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High Court Drops The Hammer On Corporate Offending

What is the “value of the benefit” of corporate criminal offending? Should it be the gross benefit received by the offending corporate? Or should it be that sum with deductions for the offender’s costs? These questions were considered in a recent High Court case and the most appropriate approach was determined for setting the maximum penalty for corporate offending.

In The King v Jacobs Group (Australia) Pty Ltd formerly known as Sinclair Knight Merz (“SKM”) the High Court held that under section 70.2(5) of the Criminal Code the maximum available penalty must be set with reference to the “gross” value of the benefit obtained.

What did SKM do?

SKM pleaded guilty to three counts of conspiracy as a body corporate to bribe foreign officials. Over several years, SKM, an engineering, project delivery and consulting company, admitted that they had made bribes in respect of a number of projects in the Philippines and Vietnam funded by the World Bank or the Asian Development Bank.

SKM argued that any penalties should be calculated by reference to the “net benefit” approach being the amount they received in complying with their contractual obligations minus any third-party costs (excluding the bribes) while the Crown submitted that the “gross benefit” approach was more appropriate.

Initially, the NSW Criminal Court and NSW Criminal Court of Appeal agreed with SKM’s submissions that the “net benefit” approach was the most appropriate; however, the Crown was granted special leave to appeal to the High Court who unanimously held that the “gross benefit” approach was the correct approach and remitted the matter back to the NSW Criminal Court for resentencing with a maximum potential penalty of $30,391,062.

How does this affect me?

The High Court’s decision in this case means that corporate offenders can now expect to pay higher penalties as sentences are more likely to be ordered with reference to a higher maximum. Similar language is also found in the Australian Securities and Investments Commission Act 2001 (Cth), the Competition and Consumer Act 2010 (Cth), and the Corporations Act 2001 (Cth) (together “Acts”) meaning the High Court’s decision may have relevance to offences committed under these Acts including misleading or deceptive conduct, insider trading, market manipulation and cartel conduct.

Palisade Corporate regularly advises corporate entities, directors and officers on their duties and obligations under a multitude of State and Federal legislation. If you or someone you know needs further advice in relation to those duties and obligations, and the potential exposure and penalties which may arise from them, please feel free to contact us.


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