Australia: Lengthening and strengthening the chain of responsibility - developments in Western Australian road transport regulation

Insurance Update

On 27 April 2015, Western Australia enacted chain of responsibility laws (CoR Laws) for road transport, joining all other Australian jurisdictions (save for the Northern Territory) in introducing significant reform in this area. Based on experience in other states, these new laws could have a significant impact on parties involved in road transport supply chains and their insurers, by increasing the potential for losses, claims and costs arising out of breaches of State road laws.

These new CoR Laws do not cover all the subject matter in the Heavy Vehicle National Law (HVNL) implemented elsewhere in Australia in February 2014. But they significantly extend the potential for criminal prosecutions, alternative enforcement action and civil claims following breaches of statutory obligations to ensure the safety of road transport vehicles on public roads.

Beyond this, at a national level, there appears to be an appetite for further reform. The National Transport Commission (NTC) is considering further legislative changes that could see the HVNL aligned more closely with work health and safety (WHS) laws. That could further extend the application of these laws, substantially increase penalties for breaches and introduce a broader suite of alternative enforcement measures.

Outline of the new CoR regime in WA

WA introduced its CoR Laws by amendments to the Road Traffic (Administration) Act 2008 and Road Traffic (Vehicles) Act 2012. These CoR Laws differ from the HVNL in several important respects. Notably, they do not cover fatigue management and speed, but they do apply to all light and heavy vehicles regardless of size, so potentially extending their application to many vehicles that might not otherwise have been covered. Conversely, these laws contain broader exclusions for vehicles involved in the resources and agribusiness sectors than are to be found in the HVNL.

WA's reforms are focussed on the requirements for mass, dimension and load restraint (MDLR), and the provision of accurate container weight declarations (CWDs), in order to combat overloading and poor restraint practices. In addition, as with the HVNL, the CoR laws impose obligations on each party in the transport chain that is involved with a road transport vehicle to ensure that the vehicle meets legal requirements. As a result, the potential liability for a breach extends beyond drivers to road transport operators, managers, consignors, receivers, loaders, packers and schedulers. Individuals as well as businesses may be prosecuted and there are provisions to attribute liability to an employer, company director or officer and a partner in a partnership.

There is a statutory 'reasonable steps' defence, which requires the accused to prove on the balance of probabilities that they did not know, and there was no way they could reasonably be expected to know, that the offence had been committed, and either they had taken all reasonable steps to prevent the commission of the offence, or there were no steps that they could reasonably have been expected to take to prevent the commission of the offence.

Whether this defence is available, and in particular what amounts to 'reasonable steps', will vary according to the circumstances and the role of the defendant in the transport chain. In principle, 'reasonable steps' can include conducting proper risk assessments, implementing suitable commercial arrangements, establishing and enforcing policies, procedures and safe work practices, ensuring effective contractor management (including taking steps to identify and remedy past compliance problems and anticipate future problems) and training, educating and supervising workers in their roles and responsibilities.

Enforcement

Breach of the CoR Laws is a criminal offence and each count can attract a fine of up to $75,000. The key enforcement authority is Main Roads WA. A key compliance risk for businesses and senior managers and operators is that deficiencies in establishing and implementing compliance assurance processes may result in multiple charges being brought against a single accused for failing to prevent mass breaches, potentially giving rise to very significant fines.

A successful prosecution may result in other pecuniary penalties and orders being imposed which may give rise to further significant liabilities:

  1. A Commercial Benefit Penalty Order requires a convicted party to pay a fine up to three times the commercial benefit that was received or receivable from the commission of the offence.
  2. A Compensation Order requires a person guilty of an MDLR offence to pay a road authority such amount as the court thinks fit for damage to any road infrastructure that the road authority has incurred or is likely to incur in consequence of the offence. So, for example, a defendant could be required to pay compensation for damage to a bridge caused by a vehicle that breached height requirements.

Other available compliance measures include directions and instructions by transport inspectors and/or police officers that could give rise to financial losses. For example, a police officer suspecting a breach of MDLR requirements may issue directions to a driver of a vehicle to move the vehicle to a specified location and ensure that the vehicle remains there until the suspected breach is resolved and/or rectified. In addition, the CoR laws contain provisions permitting a person who has suffered loss caused by a breach of the CWD requirements to bring a claim directly against the entity responsible for the breach.

This new regime, and in particular the extension of legal responsibility to more parties in the road transport chain, introduces an environment of heightened legal and regulatory risk for insureds and insurers. The experience in other states, particularly in New South Wales over the past 10 years, reveals a very significant level of enforcement activity by the prosecuting authorities in those states against interested parties, including consignors, receivers, operators and individual company directors and officers. Whether the enforcement activity by Main Roads WA will be at a similar level remains to be seen, but on its face the regime anticipates greater scope for prosecutions against businesses and individuals, more civil claims against more parties, and an increase in associated costs for insureds and their insurers.

At the same time, the aim of the legislation is to bring about a safer road transport environment, which should ultimately benefit interested parties and their insurers. Establishing and implementing effective compliance assurance measures may not only give interested parties a defence to a claim of breach but also help to reduce risk overall. That aside, there may be commercial opportunities for insurers in being able to assist interested parties to protect themselves against exposure to claims and costs which may arise from a breach of the CoR Laws.

Further national reform on the agenda

Last year the NTC released a discussion paper setting out several options for reforming CoR Laws across Australia, which included the option of introducing similar concepts to those under WHS legislation, including an overarching primary duty of care to ensure safety so far as reasonably practicable, a positive duty on company officers to exercise due diligence to ensure compliance, significantly higher penalties and further alternative enforcement mechanisms. Most public submissions have supported alignment of CoR and WHS regulation.

Following a briefing by the NTC and the National Heavy Vehicle Regulator, the Transport and Infrastructure Council, a body convened under the Council of Australian Governments , released a communique on 22 May 2015, flagging further reforms.

The Council endorsed the development of a Regulation Impact Statement in July 2015, and will bring forward consideration of a package of further measures to expedite national consistency and compliance improvements for decision in November 2015, including measures regarding chain of responsibility duties for vehicle maintenance and scheduled inspections. The Council also directed the National Heavy Vehicle Regulator to progress plans for the implementation of a fully workable scheme for national heavy vehicle registration by 1 July 2018.

Chain of responsibility laws in Australian road transport looks set to remain a focus for reform and a continuing source of criminal prosecutions and related litigation and costs. This changing legal and regulatory environment will continue to present opportunities and risks for insurers and their insureds and require them to consider carefully what tighter regulation and greater enforcement activity may mean for them. As a first step, insurers should review where their policies provide investigation and defence cover for alleged breaches of chain of responsibility and other health and safety laws, and consider whether risk ratings are adequate to take into account a likely increase in exposure to claims and costs.

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Authors
Tom Martin
 
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