Corporate Culture and Systems Intentionality: part of the regulator’s essential toolkit

ABSTRACT

The recent Law Commission of England and Wales review of corporate criminal liability has presented a range of options to the Government to address current deficiencies in the law of corporate attribution. This article explores the nature and operation of two holistic models closely considered by the Law Commission, but which were not included in the suite: the distinctive Australian ‘Corporate Culture’ model and a novel model of ‘Systems Intentionality’. In so doing, the analysis sheds considerable light on the comparative nature, strengths and limitations of Failure to Prevent offences, which formed a key element in the Law Commission’s reform recommendations. Using the Rolls Royce Deferred Prosecution Agreement proceedings as a case study, the article demonstrates how, far from being foreign and uncertain conceptual tools, Corporate Culture and Systems Intentionality are essential parts of the regulatory toolkit that deserve further consideration given the complex reality of modern corporate defendants.

KEYWORDS:

• Corporate attribution
• corporate liability
• Systems Intentionality
• corporate culture
• failure to prevent
• corporate criminal liability
• Rolls-Royce

Acknowledgments

We would like to extend our sincere thanks to Eva Micheler and David Gindis for their very helpful feedback on earlier versions of this paper, which improved it greatly. The responsibility for all remaining infelicities, errors and omissions rests with us.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Law Commission, Corporate Criminal Liability (Options Paper, 10 June 2022) paras 6.34–6.41, para 1.4, ch 6 (Law Commission Options Paper).

2 ibid paras 6.30–6.46. The model is developed in the following publications: Elise Bant, ‘Culpable Corporate Minds’ (2021) 48 University of Western Australia Law Review 352; Elise Bant and Jeannie Marie Paterson, ‘Systems of Misconduct: Corporate Culpability and Statutory Unconscionability’ (2021) 15 Journal of Equity 63; Jeannie Marie Paterson, Elise Bant and Henry Cooney, ‘Australian Competition and Consumer Commission v Google: Deterring Misleading Conduct in Digital Privacy Policies’ (2021) 26 Communications Law 136; Elise Bant, ‘Catching the Corporate Conscience: A New Model of “Systems Intentionality”’ [2022] Lloyds Maritime and Commercial Law Quarterly 467; Elise Bant, ‘Reforming the Laws of Corporate Attribution: “Systems Intentionality” Draft Statutory Provision’ (2022) 39 Company & Securities Law Journal 259; Elise Bant, ‘The Culpable Corporate Mind: Taxonomy and Synthesis’ (ch 1), ‘Systems Intentionality: Theory and Practice’ (ch 9), Modelling Corporate States of Mind through Systems Intentionality’ (ch 11) and, with Jeannie Marie Paterson ‘Automated Mistakes’ (ch 12), all in Elise Bant (ed) The Culpable Corporate Mind (Hart Publishing 2023); Elise Bant, ‘Corporate Evil: A Story of Systems and Silences’ in Penny Crofts (ed), Evil Corporations (Routledge, Oxford) (forthcoming 2024); Elise Bant, ‘Corporate Mistake’ in Jodi Gardner et al. (eds), Politics, Policy and Private Law (Hart Publishing, Oxford) (forthcoming 2024).

3 Law Commission Options Paper (n 1) para 6.54.

4 Justice Robert French, ‘The Culture of Compliance – a Judicial Perspective’ [2003] Federal Judicial Scholarship 16.

5 Australian Law Reform Commission, Corporate Criminal Responsibility (Discussion Paper No 87, November 2019) para 1.21 (ALRC Discussion Paper); Australian Law Reform Commission, Corporate Criminal Responsibility (ALRC Final Report, April 2020) paras 1.15, 1.25 (ALRC Final Report). The ALRC’s expansive approach was fortified by the lack of existing, principled lines of demarcation between civil and criminal corporate regulation in Australia: see ALRC Final Report ch 5. Cf Law Commission Options Paper (n 1) para 7.9, describing regulatory offences as ‘not truly criminal’. On the fuzzy boundary between regulatory and criminal offences, see Peter Cartwright, Consumer Protection and the Criminal Law: Law, Theory, and Policy in the UK (Cambridge University Press 2001) ch 5; Celia Wells, Corporations and Criminal Responsibility (2nd edn, OUP 2001) ch 1.

6 These are the subject of extended consideration in the Law Commission Options Paper (n 1) ch 8.

7 cf Law Commission Options Paper (n 1) para 6.23, discussed below.

