By Emmanuel M. Nzaku**
In 1892, when Mr. Aron Salomon was making leather boots and shoes in his White Chapel High Street establishment, he had no idea that his enterprise would shape the nature and operation of modern trade. Since his sons wanted to become business partners, he turned the business into a limited liability company. The company purchased Salomon’s business at an excessive price for its value with his wife and five elder children becoming subscribers and the two elder sons directors but as nominee for Salomon, making it a one-man business. Not only didn’t Mr. Salomon take 20,001 of the company’s 20,007 shares, the company also gave Mr. Salomon £10,000 in debentures. When the company’s business failed and it went into liquidation, Salomon’s right of recovery against the debentures stood prior to the claims of unsecured creditors, who would, thus, have recovered nothing from the liquidation proceeds.
To avoid such alleged unjust exclusion, the liquidator, on behalf of the unsecured creditors, alleged that the company, a sham was essentially an agent of Salomon and therefore, Salomon being the principal, was personally liable for its debt. In other words, the liquidator sought to overlook the separate personality of Salomon Ltd., distinct from its member Salomon, so as to make Salomon personally liable for the company’s debt as if he continued to conduct the business as a sole trader.
When the dispute was tabled before the Courts, at first instance, Vaughan Williams J held that claim against Mr. Salomon was valid. In essence he asserted that the signatories of the memorandum were mere ‘dummies’, the company was just Mr. Salomon in another form, an alias or at most his agent. Therefore, granting remedies to the creditors. Lord Justices Lopes, Kay and Lindley in the Court of Appeal confirmed Vaughan Williams J’s decision against Mr. Salomon albeit on the grounds that Mr. Salomon had abused the privileges of incorporation and limited liability, which Parliament had intended only to confer on ‘independent not counterfeit shareholders, who had a mind and will of their own and were not mere puppets’. Lindley LJ went on to state that the company must, therefore, be regarded as a corporation, but as a corporation created for an illegitimate purpose. Lopes LJ and Kay LJ variously described the company as a myth and a fiction and said that the incorporation of the business by Mr. Salomon had been a mere scheme to enable him to carry on as before but with limited liability.
The House of Lords, unanimously overturned this decision, rejecting the arguments of agency and fraud. It is prudent that it at this moment, it is mention that the apex court defied convention and made what would be a renegade and unconventional holding. They held that there was nothing in the Companies Act about whether the subscribers should be independent of the majority shareholder and that he company was duly constituted in law and it was not the function of judges to read into the statute limitations they themselves considered expedient. Lord Halsbury LC stated that, it was either the limited company was a legal entity or it was not. If it was, the business belonged to it and not to Mr. Lord Macnaghten held that a company attains maturity on its birth. There is no period of minority; no interval of incapacity. It thus defeated logic how a body corporate thus made ‘capable’ by statute can lose its individuality by issuing the bulk of its capital to one person, whether he be a subscriber to the memorandum or not. The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act.
Reference is made to this peculiar creature in the name of a company because like the computer, at its time was revolutionary in changing the course of commerce and consequently the adjudication of disputes arising therefrom. Needless to say, a company is a juridical person, meaning that it is an entity other than a natural person created by law and recognized as a legal entity having distinct identity, legal personality and duties and rights. In the same vein, I posit that a computer ought to be granted juridical personality based on the elements of legal personality. It is trite law that a company by dint of incorporation becomes a separate legal entity from its promoters. To crown that, a company has directors; it can sue or be sued; it has the ability to enter into contracts and agreements; and it can hold property.
A computer verily satisfies all these requirements of legal personhood. First, a computer has a serial number that is a unique, identifying number or group of numbers and letters assigned to it as an individual piece of hardware, or its various hardware components. Further, in the same manner that companies declare their physical offices, a computer connected to a computer network that uses the Internet Protocol for communication has an Internet Protocol address (IP address) that is a numerical label assigned to each device critical for network interface identification and location addressing.
