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Tuesday, 21 May 1985
Page: 2282

Senator BUTTON (Minister for Industry, Technology and Commerce)(10.13) — The Government has examined the views of the Law Council of Australia. The provisions in this legislation are not new. As I understand it, the Law Council of Australia may well have been aware of that fact. I understand there are very similar provisions in the trade practices legislation. Nonetheless, let me say something about the provisions of clause 17 which are intended to make a corporate or non-corporate principal liable for the actions of an agent, including a director in the case of corporations, or a servant, who deals with the Australian Customs Service on behalf of such principals when that person is acting within the scope of that principal's actual or apparent authority.

Within the experience of the Australian Customs Service, I understand there have been a number of attempts-I think some examples of the sorts of things that have happened will have been identified to Senator Chaney-to shelter behind the law in relation to this matter and companies have tried to shelter behind the alleged irresponsibility or incapacity to act of a servant or agent. However, that is a practical matter. The point of the proposed new section is to extend responsibility to other persons exercising an agency role at the direction of such director or servant or agent given within the scope of apparent authority.

In the area of entry and clearance of goods, which is very important in the administration of the Customs Service, the particular constraints operating make it quite impossible, especially in the case of large corporations with far flung offices, for questions raised and explanations sought by Customs to have the consideration of and response by the managing director or the board of directors of a company. Customs has the right to act on the understanding that a director, agent or servant who presents himself as acting on behalf of his corporate principal, and who gives to Customs answers or explanations in respect of particular importations of goods, is speaking with the voice of the corporation. Similar reasoning applies to non-corporate principals.

Under the existing law bodies corporate are, in the Customs area and other areas such as trade practices, consumer affairs, et cetera, able to avoid the consequences of serious breaches of the law, by which a corporation has profited and Commonwealth revenue has suffered, by claiming that the director, servant or agent, whose action ostensibly on behalf of the corporation constituted the offence, did not have the express authority of the heart and core of the corporation to make the particular action or the particular statement. The Government takes the view that the present state of the law is clearly inadequate and is being used to the disadvantage of the Commonwealth and the public interest by tax evaders and others. Furthermore, the use of this device could be expected to become more rampant, should the present weaknesses of the law remain uncorrected, and become more widely recognised.

In the Government's view, the Opposition's proposed amendment would do nothing to correct the weakness that has been identified in a number of important cases because, under the Opposition's proposal, liability would fall on the body corporate where the action constituting the offence was committed by a director, servant or agent or somebody acting within their scope of authority and with the control of those persons having the management and control of the aspect of the body corporate's affairs with which the conduct is concerned. The Government argues that it would be impossible to define with certainty when an agent was acting with the control of what it considers to be those vague personages appearing in the Opposition's proposed amendment. I do not wish to be offensive about the language of the Opposition's proposed amendment.

Senator Chaney —We have not circulated an amendment so I am not quite sure what you are talking about.

Senator BUTTON —It was circulated in the House of Representatives, I believe. For those reasons the proposed amendment is regarded as inadequate. The fact that there is a serious weakness in the current law has been identified by the courts in a number of important cases and, arising from these, it is the Government's view that the situation ought to be corrected. The Opposition's proposed amendment, which we have had the advantage of seeing, would result in responsibility being avoided in the same means as it has been in the past, that is, by utilising the corporate veil.

The last time the Senate debated this legislation Senator Chaney quoted from Professor Colin Howard's book. As I recall the passages quoted by Senator Chaney, they in fact were very supportive of the view about deficiencies in the present law which the Government is concerned about in this proposed new section. We do not accept the view of the Law Council of Australia on this matter. We as a government should certainly respond to the Law Council in a formal sense but we do not accept the view which is implicit in what has been said.