8 ALRC Final Report (n 5) paras 4.50–4.57. See New York Central & Hudson River Railroad Co v United States (1909) 212 US 481. In England, see DPP v Kent and Sussex Contractors Ltd [1944] KB 146; R v ICR Haulage Ltd [1944] KB 551; Moore v I Bresler Ltd [1944] 2 All ER 515. In Australia, vicarious liability was applied by the High Court in R v Australasian Films Ltd (1921) 29 CLR 195 and Morgan v Babcock & Wilcox Ltd (1929) 43 CLR 163.

9 It remains contentious in Australia whether vicarious liability entails that the corporation is responsible for the act of another, or the wrong of another: see Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd (2016) 250 FCR 136, 147–49 [48]–[58] (Davies, Gleeson and Edelman JJ). If the latter, then the individual’s mental state must still be established.

10 Wells (n 5) 152–53; Pamela H Bucy, ‘Corporate Ethos: A Standard for Imposing Corporate Criminal Liability’ (1991) 75 Minnesota Law Review 1095, 1104; William S Laufer, ‘Corporate Bodies and Guilty Minds’ (1994) 43 Emory Law Journal 647, 659; William S Laufer, Corporate Bodies and Guilty Minds: The Failure of Corporate Criminal Liability (University of Chicago Press 2006) 17–25; Mark D’Souza, ‘The Corporate Agent in Criminal Law: An Argument for Comprehensive Identification’ [2022] CLJ 91; Eva Micheler, Company Law: A Real Entity Theory (Oxford University Press, 2021) [5.3.4]. For an important and novel corrective justice explanation of strict liability, see Cristina Carmody Tilley, ‘Just Strict Liability’ (2022) 43 Cardozo Law Review 2317.

11 For the Identification Principle, see Lennard’s Carrying Co v Asiatic Petroleum Co [1915] AC 705 (HL) 713; Tesco Supermarkets Ltd v Nattrass [1972] AC 153, [1971] 2 WLR 1166 (HL); Hamilton v Whitehead [1988] HCA 65, (1988) 166 CLR 121. See, further, discussion in ALRC Final Report (n 5) para 4.32 and Law Commission for England and Wales, Corporate Criminal Liability (Discussion Paper, June 2021) para 1.7.

12 James Gobert, ‘Corporate Criminality: Four Models of Fault’ (1994) 14 Legal Studies 393, 401. See also Wells (n 5) 98–101.

13 Brent Fisse, ’Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault, and Sanctions’ [1983] Southern California Law Review 1141, 1189; ALRC Final Report (n 5) [4.68] – [4.69]; Brent Fisse and John Braithwaite, Corporations, Crime and Accountability (Cambridge University Press 1993) ch 2; Jonathan Clough and Carmel Mulhern, The Prosecution of Corporations (Oxford, Oxford University Press, 2002) 90; Gobert (n 12) 394; Olivia Dixon, ‘Corporate Criminal Liability: The Influence of Corporate Culture’ (Sydney Law School Legal Studies Research Paper 17/14, 2017), 5–6.

14 Named after Meridian Global Funds Management Asia Ltd v The Securities Commission Co [1995] UKPC 26, [1995] 2 AC 500.

15 ASIC v Westpac Banking Corp (No 2) (2018) 357 ALR 240, [1660] (Beach J). We share Rachel Leow’s concerns that this approach is not fit for determining attribution in general law contexts: see Rachel Leow, ’Equity’s Attribution Rules’ [2021] J Eq 35; R Leow, Corporate Attribution in Private Law (Oxford, 2022); R Leow, ‘Meridian, Allocated Powers, and Systems Intentionality Compared’, in Bant, The Culpable Corporate Mind (n 2) ch 6.

16 Originating in s 84 of the Trade Practices Act 1974 (Cth).

17 ALRC Final Report (n 5) 39 [1.43], 67[2.82], including in relation to the use of the TPA Model at 92–93, 219–22, [3.60] – [3.65].

18 While the Law Commission considered that this was similar to a doctrine of respondeat superior, the provisions operate as direct attribution rules, rather than a form of vicarious liability: see Law Commission Options Paper (n 1) para 6.7. It may, however, be that this reflects a difference of jurisdictional opinion over whether vicarious liability is direct or indirect, and the relationship between this and the doctrine of respondeat superior: see Law Commission Options Paper at para 5.3. The ALRC’s Option 2, discussed below, was to adopt the TPA model, but subject to a reasonable precautions defence.

