Snapshot: criminal liability for corporate human rights violations in Australia

Criminal liability

What criminal charges can be asserted against businesses for the commission of human rights abuses or involvement or complicity in abuses? What elements are required to establish guilt?

A body corporate may be found guilty of offences under the Criminal Code Act 1995 (Cth) (the Criminal Code (Cth)) in respect of federal offences, or under the criminal legislation of an Australian state and territory, depending on the nature of an offence. The focus below is on the attribution of liability to corporations pursuant to the Criminal Code (Cth), although similar provisions exist in the criminal law of each Australian state and territory.

As a general rule, offences that are attributable to an individual can also apply to body corporates, subject to the general principles of corporate criminal responsibility set out in Chapter 2, Part 2.5, Division 12 of the Criminal Code (Cth). An offence generally consists of physical and fault elements (section 3.1 of the Criminal Code (Cth)), as outlined below.

• Physical element: an offence will be attributed to a body corporate if it was committed by an employee, agent or officer of a body corporate acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority (section 12.2 of the Criminal Code (Cth)).
• Fault element: if intention, knowledge or recklessness is a fault element in relation to a physical element of an offence, that fault element must be attributed to a body corporate that expressly, tacitly or impliedly authorised or permitted the commission of the offence (section 12.3 of the Criminal Code (Cth)). Such authorisation or permission may be established by proving that:
• the body corporate’s board of directors, or a high managerial agent of the body corporate, intentionally, knowingly or recklessly carried out the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence; or
• a corporate culture existed within the body corporate that directed, encouraged, tolerated or led to non-compliance with the relevant provision, or the body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision.

According to Division 11 of the Criminal Code (Cth), a body corporate may be held liable for attempt (section 11.1), complicity (section 11.2), joint commission (section 11.2A), incitement (section 11.4) and conspiracy (section 11.5).

Offences that carry terms of imprisonment under the Criminal Code (Cth) can result in pecuniary penalties being issued to companies, by virtue of sections 4B(2) and 4B(3) of the Crimes Act 1914 (Cth).

The Criminal Code (Cth) specifically identifies the following as human rights offences for which a body corporate can be found liable, provided that it is an Australian company or it carries on activities principally in Australia:

• child sex offences outside Australia (Division 272); and
• offences involving child abuse material outside Australia (Division 273).

However, generally each of the human rights offences captured in the Criminal Code (Cth) can apply to corporate entities as well as employees, agents or officers of the entity.

The Australian Law Reform Commission (ALRC) report on Australia’s corporate criminal liability regime was tabled in Federal Parliament on 31 August 2020. The report made 20 recommendations including the following.

• Section 12.2 of the Schedule to the Criminal Code (Cth) should be amended such that a physical element of an offence is taken to be committed by a body corporate if committed by an officer, employee or agent of the body corporate acting within actual or apparent authority (Recommendation 6).
• A corporation should be considered at fault when an employee, officer or agent of the corporation has the relevant state of mind for the particular criminal offence (Recommendation 7).
• The Australian government, together with state and territory governments, should develop a national debarment regime (Recommendation 15).
• The Crimes Act 1914 (Cth) should be amended to empower the court to order a pre-sentence report for a corporation convicted under Commonwealth law (Recommendation 16) and, when sentencing a corporation, to consider victim impact statements (Recommendation 17).
• The government should consider applying the new model of ‘failure to prevent’ offences to misconduct overseas by Australian corporations (Recommendation 19).

What defences are available to and commonly asserted by parties accused of criminal human rights offences committed in the course of business?

Section 12.3(3) of the Criminal Code (Cth) provides a due diligence defence in circumstances where the misconduct was committed by a high managerial agent of the body corporate. Where a high managerial agent of the body corporate intentionally, knowingly or recklessly engaged in the relevant conduct, or expressly, tacitly or impliedly authorised or permitted the commission of the offence, the body corporate will not be liable if it proves that it exercised due diligence to prevent the conduct, or the authorisation or permission.

Section 12.5 of the Criminal Code (Cth) provides a limited mistake of fact defence to bodies corporate in the case of strict liability (ie, an offence that has a physical element but no fault element). The body corporate will not be liable if it proves that, at or before the time of the conduct constituting the physical element, the employee, agent or officer of the body corporate who carried out the conduct was under a mistaken but reasonable belief about facts that, had they existed, would have meant that the conduct would not have constituted an offence and the body corporate proves that it exercised due diligence to prevent the conduct.

In what circumstances and to what extent can directors and officers be held criminally liable for involvement or complicity in human rights abuses? What elements are required to establish liability?

Directors and officers may be held criminally liable for the body corporate’s commission of, or involvement or complicity in, human rights abuses in the following circumstances:

• concurrent liability: where both the individual and the body corporate may be separately liable as principals in respect of the same offence or contravention (a form of direct liability);
• accessorial liability: where the individual is liable as an accessory to an offence or contravention for which the body corporate is principally liable (a form of indirect liability) – this could occur where a director or officer has aided, abetted, solicited, counselled, incited or procured the commission of the offence by the corporation; and
• managerial liability: where the individual is deemed to be liable as a principal for an offence or contravention because of that individual’s role and status in the management of the body corporate (a form of deemed liability).

For more information, see the ALRC report, 'Principled Regulation: Federal Civil and Administrative Penalties in Australia' (Final Report No. 95, 2002).

When can the courts disregard the separate legal personalities of corporate entities within a group in relation to human rights issues so as to hold a parent company liable for the acts or omissions of a subsidiary?

