Inspector Graeme Keith Aldred v Salamander Shores Hotel Pty Ltd and Others

Industrial Relations Commission (NSW)|2007-11-16|Before: Backman J

CITATION: Inspector Graeme Keith Aldred v Salamander Shores Hotel Pty Ltd and Others [2008] NSWIRComm 102

PROSECUTOR: Inspector Graeme Keith Aldred

PARTIES: DEFENDANTS: Salamander Shores Hotel Pty Ltd Christopher Paul Herbert Niall Chang Brian Francis Wadley

CATCHWORDS: Occupational Health and Safety - sentences under s 8(2) pursuant to s 26(1) of the Occupational Health and Safety Act 2000 following defended hearings and sentence under s 8(2) of the Occupational Health and Safety Act 2000 following a plea of guilty by the corporate defendant - objective and subjective factors considered - submission that plea of guilty entered by corporate defendant at the earliest opportunity rejected - respective culpabilities considered - applications by individual defendants for orders under s 10(1) of the Crimes (Sentencing Procedure) Act 1999 rejected - submission that remaining directors will bear the burden of any penalty imposed on the corporate defendant which may justify a lesser penalty being imposed on the corporate defendant rejected - corporate defendant's capacity to pay a fine considered - orders.

LEGISLATION CITED: Crimes (Sentencing Procedure) Act 1999 Occupational Health and Safety Act 2000

Haynes v CI& D Manufacturing Pty Limited (No 2) (1995) 60 IR 455 Inspector Aldred v Herbert and others [2007] NSWIRComm 170 Inspector Clothier v Malcolm McIntyre trading as Corambie Pastoral Company and another [2007] NSWIRComm 40 Inspector Green v Camilleri Properties Pty Ltd (2006) 152 IR 156 CASES CITED: Inspector Jones v JT & LC Tippett Pty Ltd and Anor (No 2) [2007] NSWIRComm 306 Inspector Steven Cooper v Rail Infrastructure Corporation [2008] NSWIRComm 92 T & M Industries Pty Ltd v Inspector James [2007] NSWIRComm 85 WorkCover Authority (NSW) (Inspector Green) v Big River Timbers Pty Ltd (2006) 156 IR 341 WorkCover Authority of New South Wales (Inspector Downie) v Menzies Property Services Pty Ltd (2004) 136 IR 449 WorkCover Authority of New South Wales (Inspector Page) v Walco Hoist Rentals Pty Limited and Another (No 2) (2000) 99 IR 163

PROSECUTOR: Mr R Reitano of counsel WorkCover Authority of New South Wales (Ms L Barnes) LEGAL REPRESENTATIVES: DEFENDANTS: Ms W G Thompson of counsel Truman Hoyle Lawyers (Ms F Inverarity)

INSPECTOR GRAEME KEITH ALDRED v SALAMANDER SHORES HOTEL PTY LTD

Prosecution under section 8(2) of the Occupational Health and Safety Act 2000

INSPECTOR GRAEME KEITH ALDRED v CHRISTOPHER PAUL HERBERT

Prosecution under section 8(2) of the Occupational Health and Safety Act 2000 pursuant to section 26(1)

INSPECTOR GRAEME KEITH ALDRED v BRIAN FRANCIS WADLEY

Prosecution under section 8(2) of the Occupational Health and Safety Act 2000 pursuant to section 26(1)

1 The defendants, Christopher Paul Herbert, Niall Chang and Brian Francis Wadley have been found guilty of one offence each under s 8(2) by virtue of s 26(1) of the Occupational Health and Safety Act 2000 following defended hearings. Each defendant at the time of the offence was a director of Salamander Shores Hotel Pty Limited. That defendant has pleaded guilty to one offence under s 8(2) of the 2000 Act. The charge against the corporate defendant was stood over generally, pending determination of the defended hearings against the three individual defendants. 2 The relevant background was set out in Inspector Aldred v Herbert and others [2007] NSWIRComm 170 at [3] to [7]. For convenience the passages are set out below: [3] The corporate defendant carried on the business of operating a hotel/motel. The hotel/motel was purchased by the corporate defendant on 22 February 2002. About 50 staff were employed including six full-time maintenance personnel. James Christie was employed as the maintenance manager. Jeff Pennell, a licensed electrician, had been employed to provide electrical maintenance services up to September 2002. Thereafter the services of a contract electrician was utilised by the business. Ian Mitchell was employed as the general manager and licensee from September 2002 and Neil Gordon was employed as the operations manager also from September 2002. [4] The hotel/motel was located on approximately 3 acres of land (the premises). A swimming pool was attached to the motel section of the premises. Childproof gates secured access to the pool. A semi-enclosed area at the western end of the pool was located beneath the balconies of two accommodation rooms. There was no access path to this area and the only means of access was either from the top of a terraced garden to the north or by climbing over the pool fence or over the balconies. [5] A metal conduit pipe 25mm in diameter and 1.8m in length lay inside the semi-enclosed area. It was attached at one end to the base of the balcony floor of room 206, one of the accommodation rooms, by means of a metal saddle, and at the other end, to the wall. The pipe had been bent apparently to allow for a difference in height between the motel building and the pool wall. As a result of this action (at some undisclosed time) some 400mm length of pipe was exposed to view. The pipe had been installed at the time the pool was constructed which was in about 1971. It contained double insulated electrical cables that supplied power to the pool filter and to a light under the pool deck. [6] On 1 December 2002 a 13 year old boy, Lucas Morgan, was swimming with a friend in the pool. Master Morgan was not a hotel guest. He lived locally and had not obtained the permission of hotel staff to use the pool. The motel's general manager was not aware that Master Morgan occasionally swam in the pool or that he was swimming in the pool that day. Some of the motel's maintenance staff were aware that Master Morgan had on earlier occasions used the pool. On those occasions he had been asked to leave the pool by the staff. [7] At about 4.45pm Master Morgan climbed into the semi-enclosed area where the conduit pipe was located in order to retrieve a tennis ball that had been thrown into the area. While attempting to return to the pool by climbing the retaining wall and the pool fence Master Morgan stood on the pipe, and sustained an electric shock. He later died from injuries consistent with electrocution. The physical evidence suggested that while attempting to climb over the fence back into the pool Master Morgan, who was wet at the time, had placed his foot on a corroded section of the pipe which collapsed and cut through the insulation layers exposing an active wire and causing the pipe upon which he was standing to become electrified. 3 The charge under s 8(2) against the corporate defendant alleged that it failed to ensure that Lucas Morgan was not exposed to risks to his health and safety arising from the conduct of its undertaking while at its place of work. The charge in its amended form alleged the following particulars:

