The District Court of New Zealand has found the former CEO of Ports of Auckland Limited guilty of breaching his due diligence duty under the Health and Safety at Work Act 2015.
This decision marks a significant milestone in director due diligence prosecutions in New Zealand. It is the first successful prosecution of an officer of a large, sophisticated company under director due diligence provisions.
The decision serves as a salient reminder that the due diligence duty is proactive. Officers cannot simply rely upon their health and safety managers to comply with their duty nor can they assume, without proper inquiry, that their organisation’s systems are adequately addressing health and safety risks.
Background
Ports of Auckland Limited (POAL) administers Auckland’s commercial freight and cruise ship harbour facilities. The company is owned by Auckland Council.
On 30 August 2020, Mr Pala’amo Kalati (Mr Kalati) was working a night shift as a stevedore lasher at the Port of Auckland in a passageway between rows of containers located on a container ship. A container crane was also being used to lift containers off the ship, however, the crane operator was unaware that Mr Kalati and his lashing partner were nearby.
As the crane lifted two containers off the ship, a third container, which had mistakenly been left attached to the other containers by a twist-lock, was also lifted. The twist-lock failed, causing the third container to fall on Mr Kalati, who was fatally crushed (Incident).
Maritime NZ (MNZ) brought charges against POAL for breaching its section 36 duty under the Health and Safety at Work Act 2015 (HSWA). These charges were on the basis that POAL had engaged in reckless conduct in respect of its section 36 duty or, in the alternative, that POAL had failed to comply with its section 36 duty and the failure to comply exposed workers to a risk of death or serious injury pursuant to section 48.
POAL pleaded guilty to two offences under sections 36 and 48. POAL received a penalty of NZ$561,000 plus costs. The court accepted POAL’s voluntary reparation payment to Mr Kalati’s family. POAL was also ordered to pay NZ$20,000 in reparation to another worker who was impacted by the Incident.
MNZ also brought charges against the CEO of POAL at the time of the Incident, Mr Tony Gibson (Mr Gibson). Both of the charges alleged that Mr Gibson failed to comply with his duty under section 44 of the HSWA.1 This was a duty to exercise due diligence to ensure that POAL complied with its duties or obligations under the HSWA (Section 44 Duty).
In relation to both charges, MNZ alleged that Mr Gibson failed to exercise the care, diligence and skill that a reasonable officer would exercise in the same circumstances.2 In particular, MNZ alleged that Mr Gibson:3
- Failed to have clearly documented and effectively implemented appropriate exclusion zones around operating cranes.
- Failed to have clearly documented and effectively implemented appropriate processes for ensuring coordination between lashers and crane operators (which was successfully defended).
- Failed to take reasonable steps to verify the provision and use of appropriate resources and processes to eliminate or minimise risks to health and safety from the work carried out as part of the conduct of POAL.
Work as done vs work imagined
The Court heard evidence in relation to the contrast between “work as done” versus “work as imagined”. This is a reference to the difference between the reality of work carried out by workers on the ground, versus the methods of work designed, understood or expected by management and other staff who do not actually undertake the work. In particular, evidence was heard that during Mr Gibson’s tenure as CEO, POAL was convicted of offences under the HSWA or previous legislation on four occasions. These included:
- A January 2014 serious injury where a stevedore fell overboard from a vessel because a safety rail which should have been in place on the vessel was not in place.
- An October 2014 serious injury involving a stevedore falling through a hatch lid on a vessel.
- Pilot boat speed offences between 20 April 2017 and 31 January 2018 due to a failure to implement processes to ensure speed restrictions were observed.
- An August 2018 incident where a nightshift straddle driver was killed when his straddle carrier tipped over.
On each occasion POAL pleaded guilty, it demonstrated deficiencies in the implementation of POAL’s safety systems and processes. Under cross-examination, Mr Gibson accepted that each previous case was an example of the disconnect between work as done and what should have been done.
The Court also heard evidence that in 2018, an audit report had been prepared by KPMG which assessed the progress that POAL had made following previous audits in 2015 and 2016. The audit made a number of key recommendations, most notably that “To ensure health and safety is successfully embedded across all Business Units will require the Executive Leadership Team and senior management to be consistently engaged and empowered”.4 An agreed action item arising from this was the development of a responsibility and accountability matrix. This was never developed. In this respect, the Court found that POAL failed to action the recommendations of the KPMG report in an appropriate and timely manner,5 and Mr Gibson was aware of this lack of response.
In light of the above, the Court found that Mr Gibson was aware of risks in relation to the business and was put on notice with the earlier convictions which reflected that there were failures in POAL’s safety systems.
