Comcare v Subsee Explorer Pty Ltd

The OHS Act 37 Section 18(1) provides as follows: Duties of manufacturers in relation to plant and substances 18(1) A manufacturer of any plant that the manufacturer ought reasonably to expect will be used by employees at work must take all reasonably practicable steps: (a) to ensure that the plant is so designed and constructed as to be, when properly used, safe for employees and without risk to their health; and (b) to carry out, or cause to be carried out, the research, testing and examination necessary in order to discover, and to eliminate or minimise, any risk to the health or safety of employees, that may arise from the use of the plant; and (c) to make available to an employer, in connection with the use of the plant by employees at work, adequate information concerning: (i) the use for which it is designed and has been tested; and (ii) details of its design and construction; and (iii) any conditions necessary to ensure that, when put to the use for which it was designed and tested, it will be safe for employees and without risk to their health. Note: A manufacturer who breaches subsection (1) may be subject to civil action or a criminal prosecution (see Schedule 2). 38 Section 19(1) is in similar terms and provides: Duties of suppliers in relation to plant and substances 19(1) A supplier of any plant or substance that the supplier ought reasonably to expect will be used by employees at work must take all reasonably practicable steps: (a) to ensure that, at the time of supply, the plant or substance is in such condition as to be, when properly used, safe for employees and without risk to their health; and (b) to carry out, or cause to be carried out, the research, testing and examination necessary in order to discover, and to eliminate or minimise, any risk, to the health or safety of employees, that may arise from the condition of the plant or substance; and (c) to make available to an employer, in connection with the use of the plant or substance by employees at work, adequate information concerning: (i) the condition of the plant or substance at the time of supply; and (ii) any risk to the health and safety of employees to which the condition of the plant or substance may give rise unless it is properly used; and (iii) the steps that need to be taken in order to eliminate such risk; and (iv) in the case of a substance--the first aid and medical procedures that should be followed in the event of the condition of the substance causing injury to an employee. Note: A supplier who breaches subsection (1) may be subject to civil action or a criminal prosecution (see Schedule 2). 39 Schedule 2 to the OHS Act relevantly provides: 2 Declarations of contravention (1) If a court considers that a person has breached one of the following provisions, or was involved in such a breach, it must make a declaration that the person has contravened this subclause: … (c) subsection 18(1) or 18(2) (duties of manufacturers in relation to plant and substances); (d) subsection 19(1) (duties of suppliers in relation to plant and substances); … 4 Pecuniary penalty orders (1) If a court has declared, under subclause 2(1), a contravention of that subclause by a person because the person breached, or was involved in the breach of, a provision listed in that subclause, the court may order the person to pay the Commonwealth a pecuniary penalty. (2) The pecuniary penalty must not exceed the amount stated in the table to be the maximum penalty in relation to the provision concerned.

