Personal liability of officers under Commonwealth strict and absolute liability offences

What officer liability provisions do

Executive officer liability provisions are found in many Commonwealth Acts. These provisions allow officers to be held personally liable for offences committed by the body corporate. This represents a significant departure from the standard legal position, where liability typically rests solely with the company itself.

These provisions effectively reverse the usual corporate shield, exposing officers to personal legal consequences for corporate wrongdoing. Examples of Acts containing such provisions include the WHS Act, Customs Act, Migration Act, Environment Protection and Biodiversity Conservation Act, and the Fair Work Act (for specific accessorial provisions).

A key feature of these liability provisions is the requirement that the body corporate must have first contravened the relevant law. This establishes a direct link between the corporate action and the officer’s potential personal liability.

Three categories

The Council of Australian Governments (COAG) Personal Liability for Corporate Fault Reform Act 2012 standardised the categories of officer liability for Commonwealth strict and absolute liability offences. Three categories have been established, dictating the evidentiary burden on the officer. These categories affect which Acts are subject to each type.

Type 1 offences impose a full reverse onus. This means an officer is liable for the contravention unless they can prove they took reasonable steps to prevent it. This aligns with the WHS Act primary duty — section 19 and similar duties.

Type 2 offences operate under a partial reverse onus. Liability arises if the prosecution proves the officer had knowledge or was reckless, and that the officer was in a position to influence the conduct that led to the contravention. Type 3 offences involve accessorial liability, meaning the prosecution must establish the officer’s knowing involvement in the contravention.

WHS officers — section 27 of the model Act

Section 27 of the model Work Health and Safety Act places a positive duty on officers to exercise due diligence to ensure a person conducting the business or undertaking (PCBU) complies with its WHS duties. This means officers are expected to actively take steps to prevent WHS breaches, rather than simply relying on the PCBU to fulfil its obligations. WHS industrial manslaughter state comparison highlights the varying approaches across jurisdictions.

Officers can be prosecuted personally for a breach of section 27, even if the PCBU is also prosecuted for the same matter. Due diligence involves several key actions, including keeping up to date with WHS matters, understanding the operations and associated hazards, ensuring adequate resources are available and used for WHS purposes, and ensuring that incidents are reported and responded to appropriately.

Industrial manslaughter offences generally apply to officers and PCBUs separately, meaning both can face prosecution and penalties for failures that result in a death.

Insurance and D&O cover

Directors' and officers' (D&O) liability insurance may provide coverage for defence costs and certain civil penalties arising from alleged breaches of the Corporations Act 2001 (Cth). However, it is important to note that such insurance generally cannot cover criminal fines imposed as a result of offences.

Company law places restrictions on indemnification of officers. Section 199B of the Corporations Act 2001 (Cth) prevents a company from indemnifying an officer against liability owed to the company or a related entity. Similarly, section 199A prohibits indemnification for wilful breaches of duty or contraventions of sections 182 or 183. This limitation is relevant as it impacts the extent to which a company can contribute to an officer’s legal expenses. Director penalty notice regime

The availability of insurance to cover civil penalties for non-deliberate contraventions varies. While permissible in many jurisdictions, the specific rules are subject to state-by-state and Act-by-Act variation, requiring careful consideration of the applicable legislation.