight through branch inspectors, area controllers and regional directors.
- Regularly monitored compliance, including mandatory daily checks recorded in a Weights-and-Measures book.
Those findings, unchallenged on appeal, satisfied paragraph (b). Earlier authorities that compelled a contrary result (Hammett and Series v. Poole) were expressly over-ruled. The House emphasised that the statutory defence distinguishes between blame-worthy and blameless defendants; extending liability to employers who have done everything reasonably possible would undermine that purpose.
Holding and Implications
APPEAL ALLOWED – CONVICTION QUASHED.
The House of Lords held that:
- A store manager is “another person” within section 24(1)(a); his default need not be attributed to the company.
- Once a company proves that it has instituted and enforced an effective compliance system, it satisfies section 24(1)(b) even if a supervisory employee fails to exercise due diligence.
- R.C. Hammett Ltd. v. L.C.C. and Series v. Poole were wrongly decided and are over-ruled.
Implications: the decision clarifies the scope of corporate criminal liability under consumer-protection legislation. It affirms that employers—corporate or individual—may rely on the statutory due-diligence defence where they can show effective systems and genuine oversight, without having to prove faultlessness on the part of every managerial employee. The ruling provides authoritative guidance on the identification doctrine and limits the reach of strict liability, but it sets no new statutory standard beyond interpreting existing legislation.