It has been over 3.5 years since the sweeping changes to the chain of responsibility laws came into force.
In a recent newsletter published by the National Heavy Vehicle Regulator (Regulator), the Regulator warned executives of parties in the chain of responsibility to be aware of their obligations under the Heavy Vehicle National Law (HVNL).
According to the publication, the Regulator is already undertaking six investigations of serious offences under the HVNL. In addition to this, another eight cases are being monitored and considered for further action. According to Ray Hassall, the Regulator’s Statutory Compliance Executive Director, the Regulator’s investigations are “targeted at serious, systemic safety breaches and respond to information gathered through multiple sources, including the Regulator’s Confidential Reporting Line.” According to Mr Hassall, the Regulator is focusing on “the extent to which an executive has satisfied their individual due diligence obligations, in addition to other roles within the supply chain.”
The investigations reportedly concern:
Directions to disregard work/rest requirements;
The absence of a system for managing risks;
Ineffective driver monitoring systems; and
Poor load restraint practices.
This article explains who qualifies as an executive, their duties under the HVNL and the penalties that apply to executives if they fail to comply with their due diligence obligations.
Who is an executive?
An executive means:
For a company, an “executive officer” of that company (which is defined in section 5 of the HVNL as a director or officer of a corporation and includes any person who is concerned with or takes part in the management of a corporation);
For a partnership, a partner in the partnership; and
For an unincorporated body, a management member of the body.
What is required of an executive?
The HVNL requires an executive of any entity that has a safety duty under the HVNL to exercise “due diligence” to ensure that the relevant entity complies with its safety duties.
“Due diligence” involves among other things:
Knowing what the entity is doing to ensure that its transport activities are safe;
Understanding the risks and hazards that the entity is exposed to and ensuring that it has, and uses, appropriate resources to eliminate or minimise those hazards and risks; and
Checking that the resources and processes adopted by the entity to address safety are actually being provided, used and implemented by the entity, and that they are effective in eliminating or minimising identified hazards and risks.
The above duties apply to the executive of any party in the chain of responsibility.
Who is a party in the chain of responsibility?
Under the HVNL, the following parties are considered a “party in the chain of responsibility”:
A driver’s employer or if the driver is self-employed, the driver’s prime contractor;
Operators;
Schedulers;
Consignors;
Consignees;
Packers;
Loading managers;
Loaders; and
Unloaders.
What are the safety duties of parties in the chain of responsibility?
Each of the parties in the chain of responsibility share the responsibility for the safety of transport activities relating to heavy vehicles and have an ongoing “duty” to ensure, as far as reasonably practicable, safe practices relating to their transport activities.
Transport activities include any activity associated with the use of a heavy vehicle on a road (such as packing, consigning, loading, unloading or receiving goods or operating premises at which heavy vehicles are regularly loaded/unloaded), and may include the activities of the business generally (such as business practices and decision making). Each party in the chain of responsibility is responsible for a transport activity to the extent that they have the capacity to control, eliminate or minimise the risk.
When can an executive be liable?
Whereas under the previous heavy vehicle law, an incident, accident or on-road offence had to have occurred before an executive could be liable, under the current HVNL, executives have an independent and positive duty to exercise due diligence to ensure, that the entity that they manage or lead is complying with its chain of responsibility safety duties.
What penalties apply for a breach of an executive’s duties under the HVNL?
The penalties applicable to executives are equal to the penalties applicable to individuals under the HVNL.
Category 1 offences involve a reckless breach which exposes someone to the risk of death or serious injury/illness. Penalties of up to $300,000 and 5 years prison for an individual, or fines of up to $3 million for a corporation apply to Category 1 offences.
Category 2 offences involve a breach which exposes someone to the risk of death or serious injury/illness but which was not reckless. The penalty for Category 2 offences is a fine of up to $150,000 for an individual or $1.5 million for a corporation.
Category 3 offences involve a breach of duty only and attract a maximum penalty of $50,000 for an individual or $500,000 for a corporation.
Takeaways
Given the clear message sent by the Regulator, organisations in the chain of responsibility and their executives must have proper procedures in place to ensure that they are complying with their obligations under the Heavy Vehicle National Law.
(1)Amendments to the chain of responsibility laws under the HVNL came into force 1 October 2018.
(2)On the Road, issue 59, to view please click here.
3Ibid.
4Section 26D(3) HVNL.
5Section 26D(1) HVNL.
6Section 26D(3), HVNL.
7Definition of “party in the chain of responsibility” Section 5, HVNL.
8Section 26A, HVNL.
9Section 26C, HVNL.
10Definition of “transport activities” Section 5, HVNL.
11Section 26A(2)(c), HVNL.
12Section 26D (1) and 26D(2), HVNL.
ASIC guidance
The issue of due diligence has been the subject of much scrutiny and consideration, particularly by ASIC.
ASIC undertook a review of the due diligence practices for 12 Initial Public Offerings (IPOs). The purpose of the review was to “observe the due diligence practices being adopted in the IPO market, and to ascertain the quality of advice being provided to issuers.”
Although the review and subsequent findings were related to IPOs, the findings and recommendations are easily relevant across the board, including under the CoR regime, where executive officers are required to exercise due diligence to ensure compliance.
3 best practice due diligence initiatives
In its report, ASIC notes that the current ‘best practice’ due diligence conducted by businesses includes:
a due diligence committee (e.g. for CoR, a safety/compliance committee) that oversees and documents the due diligence process;
senior management participating in the process by undertaking certain tasks to ensure the risk awareness and management materials are properly prepared; and the due diligence committee undertaking verification of the risk awareness and management materials to ensure that they are complete.
As a result of the investigations, ASIC uncovered a number of significant deficiencies in the due diligence process, particularly in relation to the role of senior management (executive officers), including: poor due diligence which led to defective risk awareness and management materials; a ‘form over substance’ approach to due diligence (e.g. tick-box approach, rather than substantive risk assessment); poor oversight of due diligence conducted by the due diligence committee and/or external advisers; and inconsistent quality of contribution in the due diligence process.
With the exception of (c), the deficiencies appear to be particularly relevant to executive officers within the heavy vehicle and road transport supply chain sectors, especially given that executive officers cannot completely delegate their due diligence obligation.
The recommendations from ASIC were that the due diligence process should be “robust” and conducted in such a way that it promotes oversight of the due diligence process, ensures adequate record-keeping of the key or significant issues and verification of all material statements.
While the terms of reference refer to "executive officers" it also relates to all team members that have a control in a business or can influence the activity of parties in a supply chain.