Director’s H+S responsibility - A lesson from Australia

The Brisbane Magistrates Court has recently sentenced an Australian company, alongside its director, for breaching health and safety duties in relation to the tragic drowning of two tourists, a father and young son, at a popular Queensland tourist destination.

The company contracted with the Whitsunday Regional Council to provide lifeguard and water maintenance services at Airlie Beach Lagoon. In October 2018, two Chinese tourists drowned after the company’s two on-duty lifeguards failed to notice the pair struggling in the Lagoon. The Magistrates Court fined the company $AUD250,000 for failing to comply with its primary duty of ensuring the health and safety of persons are not at risk from its business of providing lifeguarding services. The company’s director was also personally fined $AUD45,000 for failing to exercise due diligence to ensure that the company complied with its primary duty.

A company manager had failed to properly undertake a risk assessment of the Lagoon area as per the company’s ‘supervision policy.’ That policy dictated that a minimum of two staff would be on duty at a time and that one of those staff ought to always be a qualified lifeguard. Despite this policy, the staff adopted a method of work where the number of lifeguards on duty was determined solely by the number of patrons in the Lagoon.

As the ‘officer’ of the ‘person’ who was conducting business or undertakings, the director was liable for (in short) his failure to prevent the company’s breach of its primary duty under the Australian Work Health and Safety Act 2011. That Act imposes a duty on ‘officers’ to “exercise due diligence to ensure that the person conducting the business or undertaking complies with the duty or obligation.”  Due diligence is defined to include:

(a)    acquiring and keeping up-to-date knowledge of work health and safety matters;

 (b)    understanding the business’/undertaking’s operations and the hazards and risks associated with those operations;

 (c)    ensuring that the person conducting the business or undertaking has and uses appropriate resources and processes to eliminate or minimise risks to health and safety;

 (d)    ensuring that the person conducting the business or undertaking has appropriate processes for receiving and considering information regarding incidents, hazards, and risks and can respond in a timely way;

 (e)    ensuring that the person conducting the business or undertaking implements processes for complying with any duty or obligation; and

 (f)      to verify the provision and use of these resources and processes.

This case is of interest because of how closely New Zealand’s health and safety legislation parallels the Australian duties. Section 44 of New Zealand’s Health and Safety at Work Act 2015 includes the same expansive and positive duties on directors to exercise due diligence to ensure their companies proactively adhere with all health and safety obligations. Equally, s 44(2) states that a director when ensuring that their company complies with its duty and obligation, must exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances. In doing so, the director must account for the nature of the company, their position, and the nature of their responsibilities. These proactive duties are phrased similarly to those in s 137 of the Companies Act 1993, which imposes a general duty of care on directors when exercising powers or performing their usual duties. Prosecutions under s 44 are relatively rare in New Zealand (though watch this space) so it is always useful to have examples from Australian jurisdictions about when a prosecution may be successful.

Regulators in Aotearoa should be mindful of the concurrent duties imposed on directors when assessing companies’ compliance with health and safety standards. Directors hold significant influence over how a company can eliminate or minimise risks to health and safety. This case serves as a reminder that taking concurrent prosecutions against a company and its director should be considered in appropriate cases. Regulators dealing with Kiwi organisations undertaking recreational and tourists based-activities should take special note as compliance with health and safety standards can easily be underappreciated.

Article written by Bayley Kalach and Tim Bain

For help with Health and Safety regulation please contact; Ben Finn, Stephanie Bishop or Tim Bain.