Australia - Stepping Through The Stages Of A Corporate Criminal Prosecution.
Legal News & Analysis - Asia Pacific - Australia - Regulatory & Compliance
6 January, 2020
The recent judgment in Commonwealth Director of Public Prosecutions v Kawasaki Kisen Kaisha Ltd  FCA 1170 (CDPP v K-Line) provides a unique opportunity to examine the procedural steps that a corporate defendant will encounter when charged with, and prosecuted for, an indictable offence.
This examination is particularly relevant in the current context, which has seen a broad push for increased enforcement of the criminal law against corporations in the aftermath of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission). For example, in February 2019, ASIC’s Deputy Chair, Daniel Crennan QC predicted that in the twelve months to follow the Royal Commission, the referral of matters by ASIC to the Commonwealth Director of Public Prosecutions (CDPP) would increase by a staggering 82 per cent.
The following is a brief summary of the stages of a corporate criminal prosecution:
Stage 1: Investigation
The CDPP has no investigative function. A suspected breach of a criminal offence provision is investigated by the regulator responsible for administering the law that has allegedly been breached. For K-Line (which involved cartel offences in the Competition and Consumer Act 2010 (Cth) (CCA Act), this was the Australian Competition and Consumer Commission (ACCC). In other cases it will often be ASIC investigating alleged contraventions of offence provisions in the Corporations Act 2001 (Cth).
Corporate criminal investigations are extremely complex, and often lengthy. The ACCC’s investigation of K-Line was no exception. Having made 'initial contact' with K-Line on 7 September 2012, the ACCC’s investigation ran for approximately five years. During its investigation, the ACCC utilised the full suite of its coercive investigative powers, including the power to compel the provision of information, the production of documents, and the answering of questions.
Stage 2: Referral to CDPP
When an investigation uncovers evidence sufficient to warrant a criminal charge, the ‘established practice’ is for the regulator to prepare a brief of evidence and refer the matter to the CDPP.
The CDPP will then examine the evidence and determine whether a criminal prosecution should be instituted and, if so, on what charge or charges.
Following referral, but prior to any charges being laid, the assigned case officer at the CDPP will often accept representations from an accused regarding why criminal charges should not be laid. It is, in this sense, the first opportunity for an accused to put on a defence. There is, however, no formal structure or procedure which governs how, or when, representations are to be made.
In terms of how representations are made, they are ordinarily lodged in writing (possibly after an initial meeting in person). Depending on the case, written representations tend to set out:
- that there is no reasonable prospect of a conviction being secured (including arguments of law), and
- why the CDPP should exercise its discretion not to prosecute. These discretionary arguments are usually drafted against the 'public interest' factors listed in the CDPP’s Prosecution Policy.
As the potential accused does not receive a copy of the brief of evidence that the regulator provides to the CDPP when referring the matter, the accused often finds itself needing to prepare its representations without the benefit of the alleged offences being fully particularised – although it may seek to get an indication from the CDPP about what is being considered, to help focus its representations. The accused only becomes entitled to a copy of the brief of evidence if (and after) charges are laid (during the committal stage).
In terms of when representations should be lodged, in practice it usually turns on how busy the CDPP case officer assigned to the matter is, and the complexity of the case. Given there is no fixed timeframe for lodging representations, it is prudent for the accused to consider what representations can be made as soon as the regulator provides notice that the matter has been referred to the CDPP.
In CDPP v K-Line, written representations were lodged by K-Line in March 2016. Five months later on 10 August 2016, the CDPP case officer advised that it did not accept that criminal proceedings were not appropriate, and K-Line was charged.
Stage 3: Committal process (for indictable offences)
If the CDPP decides to charge the accused with an indictable offence (an offence punishable by imprisonment for a period exceeding 12 months), the matter proceeds to the committal stage. K-Line was charged with 39 counts of the indictable cartel offence under section 44ZZRG of the CCA Act.
The committal process is managed by a magistrate in the Local Court. At a high-level, the purpose of the committal process is for the prosecution to disclose its case to the accused and for the court to certify that the evidence available is capable of establishing the elements of the offences charged. Assuming this is achieved, the matter is committed for trial (if the accused pleads ‘not guilty’) or sentence (if the accused pleads ‘guilty’).
Each jurisdiction in Australia has a different committal process. The procedure in New South Wales is triggered by the issuance of a court attendance notice (CAN) on the accused (Criminal Procedure Act 1986(NSW) s 47 (CPA)). The CAN outlines the offence(s) charged, and specifies the time and date that the accused is required to attend the Local Court. K-Line was served with a CAN on 31 October 2016, and was required to appear in the Local Court at the Downing Centre in Sydney.
At the first mention in the Local Court (assuming the accused does not plead guilty), the magistrate makes orders requiring the prosecution to provide the accused with a brief of evidence. K-Line received the brief of evidence on 13 December 2016, which was further supplemented on 6 February 2017 and on various other occasions throughout 2017.
During the committal process, the accused may apply to examine the prosecution’s witnesses. In order to succeed on this application, an accused must establish that there are ‘substantial reasons why, in the interests of justice’, the witness should attend to give oral evidence. On 24 April 2019, K-Line lodged an application pursuant to s 91 of the CPA to test the prosecution witnesses (note, s 91 of the CPA has been amended and inserted in s 87 of the CPA pursuant to recent reforms which came into effect on 30 April 2018, see below). The application was heard over two days in June 2017, and was ultimately dismissed on 4 July 2017. The matter was then listed for a two-day contested committal hearing which was to take place on 19 and 20 October 2017.
