Corporate wrongdoers more likely to face justice

A model of corporate responsibility developed by Melbourne Law School’s Professor Elise Bant has proved decisive in a landmark decision of the High Court that has placed corporate wrong-doers on notice.

A model of corporate responsibility developed by Melbourne Law School’s Professor Elise Bant has proved decisive in a landmark decision of the High Court that has placed corporate wrong-doers on notice.

The landmark decision explains how corporations can now be held directly responsible for their predatory business models, with the model of corporate responsibility described in the judgment one developed by Professor Bant, whose work is cited in the decision.

“Previously, catching corporate fraudsters has been close to impossible, because the law demanded evidence that a particular person was responsible for the organisation’s misconduct,” says Professor Bant, Professorial Fellow with Melbourne Law School and Professor of Private Law and Commercial Regulation at UWA.

“That meant that many corporate wrong-doers have, in the past, escaped scot-free.

“But the High Court decision explains that if a company has a business model that preys on people, that company’s systems, policies and practices themselves reveal that this is a knowing and deliberate corporate strategy.”

Professor Bant says the implications of the decision are enormous, extending to virtually every aspect of corporate wrongdoing, including harms that occur through AI. The new principle potentially also applies to both corporate groups and government entities, “so public entities could be held to account for systemic abuses such as Robodebt”.

“Corporate fraud and predatory behaviour are common, harming consumers, fair traders and society as a whole. Yet, as the Banking Royal Commission showed, too often corporations are structured to allow them to avoid or limit responsibility, to hide behind excuses of ‘system errors’ and ‘incompetence’,” Professor Bant says.

She describes the traditional principle of needing to find evidence against an individual as a game of ‘Where’s Wally’, “but in an age where corporate business models are often complex, using natural and corporate third-party agents, and teams of employees, ‘Wally’ is often nowhere to be found”.

The case before the High Court involved a vocational college called Captain Cook College, which had hired marketers to sign up students for its online courses, tempting them with gifts such as free laptops.

The college initially had processes to weed out students who would be unable to take on study, but abandoned those systems when recruiters complained they meant they did not make as much money.

The result was that students, many from disadvantaged backgrounds, became liable for substantial debt for courses they never even started, while the college’s profits soared from $326,000 to $18.9 million.

“The High Court’s decision is a game-changer. It explains that corporations ‘think through their systems’, and that this college’s processes and practices proved its intentions.

“The reasons of Justice Gordon and Justice Edelman are ground-breaking because they lay out and apply tests for identifying the blameworthiness of organisations, as responsible entities in their own right.

“This is a practical way of unmasking corporate fraud and predatory practices.”