(a) The defendant, at all material times, was an employer;

(b) The defendant, at all material times, conducted a hotel/motel business at 147 Soldiers Point Road, Soldiers Point; (c) The defendant failed to ensure that its premises were safe and without risk to health to persons not in its employment, in that: (i) The defendant failed to ensure that the electrical cable providing power to the pool area at its premises was installed and maintained so as to ensure persons could not come into contact with a live electrical current;

(ii) The defendant failed to ensure that a residual current device (safety switch) was fitted to electrical circuit relevant to the pool area at its premises;

(iii) The defendant failed to conduct an adequate risk assessment in relation to the cable providing power to the pool area and implement measures necessary to prevent any risk to the health and safety of persons at the premises which might arise from exposure to the said cable.

(d) As a result of the said failures, Lucas Morgan was exposed to the risks created by the defendant's omissions and was fatally injured. 4 In the judgment against the three directors, the corporate defendant was found to have contravened all of the particulars in sub-paragraph (c)(i) to (iii) of the amended charge under s 8(2) except for part of particular (c)(i) which alleged a failure to ensure that electrical cable providing power to the pool area was installed so as to ensure persons could not come into contact with a live electrical current. The relevant finding is set out in [33] of the judgment. The relevant findings as to the corporate defendant's contravention of the charge, as amended, are set out in [22] to [32] of the judgment. 5 Each individual defendant, in the defended hearings, relied, unsuccessfully, on the defences under s 26(1) of the 2000 Act. The evidence against Mr Herbert is set out in the judgment at [37] to [40]. The evidence against Mr Chang is set out in the judgment at [41] to [42], and, against Mr Wadley at [43] to [44]. Relevant findings in relation to the defences under s 26(1), relied on by the three individual defendants, are set out in the judgment at [59] to [67]. For convenience, those findings are extracted below: [59] The evidence in the present proceedings reveals that the three directors did very little to inform themselves about the affairs of the corporation, in particular its safety policies and procedures, its maintenance regime and workplace safety in general. They did not take reasonable steps to familiarise themselves with the operations or the running of the corporation. Apart from installing persons whom they regarded as competent and experienced managers, making occasional site inspections and attending to some safety matters which had been specifically brought to their attention, the directors on the evidence, attended to little else by way of safety issues. They made no enquiries into matters of safety. Rather, as they have sought to emphasise, they placed complete reliance on others whom they considered possessed the necessary expertise. They themselves had no experience or expertise in running a hotel/motel business, nor they said, did they possess any experience or expertise in safety matters generally.

[60] Whether the defendants can each establish defences under s 26(1)(a) falls to be considered by reference to the corporation's contravening conduct. This conduct involved three failures or omissions under s 8(2) of the Act, namely the failures to ensure the electrical cabling at the pool area was safely maintained; that an RCD was fitted to the electrical circuitry; and, the failure to conduct an adequate risk assessment in relation to this electrical cabling. Ignorance of electrical or maintenance matters of itself could not facilitate a conclusion that the directors were not in a position to influence the conduct of the corporation. This conclusion is even more compelling in circumstances where the defendant abdicated all directorial responsibility and placed complete reliance on others of whom they said possessed the requisite experience. None of the directors, according to the evidence provided any input or played any role in the management of a safety system. (Messrs Chang and Wadley merely believed one was in place at the premises.) Mr Herbert said he regarded the management team as responsible for the safety of visitors. No board meetings were held prior to the accident to discuss occupational health and safety issues. Having appointed experienced management teams to run the business the directors relied on the management teams to raise any issues including issues of safety. Mr Herbert said that he assumed Mr and Mrs Pease would arrange for such risk assessments and he had a "level of comfort" that risk assessments had been undertaken by the maintenance team.

[61] Although these matters may also apply to considerations of whether the defendants used all due diligence under s 26(1)(b) (an issue to which I will shortly turn) they illustrate in my view the inherent flaw in the defendants' submission that they were not in a position to influence the conduct of the corporation because they lacked experience and expertise in the specific area of electrical cabling. In my view they were entitled to rely on others who possessed the relevant experience and expertise but only if they satisfied themselves that those other persons to whom the vital functions of detecting and obviating risks to safety had been delegated, could discharge and were discharging that function. An occasional site inspection and an otherwise passive role adopted by the defendants in relation to safety issues does not and cannot amount to reliance on others for the purpose of successfully establishing a defence under s 26(1). [62] In addition, the directors conceded that they had the authority to make decisions about all matters of safety which affected or may affect the corporation's operations. The approach in Inspector Kumar v Ritchie recognises that directors by reason of their role as directors within the corporate structure are capable of influencing the actions of the corporation, and that the defences provided under s 26(1) are therefore limited in nature having regard to the extent and capacity of a director to influence corporate decision-making and having regard to the objects of the occupational health and safety legislation. In relation to these considerations his Honour said (at [170]):