Admitted contraventions of the OHS Act 40 Subsee has admitted to extensive and substantial contraventions of the OHS Act. They are as follows: 1. At all material times Subsee knew that the Malu Sara would be used by employees within the meaning of s 9(1) of the OHS Act, at work, and in the sea conditions that were likely to occur in the waters of the Torres Strait (including up to 15 miles offshore). 2. Pursuant to s 18(1) of the OHS Act, Subsee had an obligation as manufacturer of the Malu Sara to take all reasonably practicable steps to: (a) ensure that the Malu Sara was designed and constructed so as to be, when properly used, safe for use by employees of the Commonwealth and without risk to their health; (b) carry out, or caused to be carried out research, testing and examination necessary in order to discover and to eliminate or minimise, any risk to the health or safety of employees of the Commonwealth that may arise from the use of the Malu Sara; and (c) to make available to the Commonwealth, in connection with the use of the Malu Sara by its employees, adequate information concerning: (i) the use for which it is designed and had been tested; (ii) details of its design and construction; and (iii) any conditions necessary to ensure that, when put to the use for which it was designed and tested, it would be safe for employees of the Commonwealth and without risk to their health. 3. Pursuant to s 19(1) of the OHS Act, Subsee had an obligation as supplier of the Malu Sara to take all reasonably practicable steps to: (a) ensure that, at the time of supply, the Malu Sara was in such a condition as to be, when properly used, safe for all employees of the Commonwealth and without risk to their health; (b) to carry out, or cause to be carried out, the research, testing and examination necessary in order to discover, and to eliminate or minimise, any risk to the health or safety of employees of the Commonwealth, that may arise from the condition of the Malu Sara; and (c) to make available to the Commonwealth, in connection with the use of the Malu Sara by Commonwealth employees at work adequate information concerning: (i) the condition of the vessel on supply to the Commonwealth; (ii) any risk to the health and safety of Commonwealth employees to which the condition of the vessel may give rise unless it was used properly; (iii) the steps that need to be taken in order to eliminate such risk. 4. Subsee accepts that it contravened s 18(1) and s 19(1) of the OHS Act in the following respects: (a) the Malu Sara was not constructed in accordance with, and did not meet the standards prescribed by, the contract between Subsee and DIMA, and in particular, was not compliant with material parts of AS166520, AS1799 and USL Code 2C as required; (b) the scuppers draining the weather deck on the Malu Sara were substantially smaller than the minimum required of AS1799; (c) a single centre line freeing port in the outboard well was of insufficient size and did not comply with AS1799; (d) the above deficiencies referred to in the preceding two sub-paragraphs, in combination with the effect of a flap fitted to the outboard motor side of the scuppers and freeing port, restricted drainage of water overboard from the weather deck and limited the effectiveness of the items; (e) the Malu Sara did not meet level flotation or swamp stability requirements, in that: (i) it was not constructed with any buoyancy situated at upper levels of the vessel to ensure that the vessel remained floating upright if swamped, contrary to AS1799; and (ii) it was not constructed with sufficient reserve buoyancy to prevent it from sinking altogether when swamped, contrary to AS1799. (f) the positive flotation statement for the vessels supplied by Subsee (including the Malu Sara) was irregular on its face, in that it incorrectly cited void air compartments as being "buoyant material", did not correctly assess or describe the standard and calculations used to assess the allowable flotation under AS1799 or USL Code 2C, and falsely declared a condition of positive buoyancy that the Malu Sara (and each of its sister vessels) did not have; (g) when the Malu Sara was fully loaded, it exhibited negative freeboard, which permitted ingress of water through scuppers onto the weather deck, affecting the weight and stability of the vessel; (h) on the basis of tests conducted on two of the sister-ships, the weather deck on the Malu Sara was not water tight, which allowed the ingress of water into the bilge, also affecting the weight and stability of the vessel, and compromising the only void relied upon for buoyancy in the vessel; (i) Subsee did not conduct swamp tests or sea trials on the Malu Sara for the purpose of verifying the accuracy of the statements made on behalf of Subsee in the positive flotation statement; (j) Subsee did not have the Malu Sara assessed or inspected by any qualified person to determine whether or not the vessel met all requirements of the contract or AS1799 or the standards required by USL Code 2C; (k) the fuel tank gauge was faulty as it read incorrectly and was not calibrated; (l) it was probable that the welding and sealing of void spaces in the Malu Sara were faulty, such that the water tight integrity of the vessel was not able to be maintained; (m) the weather deck draining provision was such that the Malu Sara's decks would not be able to be sufficiently cleared of water in conditions of weather and sea, which could reasonably be expected to be encountered; (n) no bilge alarm was fitted; (o) the fuel lines on the Malu Sara were not sufficiently protected; (p) no operational manuals or other information about the use, operation (including safe operation) or maintenance of the vessel were provided to the Commonwealth by Subsee (although operations manuals for the outboard motor were provided by Subsee); and (q) no plate or sign was affixed to the Malu Sara to indicate to the operator the safe carrying capacity of the vessel.

