2.1 This chapter provides a brief summary of the principles governing corporate criminal liability and the sentencing options available for corporate offenders.
THE CRIMINAL LIABILITY OF CORPORATIONS
2.2 As we noted in Chapter 1, a corporation can generally be convicted of the same offences as a natural person,1 such as offences involving fraud or theft,2 some drug offences,3 offences that pervert the course of justice,4 and contempt of court. Corporations can attract criminal liability as accessories to a crime as well as principals,5 and as parties to a conspiracy.6 It is open to question whether a corporation can be convicted of murder, at least in New South Wales,7 or manslaughter.8 Some commentators have suggested that corporations cannot be convicted of certain crimes that inherently require an act by a natural person,9 such as perjury or a sexual offence. Others have disputed this claim, arguing that, in this context, corporate liability should arise if the criminal acts were committed by a manager or employee of the corporation, in accordance with general principles of corporate criminal liability.10
2.3 As we also noted in Chapter 1,11 corporate criminal liability more commonly arises from a wide range of disparate statutes relating to areas of commercial activity in which corporations are typically involved. Breaches of such legislation are generally investigated and dealt with by separate enforcement agencies, such as WorkCover or the Environment Protection Agency, rather than a central enforcement body, such as the police and/or the Director of Public Prosecutions.
Principles of liability
2.4 A corporation may attract criminal liability in one of two ways.12 It can be convicted of an offence that is committed by an employee or agent acting within the scope of his or her employment or agency, following the principles of vicarious liability.13 Alternatively, it can be directly liable for acts committed by certain senior officers of the corporation, or others to whom they have delegated their powers, where their acts are viewed as constituting the acts of the corporation.14
2.5 It is outside the scope of this reference to review the principles of corporate criminal liability. However, in formulating an appropriate approach to the sentencing of corporate offenders, it is important to note that the principles by which a corporation attracts a criminal conviction have been widely criticised. It has been argued that it is unfair to impose vicarious liability in the criminal context, at least for more serious offences, and that it is out of touch with modern corporate structures and the way in which large corporations conduct business to impose direct liability according to the acts of senior corporate officers. Both principles could be criticised for failing to require proof of “organisational blameworthiness”,15 as opposed to the blameworthiness of one individual within the organisation. Proposals have been made for reforming the principles of corporate criminal liability to accommodate modern corporate structures often involving delegation to relatively junior officers.16 These proposals have been implemented in Commonwealth legislation.17
EXISTING CRIMINAL SANCTIONS FOR CORPORATE OFFENDERS
2.6 The fine is the most common sentencing option for corporate offenders. The Crimes (Sentencing Procedure) Act 1999 (NSW) makes general provision for the imposition of a fine on bodies corporate convicted of an offence for which imprisonment is otherwise the only available sentence.18 The maximum amount that can currently be fixed under that general legislative provision is, in most cases, $220,000.19 For offences arising from the various statutes impacting on corporate commercial activities, the fine is also the most commonly available sanction. The maximum amounts fixed by these statutes vary widely.20
2.7 There is no provision for sanctions other than fines for corporate offenders in general state sentencing legislation. It is possible that, in theory at least, the regime of sentencing options in the Crimes (Sentencing Procedure) Act 1999 (NSW) could apply to the sentencing of corporate offenders. This Act provides, among other things, for a range of sentencing options as alternatives to imprisonment for sentencing generally.21 These options include community service orders, good behaviour bonds, and suspended sentences. The Act applies to certain courts, most of which have jurisdiction to sentence corporate offenders.22 The sentencing options are stated to apply to an “offender”, which is defined as a person whom a court has found guilty of an offence.23 The word “person” is generally interpreted as including a corporation or a body corporate.24 However, the range of sentencing options applies “instead of imposing a sentence of imprisonment”.25 As corporations cannot be sentenced to a term of imprisonment, it may be that they are precluded from this regime of alternative sanctions. In any case, even if the legislation could be interpreted in a way that allows its application to corporate offenders, it may be preferable that sentencing legislation make provision for a separate regime of sanctions for corporations, rather than trying to accommodate the general regime to this particular group of offenders.
2.8 There have been some innovations towards more creative sentencing of corporate offenders in the disparate pieces of legislation governing corporate activities. While the primary sanction on conviction of such offences remains the fine, some legislation now provides for additional ways of dealing with the convicted corporation (as well as with individual offenders). For example, environmental protection legislation provides for a court to order an offender to take such steps as specified in a court order to prevent, control, abate, or mitigate any harm to the environment caused by the commission of the environmental offence, or to make good any resulting environmental damage, or prevent the continuance or recurrence of the offence.26
2.9 The new Occupational Health and Safety Act 2000 (NSW) goes further in introducing non-monetary penalties as additional sanctions for corporate offenders. On conviction of an offence under that Act, in addition to, or instead of, imposing a fine, a court may order publication of the offence and its penalty, order an offender to carry out a specified project for the general improvement of occupational health, safety and welfare, or make an order for restoration. These provisions follow on from a review into the occupational health and safety legislation, which recommended a broadening of the range of non-monetary penalties available for corporate offenders. It was noted that occupational health and safety problems often reflect a failing in work organisation and management practices, and that fines are ineffective in modifying or rectifying these practices, since they do not require a corporation to review its management structure.27 Since the Act has only recently commenced operation,28 the effectiveness of these non-monetary sanctions remains as yet largely untested.