19 Bant, ‘Corporate Evil’ (n 2).

20 See the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019) (FSRC Final Report); Royal Commission into the Casino Operator and Licence (The Report, October 2021) (RCCOL Report); Perth Casino Royal Commission (Final Report, 4 March 2022) (PCRC Report); Review of The Star Pty Ltd: Inquiry under sections 143 and 143A of the Casino Control Act 1992 (NSW) (Report, 31 August 2022) (Star Casino Report) and Joint Standing Committee on Northern Australia, A Way Forward: Final report into the destruction of Indigenous heritage sites at Juukan Gorge (Final Report, October 2021) for a plethora of examples.

21 Fisse and Brathwaite (n 13) ch 2; Wells (n 5) ch 4; Christian List and Philip Pettit, Group Agency: The Possibility, Design and Status of Corporate Agents (Oxford University Press 2011). See further below n 24; see also discussion of aggregation in Parts 1 and 3(b), below, and for a fascinating discussion of the long history of real entity theories and their conceptual and normative divergences from aggregation approaches, see D Gindis, ‘From Fictions and Aggregates to Real Entities in the Theory of the Firm’ (2009) Journal of Institutional Economics 25.

22 C Chapple, The Moral Responsibilities of Companies (Palgrave Macmillan, 2014), ch 1; Micheler (n 10) 22.

23 FSRC (n 20).

24 Compare United States v Bank of New England, NA, 821 F 2d 844 (1st Cir 1987); Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421, 446 [101], 448–56 [110]–[143] (Edelman J, with whom Allsop CJ generally concurred); R v HM Coroner for East Kent, ex parte Spooner (Herald of Free Enterprise/Zeebrugge Ferry Disaster) (1989) 88 Cr App R 10 (QB). See also Mihailis E Diamantis, ‘Corporate Identity’ in K Tobia (ed), Experimental Philosophy of Identity and the Self (New York, Bloomsbury, 2022) 203.

25 Bucy (n 10); Brent Fisse, ‘Penal Designs and Corporate Conduct: Test Results from Fault and Sanctions in Australian Cartel Law’ (2019) 40 Adelaide Law Review 285, 285–86; Brent Fisse, ‘Recent Developments in Corporate Criminal Law and Corporate Liability to Monetary Penalties’ (1990) 13 University of New South Wales Law Journal 1, 3–4; Fisse and Braithwaite (n 13). For further, important realist scholars, see below (n 79); PA French, Collective and Corporate Responsibility (New York, Columbia University Press, 1984), 4; Peter A French, ‘Integrity, Intentions and Corporations’ (1996) 34 American Business Law Journal 141. For more recent scholarly analysis see Dixon (n 13); Bant, ‘Culpable Corporate Minds’ (n 2); Vicky Comino, ‘Corporate Culture is the “New Black” – its Possibilities and Limits as a Regulatory Mechanism for Corporations and Financial Institutions?’ (2020) University of New South Wales Law Journal 295; Rebecca Faugno ‘Ideas of Corporate Culture from the Perspective of Penalties Jurisprudence’ in Bant ‘The Culpable Corporate Mind’ (n 2) 159.

26 Criminal Law Officers Committee of the Standing Committee of Attorneys-General, Model Criminal Code Chapters 1 and 2: General Principles of Criminal Responsibility (Report, 1 December 1992) 107 (Model Criminal Code). See discussion in ALRC Final Report (n 5) 56–66; also discussion in Jennifer Hill, ‘Corporate Criminal Liability in Australia: An Evolving Corporate Governance Technique?’ (2003) 1 Journal of Business Law 1, 18.

27 Criminal Code Act 1995 (Cth) s 12.3(2). Note that in its Final Report the ALRC recommended repealing s 12.3(2)(d): ALRC Final Report (n 5) 245–46, again a point that indicated, to the Law Commission, a lack of confidence in the provision: Law Commission Options Paper (n 1) para 6.9.

28 Note the ALRC proposal to pluralise the terms ‘attitude’, ‘policy’ and ‘rule’, and to replace ‘takes’ with ‘take’ in ALRC Final Report (n 5) Recommendation 7 Option 1, 228.

29 Law Commission Options Paper (n 1) para 6.7. See also discussion from paras 6.8–6.20.

30 ibid para 6.7, citing ALRC Final Report (n 5) para 6.108.

31 ibid para 6.14.

32 R v Potter (2015) 25 Tas R 213; J Gans, ‘Can Corporations be Dishonest?’ in Bant, ‘The Culpable Corporate Mind’ (n 2) ch 13; cf Bant, The Culpable Corporate Mind (n 2) ch 11. See also discussion of dishonesty below at Part 3(B).

