House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Parliamentary Secretary to the Treasurer, the Hon Bernie Ripoll MP)

Chapter 6

Therapeutic Goods Act 1989

Outline of chapter

6.1 The Bill amends the Therapeutic Goods Act 1989 (TGA) to remove derivative liability for relatively minor offences by removing the current blanket application of derivative liability, and to make clearthose provisions under the TGA which impose personal liability on executive officers of a body corporate for an offence committed by their company.

Context of amendments

6.2 There are numerous provisions in the TGA that impose personal criminal liability on company officers for breaches of that Act by the corporation. The audit of Commonwealth legislation identified a number of those provisions that applied personal criminal liability on officers in a manner that did not accord with the COAG Principles.

6.3 Section 54B (1) applies personal liability where:

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the body corporate commits an offence;

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the officer knew that the offence would be committed;

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the officer was in a position to influence the relevant conduct; and

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the officer failed to take all reasonable steps to prevent the commission of the offence.

6.4 Section 54B(1) is currently a blanket liability provision. Blanket liability provisions are referred to in the Principlesand Guidelines as provisions that create personal liability which applies to contraventions of all relevant offences located within the Act. The COAG Principles do not consider blanket liability provisions to be appropriate because they result in personal criminal liability being applied by default to the rest of an Act, and make the full extent of potential liability for the company breaching a requirement difficult to ascertain.

6.5 Section 54B was introduced into the TGA by the Therapeutic Goods Amendment Act ( No.1 ) 2006 . The amendments made by that Act were made because of a succession of serious safety and quality breaches by a major Australian manufacturer of therapeutic goods which necessitated regulatory action to protect the Australian public from medicines manufactured in a way that posed a threat to public health and safety. Section 54B ensures that executive officers who are in a position to prevent a contravention by the body corporate will be liable for the contravention if they fail to take reasonable steps to do so.

6.6 The majority of sponsors of therapeutic goods in Australia are body corporates, and a considerable number of those are small body corporates. Directors and officers of small companies have a greater role to play in the lower level management of the company and have greater influence over its day to day operations. Therefore, the industry structure makes it more likely that directors and officers will have influence over the companies conduct in relation to many issues dealt with by the TGA. However, even for larger companies, where directors and officers have high level strategic roles and little, if any, involvement in day to day operational and managerial issues, those directors should ensure that there are systems and policies in place that ensure employees are aware of the laws which apply to them and that the company complies with these laws.

6.7 Failure to comply with the TGA has criminal consequences that attract an appropriate level of punishment, deterrence, and censure for contraventions which can seriously endanger public health and safety due to problems with the quality, safety and efficacy of therapeutic goods.

Summary of new law

6.8 The Bill removes the personal liability of executive officers for the offences of a body corporate in relation to relatively minor offences under the TGA.

6.9 The Bill removes the automatic application of this derivative liability under the TGA. Derivative liability will only apply to those sections listed under the new section 54BA, and those regulations that are prescribed for the purpose of section 54BA. The general application of the Crimes Act 1914 and the Criminal Code (that is in relation to attempt, accessories after the fact, complicity, incitement, and false or misleading statements) continues to apply

6.10 The Bill inserts notes under each offence provision where an executive officer of a body corporate may be personally liable for a breach.

Comparison of key features of new law and current law

Detailed explanation of new law

6.11 The Bill limits the application of personal criminal liability for corporate fault to serious offences under the TGA, rather than to all offences.

6.12 The Bill amends the heading of section 54Bto make reference to the personal liability of executive officers. [ Schedule 5, Item 1 ]

6.13 The Bill amends the TGA so that Executive Officers will only be personally criminally liable for offences covered by the new section 54BA. Section 54B continues to apply to serious offences, being those listed under new section 54BA. [ Schedule 5, Item 2 ]

6.14 Many of the offences in the TGA are structured such that there are three 'tiers' of culpability for conduct that breaches the Act. The different tiers of culpability in general relate to the likelihood of harm arsing.

6.15 For example, section 32BA of the TGA prescribes different penalties for the same conduct, according to whether:

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the offence has or would result in harm or injury to any person;

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the offence would likely result in harm or injury to any person; or

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the offence had been committed, regardless of harm.

6.16 Where offences follow this above structure, the application of personal liability via section 54B has been removed in relation to the lowest level of culpability (where it is not shown that harm has resulted).

6.17 The Bill inserts the new section 54BA which contains all of theoffences to which Subsection 54B(1) applies. Section 54BA retains the existing power under the TGA to prescribe offences in regulations made under the TGA that will attract personal liability for executive officers, and allows certain provisions under the Crimes Act 1914 and the Criminal Code to continue to apply. [ Schedule 5, Item 3 ]

6.18 The Bill also amends the offence provisions in the TGA that continue to apply personal criminal liability through the operation of Section 54B by inserting a note to these provisions to signify that subsection 54B(1) and section 54BA apply in relation to the offences. [ Schedule 5, Items 4 to 80 ] Application and transitional provisions

6.19 These amendments apply from the day after Royal Assent. [ Section 2 ]

6.20 The amendments apply only in relation to acts or omissions occurring on or after the day the Bill commences. [ Schedule 7, Item 1 ]