Secondly, I opine that a computer can sue or be sued. By this I do not seek to make a outlandish argument like Professor Marcus du Sautoy, a mathematician at Oxford University, has intimated in his book What We Cannot Know that as artificial intelligence (AI) leads to our devices developing their own consciousness, they may need their own laws to protect them such as having their own set of ‘rights’ that could let them sue you for neglect. Instead, I adopt the simple approach right to sue and be sued being one of dispute resolution. If a computer gets into a dispute with another computer it sends a report to the computer in question, in regular law practice we call that a demand letter. This is exemplified when a packet collision occurs whereby the packets are either discarded or sent back to their originating stations and then retransmitted in a timed sequence to avoid further collision. The packets being sent back to the originating station is construed as an instruction to write the wrong that occurred. If that wrong is not rectified for retransmission the packets are discarded altogether. The same can be construed to be a breach of contract demand letter whereby the originating computer is required to rectify its errors. Moreover, conventional dispute resolution mechanisms are to be found in network support systems where computer users are involved as complainants or subjects of investigations.
Thirdly, in the same manner that a corporation has no body to be kicked or soul to be damned as Lord Denning’s oft-quoted dictum in the case of British Steel Corporation v Granada Television Ltd informs us, both a company and a computer need natural persons for their proper functioning in a world where laws are made for and by the latter. By agency of that, a company has directors whilst a computer has users.
The next bone of contention is whether computers can enter into contractual agreements. Tom Allen and Robin Widdison in their paper ‘Can Computers Make Contracts?’ published in the 9th Volume of the Harvard Journal of Law & Technology respond to this in the affirmative. In considering whether the computer can be determined as a legal person re contractual capacity they consider if there are any reasons to confer personality on computers. They suggested three reasons: moral entitlement, social reality and legal convenience. As regards moral entitlement they nodded to Lawrence Solum who posits that a system that achieves self-consciousness is morally entitles to be treated as a legal person, and the fact that self-consciousness does not emerge from biological processes should not disqualify it from legal personality. As regards social reality, legal personality recognizes social reality in that many artificial legal persons are already regarded as persons in some extra legal sense. As regards legal convenience, there are sound commercial reasons for treating computer generated agreements as contracts topped by inferring intention somewhere in the transaction or alternatively stating that the computer acts an agent of the party, or even as a party in its own right.
Finally, a computer can hold property by occupying the virtual internet real estate which Katie Hafner in her New York Times writing termed as an obscure academic playpen, information superhighway, vast marketplace, sci-fi-inspired matrix. If then a computer qualifies for juridical person status, it then follows that it qualifies for criminal liability. In 1972, Lord Reid in Tesco Supermarkets Ltd v Nattrass in setting the identification test for corporate criminal liability in the UK held that the person who acts is not speaking or acting for the company but he is acting as the company and his mind which directs his acts is the mind of the company. Therefore, if it is a guilty mind then that guilt is the guilt of the company.
Since cybercrime is defined as a crime in which a computer is the object of the crime or it being used as a tool to commit an offence, it follows that if evidence overwhelmingly shows that a cybercrime was committed using a certain computer, the user is acting as the computer and as so the computer’s guilt is his guilt. Alternatively, the accused person can be charged for aiding and abetting since the accused is not the principal offender. How will the computer be punished you ask? A regular criminal is normally incarcerated, effectively removing him from society. The same can be done to a computer, having its exclusion from the Internet by blacklisting including other punitive measures.
Ella Fitzgerald and Luis Armstrong, the Queen and King of Jazz respectively in their cover of ‘They All Laughed’ composed by George Gershwin and written by Ira Gershwin for the 1937 film ‘Shall We Dance’ sang that:
The odds were a hundred to one against me,
The world thought the heights were too high to climb,
They all laughed at Christopher Columbus,
When he said, ‘The world was round’,
They all laughed when Edison recorded sound,
They all laughed at Wilbur and his brother,
When they said that man could fly,
For ho, ho, ho! Who’s got the last laugh?
Hee, hee, hee! Let’s at the past laugh, Ha, ha, ha! Who’s got the last laugh now?
They will probably all laugh when they hear that a computer should be held liable when it commits a crime but the ‘House of Lords’ and its equivalents in other legal systems should and might have the last laugh by salomonising them.
**Emmanuel M. Nzaku is a final year Bachelor of Laws student at Strathmore University.