What’s happened?

On 11 January 2013, the Miscellaneous Acts Amendment (Directors’ Liability) Act 2012 (NSW) (Act) will commence.

Under current NSW legislation, a director or a manager of a corporation can:

  1. in certain circumstances, be held criminally liable for actions of the corporation which constitute an “environmental offence”, and
  2. bear the onus of proving beyond a reasonable doubt that one or more elements of the offence have not been established.

Broadly speaking, subject to certain exceptions, the Act shifts the onus of proving that an ‘environmental offence’ has been committed by a director or manager of a corporation wholly to the prosecutor. That is, the Act restores the “default” position that applies in the general criminal law in respect of the evidentiary burden borne by defendants charged with a criminal offence.

Who needs to know?

Anyone who is a director or manager of a corporation.

Implications

The key implications of the Act are that, in respect of the offence provisions modified by the Act:

  1. regulatory authorities may be less likely to lay charges against a director or a manager of a corporation except in cases of flagrant contraventions of the offence provisions, and
  2. where a charge is laid, a director or a manager of a corporation will often face a less onerous task in defending the charge.

Background

Central Object of the Act

The central object of the Act is to create uniformity in the way that various Acts impose ‘Executive Liability’ and ‘Accessorial Liability’ in relation to offences by corporations.

Three Types of Liability

The Act does this by distinguishing between three types of liability:

  1. the liability which a corporation has for the commission of an offence,
  2. the liability which a person has as a director or manager of a corporation for the commission of an offence by the corporation (Executive Liability), and
  3. the liability which a person has as an accessory to the commission of an offence by a corporation (Accessorial Liability).

Act affects NSW Environmental Legislation

Included in the environmental statutes which are amended by the Act are:

  1. Contaminated Land Management Act 1997,
  2. Environmentally Hazardous Chemicals Act 1985,
  3. Heritage Act 1977,
  4. Mining Act 1992,
  5. National Parks and Wildlife Act 1974,
  6. Native Vegetation Act 2003,
  7. Protection of the Environment Operations Act 1997, and
  8. Threatened Species Conservation Act 1995.

The Act’s effect on the Contaminated Land Management Act 1997 and the Protection of the Environment Operations Act 1997 are discussed in more detail below.

What does the Act do?

Type 1 Executive Liability

The Act amends the Executive Liability created by these NSW environmental statutes as follows:

  1. The Act removes the “reverse onus” of proof  currently borne by a director or manager to satisfy a court that he or she:
  1. was not in a position to influence the conduct of the corporation in relation to its contravention of the particular statutory provision, or
  2. used all due diligence to prevent the contravention by the corporation.

The prosecutor is now required to prove these elements, as well as all other elements of the offence, beyond reasonable doubt.

In addition, the prosecutor is also required to prove beyond a reasonable doubt that the director or manager failed to take all reasonable steps to prevent or stop the commission of the offence by the corporation . 

This new type of Executive Liability is called ‘Type 1 Executive Liability’.

There are two exceptions:

  1. first, there will be no Executive Liability under the Heritage Act 1977, and
  2. second, in the case of the Protection of the Environment Operations Act 1997 the onus of proof in relation to certain offences will remain unchanged.

Accessorial Liability

The Act provides that a person will have Accessorial Liability in respect of an offence if all of the following conditions are met:

  1. A corporation commits an offence.
  2. The person is either:
  1. a director of the corporation, or
  2. an individual who:
  1. is involved in the management of the corporation, and
  2. is in a position to influence the conduct of the corporation in relation to the commission of the corporate offence.
  1. The person:
  1. aids, abets, counsels or procures the commission of the corporate offence,
  2. induces, whether by threats or promises or otherwise, the commission of the corporate offence,
  3. conspires with others to effect the commission of the corporate offence, or
  4. is in any way knowingly concerned in or party to the commission of the corporate offence.

The prosecution bears the onus of proving each of the elements mentioned in (a) to (c) above beyond a reasonable doubt. The prosecution may proceed against a person for Accessorial Liability even if the prosecution does not proceed against the corporation.

Contaminated Land Management Act 1997

Executive Liability

The Act inserts a new section 98 into the Contaminated Land Management Act 1997 (NSW) (CLM Act) which creates Type 1 Executive Liability in relation to the following three sections of the CLM Act only:

  1. Section 14(6) creates an offence where a corporation, having been served with a management order, without reasonable excuse fails to comply with the order,
  2. Section 28(4) creates an offence where a corporation fails to comply with an ongoing maintenance order, and
  3. Sections 60(1) and (2) impose duties on a corporation whose activities have contaminated land, or which is an owner of land that has been contaminated, to report the contamination.

‘Director’ is defined for these purposes by reference to the Corporations Act 2001 (Cth).

‘Reasonable steps’ is defined as including, but not limited to, action of a kind that is reasonable in all of the circumstances. Specifically, ‘reasonable steps’ includes:

  1. action towards assessing the corporation’s compliance with the provision creating the corporate offence and ensuring that the corporation arranged regular professional assessments of its compliance with the provision,
  2. action towards ensuring that the corporation’s employees, agents, contractors are provided with information, training, instruction and supervision appropriate to them to enable them to comply with the provision,
  3. action towards ensuring that plant, equipment, structures, work systems and other processes that are relevant to compliance with the provision creating the corporate offence are appropriate in all of the circumstances, and
  4. action towards creating and maintaining a corporate culture that does not direct, encourage, tolerate or lead to non-compliance with the provision creating the corporate offence.

Protection of the Environment Operations Act 1997 (NSW)

Executive Liability

The Act inserts a new section 169A into the Protection of the Environment Operations Act 1997 (NSW) (POEO Act) creating Type 1 Executive Liability in respect of the 20 offence provisions listed in the section.

‘Director’ and ‘reasonable steps’ are defined for these purposes in the same ways as they are defined above in relation to the CLM Act.

Special’ Executive Liability

In addition to the 20 Type 1 Executive Liability provisions listed in section 169A, the POEO Act separately identifies 19 “Special Executive Liability” offences in a new section 169(1A).

The Special Executive Liability offences remain unchanged under the Act save for these offences being identified as ones attracting the special liability.  In respect of these offences, the “reverse onus of proof” borne by directors and managers of Corporations has been retained.

Other Legislation

In the same way as described above, the Act creates Type 1 Executive Liability and Accessorial Liability in each of the following statutes:

  1. Environmentally Hazardous Chemicals Act 1985,
  2. Mining Act 1992,
  3. National Parks and Wildlife Act 1974,
  4. Native Vegetation Act 2003, and
  5. Threatened Species Conservation Act 1995.

Liability in the Heritage Act is confined to Accessorial Liability only.