Talbot, Anna --- "Institutional criminal liability: the Royal Commission and beyond" [2017] PrecedentAULA 72; (2017) 143 Precedent 34

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INSTITUTIONAL CRIMINAL LIABILITY

THE ROYAL COMMISSION AND BEYOND

By Anna Talbot

The Royal Commission into Institutional Responses to Child Sexual Abuse (the Royal Commission) published its report and recommendations on criminal justice reforms in August 2017. Despite exploring the possibility, it did not recommend that criminal liability be introduced for institutions for child abuse offences. While criminal liability is clearly a strong statement that particular conduct is unacceptable in our community, would institutional criminal liability be useful in efforts to eradicate child abuse?^[1] This article explores this question, first by examining the concept of institutional criminal liability and then by analysing whether this form of liability would help keep children safer.

WHAT DOES INSTITUTIONAL CRIMINAL LIABILITY ACHIEVE?

Much as with criminal liability for individuals, criminal liability for institutions can achieve one or more of a number of aims. Criminal law constitutes guidance as to what is acceptable conduct in a community. Transgression of those laws results in condemnation and denunciation, by way of criminal sanction. Retribution and deterrence are also strong motivators for imposing criminal penalties. When particular actions are identified as ‘criminal’, that classification in itself is a strong indication that those actions should be avoided, and anyone (or any institution) engaging in such acts will be penalised, by way of court-imposed sanction, such as a fine, community service or a custodial sentence. In recent years, in particular, a focus of criminal law has increasingly been to rehabilitate the offender and restore the victim to the position they were in prior to the offence being committed against them, to the greatest extent possible.^[2] Penalties are increasingly (but by no means exclusively) targeted to these ends.

Criminal liability can also be meaningful for victims of crime. A finding of criminal guilt could be of comfort to survivors of institutional misconduct and confirm that what has happened to them is wrong in the eyes of the community, and that the institution as well as any individual perpetrator bears responsibility for that wrong. It can act as an incentive to take action if abuse is suspected – if office-bearers know that they might be held criminally liable for the (in)action of the institution in response to child abuse allegations, they might display greater vigilance. In this way, it could help to protect children.

However, criminal liability is not without its challenges. The threshold that must be met in establishing criminal liability is much higher than for civil liability. Where the institution is not a corporation, practical legal challenges might arise, especially around how to issue a penalty and determine who should be punished for the actions of the institution. A civil action at common law could be brought against an unincorporated institution, by way of an order that the executive or trustee represent the members. If damages were awarded, all members would be liable to pay them. It would clearly be inappropriate to apply such an approach in criminal proceedings.

Institutional criminal liability has developed in a number of selected areas, where serious personal or environmental damage arises in connection with an institution. In such circumstances, it may be difficult to identify a responsible individual who can be held accountable for the damage. The individual whose action caused the damage may have been implementing institutional policies, which were set by superiors. In such cases, holding that individual liable is unlikely to ameliorate the risk, as it does not address the role of the institution and its policies. Therefore, the guilty act and the guilty mind do not coexist in the one physical body, meaning that legal liability might not arise. Institutional criminal liability is a logical response to bridge that gap.

Extending the concept of criminal liability to institutions can be complex, and continues to raise questions regarding the capability of an abstract entity composed of individuals to be liable for a crime, rather than the individuals themselves. These challenges are compounded in relation to unincorporated associations, due to the absence of a separate legal personality. The former Tasmanian Director of Public Prosecutions Mr Tim Ellis SC, for example, has stated that he would have ‘real conceptual difficulty in envisaging how [he] would set out to a jury a case of manslaughter by an organisation, corporate or otherwise’.^[3]

An additional complication is penalties. Given that an institution has no ‘body’ to imprison, penalties are generally limited to those that are available in civil litigation. The primary penalty is financial, although orders can also be imposed requiring action from the organisation, such as implementing procedures or conducting remediation works.^[4]

Despite these challenges, the extension of criminal liability to institutions has proved attractive in a number of areas of law. With their separate legal identity, corporations are the types of institutions most easily subjected to criminal sanctions, and they are technically already the subject of criminal laws. Crimes of child abuse, however, have traditionally not given rise to corporate prosecutions. However, crimes that, by their nature only humans can commit, such as sexual crimes, are generally understood to be beyond the scope of corporate criminal liability.^[5]