Consideration of relevant principles 41 As a general proposition, the sentencing principles developed by State Courts and the State Workplace Health and Safety legislation provide "useful, analogical, general guidance as to the approach to be taken in consideration of penalties under the Act": Comcare v Commonwealth of Australia [2007] 163 FCR 207 at [124]. In that decision, which comprehensively considered principles relevant to imposition of penalties under the OHS Act, Madgwick J stated those principles to be as follows: (i) the penalty must be such as to compel attention to occupational health and safety generally, to ensure that workers whilst at work will not be exposed to risks to their health and safety; (ii) it is a significant aggravating factor that the risk of injury was foreseeable even if the precise cause or circumstances of exposure to the risk were not foreseeable; (iii) the offence may be further aggravated if the risk of injury is not only foreseeable but actually foreseen and an adequate response to that risk is not taken by the employer; (iv) the gravity of the consequences of an accident does not of itself dictate the seriousness of the offence or the amount of penalty. However the occurrence of death or serious injury may manifest the degree of the seriousness of the relevant detriment to safety; (v) a systemic failure by an employer to appropriately address a known or foreseeable risk is likely to be viewed more seriously than a risk to which an employee was exposed because of a combination of inadvertence on the part of an employee and a momentary lapse of supervision; (vi) general deterrence and specific deterrence are particularly relevant factors in light of the objects and terms of the Act; (vii) employers are required to take all practicable precautions to ensure safety in the workplace. This implies constant vigilance. Employers must adopt an approach to safety which is proactive and not merely reactive. In view of the scope of those obligations, in most cases it will be necessary to have regard to the need to encourage a sufficient level of diligence by the employer in the future. This is particularly so where the employer conducts a large enterprise which involves inherent risks to safety; (viii) regard should be had to the levels of maximum penalty set by the legislature as indicative of the seriousness of the breach under consideration; (xi) the neglect of simple, well-known precautions to deal with an evident and great risk of injury, take a matter towards the worst case category; (x) the objective seriousness of the offence, without more may call for the imposition of a very substantial penalty to vindicate the social and industrial policies of the legislation and its regime of penalties. (at [120]) 42 As I have already noted, however, the Court has not, to date, imposed penalties on a supplier or manufacturer under the Act, and the question arises whether those same principles applied by Madgwick J (and subsequently adopted on many occasions by this Court) are relevant in this case. 43 In my view these principles are relevant, subject to modification appropriate to the circumstances of a manufacturer or supplier of equipment to be used by employees, rather than the circumstances of an employer. I find support for this view in the decision of the New South Wales Industrial Relations Commission in Inspector Jelley v Lanza Management Pty Ltd [2008] NSWIRComm 125, where suppliers were charged with supplying for use - by persons at work - plant which they failed to ensure was safe and without risks to health when properly used contrary to the relevant State occupational health and safety legislation. I note in particular the analysis of President Boland in considering the appropriate penalty at [36], [38], [41], [43], [44] and [45]. 44 Notwithstanding the assistance provided by these principles however, the quantum of penalty to be imposed in an individual case must be determined by reference to the facts of each case. The overriding principle in assessing penalty is that the amount of the penalty should reflect the Court's view of the seriousness of the offending conduct in al the relevant circumstances: Comcare v Commonwealth of Australia [2007] 163 FCR 207 at [116]. 45 In this case the following facts are clear. 