...the Act imposes a strict or absolute liability on employers in relation to safety at the workplace. It is quite consistent with that approach that where a corporation is the employer that strict liability applies to those who are the operative minds of the corporation, namely the directors. There is nothing incongruous or unlikely about such an approach. The legislature has, however, provided a limited defence by allowing liability to be avoided if the director demonstrates that he or she was not in a position to influence the conduct of the corporation in relation to the contravention or, being in such a position, used all diligence to prevent the contravention by the corporation. Those defences focus upon the contravention and, in a sense, recognise that in the "real world" (so heavily relied upon by the defendant) there may be situations where, for a variety of reasons, a director was not able to influence the conduct of the corporation. Hypothetical examples are of necessity artificial but it is not beyond the realms of possibility that a director may have been in a minority on the Board in urging a more costly but effective system of safety that the other directors were not prepared to adopt or, as suggested by the prosecutor, at the relevant time a director was on leave of absence or suffering some other disability when a particular policy decision was taken and may not have been informed of that decision. Indeed, in Newcastle Wallsend a defence was established where, at the relevant time, the defendant did not hold a position of authority to influence the conduct of the corporation although he did so at another relevant time. Those examples are sufficient to indicate that there is an opportunity for the sub-section (1)(a) defence to be availed of by a director but it is no answer to say that the defences are narrow and limited. Much the same comment might be made in relation to the general defences found in s 28. The limited nature of these defences is understandable having regard to the public purpose served by safety legislation, especially having regard to the objects of the Act set out in s 3, namely, (a) to secure and promote the health, safety and welfare of people at work; (b) to protect people at a place of work against risks to health or safety arising out of the activities of persons as work; (e) to ensure that risks to health and safety at a place of work are identified, assessed and eliminated or controlled; (g) to provide a legislative framework that allows for progressively higher standards of occupational health and safety to take account of changes in technology and work practices; and, (h) to protect people (whether or not at a place of work) against risks to health and safety arising from the use of plant that affects public safety. To secure these objectives the legislature has adopted a system of strict or absolute liability of employers and has adopted provisions like s 26 to emphasise responsibility of persons in the corporate structure to ensure the safety of workplaces. [63] None of the limited examples cited in the above extract are applicable to the present circumstances, nor have the defendants contended otherwise. Even if s 26(1)(a) was not of such limited application as suggested by Haylen J, I would find based on the conclusions which I have earlier drawn as to the respective roles of each of the three directors that they have each failed to establish defences under s 26(1)(a). Each defendant submitted that they were not in a position to influence the corporation because they lacked the expertise in the very specific area of electrical cabling and in circumstances where the business had been operating without incident for a lengthy period of time and where the defect in the electrical cabling installation, which only became apparent at the time of the accident, could not have been known or predicted or foreseen. In relation to the corporate defendant's contravening conduct as particularised, the evidence suggests that the electrical cabling was installed some 30 years before the accident but that no records were available which might have indicated that the installation at any stage had been maintained. The three directors might have lacked expertise in relation to matters of electrical cabling but they had the authority to enquire into the history of maintenance of the cabling and whether, with regard to risks to safety, there were any risks associated with the cabling or, whether relevant risks had been assessed or identified, and whether the cabling needed to be, or could be rendered more safe by the fitting of some safety device such as an RCD. None of these actions would have required any prior knowledge or foresight (or expertise) as preconditions which had to be present before enquiries could be instituted. Each director, as one of three directors of the corporate defendant, was in a position to make decisions about safety matters in particular. According to their evidence when specific safety matters (such as the installation of fire stairs and the removal of a trip hazard) were brought to the their attention by management they provided the funds. They did not however, having employed persons whom they considered to be competent and experienced managers, initiate any further steps or make any enquiries to ensure that persons at the premises, in particular Master Morgan would be protected from risks of injury to safety, while at those premises. I therefore find that each defendant has failed to establish a defence on the balance of probabilities under s 26(1)(a) of the 2000 Act. [64] The defendants' submissions in relation to the defence under s 26(1)(b) have been made in conjunction with their submissions in relation to the defence under s 26(1)(a). The legislative scheme under s 26(1) requires that both defences be given separate consideration. If a defendant has relied upon, but fails to make out the defence under s 26(1)(a), then s 26(1)(b) falls next for consideration as to whether a director, being in a position to influence the conduct of the corporation in relation to its contravention, has used "all due diligence" to prevent the contravention. [65] The Court's attention was not directed to any authorities that have considered the provision, or more specifically, that have focused on the meaning of the words "all due diligence". In State Pollution Control Commission v Kelly (1991) 5 ACSR 607, Hemmings J considered the meaning of "all due diligence". In that judgment an individual defendant, a director, faced a charge under s 10(1) of the Environmental Offences and Penalties Act 1989 (repealed on 1 July 1999), a provision almost identical to s 26(1) of the 2000 Act. The director, Mr Kelly, raised the defence that he, being a person in a position to influence the conduct of the corporation in relation to its contravention, "used all due diligence to prevent the contravention by the corporation". His Honour considered that the expression "all due diligence" required the taking of appropriate precautions aimed at preventing the conduct of the corporation which led to the contravention (at 609). The expression "all due diligence", his Honour said, depended upon the circumstances of the case but, "contemplates a mind