Inspector Wayne James v Sunny Ngai & Ors

CATCHWORDS: Occupational health and safety - Defended hearings unders s 8(2) by virtue of s 26(1) of the Occupational Health & Safety Act 2000 where corporation acknowledged contravention of the Act - Defences raised under s 26(1)(a) - Tissue manufacturing corporation - Machine not properly guarded - Employee's arm caught in machine - Defendants directors of the corporation at the time of contravention - Defences under s 26(1)(a) considered - Whether defendants being directors were not in a position to influence the corporation's contravening conduct - Governing director provision in Articles of Association - Limitations imposed upon directors by Articles of Association - Whether defendants were in a position to influence the contravening conduct of the corporation - Objective test of capacity to influence the conduct of the corporation - Status or standing of directors considered - Scope and source of powers of directors examined - Directors' roles, responsibilities, powers and duties limited - No involvement in occupational health and safety matters - Defendants had no real control over the corporation's conduct - Lack of complicity in respect of the offences - Defendants lacked necessary influence in respect of corporation's contravention - Defences made out - Summonses dismissed - Costs

Companies Act 1936 Companies Act 1961 (Q) LEGISLATION CITED: Corporations Act 2001 Occupational Health & Safety Act 2000 WorkCover Legislation (Amendment) Act 1995

Australian Securities and Investments Commission v Adler & ors (2002) 168 FLR 253 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 Corporate Affairs Commission v Drysdale (1978) 141 CLR 236 Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113 Group Four Industries Pty Ltd v Brosnan (1992) 59 SASR 22 Inspector Aldred v Herbert and others [2007] NSWIRComm 170 Inspector Jorgensen v Daoud (2005) 143 IR 170 Inspector Ken Kumar v David Aylmer Ritchie [2006] NSWIRComm 323 Inspector Stephen Gill v Wayne Thomas Fisher & Ors [2007] NSWIRComm 83 Levin v Clark [1962] NSWR 686 CASES CITED: Morrison v Powercoal & Anor (2004) 137 IR 253 Newcastle Wallsend Coal Company Pty Ltd v WorkCover Authority (NSW) (Inspector McMartin) (2006) 159 IR 121 Powercoal Pty Ltd and Anor v Industrial Relations Commission of NSW and Anor (2005) 64 NSWLR 406 Re Australasian Venezolana Pty Ltd (1962) 4 FLR 60 Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180 Rema Industries and Services Pty Ltd v Coad & Ors (1992) 107 ALR 374 Saraswati v The Queen (1991) 172 CLR 1 Secretary of State for Trade and Industry v Laing [1996] 2 BCLC 324 Smolarek & Anor v Liwszyc & Ors (2006) 198 FLR 257 Welch v Welch (1971-73) CLC 40-068 Whitehouse and another v Carlton Hotel Proprietary Limited (1986) 162 CLR 285

HEARING DATES: 5 February 2007, 6 February 2007, 7 February 2007, 8 February 2007, 9 February 2007, 20 February 2007, 5 March 2007, 25 June 2007

PROSECUTOR Mr B Docking of counsel Solicitor: Mr M Sands WorkCover Authority of New South Wales LEGAL REPRESENTATIVES: DEFENDANT Mr H J Dixon SC with Mr D O'Neil of counsel Solicitor: Mr A Douglas Douglas Workplace and Litigation

Prosecution under s 26(1) of the Occupational Health & Safety Act 2000

Prosecution under s 26(1) of the Occupational Health & Safety Act 2000

Prosecution under s 26(1) of the Occupational Health & Safety Act 2000

Prosecution under s 26(1) of the Occupational Health & Safety Act 2000

1 Mr Sunny Ngai ("the first defendant") and Mrs Guech Ning Ly ("the second defendant") (who will be referred to in this judgment as "Mr Sunny Ngai" and "Ms Ly"), in their capacity as directors of ABC Tissue Products Pty Ltd ("the corporation") which, on 21 February 2004, contravened s 8(1) of the Occupational Health & Safety Act 2000 ("the Act"), are deemed, under s 26(1) of the Act to have contravened the same provisions. The defendants have pleaded not guilty, although they acknowledge the corporation's contraventions have been established for the purposes of these proceedings. 2 The relevant facts are that the corporation failed to ensure the health, safety and welfare of its employees, in particular, Ji Yun Yang ("Mr Yang"), contrary to s 8(1) of the Act, in firstly, failing to ensure that the Rewinder No 1 Machine ("the machine") was adequately guarded ("the general guarding charge") and secondly, that the Rewinder No 1 Machine could only be inched forward to clear any blockage, rather than operated on a manual jog basis, thereby permitting the embossing roller to continually move whilst being cleaned ("the specific nip point charge"). 3 On 21 February 2004, Mr Yang was required to clean a paper build-up on the embossing roller of the machine. It was switched from automatic to manual and the roller was moved by pressing the inching or jogging button. After pressing the button, the roller and paper moved, causing Mr Yang's right hand to move, which resulted in the machine gripping Mr Yang's arm in-between the embossing roller and the printing roller up to his elbow. Mr Yang suffered a soft-tissue and muscle injury to his right arm. Statutory Provisions 4 The relevant statutory provisions are:

