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"Why not Litigate?" - the trend towards white collar prosecutions

Tuesday February 19, 2019

"Why not Litigate?" - the trend towards white collar prosecutions

The Australian legal scene is witnessing a steady increase in prosecutions by the prosecuting agencies against businesses.  We are also finding that most legislation now provides for the potential personal liability of directors and officers for offences committed by their companies.


In an era of increased penalties and increased funding available for enforcement action by regulators, and a starting point of "why not litigate?" we advise all our business clients to take the following steps:

  1. Review your compliance within the regulatory framework in which you operate;
  2. Consider what is happening with regulation in your industry generally;
  3. Consider in what areas you are at risk;
  4. Deal with and respond quickly to any enquiries by regulators.

Consider these steps in the light of what's been happening lately and what is being proposed:

  • Ultra Tune has been ordered to pay a penalty of over $2 million
    A recent Federal Court of Australia decision found the franchisor, Ultra Tune Australia Pty Ltd, guilty of breaches of the disclosure requirements to its franchisees under the Franchising Code, and misleading or deceptive conduct.  Ultra Tune was also ordered to pay the ACCC's costs of the proceeding on an indemnity basis.  Further, Ultra Tune would be required to comply with the requirements of the Franchising Code in having to refer to the conviction in every disclosure document created to existing and prospective franchisees over a five year period. Ultra Tune has indicated that they may appeal the decision.
  • Proposed increase in financial and imprisonment penalties
    Under the Treasury Laws Amendment (ASIC Enforcement) 2018 Bill, it is proposed to amend the Corporations Act, ASIC Act, Credit Act and the Insurance Contracts Act to introduce a stronger penalty framework.  The Treasurer, Hon. Josh Frydenberg MP stated that the "proposed changes would double maximum imprisonment penalties and significantly increase financial penalties for some of the most serious 'white-collar' criminal offences, bringing Australia's penalties in closer alignment with leading international jurisdictions."
  • Commitment to more Court actions
    "In its submission to the Royal Commission interim report, ASIC committed to accelerating enforcement activities, conducting more civil and criminal Court actions against larger financial institutions and, as a starting point for all enforcement matters, asking the question "why not litigate?"" (ASIC media release 4 February 2019).
  • Government provides millions to help restore trust in Australia's financial systems
    "The Government agrees [that deterrence relies on the judiciary's effectiveness and capacity to do its job] and has already provided an additional $70.1 million to boost ASIC's enforcement capabilities and supervisory approach and $41.6 million to the Commonwealth Director of Public Prosecutions to prosecute briefs from ASIC," Mr Frydenberg wrote in the government's 'Restoring trust in Australia's financial system' document.

    "Extending the Federal Court's jurisdiction will boost the overall capacity within the Australian court system to ensure the prosecution of financial crimes does not face delays as a result of heavy caseloads in the Courts."

Our commercial lawyers can assist you and your business from falling victim to what is fast becoming a trend against businesses – personal liability and litigation.