What you need to know
The ACT Industrial Magistrates Court has delivered the first judgment in Australia interpreting the meaning of "officer" under the harmonised Work Health & Safety Act, which operates in all States and Territories except Victoria and Western Australia. In the case of B McKie v Muni Al-Hasani, Kenoss Contractors Pty Ltd (in liq)  ACTIC 1, the Court found that a senior Project Manager, Mr Al-Hasani, was not required to exercise the duty of care of an officer, being due diligence, because the prosecution failed to prove beyond reasonable doubt that he was an officer of the construction company, Kenoss Contractors Pty Ltd (in liquidation) (Kenoss). Importantly, the Court held that whether a person who was not a director or company secretary could be an officer depended on assessing their role in the company as a whole rather than a particular function or project in which the individual was engaged.
Within this context, it was held that while the Project Manager had an important role managing particular large scale projects being undertaken by Kenoss, his role was less significant considering the wider organisational structure of the company which included a separate development business. Although the Project Manager conceded that he participated in making decisions that affected Kenoss' business, the learned Magistrate found that there were clear limits to his participation in this regard. A distinction was drawn between people with "organisational" responsibilities and others whose responsibilities were "operational". While the Project Manager was responsible for the delivery of specific construction contracts entered into by Kenoss, the learned Magistrate was not satisfied that this alone demonstrated that he had sufficient control of the company or that the decisions he made affected either the whole or a substantial part of Kenoss' business.
Duty of due diligence
Under the nationally harmonised WHS laws which came into effect on 1 January 2012, an "officer" of a company must exercise due diligence to ensure the company complies with its WHS obligations and duties. The duty is a positive one which requires the officer to be proactive in taking steps to ensure compliance by the company – it may be breached whether or not there is a contravention of the WHS obligations and duties by the company.
The harmonised WHS laws describe what due diligence should be exercised by an officer to ensure the company complies with its WHS obligations and duties. This includes taking reasonable steps to:
- acquire and keep up-to-date with WHS matters
- gain an understanding of the nature of the company's operations including the hazards and risks associated with those operations
- ensure the company has available for use (and uses) appropriate resources and processes to eliminate or minimise the risks to health and safety from work carried out as part of the business
- ensure the company has appropriate processes for receiving and considering information regarding incidents, hazards and risks and responding in a timely way to that information
- ensure the company has (and implements) processes for complying with any duties or obligations under the applicable WHS legislation
- verify the that those processes are implemented.
Who is an "officer"?
The term "officer" under the harmonised WHS laws means an officer within the meaning of section 9 of the Corporations Act 2001 (Cth). This definition includes a person who has the capacity to significantly affect the financial standing of the relevant business, such as:
- a director or secretary of a corporation;
- administrators and liquidators of a corporation;
- partners in a partnership; and
- officeholders in an unincorporated association.
The definition also includes a person:
- who makes, or participates in making, decisions that affect the whole, or a substantial part, of the corporation of the business;
- who has capacity to affect significantly the corporation or business;
- in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation).
In March 2012, a truck driver was electrocuted and killed (Incident) when the bucket of his truck contacted with (or came close to) low hanging power lines above a site which was used by Kenoss Contractors Pty Ltd to store materials for a nearby road surfacing project (Site).
There was evidence that the Site was considered dangerous because of the overhead power lines. Evidence was also given that contractors had been directed by the foreman for the project and the Project Manager not to use the Site when making deliveries, but instead use a different site. Notwithstanding this direction, there was evidence the Site was still used as a loading yard on occasion.
Whilst there was fencing around the Site, it was not locked. There were also no warning signs indicating the presence of live overhead power lines other than a sign on the fence which read "construction site, keep out".
At the time of the Incident, the Project Manager employed by Kenoss was an engineer who was also managing a number of other projects for the company. There was evidence the Project Manager was aware of the risks associated with the power lines above the Site. There was also evidence that while safety concerns were raised with the foreman, control for fixing those concerns fell to Kenoss management, which included the Project Manager and the General Manager of the company.
Following the Incident, the ACT Department of Public Prosecutions charged Kenoss under section 32 of the Work Health and Safety Act 2011 (ACT) (WHS Act) for failing to comply with a health and safety duty. The Project Manager was also charged under section 27 of the WHS Act for failing to exercise due diligence to ensure Kenoss complied with its WHS obligations and duties.