8 Duties of employers (1) Employees

An employer must ensure the health, safety and welfare at work of all the employees of the employer. That duty extends (without limitation) to the following: (a) ensuring that any premises controlled by the employer where the employees work (and the means of access to or exit from the premises) are safe and without risks to health, (b) ensuring that any plant or substance provided for use by the employees at work is safe and without risks to health when properly used, (c) ensuring that systems of work and the working environment of the employees are safe and without risks to health, (d) providing such information, instruction, training and supervision as may be necessary to ensure the employees' health and safety at work, (e) providing adequate facilities for the welfare of the employees at work. (2) Others at workplace An employer must ensure that people (other than the employees of the employer) are not exposed to risks to their health or safety arising from the conduct of the employer's undertaking while they are at the employer's place of work. 26 Offences by corporations - liability of directors and managers (1) If a corporation contravenes, whether by act or omission, any provision of this Act or the regulations, each director of the corporation, and each person concerned in the management of the corporation, is taken to have contravened the same provision unless the director or person satisfies the court that: (a) he or she was not in a position to influence the conduct of the corporation in relation to its contravention of the provision, or (b) he or she, being in such a position, used all due diligence to prevent the contravention by the corporation. ... 5 It is therefore necessary to examine the evidence to determine whether each of the elements in s 26(1) have been made out and then determine whether the defendants have satisfied the Court, on the balance of probabilities, that "he or she was not in a position to influence the conduct of the corporation in relation to its contravention of the provision" (s 26(1)(a)). Neither personal defendant seeks to discharge their onus in relation to the defence in s 26(1)(b). The Prosecutor's Evidence 6 Mr B Docking of counsel, who appeared for the prosecutor, tendered agreed statements of facts in respect of the defendants which were in similar terms. The agreed facts for the defendant, Ms Ly, are: ... 2. At all material times, Ms Guech Ning Ly ("Defendant") was a director of a corporation, ABC Tissue Products Pty Limited (ACN 003 085 112) ("the corporation"), a company duly incorporated with its registered office situated at 34-36 Redfern Street, Wetherill Park in the State of New South Wales. 3. The Defendant was the purchasing director of the corporation and appointed as a director since 8 July 1993. 4. At all material times, the additional working directors of the Defendant were as follows: (a) Mr Sunny Ngai ("Mr Sunny Ngai"), marketing director and appointed as a director and secretary since 12 November 1991; and (b) Mr Henry Kei Shing Ngai ("Mr Henry Ngai") managing director and appointed as a director since 18 April 1986. 5. At all material times, the corporation occupied and conducted the business of manufacturing toilet paper products at 62-68 Redfern Street, Wetherill Park, in the state of New South Wales ("site"). 6. On 21 February 2004 ("actual accident date"), the corporation employed a number of persons at the site including: (a) Mr Ji Yun Yang ("Mr Yang"), machine operator employed for 6 years; (b) Mr Kuong Srung Tea ("Mr Tea"), leading hand; and (c) Mr Daryl de Vries ("Mr de Vries"), production manager; and (d) Mr Houy Ly ("Mr Houy Ly"), night shift manager; and (e) Mr Sivagnanasundaram Sivashanmugarajah ("Mr Siva"), safety, purchasing and industrial relations officer; and (f) Mr Chek Ming Ly ("Mr Ly"), assistant general manager. 7. At all material times, the site was Mr Yang's, and the other employees' detailed above, place of work. 8. According to Mr Sunny Ngai, the corporation was a "family business". The Machine 9. At all material times, the corporation was in possession of and operated a machine known as the Rewinder No. 1, machine number ABC-91-005 ("Machine"). The Machine rewinds paper from large rolls to smaller rolls of toilet tissue and kitchen towel. 10. The Machine was approximately 18m long by 5m wide by 3m high. A blue wall covered approximately three quarters of the perimeter of the machine. 11. The Machine consisted of the roll stand, feed rollers, embossing area, perforator area and slitter and sealing units. 12. The northern sidewall of the machine had stored items restricting access to the doors along the length of the side. The middle area had a door fitted, a rack was located on the outside of the door with embossing rollers and other rollers stored on it. The doors could not be opened due to the racking. 13. On the northwest corner of the Machine there were several cabinets partially enclosing the "drive system". Access to this area was possible as the area was not fenced across from the Machine to the blue wall. This allowed unrestricted access to all moving parts of the Machine. The doors of the blue wall were open. 14. The cabinet doors had a provision for a bar to be placed and padlocks in order to prevent access to the moving parts inside the cabinets. 15. The "feed end wall" consisted of five panels across the Machine. The middle panel consisted of a door that was padlocked on the side of the Machine and the two panels each side of the door were fixed panels. 16. The southern side of the Machine had a several panels along its length of which two sections were double doors. 17. The paper flow from the feed rollers went over and then back between the pressure roller (top) and the embossing roller (bottom). 18. The paper was fed between the embossing roller and the inking roller. The embossing roller was a roller with an impression pattern on its outer surface and measured approximately 3.32m long x 300mm diameter. The pressure roller had rubber on its outer surface and measured approximately 3.32m long x 400mm diameter. The inking roller measured approximately 3.2m long x 250mm diameter. 19. Adjacent to the embossing/inking roller area was a platform that went across the Machine that measured approximately 300mm high x 700mm wide x 3.84m long. 20. The height of the inking roller from the floor to the centre was approximately 1.2m. 21. There was a gap between the tunning inking roller and the embossing rollers that measured approximately 35 - 38 mm. That gap presented a specific risk of actual potential danger and it materialised into an actual incident as referred to below. 22. Above the inking roller was a lanyard, which was tied off on northern side and a Teleinecanique XY2CK switch, IEC 947-5-1, EN 60947-5-1 on the southern side. 23. Adjacent to the embossing roller were two boxes with a number of switches fitted to it. There were a number of glue control switches and a jog switch. The jog switch when activated allowed approximately 0.5 revolutions per pressing. General Guarding Risks 24. At all material times on the actual incident date, the Machine at various points posed a risk including: (a) A blue perimeter wall partially "guarded" the Machine. However the blue walls around the Machine on the non-operator side had missing panels allowing unrestricted access to all moving parts of the Machine including moving wheels, belts, pulleys, chain and sprockets and the drive system as detailed in paragraphs 13 above that were not guarded (photographs 5, 7). The same applied on the operator side as the panelling allowed free access into the Machine as the perimeter wall was not completed (photograph 2). (b) The doors to the cabinet detailed in paragraph 14 above had provision for a bar and padlock to be placed so as to prevent access to the moving parts inside the cabinets but only two of the six doors had the bars fitted correctly (photograph 5). (c) Access to the rear of the cabinets containing the Machine's drive system could be achieved by walking across a small platform at the rear of the embossing roller area. (d) The double doors at the southern end of the Machine, as detailed in paragraph 16, were inadequately guarded (photograph 2 L 6 - 16) in that whilst those doors closest to the feed end were padlocked, the doors adjacent to the embossing roller was not padlocked or electrically interlocked (photograph 2 M 7- 14 ). (e) The exit area adjacent to the perforator was open at the front (photograph 2 G 1 - 20) and the side (photograph 2 IJ 4 - 19) allowing unrestricted access to all moving parts of the Machine. (f) The north west corner of the Machine was unguarded thereby enabling unrestricted access to all the wheels and belts of the Machine in the north west corner (photographs 8, 9, 10 & 11, overall view photograph 16). Inadequate Guarding of Machine 25. At all material times on the actual incident date, the Machine was inadequately guarded at the various points set out in paragraph 24. 26. The corporation was aware of the requirements for guarding due to Improvement Notice 202127 which was issued on 28 June 2001 (attached) and previous WorkCover visits for this particular machine. The Defendant was not aware that Improvement Notice 202127 had been issued. 27. After the actual incident date, the corporation fitted mesh metal panel between the blue wall and the blue panels of the drive system cabinets on the left side of the Machine (photograph 19). 28. The doors directly in front of the drive system cabinets had the door handles removed and the doors were fixed in place (photograph 21). 29. The cabinet doors had chains fitted through the cabinet door handles (photograph 19). 30. On the right hand side of the Machine two panels were installed and a mesh screen was put in place between the wall and the Machine (photograph 24). 31. Electrical interlocks (photograph 20 F 11) were fitted and some doors had padlocks (photographs 22 D 16 & 23 F 13) fitted on the inside of the doors. System of Work 32. At all material times prior to the actual incident date, the corporation's system to restrict or stop its employees from accessing the Machine beyond the guarding deficiencies detailed in paragraph 24 above, was to erect a warning sign which stated " do not enter while the machine is running. " Mr Siva also told employees not to go inside the Machine while it was running. . 33. Prior to the actual incident date, the padlocks referred to in paragraph 24(b) had been removed by person/s unknown. Mr de Vries and Mr Siva knew that the padlocks had been removed prior to the actual incident date. The two missing padlocks had not been replaced prior to the actual incident date. Mr Houy Ly did not know that the padlocks had been removed from the cabinet doors. It was Mr Houy Ly's evidence that " I don't check " those particular cabinet doors. 34. On or about 29 November 2002, the corporation received a quote from Shiells Sheetmetal Company (ABN 30 533 108 334) to supply, a perimeter wall for the Machine for $28,790.00. The quote was accepted by the corporation and in or about December 2002 - January 2003, the blue perimeter wall was installed around the Machine. 