News & Thinking
Duties as a PCBU – does a contract matter?
The High Court has provided welcome guidance on the question of whether the absence of a contract between duty holders affects the question of whether a party can be liable under the Health and Safety at Work Act 2015 (HSWA).
In 2017, J & Ling Properties Limited (J & Ling) bought a residential property in Point Chevalier, Auckland with an eye to development. The director of J & Ling consulted her friend, the director of Dong SH Auckland Limited (Dong SH), and he suggested engaging Quick Earth Moving Limited (QEM) to demolish the existing house on the site. J& Ling duly dis so, and the director of Dong SH disconnected services to the property and erected a security fence before QEM took over and began the demolition.
One day after the demolition began, problems arose and a wall of the house began to lean. QEM endeavoured to support the wall, but it collapsed and hit a neighbour’s home causing damage, severing a gas line, and trapping the occupant. To make matters worse, when WorkSafe New Zealand (WorkSafe) attended the scene an inspector identified the presence of asbestos on the site too.
J & Ling then formally contracted Dong SH to help it resolve matters and manage the development of the property.
WorkSafe conducted an investigation and ultimately prosecuted both Dong SH and QEM.
QEM pleaded guilty, but Dong SH defended the charge against it on the basis that it was not conducting work at the relevant time, and that the steps taken by its director were simply acts of “friendship” for J & Ling’s director. On that basis, Dong SH argued that it was not a “person conducting a business of undertaking” (PCBU) with obligations under the HSWA.
The District Court decision
In the District Court, Judge Dawson dismissed the charges against Dong SH. Judge Dawson held WorkSafe had not proved beyond reasonable doubt that Dong SH was a PCBU with respect to the demolition work, because WorkSafe had not proved that J & Ling had engaged the services of Dong SH at the time the demolition took place (either by written contract or oral agreement).
Unsurprisingly, WorkSafe appealed, and the High Court had to consider the question of whether Dong SH qualified as a PCBU.
The High Court appeal
Justice Downs reviewed the purpose and requirements of the HSWA and emphasised that the intention of the Act is to focus on questions of substance rather than form and to cast the net widely, capturing all relevant parties as duty holders. Justice Downs stated:
“it matters not if the duty holder is an individual, a company or a body corporate; whether the worker is an employee, a contractor or subcontractor, an employee of a contractor or subcontractor, an employee of a labour hire company assigned to work in the business or undertaking, or so on and so forth. It matters not whether the person is conducting a business or undertaking (terms undefined, but inherently broad); or whether the person conducts the business alone or with others. Indeed, it matters not whether the business or undertaking is conducted for profit or gain.
These features leave no room for the conclusion a PCBU must arise a particular way, still less the conclusion a PCBU must be contractually tied to the activity in question. Were it otherwise, the Act would be frustrated. So too potentially, workplace health and safety.”
As a result, Justice Downs held that the relevant issue was not whether Dong SH had contractually agreed to manage or supervise the demolition but, instead, whether Dong SH was actually managing or supervising the demolition.
Justice Downs accordingly held that:
“The existence of a contractual relationship would, of course, have been an easy way in which the charges could have been proved. If a company enters an agreement to supervise or manage the demolition of a home, clearly, it is a PCBU in relation to that undertaking, for, it is agreed to just that. However, this is not the only way the charges could have been proved. Again, what mattered is whether Dong SH was managing or supervising the demolition, not why or how it came to be allegedly doing so.”
As a result, the appeal was allowed and a re-trial ordered.
This case provides is a useful reminder that the HSWA deliberately makes all relevant parties involved in work responsible for the safe completion of the work.
Rather than focusing on the nature and extent of contractual relationships, and the limitations those contracts may seek to impose, the important question is who is actually involved in the work.
We see many situations where parties use contracts as a way to attempt to shift responsibility for health and safety to others. This decision demonstrates that those attempts are not likely to succeed. Indeed, section 28 of the HSWA specifically confirms that a party cannot contract out of its responsibilities.
This does not mean that every PCBU involved in a project has the same duties, or that parties cannot allocate responsibilities and risk between themselves. A carefully drafted contract can usefully prescribe responsibilities, and the question then becomes what oversight and verification is reasonable to expect of all concerned.
If you are unsure about the nature or extent of the obligations your organisation has (or might have) for work, or about the way your contracts currently address health and safety matters, it will be timely to revisit them. Our team of health and safety experts will be happy to assist, if needed.