13.1 In recommending a comprehensive sentencing regime that applies to corporate offenders, there will necessarily be a degree of overlap between various provisions. The overlap between the various possible orders has already been noted in relation to the form of the orders and their intended outcome.1 However, another significant area of overlap occurs in relation to various “machinery” provisions, for example, provisions relating to jurisdictional limits, duration of orders, supervision of performance and enforcement. Separate provision for each of these issues in relation to each of the possible orders would introduce an unnecessary level of complexity. As such, the following recommendations are intended to apply equally to the sentencing options proposed in relation to correction orders, disqualification, community service orders, and publicity orders (to the extent that they are required to be carried out by the corporation itself). The recommendations cannot apply to orders which require action solely by a person or body other than the corporation, that is, orders for the dissolution of a corporation and some publicity orders (where the court requires a third party to undertake the publicity), because the common provisions recommended below relate to orders that are essentially about making corporate offenders do or not do certain things.
JURISDICTIONAL LIMITS
13.2 Jurisdictional limits, or limits on the amount of penalty, are already in place generally in the New South Wales sentencing regime. For example, fines, when provided for expressly, are set as maximum amounts so that a court cannot impose a fine exceeding the statutory upper limit. In cases where imprisonment is the only penalty, the higher courts2 may impose a fine not exceeding 2,000 penalty units, while other courts may impose a fine not exceeding 100 penalty units.3
13.3 Because some of the alternative sentencing options recommended in the preceding chapters may have serious financial implications for corporations in a way not comparable to the effect of equivalent orders on individual offenders, it is necessary to establish jurisdictional limits that take this into account. Jurisdictional limits are already in place in relation to some orders. For example, the Occupational Health and Safety Act 2000 (NSW) prevents Local Courts from imposing remedial orders in cases where the cost of complying with the order exceeds the maximum amount for which the General Division of a Local Court has jurisdiction.4 The jurisdiction of the General Division of a Local Court is currently $40,000.5 Another example of a limitation in the law of New South Wales may be found in the Young Offenders Act 1997 (NSW) where any sanctions resulting from a youth justice conference cannot be “more severe than those that might have been imposed in court proceedings for the offence concerned”.6
13.4 The chief concern is that the costs of carrying out some alternative orders, for example, community service, publicity and correction orders, may far exceed the maximum fine set for the offence in question. Indeed concerns have been expressed about the potential for such orders to circumvent the upper limits of the fine set by Parliament.7 The fine set by Parliament is intended to reflect the community’s view of the seriousness of the offence in question and the imposition of penalties that may have the effect of far exceeding the limit of the fine may be seen as arbitrary and offending against the principle of proportionality.8 One commentator has suggested that the law should provide that the maximum cost of community service, including the cost of any other penalty imposed, should not exceed the maximum amount of the fine applicable to the offence for which the order is made.9 To do otherwise would leave open the possibility of almost unlimited punishment in some cases. This Report has recommended the adoption of a general statute providing a comprehensive sentencing regime for corporations. This recommendation cannot itself become the vehicle for penalty escalation. The Commission’s view is that the fine levels currently in existence should be a ceiling for punishment as they represent the Parliament’s (and hence the community’s) view of the gravity of the various offences.
DURATION OF ORDERS
13.5 Given the wide variety of possible orders and their diverse purposes and effects, it is not desirable to impose too rigid a restriction as to the timeframes in which such orders will operate. In the case of orders aimed at preventing specific corporate activities, for example, polluting a river, it may be necessary that such orders remain effective for a considerable period of time. In the case of orders requiring remedial work, a corporation may need a substantial period of time to comply with the order’s terms, for example, where an order requires extensive environmental remediation work to be carried out. In this regard, the adoption of provisions similar to that contained in the Protection of the Environment Operations Act 1997 (NSW), which simply allows the court to fix a period for compliance that “the court considers necessary or expedient for enforcement of the order”,10 has its attractions.
13.6 The South Australian Criminal Law and Penal Methods Reform Committee flagged the issue of the period for which a preventive order “might reasonably remain in effect”,11 but did not arrive at a conclusion.
13.7 Some form of upper limit is necessary to ensure that the corporation complies within a reasonable time. A maximum time limit should be imposed for orders given in the Local Courts given their generally restricted jurisdiction. In all other jurisdictions however, there should be a presumption in favour of a maximum time limit, with the possibility of the courts going beyond that where there is good reason.