35. Some time after the blue perimeter wall was installed, the corporation modified the Machine, making it longer. Mr de Vries directed the blue perimeter wall be installed around the Machine. Due to the elongation of the Machine, the blue perimeter wall no longer fully enclosed the Machine. 36. According to Mr de Vries the blue perimeter wall was never completed " Because it lost the job impetuous (sic)". 37. According to Mr Ly he did not, as assistant general manager, inform anyone above him not to operate the Machine in an unguarded state: " Because I actually told Houy to make sure working safely and about the machine to modify it so the operator still happy to work with the machine, We needed the machine running for commercial reasons as well ". Information, Instruction and Training 38. Prior to the actual incident date Mr Yang had received the following training: (a) 3 March 2004 - Forklift Operator training. (b) 3 March 2004 - OHS in the Workplace Induction Course. 39. Mr Yang received on the job training to operate a similar machine known as the Rewinder No. 3. Mr Yang had worked on the rewinder machines for a number of years prior to the accident. 40. Prior to the actual incident date, Mr Yang had not received any specific training in relation to operating the Machine. Prior to the actual incident date, the corporation had commenced a formalised, document based training program for the Machine and others like it at the site. However, prior to the actual incident date, Mr Yang had not been scheduled to attend that training. 41. After the actual incident date, the corporation trained Mr Yang in the operation and safety requirements of the rewinder machines. Supervision 42. The supervisor in charge of the night shift was Mr Houy Ly. Mr Houy Ly walked around the site during the night shift, approximately every one to one and a half hours. 43. It is Mr Houy Ly's evidence that when he saw employees access the Machine, beyond the blue perimeter wall, he would tell them not to go in and, would close the door once they had exited (Section 26 Statement, Houy Ly Q68). 44. It is Mr Houy Ly's evidence that the night shift did not attend to the incomplete guarding of the Machine because the engineers did not work at night, only on the day shift and that "I see Daryl running it, everyone sees it running and no one says not to do it " . Specific Risk Arising from the Nip Point of Embossing Roller 45. At all material times on the actual incident date, paper was fed between the embossing roller and the inking roller, as detailed in paragraph 18 above. There was a gap between the in-running inking roller and the embossing rollers that measured approximately 35-38mm. This gap constituted a running nip point. 46. On the actual incident date, at approximately 9.00pm at the site, Mr Yang was required to clean a paper build up on the embossing roller of the Machine. He proceeded to stop the Machine by turning the switch situated on the south side wall of the Machine (shown on photograph no 2) from auto to manual. He then walked down to the embosser. Then he started cleaning the paper build up on the embossing roller. As part of the process he could cause the roller to move by pressing a button fixed at the side of the roller (as shown on photograph no. 13). This button is commonly described as the inching or jogging button. If depressed and held down it causes the roller to operate slowly and at a controlled speed. Mr Yang used his left hand to press the button. By stretching out his right hand he used that hand to remove the paper. After pressing the button, the roller and paper moved, causing Mr Yang's right hand to move as well. The Machine gripped Mr Yang's arm in between the embossing roller and the printing roller up to his elbow (photograph 4 at J 15 and photograph 14). 47. Prior to the actual incident date, Mr Yang cleaned the rollers of the Machine approximately four to five times per each shift. Paper got stuck on the embossing roller sometimes never and sometimes often depending on the paper and glue. 48. Mr Yang was unable to free himself from the Machine. Mr Yang's arm was trapped in the Machine for approximately fifteen minutes. Mr Tea used a spanner to remove the bolt from the Machine so that Mr Yang's right arm could be removed from the Machine. 49. Bodily injury was caused to Mr Yang who suffered a soft tissue and muscle injury to his right arm. 50. Mr Yang was off work for a period of four days. Mr Yang returned to his pre-injury duties approximately two months after the date of the accident. Inadequate Guarding of Nip Point of Embossing Roller 51. The rollers in the embossing area of the Machine could only be inched forward to clear any blockage, rather than operated on a manual jog basis, thereby permitting the embossing area to continually move whilst being cleaned. 52. At all material times on the actual incident date, the Machine's embossing roller and inking roller were inadequately guarded. 53. According to Mr de Vries: " … I did have a guard made up that protected the nip area where he got caught - before the accident. It was the same for both machines and I suggest that the operators have taken it out at some point of time. In photograph No. 4 . " System of Work for Cleaning the Embossing Roller 54. At all material times prior to the accident, the system of work for cleaning the print rollers had not been formalised or documented. The corporation had provided on-the-job training to its employees, including Mr Yang, as to the system of operating and cleaning the Machine. An operator would: (a) Isolate the Machine's power. (b) Use the inching pendant (cable type) to rotate the roller. The inching (jog) speed for the Machine and machines similar was approximately 0.5m/sec. The use of a pendant could have assisted Mr Yang in the performance of the task and would have prevented him in having an extended reach to carry out the task. The inching pendant performs the same role as the inching or jogging button referred to in paragraph 46 above. (c) Rub or scrub the dirty roller with a wet rag and/or a wire brush. 55. On the actual incident date, the Machine's inching pendant was not operational. Therefore, Mr Yang attempted to clear a paper build up on the embossing roller in the unsafe manner described in paragraph 46. Information, Instruction and Training & Supervision for Cleaning the Embossing Roller 56. Mr Yang received on the job training to clean the roller on the Machine and there was no formalised, document based training program in relation to cleaning the rollers of the Machine. 57. After the actual incident date, the corporation put in place an administrative control for the cleaning of the rollers as an interim measure. A notice was put on all of the eleven re-winder machines to inform employees of the corporation's requirements for the cleaning of the embossing roller and the pressure rollers. 7 Mr Docking called Inspector Wayne James, who was not required for cross-examination. Through the Inspector, Mr Docking tendered: · an Australian Securities and Investment Commission current company extract for ABC Tissue Products Pty Ltd. The extract demonstrated that the corporation was registered on 18 April 1986 in the name of ABC Tissues Pty Limited before changing its name on 15 September 1986 to the above name. The directors and their date of appointment was: LY, Guech Ning: Appointed 8 July 1993 NGAI, Henry Kei Shing: Appointed 18 April 1986 NGAI, Sunny Siu Kei: Appointed 12 November 1991 LY, Check Ming: Appointed 29 June 2005 · three factual inspection reports of Inspector James dated 24 March 2004, 25 March 2004, 20 September 2004; · a statement of Inspector James dated 6 April 2005. Inspector James stated that he attended the premises of the corporation on 26 February 2004 in response to an incident notification. At the conclusion of his inspection on that day, he issued a prohibition notice in respect of the guarding of the machine Rewinder No 1. Inspector James set out the dates upon which he subsequently visited the premises and when he interviewed various employees; · A document titled "Occupational Health & Safety in the Workplace - Employee Handbook" issued by ABC Tissue Products Pty Ltd. · 24 colour photographs showing the Rewinder No 1 machine from various angles, its rollers, paper feed end, its belts and wheels inside the cabinet and access to them, mesh guards and padlocked doors through which access to the machine could be gained; · ABC Tissue Products Pty Ltd OHS Consultation documents which included a number of hazard reports; · a Memorandum to Machine Operator (Rewinders) - Safe Operating Instructions for Cleaning Rollers dated April 2005; · Notice under Section 62 of the Act to obtain information, documents and evidence to Guech Ning Ly; · the Master Tape of Record of Interview between Inspector James and Guech Ning Ly that took place on 16 August 2005, together with the transcript of the record of interview and a declaration by the transcription typist; · Notice under Section 62 to Sunny Shu Kei Ngai; · Master Tape of Record of Interview between Inspector James and Sunny Shu Kei Ngai which took place on 15 August 2005, together with a transcript of the tape recording and a declaration from the transcription typist; · a Summons for Production of documents directed to ABC Tissue Products Pty Ltd; · a flow Chart showing safety responsibility within the corporation together with the corporation's OH&S Policy; · a Prior Convictions Certificate of the corporation showing five prior convictions; · a summary of the travelling records of Mr Henry Ngai; · ABC Tissues General Working Procedures for all Machines together with Certificate II in Transport and Distribution (Warehousing) for Ji Yung Yang dated 13 June 2002; · copies of various Hazard Reports in respect of Rewinder Machine; · OHS Consultation Statement dated June 2003; · document setting out related companies in Hong Kong together with list of shareholders and directors; · ABC Tissue Products Pty Ltd Minutes of Management Meetings about OHS Management System held on 11 April 2006; · Minutes of the Management OHS briefing by Gary Rowe dated 26 April 2006; · Executive Safety Report for the month of April 2006; · Minutes of the Management of OHS briefing by Gary Rowe dated 29 May 2006; · Executive Safety Report May 2006; · Executive Safety Report June 2006; · Executive Safety Report July 2006; · Minutes of the Management OHS briefing by Mr Gary Rowe on 9 August 2006; · Executive Safety Report August 2006; · Minutes of Senior Management OHS briefing by Mr Gary Rowe dated 22 September 2006; · ABC Group Management OHS Agenda for 15 November 2006, 21 December 2006 and 1 February 2007. 8 Mr Docking called the following witnesses: (i) Mr Ji Yun Yang, a machine operator employed by the corporation; (ii) Mr Daryl de Vries, a production manager employed by the corporation; (iii) Mr Kuong Srung Tea, a supervisor employed by the corporation; (iv) Mr Chek Houy Ly, a Night Shift Manager employed by the corporation; (v) Mr Chek Ming Ly, the General Manager for the corporation; (vi) Mr Henry Ngai, the Managing Director of the corporation.