Chief Industrial Magistrate Walker found that:
- Kenoss had breached its health and safety duty by failing to take adequate measures to address the risk posed by the power lines above the Site; and
- the prosecution had not established that the Project Manager was an "officer" because there was no evidence that he made, or participated in making, decisions which affected the whole, or a substantial part, of Kenoss' business.
Health and safety duty of Kenoss
Kenoss was found to have clearly had a health and safety duty to those who visited its sites, including subcontractors such as the truck driver involved in the Incident.
It was found that there were a number of relatively simply safety measures which could have been implemented to mitigate or eliminate the risks associated with the power lines above the Site, for example, turning power off to the Site if a delivery was required to be made or limiting access to the Site by securing the fence. Accordingly, the learned Magistrate was not satisfied that Kenoss had complied with its health and safety duty by only directing its contractors not to use the Site. Kenoss was found to have breached the WHS Act and was guilty of a Category 2 offence. As it did not appear at the hearing and is in liquidation, no fine was imposed.
Due diligence duty of the Project Manager
The learned Magistrate found that although the Project Manager did not exercise due diligence to ensure Kenoss complied with its WHS obligations and duties, he was under no obligation to exercise due diligence pursuant to section 27 of the WHS Act because he was not an "officer" of the company.
The learned Magistrate observed that the interpretation of the term "officer" had to be viewed through the prism of the company as a whole rather than a particular function or project in which the individual was engaged. Within this context, it was found that while the Project Manager had an important role managing particular large scale projects being undertaken by Kenoss, his role was less significant considering the wider organisational structure of the company which included a separate development business.
Although the Project Manager conceded that he participated in making decisions that affected Kenoss' business, the learned Magistrate found that there were clear limits to his participation in this regard and that his own evidence was not determinative of the matter.
A distinction was drawn between people with "organisational" responsibilities and others whose responsibilities were "operational". While the Project Manager was responsible for the delivery of specific construction contracts entered into by Kenoss, the learned Magistrate was not satisfied that this alone demonstrated that:
- he had sufficient control of the company
- the decisions which he did make were ones which affected either the whole or a substantial part of Kenoss' business.
The learned Magistrate found that this position was supported by the fact that:
- the Project Manager was not responsible for hiring or firing employees
- the Project Manager did not have authority to commit company funds without approval
- the Project Manager did not have direction over the type of projects tendered for by Kenoss and did not sign off on the tenders for projects that were sought by the company
- there was no evidence as to matters such as who determined the corporate structure or who established any of Kenoss' policies
- it was not apparent whether the Project Manager attended board meetings or met any of the company's legal obligations.
The learned Magistrate was therefore not satisfied beyond reasonable doubt that the Project Manager's role went beyond an "operational" role.
Lessons moving forward
To be an "officer" of a company under the nationally harmonised WHS laws, the decisions which the employee makes, or participates in making, must be of an "organisational" nature and affect the wider context of the business.
While the decision of the ACT Industrial Magistrates Court will no doubt come as a relief to project managers in the construction industry, whether someone within a company is an "officer" will be a question of fact and degree in each case. In any event, employees who are not "officers" should still be conscious that they still have a duty, while at work, to:
- take reasonable care for his or her own health and safety
- take reasonable care that his or her acts or omissions do not adversely affect the health and safety of others
- comply, so far as they are reasonable able, with any reasonable instruction that is given by the company to allow the company to comply with the relevant WHS laws
- co-operate with any reasonable policy or procedure of the company relating to health or safety at the workplace that has been notified to workers.
Project managers should also be conscious that while the decision of the ACT Industrial Magistrates Court will likely be persuasive in other jurisdictions, there is no rule of law which binds a court in another State or Territory to follow this decision.
Accordingly, project managers and other types of managers (of particular divisions etc.) should consider:
- what steps they currently take to ensure the company in which they are employed complies with its WHS obligations and duties on a project, and what additional steps (if any) they could take to satisfy the types of due diligence expected to be exercised by an officer of a company which has WHS obligations and duties
- who in the company, if not them, is best placed to ensure the company complies with its WHS obligations and duties.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.