EXISTING CRIMINAL LIABILITY FOR INSTITUTIONS

The Criminal Code Act 1995 (Cth) applies to bodies corporate in the same way that it applies to individuals: s12.1. Liability will arise in similar circumstances to vicarious liability, namely where the physical act is ‘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’: s12.2. Fault elements of intention, knowledge or recklessness will be met where the ‘body corporate ... expressly, tacitly or impliedly authorised or permitted the commission of the offence’: s12.3(2)(a), (b). The relevant knowledge can be held by the board of directors, a high managerial agent, or by way of a corporate culture that ‘directed, encouraged, tolerated or led to non-compliance’ or that ‘failed to create and maintain ... required compliance with the relevant provision’: s12.3(2)(c), (d).

Where negligence is the fault element, the standard threshold applies to corporations: negligence will arise where the conduct involves ‘(a) such a great falling short of the standard of care that a reasonable person would exercise in the circumstances; and (b) such a high risk that the physical element exists or will exist; that the conduct merits criminal punishment’: s5.5. In a corporate context, this can be demonstrated by showing that prohibited conduct was substantially attributable to ‘inadequate corporate management, control or supervision’ (s12.4(3)(a)) or ‘failure to provide adequate systems’: s12.4(3)(b).

Under the Work Health and Safety Act 2011 (Cth) (WHS Act) and similar legislation at the state and territory level,^[6] exposing workers and others to health and safety risks can be a crime. Where an individual has a duty under the WHS Act, if they engage in conduct that exposes someone to whom a duty is owed to a risk (of death, serious injury or illness), and they are reckless as to the risk, that individual can be liable to five years’ imprisonment and/or a fine of $300,000. If the individual is acting as a ‘person conducting the business or undertaking’ (PCBU), the available financial penalty increases to $600,000.^[7] If the offence is committed by a body corporate, fines of up to $3 million are available: s31.

The WHS Act also imputes offences to corporations where an act is engaged in on behalf of the corporation by an employee, agent or officer acting within the scope of their employment or authority: s244. The knowledge element can be satisfied where one of these people has the relevant level of knowledge.

This regime is accompanied by a system of inspections, with inspectors having powers to issue improvement notices to improve the safety of a workplace. Comcare is the Commonwealth regulator tasked with ensuring that the WHS Act is complied with, and has powers to prosecute when it is not.

Other state legislation allows for corporate criminal liability. In NSW, for example, under the Protection of the Environment Operations Act 1997 corporations can be liable for penalties for up to $5 million for ‘tier one’ offences, being those that are considered most serious under the Act. Individuals can be liable for penalties of up to $1 million or seven years’ imprisonment for the same offences.^[8] ‘Special executive liability’ attaches to corporate liability for selected offences under the Act, meaning all directors and managers will be held to have also contravened that provision unless they can prove that an exception applies: s169. Ancillary liability is also available for offences under the Act: s168.

Corporations can also be prosecuted for engaging in cartel behaviour, where they agree not to compete with market rivals to maximise their own profits and eliminate competition. While these prosecutions are rare, they can have a significant impact on discouraging future cartel behaviour. The first prosecution for cartel behaviour in Australia^[9] was against Nippon Yusen Kabushiki Kaisha Ltd (NYK), a Japanese shipping company that pleaded guilty to the charge and was fined $25 million in 2017.^[10] A plea of guilty contributed to mitigation of the penalty,^[11] as did past, and undertakings of future, co-operation.^[12]

EXISTING INSTITUTIONAL LIABILITY FOR CHILD ABUSE

The role that an institution can play in abuse has been recognised in law outside of the direct criminal context. Vicarious liability, individual criminal liability for office-bearers and of course, civil liability, are all available to ensure that the role of the institution, and office-bearers within it, is not overlooked in punishing child abuse.

Vicarious liability allows institutions to be held responsible for criminal acts of employees. In Lee v Smith & Ors,^[13] the Australian Defence Force was held vicariously liable for a rape committed by one of its employees against another of its employees, in the context of ongoing sexual harassment.

In South Australia, the offence of criminal neglect means that, where a defendant had a duty of care towards a child or vulnerable adult who has suffered serious harm as a result of an unlawful act, and the defendant was aware that there was a risk of serious harm and failed to take reasonable steps to protect the victim from that harm, the defendant can be held criminally liable.^[14] Such liability could be available for corporations^[15] or institutional office-bearers where such a duty arises.

