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
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
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
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.
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.