Director Convicted for Health and Safety Breach

Wednesday 26 March 2014

Authors: Tim Clarke, Grace Stacey-Jacobs and Anna Holland

Introduction

Last week the District Court convicted a company and its sole director under the Health and Safety in Employment Act 1992 (HSE Act) for failing to take all practicable steps to prevent harm to its contractors on a fishing vessel.

The decision illustrates the liability of directors under the HSE Act. In November 2012 we reported on the proposals to increase directors’ liability as part of the current reform of New Zealand’s health and safety regime. We expect to see more prosecutions of individuals once the reform is effected next year.

Under the current HSE Act, directors, officers and agents are only exposed to potential secondary liability if they have participated in, contributed to, or acquiesced in any failure of the company to comply with the HSE Act. This means that directors can only be liable where the company (which has primary liability) is in breach of the HSE Act and is liable for an offence. In contrast, under the Health and Safety Reform Bill, directors will have a personal, proactive due diligence duty to ensure that the company (or person conducting a business or undertaking (PCBU)) complies with its duties and obligations. This duty must be discharged personally, and a director may be convicted or found guilty of an offence, whether or not the PCBU has been convicted or found guilty of an offence under the proposed Act.

The conviction in this case relates to events on 14 March 2012, when nine people, including the skipper and two crew members, departed Bluff on the Easy Rider vessel with the intention of sailing to the Muttonbird Islands, before continuing on to fish in the southern waters. Just two hours into the voyage, the vessel capsized and sank. Only one person survived.

The company’s liability under the HSE Act

AZ1 Enterprises Limited and Gloria Davis (sole director, a shareholder, and owner of the Easy Rider) were each convicted as principals for failing to take all practicable steps to ensure that contractors were not harmed while doing any work that they were engaged to do.

While AZ1 Enterprises was the principal under the HSE Act, the company could only discharge its responsibilities through its agents, Mr Karetai (who died in the accident), and Ms Davis. The individuals’ actions could be attributed to the company, and the company’s liability was therefore the result of the shortcomings of its authorised agents.

Ms Davis effectively operated as the company’s physical mind and body (or agent). Mr Karetai was the person in authority on the day, and represented the company on board the boat. He chose to take the Easy Rider to sea with eight passengers knowing that he was not qualified to do so, that the weather forecast was not good, and knowing that the boat was uncertified to take any passengers.

The director’s acquiescence – liability under the HSE Act

Ms Davis was the sole director and took on the primary responsibilities relating to the vessel on behalf of the company. These responsibilities were outlined in the company’s safety policy and operations manual. It was significant that Ms Davis had willingly accepted these responsibilities and the Court found that it was not open for her to say that she was only an administrator. Ms Davis had the company’s authority to act and bind the company as director, and she had specific responsibilities in relation to health and safety. For example, she was responsible for the safety of passengers on board and for land based management, including safety training, operations procedure and compliance.

To be liable under the HSE Act, a director (or officer or agent) must be found to have directed, authorised, assented to, acquiesced in, or participated in, the failure of the company. The Court found that Ms Davis knew of the proposed voyage, that Mr Karetai was going to act as skipper despite his lack of qualification, and that six passengers would be taken on board the vessel (which she ought reasonably to have known was not surveyed to take passengers).

Under the HSE Act, a person is only required to take all practicable steps in respect of circumstances that the person knows or reasonably ought to know about. While the evidence was unclear in relation to Ms Davis’ knowledge of the number of lifejackets on board, as the safety officer for the company she had a responsibility, and it was reasonable to expect that she would have known how many lifejackets were on board.

The Court found that Ms Davis failed to ask the relevant questions and consciously ignored safety issues, including when she should have made an enquiry into the safety audit, which had not been completed. Ms Davis should have either stopped the boat from travelling on that day or alternatively, should have ensured a suitably qualified skipper was available. Both of these actions were practical steps that Ms Davis, as a person in authority, could have taken to protect the contractors from harm.

In any case, the Court was unable to distinguish between the company’s failures (through the actions of its authorised agents, including Ms Davis) and Ms Davis’ inactions in her capacity of director.

Ms Davis and the company were also convicted on charges laid under the Maritime Transport Act 1994.

Health and Safety Reform Bill

Prosecutions of directors under the HSE Act have been very rare. However, directors will face significantly greater exposure to liability when the health and safety reforms come into effect next year. The Health and Safety Reform Bill proposes to impose a proactive duty on officers of corporate entities to exercise due diligence to ensure that a PCBU complies with any duty or obligation under the Bill. Due diligence will include, for example, acquiring and keeping-up-to-date knowledge of work health and safety matters and ensuring the PCBU has, and implements, processes for complying with any duty or obligation the PCBU has under the Bill.

For more information about the current health and safety reform, click here.


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
  • Rob Towner

    Partner Auckland
  • Tim Clarke

    Partner Auckland
  • Rachael Brown

    Partner Wellington
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