46 First, Subsee designed, manufactured and supplied to the Commonwealth vessels which not only failed to meet the requirements of the contract between the parties, but were dangerously unseaworthy and unsuited to the conditions in which they were required to operate. 47 Second, Subsee knew the conditions in which the vessels were required to operate, namely on the open sea. I reject the submission of Subsee that it had no knowledge of the actual use of the vessels by the Commonwealth once supplied, and that therefore it cannot be said that it actually foresaw the risk of injury inherent in the fatal voyage of the Malu Sara. It is indisputable that passengers and crew on the Malu Sara in the open ocean would depend entirely on that vessel to sustain their lives. It was entirely foreseeable that, if the manufacture and supply of the vessels including the Malu Sara was not carried out in a sound and competent manner, the MMOs and any other persons on board could be placed in a situation which was, at the very least, life-endangering. While Subsee may not have foreseen the actual events which occurred, including that Mr Baira became disorientated and lost in the conditions, that is irrelevant in this case. In my view had the Malu Sara been constructed in a competent and seaworthy manner, or in accordance with the relevant standards and the contract, the vessel would have been sufficiently seaworthy and sound to support and protect the passengers and crew while waiting for rescue. It clearly was none of these things. 48 Third, the fact that in this case the vessel was lost with all aboard manifests the degree of seriousness of the relevant detriment to safety. The inability of a vessel to sit at anchor while loaded without taking water and eventually sinking is almost inconceivably dangerous in the case of a vessel which is expected to go out to the open sea with passengers. It is almost inevitable that the passengers and crew will be thrown into the water without proper support and without the possibility of immediate rescue. Even worse, the Malu Sara was represented as being constructed such that it would remain afloat even if it were swamped, and provide a measure of safety for its occupants while awaiting rescue. It is abundantly clear that this was not the case. 49 Fourth, while as a general proposition considerations of whether conduct is systemic may appear more relevant to the conduct of an employer than a manufacturer or supplier, in this case there is ample evidence to support a finding, for the purposes of penalty, that the actions of Subsee constituted a systemic failure to appropriately address a known or foreseeable risk. The reasons for the complete and utter failure of Subsee to design and construct the vessels in the manner contracted are not explained on the material before me, and can only be the subject of inferences damning to Subsee. That material demonstrates a course of conduct of Subsee in respect of the construction of the vessels including the Malu Sara which was, at best, derelict and grossly neglectful of the standards required by the contract and the requirements of the construction of a seaworthy vessel. That Subsee actively attempted to mislead DIMA as to the flotation characteristics of the vessels by issuing flotation certificates which were false in almost every respect indicates systemic failures of the most serious kind. 50 Fifth, in my view issues of general deterrence and specific deterrence are both relevant factors. It is important to remind those concerned with the manufacture and supply of vessels of this kind that fundamental failures to implement their responsibilities will result in the imposition of severe penalties. 51 Sixth, Subsee did not take all practical measures to ensure the safety of the vessels. Indeed, its approach to safety in this matter appeared non-existent. Simple, well-known precautions, including testing and research to ensure that the vessels carrying the requisite load would remain buoyant, were not apparently undertaken at any point in the manufacturing and supply process. Again, what appears to be an almost incomprehensible lack of interest by Subsee in ensuring that its vessels were, in fact, safe and seaworthy, is not explained on the material before me. The tragedy of this case is exacerbated (if possible) by the fact that it was readily avoidable by Subsee producing vessels in accordance with the terms contracted. 52 In my view, these facts take this case into the very worst case category under the OHS Act.

