Australia: Director convicted of WHS breach and sentenced to additional orders, as regulator questions relevance of insurance for breaches

Last Updated: 14 May 2019
Article by Greg McCann and Kerry O'Brien

In brief - Are your company's directors and officers at risk of novel orders against them personally if something goes wrong?

In SafeWork NSW v Macquarie Milling Co Pty Limited ; SafeWork NSW v Samuels [2019] NSWDC 111, a business that made stockfeed products for farm animals (Macquarie Milling) and its sole director (Mr Samuels) plead guilty to breaches of the Work Health and Safety Act 2011. The District Court judgment demonstrates how sentencing factors are considered where pleas of guilty are entered and may indicate the position of work health and safety regulators to pursuing orders against directors.

SafeWork NSW alleged Macquarie Milling breached subsection 19(1) of the WHS Act by failing its primary duty of care, by not ensuring so far as was reasonably practicable the health and safety of workers, which exposed workers to a risk of death or serious injury.

SafeWork NSW also alleged that Mr Samuels breached section 27 of the WHS Act by failing his duty as an officer to exercise due diligence to ensure Macquarie Milling complied with its primary duty of care.

No safe process for clearing blockage to chaff cutting machine results in injury to worker

A machine that was used in the production, called a chaff cutting machine and which processed hay, became blocked with hay. One worker attempted to clear the hay blockage with a metal rod while standing close to an unguarded rotating shaft with the machine still on. The worker was able to do this by climbing over a barrier and descending a makeshift ladder into an area of the chaff cutting machine.

Part of the worker's clothing became caught on the rotating shaft. This resulted in the worker's clothing becoming wrapped tightly around his back and a deep laceration to his left hand; his left arm and shoulder also became jammed against the housing of the hydraulic motor.

The worker required significant medical attention following the incident, including a surgery to remove nerve endings from his leg to place into his left hand.

At the time of the incident, SafeWork NSW issued an improvement notice under the WHS Act to Macquarie Milling, who installed a guard for the chaff cutting machine on the same day, quickly and cheaply.

Company and its director plead guilty and cooperate with the regulator

The Court considered a range of matters when sentencing each defendant.

The Court noted that Macquarie Milling had no sophisticated WHS structures in place - it did not have a WHS committee or WHS representatives; toolbox meetings took place, but did not enforce safety policies and typically only where near misses or hazards were reported to management. There was no supervision in place to ensure that the machinery could be stopped if maintenance to the machine was required. Mr Samuels did not ensure effective processes were maintained and did not supervise workers around plant and machinery. The Court concluded that workers adopted their own method to clear blockages of the chaff cutting machine in the absence or Mr Samuels implementing any safe process for doing so.

Macquarie Milling had been issued with 20 different improvement and prohibition notices under the WHS Act by SafeWork NSW which referred Macquarie Milling to the appropriate Australian Standard about safety of machinery. Macquarie Milling also had two prior convictions arising out of an incident in 1997 where a worker received severe lacerations and crush injuries to his hand as a result of using a machine.

The defendants submitted to the Court that the worker's use of a makeshift ladder to access an area of the chaff cutting machine, rather than access that same area by a method that would have automatically turned the machine off, should decrease the objective seriousness of the offences. Apparently, the makeshift ladder was removed and replaced by workers and management from time to time. The prosecutor submitted that this demonstrated a higher level of culpability because the continued use of the ladder made the offending more serious.

The Court concluded that persons with a WHS duty must have regard to the fact that sometimes workers will not take sufficient care for their own safety and that, if anything, this demonstrated that the defendants needed to put stronger measures in place.

Overall, the Court considered the context of the offending to be serious as the defendants were aware of the Australian Standard, had been prosecuted for a similar incident and had been served with several sanctions by SafeWork NSW over time. The remedial steps were simple and the likelihood of the risk was high. The injuries sustained by the worker were a manifestation of that risk.

Should the Court take into account an insurance policy when sentencing a WHS breach?

The Court was aware that each of the defendants were indemnified against any fine imposed by the Court through an insurance policy, less an excess payable under the policy.

SafeWork NSW raised this with the Court, submitting that the insurance policy would relieve the defendants from the legal consequences of their actions. SafeWork NSW also submitted that the existence of insurance meant that there was no genuine remorse, as the defendants were not accepting responsibility in a financial sense for their conduct.

The Court considered that an insurance policy was relevant to sentencing by removing capacity to pay as an issue in sentencing. However, the Court specifically rejected the submissions of SafeWork NSW and considered the existence of insurance as a neutral matter. The Court considered that sentencing a WHS offence included preventing both the specific offender and the community generally from committing similar offences and that one purpose of sentencing is to denounce the conduct of the offender through recognising the harm done to the victim and the community. These matters are unaffected by the existence of insurance.

Court grants additional orders sought by SafeWork NSW in these proceedings

SafeWork NSW asked the Court to make orders in addition to the usual orders to convict offenders, impose a fine and ask that the prosecutor's costs are paid.

SafeWork NSW sought the following orders against the director only:

  • an order for training, being a course in due diligence training within six months, under section 241 of the WHS Act
  • an order for the offender to undertake a specific project for the general improvement of WHS under section 238 of the WHS Act, and
  • an order that the director enter into a WHS undertaking under section 239 of the WHS Act

The Court noted the peculiar circumstances of the defendants, in their history of WHS incidents and interactions with the regulator. The Court made all additional orders sought by the prosecutor.

These orders are not common in NSW, as the circumstances that may give rise to these orders do not often come before the courts. This may indicate that SafeWork NSW may be more willing to seek these orders in the future.

Businesses should consider the WHS systems at their worksites and be responsive to training and compliance needs

Courts can make far-reaching orders that impact your business and create additional costs where WHS systems are not up to scratch.

Greg McCann Kerry O'Brien
Work health and safety
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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