33 Law Commission Options Paper (n 1) para 6.8.

34 ibid para 6.7.

35 ibid paras 6.18–6.19.

36 ibid para 6.16.

37 Bant, ‘Culpable Corporate Minds’ (n 2). For early identification of this critical issue, see Laufer, ‘Corporate Bodies and Guilty Minds’ (n 10) 669.

38 ALRC Final Report (n 5) 232.

39 The Law Commission noted support for the model in regulatory contexts: Law Commission Options Paper (n 1) para 6.24. See also paras 6.25–6.29.

40 See below at n 52.

41 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (4th edn, February 2019) 16–17 (ASX Guidelines), in particular Principle 3, which requires that a corporation should ‘instil … a culture … of acting lawfully, ethically and responsibly’.

42 See RCCOL Report (n 20); PCRC Report (n 20); Star Casino Report (n 20).

43 Successive Chairs of the Australian Securities and Investments Commission (ASIC) have highlighted ASIC’s ‘regulatory interest in culture’, over the past decade and a half: ASIC Commissioner John Price, ‘Book Launch: “Managing Culture: A Good Practice Guide”’ (Speech, ASIC, 12 December 2007). See also, for example, ASIC Chair James Shipton, ‘Keynote Address’ (Speech, Centre for Economic Development of Australia event, Melbourne, 27 June 2019); ASIC Chairman Greg Medcraft, ‘Corporate Culture and Corporate Regulation’ (Speech delivered to the Law Council of Australia BLS AGM seminar, Melbourne, 20 November 2015); John Price, ‘Outline of ASIC’s Approach to Corporate Culture’ (Speech, AICD Directors’ Forum: Regulators’ Insights on Risk Culture, Sydney, 19 July 2017).

44 See, eg, ‘Crown Must Reform its Corporate Culture’ (The Age, 9 February 2021) <https://www.theage.com.au/national/victoria/crown-must-reform-its-corporate-culture-20210209-p5710m.html> accessed 27 January 2023; Sam McKeith, ‘Corporate Culture, Not ‘Bad Apples’ to Blame at Star, Inquiry Told’ (The Sydney Morning Herald, 17 June 2022) <https://www.smh.com.au/national/nsw/corporate-culture-not-bad-apples-to-blame-at-star-inquiry-told-20220617-p5aul2.html> accessed 27 January 2023; Charles Livingstone, ‘Illegal, Improper, Unacceptable: Revelations About Crown’s Casino Culture Just Get Worse’ (The Conversation, 9 July 2021) <https://theconversation.com/illegal-improper-unacceptable-revelations-about-crowns-casino-culture-just-get-worse-164084> accessed 27 January 2023, all of which are aimed at public readership.

45 ALRC Final Report (n 5) Recommendation 7.

46 ibid Recommendation 7 Option 1. These include amending the definition of ‘corporate culture’ to include the plural as well as the singular and, for the avoidance of any possible confusion, replacing the idea of ‘due diligence’ with ‘reasonable precautions’.

47 ibid paras 6.56–6.60.

48 ibid 6.69.

49 cf Law Commission Options Paper (n 1) paras 6.9, 6.20.

50 ALRC Final Report (n 5) Recommendation 7 Option 2, 14, 228, 233.

51 ibid para 6.126.

52 See, for example, publications by ASIC (https://asic.gov.au/regulatory-resources/corporate-governance/directors-and-corporate-culture/) and the Australian Institute of Company Directors (https://www.aicd.com.au/organisational-culture/business-ethics/change/culture-wins.html). A swathe of prominent Australian companies actively and publicly promote their positive corporate culture. See for example, National Australia Bank (https://www.nab.com.au/about-us/careers/people-culture); FMG (https://www.fmgl.com.au/about-fortescue/our-culture) and Woodside (https://www.woodside.com/careers/our-culture).

53 ‘Culture Rises Up The Leadership Agenda Yet Major Gap in Attitudes Between Senior Management and Rest of Workforce Greater Than Ever – PwC Global Culture Survey’ (PwC 2021) <pwc.com.au/media/2021/global-culture-survey-2021-australia.html>, reflecting an observation made as far back as 2003 by Justice Robert French: French (n 4), ‘an idea whose time has come and which has a useful role to play in corporate law enforcement’.

