Australia: Executive liability in the infrastructure industry: what you need to know

The discovery of cracks in Mascot Towers felt like Groundhog Day for Sydney residents. They had heard a familiar story six months earlier, when the Opal Tower was evacuated following structural failures. The potentially catastrophic outcome of the structural failures, and the lack of legal recourse available to residents, highlight the serious regulatory and accountability issues facing the construction industry.

These cases make compelling arguments for the imposition (on public policy grounds) of personal liability on executives for offences committed by corporations.

Executive liability recognises the potential for corporate misconduct to cause public harm. Extending liability to 'pierce the corporate veil' would motivate directors and senior management to actively ensure a corporation's compliance.

The NSW Government has already taken steps in this direction. It has introduced a number of executive liability offences relevant to the infrastructure industry over the past few years, and is likely to further extend its net to other areas. The most recent example is the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW), which introduces executive liability for the service of knowingly false or misleading supporting statements, with penalties of up to $22,000.

We explore some key executive liability offences in greater detail.

What is executive liability?

Executive liability refers to personal liability imposed by law on:

  • a director of a corporation; or
  • an 'individual who is involved in the management of the corporation and who is in a position to influence the conduct of the corporation';

as a result of the corporation having committed an offence classified as an executive liability offence.

Legislative provisions imposing executive liability include the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) s 34D, and the Building Products (Safety) Act 2017 (NSW) s 59.

The onus is on the prosecution to establish that a director or individual involved in management:

  • knew or was recklessly indifferent about whether the offence would be or was being committed; and
  • failed to take all reasonable steps to prevent the commission of that offence.

What are reasonable steps?

In NSW, the term reasonable steps is defined in legislation. It includes any reasonable action towards:

  • assessing the corporation's compliance with the provision creating the executive liability offence, and ensuring that the corporation arranged regular professional assessments of its compliance with the provision;
  • ensuring that the corporation's employees, agents and contractors are provided with information, training, instruction and supervision appropriate to them, to enable them to comply with the provision creating the executive liability offence so far as the provision is relevant to them;
  • ensuring that the plant, equipment and other resources, and the structures, work systems and other processes, relevant to compliance with the provision creating the executive liability offence are appropriate in all the circumstances; and
  • creating and maintaining a corporate culture that does not direct, encourage, tolerate or lead to non-compliance with the provision creating the executive liability offence.

Who is involved in the management of a corporation?

This depends on the corporation's organisation and structure, which may well be unique to it.

However, those in key management positions (including those at project manager level and senior in-house legal counsel) may be involved in the management of the corporation and in a position to influence its conduct.

People in these positions are involved in managing the risk of projects, decision making, legal governance frameworks and the workings of organisations. They may have advised senior management and the board of directors in setting up those frameworks and processes.

Key executive liability provisions relevant to the infrastructure industry

Building and Construction Industry Security of Payment Act Amendment Act 2018

At this stage, only offences regarding the head contractor's supporting statements attract executive liability (see sections 13(7), (8) and section 34D). The maximum penalty is 200 penalty units (currently $22,000). However, the NSW Government is now seeking feedback on developing accompanying regulations, under which new executive liability offences may be created.

Building Products (Safety) Act 2017

The Act creates bans for using unsafe building products. Once a ban is in force, it becomes an offence to:

  • cause a building product to be used in a building in contravention of a building product use ban (section 15(1));
  • in trade or commerce, represent that a building product is suitable for a use in a building if that use would contravene a building product use ban (section 15(3)); or
  • contravene a building product undertaking (section 29).

These offences attract executive liability with a maximum penalty of $220,000 for an individual.


It is important that executives in the infrastructure industry be aware of their potential personal liability for offences committed by the corporations they work for – and to understand what reasonable steps are required under the legislation in order to offset liability.

When considering whether an employee involved in key management roles may be liable under the executive liability provisions, the questions to be addressed include:

  • Is the employee involved in the management of the corporation?
  • Are they in a position to influence the corporation's conduct?
  • If so, does that influence relate especially to the relevant legislative requirement?
  • Are the organisation's training and governance procedures sufficient to establish the corporation has taken 'reasonable steps' to fulfil the relevant obligation?

Corporations should consider putting in place risk mitigation measures, including extending their directors' and officers' liability insurance to provide coverage for management personnel who are in a position to influence the corporations' conduct.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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