Company law; regulatory offence; liability of company for actions of employees
Facts: The ABC Developmental Learning Centres Pty Ltd (ABC) and its staff were required by the Children’s Services Act 1996 to take every reasonable precaution, including adequate supervision, to protect children in its care from any hazard likely to cause injury. While the supervisory staff employed by an ABC centre were not looking, a three-year-old child used a foam block to scale the fence of the centre and get into the surrounding streets. He was returned unharmed to the centre by a neighbour. The Department of Human Services prosecuted ABC for breaching the Children’s Services Act. The company argued that it should not be held liable for the offence of failing to properly supervise the child.
Issue: Should the failure of lower-level employees to properly supervise the child be attributed to the company itself?
Decision: In the circumstances, the company itself should be held liable for the offence.
Reason: Bell J said (at 10):
Where the employees are high-level, it may be possible to identify the company with their actions because they represent its directing mind and will. Where the employees are low-level, as in this appeal, the company can still be identified with their actions if this is required by the terms of the offence and the achievement of the policy objectives of the enabling statute.
In dismissing an appeal against the original decision, the Victorian Court of Appeal endorsed this passage (at [9]). The Court of Appeal also said (at [29]) that, had it been necessary, it would also have upheld the following conclusions reached by Bell J (at [11]):
The need to ascertain the nature of the offence and the policy of the statute comes through strongly in the decided cases. … These cases all have an important feature in common with the present case – the offences concerned were regulatory in nature. Such offences are typically created in legislation regulating a sphere of social or economic activity in the public interest. The legislation may, in that sphere, lay down a standard of action or behaviour for everybody bound by the legislation, companies and natural persons, to follow. If the person does not follow the standard, the legislation may allow he, she or it to be prosecuted for an offence. … Therefore, where appropriate, the courts will fashion a rule of attribution that counts, as a company’s, the actions of employees, of whatever level, whose work involves the performance of a regulatory obligation on the company’s behalf.