Corporate criminal liability in Australia

Corporations cannot function without people. If a company is held responsible for a crime, the acts or omissions in question have been committed through humans.

At present, there is a smorgasbord of different legislation and legal frameworks which guide how a company is held responsible for the actions of its people.

The Australian Law Reform Commission (ALRC) released a Discussion Paper in November 2019 in which it proposed a simplified method for attributing criminal responsibility to corporations. We explore the key principles outlined in that proposal.

 

The current system of attribution

The Australian Commonwealth law contains essentially three methods of attribution:

  • Part 2.5 of the Criminal Code,
  • Various statutory attribution provisions (referred to as the ‘TPA Model’ in the paper), and
  • The common law.

These methods differ in a number of important ways, including:

  • How commonly they are applied – the TPA Model applies in nearly 90 percent of cases.
  • Who may be held responsible – Part 2.5 requires that the actions be committed by a ‘high managerial agent’, and is therefore more narrow in its approach to attribution.

 

The proposed system

The ALRC posits that multiple attribution methods create complexity and uncertainty, and that there should be one single statutory method of attribution under Commonwealth law, combining aspects of the current attribution methodology under Part 2.5 and the TPA Model.

In addition, the ALRC proposes two key changes:

  • Attributing conduct and fault from ‘associates’, and
  • Incorporating a due diligence defence.

 

Associates

An associate is defined as ‘any person who performs services for or on behalf of the body corporate’. In addition to employees and agents, this may extend to parties such as contractors and subsidiaries.

Liability only applies if the illegal actions by the associate were for or on behalf of the company. For example, if a corporation engages an external accountant to complete the company’s tax return, and the accountant uses the company’s identity documents to commit fraud for his/her own benefit, they would not be considered an ‘associate’ for the purpose of attributing responsibility to the company.

Liability can also be attributed to a company if it is shown that a corporate culture exists which effectively authorised or permitted the conduct.

 

Due diligence defence

A key question to consider before a company can be held criminally liable is whether it is truly to blame for the conduct.

The ALRC states that in its defence, a corporation should be allowed to prove that it took reasonable steps to prevent the conduct and to ensure that its business was conducted in accordance with law.

For example, if an accountant submits an incorrect tax return on behalf of a company, the company may demonstrate that it verified the account was appropriately qualified, that it had adequate systems in place to protect against tax fraud.

Nyman Gibson Miralis provides expert advice and representation to companies and individuals the subject of investigations for corporate misconduct and financial crime.

Contact us if you require assistance.