13.8 The time limits on various court orders with respect to individual offenders are not, at present, uniform. For example, good behaviour bonds must not exceed five years.12 However, when entered into as part of a conditional discharge or suspended sentence, bonds cannot exceed two years.13 The Trade Practices Act 1974 (Cth), which also applies to corporate offenders, allows for a probation period of no longer than three years.14 The United States Sentencing Commission on the other hand, requires a minimum period of one year for felonies and a maximum period of five years for all offences.15
13.9 In the view of the Commission, a period of less than three years should be appropriate to orders issued by a Local Court. A general period of less than three years should also be sufficient to allow for compliance with orders issued by most other courts. However, these courts should be able to provide reasons for issuing an order that has effect for longer than three years.
13.10 Most orders need only have effect so long as they are necessary to ensure that the corporation carries out their terms. The proposal of the Australian Law Reform Commission, that an order can be “discharged upon proof by the contravener of satisfactory compliance”, therefore has merit.16
RECOMMENDATION 16
A court may fix such a period as it considers necessary or expedient for carrying out the terms of an order, subject to the following:
(a) orders issued by Local Courts shall have effect for a maximum period of 3 years;
(b) orders issued by higher courts shall have effect for a maximum period of 3 years, except when the court considers there is good reason for a longer period (and has provided reasons in writing);
(c) any order may by discharged at any time before the time limit fixed by the court when the corporation provides proof of satisfactory compliance.
SUPERVISING PERFORMANCE
13.11 A well-established system currently exists for the purpose of supervising individuals who are subject to alternative sentencing options. For example, probation officers, employed by the Probation and Parole Service (a division of the Department of Corrective Services), supervise offenders who are subject to probation orders and home detention orders. The Probation and Parole Service also administers the Community Service Orders scheme. The Probation and Parole Service, which deals with individual offenders, cannot currently be expected to undertake the professional supervision that may be required in the case of orders made against corporate offenders.
13.12 The type of supervision required for each corporate offender will depend on the circumstances of the case. For example, there have been proposals in both the US and Australia for particular professionals or groups of professionals, such as accountants, auditors, audit committees, special counsel or corporate lawyers to supervise organisational reform orders.17 The New South Wales Land and Environment Court recently ordered a corporation convicted of water pollution to carry out specified projects for the restoration the environment in consultation with representatives of Charles Sturt University and the Macquarie River Care Bathurst Inc.18
13.13 The courts should be given a wide discretion to ensure the management, control, administration and supervision of their orders.
In some cases it may be possible for the court to supervise the probation, for example, by requiring regular reporting by the corporation. However, courts may not have the time and/or other resources to ensure that corporations are complying with their orders. The system should therefore be flexible enough to allow the appointment of a suitable person or persons to supervise and/or report on a corporation’s compliance with a sentencing order. Where appropriate, a court should be able to appoint:
- a relevant regulatory agency to monitor compliance with some of the orders; or
- a suitable person or organisation with relevant expertise to monitor compliance.
Where appropriate, the courts should also have the power to order regular unannounced audits to ensure compliance with relevant orders.
13.14 It should also be possible, in appropriate circumstances, for a court to make orders that a corporation pay the costs of supervision. Although some would argue that, in almost all cases, corporations should pay the costs of their own rehabilitation,19 there may be circumstances where it is not appropriate for the corporation to meet the costs of supervision, for example, where the costs place undue hardship on the corporation or lead to undesirable spillovers.20
ENFORCEMENT
13.15 A system that includes alternative sentencing orders must also have mechanisms in place for dealing with offenders who fail to adhere to the terms of their orders. In some respects, the question of dealing with corporations who fail to adhere to the terms of their orders is more difficult than dealing with individual offenders, because the ultimate sanction of imprisonment is not available. Options available for dealing with corporations that breach an order include:
- making the breach an offence that attracts the imposition of a further penalty (usually a fine);
- allowing proceedings against the corporation for contempt of court; and
- requiring that the matter be returned to court so that the order can be changed or the offender re-sentenced.
Offence attracting further penalty
13.16 Current provisions making it an offence not to comply with a sentencing order include those in:
- the Protection of the Environment Operations Act 1997 (NSW), which make failure to comply with certain orders (including orders “for restoration and prevention” and publicity orders) an offence and impose a maximum penalty on corporations of $120,000 for each day the offence continues;21 and
- the Occupational Health and Safety Act 2000 (NSW), which make it an offence to fail to comply with various orders (including publicity orders and orders to carry out a specified project for the general improvement of occupational health, safety and welfare).22
Contempt of court
13.17 Another option, in situations where the threat of re-sentencing is insufficient to ensure compliance, is to make breach of an order of the court punishable by contempt proceedings. The Environment Protection Act 1970 (Vic) leaves open the possibility that an offender who fails to comply with certain orders (including publicity orders and orders to carry out a project for the restoration and enhancement of the environment) may be found to be in contempt of court. The statute makes no provision as to the penalty for contempt, but at common law, there is no limit to the amount of fine that may be imposed. The Act also authorises the Environment Protection Authority to take the following courses of action when a offender is found to be in contempt of court:
- do anything that is necessary or expedient to carry out any action that remains to be done under the order and that it is still practicable to do;
- publicise the failure of the person to comply with the order; and
- recover any cost it incurs in taking these actions.23
13.18 In the United States, it seems to be accepted, at least in the case of individual offenders, that the availability of harsh penalties on re-sentencing is sufficient to ensure compliance with probation orders. However, since the ultimate sanction on re-sentencing – imprisonment – is not available with respect to corporate offenders, it has been suggested that the availability of contempt proceedings may achieve a greater level of compliance.24
13.19 A significant disadvantage of allowing the common law on contempt to deal with such situations is the uncertainty of the penalty. However, the additional remedies in the Victorian statute are useful when it is necessary to implement some of the terms of an order, (for example, publicity or community service), after the corporation has failed to do so.