concentrated on the likely risks". In Inspector Kumar v Ritchie , Haylen J considered whether the defence of all due diligence under s 26(1)(b) was made out in circumstances where the defendant was ignorant of the various risks to safety and of the processes necessary to obviate the risks, commenting that in those circumstances it was "quite impossible" to make a finding that the defendant had used all due diligence. Haylen J found that the evidence before him did not disclose "a director's mind concentrated on the risks of the operation..." (at [177]). [66] The application of the above considerations to the evidence here does not reveal directorial minds concentrated on the likely risks to safety involved in running a business or in addressing procedures or processes to expose any risks to safety. According to the defendants they had no knowledge of, and would have been unable to predict any risks to safety arising from the electrical cabling installation located in the semi-enclosed area near the pool and they did not possess the relevant expertise which would have, or might have, enabled them to identify and address those risks. Instead the defendants have maintained that it is sufficient for them to make out the defences under s 26(1) by taking the actions that they did, namely, employing competent managers whom they believed possessed the relevant experience and expertise. But this measure only amounts to a preliminary step and, in my view, more is needed in order to have taken appropriate precautions to the extent required to make out the defence that they used all due diligence to prevent the contravention of the corporation. [67] Nor in my view does "all due diligence" (or "...being in a position to influence", the contravening conduct of the corporation) require as a minimum or threshold requirement that the directors have played a "significant and hands on role" in the corporate defendants operations or that they have responsibility for day-to-day decision making. Reliance on the Full Bench judgment of Daly Smith Corporation does not assist the defendants in this regard. The case is not authority for some threshold requirement of directorial liability, namely that the director must have a direct and substantial (a "hands" on) role in the company operations in order to attract liability. Much will depend on the circumstances of each individual case. Liability will be attracted where, as here, circumstances reveal that the directors played a limited direct role in the operation of the business, preferring to leave the decision-making, relevantly in relation to safety matters, to the management team but without at the same time making consistent and on-going enquiries aimed at ensuring that management was both capable and competent of discharging the corporation's statutory obligations as to safety. 6 The defendants come before the Court for sentence following the hearings and the findings of guilt against the individual defendants, and the corporate defendant's plea of guilty. 7 The risk to Master Morgan's safety at the corporate defendant's premises arose from the exposure to live electrical current. As outlined above, Master Morgan sustained an electrical shock after placing his feet on a corroded section of the pipe which collapsed under his weight and went through insulation layers surrounding the active wire, causing the pipe upon which he was standing to become electrified. Master Morgan later died of injuries consistent with electrocution. He was 13 years of age at the time. 8 This was a very tragic accident, some direct causes of which were the failures on the part of the corporate defendant to conduct a risk assessment in relation to the electrical cable which provided power to the pool and to implement a maintenance programme for the cable. The evidence, detailed in the judgment, disclosed that the pipe's condition and the interior cabling had deteriorated to a hazardous state in the absence of any maintenance of the assemblage at any time from the date of installation, which according to records was sometime in 1971 when the pool was installed (at [24] of the judgment). The tragic consequence of those failures, could have been prevented by fitting a residual current device (RCD) to the hotel's main switchboard, a measure which was in fact implemented by the corporate defendant following the accident in December 2002. Although the fatal accident, as a consequence of the breach of the Act, does not impact on the penalty imposed, it is a measure of the seriousness of potential consequences which may flow from a breach, in this case, the hazardous nature of live electrical circuitry and the risk to persons located in the vicinity of that circuitry. These matters, in my view, elevate the objective seriousness of the offences into the serious category. 9 The defendants submitted that the risk to safety could not be, "readily foreseen" on the day of the accident because the pipe did not pose an obvious risk to safety until such time as Master Morgan stood on it and it collapsed, damaging the internal cabling. In my view, the submission misconceives the nature of the risk. The relevant risk arose not because the pipe collapsed but because of the corporate defendant's failure to assess the risk arising from live electrical circuitry, and its failure to implement a programme of maintenance in relation to that circuitry. This risk to safety was both obvious and reasonably foreseeable. Obvious, because the dangers associated with live electrical circuitry are well-known and notoriously associated with serious, often fatal, consequences. Reasonably foreseeable, because no risk assessment had been conducted, no RCD fitted, and the assemblage had not been maintained by the corporate defendant. 10 Ron Roberts, the previous proprietor of the hotel, prepared an affidavit for the defendants in the sentence hearings. According to him he purchased the hotel from the Ambassador Group, which had undertaken significant renovations to the property prior to the purchase. The renovations, however, were never completed, apparently because the sub-contractors were not paid for the work. Because of non-payment, the sub-contractors confiscated all plans and diagrammes of the hotel complex including the original plans of the hotel's construction in 1968. He said he made numerous attempts to access the plans without success. He said he was approached on two different occasions by sub-contractors suggesting that they could perform necessary work on the premises because they had access to the plans. The defendants relied on this material during the sentence proceedings as relevant to the issue of foreseeability. Mr Roberts, they contended, had a well established reputation in the hotel industry at the time the corporate defendant purchased the hotel complex, and, the hotel appeared to be running smoothly and appeared to be properly maintained. The Court was informed that the defendants made some independent attempts to obtain the hotel plans but only succeeded in obtaining architectural drawings. No plans depicting the electrical circuitry at the premises were obtained. 