Could you go to gaol for OHS breaches?

What does a managing director of a transport company, a managing director of a labour-hire company, four mine managers and a surveyor have in common? They have all recently been personally prosecuted and convicted for OHS offences.

Directors and managers are increasingly under the spotlight for breaches of OHS legislation across Australia. This is evident by the escalation of legislative developments and litigation seeking to make directors and/or managers more accountable for safety.

OHS laws in most jurisdictions have provisions making directors and managers personally liable in relation to OHS breaches by the corporation. In one high profile case this year, a mine manager was personally fined $42,000 for breaches of OHS legislation. Two other managers were also convicted and fined in that case.

New South Wales has also seen the introduction of a Draft Bill, which proposes the highest penalties in Australia in relation to workplace fatalities - up to $1.65m and/or five years imprisonment. Recent changes to OHS legislation in Victoria and Western Australia have made it easier to bring charges against directors and managers. Notably, as a criminal penalty, the penalty imposed on an individual director or manager is arguably not covered by standard directors and officers insurance policies. This means that a company may not be able to indemnify its directors and managers in relation to the penalty and/or legal costs of defending a prosecution. These developments make it imperative that directors and managers understand the nature of, and how to comply with, their obligations under OHS legislation.

The $42,000 fine against a manager arose out of the Gretley colliery disaster of 1996 in which four mine workers drowned when water rushed into the colliery. The inrush of water occurred when a continuous miner broke through from the Gretley mine into a neighbouring abandoned flooded mine. Gretley mine management was not aware that the old colliery was so close to the new mine. Management had relied upon plans about the location of the old mine from the NSW Department of Mineral Resources. The plans were incorrect and the management of the colliery had never independently checked the plans.

WorkCover prosecuted the Newcastle Wallsend Coal Company and the company, which owned the colliery, Oakbridge Pty Ltd. In addition, it prosecuted eight employees (being two mine managers, five other managers and a mine surveyor). In prosecuting the individuals, WorkCover relied on the provisions of the NSW OHS legislation which deems directors and any "person concerned in the management of the corporation" personally liable for breaches by their company.

In respect of the prosecutions against the employees, the mine surveyor and two mine managers were convicted and penalised, and the five managers were found not guilty. The mine manager at the time of the incident was fined $42,000, the previous mine manager who had left the colliery two years previously was fined $30,000 and the mine surveyor was also fined $30,000. The companies which owned the mine were convicted and fined a total of $1.46m.

In another high profile case, the managing director of a transport company was prosecuted in relation to an accident involving one of the company's drivers. Fatigue was alleged to have contributed to the accident. The prosecution of directors and managers is becoming more and more prevalent and the net of liability seems to be cast very broadly.

In her judgement concerning the prosecution of the eight employees, Justice Staunton considered in detail the meaning of the phrase "persons concerned in the management" of a corporation.

While noting that there was no definitive authority within the jurisdiction as to the proper interpretation of the phrase, Justice Staunton made the following comments about the meaning of "persons concerned in the management of a corporation": "The person's decision making powers and/or authority must go directly to the management of the corporation and must be such as to directly influence the corporation in relation to the act or omission that constituted the offence of the corporation;

the phrase may include advice given to management encompassing a participation in its decision-making processes and the execution of those decisions going beyond the mere carrying out of directions as an employee; the individual does not have to be at the director or executive management level of the particular corporation; and the corporation's structure and size, as well as the role of the person within it are relevant."

Justice Staunton concluded that a person concerned in the management of a corporation: "must be a person who was in a position to influence, by advice or decision making, the conduct of the corporation in relation to its contravention or whose decision making powers within the corporation comprehends activities the consequences of which have a significant bearing on the conduct of the corporation relevant to its contravention."

Justice Staunton held that the mine managers were "persons concerned in the management" because they were, in fact, involved in the acts or omissions by the corporation's offences; or were in a position to influence the conduct of the corporations (ie, there was a "practical connectio" between the mine managers and the corporation's actions). The surveyor was also considered a "person concerned in the management" because he had control over the surveying and survey drafting staff for the mine, subject to the instructions of the mine manager. However, the under managers were not considered "persons concerned in the management" because they had no decision making role in the acts or omissions of the corporation that affected the principal offences alleged against the corporation. Furthermore, there was no evidence that the under managers were aware of the presumed workings of the old mine.

In NSW, Queensland and Tasmania, the onus is on the directors or managers to prove either:

1. they were not in a position to influence the conduct of the corporation in relation to the offence; or

2. they exercised all due diligence in relation to the contravention.

"All due diligence" has a wider import than "due diligence". The defendant must show that they did all that was required to ensure the putting in place of a system of work within the company designed to identify and manage risks to safety at the place of work. The court has recently held in Insp Mansell v Smith that this is not achieved by merely "hoping that others would or could do what they were told, but ensuring that they had the skills to execute the job they were required to do and then ensuring compliance with that in accordance with the safe standards established. Compliance requires a process of review and auditing, both formal and random, in order to ensure that the safe standards established are in fact being adhered to and under ongoing review."

In Victoria, Western Australian and South Australia, officers of the company will be personally liable if it is established that the offence was committed under their consent or connivance or was due to their wilful negligence.

With the escalation in penalties and the frantic regulatory activity in prosecution of individuals, manager and directors of companies would be well served ensuring that they have appropriate systems in place to ensure health and safety and protection protect their personal position.