Australia: Executive officer liability set to increase following amendments to the HVNL

Last Updated: 31 March 2017
Article by Dilip Ramaswamy (formerly with Holding Redlich)

Most Read Contributor in Australia, July 2018

The amendments to the Heavy Vehicle National Law (HVNL) mean that executive officers must proactively exercise due diligence and ensure compliance with all areas of the HVNL, not just with the 'primary safety' duty. We look at the reforms and their potential impact.

Under the HVNL, strict penalties have always applied to the executive officers of parties in the Chain of Responsibility (CoR) if they fail to take reasonable steps to ensure corporate compliance in relation to mass, dimension, load restraint, fatigue or speed laws. However, recent reforms have increased the scope of executive officers' liability.

Executive officer liability in the past

As a refresher, 'executive officer liability' refers to the personal liability of individuals who are concerned with, or who take part in, managing corporations. It makes executive officers responsible for decisions they make that might result in harm to others.

Under the HVNL, executive officers have an 'active duty' to exercise reasonable diligence in relation to CoR compliance. This duty cannot be delegated. Their liability comprises:

  • corporate accessorial liability, where an executive officer "knowingly authorised or permitted the conduct" that constituted their corporation's offence; and
  • corporate derivative liability, where an executive officer "knew or ought reasonably to have known" either of the conduct constituting the offence or that there was a substantial risk that the offence would be committed.

The changes

The executive officer liability reforms were undertaken in two phases:

  • Phase 1 was implemented in 2016, and focused on the due diligence obligations of executive officers in relation to 'primary safety' duties; and
  • Phase 2 was a consultative process to consider extending the due diligence obligation across all duties under the HVNL, rather than just the 'primary safety' duty – subject to the outcomes of a regulatory impact statement (RIS) process. Transport ministers approved this change in November 2016, and the National Transport Commission is currently preparing amendments to the HVNL to put the change into effect.

The incoming amendments create a positive due diligence obligation to ensure that participants of the chain comply with their 'primary safety' duties, and are intended to encourage executive officers to adopt a more proactive approach to safety and compliance. They are less prescriptive than the previous provisions, in order to foster innovative and flexible action.

Section 636(2) of the HVNL, relating to corporate derivative liability, will be reformulated, and the new criteria for satisfying the primary safety duty will be 'as far as reasonably practicable', rather than the previous 'reasonable steps' approach. This will bring CoR compliance closer to other national safety legislation, such as work health and safety (WHS) law and the Rail Safety National Law.

In addition, the burden of proof on executive officers will be removed – instead, the prosecution will bear the burden of proof. Executive officers will be innocent unless proven guilty.

The impact of the changes

The incoming changes mean that it is even more critical that all parties in the supply chain (particularly 'higher-ups') exercise due diligence to avoid breaches of the HVNL. As a starting point, the reforms will:

  • Promote performance-based compliance from executive officers. As it is not prescriptive, the due diligence obligation encourages innovative and flexible outcomes. Practically speaking, executive officers will be required to undertake a much more tailored risk assessment of their organisation's CoR compliance footprint and ensure that suitable policies, working procedures, training programs and contracting and business practices are in place.
  • Help prevent executive officers from using the corporation entity to shield them from the consequences of their decisions – by providing that officers can be liable for failing to discharge their duty of care even if the corporation does not commit any CoR breach.
  • Help create the strong road safety culture desired by National Transport Commission. Increasing the breadth of liability will ensure that CoR remains at the forefront of how corporations perceive responsibility.

Lessons for executive officers

Executive officers should:

  • be aware of the CoR breach risks faced by your business;
  • ensure that assessments are undertaken to identify CoR risks within your business;
  • understand your business's CoR activities and performance; and
  • implement, monitor and evaluate the CoR compliance policy or policies and procedures.

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.

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