Factors in mitigation 53 Subsee contends that two mitigating factors present in this matter which may cause the Court to impose a penalty less than the maximum are: the extent of Subsee's cooperation; and the fact that Subsee's culpability is somewhat less than that of the Commonwealth in that the Commonwealth's conduct was a more proximate cause of the fatal events. 54 In relation to the issue of Subsee's cooperation - it is clear that Subsee advised the applicant within three months of the commencement of proceedings that it admitted liability and intended to proceed to a penalty hearing to be conducted by way of a statement of agreed facts. While this prompt course of action may have obviated the need for a trial, for reasons to which I advert below I reject the submission that such early acceptance of liability and cooperation warrants a discount of 25% on the penalty which is otherwise appropriate. 55 Further, I reject the submission that Subsee's culpability is less than that of the Commonwealth because, in summary: at the time of supply of the vessels the Commonwealth failed to have them independently surveyed so as to ensure that they met the requirements of the contract. the risk of injury created by the respondent's contraventions could have been averted if this had taken place. Subsee had no control over the course of events that transpired once the Malu Sara was supplied to the Commonwealth. the risk of injury resulting from the fatal voyage was actually foreseen by the Commonwealth, and the most proximate cause of the fatal events was the Commonwealth's failure to take appropriate action in relation to the Malu Sara after evidence of the vessel's compromised buoyancy was brought to its attention just two days before its fatal journey. 56 In this case the culpability of Subsee is demonstrated by the facts to which it admits. Five people died in circumstances which were entirely avoidable. The Malu Sara was constructed by Subsee in such a manner that it was unseaworthy and, contrary to representations of Subsee, incapable of floating in cases where it ought to have remained afloat. In my view, this case falls into the worst category of case under the OHS Act. While Subsee admitted contraventions of the OHS Act relatively promptly, to do otherwise would have been pointless in what appears to have been overwhelming and conclusive evidence of Subsee's culpability. I consider that the maximum penalty ought be imposed with no discount. 57 Further, I am not persuaded that Subsee's culpability is less than that of the Commonwealth. The facts of this case demonstrate that the principal of Subsee, Mr Radke, was experienced in the boat-building industry, and was himself an accreditation holder under the Transport Operations (Marine Safety) Act 1994 (Qld). There is also undisputed evidence that Mr Chaston, the DIMA officer with responsibility for the project of procuring construction of the vessels including the Malu Sara, had no relevant or appropriate expertise to competently assess whether any of the vessels were constructed in compliance with the contract, USL Code 2C or AS 1799. As I have also already noted, a certificate of positive flotation issued by a Mr Radke in respect of the vessels constituted a complete falsehood. The disturbing picture painted by these events, including the willingness of Mr Chaston to accept the vessels notwithstanding the absence of five of the six required certificates, is one of a deliberate strategy of Mr Radke to take advantage of Mr Chaston's ignorance and gullibility, and procure Mr Chaston's acceptance of vessels which were both unseaworthy and non-compliant with the specifications. 58 In relation to the Commonwealth's knowledge that the Malu Sara was taking water prior to the fateful voyage, and Subsee's claim that it did not know of the use the Commonwealth intended to put the vessels - in my view these factors in no way obviate the obligation of Subsee as the manufacturer to undertake testing and research to ensure that the vessels, which were the bulwark of the passengers and crew against the dangerous waters of Torres Strait, were safe and seaworthy. During oral submissions, Mr Herbert, Counsel for Comcare, submitted: The manufacturer has an obligation imposed by the Act to know that thing, to do the testing and the research under section 18 (1)(b) to discover that fact. It is not a circumstance of mitigation to say, "We didn't discharge our obligation under the Act. We didn't know that the vessel we provided to the Commonwealth to be used as a Commonwealth work base was entirely dangerous and utterly unsuited for the use to which we have provided, and when we get apprehended for doing that thing, we should receive a discount on the penalty because we didn't know". In my submission, that is, as I have said earlier, that is a circumstance of aggravation and not mitigation. (TS p 21 ll 34-42) 59 I agree.

Conclusion 60 Clause 7 of Pt 1 Sch 2 of the Act provides as follows: 7 Conduct constituting a breach of 2 or more provisions listed in subclause 2(1) Proceedings may be instituted under this Act against a person in relation to one or more contraventions of subclause 2(1). However, the person is not liable to more than one pecuniary penalty under this clause in respect of the same conduct. 61 In this case the same conduct is relied on in relation to both contraventions alleged, and only one pecuniary penalty may be imposed on the respondent despite admission of liability in relation to both matters. 62 In my view the maximum penalty of $242,000 should be imposed on the respondent on account of the contravention of s 18(1) and s 19(1) of the OHS Act. 63 Finally, an impact statement has been filed in these proceedings by Ms Racquel Banister, the sister of Mr Wilfred Baira. The Court acknowledges the extreme pain and anguish caused to Ms Banister and her family by the loss of Mr Baira. I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.