WHY PUNISH CORPORATIONS?
2.10 A fundamental issue underlying a discussion of sentencing corporate offenders is whether it is appropriate to impose criminal liability on corporations at all. Is it appropriate to impose criminal liability on the corporation, in addition to or instead of individuals within the corporation? Is it appropriate to impose criminal liability or rely instead solely on civil liability as a response to corporate misconduct?
2.11 In response to the first question, it may be easier, at a pragmatic level, to prosecute a corporation than an individual. It may be difficult and costly for the government to investigate and determine which individuals within a corporation are actually responsible for the unlawful conduct. It is generally the corporation that has the resources and is perceived by the community as the beneficiary in most cases where the conduct in question is designed to benefit the corporation. By prosecuting the corporation, it may be hoped that the corporation will itself discover those responsible and punish them. At a more fundamental level, the unlawful conduct may arise from the corporation as a collective body, rather than from the acts of an individual or individuals. The criminal conduct may result from the culmination of individual acts, each act in itself being too minor to prosecute. It may be the very structures or procedures by which the corporation operates that are at fault, rather than the conduct of any one individual. For example, it could be argued that cases of environmental pollution or dangerous work practices typically arise from defective systems rather than the wrongful conduct of a single individual or group of individuals.29 Individual officers may have committed no crime for which a sanction may be imposed, whether or not they are morally blameworthy for conduct leading to the offence. In this situation, the only way of establishing their accountability, or bringing them to account, is by imposing sanctions on the corporation that will also affect them. An issue that lies beyond the scope of our reference is whether it is possible or appropriate, at least in cases where the offence in question arises from a statutory breach, to enact more provisions establishing individual liability of directors and managers.
2.12 As for the question of whether to impose criminal liability at all, rather than simply relying on civil liability to address corporate misconduct, it is usually argued that the imposition of criminal liability is necessary to express the proper degree of condemnation of the conduct as morally reprehensible, and deter potential offenders.30 Having said that, questions have also been raised about the effectiveness of relying on existing criminal sanctions to deter corporate misconduct. These are discussed in greater detail in Chapter 3.
FOOTNOTES
1. Section 59 of the Criminal Procedure Act 1986 (NSW) provides that, unless a contrary intention appears, a provision of an Act relating to an offence applies to a body corporate as well as to individuals.
2. See, for example, provisions relating to property offences under Part 4 of the Crimes Act 1900 (NSW), such as fraudulent misappropriation (s 178A); obtaining money by deception (s 178BA) or by a false or misleading statement (s 178BB).
3. See Drug Misuse and Trafficking Act 1985 (NSW).
4. See Crimes Act 1900 (NSW) s 319.
5. See R v Robert Millar (Contractors) Ltd [1970] 2 QB 54.
6. See R v ICR Haulage Ltd [1944] 1 KB 551.
7. It has been said that a corporation cannot be convicted of a crime for which imprisonment is the only available sanction, murder typically being such a crime: see R v ICR Haulage Ltd [1944] 1 KB 551 at 554; C Corns, “The Liability of Corporations for Homicide in Victoria” (1991) 15 Criminal Law Journal 351; P Gillies, Criminal Law (4th ed, LBC Information Services, Sydney, 1997) at 132-133; but see B Fisse, Howard’s Criminal Law (5th ed, Law Book Company Limited, Sydney, 1990) at 611. In New South Wales, s 16 of the Crimes (Sentencing Procedure) Act 1999 (NSW) provides that a fine may be imposed on a body corporate for an offence for which imprisonment is the only sentence. Arguably, this overcomes the difficulty typically put forward.
8. See R v ICR Haulage Ltd [1944] 1 KB 551; but see R v Cory Bros & Co Ltd [1927] 1 KB 810. A company was tried for (and acquitted of) manslaughter in New Zealand: see R v Murray Wright Ltd [1970] NZLR 476.
9. See P Gillies, Criminal Law (4th ed, LBC Information Services, Sydney, 1997) at 133; R v ICR Haulage Ltd [1944] 1 KB 551 at 554.
10. See B Fisse, Howard’s Criminal Law (5th ed, Law Book Company Limited, Sydney, 1990) at 609. Professor Fisse argues that, while it is unlikely that a sexual assault would come within the scope of employment so as to attract liability, it is not completely impossible, such as where a company producing pornographic videos engages in the business of performing actual rather than simulated sexual acts without consent.