Re-sentence or change the existing order
13.20 The Australian Law Reform Commission, in its report on compliance with the Trade Practices Act 1974 (Cth), recommended that when corporations fail to comply with corporate probation orders, the court should be able to:
- continue or extend the period of corporate probation subject to such additional requirements as the court may consider necessary; or
- re-sentence the corporation, taking into account the extent to which the corporation may have complied with the probation order before the default.25
13.21 The United States Sentencing Commission’s Guidelines suggest that when a corporation breaches a condition of probation:
the court may extend the term of probation, impose more restrictive conditions of probation, or revoke probation and resentence the organization.26
13.22 Our preferred approach is to bring the corporate offender back before the court when the terms of an order are breached so that the court may then:
- continue or extend the term of the order;
- impose additional or more restrictive conditions on the order; and
- revoke the order(s) and re-sentence the corporation.27
On re-sentencing the court should be able to take into account the extent to which the corporation complied with the order(s) before its ultimate failure to comply.28
13.23 Making the breach of an order an offence should not be necessary so long as the option to revoke the order and re-sentence the corporation is available. This approach is consistent with recommendations in our 1996 sentencing report in relation to community service orders, as well as consistent with current provisions with respect to other non-custodial sentences.29
13.24 In most cases, re-sentencing will result in a fine being imposed. This is effectively the same result that would be achieved if the breach of an order were made a separate offence attracting the penalty of a fine only. However, the flexibility of imposing another combination of penalties to achieve the purposes of sentencing is preserved for appropriate cases.
RECOMMENDATION 18
Upon breach of an order, the corporation should be brought before the sentencing court to be re-sentenced. The court may do any of the following:
(a) continue or extend the term of the order;
(b) impose additional or more restrictive conditions on the order; and
(c) revoke the order(s) and re-sentence the corporation.
Responsibility for returning the offender to court
13.25 There may be a problem in finding a person who will be responsible for taking a corporation back before the court for breach of a sentencing order. In most cases it is assumed that the original “prosecutor” will maintain a continuing interest in enforcement and compliance. However, this problem is not unique to the sentencing of corporations. In some cases it may be desirable for the court to nominate who will be responsible for monitoring compliance and notifying the court of any breaches.30 No change in the law is necessary to allow this to happen.
Ancillary orders
13.26 The Commission adopts the provisions as to ancillary orders contained in the Environment Protection Act 1970 (Vic)31 as being desirable in some cases when a corporation has been returned to a court for resentencing for failure to carry out the terms of an existing order.
RECOMMENDATION 19
The court may authorise a relevant regulatory agency to:
(a) do anything that is necessary or expedient to carry out any action that remains to be done under the order;
(b) publicise the failure of the corporation to comply with the order; and
(c) recover from the corporation any cost the agency incurs in taking these actions.
Enforcing fines
13.27 In New South Wales there are special provisions for enforcing fines contained in the Fines Act 1996 (NSW). The Act provides a number of ways for dealing with offenders who do not pay their fines, including, ultimately, imprisonment. Other options include driver licence or vehicle registration suspension or cancellation; civil enforcement, including seizure of property and garnishment; and community service orders.32 These enforcement mechanisms (other than community service orders and imprisonment) also apply to fines payable by corporations.33 However, as already noted,34 such options as may apply to corporations may not be feasible, for example, when the corporation is part of a corporate group. Some of the sentencing options proposed in this Report should be incorporated into the Fines Act so that they can apply to corporations which default in the payment of fines. These options should include orders for incapacitation, both disqualification and dissolution (to take the place of the ultimate sanction of imprisonment for individuals), community service orders and correction orders.
RECOMMENDATION 20
Penalties that apply specifically to corporations should be included in the enforcement procedures in the Fines Act 1996 (NSW), namely orders for incapacitation, community service orders and correction orders.
Enforcement by punishing individuals
13.28 In the United States, general provision has been made for the punishment of persons who impede “the performance of duties under any order, judgment, or decree of a court of the United States”.35 Presumably, this would extend to the acts of individual corporate officers and employees who impede compliance with the terms of corporate probation orders.36
13.29 The Commission is of the view that a provision should also be included making it an offence for individual corporate officers and employees to impede compliance with the terms of any court order.
RECOMMENDATION 21
It should be an offence for individual corporate officers and employees to impede compliance with the terms of any order.
FOOTNOTES
1. See para 5.20.
2. Supreme Court, Court of Criminal Appeal, Land and Environment Court, Industrial Relations Commission and District Court: Crimes (Sentencing Procedure) Act 1999 (NSW) s 16(a).
3. A penalty unit is currently set at $110: Crimes (Sentencing Procedure) Act 1999 (NSW) s 16(b).
4. Occupational Health and Safety Act 2000 (NSW) s 116(3).
5. Local Courts (Civil Claims) Act 1970 (NSW) s 12.
6. Young Offenders Act 1997 (NSW) s 52(6)(a).
7. J Gobert, “Controlling corporate criminality: penal sanctions and beyond” [1998] 2 Web Journal of Current Issues.
8. NSWLRC DP 33 at para 3.35.
9. B Fisse, “Sentencing options against corporations” (1990) 1 Criminal Law Forum 211 at 245.
10. Protection of the Environment Operations Act 1997 (NSW) s 250(2).
11. Criminal Law and Penal Methods Reform Committee of South Australia, The substantive criminal law (4th Report, 1977) at 360.
12. Crimes (Sentencing Procedure) Act 1999 (NSW) s 9(2).
13. Crimes (Sentencing Procedure) Act 1999 (NSW) s 10(1)(b) and s 12(1).
14. Trade Practices Act 1974 (Cth) s 86C(2)(b). This accords with a recommendation of the ALRC: Australian Law Reform Commission, Compliance with the Trade Practices Act 1974 (Report 68, 1994) at para 10.10.
15. United States Sentencing Commission, Guidelines manual (2002) §8D1.2(a).
16. ALRC Report 68 at para 10.10.
17. American Bar Association, Standards for criminal justice (3rd edition), 18.2.8(a)(v); J C Coffee, “‘No soul to damn: no body to kick’: an unscandalized inquiry into the problem of corporate punishment” (1981) 79 Michigan Law Review 386 at 455; Australian Law Reform Commission, Sentencing: penalties (Discussion Paper 30, 1987) at para 297. See also B Fisse, Sanctions against corporations: economic efficiency or legal efficacy? (Sydney University, Transnational Corporations Research Project Occasional Paper No 13, 1986) at 21.
18. Environment Protection Authority v Simplot Australia Pty Ltd [2001] NSWLEC 264.
19. S Box, Power, crime, and mystification (Tavistock Publications, London, 1983) at 72.
20. Compare the proposal of the ALRC Report 68 at para 10.10; and also the optional probation condition in United States Sentencing Commission, Guidelines manual (2002) §8D1.4(c)(4). See the general discussion on “spillover” at para 6.8-6.11.
21. Protection of the Environment Operations Act 1997 (NSW) s 251.
22. Occupational Health and Safety Act 2000 (NSW) s 117. The penalty is 1,000 penalty units ($110,000) for first time offenders and 1,500 penalty units ($165,000) for repeat offenders. This provision also applies to other non-fine orders that a court may impose for offences under the Act.
23. Environment Protection Act 1970 (Vic) s 67AC(5) and (8).
24. R Gruner, “To let the punishment fit the organizations: sanctioning corporate offenders through corporate probation” (1988) 16 American Journal of Criminal Law 1 at 78.
25. ALRC Report 68 para 10.13.
26. United States Sentencing Commission, Guidelines manual (2002) §8D1.5.
27. See United States Sentencing Commission, Guidelines manual (2002) §8D1.5; ALRC Report 68 at para 10.13.
28. See ALRC Report 68 at para 10.13.
29. NSWLRC Report 79 at para 5.13-5.15 and Recommendation 22. Community Service Orders Act 1979 (NSW) s 23(1) was not re-enacted when the Community Service Orders Act 1979 (NSW) was repealed by the Crimes Legislation Amendment (Sentencing) Act 1999 (NSW).
30. Australian Industrial Group v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union of Australia (2001) 188 ALR 653 at para 17.
31. Environment Protection Act 1970 (Vic) s 67AC(5). See para 13.17.
32. Fines Act 1996 (NSW) Pt 4.
33. Fines Act 1996 (NSW) s 98.
34. See para 6.12.
35. 18 USC §1509.
36. R Gruner, “To let the punishment fit the organization: sanctioning corporate offenders through corporate probation” (1988) American Journal of Criminal Law 1 at 79.