In Victoria, the Crimes Act 1958 imposes an obligation to report suspected child sexual abuse (CSA) to the police, unless the individual has a reasonable excuse: s327. It is not a reasonable excuse to fail to report, under this section, merely because the individual is concerned about the perceived interests of an organisation. It is also an offence for a person in a position of authority in an organisation to fail to act to reduce or remove a risk of CSA. This offence is punishable by up to five years in prison: s49O.

Holding institutions civilly liable for child abuse is perhaps the most familiar accountability mechanism for personal injury lawyers. Even before the advent of the Royal Commission, corporations and other institutions had been ordered to pay damages for injuries arising out of child abuse.^[16] Imposing this penalty has, however, proved more difficult where the defendant institution is not a corporation, in the case of churches, for example.^[17]

CHILD ABUSE: IS INSTITUTIONAL CRIMINAL LIABILITY APPROPRIATE?

It was argued in research conducted for the Royal Commission that institutional criminal liability could be an appropriate way to eliminate the risk of CSA in institutions. Institutions can be ‘criminogenic’, meaning crime-causing, according to the research, and organisations can be directly responsible for abuse of children, by failing to protect victims and/or to report offenders.^[18]

The Royal Commission, however, did not recommend that institutional criminal liability for CSA be introduced. It provided three reasons for refraining from making this recommendation. First, the historical nature of much of the abuse that it has considered means that contemporary institutional criminal liability would not enhance the ability to protect children: the individuals involved in historical abuse may have left the institution or died, and policies and procedures may well have evolved since the abuse took place. Secondly, the Royal Commission questioned the utility of adding institutional liability to the individual criminal liability of the perpetrator: it was not clear what this would achieve if the individual and institutional liability were based on the same conduct. Finally, the Royal Commission noted the difficulty in identifying a ‘corporate culture’ in circumstances where internal responses to reports of child abuse were in conflict. Where internal whistleblowers were thwarted by more senior decision-makers within an institution, the question arose as to how a single institutional culture could be determined.

Ultimately, any kind of legal liability must seek to remedy the problem that gives rise to the liability. It is difficult to see how introducing criminal liability would assist in remedying the problem of child abuse. Concealing offences of child abuse is already a crime in some jurisdictions, as described above.^[19] Any ills that institutional criminal liability for the actual abuse might seek to remedy, such as institutional culture, can also be remedied by way of civil liability.

The practical differences between criminal and civil liability for institutions in relation to child abuse are limited. While survivors of abuse might attach value to seeing the institution that facilitated the abuse against them being criminally prosecuted (the importance of which should not be discounted), the practical difficulties of a criminal prosecution, with its higher standard of proof, must be considered. This difficulty gives rise to a risk of a failed prosecution, which could cause greater trauma to survivors who see the institution as clearly responsible for the trauma that they have suffered: a failed prosecution could compound that trauma, as the institution would be seen as officially escaping liability.

It is also difficult to see how making institutions criminally, rather than civilly, liable for abuse would assist victims in any material way, or discourage abuse or the hiding of abuse. The individual who would be the primary target of the disincentive, the offender, is already subject to criminal penalties as an individual. In some jurisdictions, institutions and their office-bearers may also be liable for concealing or facilitating abuse. The primary means of enforcing criminal penalties against institutions, fines, would not assist survivors in the same way that civil damages would.

The challenges in establishing institutional civil liability are by now well known. Limitation periods,^[20] the absence of an entity to sue,^[21] the absence of assets or insurance by which the institution might meet a claim for damages, and complications making vicarious liability difficult to establish,^[22] are just some of the barriers that survivors of child abuse might face in seeking a civil remedy. These challenges would not be any easier to overcome if criminal liability were available.

In the examples of institutional criminal liability referred to above, liability was connected with the institutional nature of the crime. Institutions (generally but not always corporations) directly benefit from the crimes, by way of increased profit (in cartel crimes) or reduced costs (in relation to workplace safety or environmental crimes). While it can be said that any institutional involvement in concealing the crime of child abuse might be motivated by reputational concerns,^[23] the abuse itself will not have such a motivation. Any institutional responsibility for child abuse is likely to arise from ‘incompetence, institutional defensiveness, poor communication or a refusal or failure to recognise the true nature and effect of the conduct on victims’.^[24]

Ultimately, the gap that institutional criminal liability meets, in terms of unifying the criminal act and the criminal mind, does not exist in relation to abuse.