Each witness was required for cross-examination. 9 Mr Yang, who gave evidence through a Mandarin language interpreter, was employed as a machine operator with the corporation at the time of the incident. He had been employed for approximately five years prior to the incident. A part of Mr Yang's duties was to clean the rollers on the Machine. Mr Yang was working on the machine when he was injured, cleaning the roller. He gave evidence that he had to stop the machine before cleaning it. This was standard procedure. Mr Yang said that before he was injured he had not seen Ms Ly in the area of the factory where he worked, nor had she ever talked to him about his work at the factory. Mr Yang gave evidence that before the accident he did not know Mr Sunny Ngai. He could not recall if he had ever seen him in the factory where he worked. 10 In cross-examination, Mr Yang agreed that the machine had stopped because paper had got stuck in the rollers. This required him to remove the paper, clean the rollers and feed the paper back into the rollers. 11 Mr Daryl de Vries, who has been employed by the corporation for approximately 15 years, has held the position of Production Manager for the corporation since 1998. Before taking up this position, Mr de Vries was involved in building and maintaining machines for the corporation. He holds a Bachelor of Engineering (Mechanical) and a Graduate Diploma in Engineering (Maintenance Management) and is a Member of the Institute of Engineers of Australia. He is also certified as a professional Engineer. 12 Mr de Vries' gave evidence that when he initially commenced working for the corporation, it had a single site at 34 Redfern Street, Wetherill Park. In approximately 1995 the corporation acquired 62 Redfern Street, Wetherill Park. At the date of the incident, Mr de Vries spent 95 per cent of his time at his office at 62 Redfern Street, Wetherill Park. Mr de Vries' recalled seeing Ms Ly at both sites. The majority of the time he saw her at 34 Redfern Street and occasionally at 62 Redfern Street. Mr de Vries saw Ms Ly mostly on the phone speaking in Chinese. Ms Ly had an office at 34 Redfern Street and from time to time, Mr de Vries would have a conversation with her about work. 13 There is a factory located at each of the sites. At the time of the accident tissue folders, napkin folders, finished goods and jumbo rolls were housed at the 34 Redfern Street site. Approximately 50 per cent of the site was used for storage with the other 50 per cent housing machinery. The factory at 62 Redfern Street was twice the size of that at 34 Redfern Street and housed machines. 14 Mr de Vries gave evidence that he saw Ms Ly at 62 Redfern Street with Mr Henry Ngai, her husband, showing what he thought were dignitaries or perhaps bank managers around the factory. This occurred approximately once a month. The site, on Mr de Vries evidence extended to 72 Redfern Street, which was part of the overall site extending from 62 Redfern Street. The machine, the subject of the incident was situated on this site. The three factories located at 62 - 72 Redfern Street are interlinked and Ms Ly and Mr Ngai were able to walk through the three factories without going outside. 15 Mr de Vries said he knew Mr Sunny Ngai. Although he never saw him perform work in the factory, he saw him on or before 21 February 2004 in his office, which was located upstairs at the front of 34 Redfern Street. He also observed him, from time to time, in the factory premises attached to 34 Redfern Street generally showing buyers from Woolworths or Coles or other supermarket chains around the factory. 16 Mr de Vries gave evidence that he had three "bosses": Chek Ming Ly, Houy Ly and Henry Ngai. Chek Ming Ly would look after, what was described as the front office, dealing with day-to-day business and external contracts. Houy Ly would deal with the factory (which I infer meant that he would ensure it was functioning properly) and Henry Ngai was the General Manager. Mr Henry Ngai was described by Mr de Vries as the final decision-maker. Employees would go to him with business decisions that had to be made. 17 Mr de Vries said that both he and Mr Houy Ly were responsible for the operation of the machines at the three premises at 62 Redfern Street before 21 February 2004. Mr Houy Ly was the Supervisor for night shift and Mr de Vries worked during the day. Mr de Vries had the authority to implement improvements or modifications to the machines. Mr de Vries gave evidence that Mr Siva, or Mr Houy Ly, or himself, had the authority to engage external maintenance persons to work on the machines. Mr de Vries and Mr Siva had Safety Inspection Lists for the machines, to enable them to check that guard doors were working, and in particular, that guard switches and emergency stoppers were working. Mr Siva was the Safety Officer who was responsible for implementing safety audits. Mr de Vries was unsure if the Safety Inspection List was in the form of a written document. 18 Mr de Vries said there was no system in place to report the state of guarding on the machines to any of the directors of the corporation. If a guard was missing from a machine, Ms Ly would probably be "one of the last people [he] would want to talk to about it" as there were many people in the chain-of-command who would be more important to talk to than her. He expressed a similar opinion in respect of Mr Sunny Ngai. Mr de Vries gave evidence that he saw little point in reporting guarding matters to Mr Sunny Ngai because in his opinion Mr Sunny Ngai exerted no control over the maintenance people and there were more senior people in the company he could talk to about such an issue. He said the first person he would talk to would be Mr Siva. If he saw a serious safety issue, he would approach Mr Siva before approaching Mr Henry Ngai, Mr Sunny Ngai or Ms Ly. Mr de Vries did not rule out speaking to Mr Sunny Ngai or Ms Ly about a safety issue. Mr de Vries said he was not given any written instructions as to what the responsibilities of the directors were prior to 21 February 2004. 19 During cross-examination, Mr de Vries stated that Ms Ly and Mr Gary Lim were responsible for purchasing jumbo rolls of paper that were used to make smaller packaged tissue paper and napkins. Mr de Vries said he spoke to Ms Ly on occasions about the quality of the paper the corporation was getting from overseas. He also said he may have spoken to her in very broad terms about production. Mr de Vries understood Mr Sunny Ngai's role to be in charge of all sales and marketing for the corporation in Australia. 20 Kuong Srung Tea gave evidence through a Cambodian interpreter. Mr Tea has been employed by the corporation since 29 July 1996. He was initially employed as a Leading Hand before he was promoted to the position of Supervisor, which occurred after the incident. In his position of Leading Hand, he was required to inspect the machines. Mr Tea gave evidence that his duties included ensuring that if a machine were not working, he would organise for it to be inspected and repaired, if necessary. He worked night shift and did not know Ms Ly or Mr Sunny Ngai. Mr Tea said he reported to Mr Houy Ly. 21 Mr Chek Houy Ly gave evidence through an interpreter of the Cambodian language. Mr Ly, who is employed as the Night Shift Manager, commenced employment with the corporation in 1987. He said he was not provided with a written statement of his duties by the corporation. 22 Mr Ly is Ms Ly's brother and thus Mr Henry Ngai's brother-in-law. He gave evidence that he did not see her at the factory before 21 February 2004 nor did he see Mr Sunny Ngai at the factory although occasionally he saw him inside the office at 34 Redfern Street. Mr Sunny Ngai is Mr Ly's nephew. Asked what he would do if a machine broke down, his evidence was that he would report it to Mr Check Ming Ly, who held the position of Manager and not to Mr Sunny Ngai. Such reports were made orally. Mr Siva would also assist him from time to time, as would Mr de Vries. Mr Ly said that he did not speak to Mr Henry Ngai about work matters. 23 Mr Chek Ming Ly gave evidence through an interpreter. Mr Ming Ly has been employed by the corporation since 1986, when it commenced operating. He currently holds the position of General Manager and become a director in 2005. He explained his role as "making sure everything was safe". He is in charge of the day-to-day operations at the factory. Mr Ming Ly normally works day shift. He did not have a duty statement. 24 Mr Ming Ly acknowledged that he had pleaded guilty to a charge relating to the general failure to guard the Rewinder Machine No 1 and to a charge dealing with the specific nip point. Mr Ming Ly is yet to be sentenced. 25 Mr Ming Ly gave evidence that before 21 February 2004, a special sensor had been put on the machine to minimise the risk of injury. The effect of his evidence was that if what was described as the red cord (sensor) was broken, the machine would stop. 26 Mr Ming Ly explained that prior to 21 February 2004 he was involved in ensuring safety at the factory. He gave evidence that he ordered guards to be placed on machines and that sometimes the guards were taken off because a door to the machine did not close properly. His evidence was that he was primarily responsible for safety and the day-to-day operations of the Rewinder machines. The Production Manager, Mr de Vries was also responsible for safety and the day-to-day operation of the machines. Mr Houy Ly was responsible for the machines on night shift. 27 Mr Ming Ly said that before 21 February 2004, he knew Mr Henry Ngai. His evidence was that if a machine(s) needed a new guard, or if guards changed, he had the authority to approve such work without having to obtain approval from Mr Henry Ngai. Mr Henry Ngai is Mr Ming Ly's Brother-in-Law. Mr Sunny Ngai is Mr Ming Ly's Nephew. 28 Mr Ming Ly stated that Mr Sunny Ngai was involved in sales and marketing and on occasions he spoke to him about sales. His evidence was that Mr Sunny Ngai had an office upstairs at 34 Redfern Street, Wetherill Park. On occasions he saw him in the lunchroom and accompanying people walking around the factory. He said he was never given any instructions about the work he was doing by Mr Sunny Ngai. 29 Ms Ly is Mr Ming Ly's sister. Although he saw Ms Ly at the factory, he never spoke to her about his work. His understanding was that her role was to purchase jumbo rolls of paper from overseas. On occasions when there was no paper, he would ask her to order it. 30 Mr Ming Ly gave evidence he was not required to report any problems in respect of the guarding of machines to Ms Ly or any of the Directors because there was no limit on the money he could spend in respect of the corporation's safety. He said that on occasions he spoke to Mr Henry Ngai about the machines but not the other Directors. 31 Mr Ming Ly gave evidence that the corporation did not have Board meetings, but on occasions, meetings were held between Mr Henry Ngai, Mr Sunny Ngai and Mr Ming Ly to discuss marketing if the sales slowed down or if there was a price change. Such meetings did not include Ms Ly. He only discussed the purchasing of jumbo rolls with Ms Ly and on occasions complained about the quality of the jumbo rolls. Prior to 21 February 2004, Mr Ming Ly observed Ms Ly in the factory on occasions in the company of bankers. 32 Mr Ming Ly undertook some on-the-job training in approximately 1996 or 1998 with Mr Siva when he employed someone from outside the corporation to conduct occupational health and safety training. Mr Ming Ly sent Mr Siva to TAFE to undertake occupational health and safety course. Mr Siva was required to report any safety issues to Mr Ming Ly and not the other Directors. 33 During cross-examination, Mr Ming Ly stated that Mr Siva had been employed for approximately six to eight years with the corporation and that he relied on him for safety matters. He worked on safety matters with him on a day-to-day basis. 