11. See para 1.7.
12. See B Fisse, Howard’s Criminal Law (5th ed, Law Book Company Limited, Sydney, 1990) at 599-608; P Gillies, Criminal Law (4th ed, LBC Information Services, 1997) at 134-146; D Brown, D Farrier, S Egger, L McNamara, Brown, Farrier, Neal and Weisbrot’s Criminal Laws: Materials and Commentary on Criminal Law and Process in New South Wales (3rd ed, Federation Press, 2001) at para 4.8.1-4.8.6.
13. For example, s 85 of the Proceeds of Crime Act 1987 (Cth) and s 84(1) and s 84(2) of the Trade Practices Act 1974 (Cth) impose vicarious liability on a body corporate for crimes committed by employees.
14. See Tesco v Nattrass [1972] AC 153; Hamilton v Whitehead (1988) 166 CLR 121.
15. See B Fisse, Howard’s Criminal Law (5th ed, Law Book Company Limited, Sydney, 1990) at 606; B Fisse and J Braithwaite, Corporations, Crime and Accountability (Cambridge University Press, Cambridge, 1993), especially ch 2.
16. B Fisse and J Braithwaite, Corporations, Crime and Accountability (Cambridge University Press, Cambridge, 1993) at 140-157; Australia, Criminal Law Officers Committee of the Standing Committee of Attorneys General, Model Criminal Code: Chapter 2: General Principles of Criminal Responsibility (Final Report, December 1992) at 104-113. The Committee proposed, among other things, that in cases where intention, knowledge, or recklessness is an element of an offence, that element exists on the part of a body corporate that expressly, tacitly, or impliedly authorised or permitted the commission of the offence. It then proposed various means of satisfying this test, including that a corporate culture existed within the body corporate that directed, encouraged, tolerated or led to non-compliance with the relevant provision: see proposed section 501.2-501.2.2.
17. See Criminal Code (Cth) Pt 2.5 Div 12.
18. See Crimes (Sentencing Procedure) Act 1999 (NSW) s 16.
19. This is the maximum amount that can be imposed by the NSW Supreme Court, Court of Criminal Appeal, the Land and Environment Court, the Industrial Relations Commission, or the District Court. In any other case, s 16 sets a maximum amount of $11,000. See s 17 of the Crimes (Sentencing Procedure) Act 1999 (NSW) for the amount fixed for a penalty unit.
20. For example, for certain offences under the new Occupational Health and Safety Act 2000 (NSW), a corporation may be fined as high as $825,000: see s 12, 24.
21. Crimes (Sentencing Procedure) Act 1999 (NSW) Pt 2 Div 2-3, Pt 5-8.
22. See the definition of “court” in the Crimes (Sentencing Procedure Act) 1999 (NSW) s 3(1).
23. See Crimes (Sentencing Procedure) Act 1999 (NSW) s 3(1).
24. See Interpretation Act 1987 (NSW) s 21.
25. See Crimes (Sentencing Procedure) Act 1999 (NSW) Pt 2 Div 3.
26. See Protection of the Environment Operations Act 1997 (NSW) s 245.
27. See Review of the Occupational Health and Safety Act 1983, Final Report of the Panel of Review (February 1997) at 105, 113. This was an independent review to the Legislative Council’s Standing Committee on Law and Justice, as part of the Committee’s inquiry into occupational health and safety: see Parliament of NSW, Legislative Council, Standing Committee on Law and Justice, Final Report of the Inquiry into Workplace Safety (Report 10, November 1998, 2 volumes). See also New South Wales, Parliamentary Debates (Hansard) Legislative Council, 26 May 2000 at 5936; 6 June 2000 at 6581; 7 June 2000 at 6691; Legislative Assembly, 7 June 2000 at 6804; 21 June 2000 at 7325.
28. The Act commenced operation on 1 September 2001: see Government Gazette No 129 of 24 August 2001 at 6186.
29. See, for example, B Fisse, Howard’s Criminal Law (5th ed, Law Book Company Limited, 1990) at 591-594; C D Stone, “The Place of Enterprise Liability in the Control of Corporate Conduct” (1980) 90 Yale Law Journal 1.
30. For example, see J Braithwaite, “Challenging Just Deserts: Punishing White-Collar Criminals” (1982) 73 Journal of Criminal Law and Criminology 723-763; J Duns, “A Silent Revolution: The Changing Nature of Sanctions in Companies and Securities Legislation” (December 1991) Company and Securities Law Journal 365; B Fisse, “Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault, and Sanctions” (1983) 56 Southern California Law Review 1141; B Fisse and J Braithwaite, Corporations, Crime and Accountability (Cambridge University Press, Cambridge, 1993); Review of the Occupational Health and Safety Act 1983, Final Report of the Panel of Review (February 1997) at 100.
