Executive officers (EOs) have a duty to ensure that their business does not breach the Heavy Vehicle National Law (HVNL) – and being informed about the business's Chain of Responsibility (CoR) performance is a crucial part of this. This article explores the duties of EOs and looks at how effective board and management reporting can ensure these duties are met.
Executive officers are directors and "any person, by whatever name called and whether or not that person is a director, who is concerned or takes part in the management of a corporation". This may include those who exercise the functions of a manager, even if they do not hold that title.
Executive officers may be held personally liable if their business breaches the HVNL. Directors are the third highest prosecuted category of CoR party in NSW, with 698 prosecutions of directors (and counting) being commenced in NSW since 2006.
Exercising reasonable diligence
EOs have an 'active duty' to exercise reasonable diligence in relation to CoR compliance. This means that EOs must be actively and meaningfully engaged in CoR compliance and cannot delegate their obligation. To be in a position to exercise reasonable diligence in relation to CoR compliance, directors and managers must be:
- alert to the CoR breach risks faced by the business, including ensuring that a CoR risk assessment has been undertaken;
- informed so that they can sufficiently identify risks, breaches and performance – specifically, they need information about:
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- the business's CoR activities;
- the business's CoR performance; and
- any breaches and subsequent remedial action; and
- active, including developing and implementing a CoR compliance policy, monitoring its implementation and effectiveness and responding to any incidents.
Board and manager CoR briefings and awareness seminars, given by independent lawyers or consultants, are an excellent tool to:
- increase awareness about CoR compliance; and
- demonstrate that by seeking advice, the business and its EOs have taken steps to exercise reasonable diligence in relation to compliance.
It is crucial that EOs are given only relevant and meaningful information. Anecdotal evidence suggests that information is submitted to the EOs even when there is doubt about its relevance. The board ends up with pages of figures and tables, which board members can't properly assess in context, either within a reasonable timeframe or at all.
Caution: A common thread in CoR prosecutions is that either:
- there were no systems or checks in place; or
- information was being collected, but was not properly analysed and acted upon.
Three tips for effective reporting
To help ensure that your reporting is effective, there are three things you need to remember:
- The CoR is directed at safety, not business performance
Your CoR compliance reporting must reflect this. Further anecdotal evidence suggests that the majority of EO reporting is financial. But figures are unlikely to give any insight into CoR compliance and performance on a day-to-day basis. At best, financial information might reveal the totality of fines or penalties imposed after the event. That's why CoR compliance reporting should primarily concern incidents, not dollars.
- You must avoid CoR breaches
EOs are under a duty to exercise due diligence to avoid CoR breaches. CoR compliance reporting that is limited to information on breaches and remedial action following CoR breaches only goes halfway to discharging this duty.
Ideally, CoR compliance reporting should also be used to forecast non-compliance trends, so that compliance measures or further information, supervision and training can be put in place to prevent breaches before they occur.
- CoR compliance reporting should focus on the bad, not the good
CoR compliance reporting, especially at board level, is not a school awards night. The number of road movements that have been conducted without any compliance issues might deserve an accolade, but does little to assist in identifying areas of concern.
CoR compliance reporting should mainly be exception or non-conformance based, to focus attention on potential or actual compliance problems.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
