What is accessorial liability?

May 19, 2017

Accessorial liability in the civil context goes back (at least) as far as Selbourne LC’s speech in Barnes v Addy (1874) LR 9 Ch App 244:

[S]trangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions … unless those agents received and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.

It is, however, a concept borrowed from the criminal law: see for example Accessories and Abettors Act 1861 (UK). The codification of the criminal law in Queensland in 1889 picked up these concepts. Section 569 has used the now common terminology of “counsels”, “procures”, “aids” and “abets”.

Accessory liability requires knowledge (actual or constructive) of the essential circumstances of the offence. It is not required to prove that the accessory knew the conduct would constitute an offence. Intention to commit an offence (or to aid one being committed) is not required. The accessory’s conduct can be before, during or after the relevant offence is committed.

Hotspots
  • insolvency and restructuring (especially unlawful phoenix activity)
  • employment and human resources (payroll, hiring, firing)
  • anti-competitive practices (eg exclusive dealing)
  • directors of companies
Cases

ASIC v Somerville & Ors [2009] NSWSC 934

Somerville was a solicitor. The directors of multiple companies nearing insolvency approached him for advice. Somerville advised the directors to transfer the assets to a new company for consideration of shares in the new company. Somerville arranged the registration of the new company, and prepared the necessary resolutions and sale agreements.

The directors were found to have breached ss 181, 182 and 183. Additionally, the court found that, but for Somerville’s involvement, the transactions would not have taken place. He was therefore liable under 79 for the same breaches. Somerville was disqualified from being a director for six years (the actual directors only got two-year disqualifications).

FWO v Oz Staff Career Services Pty Ltd & Ors [2016] FCCA 105

The employer had been unlawfully deducting meal allowances and administration fees from employees’ wages and admitted to the contravention. However, the regulator also brought proceedings against the human resources manager under s 550. The manager denied any liability.

The court found that the manager was aware of the deductions and knew that the practice was a contravention. The manager was thus “involved in” the contravention and was ordered to pay a penalty of $9,920.

FWO v Blue Impression Pty Ltd & Ors [2017] FCCA 810

Ezy Accounting 123 Pty Ltd was the third respondent. It was an accounting firm that provided accounting, bookkeeping and payroll services to the first and second respondents (who admitted underpayment contraventions).

Ezy denied it was involved in its client’s contravention because:

“… in processing the first respondent’s payroll … it only confirmed whether the amounts to be paid to employees of the first respondent were correct for the relevant pay period by inputting the number of hours worked for the relevant pay period into MYOB. MYOB would then calculate the correct pay in accordance with the employees’ hourly rate recorded in MYOB.”

The court found that even if Ezy did not have actual knowledge of the contraventions, the extent of Ezy’s familiarity with its client’s business meant that Ezy had constructive knowledge – it wilfully shut its eyes or failed to make enquires an honest and reasonable person would.

Further, accessorial liability does not depend on control. For example, Ezy could have terminated its retainer but chose to provide services that aided the contravention.

Upshot

Accessorial liability is not limited to the criminal law. As the cases make plain, it can be engaged in response to breaches of statutory (or fiduciary) duty or even negligence (see for example Corporations Act, s 598).

Some people will be delinquent. Advisers and senior managers must be cautious not to be caught in their web. Identifying risk is the name of the game. Lack of control or advising against (but continuing to take instructions anyway) is no defence.


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