Introduction

On Tuesday 10 June 2014 in the Australian Capital Territory Industrial Magistrates Court, an early mention in the Kenoss Contractors case was heard.  This case includes a prosecution of both an organisation for allegedly failing to meet the primary health and safety duty and an officer for allegedly failing to exercise due diligence under the Work Health and Safety Act 2011 (ACT) which commenced on 1 January 2012.  This case is ostensibly the first prosecution of an officer under the new harmonised WHS laws.

Norton Rose Fulbright provides its analysis of these breaking developments below.

Background

In the Australian Capital Territory, Kenoss Contractors Pty Ltd (Kenoss Contractors) and one of its officers have been charged with breaches of their respective duties under the Work Health and Safety Act 2011(ACT) (WHS Act), following upon the 2012 death of a 48 year old worker/truck driver, who died as a result of electric shock injuries sustained at work. This fatality was one of the 4 fatalities (3 of which had been in the ACT construction industry) in a 7-month period which led to the Getting Home Safely Report being commissioned by the ACT Government. The facts all arose prior to the appointment of liquidators and receivers to various companies and assets in the Kenoss group.

The charges under the WHS Act

Charges against Kenoss Contractors

Kenoss Contractors has been charged as the person conducting a business or undertaking (PCBU), with allegedly breaching the primary duty under section 19 of the WHS Act to ensure the health and safety of its workers while at work in the business or undertaking by failing to provide and maintain a work environment without risks to health and safety.

Kenoss Contractors has also been charged with a category 2 offence under section 32 of the WHS Act as a consequence of the alleged failure to comply with a health and safety duty, where that failure exposed Mr Booth to a risk of death, serious injury or illness. This offence carries a maximum penalty of $1.5 million for a PCBU that is a corporation and $300,000 for a PCBU as an individual.

Charges against the relevant officer

The individual officer has been charged with allegedly failing to exercise due diligence under section 27 of the WHS Act to ensure Kenoss Contractors complied with its work health and safety duties under the WHS Act.

The officer has also been charged with the same category 2 offence under section 32 of the WHS Act. Category 2 offences carry a potential maximum penalty of $300,000 for officers.

The prosecution of the officer

An interesting aspect is that the individual officer was not a director of Kenoss Contractors, but a director of a related company. A central issue to be determined at trial will be whether as such, he is an officer (of the PCBU) as defined in section 9 of the Corporations Act 2001 (Cth) (Corporations Act).

The officer pleaded not guilty to both charges under sections 27 and 32 of the WHS Act and the hearing of his case has been scheduled for 17-19 December 2014.

The prosecution of the PCBU

Kenoss Contractors is currently in liquidation and was unrepresented at the mention. Another legal issue that arises is whether or not Kenoss Contractors can be criminally prosecuted whilst insolvent.

Section 471B of the Corporations Act provides that a person cannot begin or proceed with a proceeding against a company that is being wound up in insolvency, except with the leave of the Federal Court of Australia or the ACT Supreme Court. The Office of ACT Director of Public prosecutions (DPP) however, submitted that section 471B does not apply to criminal proceedings.

Section 500(2) of the Corporations Act provides that after the passing of a resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except with leave of the Federal Court of Australia or the ACT Supreme Court. The DPP also submitted that that does not apply in criminal proceedings this being supported by the plain and ordinary meaning of the language of the section and the purpose of the legislation.

The DPP submitted that sections 471B and 500(2) did not apply to Kenoss Contractors in the event respectively, of either a court-ordered winding up or a voluntary winding-up and that therefore it could proceed with the prosecution of the company.

Chief Industrial Magistrate Lorraine Walker has listed the matter for a further hearing on 17 June 2014, but limited to determining whether it is appropriate for the prosecution against Kenoss Contractors to proceed in light of the Corporations Act issues outlined above, when it is expected the Liquidators of the Company will appear.