11 It is difficult to see how any of this material assists the defendants. Without access to any of the plans depicting the electrical circuitry, the need to undertake a risk assessment and a maintenance programme should have been, in the circumstances, of critical importance. At the time of the offence, fitting a residual current device to a switchboard was a common and a well-known safety feature. The defendants conceded in written submissions that fitting such a device prior to the offence, "could have … minimised if not eliminated (the risk)." This material only reinforces the conclusion that the risk to safety was reasonably foreseeable. 12 Fitting a residual current device was not a requirement under the relevant standard (AS 3000) until 1991. Nor at the time of the offences was there a requirement for the retrospective fitting of such a device under the standard. Nevertheless it was a common and readily available measure which could have been installed by the corporate defendant at any stage prior to the offence. Equally, the undertaking of a risk assessment and the implementation of a maintenance programme were measures readily available to the corporate defendant. Neither measure required particular expertise or knowledge of electrical circuitry. These matters contribute to the objective seriousness of the offences. 13 This is not to say that the defendants were indifferent to matters of safety. Prior to the incident the evidence suggested that the corporate defendant either employed or engaged experienced and specialist staff and workers to run the hotel. In addition, all safety issues to which the defendants' attention had been specifically directed, received prompt attention. This matter was addressed and acknowledged in the judgment at [38]. In addition the corporate defendant had in place, prior to the offences, measures to address risks to safety associated with the pool, including fencing and signage. The pool surrounds were also regularly inspected and maintained up to May 2002. An internal maintenance team was responsible for safety matters and external contractors were engaged when it was determined that safety issues lay outside the expertise of the maintenance team. These matters serve to mitigate the otherwise objective seriousness of the offences. 14 The defendants chose to make no submissions in relation to specific and general deterrence. Both principles are of paramount importance, in my view, given the circumstances of the offences. 15 The corporate defendant, operated, and continues to operate, in the hospitality industry. The three individual defendants were directors prior to, and at the time of, the offences. Approximately 50 staff were employed by the corporate defendant and the premises occupied some three acres of land. The hospitality industry, in which the corporate defendant operates, is labour intensive. It employs and engages workers from diverse backgrounds with various skills and occupations. The nature of the industry is such that it offers a wide range of services to the public which include business, entertainment and recreational services. There is a high turnover of persons who patronise the industry's facilities. All these matters attest to the critical importance of proper risk management. This includes the identification of risks to safety associated with electrical equipment, for example, which is used extensively in the industry, and the control of those risks. The very serious dangers associated with working with, and being in the vicinity of live electrical circuitry requires a comprehensive assessment of risks so that a safe environment is assured for both hospitality workers and members of the public who use the facilities. The failure to adhere to these requirements may result in prosecution, conviction and the imposition of heavy penalties under the occupational health and safety legislation. 16 The application of specific deterrence is also important to all defendants in these proceedings. The corporate defendant continues to operate in the industry. Messrs Herbert and Chang remain as two of its directors. According to Neil Gordon, the corporate defendant's general manager, Mr Wadley resigned as a director on 10 January 2007. In the absence of information as to Mr Wadley's current occupation, and given the defendants' decision not to make any submissions on the application of the principle, there is no reason to suggest that the principle should not be invoked against Mr Wadley. 17 In mitigation of the objective seriousness of the offences, the defendants have put in place a number of safety measures designed to ensure public and worker safety at the premises, following the offences. The measures have been set out in Mr Gordon's affidavit filed in the proceedings on 1 November, 2007. First, the corporate defendant's maintenance team has been restructured with specialist work, which includes electrical work, now being performed by qualified contractors. Two systems are utilised by the team for reporting and carrying out maintenance tasks. For major tasks a register is kept at reception which is checked twice daily. For minor tasks, a whiteboard located in the maintenance shed is updated at the completion of each housekeeping shift and checked by maintenance staff during their shift. Secondly, an OH&S committee was formed in 2006. It meets monthly and comprises six persons. Minutes of the meetings are forwarded to Mr Gordon and reviewed at the monthly management meetings. John Bates, the corporate defendant's operations manager, has primary responsibility for the day-to-day implementation of OH&S policies and procedures. Mr Bates has a diploma in occupational health and safety. 18 Thirdly, the corporate defendant has implemented significant changes to its safety management. These changes include the implementation of the AHA Hazard Free Hotel OH&S model (AHA) in 2003 and the provision of a comprehensive manual to each work group employee. In 2003 LecSafe Australia Pty Limited was retained to carry out a full electrical safety inspection and testing of all electrical appliances and equipment at the premises. Fifteen employees undertook a Hospitality Operations Certificate III Program which included OH&S modules and competencies. A new pool fence was also installed to meet revised pool wall height requirements. In 2004 P.R.I.D.E Coaching Network was engaged to develop and implement standard operating procedures and workplace improvements for tasks undertaken at the hotel premises. In late 2005, after a determination that the AHA model was too general and cumbersome for application at the premises, a decision was made that Mr Bates conduct a review of the existing OH&S system and integrate it with the corporate defendant's procedure manual developed with P.R.I.D.E Coaching. In November 2005, Mark Mellor, a licensed contract electrician, conducted electrical testing at the premises. His test results, which are annexed to Mr Gordon's affidavit, included testing of the pool equipment and work shop. In February 2006, OH&S Asset Management conducted an annual electrical testing and tagging of all electrical appliances. All items identified as requiring repairs were taken out of service and repairs completed. 19 The corporate defendant, currently, has a number of OH&S procedures in place at the premises. These include: (i) OH&S Policy Statement

