The Australian Federal Government has introduced a new bill, the Personal Liability for Corporate Fault Reform Bill 2012, which (if passed) will be good news for directors and officers of some life sciences companies. It is part of a reform project, the purpose of which is to harmonise the imposition of personal criminal liability for corporate fault across Australian Federal and State legislation.

This Bill, if passed, will amend Australian federal laws, to reduce personal liability for directors and officers in certain situations.  The Government's intention is that where legislation imposes liability on directors for actions or omissions of a company, it is fair and principled, and is not imposed as a matter of course.

Potential good news for officers of companies which operate private hospitals: proposed amendments to the Health Insurance Act 1973 (HIA).

It is an offence under the HIA for a proprietor of a private hospital to offer or accept a bribe to enable a patient to be admitted to the hospital under certain circumstances. The HIA goes further and makes an officer of a corporation guilty of an offence where the corporation has committed an offence. This includes an officer who wilfully authorises or permits the commission of the offence. This personal liability is proposed to be repealed. 

No change for officers of companies which provide pathology and diagnostic imaging services

Other sections of the HIA impose offences relating to the making of bribes or threats to induce a person to provide certain medical services. These offences were aimed at encouraging fair competition between providers of pathology and diagnostic imaging services, and to deal with claims of prohibited practices within the pathology sector in particular. These provisions had been included in consultation with the pathology industry at the time. The Government considers that regulation without personal liability has proved ineffective in combating prohibited practices within the sector. The Bill does not remove the personal liability imposed by these sections; however, it is proposed to insert notes to make clear that personal liability may apply.

Potential good news for executives of companies which supply healthcare products: proposed amendments to the Therapeutic Goods Act 1989 (TGA) 

Currently, the TGA applies blanket liability to executives of a company where the company commits an offence under the Act, and the executive was in a position to influence the conduct, knew that the conduct would occur, and failed to take reasonable steps to prevent the conduct. Consequently, a large number of offences are subject to personal liability. 

Offences under the TGA have three tiers of seriousness, based on the level or likelihood of harm. While personal liability is retained for the more serious offences, in general the Bill removes personal liability from the offences of the lowest tier of seriousness. Additionally, the blanket liability provision is proposed to be removed, and replaced by a requirement that only certain provisions are subject to personal liability. This approach is intended to ensure that for any future proposed offences under the TGA, a positive policy decision will be required to apply personal liability by adding it to the table inserted by section 54BA, rather than having it apply by default. It is proposed to insert notes to offences to make clear where personal liability will continue to apply.

For the more serious offences, the Government does not propose to remove personal liability for executives.  As the TGA essentially governs the supply of healthcare products to the Australian public, justifications for the retention of personal liability include the serious harm that could result from supply of unsafe healthcare products, and the likelihood that suppliers may be smaller companies for which company liability would be insufficient to promote compliance. Additionally, a court is to have regard to any action the officer took to ensure the corporation was aware of the need to comply with the Act, and the action taken upon becoming aware of the commission of the offence. Combined with the required level of involvement for the relevant officer (essentially a negligence standard), the Government considers that retention of personal liability for a number of offences under the TGA is warranted on strong public policy grounds