Accessorial Liability under the Corporations Act 2001 (Cth)

Meaning of accessorial liability

Individuals or corporations may be liable for contraventions of the Corporations Act 2001 (Cth) (‘the Act‘) on the basis of their primary liability or accessorial liability.

Primary liability includes where a person has, by act or omission, contravened a provision of the Act. For example, where a director has breached their duties under sections 180-183 of the Act.

Accessorial liability is defined in s 79 of the Act but is not the section that will impose liability. Section 79 provides that accessorial liability is where a person is ‘involved’ in a contravention of the Act. A person is ‘involved’ if they have, for example, aided, abetted, counselled or procured the contravention. In addition, a person is ‘involved’ if they have induced, by way of threats or promise or otherwise, the contravention.

A primary example of accessorial liability is where a director has breached their duties under section 180-183 of the Act and in doing so provided a benefit to a third party. That third party may be liable. However, the liability of an accessory is derivative only and dependant upon the guilt of the principal offender.

Accessorial liability requires a person to have had actual knowledge of the essential elements that constitute the contravention and to have intentionally participated in the contravention.

Elements of accessorial liability

Imputed or constructive knowledge is insufficient to meet the requisite bar of ‘actual’ knowledge. Further, it is not necessary that a person know the combination of elements that amount to a contravention. Rather, actual knowledge may be shown by direct evidence or, more commonly proved by inference from the circumstances of the case.

Accessorial liability may be imposed where a person did a positive act that amounted to intentional participation or omitted to do something that implicates or involves that person.

In some cases, the court has held that actual knowledge may be inferred from the defendant’s knowledge of suspicious circumstances and the defendants deliberate failure to make inquiries to remove those suspicions.

The actual knowledge must also be present at the time of the contravention. Where a person becomes aware of the essential facts constituting the contravention only after the contravention has occurred and is complete, that person is not involved in the contravention in terms of s 79.

Case Considerations

At common law, the case of The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) WASC 239 (‘Bell‘), assists in considering what type of knowledge must be met. Bell affirmed four divisions of ‘knowledge’ required to establish a third party as accessorily liable. These are:

1. Actual knowledge
2. Wilfully shutting one’s eyes to the obvious
3. Wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make;
4. Knowledge of circumstances which would indicate the facts to an honest and reasonable person.

However, Justice Black in Ramsay v. Big Tin Can Pty Ltd (2014) ACSR 415 (‘Ramsay‘), had a slightly higher requisite bar to meet in order for an accessorial liability claim to succeed. His Honour found that it must be proven that the relevant individual participated in the transaction with knowledge as an intentional party.

Black J later said in Re Waterfront Investments Group Pty Ltd (in liq) [2015] NSWSC 18 (‘WIG‘), “the requisite intention [may be proven] if the person has awareness of the fundamental elements of the infringement”. Most importantly, Black J states that:

“It is not essential to allege that that individual understood that the behaviour amounted to a violation of the [Corporations] Act.”

A more recent approach

More recently and a somewhat more balanced view between that made in Bell, Ramsay and WIG, the Full Court of the Federal Court in the decision of Gore v Australian Securities Investments Commission [2017] FCAFC 13, considered what is necessary to establish that a person is knowingly concerned in a contravention of the Act. Dowsett and Gleeson JJ observed that in order to establish accessorial liability as defined in s 79 of the Act, the plaintiff must show that the alleged accessory knows the relevant factual matters leading to illegality, and it is not necessary to show that he or she show the relevant legal provisions which rendered the conduct unlawful.

Punitive measures against accessories

Generally, persons who are found to be liable as accessories pursuant to s 79 of the Act, are subject to similar penalties as if they were the primary instigator of such contravention. This includes, but is not limited to, pecuniary penalty orders, injunctions or compensation orders.

Takeaways

Section 79 of the Act allows for persons who are not necessarily the instigator of a contravention of the Act, but were willingly involved or benefitting from the contravention, to be held accountable.

The accessory need be at least ‘concerned’ with the violation by participating in the acts or omissions which constituted the contravention however each matter will be reviewed with the unique circumstances of the case.