Directors of companies should consider themselves put on notice, regardless of their day-to-day business involvement after a new decision was handed down from the NSW Industrial Court. The court found the CEO of a large multinational guilty of an OHS defence, but also criticised director’s reliance on “alternative” defences to charges.
The matter in question occurred in January 2003 at a tank washing facility that was, at the time, part of the Owens Group of companies operating in Australia, New Zealand and Fiji. The depot manager was fatally injured whilst cleaning a tank with a highly combustible solvent known as MEK.
Both the division general manager and Owens Containers were charged by WorkCover, who alleged that they had failed to:
•provide a safety system of work (failing to ensure that MEK wasn’t used in confined spaces at a temperature above its flashpoint, used in a sufficiently oxygen-depleted atmosphere, and with employees not located near the hatch of the tank);
•ensure plant was safe (so that the wash bay and tanks were earthed);
•provide adequate information, instruction, training and supervision; and
•provide or ensure the use of safety footwear.
Justice Wayne Haylen of the NSW Industrial Court heard that the site safety officer had not received any relevant training; audits of the site, both internal and external had not addressed the use of the chemical responsible for the accident and no risk assessments had been performed for the tank washing. He fined the company $160,000 (out of a maximum $550,000) and the general manager $18,500.
Both the company and GM pleaded guilty. However, the CEO defended the charge, asserting that he was not involved with the operations and that general managers of each division were responsible for day-to-day operations. Despite having undergone OHS training, he strove to separate himself from the safety of operations, citing no personal involvement and a lack of specialist knowledge.
He also spoke about the remote nature of his position which left him unable to influence the conduct of the corporation, citing that he spent less than one day a month directly involved with Owen’s container division, and of that, less than a third of that time was devoted to Australian operations.
Citing section s26(1)(a) of the Act, which offers a defence in the instance an individual can prove that they were “not in a position to influence the conduct of the corporation in relation to its contravention”, the CEO claimed he could establish that particular defence “because he was at the apex of the management system, and his authority and capacity to control employees and work on sites was theoretical and didn’t reflect upon his role in the company”.
Justice Haylen rejected the CEOs defences. He said that all directors were capable of influencing the actions of the corporation given the nature of their roles. Despite the CEO claiming that WorkCover’s approach required an “unrealistic level of detail”, Justice Haylen accepted that due diligence would have involved auditing and risk assessment, correct OHS training and consistent checks to ensure an OHS system was working, which would have meant the CEO had knowledge of safety processes being in place.
Justice Haylen said: “It is very difficult for a defendant to be able to call evidence to demonstrate that as a director he was not in a position to influence the conduct of the company in relation to a particular contravention, but at the same time call evidence to show that as a director he had, by all due diligence, acted to prevent the corporation’s contravention.”
The CEO will be sentenced at a later date.