(iii) Injury Report Form and Hazard Incident Report Form

(v) Certificate of Currency Register for contractors and suppliers

(vi) OH&S Expectations and Responsibilities for General Manager, Supervisors and Employees

(xii) OH&S Committee Inspection Report 20 In March 2007 expressions of interest were sought by AHA from hotels to become involved in the piloting of the AHA PubOHS programme. The aim of this programme is to develop an OH&S system which is suitable for the hospitality industry in New South Wales. It is funded by WorkCover. The corporate defendant was chosen as one of three trial hotel sites for PubOHS. AHA completed a full site audit, a report of which was published on 8 September 2007. Following the audit and the publication of the report the corporate defendant is presently refining its OH&S procedures at the premises with a view to implementing procedures which will be model OH&S procedures for the hospitality industry. It is anticipated that the process will be completed by November 2008. 21 The corporate defendant has also instituted a number of training seminars including first aid, fire appliance training and fire safety awareness training. On 5 December 2002 the conduit pipe involved in the accident was relocated underground. 22 The corporate defendant expended approximately $170,000 on OH&S matters at the premises, in the financial year ending 30 June 2007. 23 The prosecutor conceded that all defendants co-operated with WorkCover during the investigation of the offences. In addition, the defendants have expressed their remorse for the death of Master Morgan. The corporate defendant has emphasised that it is committed to taking whatever action is required in order to prevent any similar incident arising in the future in relation to its business operations. This commitment is shared equally by the directors. In written submissions, on behalf of the defendants, it was contended that much of the expenditure on safety matters at the premises has been personally financed by the directors. These matters will be taken into account in the individual defendants' favour in mitigation of the penalties. 24 The corporate defendant is also entitled to leniency by reason of its plea of guilty. In relation to the utilitarian value of the plea, the corporate defendant contended that its plea of guilty was entered at the earliest opportunity after the particulars of the charge were amended, and should therefore attract the, "maximum discount", of 25 per cent. I recently discussed the utilitarian value of a plea of guilty and the relevance of a plea at the "earliest opportunity" in the context of its utilitarian value in Inspector Steven Cooper v Rail Infrastructure Corporation [2008] NSWIRComm 92 at [33] to [54]. I adopt the reasons and conclusions set out in that judgment, in these present proceedings. 25 The prosecutor has joined issue with the corporate defendant's contention that its plea of guilty was entered at the earliest opportunity. According to the prosecutor, the amendments to the charge were not substantial, reflecting changes to form rather than to substance. Neither party provided any further information to the Court on the issue. The correspondence file records that the corporate defendant entered its plea of guilty on 13 June 2006, the same day as the matter had been set down for a defended hearing. On that day, following an inquiry from the Court as to the nature of the amendments, Mr Reitano, counsel for the prosecutor, informed the Court: In each of the following particulars, my recollection is that there is a narrowing - I will go to it, rather than try to remember. In particular (c) in (i) - that is the same. In respect of (ii) "electrical circuit relevant to the pool area of the premises" is an addition, and in (iii) at the end, after the words "the premises" - in the original it was stated as "which might arise from exposure to those electrical installations" - it now is "which might arise from the exposure to the said cable". My learned friend tells me that there is a slight change to (i) in that the original referred to "electrical cables' in the plural, but now it refers to "electrical cable", in the singular. I understand, upon that amendment, there is now a plea of guilty in respect of that charge. The application would be that that matter go over for sentencing at a later date. 26 A comparison of the original charge and the amended charge confirms the extent of the changes made to the original charge as indicated by the prosecutor. The corporate defendant provided no comment on the prosecutor's submissions in relation to the nature of the amendments at the time it entered its plea of guilty to the amended charge on 13 June 2006. The amendments in my view achieved no more than a narrowing of the focus of the original charge, that is, from the more general allegations of electrical cables, electrical circuits and installations at the premises, to the particular cable which provided power to the pool area and the electrical circuitry relevant to the pool area. The substance of the allegations concerning the failures to install, maintain, fit an RCD and conduct an adequate assessment of the electrical cabling and circuitry in the pool area, remained. Nor was there anything to suggest, on the material presented to the Court, that a plea of guilty to a charge which incorporated the amendments which were made, could not have been entered at an earlier stage. I find therefore that the plea of guilty was not entered at the earliest opportunity. It was a late plea entered on the first day the matter was set down for a defended hearing. Given these circumstances, I assess an appropriate discount of penalty for the utilitarian value of the plea at 10 per cent. 27 As a separate consideration from the utilitarian value of the plea, the corporate defendant is also entitled to leniency in recognition of its remorse shown by the plea of guilty. 28 The individual defendants also advanced a submission that their roles in the offences were less serious than that of the corporate defendant. I agree, (see WorkCover Authority of New South Wales (Inspector Page) v Walco Hoist Rentals Pty Limited and Another (No 2) (2000) 99 IR 163 at [38] [39] which held that the culpability of an individual defendant could not be greater than that of the corporation, and where the individual defendant was not the alter ego of the corporation, then his or her culpability may be less). Here, each individual defendant was one of three directors of the corporate defendant. Their respective roles in relation to the offences have been set out earlier in this judgment at [5]. It has not been suggested that the culpability of any of those individual defendants was greater or less than the other. I propose therefore to treat the culpability of each individual defendant as the same in relation to the circumstances of the offences. 29 The individual defendants seek orders pursuant to section 10(1) of the Crimes (Sentencing Procedure) Act 1999 (CSPA). In support of this the defendants' counsel, Ms Thompson, relied on the Full Bench judgment of WorkCover Authority of New South Wales (Inspector Downie) v Menzies Property Services Pty Ltd (2004) 136 IR 449. 30 In oral submissions on the application of s 10(3)(c) (extenuating circumstances in which the offence was committed) the individual defendants relied on the corporate defendant's participation in the AHA PubOHS programme and sought to characterise that programme as an, "intervention programme," under s 116 of the 2000 Act. Under that section, the Court may order an offender to carry out a specified project for the general improvement of occupational health, safety and welfare, and may, as part of the order, fix a period for compliance, and impose other requirements the Court considers necessary or expedient for enforcement of the order. Shortly after making the submission however, the individual defendants adopted the position that a s 116 order operates in addition to any other penalty that the Court may impose (as to which see Inspector Clothier v Malcolm McIntyre trading as Corambie Pastoral Company and another [2007] NSWIRComm 40). The individual defendants then sought to express the corporate defendant's involvement in the AHA PubOHS programme in terms of the contrition and commitment to safety demonstrated by them as a matter which was relevant to either s 10(3)(a) or (c). 31 The individual defendants also contended, in support of their applications, that findings by the Court that the offences are serious would not preclude the granting of the orders under the section. Various testimonials tendered during the proceedings, attesting to the good character of the individual defendants, were also relied upon, as relevant to matters that the Court may take into account under s 10(3)(a) (character, antecedents, age, health and mental condition). 32 In relation to "extenuating circumstances" under s 10(3)(c) the individual defendants relied on a number of matters which were described in oral submissions as, "the nature of the risk, that it had lain dormant for a long period of time, the unusual or freak manner in which this came about. It is accepted the pipe was corroded and ought to have been maintained. If it had been maintained it would not have collapsed in the manner it did and if the RCD was there it would have prevented it. It appears to be an exceptionally well run and maintained business at the time they took it own." 33 In my view the application of the section to any of the individual defendants is inappropriate in the circumstances. First, as the Court has found, the offences fall into the serious category. The individual defendants conceded that the offences were serious. In Menzies Property Services, a case relied upon by the individual defendants, the Full Bench emphasised the availability of the section to offences under occupational health and safety legislation in rare and limited circumstances. The relevant passages are extracted below (at [45] to [47]): [45] There is abundant, clear authority for the proposition that s 10 of the Crimes (Sentencing Procedure) Act , like its predecessor s 556A of the Crimes Act , will be available only in rare, limited circumstances in proceedings under the Occupational Health and Safety Act (see, for instance, Riley v Australian Grader Hire and McCarthy v Sell & Parker .) [46] The principles relevant to the application of s 10 of the Crimes (Sentencing Procedure) Act were considered in Department of Mineral Resources v Berrima Coal Pty Ltd (2001) 105 IR 348: "The application of the former equivalent of s 10 of the Crimes (Sentencing Procedure) Act 1999 , that is, s 556A of the Crimes Act 1900 , was recently and comprehensively considered in WorkCover Authority of New South Wales (Inspector Hopkins) v Profab Industries Pty Ltd . In that decision, the Full Bench of the Commission in Court Session pointed out the clear and long standing authority which established the rarity of situations in which such an ameliorative provision was available to a defendant under the Act. The Full Bench stated (at [26]): `Nevertheless, in occupational health and safety offences before this Court the exercise of the discretion under s 556A (cf s 10 of the Crimes (Sentencing Procedure) Act 1999 ) must be considered as extraordinary and highly exceptional. When a defendant seeks its exercise cogent reasons must, in our view, be provided by the defendant for such exercise and also by the judge acceding to that submission. The obligation is increased rather then diminished in a situation, such as the present, where the exercise of the discretion is not sought by the defendant but raised by the Court.' It should be noted that the Full Bench in Profab followed the judgment of the former Industrial Court in WorkCover Authority (NSW) v Waugh wherein it was stated that the discretion available under s 556A would be rarely available in significant offences against the legislation.