The challenges of criminal liability, particularly the complexity involved in attaching liability to a corporate or non-corporate institution, and the higher standard of proof that must be met in criminal prosecutions, means that introducing this liability for child abuse would be difficult. Given the questionable ability of such liability to ensure greater safety for children in practice, or to assist in the healing for people who have been subjected to abuse as children, it is understandable that the Royal Commission refrained from recommending the extension of criminal liability to institutions in this way.

Anna Talbot is the ALA’s Legal and Policy Adviser. PHONE [phone] EMAIL [e-mail].

The author would like to thank Dr Andrew Morrison RFD SC for reviewing and commenting on a draft of this article. Any mistakes remain the author’s.

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^[1] While the Royal Commission’s terms of reference restrict its work to consideration of CSA, physical abuse of children can also give rise to lifelong injuries. As such, this article considers child abuse generally, without restricting discussion to a specific type of abuse. Discussion is only restricted to CSA where this is the express matter dealt with by legislation or other sources.

^[2] See Tasmania Law Reform Institute, Criminal Liability of Organizations: Final Report No 9, (April 2007), <http://www.utas.edu.au/__data/assets/pdf_file/0009/283752/CrimLiabOrgFinalA4.pdf> , part 3.

^[3] Letter from Mr Tim Ellis SC, then-Tasmanian Director of Public Prosecutions to Professor Kate Warner, then-director of the Tasmania Law Reform Institute, in response to Issues Paper No. 9 – Criminal Liability of Organisations, 5 October 2005, <http://www.utas.edu.au/__data/assets/pdf_file/0007/283768/DPP.pdf> .

^[4] See the NSW Law Reform Commission, Sentencing: Corporate Offenders Report (Report No. 102) (2003), Chapter 5, for a range of sentencing options in relation to corporations.

^[5] Dean v John Menzies (Holdings) Ltd [1981] JC 23, 35.

^[6] The Model WHS Act has been developed to allow uniform protections around Australia, and has been implemented in all jurisdictions other than Victoria and Western Australia. Equivalent legislation exists in ACT, NSW, NT, Queensland, SA and Tasmania. Each has minor variations, see Safe Work Australia, The Law in Your State, <https://www.safeworkaustralia.gov.au/law-and-regulation/law-your-state#variations-between-states-and-territories> for details.

^[7] A PCBU need not be a corporation, it can also be a partnership or an unincorporated association. It cannot, however, be a volunteer association. A volunteer association is defined as an association of volunteers carrying out work for community purposes that does not employ anyone to assist in the volunteer association’s work: s5.

^[8] Section 119. See Part 5.2 generally for Tier 1 offences.

^[9] Under the Competition and Consumer Act 2010 (Cth), s44ZZRG.

^[10] Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876, [244].

^[11] Ibid, [260].

^[12] Ibid, [261]-[270].

^[13] [2007] FMCA 59.

^[14] Criminal Law Consolidation Act 1935 (SA), s14.

^[15] See Acts Interpretation Act 1915 (SA), s4. Note, however, that the legislation provides for custodial sentences only for contravention of criminal neglect laws.

^[16] See, for example, NSW v Lepore [2003] HCA 4; (2003) 212 CLR 511 (Lepore); Prince Alfred College Incorporated v ADC [2016] HCA 37 (where relief was ultimately refused as a result of the claim being out of time, but the approach of the majority in Lepore was approved).

^[17] Trustees of the Roman Catholic Church for the Diocese of Sydney and Pell v Ellis [2007] NSWCA 117 (Ellis).

^[18] Arie Freiberg, Hugh Donnelly and Karen Gelb, Sentencing for Child Sexual Abuse in Institutional Contexts, July 2015, chapter 7, especially pp220-1.

^[19] Ibid.

^[20] Most jurisdictions around Australia have removed limitation periods for CSA, or are in the process of doing so. See for example, Limitation Amendment (Child Abuse) Act 2016 (NSW), Limitation of Actions (Child Sexual Abuse) and Other Legislation Amendment Act 2016 (Qld), Limitation of Action (Child Abuse) Act 2015 (Vic)).

^[21] Ellis.

^[22] Prince Alfred College Incorporated v ADC [2016] HCA 37.

^[23] Although the work of the Royal Commission has made it clear that any motivation to rehabilitate offenders was generally ineffective, merely facilitating further abuse of children.

^[24] See above note 18, 247.