Given the widespread use of “benefit” to calculate penalties across the corporate landscape, a new Australian High Court decision could have a significant impact on all corporations and directors that face civil or criminal penalties.
In 2012, Jacobs Group reported itself to the Australian Federal Police for possible foreign bribery that resulted in it winning construction contracts in the Philippines and Vietnam. Jacobs Group was ultimately charged, and pleaded guilty, to three offences of conspiring to bribe foreign public officials contrary to sections 11.5(1) and 70.2(1)(a)(iv) of the Criminal Code Act 1995 (Cth) (Criminal Code).
The Criminal Code prescribes the maximum penalty for that offence as the greatest of three limbs:
- 100,000 penalty units (at the time, AUD11m);
- if the benefit can be determined – three times the value of the benefit that the corporation obtained and that is reasonably attributable to the conduct constituting the offence; and
- if the benefit cannot be determined – 10% of the corporation’s annual turnover.
The third offence, which was the subject of the High Court appeal, related to bribery that took place in Vietnam between 2010–2012. The revenue Jacobs Group received from the resulting construction contracts was AUD10.13m. After deducting its expenses of carrying out the contracts, Jacobs Group was left with a net benefit of only AUD2.68m. The NSW Supreme Court interpreted the “benefit” in limb (2) to be the net benefit only, resulting in a maximum penalty under that limb of AUD8.04m. The Court therefore applied the higher maximum penalty in limb (1), AUD11m, and ultimately handed down a penalty of AUD1.35m, taking into account Jacob Group's self-reporting, guilty plea and provision of assistance to the authorities.
For some, that was a surprising result, as the penalty was lower than the net benefit Jacobs Groups obtained. The Commonwealth Director of Public Prosecution (CDPP) appealed to the Court of Criminal Appeal of NSW, then the High Court.
The question confronting the High Court was whether “benefit” means:
- gross benefit (ie the full amount payable under contracts which Jacobs Group had won because of its bribes); or
- net benefit (ie the gross benefit deducting Jacob Group’s expenses in completing its contractual obligations).
On 2 August 2023, the High Court handed down its decision overturning the NSW Supreme Court’s interpretation, ruling that “benefit” means gross benefit. That elevated the maximum penalty threefold to AUD30.4m. In reaching its decision, the High Court took into account the fact that Australia introduced the penalty provision in response to the Organisation for Economic Co-operation and Development’s (OECD) recommendation for “effective, proportionate and dissuasive” fines. The matter has now been remitted to the Court of Criminal Appeal of NSW for a fresh determination of the appropriate penalty.
Over the last two decades, the Federal Parliament has widely adopted “benefit” as a benchmark for calculating both civil and criminal penalties across the commercial landscape. This includes under the Corporations Act 2001 (Cth), Competition and Consumer Act 2010 (Cth), and the Securities and Investments Commission Act 2001 (Cth). While each statute must interpreted on its own terms, the similarity in wording across these provisions means that the High Court’s judgment on this issue may have wide ranging ramifications that significantly increase the cost of corporations and individuals getting on the wrong side of the law.
