The Health and Safety at Work Act 2015 introduced a new “due diligence” duty requiring officers, including partners and directors (whether paid or voluntary), to take appropriate, proactive steps to ensure a person conducting a business or undertaking (“PCBU”) complies with HSWA.
The duty focuses in on the governance of the PCBU and ensuring that it is held accountable for workplace health and safety.
Obligations on officers
- company directors
- any partner in a partnership (other than a limited partnership)
- any general partner in a limited partnership
- any person who holds a position comparable to a director in a body corporate or an unincorporated body
- any person who exercises significant influence over the management of the business or undertaking (such as the Chief Executive and potentially a Chief Operating Officer).
Each officer of a PCBU is required to ensure that an organisation has implemented the appropriate safe systems of work and must actively monitor and evaluate those systems to ensure health and safety is effectively and appropriately managed.
In addition, each officer must ensure that they take reasonable steps to do the following:
- acquire, and keep up to date, knowledge of work health and safety matters;
- gain an understanding of the nature of the operations of the business or undertaking of the PCBU and generally of the hazards and risks associated with those operations;
- ensure that the PCBU has available for use, and uses, appropriate resources and processes to eliminate or minimise risks to health and safety from work carried out as part of the conduct of the business or undertaking
- ensure that the PCBU has, and implements, processes for complying with any duty or obligation of the PCBU under HSWA
- ensure that the PCBU has appropriate processes for receiving and considering information regarding incidents, hazards, and risks and for responding in a timely way to that information
- verify the provision and use of the resources and processes referred to above.
Due diligence in the Courts
HSWA is based on the Australian Model Act (which has been implemented in Australian jurisdictions with variations being made for each State). To date, in New Zealand, there have been no prosecutions of officers who have breached the due diligence duty. In Australia, there have been several prosecutions which relate to officer duties, some of which are discussed below.
Brett McKie v Munir al-Hasani & Kenoss Contractors PTY Limited) (in Liquidation)
In June 2015, in a landmark case, the Industrial Court of the Australian Capital Territory (“ACT”) found Munir Al-Hasini and Kenoss Contractors PTY Limited (in Liquidation) (“KCL”) guilty of offences under the Work Health and Safety Act 2011 ACT (“WHS Act”) arising out of an investigation into the 2012 death of another contractor’s worker.
KCL had contracted to the ACT government to undertake road resurfacing works. KCL employed Mr Al-Hassan, who the court described as a well-qualified engineer and contracted another company, David O’Meley Truck Hire (“DOT”) to deliver materials to site. There were three compounds and materials were delivered to the main and a secondary compound.
KCL’s foreman had told workers to stop using a second compound on the site as he considered it to be dangerous due to the presence of low hanging electrical wires. The foreman was of the view that he had told DOT’s worker to dump his load at the “main” compound.
The second compound was fenced, but not locked, and there was no signage in place to warn of the presence of live power lines. DOT’s worker entered the second compound. The photographs taken on the day showed that the power lines were obscured by foliage, and the cloud that was present meant that the power lines were less visible.
DOT’s worker entered the site and tipped his load, the bucket of the truck either came close to or connected with, the power lines forming an electrical arc and resulted in burn marks under the tyres and the tyres being partially deflated. It is at this point that DOT’s worker exited the truck and was electrocuted, he later died in hospital as a result of the electrocution and its complications.
Despite the evidence of Mr al-Hussain and the foreman, that they had told workers not to enter the second compound, photographic evidence demonstrated that the site was still in use. The foreman said that he believed this was contrary to his instruction. However, a nearby resident noted that the compound was being used as a “loading yard”. A KCL worker gave evidence that he was inducted at all three compounds.
The Magistrate considered that the risk was obvious and well-recognised in the construction industry and specifically referred to the Approved Code of Practice, and considered it was reasonably practicable to:
- not use the site;
- limit access to the site and secure the fencing;
- have the power turned off to the site when it was in use;
- require delivery drivers to be accompanied by a spotter;
- provide the appropriate signage as to the particular risk of overhead power lines, consisting of a sign on the gate and surrounding fence;
- placing flags or “tiger tails” on the lines themselves to make them more visible;
- warning all potential users to the site of the presence of, and risk associate with, the lines at second compound through site induction.
The Court considered that Mr al-Hussain was the project manager responsible for the entire project and was fully aware, based on his own evidence, of the risks associated with the live powerlines situated above the second compound.
Mr al-Hussain’s failures were described by the Court as being multiplicitous. The Court was scathing of the purported directions given not to use the site considering that this was an inadequate response to the risk. In addition, the Court was also concerned at Mr al-Hussain’s readiness to relinquish his responsibility for managing the risk to the foreman at the site without having a process in place to ensure compliance.
However, the Court found that while Mr al-Hussain was an integral part of KCP’s business structure he was not an officer. The Court in dismissing the charges found that Mr al-Hussain:
- was not in control or responsible for the business or undertakings of the company; and
- his participation in the company was operational, there was no evidence that he made decisions, or participated in decision making that affected either the whole or a substantial part of KCP’s business.
Interestingly, the Court had commented that Mr al-Hussain had a duty as an employee but had not been charged in that capacity. Had Mr al-Hussain been charged in the alternative as a worker the outcome may have been different given his mutliplicitous health and safety failures as noted by the Court. The take away from this case is that an officer cannot be an employee who is responsible for a site by virtue of their employment. An officer must have the ability to influence and assert control over the PCBU.
MMP Industrial Pty Ltd (“MMP”)
MMP is an industrial paint mixing and manufacturing company based in New South Wales (“NSW”). SafeWork NSW investigated an incident where a worker was seriously burned while using a highly flammable solvent, acetone, to clean a paint mixing vat.
During the cleaning process, a static electrical charge caused the spontaneous ignition of the vapours. The worker was in proximity, standing half a metre from the vat when the explosion occurred. An aggravating feature of the offending was that the incident was not reported to SafeWork NSW until seven days later.
On 28 November 2019, MMP was fined $75,000 in respect of two offences under the Work Health and Safety Act 2011 (“WHSA”). However, what is of interest is that, as with HSWA, under WHSA a training order is a sentencing option available to the courts.
In this case, training orders were made ordering general managers and the work health and safety officer undertake training in due diligence, hazardous substances and electrical compliance in hazardous areas. In addition, MMP was ordered to provide comprehensive risk management training to all workers and senior staff.
As, noted by Tony Williams, SafeWork NSW Executive Director, Operations training orders are significant as the judge recognised that a basic lack of safety awareness was what led to an ultimately avoidable situation.
While the officers of the company were not personally held liable for the due diligence breach the training orders strike at the heart of that duty. However, the orders require the officers to comply with the pre-existing statutory duty and specify how they must comply.
In the New Zealand context, WorkSafe New Zealand may not be minded, given their guidance, prosecution policy, and position statement on due diligence, to support a similar order being implemented in New Zealand. It is more likely that if there is a significant breach of the due diligence duty that the individual officers of the company would be held personally liable for the breach.
For More Information:
If you would like more information about the matters raised in this article, please get in touch with our health and safety expert, DeAnne Brabant. Call 04 472 0020 to arrange a confidential consultation with our highly-skilled team.