5.1 This chapter surveys the various sentencing options currently available for dealing with corporate offenders both generally and in specialised statutes and also discusses sentencing options that have been proposed in the literature.
THE LAW IN NEW SOUTH WALES
5.2 There is no single law in New South Wales that comprehensively deals with sentencing corporate offenders. The range of sentencing options currently available for dealing with corporate offenders is also limited. Under general sentencing law options involving incarceration are not available for corporate offenders, nor are community service orders. Probation orders are available in limited circumstances. The fine is the main penalty that is imposed. Of the 2,784 convictions of corporate offenders in New South Wales Local Courts in the period 1993-2001, 2,515 (approximately 90%) resulted in the imposition of a fine.1
5.3 Some statutes also provide sentencing options that are specifically applicable to corporate offenders. These are in the areas of trade practices, industrial relations and occupational health and safety, for example, probation orders under the Trade Practices Act 1974 (Cth) and other orders under the Protection of the Environment Operations Act 1997 (NSW) and Occupational Health and Safety Act 2000 (NSW).2
Fines
5.4 For common law offences the fine is said to be the appropriate penalty for a body corporate.3 It is, however, more common for corporations to be prosecuted under a wide range of statutes, a number of different types of which are considered in the following paragraphs.
5.5 One type of statute frames offences and penalties in general terms applicable to any person, natural or artificial.4 The Crimes (Sentencing Procedure) Act 1999 (NSW) deals with situations where the only penalty prescribed is a maximum term of imprisonment (which cannot be imposed on a corporation)5 by stating that the maximum fine that can be imposed is 2,000 penalty units in cases heard by the higher courts,6 and 100 penalty units in all other courts.7
5.6 Other statutes provide fine levels that differentiate between individuals and corporations. Some statutes multiply the maximum fine applicable by a prescribed number where the offender is a corporation. For example, both the Taxation Administration Act 1996 (NSW) and the Trade Measurement Act 1989 (NSW) provide that the maximum penalty that a court may impose on a corporation is five times the maximum penalty applicable to a natural person convicted of the same offence.8 There are, however, limits on these provisions. For example, under the Exotic Diseases of Animals Act 1991 (NSW), a Local Court may not impose an increased penalty on a corporate offender that exceeds 100 penalty units.9
5.7 Another type of statute makes separate provision for the amount of fine that may be imposed on corporations in addition to the amount that may be imposed on individuals. A table in Appendix A of this Report sets out a non-exhaustive list of more than forty New South Wales statutes that carry specific penalties for corporations. The maximum amounts fixed by these statutes vary widely.10
5.8 The question of the suitability of the fine as a general sanction on corporations is discussed in Chapter 7.
Probation
5.9 Examples of probation under the general sentencing regime include good behaviour bonds, conditional discharge of an offender and suspended sentences.
- Good behaviour bonds may be imposed only as an alternative to imprisonment.11 When imposed on an offender a bond generally contains such conditions as are specified in the order. The term of a good behaviour bond must not exceed five years.12
- Conditional discharges are available where the court considers it “inexpedient” to inflict other than nominal punishment in the circumstances of the case. A conditional discharge is an “order discharging the person on condition that the person enter into a good behaviour bond for a term not exceeding 2 years”.13
- Suspended sentences: a sentence of imprisonment of not more than two years may be suspended on condition that the offender enters a good behaviour bond.14
5.10 Courts in New South Wales do not generally impose probation on corporations under the current sentencing regime. With the exception of conditional discharges, probation cannot apply to corporations because it can only be imposed as an alternative to imprisonment15 and corporations cannot be imprisoned.
5.11 There has been some judicial support for the use of good behaviour bonds in conjunction with a conditional discharge. For example, the Land and Environment Court has stated that it may be open for the Court to release a company on a good behaviour bond even though the relevant provisions16 are “referable only to non-corporate persons”.17
5.12 The Industrial Relations Commission has imposed probation for breaches of the Occupational Health and Safety Act 1983 (NSW), deciding:
to discharge [the company] on condition that it enter into a good behaviour bond by way of self recognisance with a duration of two years ... This should enable the re-activation of [the company], should other circumstances permit, without it facing a crippling financial barrier whilst demanding that its industrial safety behaviour be exemplary for the period of two years under pain of significant sanction. The public deterrent factor should thus be met.18
Such an order effectively requires the corporation to reform itself and in this way intrudes upon the corporation’s day to day operations. Further options for the imposition of probation upon corporations are discussed in Chapter 9.
