Australian Court determines project manager is not an “officer”

Thursday 29 October 2015

Authors: Tim Clarke and Anna Codlin

​The Australian Capital Territory (ACT) Industrial Magistrates Court has delivered the first judgment interpreting the meaning of “officer” under the Australian work health and safety laws (WHS). While the definition of officer under the ACT WHS laws is different to that under the Health and Safety at Work Act 2015 (which is arguably narrower and focuses on a person’s position rather than their decisions), the case provides a useful insight into how New Zealand Courts may approach the question of whether a person is an officer. The decision may also provide some comfort to those occupying senior positions within businesses in New Zealand whose status will be determined by reference to the definition of officer under the New Zealand Act.

Facts of the case

In McKie v Al-Hasani & Kenoss Contractors Ltd, the regulator brought charges against Kenoss Contractors Ltd and Mr Al-Hasani (a senior Project Manager) under the Work Health and Safety Act 2011 (ACT) for alleged failures to comply with a health and safety duty. The charges related to an incident in March 2012 where a tip-truck driver was fatally electrocuted while unloading gravel at a dumping station.

Mr Al-Hasini was charged with failing to exercise due diligence as an officer of Kenoss and faced a maximum penalty of $300,000. While it was determined that Mr Al-Hasini had not exercised due diligence in respect of safety compliance, the charges against Mr Al-Hasini were dismissed because the Magistrate could not be satisfied beyond reasonable doubt that Mr Al-Hasini’s role rose to the level of “officer” within the corporation.

Who is an “officer” under the Model Law?

The ACT WHS laws are based on the Australian Model Law. Under the Model Law, officer is defined by reference to s 9 of the Corporations Act 2001. The definition expressly provides that some persons will be officers, for example, directors of a corporation and partners in a partnership. The definition also captures -

  1. 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; or

    • 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).

Court’s findings in Kenoss

In Kenoss, the Court accepted that the definition of officer must be directed to the role the person plays in the corporation. The Magistrate stated that in the work health and safety context, the concept of an officer should be viewed through the prism of the organisation as a whole rather than a particular function in which the individual was engaged. The factors that the Court took into account included reporting lines, budgeting decisions, management participation, general decision making powers and Mr Al-Hasini’s own concession that he made decisions that affected either the whole or a substantial part of Kenoss’s business.

Despite Mr Al-Hasini’s concession, the Magistrate concluded that he could not be satisfied beyond reasonable doubt that Mr Al-Hasini’s role rose to the level of officer within the corporation. The prosecution had failed to establish that Mr Al-Hasani had control or responsibility for the business or undertaking of the company. While Mr Al-Hasini sat close to the top of the structure there was no evidence that he made, or participated in making, decisions which affected the whole, or a substantial part of the business. Mr Al-Hasini had only operational responsibility for the delivery of specific contracts and the Magistrate held that whether his participation in the business process went beyond an operational level was “purely speculative”.

The Magistrate focussed on Mr Al-Hasini’s operational responsibilities in concluding that his role as a project manager did not allow him to exert influence as an “officer” at an organisational level.

Who is an “officer” under the New Zealand Act?

While the New Zealand Act was based on the Model Law and the Model Law definition of “officer” was initially adopted in the exposure draft of the Bill, the definition saw a number of changes throughout the legislative process. The result was a different (and arguably narrower) concept of officer being enacted on 27 August this year.

In particular, substantial changes were made following the Transport and Industrial Relations Committee report to the House of Representatives on 25 July 2015.  In its report, the majority of the Committee recommended narrowing the second part of the definition of “officer” to those in positions that allow them to “exercise significant influence over the management of the business or undertaking” as well as the addition of an express exclusion from the definition of “a person who merely advises or makes recommendations”. In making these changes, the majority of the committee intended to narrow the definition by confining “the designation ‘officer’ ... to people in very senior governance roles, such as directors and chief executives”.

As enacted, section 18 of the New Zealand Act provides that unless the context otherwise requires, “officer”, in relation to a PCBU –

  1. means, if the PCBU is –

    • a company, any person occupying the position of a director of the company by whatever name called:

    • a partnership (other than a limited partnership), any partner:

    • a limited partnership, any general partner:

    • a body corporate or an unincorporated body, other than a company, partnership, or limited partnership, any person occupying a position in the body that is comparable with that of a director of a company; and

  2. includes any other person occupying a position in relation to the business or undertaking that allows the person to exercise significant influence over the management of the business or undertaking (for example, a chief executive); but

  3. does not include a Minister of the Crown acting in that capacity; and

  4. to avoid doubt, does not include a person who merely advises or makes recommendations to a person referred to in paragraph (a) or (b).

How do the definitions compare?

The key difference in the definition of “officer” under the New Zealand Act from that under the Model Law is the change from:

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

    to
  • a ​person who occupies a position that allows them to exercise significant influence over the management of the business or undertaking.

As enacted, the New Zealand Act focusses on the person’s role, position and responsibilities, and whether their position allows them to exercise significant influence – rather than whether or not they make decisions that affect health and safety outcomes. This is a different test to that contained in the original Bill (and the Model Law), and is one which focusses on a person’s position rather than their decisions. However, while the Committee’s intention to narrow the definition of “officer” may be relevant to the courts’ interpretation of the definition, it is arguable whether the definition of “officer” has in fact been narrowed. Each case will turn on its own facts.

How these differences will influence New Zealand Courts’ approach to determining whether a person is an “officer” and the roles that will be captured by the concept will be a point of interest when the majority of the provisions in the Act take effect on 4 April 2016.


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Tim Clarke

    Partner Auckland
  • Rachael Brown

    Partner Wellington
  • Rob Towner

    Partner Auckland
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