Australia: What to do with supply chain contractors who fail to comply

Last Updated: 27 August 2017
Article by Dilip Ramaswamy (formerly with Holding Redlich)

Most Read Contributor in Australia, August 2018

Under the Heavy Vehicle National Law (HVNL), all parties in the supply chain have a responsibility to ensure breaches of heavy vehicle transport laws do not occur. Ensuring compliance by contractors is particularly difficult, as they will often have separate policies, work systems and training in place and may be resistant to change. In this article, we look at the role of contractors within the chain and examine what options are available when contractors refuse or fail to comply with their obligations under the HVNL.

Although it may appear like the same phrase is repeated month-after-month, the starting point in any discussion about Chain of Responsibility (CoR) is to understand that if you do or can exercise control or influence over any transport task, you fall within CoR and have an obligation to ensure compliance with the HVNL, including by your contractors.

Responsibility as a contractor

As a 'party' in the supply chain, contractors (including prime and subcontractors) have an ongoing responsibility to prevent breaches of mass, dimension, loading, speed and fatigue laws under the HVNL. Some of the key responsibilities include ensuring that:

  1. requests or practices do not require or encourage drivers to:
    1. exceed the speed limits
    2. exceed regulated driving hours
    3. fail to meet the minimum rest requirements
    4. drive while impaired by fatigue,
  2. operators and other parties are properly informed of the nature and type of goods for transportation
  3. heavy vehicles and their loads comply with relevant mass and dimension requirements
  4. systems to manage safety and all requirements and obligations of the HVNL are in place

How do I manage compliance?

In an ideal environment, your contractors will have policies and procedures in place that manage their responsibilities under CoR.

If not and in any event, you must be able to manage your own compliance responsibilities under CoR before focusing on someone else's compliance.

This is achieved by implementing policies, work systems and training that are tailored towards your responsibilities under CoR and provides the benchmark for assessing and monitoring the compliance of other parties, including contractors.

What if these contractors aren't following their CoR responsibilities?

One contractor supervisory tool that is endorsed in the HVNL is the use of compliance assurance conditions in your contracts with contractors. Compliance assurance conditions in commercial arrangements will include terms and conditions or compliance policies which you insist upon. These will put your business partners on notice of their obligations under the HVNL and require them to comply. If your contractors fail or refuse to comply, you will need to activate your compliance assurance conditions, in order to meet your obligations to control or influence the performance of your contractors. Below are a set of steps that you should consider incorporating into your arrangements with contractors when dealing with CoR compliance issues. These are non-exhaustive and their application will often depend on the circumstances of each arrangement.

Step 1: Issue a show cause notice outlining the activities carried out by the contractor that are non-compliant with their overall CoR responsibilities

This will often be the only step required as many parties in the supply chain may be unaware that their systems and procedures are deficient and/or lacking in certain areas. Sometimes a gentle reminder is all that is necessary.

Step 2: Engage in informal discussions with the contractor to outline the deficiencies in their systems and policies, and identify areas for improvement

Subject to a few exceptions (e.g. major CoR breach), this step allows both parties to discuss the issues in an informal environment, including what changes can be implemented to avoid ongoing compliance non-performance.

Step 3: Engage in formal discussions with the contractor's key personnel to outline the deficiencies in their systems and policies, and identify areas for improvement

This step can be skipped if it appears from the previous steps that these discussions will not be productive.

Step 4: Suspend performance of the contract until you are satisfied that the contractor has rectified any outstanding concerns

You should ensure that this right to suspend performance is included in the compliance assurance conditions because it is often the most powerful tool available for ensuring compliance. However, these terms must be drafted carefully as wrongfully suspending performance can possibly amount to a repudiatory breach and result in damages being awarded to the contractor.

Step 5: Terminate the contract

This should only be exercised in circumstances where the contractor refuses to comply with previous requests and it appears that their actions/activities will result in continued or severe breaches of their responsibilities under CoR. When exercising either step four or five, it is important that you document all the steps taken with the contractor to rectify the issue so that the regulator is satisfied that you have also discharged your obligations.

Summary

Managing your relationship with contractors can be both rewarding and challenging. This is because all parties in the supply chain have a responsibility to ensure breaches of heavy vehicle transport laws do not occur. It is therefore vital that you incorporate procedures within your contractor relationships that outline the steps to be undertaken when CoR compliance becomes an issue.

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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