Other penalties
5.13 Recent legislative innovations in New South Wales contain alternative sentencing options applicable to corporations. The Protection of the Environment Operations Act 1997 (NSW) gives a court the power to make a broad range of orders including: publicity orders, community service orders, mandatory audit orders, and orders to prevent or mitigate the harm caused by the offence, or to make good any resulting environmental damage.19 Under the Occupational Health and Safety Act 2000 (NSW), a court can now order an offender to: publicise the offence and other facts relating to the offence; carry out a specified project for the general improvement of occupational health, safety and welfare; or remedy any matter caused by the commission of the offence that appears to the court to be within the offender’s power to remedy.20
THE LAW IN OTHER AUSTRALIAN JURISDICTIONS
5.14 As in New South Wales, the fine is the main penalty for corporate offenders in all other Australian jurisdictions, none of which have adopted general provisions that set out alternative options for sentencing corporations. Like New South Wales, the other States, Territories and the Commonwealth have a range of statutes creating offences and penalties that may apply to corporations. Some have statutory provisions, to be found in general sentencing or criminal legislation, which allow the court to impose a fine for an offence committed by a corporation if that offence is otherwise punishable only by imprisonment.21 Some have laws which provide that where a body corporate is convicted of an offence, the court may impose a fine not exceeding five times the maximum penalty that could be imposed by the court on a natural person convicted of the same offence.22
5.15 Some jurisdictions have introduced new sentencing options including probation orders, publicity orders, community service orders, injunctive orders and audit orders. A number of observations may be made about these new sentencing options. First, they have not been introduced under general sentencing legislation but are instead contained in statutes dealing with specialised areas of law, mainly in the areas of environmental protection and fair trading. Secondly, they are not limited in application to corporations. However, the fact that such sanctions are made available in areas of law in which corporations are frequently prosecuted shows an intention to include corporate offenders within the relevant sentencing regimes. Thirdly, these sanctions are generally stated to be in addition to any other penalty imposed (that is, in the case of corporations, usually a fine). For example, both Victoria and South Australia’s Environment Protection Acts23 contain similar sentencing options to those in New South Wales. At the Commonwealth level, new sanctions, including orders in the nature of community service orders, probation orders, and publicity orders,24 were introduced to the Trade Practices Act 1974 (Cth) in 2001.25
RECOMMENDATIONS AS TO OTHER OPTIONS
5.16 The trend in the sentencing of corporations is for options to be expanded. The fine, currently the principal sanction for corporate wrongdoing, clearly does not serve all the objects that should be addressed at sentencing.26
5.17 The Commission has considered whether or not the following sentencing options should be made generally available in addition to the fine in sentencing corporations:
- Equity fines (Chapter 7). Otherwise known as “stock dilution”, equity fines require that a corporation issue a certain number of shares to a third party, for example, a victims’ compensation fund.
- Incapacitation (Chapter 8). Incapacitation involves orders aimed at preventing a corporation from carrying out certain commercial, trading or investment activities or taking advantage of certain rights (referred to as “disqualification”) and also involves orders aimed at winding up a corporation either directly or indirectly (referred to as “dissolution”).
- Correction orders (Chapter 9). Correction orders include a range of orders, often referred to as “probation orders”, as well as another range of generally stricter orders that are referred to as “punitive injunctions”. Corporate probation orders aim to alter corporate behaviour, for example, by achieving some internal discipline in the corporation or reforming the organisation by means of external monitoring. Punitive injunctions involve a more severe form of intervention in the operation of the corporation. Such orders might involve specific internal controls, or require that particular activities cease or be undertaken.
- Community service orders (Chapter 10). Community service orders may direct a corporation to undertake or contribute to work or projects that benefit the community or a part of the community in some way.
- Publicity orders (Chapter 11). Publicity orders include orders designed to inform specific people, groups of people or the community, of details relating to the offender, the offence and the penalty imposed for the offence.
- Reparation (Chapter 12). Reparation involves orders for both compensation and restitution to victims of corporate crime.
The Commission has considered these additional sentencing options against the background of models established by legislation in various jurisdictions, and discussed or recommended in relevant academic literature, and the views expressed of these models in our consultations. The Commission has concluded that forms of each of the above options should be made generally available as part of the State’s regime for sentencing corporations with the exception, however, of equity fines and reparation.
