Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No 1) Bill 2017 [2017] AUSStaCSBSD 349 (18 October 2017)

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Purpose	This bill seeks to amend various Acts in relation to superannuation Schedule 1 replaces the 'scale test' with a broader 'outcomes test' which MySuper trustees must consider to ensure that maximum outcomes for members Schedule 2 provides the Australian Prudential Regulation Authority (APRA) the power to refuse a registerable superannuation entity (RSE) licensee a new authority to offer a MySuper product or to cancel an existing authority Schedule 3 imposes civil and criminal penalties on directors of RSE licensees who fail to execute their responsibilities Schedule 4 increases APRA’s supervision and enforcement powers when a change of ownership or control of an RSE licensee takes place Schedule 5 amends APRA’s supervision and enforcement powers to include the power to issue a direction to an RSE licensee where APRA has prudential concerns Schedule 6 requires RSE licensees to make publically available their portfolio holdings Schedule 7 requires RSE licensees to hold annual members’ meetings Schedule 8 provides APRA with the authority to obtain information on expenses incurred by RSE and RSE licensees in managing or operating the RSE
Portfolio	Treasury
Introduced	House of Representatives on 14 September 2017
Scrutiny principles	Standing Order 24(1)(a)(i) and (iv)

Strict liability offences^[100]

1.139 Proposed section 29JCB introduces a new provision which makes it an offence of strict liability for a person to hold a controlling stake in a registrable superannuation entity (RSE) licensee without approval. The offence is subject to a maximum penalty of 400 penalty units for each day on which the person holds a controlling stake without approval. The explanatory memorandum justifies the strict liability offence by stating that it is necessary to ensure the integrity of the regulatory regime.^[101]

1.140 Proposed section 131DD introduces a new provision which makes it an offence if a person fails to comply with a direction given by the Australian Prudential Regulation Authority (APRA) to an RSE licensee or a connected entity. Each offence is stated to be one of strict liability and subject to a maximum penalty of 100 penalty units. The explanatory memorandum states that the gravity of consequences following non-compliance with a direction makes it appropriate for the non-compliance to be a strict liability offence, and that 'this is also likely to significantly enhance the effectiveness of the enforcement regime in deterring the conduct'.^[102]

1.141 Under general principles of the criminal law, fault is required to be proved before a person can be found guilty of a criminal offence (ensuring that criminal liability is imposed only on persons who are sufficiently aware of what they are doing and the consequences it may have). When a bill states that an offence is one of strict liability, this removes the requirement for the prosecution to prove the defendant's fault. In such cases, an offence will be made out if it can be proven that the defendant engaged in certain conduct, without the prosecution having to prove that the defendant intended this, or was reckless or negligent. As the imposition of strict liability undermines fundamental criminal law principles, the committee expects the explanatory memorandum to provide a justification for any imposition of strict liability, including clearly outlining whether the approach is consistent with the Guide to Framing Commonwealth Offences.^[103]

1.142 In this regard, the committee notes that the Guide to Framing Commonwealth Offences states that strict liability should be applied only where the penalty does not include imprisonment and the fine does not exceed 60 penalty units for an individual (or 300 penalty units for a body corporate).^[104] In this instance, the proposed offences are subject to a maximum penalty of 100 penalty units or 400 penalty units (applicable each day of the contravention). The explanatory memorandum does not explain why these proposed penalties exceed the 60 penalty unit amount set out in the Guide to Framing Commonwealth Offences.

1.143 The committee requests the Minister's justification as to the proposed penalty applicable to each strict liability offence with reference to the principles set out in the Guide to Framing Commonwealth Offences.^[105]

Reversal of evidential burden of proof
Broad scope of offence
Significant matters in delegated legislation^[106]

1.144 Proposed subsection 29PA(1) makes it an offence for directors of an RSE licensee (and certain other persons) not to attend an annual members' meeting (AMM) if they had been given prior notice of the AMM. Proposed subsection 29PA(6) provides an exception (offence-specific defence) to this offence, stating that the offence does not apply if other directors would be attending and those directors would constitute a quorum of directors for a board of directors meeting.^[107] The offence carries a maximum penalty of 50 penalty units.