Consideration of the Section 44 Duty
Judge Bonnar KC held that determining whether Mr Gibson breached his Section 44 Duty did not involve determining what the accepted or common practices of equivalent officers were at the time.6
His honour then proposed the following principles in regard to the Section 44 Duty:7
- an assessment of whether an officer has exercised due diligence must be fact and circumstance-dependent;
- the duty applies to officers across all sizes of PCBUs;
- the duty to exercise due diligence is not limited to governance or directorial oversight;
- the officers duty under section 44 is distinct from the duties imposed on the PCBU;
- an officer in a large PCBU doesn’t need to be involved in the day-to-day operations in a hands-on way but cannot simply rely upon others. The officer must personally acquire and maintain sufficient knowledge to satisfy himself or herself that the PCBU is complying with its duties under the HSWA;
- the officer must ensure that any person within the PCBU with an assigned health & safety role must have the necessary skills or experience;
- the officer must acquire and maintain sufficient knowledge of the work carried out “on the shop floor”;
- the officer must ensure that entrenched and adequate systemic processes are put in place to ensure the PCBU complies with its duties;
- an officer must ensure that there are effective reporting lines and systems in place to ensure that necessary information flows to the officer;
- an officer can’t assume that the PCBU is compliant with its duties under the HSWA in the absence of being told otherwise. They must be proactive;
- an officer should engage in effective monitoring and review of the PCBUs systems; and
- the court must objectively determine the reasonableness of the officer’s actions or omissions in the relevant circumstances. It isn’t a case of simply comparing the officer’s conduct with that of other officers in similar positions.
His honour also considered the recent Australian case of SafeWork NSW v Doble [2024] NSWDC 58 (Doble). Doble was a significant decision relating to directors’ due diligence. The decision clarified that an officer’s due diligence duty is separate and distinct from that of their company. His honour noted that it is difficult to reconcile the Court’s conclusion in Doble with the stated facts, the history and purpose of the legislation and the earlier Australian authorities in relation to the exercise of due diligence by directors. In particular, his honour gave weight to submissions by MNZ that the Court’s conclusion in Doble arose, at least in part, from the failure of the prosecutor, in that case, to adequately particularise its allegations and provide evidence of the director’s failure to exercise due diligence.
Despite this, his honour held “that the Court in Doble correctly recognised that the duty on an officer to exercise due diligence does not mean that the officer must do everything that the PCBU [Person Conducting a Business or Undertaking] must do to ensure compliance with its own duty and that a failure by the PCBU does not, of itself, demonstrate a failure by its officer to exercise due diligence.”8
Decision
His honour found Mr Gibson guilty of breaching his Section 44 Duty. His honour concluded that Mr Gibson failed to exercise the care, diligence and skill a reasonable officer would have exercised in the same circumstances.9 This failure was due to the following criteria:10
- Mr Gibson had the capacity and the ability to influence the conduct of POAL in relation to its failures; and
- Mr Gibson was required to take active steps to obtain adequate information about the nature of the work being undertaken and the risks associated with the work.
His honour also found Mr Gibson guilty of exposing stevedores to a risk of death or serious injury pursuant to section 48 of the HSWA.11 His honour concluded that “a reasonable CEO would’ve recognised shortfalls in POAL’s management of exclusion zones and would have ensured POAL utilised appropriate resources and processes to address those shortfalls.”12 He also held that Mr Gibson’s breach of his Section 44 Duty “made it materially more likely that POAL would breach its duty of care to ensure that stevedores were not exposed to this risk of death or serious harm.”13
Mr Gibson is awaiting final sentencing. The maximum potential penalty that he faces is NZ$300,000.
Key takeaways
The Gibson decision is a landmark decision in that it is the first occasion that the NZ courts have considered the meaning of due diligence in the context of a large, sophisticated organisation.
Due diligence in that context requires curiosity by officers as to how work is done rather than mere reliance on others to do as expected of them or to assume that the system without interrogation is working effectively.
Our Workplace and Safety team can assist your company in understanding and upholding its duties under health and safety laws. If you require assistance or you’re interested in learning more, please contact Michael Tooma.
1For completeness, we note that s 44 of the HSWA mirrors the provisions of the due diligence duty set out in s 27 of the Australian Model Work Health and Safety Act.
2Maritime New Zealand v Gibson [2024] NZDC 27975 [14].
3Ibid.
4[172]
5[176]
6Ibid [78].
7Ibid [80].
8Ibid [76].
9Ibid [431].
10Ibid [428].
11Ibid [501].
12Ibid [500].
13Ibid.
