An officer’s duty to exercise due diligence: A clarification?

Introduction

A recent decision of the District Court of New South Wales has clarified the content, nature and extent of an officer’s duty to exercise due diligence in relation to safety matters under the Work Health and Safety Act 2011 (NSW) (WHS Act).

Persons conducting a business or undertaking (PCBU) have a primary duty of care under s 19 of the WHS Act to ensure, so far as is reasonably practicable, the health and safety of workers whilst at work in the business or undertaking. A PCBU must also ensure, so far as is reasonably practicable, that the health and safety of other persons is not put at risk from work carried out as part of the business or undertaking.

Separate to the primary duty of care owed by the PCBU itself, is a concurrent duty that owed by an officer of a PCBU, to exercise due diligence to ensure that the PCBU complies with its duties under the WHS Act. Officers include directors, company secretaries and other senior executives who make, or participate in making, decisions which affect the whole or part of the business or corporation.

On 8 March 2024, Judge Russell SC delivered judgment in SafeWork NSW v Miller Logistics Pty Ltd; SafeWork NSW v Mitchell Doble [2024] NSWDC 58 (Doble). The prosecutor charged the PCBU with a breach of its primary health and safety duty under s 19(1) of the WHS Act contrary to s 32. It was alleged separately that the sole director of the PCBU failed to exercise due diligence (as an officer) to ensure that it complied with its duty under s 19(1) contrary to s 27(1) of the WHS Act.

Factual background

Miller Logistics Pty Ltd (Miller) carried on a transport business and operated a number of depots throughout New South Wales. One of those depots was located in Tamworth. On 4 November 2020, Christopher Herden (Mr Herden) was working at the Tamworth depot.

Mr Herden was working on foot assisting Ron Hill (Mr Hill), the driver of a B-Double trailer which was parked in the loading/unloading area at the depot. At the time of the incident, Mr Herden was helping Mr Hill load his truck. Mr Hill asked Mr Herden to search for a smaller pallet. To find a suitable pallet, Mr Herden had to walk across the other side of the depot which was where the pallets were stored. As he was looking for another pallet, Mr Herden was struck from behind by another forklift and suffered serious injuries as a result.

The case against Miller

His Honour dealt with the case against Miller first. The risk pleaded against Miller was the risk was the risk of workers, in particular Mr Herden, suffering serious injury or death as a result of being struck, or otherwise impacted, by a forklift whilst the workers were undertaking duties associated with the loading of transport vehicles in the loading/unloading area at the premises.

His Honour accepted that the evidence clearly established the risk was present, had regard to what was reasonably practicable for Miller to have done to avoid the risk so as to ensure compliance with its primary duty and found that the substantial cause of Mr Herden being exposed to the risk was the failure by Miller to take the reasonably practicable steps pleaded against it.

His Honour concluded the offence against Miller had been proved beyond reasonable doubt.

The case against Mr Doble

The four elements of the s 27 charge pleaded against Mr Doble were identified by Judge Russell SC as follows:

1. There is a corporate PCBU which has a duty or obligation under the WHS Act.
2. The accused individual is an officer of that PCBU.
3. The accused has failed to exercise ‘due diligence’ to ensure that the PCBU complies with that duty or obligation.
4. The failure to exercise due diligence exposes an individual to a risk of death or serious injury.

Having disposed with the case against Miller, his Honour found that elements one, two and four were made out beyond a reasonable doubt and determined accordingly, that the case against Mr Doble turned solely upon element three, namely, whether Mr Doble failed to exercise due diligence to ensure that Miller complied with its duty or obligation under the WHS Act.

The evidence going to the question of Mr Doble’s exercise of due diligence was given by Miller’s Compliance Manager, James Hayter (Mr Hayter). Mr Hayter had been responsible for Miller’s work health and safety management since 2013.

In considering the scope of Mr Doble’s duty to exercise due diligence, his Honour made the following important observations:

Mr Doble was the managing director and indeed the sole director, of Miller. That does not mean that he had to do everything that the PCBU had to do to ensure safety. The WHS Act required him, as pleaded, to have processes and resources in place to ensure that the PCBU complied with its duty under the WHS Act. Miller was a medium-sized operation. It had eight depots spread throughout the State. It used a large number of transport drivers operating over a wide area. Unlike a one or two person business (such as the one Judge Scotting considered in Hetherington), a managing director in the position of Mr Doble cannot know everything that is going on at any given moment. To run a corporation there must be a level of delegation.

