"A good leader and conscientious officer may have the best intentions in the world but may still breach that [due diligence] duty".

Former Ports of Auckland Limited (POAL) chief executive, Tony Gibson, has been found guilty of breaching his due diligence obligations as an officer under the Health and Safety at Work Act 2015 (Act). The decision comes six months after the highly publicised trial took place^.[1]

This case is significant because it is the first time since the Act was introduced (eight years ago) that we have guidance from the courts on what is required from an executive officer of a large company to comply with their due diligence obligations. 

Background - a recap

Mr Kalati died in August 2020 after being crushed by a container that fell off a crane. The death came after four previous health and safety prosecutions during Mr Gibson's tenure as chief executive. Facing significant public backlash, Mr Gibson resigned in May 2021. 

After a lengthy investigation, Maritime NZ charged Mr Gibson under sections 48 and 49 of the Act. Maritime NZ, rather than WorkSafe New Zealand, had jurisdiction over the incident as it occurred on a vessel.

Legal framework

Under section 36 of the Act, a person conducting a business or undertaking (PCBU) must ensure, so far as is reasonably practicable, the health and safety of its workers and all those impacted by the PCBU's activities. POAL is a PCBU under the Act. Previously, the POAL pleaded guilty to charges under the Act relating to Kalati's death and was fined $561,000. 

Mr Gibson was an officer under the Act because his position as chief executive allowed him to exercise significant influence over management of POAL. As an officer, Mr Gibson was required to exercise due diligence to ensure that POAL complied with its health and safety obligations. 

Following Kalati's death, Mr Gibson was charged under sections 48 and 49 of the Act. 

Section 48	Section 49
Mr Gibson was charged with failing to comply with his due diligence obligations, exposing Kalati to a risk of death or serious injury or serious illness. Section 48 attracts a maximum penalty of $300,000.	In the alternative, Mr Gibson was charged with failing to comply with his due diligence obligations. Section 49 is a lesser charge which attracts a maximum penalty of $100,000.

Whether Mr Gibson had breached his due diligence obligations was distilled down to three essential elements:

• What were the circumstances in which Mr Gibson was acting during the period reflected in the charges? Relevant circumstances included the nature of POAL's business and the nature of Mr Gibson's responsibilities as chief executive;
• What steps would a reasonably careful, diligent and skilful officer take to ensure that POAL complied with its primary duty of care; and
• Did Mr Gibson fail to take those steps?

Verdict

Judge Stever Bonnar KC found Mr Gibson guilty under section 48 of the Act, dismissing the alternative lesser charge under section 49 of the Act. Key observations from the decision include that:

• The duty of a PCBU and the duty of an officer are conceptually different - an officer does not have to do everything that the PCBU must do to ensure compliance with its own duty. Importantly, failure by the PCBU does not automatically demonstrate a failure by an officer to exercise due diligence.
• Mr Gibson was ultimately responsible for health and safety at the Port. The fact that other senior employees played a significant role in managing health and safety did not detract from Mr Gibson's due diligence obligations under the Act.
• An officer cannot assume a PCBU is compliant with its duties under the Act in absence of being told otherwise. Officers must take proactive steps to understand health and safety "on the ground".
• Mr Gibson was a hands-on chief executive who had first-hand knowledge of critical health and safety failures. Health and safety audit reports and previous convictions should have put him on notice of inadequate health and safety practices. These reports and convictions demonstrated a consistent failure on the part of POAL to properly understand work as done, as opposed to work as designed or imagined.
• POAL should have recognised shortfalls in the Port's management of critical risks for stevedores. For example, POAL - under Mr Gibson's influence - could have introduced barriers or other technology to prevent workers from walking under cranes, rather than relying on workers to follow rules prohibiting this. This conclusion was compounded by the fact that additional controls were readily available, as evidenced by a full exclusion zone being put in place shortly after Kalati's death.

Ultimately, the Court held that Mr Gibson had the capacity and ability to influence the conduct of POAL in relation to its failures before they occurred, and failed to exercise the care, diligence and skill that a reasonable officer would have exercised in the same circumstances. This failure exposed Kalati and other workers to a risk of death or serious injury. 

What the case means for officers

This landmark judgment clarifies the legal benchmarks against which executive directors' efforts in workplace health and safety risk management will be assessed.

It is clear that officers must be proactive in understanding and managing risks associated with the business. While an officer can rely to an extent on delegation to health and safety personnel to ensure the business has appropriate resources and processes to manage risks, the officer is ultimately responsible for the health and safety of the business and cannot blindly rely on such delegation. This remains the case even for businesses, such as POAL, with complex structures and many layers of hierarchy. 

Proactivity, diligence and accountability from those at the top are essential to ensuring workers can return home safely at the end of every day. Chief executives are ultimately responsible for both the strategic role of introducing health and safety management systems, as well as ensuring that they are actually operating as intended 'on the ground'. The process of ensuring health and safety is dynamic and circular, officers must:

• keep up to date with health and safety matters;
• understand the nature of the specific business and the hazards and risks associated with this;
• ensure appropriate resources and processes are in place to manage health and safety risks;
• ensure there are reporting and investigation processes in place to establish what health and safety is actually like 'on the ground';
• ensure the PCBU has an implements processes for complying with obligations under the Act; and
• verify that the PCBU is actually complying with its obligations under the Act

Officers may also take guidance from the recently released report by the Institute of Directors on health and safety due diligence. The comprehensive guidance, in combination with the District Court's decision regarding Tony Gibson, now provides much needed direction to officers in complying with their obligations under the Act.

It should be noted that the judgment may yet be appealed given its significance and the potential ramifications for Mr Gibson. In sentencing, Mr Gibson will not face imprisonment but could be fined up to $300,000.

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Special thanks to Solicitor, Matthew Maitland for his assistance in preparing this article.