While we await the much-anticipated judgment involving the first prosecution of a CEO in New Zealand as an officer, in this article we do a brief recap on the officer duty, and take a look at a recent judgment from Australia involving a prosecution of a director of a medium-sized business.
Overview
At face value, the duty of an officer under the Health and Safety at Work Act 2015 (HSWA) is markedly different from the duty of the business of which they are an officer. The duty placed on officers is a governance duty.
Prior to HSWA, those in leadership positions had no proactive governance duty in health & safety.
However, the Pike River Coal Mine tragedy marked a turning point in New Zealand’s legislative approach, highlighting the need for active board participation. HSWA introduced the officer duty, drawn from the Model Work Health and Safety Act in Australia, requiring officers to exercise due diligence.
An officer includes directors, partners, and anyone with significant influence over the management of the business, such as individuals in the “C-suite.” Advisors are not considered officers.
What does good governance look like?
You need to approach the business with creativity, proactivity, curiosity, and a level of empathy.
An officer who exercises diligence duty will proactively take reasonable steps to:
- Know about health and safety, the business obligations and obligations as an officer. A level of health and safety acumen is required, and keeping that knowledge up to date is essential – whether by way of example through additional studies, training, or industry memberships.
- Understand the business. This includes including the nature of the operations, core activities, its resilience performance, and risks that affect the business.
- Resource and equip the business with the right people, equipment, and processes to address the risks that affect the business. Consider health and safety spend as an investment and an asset, not a financial burden.
- Implement processes for receiving information about risks and for responding to that information swiftly, and, implement processes for ensuring the business complies with its obligations under HSWA.
- Verify whether processes and resources provided are being used, and are effective.
So, what does this mean in practice? The duty is essentially a mandate to develop a deeper understanding of the business, which requires an attitude of curiosity and even healthy scepticism coupled with a drive to develop and enhance (and of course fund) systems which respond to the risks of the business.
How you may think work is done – “work as imagined”, and how the work is actually done – “work as done” are probably different. The goal of the due diligence duty is to motivate officers to close that gap.
To do so, you need to know the business, know the context within which it operates, and know how work is actually carried out. Reliance on static process documents and quantitative reports alone are unlikely to show the proper picture. They are an important piece of the puzzle, but good health and safety governance now requires understanding of “Safety II” methodologies, and learning from things going right.
High health and safety performance and good health and safety outcomes are achieved by:
- understanding your organisation’s critical risks, and resilience performance (the ability to deal with unexpected circumstances, including unexpected conditions, errors, and mistakes); and
- resourcing the business and implementing processes to be able to cope with variability.
Consider – not just whether the organisation is “meeting its obligations?” but also:
- “What can we do better?”
- “Does your business seek proactive advice?”
- “Does your organisation consider prevention programmes?”
- “Are officers engaged in a systematic programme of site inspections?”
A focus only on “are we meeting our obligations” implies a culture of focusing on avoiding mistakes in order to achieve compliance. No system is perfect, but systems with a proactive focus tend to achieve better outcomes.
New Zealand Insights
In 2022 Maritime New Zealand, which is NZ’s health and safety regulator in relation to activities onboard ships and in the port environment, brought a landmark case against the former CEO of Port of Auckland, alleging breach of his due diligence duty. Mr Gibson pleaded not guilty in mid-2022 and the trial took place between April and May 2024 in Auckland.
The prosecution is notable because it is the first prosecution of a non-director and the first time an officer of a large corporate has been charged under the HSWA in New Zealand. Previous prosecutions have predominantly been against directors of small businesses where the director has been “hands on” and where there have been no layers of management separating the business from the director.
In addition, most of those prosecutions have resulted in guilty pleas, meaning the cases proceeded to sentencing without the evidence being tested. These cases therefore add little to our understanding of what good health and safety governance looks like.
The court has not yet given its judgment in the Maritime NZ v Gibson case, so it remains to be seen what particular lessons may be learned from it –
- The judgment will hopefully supply some much-needed guidance about the nature and scope of the due diligence duty, particularly in the context of a sizeable business with distinct management layers.
