Avoiding double penalties when sentencing a company and director

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Avoiding double penalties when sentencing a company and director

Avoiding double penalties when sentencing a company and director

Thursday 23 April, 2020

In Southland Regional Council v Erskine,[1] a recent District Court sentencing under the RMA,[2] the Court considered whether it would be a double penalty to impose a fine on the sole director of a company as well as the company itself.

The defendant was the sole director of a company which had previously been convicted and fined $32,000 on the same charge that he faced. He initially pleaded not guilty to the charge and applied for discharge under section 147 of the Criminal Procedure Act 2011 on the basis that the charge against him was unwarranted as the purpose of sentencing, being deterrence and denunciation, had already been met with the guilty plea and conviction of the company. [3]

The District Court rejected the discharge application on the basis that the strict liability scheme in s340(3) of the RMA specifically contemplated that directors and companies could be held liable for the same offence. Further, it would be “unsatisfactory” for a director to escape liability for an action for which they were culpable, and for culpability to be ascribed solely to the company. The District Court expressed concern that by dismissing the charge, it could be endorsing a process by which directors use their company’s conviction to avoid criminal liability.[4]

Following dismissal of his s147 application, the defendant immediately pleaded guilty to the charges. At sentencing, he maintained that any fine imposed should reflect the fact that he would also be paying the company’s fine, and there should be no element of double penalty. On that basis, the defendant sought a conviction and discharge.

The District Court accepted that the double penalty principle broadly supported the defendant’s submission, but again expressed concern about the risk of directors misusing court processes to avoid personal financial liability.[5] The Court held it was appropriate to impose a fine of $2,000 against the defendant to reflect the fact that he maintained a not guilty plea right up until his s147 application was declined.

Conclusion

The double penalty principle does not prevent a court convicting and fining both a company and its sole director. The RMA prosecution scheme intends to achieve that very outcome.[6] However, the Court commented that if a similar situation arises again, where a company has pleaded guilty and its director not guilty, it may be appropriate for the sentencing Judge to delay sentencing the company until the outcome of the director's charges is known. That will ensure that both defendants have appropriate sentences passed on them if the director is also found guilty.[7]

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[1] Southland Regional Council v Erskine [2019] NZDC 22179.

[2] The defendant and his company were both found guilty of breaching section 15(1)(b) of the RMA by unlawfully discharging dairy effluent onto land where it entered a nearby waterway.

[3] Southland Regional Council v Erskine [2019] NZDC 20771.

[4] Above n 9, at [12] and [20].

[5] Above n 7, at [7].

[6] Above n 9, at [12].

[7] Above n 7, at [8].