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The Personal Liability of Company Officers for Company Breach of Workplace Health and Safety Duties

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The Personal Liability of Company Officers for Company Breach of Workplace Health and Safety Duties The Personal Liability of Company Officers for Company Breach of Workplace Health and Safety Duties Neil James Foster BA/LLB (UNSW), BTh (ACT), DipATh (Moore) Presented in fulfillment of the requirements for the Master of Laws (LLM) at the University of Newcastle February 2003 I hereby certify that the work embodied in this thesis is the result of original research and has not been submitted for a higher degree to any other University or Institution. (Signed) _________________________________ I am grateful for the invaluable help and encouragement given in the preparation of this thesis by my supervisor, Professor Anne Finlay, by Professor Neil Rees who also acted as supervisor for a time, and by my colleagues in the Law School at the University of Newcastle, especially John Anderson and Greg Pearson who have put up with my questions on criminal and company law! I dedicate this thesis with all my love to my wife Robyn and my children Rachel, James, Claire and Miriam. TABLE OF CONTENTS CHAPTER 1- INTRODUCTION: WORKPLACE SAFETY AND THE CORPORATE SHIELD 1 1. Injury and Death in the Workplace ..........................................................................2 2. Workplace Employment and the Corporate Structure...........................................4 3. Workplace Safety and the Corporate Veil................................................................7 4. The Question of Individual Managerial Responsibility ........................................14 CHAPTER 2- PERSONAL LIABILITY OF COMPANY OFFICERS FOR COMPANY TORTS 17 1. The Corporate Veil and Civil Liability- General Principles................................. 18 a. Limited Liability and Legal Personality ............................................................ 18 b. Early decisions on directors’ tortious liability- “direct and procure” ............ 19 c. “Making the tort his own”................................................................................... 22 d. Representation torts- Trevor Ivory and beyond................................................. 25 (i) Negligent misrepresentation .......................................................................... 25 (1) Trevor Ivory ................................................................................................ 25 (2) Williams v Natural Life.............................................................................. 26 (3) Example of “Assumption of Responsibility” .......................................... 28 (ii) Fraudulent Misrepresentation by Director................................................. 29 (1) Standard Chartered Bank- the Court of Appeal decision....................... 30 (2) UK Response to Standard Chartered Bank.............................................. 33 (3) Standard Chartered Bank Over-turned.................................................... 38 e. The Australian position........................................................................................ 41 2. Is there a different rule for different types of tort? ............................................... 47 3. Application of the law to workplace injuries.......................................................... 51 (a) Liability for Personal Injuries........................................................................... 55 (i) Liability under the “Directed and Procured” test ....................................... 55 (ii) Personal duty of care owed by the director................................................. 56 (1) General principles governing personal injury in the workplace .......... 57 (2) Personal (active) negligence by director leading to injury .................... 62 A. Cases Holding Directors Personally Liable for Workplace Injuries 63 B. Are Employees “Voluntary Creditors”? ............................................. 74 C. Policy Arguments for Denying Personal Liability.............................. 76 (3) Liability for directors who are “passive”................................................ 79 (4) Vicarious Personal Liability for directors? ............................................ 84 (iii) Liability of a director as “joint tortfeasor”................................................ 84 (b) Liability for Economic Loss Related to Personal Injuries.............................. 85 (i) Workplace Injury and Insurance.................................................................. 86 (ii) Possible Tort Liability where Insurance is Ineffective............................... 86 4. Conclusion ................................................................................................................. 95 CHAPTER 3- COMPANY OFFICERS’ LIABILITY FOR COMPANY WORKPLACE SAFETY BREACH UNDER GENERAL CRIMINAL LAW 99 1. General Principles............................................................................................. 101 (a) Commission of Criminal Offences by Companies ..................................... 103 (i) Direct Liability .............................................................................................. 104 (1) Identification Liability- Tesco and Meridian ........................................ 105 (2) Identification Liability- Unnecessary where there is a failure of duty?108 (3) Identification Liability in Australia....................................................... 113 (4) Aggregation of Fault of Individuals....................................................... 115 (ii) Indirect (vicarious) criminal liability......................................................... 115 (iii) Criminal Liability under the Commonwealth Criminal Code................ 118 (b) Accessorial Liability of an Officer when the Company has committed an offence...................................................................................................................... 124 2. Manslaughter ..................................................................................................... 126 (a) Manslaughter generally................................................................................ 127 (i) Manslaughter by criminal negligence......................................................... 127 (ii) Unlawful and dangerous act manslaughter............................................... 128 (b) Manslaughter by negligence while acting as a company officer .......... 131 (i) Duty of care for manslaughter purposes .................................................... 132 (ii) Application of manslaughter to company officers.................................... 132 (1) Australia................................................................................................... 133 (2) United Kingdom ...................................................................................... 134 (3) Manslaughter by Overall Management Decision................................. 137 (c) Corporate manslaughter.............................................................................. 139 (i) Corporate manslaughter under the current law........................................ 139 (ii) Proposals for new offences related to manslaughter................................ 147 (1) United Kingdom ...................................................................................... 148 (2) Victorian Proposals................................................................................. 150 (3) Other Australian Proposals.................................................................... 153 (d) Accessorial liability for corporate manslaughter .................................. 155 (i) Accessorial liability for manslaughter ........................................................ 155 (ii) Accessory to corporate manslaughter........................................................ 158 3. Other offences .................................................................................................... 162 4. Conclusion .......................................................................................................... 163 CHAPTER 4- COMPANY OFFICERS’ PERSONAL LIABILITY FOR CORPORATE WORKPLACE-SAFETY-SPECIFIC BREACHES 165 1. Introduction............................................................................................................. 166 2. Section 26 NSW OHS Act 2000 and related provisions- overview...................... 167 (a) The NSW legislation ......................................................................................... 167 (b) Other Australian legislation ............................................................................ 169 (c) The UK legislation ............................................................................................ 179 3. Issues arising under the statutory provisions....................................................... 179 (a) The law in operation- prosecution of company directors in practice .......... 180 (i) Majority “Directors” as opposed to “Managers” ...................................... 181 (ii) Directors prosecuted mostly directly involved in incident....................... 181 (iii) Most companies small ................................................................................ 182 (b) Legal issues in applying s 26 to Directors....................................................... 183 (i) Allocation of Penalty between Company and Director ............................. 184 (ii) Effect of the “deeming” provisions ............................................................ 188 (iii) The Meaning of “due diligence”................................................................ 192 (iv) Considerations
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