5.18 The Commission, therefore, recommends that when sentencing a corporation, in addition to, or instead of, imposing a fine, the court may make one or more orders that the court considers will best achieve the objects of sentencing. These orders include: correction orders, community service orders, publicity orders and incapacitation. Such an approach allows wide scope for the exercise of judicial discretion which is necessary to achieve the most appropriate outcome with respect to individual corporate offenders. The important role of judicial discretion in sentencing has recently been affirmed by the Attorney General, who stated that:
By preserving judicial discretion we ensure that the criminal justice system is able to recognise and assess the facts of an individual case. This is the mark of a criminal justice system in a civilised society.27
This is a general recommendation. Specific recommendations relating to aspects of each of the sentencing options will be made in the chapters that follow.
Use of terminology
5.19 In recommending a general regime for the sentencing of corporate offenders a number of considerations relating to the use of terminology need to be kept in mind. First, the discussion and recommendations relating to the various sentencing orders have been based to an extent on terminology generally adopted in practice or as proposed in academic literature. The terminology applicable to these options and models is not used consistently in legislation, the literature or ordinary speech. Some of the terms have been borrowed from sentencing dispositions that relate to individual offenders even though their application to corporate entities may not be precisely the same. For example, an individual carrying out a community service order cannot hire someone else to carry out the sentence, whereas corporations subject to a “community service order” would be able to make some decisions about the deployment of their resources and may even hire others to carry out some of the work. The terminology used for the purpose of discussion of the various options may, therefore, not be reflected in the final form of the new provisions relating to the sentencing of corporate offenders. The Commission has, wherever possible, used terminology that commands wide support, subject to two exceptions:
- Where the form and practical outcome of proposed individual orders are the same, we have classified the orders functionally and adopted one expression for them notwithstanding varying terminology in the legislation and literature. For example, we have used the term “punitive injunction” to identify an order that is variously described in the literature as a “punitive injunction”, “preventive order”, and an order “for restoration and prevention”.28
- We have not used terminology that, in our view, leads to confusion. For example, we have not used the term “probation” in the way in which it is used in s 86C(4) of the Trade Practices Act 1974 (Cth), because the organisational focus of that section gives the word a different meaning to that which it bears in general sentencing law.
5.20 There is also a degree of overlap between the various types of orders discussed, both in terms of the form of the orders and the outcomes to be achieved. For example, some orders relating to disqualification and some punitive injunctions may take very similar forms and achieve substantially the same outcomes. The final legislative form of the various orders should, therefore, take account of the areas of overlap between them.
Separate provision
5.21 The Commission recommends a separate set of provisions to deal with the sentencing of corporate offenders. These provisions should apply generally to corporate offenders while not detracting in any way from existing legislative provisions and common law already applicable to corporate offenders. The proposed provisions should form part of the general sentencing regime, perhaps as a new Part to the Crimes (Sentencing Procedure) Act 1999 (NSW).
Separate, non-exclusive orders
5.22 There are essentially two ways for the courts to impose alternative orders on corporate offenders:
- by making the orders conditions to a bond; or
- by making the orders separate, non-exclusive sanctions.
The various orders recommended in this Report could simply be grafted onto the current regime of bonds under existing sentencing legislation,29 in particular good behaviour bonds and conditional discharges.30 Some changes would, however, be necessary to ensure that bonds could apply to corporations, including making changes to the preconditions for entry into bonds so that it would be possible to suspend sentences other than sentences of imprisonment.
5.23 The Commission’s preferred option is to make each of the orders recommended above a separate, non-exclusive sanction. This approach is desirable for a number of reasons. First, establishing separate sanctions means that the system will not be dependent on a structure that was established primarily (if not exclusively) to deal with individual offenders. Secondly, it will allow the courts greater discretion in fixing a combination of penalties appropriate to the circumstances of the individual case so as to achieve the aims of sentencing most effectively. Thirdly, there are already legislative models in Australia and overseas that allow for some orders to be imposed as separate, non-exclusive sanctions.31
RECOMMENDATION 4
In sentencing a corporation, a court, in addition to or instead of imposing a fine, should be able to make one or more other orders that it considers will best achieve the objectives of sentencing. These orders are:
(a) orders for incapacitation;
(b) correction orders;
(c) community service orders; and
(d) publicity orders.
