On-premises retail crime: a checklist for businesses of rights and obligations

On-premises crimes continue to significantly impact Australia’s retail sector, despite increasingly sophisticated surveillance and security systems, as well as improved staff awareness and education. The National Retail Association estimates that theft-related crimes cost the industry around $4.5 billion each year, a figure which continues to rise.

For in-house lawyers in the retail sector, there are steps you can take to raise awareness and educate frontline employees of the legal rights and obligations that apply where there is an on-premises crime. From a bottom line perspective, it is also important to be aware that the business has a legal right to victim’s compensation in certain circumstances, where the business suffers economic loss.

The law is slightly different in each state, but broadly the same principles apply. This article focuses on the NSW position.

Key retail crime offences
The two most prevalent types of crime facing retailers in stores are theft (ie larceny or shoplifting) and fraud. Larceny is committed when property belonging to someone other than the accused is taken and carried away without the consent of the owner of the property.^[1] While there is a range of fraud offences in NSW, the general fraud offence concerns a person who, by any deception, dishonestly obtains another’s property or obtains any financial advantage or causes any financial disadvantage.^[2] An example is the exchange of counterfeit goods to obtain money or authentic goods.^[3]

Rights to inspect bags and remove a customer from premises

The guidelines endorsed by NSW Fair Trading set out the principles and practices for bag checks in NSW.^[4] To have the right to inspect a customer’s bag, retailers must display a prominent sign at every entrance notifying its conditions of entry: for example, by stating that “agreeing to checks is a condition of entry” or “checks are done on bags, parcels, cartons and containers”. Even if staff or security suspects that a customer has committed an offence, they are not entitled to physically search a customer’s bag against their will. Otherwise, there is a risk of liability for assault.

In order to mitigate this risk, staff or security must first ask a customer for permission. If consent is given, the check should be carried out in the following manner:

• request the customer to open the bag
• refrain from touching the bag or the items in it
• where the view of the bag is obstructed by an item, request the customer to remove the obstruction.

If a customer does not consent, a retailer may ask the customer to leave the premises^[5] or may contact the police. A “citizen’s arrest” may only be made in the circumstances set out below.

Responding to a suspected or an actual crime on retail premises

Where staff or security has reasonable grounds to suspect that a person has committed an offence on the premises, they may request that person to accompany them to a private place to discuss the matter.

Depending upon the person’s reaction, subsequent steps may include

• calling security and/or the police if that person refuses to co-operate or
• if the person agrees, attending a private area (eg. a back office) with the door kept open, and requesting the person to answer questions, and produce any items of concern and a proof of purchase.

Citizen’s arrest

A retailer’s staff or security also has the right to make a citizen’s arrest where a person is clearly in the act of committing an offence or has just committed any such offence.^[6]

However, it is usually a better course of action to contact the police immediately, and for any arrest to be made by them.^[7] The NSW Police Force has issued a media release discouraging people from performing citizen’s arrests after an incident leading to the death of a perpetrator.^[8]

A person who performs a citizen’s arrest also owes a duty of care to the person they are arresting and must not use excessive force. If the person is a juvenile, that person should only be released into the care of a parent, guardian or the police.

The person making the arrest may use such force as is reasonably necessary to make the arrest or to prevent the escape of the person after arrest.9 If excessive force is used, it could expose that person to charges of assault. In NSW, a person who arrests another must, as soon as is reasonably practicable, take the person, and any property found on the person, before a magistrate (in practice, through the police) to be dealt with according to law.^[9]

False imprisonment and wrongful arrest

Retailers should remind staff and security that exposure to a false imprisonment claim will arise where their act, without lawful excuse or justification, directly and intentionally causes a person to be confined within a delimited area.^[10]

Retailers can also be held liable for instigating a wrongful arrest by the police, if, by its employees or agents, it actively promoted and directly caused a person to be (wrongly) arrested. However, merely giving information about a possible offence which leads the police to detain a person after exercising their own independent judgment will not result in liability.^[11]

If liability is established, a retailer and/or the relevant individual will be liable to pay general compensatory damages, and potentially also aggravated damages and/or exemplary damages. Damages may also be recovered for economic loss if a wrongfully detained person can show that psychological or psychiatric injury was caused by false imprisonment.

Crime reporting obligations

An individual faces the possibility of imprisonment for up to 2 years if they commit the offence of failing to report conduct which they know or believe amounts to an (serious indictable) offence without reasonable excuse.^[12] NSW is the only state with mandatory reporting requirements for persons possessing information about the commission of a serious indictable offence.

The NSW Police Force has launched the “NSW Police Force Community Portal” in order to facilitate quick, cheap and efficient crime reporting via a secure website.^[13]

Right to seek victim’s compensation

If a retailer suffers economic loss resulting from an offence, and the perpetrator is charged and convicted, it should consider making a claim for victim’s compensation against the offender if commercially worthwhile.^[14]

Relevant factors include the costs of civil litigation to recover loss, delays associated with the criminal justice system and the perpetrator’s asset position. Under section 97 of the Victims Rights and Support Act 2013 (NSW), an “aggrieved person” can apply for a direction that compensation be paid out of the property of a person convicted of that offence. “Person” includes body corporates and corporations.

The power to grant compensation is discretionary and the court can make the order on its own initiative or on application made by or on behalf of the aggrieved person. There must be a causal connection between the offence and the loss to the civil standard of balance of probabilities.

Once a direction is made, the offender must pay immediately or within any specified time period. The direction can be easily converted into a judgment of the court and then enforced in the usual way. In summary, in-house counsel operating in the retail sector should ensure their organisation:

• has a clear and easily accessible policy setting out the dos and don’ts when an on-premises crime is suspected
• has regular training programs in place for frontline staff which addresses policy and procedure, including reporting obligations
• considers whether to pursue a claim for victim

This article was first published in Inhouse Counsel, Vol 22 No 4, August 2018.

^[1] Crimes Act 1900 (NSW), section 116.^{Back to article}

^[2] Above n 1, section 192E.^{Back to article}

^[3] Other examples of fraud include using illegal methods to pay for goods and swapping barcodes or price stickers for less expensive items at check-out.^{Back to article}

^[4] Fair Trading (NSW) “Bag check guidelines” (16 July 2018).^{Back to article}

^[5] A customer enters a retailer’s premises under an implied licence which can be denied, revoked or withdrawn.^{Back to article}

^[6] Law Enforcement (Powers and Responsibilities) Act 2002 (NSW), section 100.^{Back to article}

^[7] Security personnel possess no greater powers than those of the owner or occupier of the premises.^{Back to article}

^[8] See S Fogarty “Police warn of dangers of citizen’s arrests after suspected shoplifter left critical” (8 May 2016).^{Back to article}

^[9] Above n 6, section 100(2).^{Back to article}

^[10] R Balkin and J Davis, Law of Torts, 5th edn, 2013, at [3.24].^{Back to article}

^[11] A relevant consideration will be whether the employee deliberately gave wrong information to the arresting police officer.^{Back to article}

^[12] Above n 1, section 316.^{Back to article}

^[13] If you are subject to any retail crime, you can create an account and report the incident online at https://portal.police.nsw.gov.au/. Above n 6, section 231.^{Back to article}

^[14] In addition, or as an alternative, to any civil claim or fidelity insurance recovery.^{Back to article}