Under the new Heavy Vehicle National Law (HVNL), executive officers will have a new positive duty to exercise due diligence to ensure their legal entity complies with its chain of responsibility duties. Executive officers will be held liable for failure to exercise due diligence regardless of whether the company was charged or convicted with an offence.
With these amendments, and the substantially increased maximum penalties of up to $300,000 for individuals, the regulator is sending the message that it is up to directors and executives to set the culture of the company, understand their obligations and ensure compliance. Executive officers will be required to proactively identify and address potential risks, and verify that appropriate resources are provided and processes used.
Overview of the new provisions
| Current provisions | New provisions |
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Section 636 If a corporation commits an offence, each executive officer who:
also commits an offence. It is a defence for the executive officer to prove they exercised reasonable diligence, or was not in a position to influence the conduct. |
New section 26C
Each party in the chain of responsibility has a duty to ensure, so far as is reasonably practicable, the safety of the party's transport activities relating to the vehicle. New section 26D If a legal entity (i.e. party to the CoR that is not an individual) has a duty under section 26C, an executive of the legal entity must exercise due diligence to ensure the legal entity complies with the duty. Burden of proof is reversed so that the prosecutor must prove the executive did not exercise reasonable diligence. Executive of a legal entity means an executive officer of a corporation, a partner in a partnership, or management member of an unincorporated body. The prosecution must prove that an executive officer did not exercise due diligence. |
Guidance from Work Health and Safety prosecutions
The primary duties and executive officer duties mirror those in the Work Health and Safety model law which has been implemented in all states and territories except Western Australia and Victoria. Cases where executive officers have been prosecuted under these laws offer some guidance as to the standards which may be expected under the HVNL amendments.
In the case WorkCover Authority of NSW v Plumbwizard Limited and John Georges [2015] NSWDC 266, a company and its sole director and shareholder were found guilty of a Category 2 breach of their primary duties. In this case, a young, inexperienced worker was not trained or inducted in any matters of safety and was injured when he fell 3m through a penetration in a balcony which was not properly secured. After pleading guilty, the company was fined $60,000 and the director was fined $8,500, and both were ordered to pay the prosecutor's costs of $35,000.
In analysing the gravity of the offence, the Court considered the high probability of serious injury and the simple measures available (but not taken) which would have obviated the risk and avoided injury. These simple measures were set out by the court as the use of warning signs, induction training going to the presence and risk of penetration, securing the penetration with and appropriate cover and barricading the penetration.
This case demonstrates the impact that actions taken after an incident can have on mitigating a penalty. The Judge noted that the defendants had shown genuine contrition and remorse and taken significant measures to ensure no further accidents would occur, including hiring a safety officer. The company's actions showed that the prospects for reoffending were 'extremely low', and this was reflected in the penalty.
Sole-director companies should be aware that the fact that the director is the 'real source' of the funds to pay both the executive officer penalty and the company penalty will not necessarily mean that the fines will be reduced, as they were not in this case.
What can you do?
Due diligence is a positive duty and executive officers must undertake due diligence activities whether or not there has been a safety incident or breach of the HVNL. What is considered 'reasonable steps' towards ensuring safety will depend on the circumstances, including the executive officer's role and influence over the safety activity. An executive officer may rely on information, advice and activities of others, but must be able to demonstrate that this reliance is reasonable.
Examples of the due diligence activities that could be undertaken include:
- developing a safety management plan that identifies hazards for certain transport activities
- ensuring that information is readily available about procedures to ensure the safety of specific road transport operations
- ensuring that appropriate resources and processes are used to eliminate or minimise risks in relation to the maintenance of vehicles
- establishing processes for considering and responding to information about incidents, hazards and risks.
Although the burden of proof lies with the prosecutor to prove that you did not exercise due diligence, you should always keep records of these activities through, for example, well-documented safety plans, risk assessments, policies and procedures and processes requiring managers to sign off workers' completion of induction and training.
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.