The courts may only disregard the separate legal personalities of corporate entities within a group in exceptional circumstances. The courts’ occasional decision to pierce the corporate veil is not grounded in any common or unifying principle. The methods of piercing the corporate veil usually relied upon are:

• fraud: where the parent controls the subsidiary and intentionally uses the subsidiary to evade a legal or fiduciary obligation;
• sham or façade: where the parent and corporate controller incorporates or uses the corporate form as a mask to hide its own real purpose;
• agency: where the shareholder of a company has such a degree of effective control that the company is held to be an agent of the shareholder and the acts of the company are deemed to be the acts of the shareholder;
• group enterprises: where there is sufficient common ownership and common enterprise between corporate entities in a group; for example, where a corporate group operates in a way so as to make each individual entity indistinguishable, where there are overlapping directors, officers and employees, or where there is a partnership between companies in a group; and
• unfairness or justice: where piercing the corporate veil would bring about a fair or just result.

Various statutory provisions also permit the piercing of the corporate veil in limited circumstances; for example, where a business engages in the slavery-like offences of servitude and forced labour, another company may be held liable under Divisions 270 and 271 of the Criminal Code (Cth) for ‘(a) taking any part in the management of the business; and (b) exercising control or direction over the business; and (c) providing finance for the business’.

If the corporate veil is pierced, the same defences and remedies as would be available to the subsidiary company are applicable and depend on the cause of action. In the context of corporate criminal human rights offences specifically, section 12.3(3) of the Criminal Code (Cth) provides a due diligence defence in circumstances where the misconduct was committed by a manager with the requisite level of authority to have deemed liability of the body corporate and section 12.5 provides a limited mistake of fact defence to bodies corporate in the case of strict liability (ie, an offence that has a physical element but no fault element).

In terms of remedies, the remedies available are typically penalties imposed on the perpetrator of the offence, which are prescribed for each offence pursuant to the Criminal Code (Cth).

In what circumstances and to what extent can businesses be held liable for human rights abuses committed by third parties?

Businesses may be held liable for human rights abuses committed by third parties, such as employees or agents of the business, if the physical element of the offence is committed by an employee or agent ‘acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority’ (section 12.2 of the Criminal Code (Cth)) and the fault element of the offence is established on the part of the business (section 12.3 of the Criminal Code (Cth)). In determining whether the employee or agent was ‘acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority’, the courts distinguish between ‘a mode, albeit improper, of doing that which the employee is employed to do and conduct which is outside the scope of the employee’s employment’: Tiger Nominees Pty Ltd v State Pollution Control Commission (1992) 25 NSWLR 715, 721A (Gleeson CJ).

Where a business is held liable for human rights abuses committed by third parties, the due diligence and limited mistake of fact defences apply. The remedies available for corporate human rights offences are typically penalties imposed on the perpetrator of the offence, which are prescribed for each offence pursuant to the Criminal Code (Cth).

Who may commence a criminal prosecution against a business? To what extent do state criminal authorities exercise discretion to pursue prosecutions?

As a general rule, at the federal level, there is a statutory right to commence a criminal prosecution unless legislation specifically indicates otherwise. That right is recognised in section 13 of the Crimes Act 1914 (Cth) and has been said to be ‘a valuable constitutional safeguard against inertia or partiality on the part of authority’ (per Lord Wilberforce in Gouriet v Union of Post Office Workers [1978] AC 435 at 477). However, the Criminal Code (Cth) provides that the Attorney-General’s written consent is required to bring proceedings under the following Divisions of the Criminal Code (Cth):

• 268 (genocide, crimes against humanity, war crimes and crimes against the administration of justice of the International Criminal Court);
• 270 (slavery and slavery-like offences);
• 272 (child sex offences outside Australia);
• 273B (protection of children); and
• 274 (torture).

Notably, an attempt at a private prosecution of Aung San Suu Kyi in 2018 for crimes against humanity failed because it did not have the written consent of the Attorney-General (see High Court decision Taylor v Attorney-General (Cth) [2019] 372 ALR 581).

In practice, almost all Commonwealth prosecutions are commenced by Commonwealth officers. Section 9(5) of the Director of Public Prosecutions Act 1983 (Cth) grants the Director of Public Prosecutions the power to take over a private prosecution. The main federal prosecution authority in Australia is the Commonwealth Director of Public Prosecutions (CDPP). The CDPP is responsible for prosecuting businesses for criminal offences under Commonwealth laws. Each state and territory also has its own prosecution authority that is responsible for prosecuting offences committed against the criminal law of that particular state or territory.

The CDPP applies a three-stage test when considering whether to commence a prosecution, outlined in its prosecution policy, which considers whether there is a prima facie case, whether there are reasonable prospects of success and whether there is public interest in proceeding with the prosecution.

What is the procedure for commencing a prosecution? Do any special rules or considerations apply to the prosecution of human rights cases?

The CDPP describes the procedure for commencing prosecution of a Commonwealth offence as follows.

• Investigation: the CDPP has no investigative powers. The federal law enforcement authorities that have the power to investigate companies and refer matters to the CDPP for criminal prosecution include the Australian Federal Police, the Australian Securities and Investments Commission, and the Australian Taxation Office. The investigator takes statements from witnesses and collects evidence to be used in criminal prosecution. The investigator must gather sufficient evidence to prepare a brief to the CDPP for the purposes of seeking the CDPP’s views as to whether there is enough evidence to substantiate a criminal charge.
• Brief assessment or decision to charge: the CDPP prosecutors then assess the brief in accordance with the Prosecution Policy of the Commonwealth. This stage can involve the CDPP requesting that further investigation be undertaken by the referring agency.
• Charging or commencing proceedings: if, during the brief assessment stage, the CDPP decides that charges should be laid, an initiating process (such as a prosecution notice or complaint and summons) will be sent to the defendant notifying them of the charge and the date that they are first required to attend court.

Law stated date

Give the date on which the information above is accurate.

1 February 2021