Each order should be capable of being a separate, non-exclusive sanction.
The orders should form part of the general sentencing regime but should be expressed to apply only to corporations.
The orders should not detract in any way from existing legislative provisions and common law that are applicable to the sentencing of corporations.
FOOTNOTES
1. See para 1.25.
2. Trade Practices Act 1974 (Cth) s 86C; Protection of the Environment Operations Act 1997 (NSW) s 245, s 250; Occupational Health and Safety Act 2000 (NSW) s 113, s 116. See Chapter 9, below.
3. Registrar of the Court of Appeal v John Fairfax Group Pty Ltd (NSWCA, No 40478/92, 21 April 1993, unreported) at 5 (Mahoney J). This case involved the common law offence of sub judice contempt. Most convictions for this offence involve media organisations and fine is the usual penalty.
4. Criminal Procedure Act 1986 (NSW) s 59 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. Most offences in the Crimes Act 1900 (NSW) refer to “a person”, rather than a natural person. Interpretation Act 1987 (NSW) s 21 states that “person” includes “an individual, a corporation and a body corporate or politic”.
5. See Crimes (Sentencing Procedure) Act 1999 (NSW) s 16.
6. That is, the NSW Supreme Court, Court of Criminal Appeal, Land and Environment Court, Industrial Relations Commission and District Court.
7. A penalty unit is currently set at $110: Crimes (Sentencing Procedure) Act 1999 (NSW) s 17.
8. Taxation Administration Act 1996 (NSW) s 122; Trade Measurement Act 1989 (NSW) s 69.
9. Exotic Diseases of Animals Act 1991 (NSW) s 72(2).
10. For example, a corporation may be fined as much as $825,000 for certain occupational health and safety offences: See Occupational Health and Safety Act 2000 (NSW) s 12, 24.
11. Crimes (Sentencing Procedure) Act 1999 (NSW) s 9.
12. Crimes (Sentencing Procedure) Act 1999 (NSW) s 9(2).
13. Crimes (Sentencing Procedure) Act 1999 (NSW) s 10.
14. Crimes (Sentencing Procedure) Act 1999 (NSW) s 12.
15. Crimes (Sentencing Procedure) Act 1999 (NSW) s 9, s 12.
16. Crimes (Sentencing Procedure) Act 1999 (NSW) s 95, s 96.
17. Environment Protection Authority v Virotec International Ltd [2002] NSWLEC 110 at para 36.
18. WorkCover Authority of NSW (Inspector Dubois) v Galicia Constructions Pty Ltd [2000] NSWIRComm 195 at para 24 (Maidment J). However, such an order has only rarely been made in relation to breaches of the Occupational Health and Safety Act 1983 (NSW): WorkCover Authority of NSW v Genner Constructions Pty Ltd [2000] NSWIRComm 87 at para 12-15.
19. Protection of the Environment Operations Act 1997 (NSW) s 245, s 250.
20. Occupational Health and Safety Act 2000 (NSW) s 113, s 115(1)(a), s 116.
21. See, for example, Sentencing Act 1991 (Vic) s 109(3A); Sentencing Act (NT) s 118.
22. See eg, Crimes Act 1914 (Cth) s 4B; Sentencing Act 1995 (WA) s 40(5).
23. Environment Protection Act 1993 (SA) s 133; Environment Protection Act 1979 (Vic) s 67AC. See also R Baird, “Environmental prosecutions in Victoria – full benefit of amendments limited by prosecution structure” (2002) 19 Environmental and Planning Law Journal 83.
24. Trade Practices Act 1974 (Cth) s 86C(2)(a), s 86C(2)(b), s 86C(4), s 86D.
25. The changes were made to implement the recommendations made by the Australian Law Reform Commission, Compliance with the Trade Practices Act 1974 (Report 68, 1994).
26. See Chapter 6.
27. NSW Parliamentary Debates (Hansard) Legislative Assembly, 23 October 2002, the Hon R J Debus, Second Reading Speech at 5813.
28. See Chapter 9.
29. See material on the attempts by US courts and legislatures to meld personal probation orders to corporations: E Lederman, “Criminal law, perpetrator and corporation: rethinking a complex triangle” (1985) 76 Journal of Criminal Law and Criminology 285 at 309-310.
30. Crimes (Sentencing Procedure) Act 1999 (NSW) s 9 and Pt 8, s 10.
31. See para 5.15.