Further, in a recent discussion of s 10 of the Crimes (Sentencing Procedure) Act 1999 , the Full Bench of the Commission in Court Session reiterated that the exercise of such a discretion is saved for extraordinary and highly exceptional circumstances (see Australian Grader Hire ). I shall apply the principles stated in Profab and Australian Grader Hire in this matter.

In Waugh , the former Industrial Court had noted that the company and the personal defendant had a prior good character. However, this seemed to be due to good fortune rather than good conduct. The Court approached the question of s 556A in quashing the decision at first instance as follows (at 101): `We consider that in serious cases where, as found by her Honour, the risk of injury from an accident was not one difficult to foresee, where the breach could and did result in serious consequences to the health of the injured man, where the risk of injury was preventable and where a safety fence with an isolation device was installed without difficulty after a second inspection, the operation of s 556A of the Crimes Act to such proceedings would seldom be appropriate. If such an application is pressed but opposed it should normally be supported by evidence subject to cross-examination rather than the untested assertions made from the bar table.' This approach was applied by Hungerford J in WorkCover Authority (NSW) v Neaves (unreported, Industrial Relations Commission, NSW, Hungerford J, No CT 1150 of 1995, 29 March 1996). His Honour rejected an application under s 556A of the Crimes Act 1900 because the detriment to safety there occasioned by the employee had been foreseeable and the work practice involved was known to be dangerous and resulted in serious injury. His Honour found that the risk could have been prevented. In applying the foregoing authorities to an application for the exercise of the Court's discretion under s 10 of the Crimes (Sentencing Procedure) Act , it is important, however, to bear in mind that each matter requiring consideration under s 10 of that Act needs to be considered in the light of its own particular circumstances: WorkCover Authority (NSW) v Ecolab Pty Ltd (1999) 90 IR 413 at 430."

