When and why a corporation should report a criminal offence

In the first of a two part series, we look at the reporting obligations which apply when you become aware of a serious indictable offence. In Part 2, we consider the pros and cons of a voluntary report when reporting obligations do not apply.

What you need to know

• Leaving aside specialised regimes (such as breach reporting obligations for financial services licence holders), the general rule is that there is no positive obligation to report a criminal offence to authorities.
• That rule is displaced in NSW (but not other states) – where it is an offence not to report a "serious indictable offence" unless there is a "reasonable excuse" not to do so.
• It is an offence in most states and territories to seek or take a benefit in exchange for not reporting a serious indictable offence. This is very important to be aware of when dealing with employee misconduct, or when proposing the settlement of a dispute.

The reporting conundrum

It is not uncommon for a corporation to stumble across information relating to the commission of a serious corporate crime in the course of doing business. For example, this can happen when:

• a corporation is the victim of a crime committed by its employee(s) (eg employee theft);
• a corporation learns of fraudulent processes or conduct at another company during the due diligence process of a major transaction (such as a restructure or M&A deal); or
• a corporation holds information relating to individuals or other customers who are breaking the law (eg financial services companies holding certain information about transactions by their customers).

General rule – No obligation to report

The general rule is that a corporation (or its employees or officers) is under no obligation to report a suspected criminal offence.

Exception – NSW positive reporting obligation

The general rule is displaced in NSW by section 316(1) of the Crimes Act (NSW), which makes it an offence not to report a serious indictable offence. The offence is unique to NSW – no other Australian jurisdiction compels the reporting of an offence.

The offence contains four elements, as follows:

1. A committed a serious indictable offence with "geographic nexus" to NSW;
2. B knew or believed that A had committed a serious indictable offence;
3. B had information which might have been of material assistance: (i) in securing the apprehension of the offender or (ii) in the prosecution or conviction of the offender for the offence; and
4. B failed, without reasonable excuse, to bring that information to the attention of a member of the police force or other appropriate authority.

We examine each element below. 

Threshold – who does the NSW offence apply to?

Section 316(1) was amended in 2018 to apply to "an adult" rather than "a person" – recognising that children are particularly vulnerable to being pressured into not reporting another person's offending and may not understand when they have information that might be of material assistance.

It may be arguable that this amendment had the unintended effect of also carving out corporations. We consider corporations should treat the obligation as applicable to them – not least because any information held by the company will be held by individual adults (ie. directors and officers) to whom the offence does apply.

Element 1 – Serious indictable offence with "geographic nexus" to NSW?

A "serious indictable offence" is one that "is punishable by imprisonment for life or for a term of 5 years or more" (section 4 of the Crimes Act (NSW)).

The "serious indictable offence" must have a "geographical nexus" with NSW (section 10C(2) of the Crimes Act (NSW)). This exists where the offence:

• is committed wholly or partly in NSW (whether or not the offence has any effect in NSW); or
• has an effect in NSW.

Examples in the business setting include various fraud offences in Part 4AA of the Crimes Act (NSW), larceny and embezzlement (ss 156 and 157) and documentary offences such as making, using or possessing a false document (ss 253, 254 and 244). It is not clear whether offences under Commonwealth statutes, or laws of other jurisdictions, are also covered.

The "place" in which an offence is committed is the "place in which the physical elements of the offence occur" (section 10B of the Crimes Act (NSW)).

The place in which an offence has "effect" includes:

• any place whose peace, order or good government is threatened by the offence; and
• any place in which the offence would have an effect (or would cause such a threat) if the criminal activity concerned were carried out.

The definition of "effect" in section 10B(3) has not been the subject of much judicial consideration. The NSW District Court has described section 10B(3) as "an omnibus provision which incorporates great scope for flexibility of interpretation, [which] is inconsistent with how statutes imposing criminal sanctions are customarily construed" (Smith v NSW [2016] NSWDC 55 at [105]-[113]).

Elements 2 & 3 – whether the person "knows or believes" or "has information"

"Believes" is not defined in the Crimes Act (NSW). The case law has set a particularly low bar, requiring only subjective belief that a serious indictable offence had been committed without requiring that belief be reasonably held. The High Court in George v Rockett (1990) 170 CLR 104 at 117 held that the assent of belief "is given on more slender evidence than proof".

Element 4 – No "reasonable excuse"

It has been held in other contexts that "reasonable excuse" is not confined to physical or practical difficulties in complying with the statutory prescription. For example, for individuals it would include situations covered by the privilege against self-incrimination – that is, if reporting the offence would incriminate the person reporting the offence (such as where that person participated in the offence). For a corporation, a reasonable excuse may include that it believed on reasonable grounds that the information was already known to the police. Privilege against self-incrimination is not available for corporations: Corporations Act 2001 (Cth), s 1316A; Uniform Evidence Acts, s 187; see also Environment Protection Authority v Caltex Refining Co Pty Limited (1993) 178 CLR 477.

Seeking a benefit not to report – an offence throughout Australia

Section 316(2) of the Crimes Act (NSW) makes it an offence for a person (including a corporation) to solicit, accept, or agree to accept, any benefit in exchange for not reporting a serious indictable offence. This prohibits (among other things) a quid pro quo between a company and an employee or an opponent in a dispute, where the company may wish to use the threat of reporting as leverage to be compensated for loss.

There are similar provisions in all Australian jurisdictions other than South Australia.

Authors: Rani John, Partner; Ian Bolster, Partner; Stephen Speirs, Senior Associate; Joshua Kang, Lawyer, Phimister Dowell, Lawyer