A Fatal Lack of Officer Due Diligence

Two prosecutions of companies and their Officers under the Model WHS Laws may be of interest to anyone who is an Officer themselves. An Officer is a business owner, director, CEO, or other Executive Officer in the business that can make significant decisions for the business. These people have specific "due diligence" duties as officers of an organisation under Section 27 of the WHS Act 2011.

Though these two cases are separate, they both involve the same incident in which an 8-year-old girl died. One Officer was prosecuted for their "due diligence" omissions under Section 27. In the other case the Officer is also being prosecuted for "due diligence" omissions under Section 27 but for omissions driven by negligence. At this time of writing the case is not complete.

Both cases illustrate the importance of Directors and CEOs complying with their WHS obligations and personal liabilities for breaching their duties.

The First Prosecution

In September 2014 at the Royal Adelaide show, an eight-year-old girl was ejected from an amusement ride called the Airmaxx 360. SafeWork SA prosecuted the company that owned the Airmaxx and also its Officer. The SafeWork prosecutor told the Court that the defendants had failed to properly maintain the ride or properly enforce safety standards since the Airmaxx was purchased in 2012.

The Officer pleaded guilty to failing to exercise due diligence to ensure that the company complied with its WHS duties in regard to;

• register the Airmaxx as required by WHS Regulations and not use it until its design registration was authorized

• provide and maintain safe systems of work

• have the repairs, maintenance and inspection of the Airmaxx carried out by appropriately qualified persons.

• have appropriate systems and processes in place to record maintenance and repair work

The Tribunal noted that the company and its Officers relied upon and were let down by the experts they engaged for the purchase, registration and operation of the Airmaxx. The Tribunal also noted that there were “ample opportunities” for the Officer to be a lot more careful in carrying out her duty.

The Tribunal recorded convictions against the company and the Officer but because of the “precarious financial situation” of the company and the Officer, the Tribunal did not order financial penalties against them.

The Other Prosecution

SafeWork SA has also prosecuted the engineering company and its Director for their role in carrying out inspections for the company that owns the Airmaxx. SafeWork SA has charged them with reckless conduct. This is a Category 1 offence – (see section 31 WHS Act). If convicted the engineering company may be fined up to a maximum of $3 million and the Officer may be fined a maximum of $600,000 or a 5-year jail term, or both (as of 2014.)

Note

In the main, prosecutions of Officers under the WHS Act that have come into Court so far have been of small companies where the Officer was the business owner and was involved directly on a daily basis with the operations of the company. Two years into the enactment of the Model WHS Laws (as of 2014), we have not yet seen a prosecution of an Officer in a large company where there are layers of management or distance between the Officer and the incident.

To assist business owners, CEOs, and Directors, Courtenell delivers a short course to assist them in understanding their WHS due diligence requirements as Directors or CEOs of a business, and how they might apply them in their workplace. See here: WHS Due Diligence for Officers (courtenell.com.au)

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