34 Mr Ming Ly acknowledged that he had built the company up with Mr Henry Ngai since it was established in 1986. He looked after the production side, whilst Mr Henry Ngai looked after the financial side. This resulted in him learning more about the equipment over the years and about safety issues, which were left to him. He was the decision-maker in respect of spending money on the safety side of the business. 35 As the company grew, the number of machines increased. The company commenced operations with two machines and approximately five employees. There are now over 300 employees. When Mr Sunny Ngai was appointed to the marketing role, sales increased. 36 Prior to 21 February 2004, Mr Ming Ly said he had no discussions with Mr Sunny Ngai about any employees being injured in the factory or in respect of fines imposed for breaches of safety after accidents. Mr Ming Ly gave evidence that after the incident, an occupational health and safety consultant, Mr G Rowe, was engaged by the corporation. It was not until 2005 that he advised Mr Sunny Ngai of the incident involving Mr Yang. This was after Mr Sunny Ngai received a notice from Inspector James of WorkCover who was investigating the incident. This was the first time that he had had any discussions with Mr Sunny Ngai about safety matters. At this time, Mr Sunny Ngai assumed the role for safety matters in the corporation and became a member of the Occupational Health and Safety Committee. Ms Ly was not involved in these discussions, nor was she ever a member of the Safety Committee. 37 Mr Henry Ngai is the Managing Director of the corporation, which he established in 1985. At the time the company was incorporated, there were two Directors, Mr Henry Ngai and his daughter Anna Lai Chang Ngai, as it was necessary for there to be two directors and shareholders at the time. 38 Mr Henry Ngai has pleaded guilty to two charges that arise out of the incident that occurred on 21 February 2004. Mr Henry Ngai is yet to be sentenced. Mr Henry Ngai could not recall being told of convictions being entered against the corporation by the Chief Industrial Magistrate on 7 March 2001 and 8 November 2004. He gave evidence that he was only informed about these convictions prior to giving evidence in these proceedings. He stated that Mr Ming Ly, his brother-in-law managed the employees and he managed the finances. The incident, the subject of these proceedings, occurred when Mr Henry Ngai was overseas. He was informed of this incident upon his return. 39 Mr H Ngai stated that the corporation had no systems in place that required him, as the Managing Director, to be told that fines had been imposed on the corporation in respect of breaches of the Act. The reason for this was that Mr Ngai's Brother-in-Law, Mr Ming Ly, in his role as General Manager, was responsible for the employees and all health and safety matters in the factory. Mr H Ngai gave evidence that he told Mr Ming Ly to attend to anything he needed to do in respect of the employees or occupational health and safety issues. He was not required to report any such decisions he made to Mr H Ngai. 40 Mr H Ngai said he would talk to Ms Ly, his wife, about the purchasing of jumbo rolls, but could not recall talking to her about work matters generally before March 2004. Mr H Ngai stated it was a family business and his wife would use his office. His evidence was "there is no clear separation of offices because it is a family business and people can come in". In response to questions whether he talked generally about the work of the company to anyone, Mr H Ngai said he talked only about sales to Mr Sunny Ngai. Mr H Ngai stated that some times he would walk around the factory but "not too much". He did this to say hello to his staff. Mr H Ngai acknowledged that Ms Ly, from time-to-time, would accompany bankers on tours of the factory, so they could view the machines. I infer that such tours occurred prior to a bank determining an application by the corporation for a loan. However, Mr H Ngai's evidence was that he would reprimand Ms Ly if he became aware that she was walking around the factory because she had no knowledge of the machines and he considered it dangerous, particularly as there were forklifts moving around the factory. He said that Ms Ly was responsible for purchasing and that she had no knowledge about the machines. He was concerned that if she were injured, she would not be able to look after him. 41 Mr H Ngai gave evidence that before March 2004 and to the present day, he has endeavoured to prevent Ms Ly from going to that part of the factory where the machine are now located. He said she did not come to work every day and he would say to her "not go to the factory, I don't like you to go to factory." He did not want her to be involved in something she did not understand. He accepted that on occasions when he was unwell he would ask her to escort bank representatives around the factory in the company of the Production Manager or Mr Ming Ly. 42 Mr H Ngai stated that, from time-to-time he went overseas on business. He produced a three-page summary of his travelling record, which was tendered in the proceedings. 43 Mr H Ngai stated that as the business is a family business, there were no formal board meetings. Mr H Ngai signs the income tax returns and attends to any payment required to be made to the Taxation Office. The auditing of the business is done by his accountant and Mr Ngai signs the report. Unless there is a need for two directors to sign a document, the directors do not assemble as a board. Mr H Ngai owns 60 per cent of the company. If two directors were required to sign a bank loan or to buy property, they would come together. However, the effect of his evidence was that there were no formal board meetings. Mr H Ngai said there was no need for the directors to meet to discuss production matters or reports because he would speak to Ming Ly or the Production Manager about those matters. He confirmed Ms Ly was responsible for the purchasing of raw materials and Mr Sunny Ngai for selling the products. 44 Mr H Ngai said he was not aware of Mr Sunny Ngai walking around the factory where the machines were located because he believed he was busy with the sales part of the business. He was not prevented by Mr Henry Ngai from walking around the factory but he was urged by him to concentrate on the sales part of the business. 45 Mr H Ngai explained that Mr Ming Ly was responsible for occupational health and safety in the factory. He gave evidence that as Mr Ming Ly is Mr Sunny Ngai's Uncle, if Mr Sunny Ngai involved himself in production or safety issues, that would upset Mr Ming Ly. This reaction was explained on the basis that it is customary in Chinese culture to have respect for your seniors. Mr Henry Ngai was therefore of the view that Mr Sunny Ngai should not tell Mr Ming Ly what to do. Mr H Ngai said he had asked Mr Sunny Ngai to concentrate on sales because the company employs in excess of 300 people and if there are no sales then employees may have to be terminated. 46 Mr H Ngai stated that he only became aware that WorkCover had issued prohibition notices in the past to the corporation, after the incident in March 2004. He acknowledged there was no system in place that required directors to be told that WorkCover had issued an improvement notice. There was also no system in place prior to the 2004 incident, which required the directors, apart from Mr Henry Ngai to be informed if an employee was injured whilst at work. Since the incident involving Mr Yang, such a system has been put in place. It includes informing all the managers on day and night shift and Mr H Ngai that an incident has occurred. The reason why such a system was not in place prior to March 2004, was because Mr H Ngai did not understand that there was an obligation for persons, including other directors to be informed of such incidents. There was no occupational health and safety committee in existence prior to March 2004, as occupational health and safety matters were dealt with by Mr Ming Ly and Mr Siva. 47 During cross-examination, Mr H Ngai stated that from 1985 when he established the company until March 2004, he decided who would carry out particular roles and have responsibility in the company. As more employees were engaged, he continued to allocate responsibility for areas in the business. As an example, Mr H Ngai referred to appointing Mr Sunny Ngai to be in charge of sales and marketing and inviting him to be a director. Mr Henry Ngai said that whilst Mr Sunny Ngai had been responsible for sales and marketing, he did not have any involvement in the management of the company outside that specific area of responsibility, for example, in the production area, or the occupational health and safety area. 48 Mr Henry Ngai gave evidence that Ms Ly, his wife, became a director during 1993. She does not receive any director's fees for her duties, or any salary. She is a shareholder in the company. The role he assigned her was purchasing jumbo rolls. At the time that she was appointed to carry out this role, she did not reside in Australia on a fulltime basis. She carried out her purchasing role from Hong Kong where Mr H Ngai also has a company that produces tissues products. From approximately 2000, Ms Ly commenced spending more time in Australia due, in particular, to Mr H Ngai's health problems. Mr H Ngai said that Ms Ly had no other responsibilities in the company. Mr H Ngai confirmed that it was his decision whether she undertook any other responsibilities in the company. He stated that she had recently resigned as a director of the corporation. 49 Mr H Ngai acknowledged that in order to sign audit documents and approve accounts, it was necessary for two directors to assemble for this purpose. Mr H Ngai provided a document which set out the reporting lines in the company. This document demonstrated that Mr Ming Ly, Mr Houy Ly and Mr Sunny Ngai all reported to Mr Henry Ngai. He said Mr Ming Ly became a director in 2005. Mr Ming Ly had an unlimited budget in respect of safety matters that arose in the Production Department of the factory. 50 Mr H Ngai said that in 2005, Mr Sunny Ngai's role was expanded to include his attendance at occupational health and safety meetings. He was also required to consider how to improve the company's position in that area. He has also been asked to take over the responsibility for the finances for the company in light of Mr H Ngai's pending retirement. Evidence of the Defendants 51 Mr HJ Dixon SC, with Mr D O'Neil of counsel, appeared for the defendants and tendered the following documents: · a job application by Sivagnanasundaram Sivashanmugarajah (known as Mr S Siva) to the company together with Resume and Certificates of WorkCover NSW in respect of courses completed in OHS Risk Management for Supervisors and Managers on 7 and 8 February 2005 and Certificate of Completion of Induction Training for Construction Work dated August 2005; · Mr Siva's Certificate IV from the Western Sydney Institute in Workplace Safety dated 22 September 2000; · Mr Siva's WorkCover Certificate - Introduction to Rehabilitation Co-ordination dated 9 May 2000; · Mr Siva's WorkCover Certificate for attendance at four day Accredited Training Course on Occupational Health and Safety (Committees in Workplaces) Regulation 1999, such attendance being on 21, 22, 28 and 29 February 2000; · Mr Silva's First Aid Certificate dated 24 November 2003; · WorkCover Certificate in respect of Effective Case Co-ordination Training attended on 17 October 2000; · Flow Chart setting out Reporting Lines in the Company and those involved in the Occupational Health and Safety Department before and after August 2005; · Australian Securities and Investment Commission document in respect of the corporation dated 19 February 2007, together with Certificate of Incorporation on Change of Name of Company and the Memorandum and Articles of Association of ABC Products Pty Ltd. 52 Mr Dixon called the defendants to give evidence. 