Directors’ liability for corporate offences has been redefined in 40 Acts and two Regulations in the Northern Territory, including when a director will be personally liable for environmental offences committed by a corporation under the Energy Pipelines Act and Waste Management and Pollution Control Act.
Following on from the approved Council of Australian Governments' (COAG) guidelines to deliver a nationally-consistent and principles-based approach to the personal criminal liability of directors and officers for corporate offences, a new Bill was introduced to the Northern Territory Legislative Assembly on 18 June 2015.
The new Bill will align directors’ liability in the Northern Territory with the COAG guidelines and those States and Territories that have already passed similar legislation.
Redefined types of liability
Consistent with the COAG guidelines, the Statute Law Amendment (Directors’ Liability) Bill 2015 contains the following three types of liability to determine whether the defence or prosecution (and to what extent) bears the onus of establishing whether a director took "reasonable steps" to prevent the corporation’s offending:
- Type 1 – the failure of the director to take reasonable steps to prevent the corporation’s offending must be proved by the prosecution beyond reasonable doubt.
- Type 2 – a director is deemed to be liable unless they can produce enough evidence to suggest that there is a reasonable possibility that a defence applies. The prosecution must prove beyond reasonable doubt that the defence does not apply.
- Type 3 – a director is deemed to be liable for a corporate breach unless they can produce enough evidence to prove their defence on the balance of probabilities.
For national consistency, the amending provisions apply to an “executive officer” which is defined, in relation to a body corporate, as a director or other person who is concerned with, or takes part in, the management of the body corporate.
Energy Pipelines Act – environmental offence liability
Section 58G of the Energy Pipelines Act currently says that if a body corporate commits an environmental offence (that is, causes the release of a waste or contaminant from a pipeline which causes serious or material environmental harm during the conduct of an operation authorised under this Act),then every person who is a director of, or who is concerned in the management of, the body corporate is to be taken to have committed the same offence, unless a defendant can establish a defence that:
- the body corporate had a defence to the offence; or
- the act or omission that constituted the offence took place without the defendant’s authority, permission or consent; or
- the defendant did not know, and ought not reasonably be expected to have known, that the offence was to be or was being committed and took all reasonable steps to prevent or stope the commission of the offence; or
- the defendant could not by the exercise of reasonable due diligence have prevented the commission of the offence by the body corporate.
The amending provision in the Bill replaces the above with a Type 1 liability provision where an executive officer of a body corporate will only have committed an offence if:
- the body corporate commits an offence by contravening a declared provision (a relevant offence) and the officer knew, or could reasonably have been expected to have known, that the contravention would happen; and
- the officer was in a position to influence the conduct of the body corporate in relation to the contravention; and
- the officer failed to take reasonable steps to prevent the contravention.
The new provision limits a director's personal criminal liability to relevant offences committed by a corporation, which no longer includes an offence against the general environmental provisions of the Energy Pipelines Act. A director will, however, continue to be personally liable under the general environmental provisions where that director has personally committed the offence.
Waste Management and Pollution Control Act – environmental offence liability
Section 91 of the Waste Management and Pollution Control Act currently contains similar wording to the liability provision (including the defence) currently in the Energy Pipelines Act as described above.
The amending provision in the Bill retains a Type 3 liability for directors however, it will only apply to a relevant offence contained in the declared provisions (not any offence against the Act as per the current provision) and the defence is redefined to where the defendant can prove (on the balance of probabilities) that he / she:
- was not in a position to influence the conduct of the body corporate in relation to the contravention; or
- took reasonable steps to prevent the contravention; or
- did not know, and could not reasonably have been expected to know, that the contravention would happen.
Unlike the new provision in the Energy Pipelines Act, under the new section 91 in the Waste Management and Pollution Control Act a director will have personal criminal liability for an offence against the general environmental and duty to notify provisions which is committed by a corporation unless the director can prove one or more of the defences on the balance of probabilities. The director will bear the legal burden to establish their defence which reverses the usual onus of proof in criminal law.
What are "reasonable steps"?
In deciding whether the executive officer took (or failed to take) "reasonable steps" to prevent the contravention, the court must, but is not limited to, consider any action the officer took directed towards ensuring the following (to the extent the action is relevant to the contravention):
- the body corporate arranged regular professional assessments of the body corporate's compliance with the declared provision;
- the body corporate implemented any appropriate recommendation arising from an assessment referred to above; and
- the body corporate's employees, agents and contractors had a reasonable knowledge and understanding of the requirement to comply with the declared provision.
It must also consider any action the officer took when the officer became aware that the contravention was, or could be, about to happen.
Transitional provisions and timing
The amending provisions will only apply to all of the conduct constituting the offence that occurred after commencement of the Act.
Debate was adjourned on the Bill and the next Legislative Assembly sittings are on 25, 26 and 27 August 2015.