Who is an "officer" under the WHS legislation?

Brett McKie v Munie Al-Hasani & Kenoss Contractors Pty Ltd (in liq) [2015] ACTIC 1 (Al Hasani case).

WHAT YOU NEED TO KNOW

• The Industrial Court of the Australian Capital Territory (ICACT) has handed down what we understand is the first decision on the meaning of the term "officer" under the harmonised work health and safety legislation, in the Al Hasani case.
• The definition of the term "officer" under the work health and safety legislation brings in the definition from the Corporations Act 2001 (Cth) (the Corps Act). Consequently, Magistrate Walker of the ICACT reviewed the case law concerning the relevant definition under the Corps Act.
• Importantly, it was found that the inquiry into whether someone is an officer should be made through the prism of the organisation as a whole rather than a particular function in relation to which the individual was engaged.
• The personal defendant, Mr Al Hasani, a project manager employed by Kenoss Contractors Pty Ltd (in liquidation) (the Company), was found NOT to be an "officer". This was because there was no evidence "as to where Mr Al Hasani sat" within the Company, or "his level of influence", other than in relation to those who sat below him. There was a director and a general manager of the Company, to whom Mr Al Hasani reported, but the role of these positions was unknown.

WHAT YOU NEED TO DO

• Ensure those at the highest levels within your company, who are, or are likely to be, officers, are taking appropriate steps to exercise due diligence. In this case it was found that Mr Al Hasani had not exercised due diligence, but the prosecution was dismissed because Magistrate Walker was not satisfied beyond reasonable doubt that Mr Al Hasani was an "officer".
• Consider what regulators under harmonised work health and safety legislation may take away from this decision. This case may cause regulators to pursue directors on boards and persons higher up the decision making corporate structure, in order to avoid, or reduce the ability to argue, the issue whether a person is an "officer".

Background

Proceedings were brought against Mr Munir Al-Hasani and the Company by the Department of Public Prosecutions on behalf of WorkSafe ACT for an alleged failure to comply with the Work Health and Safety Act (2011) ACT (the Act).

The Company contracted with the ACT Government to complete certain road resurfacing works (the Project). Mr Al-Hasani, an engineer, was employed by the Company as the Project Manager for the Project.

He also managed a number of other projects for the Company.

The Company retained David O'Meley Truck Hire to deliver materials to the Project. Mr David Booth was employed by David O'Meley Truck Hire, and made deliveries for the Project.

On 23 March 2012, Mr Booth made a delivery for the Project to a small compound (the Boldrewood Compound). When Mr Booth tipped his load, the bucket of the truck came very close to, or contacted with, low hanging power lines forming an electrical arc. As a consequence, Mr Booth died from electrocution and its complications.

Boldrewood Compound

Prior to the incident there was evidence that Mr Al Hasani and Mr Clarke, the Project foreman, had instructed workers to stop using the Boldrewood Compound.

However, photographic evidence indicated that workers did continue to use the Boldrewood Compound. No other action had been taken by the Company, or Mr Al Hasani, to stop using the Boldrewood Compound. The Boldrewood Compound was not locked so as to prevent access. There was no specific sign in place giving warning of the low hanging electrical wires. Also, visibility of the lines was partly obscured by foliage.

Proceedings against the Company

Proceedings were brought against the Company for failing to maintain a safe system of work, and failing to take adequate measures to address the risk posed by live overhead electric cables. Although the risk at the Boldrewood Compound was identified, no action was taken to adequately address this issue. Magistrate Walker found that the offence against the Company was proved.

Proceedings against Mr Al-Hasani

Proceedings were brought against Mr Al-Hasani alleging that he was an "officer" of the Company, within the meaning of the Act, and that he had failed, pursuant to section 27 of the Act, to exercise due diligence to ensure that the Company complied with its duties under the Act.

In the event that Mr Al Hasani was found to be an officer of the Company, he held a positive duty to exercise due diligence under the Act.

Magistrate Walker found that Mr Al Hasani had not exercised due diligence. Magistrate Walker found that Mr Al Hasani's failures in this regard were multiplicitous.