1.145 Proposed subsections 29PB(2), 29PC(2), 29PD(2) and 29PE(2) make it an offence for a responsible officer of an RSE licensee, an individual trustee, an auditor or an actuary not to answer questions raised at an AMM. Proposed subsections 29PB(3), 29PC(3), 29PD(3) and 29PE(3) provide exceptions (offence-specific defence) to these offences, stating that the offence does not apply when the responsible person does not answer questions in certain circumstances.^[108] The offence carries a maximum penalty of 50 penalty units.

1.146 Subsection 13.3(3) of the Criminal Code Act 1995 provides that a defendant who wishes to rely on any exception, exemption, excuse, qualification or justification bears an evidential burden in relation to that matter.

1.147 At common law, it is ordinarily the duty of the prosecution to prove all elements of an offence. This is an important aspect of the right to be presumed innocent until proven guilty. Provisions that reverse the burden of proof and require a defendant to disprove, or raise evidence to disprove, one or more elements of an offence, interferes with this common law right.

1.148 While in this instance the defendant bears an evidential burden (requiring the defendant to raise evidence about the matter), rather than a legal burden (requiring the defendant to positively prove the matter), the committee expects any such reversal of the evidential burden of proof to be justified. The reversals of the evidential burden of proof in proposed subsections 29PA(6), 29PB(3), 29PC(3), 29PD(3) and 29PE(3) have not been addressed in the explanatory materials.

1.149 In addition, in relation to both the obligation to attend an AMM and the requirement to answer questions at an AMM, it appears the matters contained in the defences to these broadly framed offences could be more appropriately framed as elements of the offence. The committee considers that the offence-creating provision should state the essential elements of the offence and a matter that is relevant to whether an offence has been committed should generally form part of the offence itself, and should not unnecessarily be included as an offence-specific defence. For example, the offence provision relating to the requirement to answers questions at an AMM could provide that it is a requirement to answer any questions that are relevant, that would not be in breach of the governing rules or any law, and that would not result in detriment to the members taken as a whole (rather than these matters being listed as exceptions to the offence).

1.150 In addition, the offence not to answer questions at an AMM^[109] includes an offence-specific defence to provide that the requirement to answer questions does not apply in any circumstances prescribed by the regulations. The committee's view is that significant matters, such as exceptions to offence provisions, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this case, the explanatory memorandum does not explain why it is considered necessary to provide that the regulations may prescribe other exceptions to the offence relating to the obligation to answer questions.

1.151 The committee requests the Minister's advice as to the appropriateness of amending the bill to provide that the exceptions to these offences be included as elements of the offence, rather than as exceptions.

1.152 If this approach is not considered appropriate, the committee requests the Minister's advice as to why it is proposed to use offence-specific defences (which reverse the evidential burden of proof) in this instance. The committee's consideration of the appropriateness of a provision which reverses the burden of proof is assisted if it explicitly addresses relevant principles as set out in the Guide to Framing Commonwealth Offences.^[110]

1.153 In addition, the committee also requests the Minister's advice as to why it is proposed to allow the regulations to prescribe other exceptions to the offence relating to the obligation to answer questions.

[100] Schedule 4, item 9, proposed section 29JCB; Schedule 5, item 11, proposed section 131DD. The committee draws Senators’ attention to these provisions pursuant to principle 1(a)(i) of the committee’s terms of reference.

[103] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 22–25.

[104] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, p. 24.

[105] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 22–25.

[106] Schedule 7, item 5, proposed subsections 29PA(6), 29PB(3), 29PC(3), 29PD(3) and 29PE(3). The committee draws Senators’ attention to these provisions pursuant to principles 1(a)(i) and (iv) of the committee’s terms of reference.

[109] See proposed subsections 29PB(3)(d), 29PC(3)(d), 29PD(3)(d) and 29PE(3)(d).

[110] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 50-52.

Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests