CAMAC has released its report on Personal Liability for Corporate Fault. The report makes recommendations for a principled and consistent approach to the imposition of personal liability on individuals by reason of corporate misconduct. It aims to redress undue burdens on people involved in the governance of companies while maintaining appropriate levels of responsibility on their part.
The Advisory Committee is concerned about the trend in regulatory legislation – particularly state and territory statutes – to impose criminal sanctions on directors and others for corporate breaches by reason of their position within the company unless they can establish a defence. To be guilty of these it is not necessary to show that the individual was actually involved in some way in the offence. The Committee also draws attention to considerable variation in the form of personal liability provisions used in legislation across Australia and to consequential complexity and lack of clarity in regard to responsibilities for compliance.
The report includes a review of the treatment of corporate officers in environmental protection, occupational health and safety, hazardous goods and fair trading statutes in the various jurisdictions.
The Committee considers that liability for breach of a legal requirement by a company should fall in the first place on the company itself. In addition, an individual who has personally helped in or been privy to the misconduct should be punishable as an accessory in accordance with ordinary principles. The Committee acknowledges that, in some circumstances, it may be appropriate to make a designated individual responsible for compliance with a particular requirement or to extend ordinary notions of accessorial liability to cover reckless or negligent disregard of a company’s relevant conduct.
However, the Committee considers that the presumption of fault in many provisions that currently apply to company officers is objectionable in principle and unfairly discriminates against those individuals compared with the way other people are treated under the law. While those provisions may be well-intentioned – to encourage corporate compliance – they are not well suited to the practicalities of governance of many firms. Moreover, inconsistencies and lack of harmony in the standards of responsibility and defences available under the statutes that apply to various aspects of a company’s operations can be counter-productive. A standardised as well as principled approach would reduce complexity and aid understanding. It would assist efforts to promote effective corporate compliance and risk management while providing more certainty and predictability for the individuals concerned.
The subject matter of the report was also referred to by the Regulation Task Force in its report earlier this year Rethinking Regulations: Report of the Task Force on Reducing Regulatory Burdens on Business. That report (the Banks report) recommended that the Council of Australian Governments initiate reviews to achieve more nationally consistent regulation of various matters, including personal liability of company directors and officers for corporate fault, following the completion of the Advisory Committee review.
