The recent case of SafeWork NSW v Miller Logistics Pty Ltd; SafeWork NSW v Mitchell Doble [2024] NSWDC 58 (Doble) contrasts the challenges and complexities directors face in fulfilling their WHS due diligence obligations. While Doble serves as a good example of the due diligence expectations placed on directors, it also highlights the impracticality of relying solely on direct involvement, particularly in day to day WHS matters, as evidence of exercising due diligence for directors overseeing large and diverse business operations.
In Doble, the sole director of Miller Logistics Pty Ltd was accused of failing to exercise due diligence under section 27 of the Work Health and Safety Act 2011 (NSW) (WHS Act). The court found that Mr Doble had taken significant steps to ensure compliance with his due diligence obligations. He regularly attended management meetings where WHS was a standing agenda item, engaged in discussions about safety measures, and followed up on their implementation. Furthermore, Mr Doble ensured that the business had a WHS manager responsible for updating policies and procedures and addressing WHS issues promptly.
The court acknowledged that Mr Doble had engaged a competent WHS manager and took an active role in ensuring WHS compliance. Consequently, the court found that he had not breached section 27 of the WHS Act. While Doble provides PCBUs with some guidance on directors’ duties under section 27 of the WHS Act, there remains limited guidance from Australian courts on how directors of larger organisations, with extensive operations and numerous employees, can sufficiently discharge their duty of due diligence.
Even with the guidance now provided in Doble, ambiguity remains for larger organisations. This is partly because safety regulators around Australia historically have prosecuted directors who were directly involved in the events leading up to the incident. Many directors charged under section 27 were often ‘on the tools’. That is, they were actively engaged in the operational task leading to the incident. This direct involvement makes it easier for safety regulators to link the risk to the acts or omissions of the director.
Doble was a rare case in which the director who was prosecuted was not directly linked to the incident. Although Mr Doble was directly involved in WHS matters, the case highlights a key issue: a managing director cannot practically be aware of everything occurring at any given moment within the company. Managing an organisation, especially a large and diverse one, necessitates a high level of delegation. Therefore, to what extent does Doble provide guidance to large companies and organisations with complex, vertically integrated businesses? The answer is very little.
A review of case law over the past decade shows that in all cases involving the prosecution of a director, the director was almost always both ‘hands-on’ and the sole director. To date there has not been a WHS prosecution in Australia of a director of a large company failing their due diligence duties under any model WHS laws. The lack of guidance for large corporate or ‘professional’ directors has led to some ambiguity about the extent of directors’ duties in large organisations.
Given that Doble is the first recent case dealing with a ‘hands-off’ director, further questions arise about the obligations of directors of large companies.
The reality is that many of the measures safety regulators provide guidance on are either vague or simply impracticable for large companies and organisations with multiple directors or officers overseeing diverse business operations.
Unlike the company in Doble, many large companies or organisations operate across multiple industries and geographical locations, employing hundreds or thousands of workers. This vast and dispersed workforce makes it impracticable for directors to be intimately involved in every aspect of WHS detail. Directors of such companies are responsible for strategic oversight and governance rather than day-to-day operational details.
Mr Doble’s direct involvement in WHS matters was feasible due to the company’s size and structure. He attended management meetings, engaged in discussions about safety measures, and ensured the implementation of WHS policies. However, replicating this level of personal involvement in a large, multi-layered organisations is simply unrealistic. Directors of large companies are typically required to oversee multiple business units, each with its unique set of WHS challenges.
Fortunately, the WHS Act does not require directors to personally manage every aspect of WHS in the business, but instead, to exercise due diligence, which can in part be achieved through appropriate delegation to persons who are competent. Large corporations employ specialised WHS professionals whose expertise and focus are dedicated to maintaining compliance with the WHS Act, with adequate consultation and oversight by directors.
The Doble case underscores the necessity for directors to be actively engaged in WHS compliance but also highlights the practical challenges faced by directors of larger corporations and organisations.
Further guidance will assist directors to understand the measures they need to take to meet their duties under the WHS Act. This is even more important now with various amendments and proposed amendments in different jurisdictions to include provisions whereby the conduct and/or attitudes of key individuals will be determinative of corporate cultures of their organisations.
Organisations should review their governance structures and assurance processes so as to arm their officers with the requisite tools to meet due diligence responsibilities.
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The views expressed in this article are general in nature only and do not constitute legal advice.
Please do not hesitate to contact us if you require specific advice tailored to the needs of your organisation in relation to the implications of these changes for your organisation.