54 See for example corporate culture consulting, advisory and remediation services offered by a plethora of consultants and experts, such as The Culture Equation (https://thecultureequation.com.au/); EY (https://www.ey.com/en_au/corporate-culture); Holistic Services Group (https://www.holisticservices.com.au/organisational-culture-change/); Deloitte (https://www2.deloitte.com/au/en/pages/financial-services/articles/culture-leadership-analytics-matter-more.html), and Keogh Consulting (https://keoghconsulting.com.au/business-transformation/organisational-culture/).

55 For some recent examples from a very extensive and well-established literature, see Gary B Gorton, Jillian Grennan and Alexander K Zentefis, ‘Corporate Culture’ (2022) 14 Annual Review of Financial Economics 535; Eric Flamholtz and Yvonne Randle, Corporate Culture: The Ultimate Strategic Asset (Stanford University Press 2011); Kai Li, Feng Mai, Rui Shen, Xinyan Yan and Itay Goldstein, ‘Measuring Corporate Culture Using Machine Learning’ (2021) 34 The Review of Financial Studies 3265; Andreas Bath and Sasan Mansouri, ‘Corporate Culture and Banking’ (2021) 186 Journal of Economic Behaviour and Organisation 46; Luigi Guiso, Paola Sapienza and Luigi Zingales, ‘The Value of Corporate Culture’ (2015) 117 Journal of Financial Economics 160 and Carmen Tanner, Katharina Gangl and Nicole Witt, ‘The German Ethical Culture Scale (GECS): Development and First Construct Testing’ (2019) 10 Frontiers in Psychology 1667.

56 Crown Resources Limited engaged Deloitte to carry out an assessment of Crown’s corporate culture. Deloitte produced four reports: ‘Crown Culture Review – Current State Culture – Final Report’ (Deloitte July 2021) (Deloitte Final Report); ‘Culture at Crown Survey – Survey Results – Demographic Detail’ (Deloitte September 2021); ‘Crown’s Draft Ethical Compass and Aspirational Culture’ (Deloitte August 2021) and ‘Crown Organisational Culture Review – Draft Culture Change Roadmap’ (Deloitte August 2021). Deloitte also produced for Crown a ‘Crown Culture Review – Culture Measurement and Reporting Framework’ (August 2021), Detailed Project Plan (27 August 2021) and Crown Culture Change Program – Change Management Strategy (September 2021). See discussion in PCRC Report (n 20). For consideration of the Deloitte reports, see RCCOL Report (n 20) and PCRC Report (n 20) paras 564–608.

57 Elizabeth Arzadon, ‘Observations in relation to Deloitte Culture Review of Crown: Expert Opinion’ (PCRC October 2021) (Arzadon Report).

58 Deloitte’s four reports as above (n 56).

59 Deloitte Final Report (n 56) 7.

60 Arzadon Report (n 57).

61 ibid, in particular 25–29.

62 This latter approach is also more consistent with concepts of corporate culture as developed by leading scholars: see discussion in Part 2 below. For detailed consideration of the conceptions of corporate culture adopted by the PCRC and RCCOL, see Rebecca Faugno and Elise Bant, ‘Corporate Culture, Conscience and Casinos’ (forthcoming).

63 See for example RCCOL Report (n 20) 12; PCRC Report (n 20) 167.

64 The ACL is a self-contained legislative instrument, annexed as Schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL).

65 Australian Securities and Investments Commission Act 2001 (Cth) s 12GBB(3) (ASIC Act); ibid s 224(1). The civil penalty regimes are contained in chapter 5–2 division 1 of the ACL and part 2 division 1 of the ASIC Act.

66 French J in Trade Practices Commission v CSR Limited set out a list of factors for guiding the court’s exercise of discretion in determining penalty: Trade Practices Commission v CSR Limited (1991) ATPR 41–076 (CSR), 152–53, 54 (French J). Note the factors are not exhaustive: Australian Competition and Consumer Commission v Visa Inc (2015) 339 ALR 413. For consideration of the multi-factorial decision-making process, often referred to as ‘intuitive’ or ‘instinctive’ synthesis, see Elise Bant and Jeannie Marie Paterson, ‘Intuitive Synthesis and Fidelity to Purpose? Judicial Interpretation of the Discretionary Power to Award Civil Pecuniary Penalties under the Australian Consumer Law’ in Prue Vines and Donald M Scott (eds), Statutory Interpretation in Private Law (Federation Press 2019) 154 and see also discussion in, eg, Cam H Truong and Luisa F Alampi, ‘Increased Civil Pecuniary Penalties – The “Cost of Doing Business” or an Effective Deterrent?’ (2020) 28 Australian Journal of Competition and Consumer Law 21.