The evidence in the case shows that Mr Hayter was specifically employed to deal with work health and safety. This required Mr Hayter to not only update policies and procedures, but to deal with any issues which arose from time to time. There was no suggestion in the evidence that Mr Hayter was anything other than conscientious. There was no suggestion in the evidence that Mr Doble had any reason not to place confidence in Mr Hayter carrying out his work health and safety duties. The engagement of Mr Hayter was the primary process or resource which Mr Doble used to ensure that the PCBU carried out its duty under the WHS Act.

The fact that Mr Hayter failed to mandate the separation of forklifts and pedestrians is a failure by the PCBU. Of itself it is not a failure by Mr Doble to exercise due diligence.

His Honour went on to accept that Mr Doble:

1. was not a ‘hands-off’ director;
2. visited each depot from time to time; and
3. was involved in discussions around safety and took an active interest in ensuring that work health and safety and compliance matters were attended to.

Further, his Honour identified several matters in evidence in support of an ultimate finding that the prosecution had not proved beyond reasonable doubt that Mr Doble failed to discharge his duty to exercise due diligence:

1. If Mr Hayter raised a work health and safety matter with Mr Doble that required the expenditure of funds by Miller, there was never any pushback by Mr Doble.
2. Health and safety matters were minuted at management meetings which were followed up at the next meeting. His Honour was satisfied this constituted a verification that the resources being provided to Miller by Mr Doble were being implemented.
3. Mr Doble put in place a system to identify and manage health and safety risk at Miller’s depots.
4. Mr Doble addressed safety matters at board level and required the work health and safety manager to report on those matters and to monitor compliance.
5. Mr Doble reviewed whether safety matters brought to his attention were being followed up.

Having found that Mr Doble had in fact discharged his duty to exercise due diligence, his Honour acquitted Mr Doble of the s 27 charge brought against him.

Commentary

Doble is an important case clarifying the scope of the personal liability of directors and officers in the context of work health and safety prosecutions.

In this case, Judge Russell SC considered that the WHS Act required Mr Doble to arrange and oversee the corporation’s structures and systems so as to ensure it complied with its duties. That included the appointment of Mr Hayter as Miller’s work health and safety manager to deal with safety matters as they arose and also to update Miller’s policies and procedures as necessary. His Honour accepted that Miller was a medium-sized operation with eight depots across the state and that (unlike a one or two person business), Mr Doble could not be expected know about everything going on in the business at any given moment and that there must be a level of delegation.

It is significant that Honour was satisfied that the engagement of Mr Hayter as health and safety manager was Miller’s primary resource allocation towards ensuring it complied with its duties under the WHS Act. His Honour found that Mr Hayter’s failure to implement steps to eliminate the risk which led to the incident was a failure by the corporation itself and not a failure by Mr Doble to exercise due diligence. His Honour found there was no evidence to suggest that Mr Doble had any reason to doubt Mr Hayter’s competence as a health and safety manager, nor to question his conscientiousness.

Despite this finding, his Honour seemed to ascribe some weight to evidence of Mr Doble’s ‘hands on’ approach to work health and safety matters as a director. It appears that evidence of Mr Doble’s diligence in attending the depots personally and following up safety matters as they were brought to his attention, both personally and at the board level, contributed to his Honour’s ultimate determination that due diligence had been exercised.

Another key aspect of the judgment in Doble was his Honour’s comments in relation to the difficulties inherent in the prosecution of a s 27 case against a director. At [269], his Honour observed that in order to be successful, the prosecutor needed to ‘prove a negative’, that is, to adduce evidence demonstrating the absence of the exercise of due diligence by Mr Doble. His Honour suggested that if, for instance, Mr Doble had not had discussions at the board level about safety matters, one might have expected the prosecutor to have tendered the minutes of the management committee meetings and ask the Court to draw an inference that the lack of entries concerning work health and safety demonstrated that due diligence was not being exercised by Mr Doble. From a corporate governance perspective, this aspect of the case serves to remind board directors about the importance of accurate record keeping practices, particularly in relation to health and safety matters.

This case is important because it very clearly identifies the differences between the primary duty owed by PCBUs under s 19 and the due diligence duty owed by officers under s 27. Here, the same incident resulted in the conviction of Miller Logistics and the acquittal of Mr Doble, which serves as a reminder that the duties are not the same and that the Courts will not treat them as such.

A key point for directors and officers arising from case is to ensure that companies, large and small, are adequately resourced to pre-emptively address and swiftly respond to WHS matters as they arise in the course of business. In this case, the employment of a health and safety manager in combination with Mr Doble’s diligent ‘hands on’ approach as director assisted to demonstrate Mr Doble’s compliance with his due diligence duties.

Further, the importance of accurate record-keeping is also emphasised in this case - his Honour made it clear that an absence of WHS matters recorded in the management committee meeting minutes may provide a basis on which the Court may draw an inference that due diligence was not being exercised by officers.