I rise to speak on the Statute Law Amendment (Directors’ Liability) Bill 2012. This bill amends directors liability provisions in 18 different acts. Specifically the bill implements a Council of Australian Governments (COAG) agreement that reforms and harmonises the law on criminal liability for company directors. The bill does not actually change the underlying offences or penalties, but it changes the circumstances in which personal liability may be imposed by inserting new model provisions that are supposed to bring consistency across Australia.
Opposition members in the lower house indicated that Labor does not oppose the bill, but I will raise some of Labor’s concerns later in my contribution.
The genesis of this bill goes back as far as 2006. The previous government was at the COAG table at the time. The commonwealth Corporations and Markets Advisory Committee released a report that concluded that the approach at the time to impose personal criminal liability on company directors lacked coherence and consistency. The central concern was that personal criminal liability had a blanket approach that did not properly distinguish between the liability of a corporation and the liability of an individual director. In other words, directors could often be liable for a corporation’s offence automatically, even when that seemed inappropriate.
Following on from that report, at a COAG meeting the state governments agreed to what was called the national partnership agreement to deliver a seamless national economy 2008. The broad principles adopted as part of that agreement were that directors should only be liable for a corporation where the director was able to influence the conduct of the corporation when necessary to promote compliance with legislation or where justified by public policy. More specific guidelines were then developed by a COAG working group, and we have this bill before us today as a result of that working group and those guidelines.
As I previously mentioned, this bill amends 18 acts that currently impose personal criminal liability on a director or manager for offences by a corporate body. The bill does not amend the underlying offences committed by a body corporate or the penalty provisions. In the changing circumstances where liability can be imposed, the bill uses model provisions that set out different types of liability, which I will go to briefly in a moment. Those model provisions are supposed to bring the consistency that is sought by COAG.
In a number of specific acts directors liability provisions are replaced with accessorial liability only.
Those changes occur in the Broiler Chicken Industry Act 1978, the Business Franchise (Petroleum Products) Act 1979, the Disability Act 2006, the ANZAC Day Act 1958, the Electoral Act 2002, the Shop Trading Reform Act 1996, the Congestion Levy Act 2005 and the Payroll Tax Act 2007. Acts where the directors liability provision is replaced with a model directors liability provision or a combination of liability provisions include the Agricultural and Veterinary Chemicals (Control of Use) Act 1992, the Dairy Act 2000, the Food Act 1984, the Liquor Control Reform Act 1998, the Livestock Disease Control Act 1994, the Local Government Act 1989, the Surveillance Devices Act 1999, the Taxation Administration Act 1997, the Duties Act 2000 and the Unclaimed Money Act 2008. That is a total of 18 acts.
The four different types of liability that are spelt out in the bill essentially go to four different areas. The first is the failure to exercise due diligence.
This is a liability that arises out of a director’s failure to exercise due diligence to prevent an offence by a corporation. There are a range of relevant factors that are set out to assess whether the director has failed to exercise due diligence.
Firstly, there is the matter of what the director ought to have known about the offence and what steps they reasonably could have taken.
Secondly, there is the failure to exercise due diligence with evidential burden of proof, and this liability also arises out of the director’s failure to exercise due diligence to prevent an offence by the corporation. It places an evidential burden of proof on the director, which means that where a body corporate commits an offence, the burden is on the director to show that they exercised due diligence to try to prevent it.
Once the director raises evidence that suggests a reasonable possibility that they exercised due diligence, the burden shifts to the prosecution to prove a lack of due diligence beyond reasonable doubt. If the director cannot present such evidence, he or she is deemed to be guilty.
Thirdly, there is the failure to exercise due diligence with a legal burden of proof, and this is a reverse onus provision. It means that when the body corporate commits an offence, the director is presumed liable unless he or she can prove that they exercised due diligence to prevent the offence. The accessorial liability also requires the prosecution to prove that the director either authorised or was knowingly concerned in the commission of the offence by the body corporate, and such liability does not depend on whether the corporation has in fact been prosecuted. However, any defence available to the corporation is available to the director.
Labor’s view on what is before us is that this bill has been a long time coming. It had its genesis in 2006. Labor governments at the COAG table were the engine drivers in terms of the national reform agenda. We have supported this sort of consistency across our state borders to provide more clarity, consistency and transparency in the way we govern our respective organisations. We also think this is a bit of catch-up by the government. The previous government was certainly at the front of the queue when it came to these sorts of reforms. This should have been in the legislative reform pipeline of this government way before March 2013.
However, having said that, we believe there has been ample opportunity for this government to talk up these issues over time, and it has failed to do so. That is unlike Labor, which has addressed this very issue in its own jobs plan. Page 52 of Victorian Labor’s Plan for Jobs and Growth states:
“The Australian Institute of Company Directors (AICD) has identified the significant increase in the imposition of criminal liability of company directors … in hundreds of statutes across Australia.”
We challenge the imposition of personal criminal liability on a director in instances of compelling threats to public health or safety that may result in death or serious injury. Where directors have knowingly authorised or recklessly permitted serious contraventions the imposition of personal criminal liability is appropriate. We say that a Labor government will review the Victorian statute book with the objective of assessing all instances of criminal director liability and ascertaining whether such a liability satisfies the public interest. We also say on a separate but related issue that, where appropriate, Labor will commit to harmonising the model rules under the Associations Incorporation Act 1981 with those used by the Australian Institute of Company Directors.
I also want to make note of three other things. It is important to note that the bill does not amend the Occupational Health and Safety Act 2004 or the Environment Protection Act 1970 — and rightly so, given that COAG did not seek changes to these on public policy grounds. Criminal offences under the occupational health and safety laws are extremely serious, and we would argue that a compelling case is needed for any amendment. Naturally any changes to directors liability for offences under these acts would be heavily scrutinised by Labor.
In terms of the model provisions being non-binding, the fact that this government has stated that it intends — it uses the word ‘intends’ — to use the model provisions in future legislation which imposes directors liability shows that there is nothing in the bill that requires the government to do so, and it begs the question of whether the government is fully committed to the COAG principles that have been worked on for some seven years. If it does not use the model provisions in the future, the states will end up having the same patchwork of provisions that necessitated the original COAG agreement.
The other issue that has been raised by most of the Labor speakers in the Assembly is how the bill relates to the ANZAC Day Act. We find it quite bewildering that currently businesses, mostly cinemas and entertainment venues, can open on the morning of Anzac Day without permission and seem to get away with it and will be able to get away with it even more under this bill. We argue that this bill offers a lower standard than that which currently exists.
It is odd that the government has prioritised this as part of its reform of corporate law. We hope that government speakers will explain why they think that the present law is unduly harsh on those who breach the ANZAC Day Act and further explain how they are satisfied that this will not increase the likelihood of businesses operating in an inappropriate and disrespectful manner on such an important day.
Whilst we have some concerns on the edges overall, this bill is non-controversial and straightforward, and it provides greater clarity and consistency throughout the nation. We are pleased that the government finally has its act together in having this piece of legislation before the house today.