67 Faugno (n 25).

68 ibid.

69 This being the wording used by French J in setting out the initial iteration of factors to consider in determining penalty: CSR (n 66) 152–3, 154 (French J).

70 For the most recent account of this influential concept see B Fisse, ‘Reactive Corporate Fault’ in Bant, ‘The Culpable Corporate Mind’ (n 2) ch 7.

71 Faugno (n 25).

72 Model Criminal Code (n 25) 107, 113.

73 Bucy (n 10).

74 Brent Fisse and John Braithwaite, ‘The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability’ (1988) 11 Sydney Law Review 468, 506.

75 French, ‘Collective Corporate Responsibility’ (n 25) 151; see also 41–44.

76 Faugno (n 25) part III.

77 See Bant citations at (n 2).

78 See ACL s 21.

79 The debt is large, but includes as leading influences: French, ‘Collective Corporate Responsibility’ (n 25) Fisse, ‘The Social Policy of Corporate Criminal Responsibility’ (1978) 8 Adelaide Law Review 361; Brent Fisse, ‘Recent Developments in Corporate Criminal Law and Corporate Liability to Monetary Penalties’ (n 25); Fisse, ‘The Attribution of Criminal Liability to Corporations: A Statutory Model’ (1991) 13 Sydney Law Review 277; Fisse and Braithwaite (n 13); Bucy (n 10); Gobert (n 12); Wells (n 5); Laufer, ‘Corporate Bodies and Guilty Minds’ (n 10); Laufer ‘Corporate Bodies and Guilty Minds: The Failure of Corporate Criminal Liability’ (n 10); List and Pettit (n 21) ch 7; Chapple (n 22); Mihailis E Diamantis, ‘The Extended Corporate Mind: When Corporations Use AI to Break the Law’ (2020) 98 North Carolina Law Review 893. The important recent work of Micheler (n 10) which emphasises the routines, procedures and culture of companies as essential to their identity as autonomous and responsible actors, is also we consider largely consistent with and supportive of the proposed model, and provides important insights for its further development: see, in particular [1.4.3] –[1.4.4], [5.3.5]–[5.3.8].

80 Bant, ‘The Culpable Corporate Mind’ (n 2) ch 11.

81 M Diamantis, ‘The Extended Corporate Mind’ (n 79). See also M Diamantis, ‘How to Read a Corporation’s Mind’, in Bant, ‘The Culpable Corporate Mind’ (n 2) ch 10.

82 Law Commission Options Paper (n 1) paras 6.34–6.41, cf Diamantis, ibid, and Bant, ‘The Culpable Corporate Mind’(n 2).

83 Bant, ‘The Culpable Corporate Mind’ (n 2) ch 1.

84 RCCOL Report (n 20) paras 87–102, paras 19–25; PCRC Report (n 20) paras 57–64; Star Casino Report (n 20) ch 6.3.

85 Above (n 15): for her own view on the alignments between the models, see Leow, ‘Meridian, Allocated Powers, and Systems Intentionality Compared’ (n 15).

86 The ‘Corporate Internal Decision’ structures: see French, Collective and Corporate Responsibility (n 25) 41–44.

87 Micheler (n 10) 29–30.

88 Ibid, 20 and 29.

89 The extent to which individual agency continues within a system is likely to depend on the nature of the system itself: for a discussion of the debates, see Micheler (n 10) [1.4.3]; for an analysis of the authorities concerning ‘clerical errors’ compared to the role of individuals exercising active judgement, see Bant ‘Corporate Mistake’ (n 2).

90 Paterson, Bant and Cooney, ‘Australian Competition and Consumer Commission v Google: Deterring Misleading Conduct in Digital Privacy Policies’ (n 2); Jeannie Marie Paterson and Elise Bant, ‘Privacy Erosion by Design: Why the Federal Court Should Throw the Book at Google over Location Data Tracking’, (The Conversation, 19 April 2021).

91 Elise Bant, ‘Submission to Robodebt Royal Commission’ (Royal Commission into the Robodebt Scheme, October 2020).

92 Precisely how the model might map on to different mental states is addressed elsewhere: see Bant, The Culpable Corporate Mind (n 2) ch 11.

93 Law Commission Options Paper (n 1) para 6.42, doubting whether the model could reach the kinds of specific knowledge required to prove most offences.

94 See in particular Bant, The Culpable Corporate Mind (n 2) ch 11 and Bant and Paterson, ‘Systems of Misconduct: Corporate Culpability and Statutory Unconscionability’ (n 2).