For example, a safe work method statement that existed, was general in nature, and did not address the particular risk at the Boldrewood Compound (and therefore, ensuring there was in place appropriate resources and processes to eliminate risks, one of the elements of due diligence, was not met). Also, it was found that Mr Al Hasani readily relinquished responsibility for the identified risk to the Project foreman, with no process in place to ensure compliance (and therefore, another one of the elements of due diligence was not met, namely, ensuring that processes for compliance with duties under the Act were implemented).

An "Officer" for the purposes of the Act?

The term "officer" in the Act was defined by reference to section 9 of the Corps Act. Relevant parts of that section include a person:

• who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
• who has the capacity to affect significantly the corporation's financial standing;

Magistrate Walker had regard to the decision of the High Court of Australia in Shafron v Australian Securities and Investment Commission [2012] HCA 18 in which it was said that the inquiry as to whether a person is an officer should:

"be directed to what role the person in question plays in the corporation. It is not an enquiry confined to the role that person played in relation to the particular issue in respect of which it is alleged that there was a breach of duty…

The notion of participation in making decisions presents a question of fact and degree in which the significance to be given to the role played by the person in question must be assessed".

An organisation chart was in evidence in relation to the Project, and showed Mr Al Hasani at its head, as project manager, but the chart did not show the Company's wider organisational structure.

At the relevant time, Mr Al Hasani reported to a Mr Spiros Brendas, General Manager of the Company, and there was a director of the Company, Mrs Brendas (the wife of Mr Brendas).

Mr Al Hasani conceded that he participated in management meetings, and sometimes he would make decisions as the project manager, and that sometimes he would participate in making decisions with Mr and Mrs Brendas.

He also carried out range of other activities, such as customer liaison, implementation of project plans, briefing, managing and supervising performance of the Project team, selecting sub-contractors and material suppliers, managing variations of contractual price, verifying and signing off on completion of projects and assessing and taking action on potential nonconformances.

Despite this evidence, Magistrate Walker found that Mr Al Hasani was not an "officer" of the Company within the meaning of the Act.

The main reason for this finding was that there was no evidence "as to where Mr Al Hasani sat" within the Company, or "his level of influence" other than in relation to those who sat below him.

Despite there being a director and a General Manager, the role of these positions was unknown (beyond what can be assumed within the statutory role of a director).

Mr Al Hasani's concession that he participated in decision making within the organisation, was found not to be conclusive of the issue.

There were clear limits on his participation delineated by his role as project manager, and as detailed in responses he gave in cross examination.

While Mr Al Hasani sat close to the top of the structure of the Company, there was no evidence that he made, or participated in making, decisions which affected the whole, or a substantial part of the business of the Company (other than his concession to that effect which was given without context).

On the evidence, Mr Al-Hasani:

• did not sign off on tenders;
• did not commit corporate funds; and
• had no ability to hire or fire people.

There was no evidence that Mr Al Hasani:

• had direction over the type, or specific contracts, which were to be pursued;
• determined the corporate structure; or
• established Company policy as to the type of business to be pursued, or which projects were to be entered into.

Also, it was not apparent whether Mr Al Hasani participated in board meetings or met any of the Company's legal obligations, eg, ASIC returns or establishing quality assurance.

Magistrate Walker found that Mr Al Hasani's participation in the business process was operational, and that it was not able to be established that it went beyond this to "being organisational".

Recap and Insights

• This case is important as we understand it is the first decision which considers the definition of the term "officer" in the harmonised work health and safety legislation. Even though it is a decision at Industrial Magistrate level, it is likely to be reviewed generally, and in particular by regulators.
• In our experience, when considering a personal prosecution, regulators have tended not to prosecute directors, or very senior decision makers, other than in the case of small companies.
• Because the regulator in this case failed to establish that a project manager in a company was an officer, regulators more generally may be encouraged to set their sights higher up the corporate decision making structure, including to directors on boards.
• Now that we have experienced the operation of harmonised work health and safety legislation in many jurisdictions for some time, the Al Hasani case is a timely reminder to review safety corporate governance structures at the highest levels, so as to ensure safety throughout your organisation, and to ensure that your senior decision makers are taking steps so as to demonstrate the exercise of due diligence.