In a recent High Court decision[1], which has wide-reaching implications for trustees, Justice Harvey found that trustees  collectively meet the definition of a “person” under section 16 of the Health and Safety at Work Act 2015 (HSWA). The Court also ruled that trustees are not prohibited from being indemnified for any fine or infringement fee under HSWA.

In this FYI we discuss important aspects of the decision and what it means for trustees, in particular professional trustees, who carry out activities in a workplace (such as a trust that owns a farm or other property where work is undertaken). 

Background

The RH & Jury Trust (Trust) was charged by WorkSafe New Zealand (WorkSafe) after a machine-related incident on a dairy farm in Waiotahe.  The Trustees are the legal owners of the dairy farm and farming operations are primarily carried out in the Trust’s name.  In 2020, a young child was visiting his grandfather, who worked on the farm. The child’s jacket was caught in machinery, and he was fatally injured. Worksafe charged both the Trust and the Trustees under s37 of HSWA for failing to ensure the farm, as a “workplace”, was without risks to the health and safety of any person. WorkSafe decided to attribute liability to the Trust on the basis that the Trust was conducting the business and that the incident was caused by governance and management failures of the Trust, rather than personal failures of the Trustees themselves.

The District Court dismissed the charge against the Trust on the basis that it was contrary to equity and common law principles;  a trust was not a body of persons, a person, nor a legal entity; and therefore, the Trust could not be a PCBU under HSWA.^[2]  The District Court also held that there was no basis for the Trustees to be charged collectively, “because personal liability attaches to an individual” and instead, the Trustees should be charged as individuals.

Summary of key points from the High Court decision

The question of law before the High Court was whether a trust (or its trustees collectively) could be considered a “person” under s16 of HSWA, which is defined to include “the Crown, a corporation sole, and a body of persons, whether corporate or unincorporate”?.

WorkSafe argued that interpreting a trust as a “person” was necessary for effective enforcement of HSWA and this would recognise the common use of trusts to run businesses and the collective nature of trust decision making.  Justice Harvey agreed with WorkSafe’s interpretation on a policy basis. However, His Honour preferred the interpretation that the trustees collectively fall within the definition of a “body of persons … unincorporated”, rather than a trust itself.  

In finding trustees collectively meet the definition of a “person”, and could therefore be charged under HSWA, Justice Harvey observed the “perverse outcome” if a body of persons with pseudo corporate features (as a trust) and an informal structure could collectively be considered a PCBU, while trustees could not.

Justice Harvey was cautious to apply principles from case law that a trust itself, rather than the trustees collectively, fall under the definition of a “person”. His Honour emphasised the importance of conceptual consistency with well-established trust law that a trust is not a legal entity and the practicality of enforcing criminal liability.  Justice Harvey also considered there was no advantage in prosecuting a trust rather than trustees collectively, as the maximum enforcement under s 48(2)(c) of HSWA (a fine of $1.5million) would be available in either instance. This approach avoided the conceptual and practical difficulties of prosecuting a trust itself. (Although, we note, this position may be different for a trust board of a charitable trust, which can be incorporated under the Charitable Trusts Act 1957 (and could therefore be considered a PCBU itself as “body of persons incorporated”, unless it is a “volunteer association” under s 17 of HSWA)).

Finally, Justice Harvey found that s 29 of HSWA does not prohibit indemnity of trustees for any fine or infringement fee under a trust deed. This finding was made on the basis that if the provision were intended to override fundamental trust principles, it would be worded more broadly.  Further, as a trust itself is not a “person” under HSWA, a trust does not fall within the prohibition that “a person … must not indemnify another person.”  However, trustees will not always be indemnified from the trust assets if fined under HSWA.  Whether a trustee will be indemnified will “depend on the specific facts, the trust deed and the general law of trustee indemnity”. Specifically, the Trusts Act 2019 provides limitations on indemnity of trustees, stating that the terms of a trust must not give a trustee indemnity for any breach of trust arising from a trustee’s dishonesty, wilful misconduct or gross negligence.

Please get in touch with one of our experts if you would like advice about the implications of this decision on your circumstances.