On 18 October 2017, K-Line waived its right to a contested committal hearing, and on 19 October 2017, the matter was committed for trial. As an indictable offence cannot be determined in the Local Court (they must be transferred to a superior court for trial and sentence), the matter was transferred to the Federal Court pursuant to a 'committal order' made under s 23AB(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), entered on 6 November 2017. An indictment was later presented to the Federal Court on 15 November 2017.
Notably, there is no "committal process" for summary offences. That is because summary offences are tried in the Local Court, meaning that there is no superior court for the Local Court to "commit" the matter to. For example, a corporation that is charged with breaches of a strict liability offence in the Corporations Act will be tried in the Local Court.
Early Appropriate Guilty Pleas
Since CDPP v K-Line, the committal procedure in NSW has undergone significant change as a result of amendments to the CPA introduced by the Justice Legislation Amendment (Committals and Guilty Pleas) Act 2017 (NSW) (the Early Appropriate Guilty Pleas reforms). Two material changes introduced by the reforms include:
- removal of contested committal hearings, which were effectively replaced with a new 'charge certification' process, whereby a senior prosecutor reviews the evidence and certifies which charges will proceed (CPA ss 65-68); and
- introduction of a case conferencing procedure between defence legal representatives and prosecutors aimed at facilitating early appropriate guilty pleas (with cascading discounts) (CPA ss 69-81).
These reforms effectively limit the role of a magistrate to case management during the committal process. The magistrate is no longer required to make a decision about the sufficiency of the evidence before committing a matter. The reforms are aimed at reducing delays and costs incurred during the committal stage.
Stage 4: Pre-trial stage (Federal Court for serious cartel offences)
Once an indictable offence matter is transferred to a superior court, the matter proceeds in accordance with the pre-trial management procedures of that court. The Federal Court’s pre-trial management procedure is set out in Division 1A of Part III of the FCA Act.
The Federal Court procedure requires that, as soon as practicable after the indictment is filed, the Federal Court is to hold a pre-trial conference, and at the pre-trial conference the court must direct the accused to enter a plea to each count in the indictment (s 23CA). The first pre-trial conference in CDPP v K-Line was held on 16 November 2017, at which K-Line pleaded not guilty.
At a subsequent pre-trial conference held on 11 December 2017, Wigney J made orders listing the matter for trial to commence on 30 July 2018, and setting out a timetable for pre-trial disclosure by the parties.
The procedure for pre-trial disclosure in the Federal Court, as set out in s 23CD of the FCA Act (and supported in ss 23CE, 23CF, 23CG and 23CH), establishes a three-step process as follows:
- First, the CDPP is to provide notice of the prosecution’s case (including an outline of the facts, matters and circumstances) to the accused (FCA Act s 23CE).
- Secondly, the accused is to provide its response, specifying each fact and matter it agrees with, and those with which it takes issue (FCA Act s 23CF).
- Thirdly, the prosecutor is to respond to the matters in the accused’s response (FCA Act s 23CG).
The CDPP provided K-Line with notice of its case on 5 February 2018, and an outline on 6 February 2018, pursuant to s 23CE.
As a result of ongoing negotiations, on 2 March 2018, K-Line indicated that it would enter a plea of guilty to a single rolled-up charge. On 5 March 2018, the Court was informed that the matter would proceed by way of a plea of guilty and sentencing hearing. The parties returned to court on 16 March 2018, at which time the orders of 11 December 2017 were set aside and the matter was listed for a two-day sentencing hearing. On 5 April 2018, a guilty plea was entered.
The Federal Court's indictable criminal jurisdiction is currently limited to serious cartel offences in the CCA Act (ie, cases like CDPP v K-Line). This may, however, be about to change. In March 2019, the Federal Government announced a proposal to extend the Federal Court's indictable jurisdiction "to include corporate crime". Although no bill has yet been introduced, if the Federal Court's jurisdiction is expanded as proposed, it will likely be expanded to include indictable offences in the Corporations Act, which are currently tried in state District or Supreme courts.
Stage 5: Trial
As K-Line pleaded guilty, the trial did not commence and the matter proceeded directly to sentencing. However, if the trial had proceeded, it would have been a long and complex one. Wigney J had originally listed the trial to commence on 30 July 2018 with an estimate of 16 weeks.
Despite the growing number of corporate criminal cartel cases brought in recent years, each of those which have resolved have been by way of guilty plea. As a result, we are yet to see a criminal cartel proceeding progress to a full trial, and the procedural steps in the trial stage of the Federal Court’s criminal cartel jurisdiction remain untested. The criminal prosecution of Country Care Group Pty Ltd, which has been set down for a six week trial to commence on 3 February 2020, may be the first case to test the Federal Court’s criminal trial procedure.
Stage 6: Sentencing
Roughly five months after K-Line entered its plea of guilty, a two-day sentencing hearing was held on 15 and 16 November 2018. On 2 August 2019, some eight months later, Wigney J handed down his remarks on sentence.
The decision sets out the law as it applies at a sentencing hearing. In particular, it considers the principles of section 16A of the Crimes Act 1914 (Cth).
This is an abridged version of the article first published in the November 2019 edition of the 'Law Society of NSW Journal’
For further information, please contact:
Ian Bolster, Partner, Ashurst