[47] We consider the statements of principle in Profab Industries , summarised in Department of Mineral Resources v Berrima Coal and affirmed in Riley v Australian Grader Hire , as to the application of s 10 of the Crimes (Sentencing Procedure) Act are correct and we apply those principles in the present matter. 34 Secondly, the present circumstances do not lend themselves to a characterisation consistent with "extenuating circumstances." The matters relied upon by the individual defendants to establish "extenuating circumstances" under s 10(3)(c) misconceive in my view, the nature of the risk. This observation was made earlier in the judgment, in the context of considering the foreseeability of the risk to safety, and it is equally pertinent to the present issue. Thirdly, matters of contrition and commitment to safety by the individual defendants have already been taken into account in mitigation of penalties that may be imposed. Fourthly, the testimonials relied upon by the individual defendants will be taken into account as evidence of the individual defendants' good character, and in further mitigation of penalties. 35 A further submission put by the defendants was that the two individual defendants who remain as directors of the corporate defendant will bear the burden of any penalty imposed on the corporate defendant because of their close connections to the corporate defendant, and that this circumstance may warrant the imposition of a lesser penalty on the corporate defendant. Reliance for this proposition was said to be found in the dicta of the Full Bench in Haynes v CI& D Manufacturing Pty Limited (No 2) (1995) 60 IR 455 at 457. The submission however, is against the weight of authority in this jurisdiction: see for example WorkCover Authority (NSW) (Inspector Green) v Big River Timbers Pty Ltd (2006) 156 IR 341 and T & M Industries Pty Ltd v Inspector James [2007] NSWIRComm 85. In the former authority the Full Bench found that the magistrate at first instance had misapplied the principle of totality by treating two corporate defendants as one entity for the purposes of sentencing on the basis that they were closely related entities having a common governance and operations. The principle sought to be relied upon by the individual defendants in Haynes v CI & D is found in the following passage extracted below (at 457): In a number of cases decided under the OHS Act where the corporate structure of the defendant has been shown to be little more than the means of distribution of earnings arising from personal exertion, or where, as a matter of corporate structure, the burden of any fine levied would fall on one person or one family group ownership, the Court has seen it appropriate to impose a fine substantially less than if the corporation was functioning as a company with assets of a substantial kind. 36 In Inspector Jones v JT & LC Tippett Pty Ltd and Anor (No 2) [2007] NSWIRComm 306 I made a number of observations (at [39] to [41]) on the passage extracted above, which I adopt in these sentencing reasons. Although the observations in JT & LC Tippett were directed to a submission put on behalf of the defendants in that judgment that the Court may approach the imposition of penalty on a corporate defendant as if it were an individual, facing the lesser statutory maximum, they are equally applicable to the present submission advanced on behalf of the individual defendants in these proceedings. In my view, the passage extracted from Haynes v CI & D involves no more than a consideration of the means of a particular defendant to pay a fine. In addition, the Full Bench, in the passage, draws a clear distinction between a situation where the corporate structure is such that the burden of a fine imposed would fall on one person or one family group which may justify a lesser penalty and, a situation where the corporation has substantial assets which would not justify a lesser penalty. The corporate defendant in the present proceedings falls into the latter category. Nor does the Court know, on the evidence and material placed before it, whether the two remaining individual defendants, Messrs Chang and Herbert, will bear the burden of any penalty imposed on the corporate defendant. The issue insofar as it arises is rather, whether the corporate defendant has substantial assets which would enable it to meet any penalty imposed on it, or whether its financial situation is such that it has limited capacity to pay a penalty. 37 In this regard the defendants bear the onus of placing appropriate evidence before the Court to enable it to give proper consideration to the exercise of its sentencing discretion: Inspector Green v Camilleri Properties Pty Ltd (2006) 152 IR 156 at [21]. 38 The prosecutor contended that the corporate defendant is a corporation of some substance and that it has the means to pay a substantial fine. The defendants in oral submissions conceded that the corporate defendant does have assets but that these assets are tied up in the buildings and other fixtures associated with the business and its day-to-day operations. The defendants characterised the corporate defendant's financial situation as, "a company not running at a high profit rate". In written submissions the defendants referred to evidence tendered during the sentence proceedings which demonstrated that the corporate defendant operated at an overall loss of $199,547 for the financial year ending 30 June 2006, and a loss of $153,071 for the financial year ending 30 June 2007. This evidence, according to the defendants, suggested that the corporate defendant is a corporation without large operating profits and that the burden of paying the penalty imposed will fall on the directors. 39 I have earlier rejected the defendants' latter contention as a consideration not applicable to the sentencing of the corporate defendant. In relation to its business operations the defendants tendered a number of financial records in support of the contention that the corporate defendant was not operating at a "high profit rate." An examination of those records reveals that the corporate defendant has indeed incurred losses for the financial years ending 30 June 2006 and 2007 but that it has substantial assets worth several millions of dollars. Given these financial circumstances it is clear that the corporate defendant has the capacity to pay any penalty that may be imposed against it. 40 The defendants are entitled to leniency on the basis that they have no prior convictions. 41 The maximum penalty that may be imposed on the corporate defendant is $550,000 and on the individual defendants, $55,000. 42 In determining penalties I take into account the objective seriousness of the offences, the subjective factors in mitigation applicable to each defendant, the absence of prior convictions and the maximum penalties. All of these matters have been considered by reference to the CSPA, in particular, s 21A. I take into account the corporate defendant's plea of guilty and the culpabilities of the individual defendants by reference to the culpability of the corporate defendant. Orders

43 In Matter No IRC 7002 of 2004 I make the following orders:

The defendant Salamander Shores Hotel Pty Ltd is convicted of the offence.
The defendant is fined $150,000 with a moiety to the prosecutor. 44 In Matter No IRC 7003 of 2004 I make the following orders:
The defendant Christopher Paul Herbert is convicted of the offence.
The defendant is fine $12,000 with a moiety to the prosecutor. 45 In Matter No IRC 1205 of 2005 I make the following orders:
The defendant Niall Chang is convicted of the offence.
The defendant is fined $12,000 with a moiety to the prosecutor. 46 In Matter No IRC 1207 of 2005 I make the following orders:
The defendant Brian Francis Wadley is convicted of the offence.
The defendant is fine $12,000 with a moiety to the prosecutor. 47 In Matter Nos IRC 7002 and 7003 of 2004 and Matter Nos IRC 1205 and 1207 of 2005 the defendants are ordered to pay, jointly and severally, the costs of the prosecutor as agreed, or in the absence of agreement, in accordance with the rules.

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