95 Bant, The Culpable Corporate Mind (n 2) ch 9; cf Gans (n 32). In Bant, ‘Reforming the Laws of Corporate Attribution’ (n 2), Bant suggests amendment to the Corporate Culture provisions to align them with Systems Intentionality, replacing the listed elements with ‘state of mind’.

96 The detailed treatment by courts of these concepts, often in light of common dictionary meanings, is contained in Bant, The Culpable Corporate Mind (n 2): see, eg, Australian Competition and Consumer Commission v EDirect Pty Ltd [2012] FCA 1045, [91] (Reeves J).

97 The Australian authorities also contain a wealth of insights on how to prove ‘systems of conduct’: see Bant, ‘Systems Intentionality: Theory and Practice’ (n 2).

98 See below at n 99.

99 Bant, ‘Submission to Robodebt Royal Commission’ (n 91), citing FSCR Final Report (n 20) vol 1, 157: fees for no services were ‘part of an established system and were not matters of accident’.

100 Law Commission Options Paper (n 1) paras 6.44–6.45.

101 cf Law Commission Options Paper (n 1) para 6.45: ‘One might go so far as to suggest that a system of dispersed knowledge which makes it likely that such misleading statements might be issued could be said be one “designed” to make misleading statements’. The relationship between the accounts system and public statements on corporate finance made by the director would be important here. This is similar to the analysis accepted in the RCCOL Report in relation to Crown’s anti money laundering processes: at ch 8, see in particular pp 438 and 450–55.

102 Fisse, ‘Reactive Corporate Fault’ (n 70); Bant, ‘The Culpable Corporate Mind: Taxonomy and Synthesis’ in The Culpable Corporate Mind (n 2).

103 On the necessity to choose a greater or lesser level of generality to obtain the correct ‘angle of focus’ in identifying and assessing a system of conduct, see Bant, ‘Systems Intentionality: Theory and Practice’ (n 2).

104 For examples that would demonstrate this intentionality, see the branding marketing campaigns Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25; Australian Competition and Consumer Commission v GlaxoSmithKline Consumer Healthcare Australia Pty Ltd (No 2) [2020] FCA 724.

105 Other considerations include the need for specific and general deterrence and, in the case of criminal penalties, punishment: see Bant and Paterson, ‘Intuitive Synthesis and Fidelity to Purpose? Judicial Interpretation of the Discretionary Power to Award Civil Pecuniary Penalties under the Australian Consumer Law’ (n 66).

106 French (n 25) 58.

107 ASX Guidelines (n 41).

108 Tyson McEwan, ‘Holding Corporations to Account for their Supplier Diversity Commitments in Reconciliation Action Plans’ (2023) (forthcoming).

109 Edgington v Fitzmaurice (1885) 29 Ch D 459 (CA) 483 (Bowen LJ); Generics (UK) v Warner-Lambert Company LLC [2018] UKSC 56, [2018] RPC 21 [171] (Lord Briggs).

110 See, eg, s 18 ACL (prohibition on misleading or deceptive conduct in trade or commerce); Magill v Magill (2006) 226 CLR 551, 567 (Gleeson CJ) 574 (Gummow, Kirby and Crennan JJ) (tort of deceit).

111 See, eg, Fiona McGaughey, ‘Regulatory Pluralism to Tackle Modern Slavery’ in Bant, ‘The Culpable Corporate Mind’ (n 2) ch 20.

112 RCCOL Report (n 20) 178, para 6.101.

113 Often a popular outcome: see, eg, Aleks Vickovich and Joanna Mather, ‘Industry Funds Want More Westpac Heads on Sticks’ (Financial Review, 2 December 2019) <www.afr.com/companies/financial-services/industry-funds-want-more-westpac-heads-on-sticks-20191129-p53fg5> accessed 27 January 2023; ‘Banking royal commission: Regulators urged to get “heads on sticks”’ (The Australian, 10 February 2019), <https://www.theaustralian.com.au/business/banking-royal-commission/banking-royal-commission-regulators-urged-to-get-heads-on-sticks/news-story/acfa5cce43eea535b82070cf55d066e2> accessed 13 June 2023.

114 ALRC Final Report (n 5) paras 8.94–8.98.

115 Melissa Horne, ‘Royal Commission: Sweeping Reforms Needed for Crown’ (Media Release, 26 October 2021) <www.premier.vic.gov.au/royal-commission-sweeping-reforms-needed-crown> accessed 27 January 2023.

116 ibid, emphasis added.