53 Ms Ly gave evidence through an interpreter that she became a Director of the Corporation in 1993 and resigned in approximately January 2007. She received no payment for being a Director, nor did she receive any salary for the work that she performed for the Corporation. Mr Ly gave evidence that she has an investment company in Hong Kong, which has shares in the corporation. 54 Ms Ly described the work that she has been involved in with the corporation since 1993 as purchasing jumbo rolls from overseas. This is the raw product from which tissue products are produced. She stated that her role did not change between 1993 and March 2004. She said she had no involvement in the management of the corporation, apart from being advised by employees of the corporation, on occasions, that the jumbo rolls were not of good quality. Ms Ly had no need to talk to anyone in management about how the business was run. She had no responsibility for safety and her evidence was that she only became aware that she had such responsibility approximately two months prior to these proceedings. Ms Ly said she did not have any knowledge of safety matters, nor was she allowed to take part in discussions regarding safety issues. These decisions were made by Mr Henry Ngai, her husband. She was unable to change her role or position, or do anything within the corporation without Mr Henry Ngai's agreement. This, she said, was the corporation's policy, which was firmly applied. She was required to follow instructions from the Managing Director. 55 Ms Ly gave evidence that she carried out her purchasing work in Australia, Hong Kong and New Zealand. From time to time she would visit suppliers located overseas. She was overseas at the time of the incident. For the majority of the period between 1993 and 2004, she resided in Hong Kong. During the past two years Mr H Ngai has not enjoyed good health, which has resulted in her spending more time with him in Australia. Between 2002 and 2004, about half her time was spent in Australia. In 2002 she spent 106 days overseas; 2007, 137 days and 2004, 182 days. Whilst in Australia, she carried out the work of purchasing rolls from both her home and an office in the factory. It was her decision where she worked. 56 Ms Ly gave evidence that sometimes she would go to the office once a week and on other occasions, twice a week, depending upon whether she had to look after her grandchildren. It was only on rare occasions that Ms Ly would enter the factory. Such occasions would be if a banker came to the factory and Mr Henry Ngai was not available. She would ask her brother, Mr Houy Ly, to accompany her and the banker to the factory. She stated that she did not have the knowledge to make a contribution regarding safety at the factory. Ms Ly concentrated on purchasing. Her evidence was that she also did not have the time to involve herself in other matters, as she had to look after her family. She stated that her English was very basic and she had not been informed about accidents which had occurred at the factory. I infer that she was informed about such accidents prior to these proceedings. 57 During cross-examination, Ms Ly stated that she was a Director of six companies in Hong Kong. Ms Ly gave evidence that she has a manager looking after those companies. One of these companies, Hong Kong Overseas Investment Limited owns 3,897,754 shares in the Corporation The sixth company manages the other five companies, who together, employ approximately 32 people. Ms Ly is a shareholder in the company. Some of these employees make up a management team who look after the companies. 58 Mr Ming Ly (her brother) would inform her when raw materials were required by the corporation. Without jumbo rolls, that were supplied either locally or from overseas, the corporation could not produce tissue products. Ms Ly had other employees to assist her in purchasing jumbo rolls. Mr Henry Ngai would accompany her when she was purchasing jumbo rolls overseas. Jumbo rolls were purchased from Taiwan, Japan, Korea, China, Thailand and Indonesia. Some of the purchases were effected by Ms Ly when attending locations overseas and negotiating face-to-face with suppliers. Prior to taking on the role of purchasing jumbo rolls for the corporation, Ms Ly had no purchasing experience in respect of jumbo rolls. She gained experience in this area by going overseas with her husband. The purchasing of jumbo rolls in Australia was organised by Mr Ming Ly and Mr Gary Lim. 59 Ms Ly could only recall Mr de Vries complaining about the quality of the jumbo rolls about once a year. If there were too many joins in the jumbo roll, this would cause the Rewinder Machines to stop. Ms Ly complained to the overseas supplier(s) when this occurred. Ms Ly did not understand how the plant or the machines operated. Ms Ly could not remember if Mr Ming Ly had also complained about the jumbo rolls prior to March 2004, except for one complaint that the paper was bulky. If there were complaints about the quality of the jumbo rolls, Ms Ly would refer the complaint to the supplier and ask them to send better quality paper on the next occasion. She did not go to the production area and ask about the problems or difficulties with the paper because she did not have any knowledge of the machines. Nor did she ask Mr de Vries or Mr Ming Ly about the problems poor quality paper caused the machines. Ms Ly disagreed that she could go the factory and observe what effect poor quality paper had on the machines. She stated that the Managing Director had put her in charge of purchasing and she did not have any knowledge of the machines, nor did she ask Mr de Vries, Mr Siva or Mr Ming Ly to explain to her the importance of health and safety in the factory. 60 She saw her role as being limited to buying jumbo rolls of paper and was mindful that Mr Henry Ngai did not allow her to do other work. Ms Ly said that she was put into the role of purchasing jumbo rolls because she was the wife of the owner of the corporation. She was not aware that being a Director involved so much responsibility until these proceedings commenced. Ms Ly confirmed her earlier evidence that on occasions she would accompany bankers around the factory, together with Mr Ming Ly or Mr Henry Ngai. During these tours, she did not ask anyone to explain to her how the Rewinder No 1 Machine had to be guarded to ensure it operated safely, as she saw her role as not including looking after the machines. She was not aware that she was required to ask questions regarding the safety of the machines until these proceedings. Tours around the factory with the bankers occurred once or twice a year. 61 Ms Ly gave evidence that she had never received any training in occupational health and safety, nor had she asked to receive such training. She explained this was because there were many people in charge of this area in the corporation. After August 2005 Ms Ly, unlike other directors, did not attend occupational health and safety meetings. When she became aware of her obligations in this area, she chose to resign as a director, stating that it was too much responsibility, particularly when she was an unpaid director. 62 Mr Sunny Shu Kei Ngai is a defendant in these proceedings and a Director of the corporation. In November 1991, after graduating in Electrical Engineering from the University of Sydney, he commenced full-time employment as the Marketing Director with the corporation. He described his role and responsibilities as initially being those of a salesman, selling product to Franklins Supermarkets. His role expanded, as the business grew, to include marketing responsibilities, which involved advertising and researching the products in supermarkets, both in Australia and overseas. 63 Mr Sunny Ngai reported only to Mr Henry Ngai. For many years, Mr Henry Ngai "looked over (Mr Sunny Ngai's) shoulder". Initially, he was required to report frequently to Mr Henry Ngai. This became less, the longer he was with the corporation. He said 99.9 per cent of his time was devoted to sales and marketing, working 12 hours a day, six days a week. His roles and responsibilities were determined by Mr Henry Ngai. In approximately 2004, he undertook the sales and marketing function of the corporation in his own right. In 2006, as a result of Mr Henry Ngai's health problems, Mr Sunny Ngai took over negotiations with the banks. This decision was made by Mr Henry Ngai. 64 Mr Sunny Ngai's office was initially at 34 Redfern Street, Wetherill Park. In 2006, his office was moved to 32 Redfern Street, Wetherill Park. In the three years prior to March 2004, Mr Sunny Ngai spent approximately 70 per cent of his time in the office. Initially, he had no-one working for him in the sales and marketing area. In 1996, after discussions with Henry Ngai, he employed an assistant. By 2000, after the business continued to expand, he employed a further four or five people. By 2004, he had approximately seven people working with him in sales and marketing. 65 From time to time customers wanted to see the factory in operation. Mr Sunny Ngai would ask Mr Ming Ly if it was convenient to take a customer to the factory and give them a quick tour. Mr Ming Ly would explain how the factory operated during the tour, or ask other employees to do so. This occurred approximately twice a year. 66 Mr Sunny Ngai was one of the corporation's joint cheque signatories. He was also required, from time to time, to sign financial reports and land purchase transactions. 67 Mr Sunny Ngai could not recall participating in formal meetings of the corporation during which its business was discussed. On occasions, between March 1991 and March 2004, he said he would sit down with his mother and father, who were also directors, and talk about the business. Normally this occurred during lunch or dinner. There were no meetings at work between the three Directors where management matters were discussed. Mr Sunny Ngai could not recall having any discussions with any Directors or Managers of the corporation between 1991 and March 2004 about any safety matters in the production area of the corporation. He was aware that Mr Siva and Mr Ming Ly were looking after safety matters in the production area. His understanding was that Mr Ming Ly had the ultimate responsibility for safety matters in the production area. 68 In 2006, Mr Sunny Ngai was required to attend occupational health and safety meetings held at the factory. Discussions had initially taken place in respect of occupational health and safety, which involved Mr Sunny Ngai in the first half of 2005. 69 In 2005, the corporation engaged Mr Andrew Douglas, an Occupational Health and Safety Consultant. Shortly after being engaged, he requested a meeting with the Directors through Mr Ming Ly. After this meeting with Mr Douglas, Mr Sunny Ngai had discussions with Mr Henry Ngai regarding occupational health and safety at the factory. Mr Douglas informed the directors that WorkCover was interviewing employees of the corporation in respect of a safety issue. Mr Sunny Ngai spoke to Mr Ming Ly after his discussions with Mr Douglas and was informed by him that there was "no problem, everything ok". Mr Sunny Ngai did not become aware of the incident, which resulted in this prosecution, until his meeting with Mr Douglas. In the first half of 2005, after receiving a report from Mr Douglas, a further meeting took place between Mr Sunny Ngai, Mr Henry Ngai, Mr Siva and Mr Ming Ly. Prior to this meeting, Mr Sunny Ngai said he had not had any discussions with Mr Siva about safety matters in the corporation. 70 In his record of interview with Inspector James, Mr Sunny Ngai stated that the Directors of the corporation did not have regular Board Meetings. He gave evidence that the Board only met once a year, which he explained was to sign "half yearly financial statements". At this Board Meeting, he stated that occupational health and safety issues were discussed informally with "Ming reporting and then we are given a budget to do." In oral evidence, Mr Sunny Ngai clarified this evidence by stating that he was referring to a meeting in February or March 2005 when Mr Ming Ly presented a budget concerning occupational health and safety. Mr Sunny Ngai said that Mr Ming Ly was advising Mr Henry Ngai that some changes he had introduced regarding safety in the factory were expensive. Mr Sunny Ngai attended this meeting to co-sign financial reports. He recalled Mr Henry Ngai directing Mr Ming Ly to do everything he needed to do regarding safety because he did not know what was required. 