- It may also provide some direction on whether those officers with an executive role have a stronger duty of due diligence than those in purely governance roles (such as independent directors).
- From what has been reported publicly, we know that investigations and litigation is time-consuming and costly for all.
Australia Insights
To date, like in New Zealand most cases in Australia have also involved directors of small and medium sized businesses and “hands on” sole directors. This means there is limited case law under the Model Act on what due diligence means and the extent an officer needs to take reasonable steps to exercise due diligence from the court’s perspective.
A recent case in New South Wales where a director was found “not guilty” after a judge-alone trial provides some useful insights on what “good governance” looks like for a medium-sized business, or at least some insight into the extent to which an officer may rely on workers who work for the business.
SafeWork NSW v Miller Logistics Pty Ltd & Mitchell Doble[1]
Facts
- Mr Doble was the sole director of a medium sized business, Miller Logistics Pty Ltd, with three workers reporting to him. Miller Logistics had eight depots across the state of NSW.
- Miller Logistics had a large number of truck drivers spread across a wide area. One of the workers reporting to him was a Mr Hayter, a ‘Compliance Manager’ with health and safety responsibilities.
- A truck driver was struck by a moving forklift at a transport depot and consequently suffered serious injuries.
- Miller Logistics was charged for breaching its primary duty of care to workers. Mr Doble was charged for breaching his due diligence duty, which required him to take reasonable steps to ensure Miller Logistics complied with its PCBU duty.
- Miller Logistics and Mr Doble both pleaded not guilty and a trial took place in New South Wales District Court. The Court found Miller Logistics guilty, but found that Mr Doble was not guilty.
Outcome
The Court stated that “the prosecutor in a due diligence prosecution has a difficult task in that it must prove a negative”[2] that is, ways in which an officer failed to exercise due diligence beyond reasonable doubt.
The Court found that Mr Doble exercised due diligence by taking the following reasonable steps:
- He kept himself informed about what Mr Hayter was doing and Mr Hayter would inform Mr Doble following any inspections by the regulator.
- Mr Doble attended weekly management meetings which had health and safety on the agenda. The weekly management meetings were minuted.
- If a health and safety matter required actioning, it was attended to quickly.
- Not everything required Mr Doble’s approval – if a health and safety measure needed to be implemented at management meetings the task was allocated to Mr Hayter. At the next management meeting there would be a discussion whether the suggested safety measure had been implemented.
- If anyone raised a problem that workers were not responding to, Mr Doble would direct who was in charge of the workers to get them to do what was instructed.
- There was no pushback by Mr Doble around health and safety expenditure.
- Mr Doble visited depots from time to time. If he observed a problem while at a depot, he would make a phone call to Mr Hayter to fix it.
- Mr Doble would get involved with anything that required urgent attention.
The Court was of the view that Mr Hayter was the “primary process or resource which Mr Doble used to ensure that the PCBU carried out its duty under the WHS Act.”[3]
The Court considered Mr Doble was not a “hands-off” director and “took an active interest in ensuring that work health and safety and compliance were attended to.”[4]
Takeaways
- The Court recognised that a director of a medium sized business, cannot know everything happening in the business in any given moment. Therefore, to run a business there has to be a level of delegation – and this includes the appointment of capable people.
- Officers of a medium sized business are required to be proactive, not reactive. For example, verifying whether agreed control measures have been implemented, or going to sites to understand day to day operations.
The outcome of the Gibson decision will hopefully help confirm to what extent officers need to be “in the weeds” when it comes to health and safety matters, and to what extent it is appropriate to exercise due diligence by relying on advisors and other health and safety experts.
In the interim, robust legal advice can help you ensure your due diligence policies and procedures are up to the HSWA’s standards. Duncan Cotterill have a highly experienced team of Health & Safety lawyers equipped to assist you from the boardroom to the courtroom.
Special thanks to Senior Associate Sanja Marin for preparing this article.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
[1] SafeWork NSW v Miller Logistics Pty Ltd & Mitchell Doble [2024] NSWDC 58.
[2] Doble at [269].
[3] Doble at [265].
[4] Doble at [268].