117 Tony Buti, ‘Independent Monitor Appointed to Oversee Casino Remediation’ (Media Release, 12 October 2022) <www.mediastatements.wa.gov.au/Pages/McGowan/2022/10/Independent-Monitor-appointed-to-oversee-casino-remediation.aspx> accessed 27 January 2023. A similar approach was taken with the Star Casino, again emphasising the systemic and sustained nature of the required reforms: see, eg, Nick Nichols, ‘The Star’s Independent Monitor Heaps The Pressure on Cooke to Bring Casino Group Back Into Line’ (Business News Australia, 24 October 2022) <www.businessnewsaustralia.com/articles/the-star-s-independent-monitor-heaps-the-pressure-on-cooke-to-bring-casino-group-back-into-line.html> accessed 27 January 2023.

118 The ALRC Discussion Paper initially supported adopting a more generalised attribution modelled on Failure to Prevent offences. This option was abandoned for the final report. However, Failure to Prevent offences remain an important part of the overall regulatory toolkit. See ALRC Final Report (n 5). For excellent analyses of this form of liability, see Jonathan Clough ‘Failure to Prevent’ Offences: The Solution to Transnational Corporate Criminal Liability?’ in Bant, ‘The Culpable Corporate Mind’ (n 2) ch 18; Liz Campbell, ‘Corporate Liability and the Criminalisation of Failure’ (2018) 12 Law and Financial Markets Review 57 and Micheler (n 10) [5.3.5]–[5.3.6].

119 The Law Commission recommended a defence of ‘having put in place such prevention procedures as it was reasonable to expect’, with the defendant organisation bearing the onus of proof: Law Commission Options Paper (n 1) paras 1.43, 8.38. Note that this is different from the ‘adequate measures’ variant of the defence adopted in the Bribery Act 2010. For discussion see also Select Committee on the Bribery Act 2010, The Bribery Act 2010: Post-Legislative Scrutiny (HL 2017–19, 303), paras 172–211.

120 Law Commission Options Paper (n 1).

121 ibid para 6.23.

122 cf ibid 8.13.

123 Serious Fraud Office v Rolls-Royce plc [2017] Lloyd's Rep FC 249 (‘Rolls-Royce judgment’). See also Serious Fraud Office v Standard Bank plc [2016] Lloyd's Rep FC 102 and R v Serious Fraud Office [2018] EWHC 856 (Admin), [2018] 1 WLR 4557.

124 Rolls-Royce judgment (n 123) [4].

125 ibid [97].

126 ibid [97].

127 ibid [4].

128 Rolls-Royce judgment, Annexure A (‘Rolls-Royce Annexure’) [83].

129 Rolls-Royce judgment (n 123) [48].

130 Rolls-Royce Annexure (n 123) [159].

131 Rolls-Royce judgment (n 123) [93].

132 This analysis clearly has implications for corporate groups.

133 Rolls-Royce judgment (n 123) [94]; see also [112].

134 ibid [62].

135 ibid [131].

136 ibid [43]–[47].

137 The Law Commission recommended a ‘reasonable procedures’ defence: see n 119 above.

138 HM Revenue & Customs, ‘Tackling Tax Evasion: Government Guidance for the Corporate Offences of Failure to Prevent the Criminal Facilitation of Tax Evasion’ (Government Guidance, 1 September 2017) 18; Facilitation of Tax Evasion Offences (Guidance About Prevention) Regulations 2017 (UK) SI 2017/876. See also discussion in Penny Crofts, ‘Three Recent Royal Commissions: The Failure to Prevent Harms and Attributions of Organisational Liability’ (2020) 42 Sydney Law Review 395, 411–18.

139 HM Revenue & Customs (n 138) 16–30.

140 As noted by the Law Commission Options Paper (n 1) para 8.38.

141 Rolls-Royce judgment (n 123) [104].

142 ibid [114].

Additional information

Funding

This work was supported by Australian Research Council (Future Fellowship project FT190100475) Unravelling Corporate Fraud.

Notes on contributors

Elise Bant

Elise Bant, Professor of Private Law and Commercial Regulation, The University of Western Australia, and Professorial Fellow at the University of Melbourne. This article forms part of Bant’s Australian Research Council Future Fellowship project FT190100475 Unravelling Corporate Fraud: see https://www.uwa.edu.au/schools/research/unravelling-corporate-fraud-re-purposing-ancient-doctrines-for-modern-times.

Rebecca Faugno

Rebecca Faugno, Lecturer in Law, The University of Western Australia. This article forms part of Faugno’s doctoral research into corporate culture.