71 Inspector James also asked Mr Sunny Ngai whether the Board received feedback in respect of any safety improvements. He said this did not occur during the meetings he attended. Mr Sunny Ngai explained that feedback on safety improvements in the factory were provided through talking to Mr Ming Ly and Mr Siva. In oral evidence, Mr Sunny Ngai clarified this answer to mean that after 15 August 2005, there were regular discussions between himself, Mr Henry Ngai, Mr Ming Ly and Mr Siva regarding these matters. He confirmed that he did not attend meetings with other Directors prior to March 2004, during which feedback was provided to the Directors about safety improvements made in the corporation. Prior to February 2004, Mr Sunny Ngai's evidence was that he did not talk at all on a regular basis to either Mr Ming Ly or Mr Siva about occupational health and safety matters. Although this suggests that there were some irregular discussions about occupational health and safety, the evidence was not clarified and Mr Ming Ly's evidence was there were no discussions prior to February 2005. Therefore, being mindful of the nature of these proceedings, I do not propose to infer such discussions occurred. However, Mr Sunny Ngai's evidence was that if a machine stopped, thus affecting production, he would sometimes contact Mr Ming Ly and enquire what had happened. I infer from this evidence that Mr Sunny Ngai would be informed of the reason for the stoppage of the machine. Such reason would, of course, include a paper blockage, a mechanical problem, or an accident. 72 Mr Sunny Ngai confirmed that after meetings with Mr Douglas in 2005, he became aware that an occupational health and safety system was implemented in the factory and instruction and training in respect of that system was provided to employees. Mr Ming Ly and Mr Siva also informed him of the Occupational Health and Safety system. Mr Sunny Ngai was aware that Mr Siva was employed in about 1999 to deal with safety matters at the corporation. Immediately prior to his interview with Inspector James, Mr Sunny Ngai and Mr Henry Ngai had day-to-day discussions about safety matters. Mr Sunny Ngai's evidence was that he did not participate in any Board Meetings prior to 21 February 2004 where approval was given for a budget in respect of safety matters. 73 Asked by Inspector James whether the corporation had any other consultative process for safety issues, Mr Sunny Ngai said: Now we have after, after when you have request to see the directors then we start to investigate the, what went wrong with Ming and Silva and we have identified that they need a lot of help from outside consultants and we immediately, the board immediately engage Andrew, that is the lawyer, as well as Steve as the practical guy and Gary to give us, an outsider professional opinion of what we need to do to bring up to speed with OH&S. In the past is my fault, my fault too I was believing that because we satisfy all the improvement Notice and most of them in lately, all on time, I thought we doing what is required under the OH&S WorkCover law and obviously after engaging the outside consultants, what we find that we not supposed to get an Improvement Notice at all. We should be more proactive in chasing up what is outstanding and continuing to improve in our workplace to make it actually no Improvement Notice is right. In the past my wrongful perceptions but from talking to Ming and Siva was fixing the Improvement Notice this enough. Now our mentality is proactive safety first and continue improvement and don't want to get any Improvement Notices again. 74 Mr Sunny Ngai explained the use of the words "Now we have after ..." as being a reference to receiving an Improvement Notice from WorkCover in late July 2005. Mr Sunny Ngai also clarified the reference to "we satisfy all the improvement Notice" as being a reference to a meeting with Mr Douglas during which he was informed by Mr Ming Ly and Mr Siva that they had satisfied all Improvement Notices, which the corporation had received in the past. He said he only acquired this knowledge prior to the interview with the Inspector on 15 August 2005. He also said he attended an occupational health and safety course at the corporation's premises on the Saturday prior to his interview with Inspector James where he learnt about improvement notices and that it was not a question of satisfying them, but rather ensuring that such notices were not received. This, he explained, was the basis for his reference to "wrongful perceptions", which he had gained from discussions with Mr Ming Ly and Mr Siva, that they were attending to all improvement notices. 75 In July 2005, Mr Sunny Ngai said Mr Henry Ngai told him to become proactive in respect of occupational health and safety. This direction occurred shortly before the interview with Inspector James. Mr Sunny Ngai could not recall whether his mother, Ms Ly, participated in the meetings that occurred in July 2005 regarding occupational health and safety. His evidence was that he did not have any discussions with her prior to the first half of 2005 regarding any safety matters. 76 Mr Sunny Ngai stated that he was not a party to any discussions with Mr Ming Ly about safety matters prior to the first half of 2005. Mr Sunny Ngai was asked by Inspector James, in his record of interview, what he had done as a Director before 21 February 2004 to prevent access to the machines. Mr Sunny Ngai answered as follows: Our systems? I was led to believe that it is continuing safety issue in term of guarding every machine is happening and I was led to believe that there was a system in place to prioritise the machines according to the risk and we also spending close to two or three hundred thousand dollar a year, as far as I know, to put guarding on to the machines and put any lock necessary to keep people out. So I cannot say whether we have done it, this machine or after we are spending a lot of monies on OH&S issues and but we know that the site is, actually make it an absolute top priority in organisation for safety and even mean that we have to be more involved in the future. More actively involved in the future down to the lower on the lower level and continue safe. 77 This knowledge was acquired by Mr Sunny Ngai from discussions with Mr Ming Ly and Mr Siva in preparation for the interview with Inspector James. Mr Sunny Ngai said he did not know what an improvement notice or prohibition notice was prior to his discussions with Mr Siva and Mr Ming Ly which took place shortly before his interview with Inspector James. 78 During cross-examination, Mr Sunny Ngai acknowledged that he had informal meetings with Mr Ming Ly from time to time, most likely in the lunchroom, where Mr Ming Ly would inform him that he was out of stock of a certain product and ask him for help in chasing it up. He confirmed that Mr Henry Ngai did not allow him to deal with health and safety matters prior to March 2004, although he did not stop him going to the factory with customers. Mr Sunny Ngai stated that he did not know whether a machine should or should not have guards on it until his involvement with Mr Douglas after the incident. His evidence was that he observed guarding on the machines in 2005. However, he stated that he did not have the knowledge to ask about the guarding of machines prior to March 2004. Mr Sunny Ngai accepted that the only reason that would have prevented him asking about the guarding of machines prior to March 2004 was that he did not have any occupational health and safety knowledge. His evidence was that he would have to ask Mr Henry Ngai first before approaching Mr Ming Ly to discuss safety matters. He acknowledged that prior to March 2004 he never asked Mr Henry Ngai if he could approach Mr Ming Ly or Mr Siva to ask them to explain to him the importance of guards on machines. 79 Mr Sunny Ngai gave evidence that Mr Henry Ngai did not instruct him to get involved in occupational health and safety. However, he said he did advise him to concentrate on sales and marketing. Mr Sunny Ngai recalled his mother, Ms Ly, attending meetings organised by Mr Gary Rowe and the National Occupational and Safety Manager, Mr Steve Johnson, after August 2005 and in 2006. These meetings occurred once every two months with Ms Ly missing up to three of them. Mr Sunny Ngai stated that in the first half of 2005, Mr Douglas brought occupational health and safety matters to Mr Sunny Ngai's attention and explained why workers were to be interviewed by WorkCover and that the Directors could be prosecuted for the incident in February 2004. Mr Sunny Ngai said he learnt a lot more about occupational health and safety through his discussions with Mr Douglas. 80 Mr Sunny Ngai was asked by Inspector James what he had done as a Director before 21 February 2004 to prevent access to the area where the Rewinder Machine was located. His answer was as follows: We, I have been talking to Ming and Siva in term of whether they need monies to put safety guard and, around the machines and whether we are doing everything that WorkCover ask us to do and the answer from them is always yes, although we can't do everything immediately but we always meet the Improvement Notice on time and things, so I was led to believe that we done everything we could in a timely, timely manner according to the risk before I could, yeah not in any particular machines, but overall I thought we, our company were in a good standing in term of the safety by continue improving it and as I said before I believe that yes we have done things but is not enough and we have our staff need external professional help to get it correctly and be more proactive. 81 Mr Ngai was asked whether he was certain at the time he gave this answer what he had done as a Director prior to 21 February 2004. He answered "no". 82 At the conclusion of Mr Sunny Ngai's evidence, Mr Dixon sought to tender the Articles of Association of the corporation. Mr Docking objected to the tender and submitted that if the Articles were admitted, he required both personal defendants to be recalled for cross-examination and the Articles to be formally proved. 83 Mr Bill Li, a Chartered Accountant and the corporation's Accountant, was called for this purpose. I admitted the Articles of Association of the corporation. 84 Mr Sunny Ngai was recalled for cross-examination and gave evidence that he had not read the Articles of Association before he gave evidence, nor had he heard Mr Henry Ngai ever mention the Articles of Association prior to March 2004. 85 Mr Henry Ngai was also recalled for further cross-examination. His evidence was that when he decided to establish the corporation, he engaged an Accountant, Mr Yip, and gave him instructions that he wanted to have total control of the corporation. Mr Henry Ngai said that he instructed Mr Yip to prepare the Corporation's documents to ensure this occurred and that other Directors would only be entitled to exercise such control as he allowed. He explained that the reason he took this approach was that he was worried that people may sell the corporation or do something wrong to it. Mr H Ngai said Mr Yip informed him that he was protected and had "total rights". 86 Ms Ly was also required for further cross-examination. Ms Ly stated that she could not read the Articles of Association because they were in English. She said they had never been translated into a language that she could read. She gave evidence that she had never heard Mr Henry Ngai or Mr Sunny Ngai talk about the terms of the Articles of Association of the corporation. 87 The evidence enables the following findings to be made:

(a) Corporate Background and Structure 1. ABC Tissue Pty limited (ACN 003 0$5 112) was incorporated as a proprietary company on 18 April 1986.

On 15 September 1986 ABC Tissue Pty Limited changed its name to ABC Tissue Products Pty Limited, retaining the same ACN - 003 085 112 ("the Corporation", "ABC").

The Managing Director and the majority shareholder was the founder of the company, Mr Henry Ngai.

The Articles of Association of the company authorised Mr Ngai, during his lifetime, to assume the role of Governing Director of the company.

The Articles of Association bestowed upon the Governing Director Mr Henry Ngai, wide ranging powers to the exclusion of powers otherwise available to other directors.

Mr Sunny Ngai became a director of the company in 1991.

Mr Sunny Ngai was appointed a director by Mr Henry Ngai.

Ms Ly was appointed a director by Mr Henry Ngai.

Ms Ly does not receive any payment from the company.

Ms Ly is a director of and shareholder in Hong Kong Overseas Investment Limited, which company owns 3,897,754 shares in ABC.

Prior to 21 February 2004 the company did not hold formal board meetings.

Mr Henry Ngai decided whether the board needed to meet.

Prior to 21 February 2004 the directors, at the direction of Mr Henry Ngai, signed annual financial statements.

14(a) At such meetings as did occur, discussions were limited to sales and marketing

Mr Ming Ly was the general manager of the company at all relevant times.

Mr Ming Ly joined the company shortly after it commenced in 1986.

From the beginning of his involvement Mr Ming Ly was responsible for all aspects of production.

Mr Henry Ngai saw himself as (and was) the father, most senior director and major shareholder and as such had every entitlement to have the say in how the business was conducted. He had responsibility for the family and the company. (b) Roles of Mr Sunny Ngai and Ms Ly 19. The areas of responsibility within the company were clearly defined and separate.

20. Mr Henry Ngai fixed the duties of Mr Sunny Ngai. 21. The duties of Mr Sunny Ngai were fixed to the following: (i) Sales (ii) Marketing (iii) Signing of cheques (iv) Signing of documents for the bank and land transactions (v) Showing premises and plant to purchasers of production 22. Mr Sunny Ngai confined himself to the duties fixed by Mr Henry Ngai.

23. Mr Sunny Ngai did not have and did not exercise any management responsibility beyond the duties fixed by Mr Henry Ngai. 24. Mr Sunny Ngai devoted 99.9% of his time to sales and marketing, working at least 12 hours per day up to six days per week.

26. Mr Henry Ngai fixed the duties of Ms Ly to the following: (i) Purchasing of bulk paper generally

(v) Showing the premises and plant to bankers when requested 27. Ms Ly confined herself to the duties fixed by Mr Henry Ngai. 28. Ms Ly did not have, and did not exercise, any management responsibility beyond the duties fixed by Mr Henry Ngai. 29. Ms Ly's day to day work included: (i) travelling overseas (ii) discussions with overseas customers on the telephone (iii) visiting the factory for the purpose of showing sellers, bankers and other dignitaries through the factory She was not required to attend the corporation's premises to perform her purchasing work and could, and did do so, from any location. 30. Ms Ly travelled overseas to purchase raw material. 31. Mr Henry Ngai taught Ms Ly how to purchase the relevant raw material. 32. Ms Ly was away for the following number of days in the years indicated: (i) 2002 106 days (ii) 2003 137 days (iii) 2004 182 days 33. Mr Henry Ngai accompanied Ms Ly on her overseas trips. 34. Ms Ly was out of Australia as at the date of the incident. 35. Both directors conducted themselves in conformity with Mr Henry Ngai's directions in regard to the company's business and in particular, in regard to any role, duty or responsibility. In particular they did not play any role or undertake any duty or responsibility beyond those determined by Mr Henry Ngai. 36. Mr Henry Ngai did not permit any involvement in the management of the company by either of the two defendants. 37. Mr Sunny Ngai and Ms Ly could not change their role or positions. They could not go behind Mr Henry Ngai and change the way things were done in the company. (c) Production 38. Mr Ming Ly was responsible for all aspects of production. 39. Neither Mr Ming Ly, Mr Siva nor Mr De Vries sought or received any instruction or advice from Ms Ly or Mr Sunny Ngai in respect of the management of the company and, more particularly, the management of production where the contraventions by the corporation occurred. 40. The contraventions by the corporation occurred in the production area. 41. Ms Ly had no knowledge of the machinery used in the factories. 42. Neither of the defendants had any other responsibility for production. 43. In accordance with the manner in which the business was structured sales and marketing was not part of production, but a separate area of responsibility. 44. In accordance with the manner in which the business was structured purchasing of raw material was not part of production but a separate area of responsibility and function. (d) Safety 45. Mr Ming Ly had overall responsibility for safety within the production area of the business. 46. Mr Ming Ly from time to time had informal meetings with Mr Henry Ngai concerning the management of the company or concerning safety matters. 47. There was no participation by either defendant in informal meetings held between Mr Henry Ngai and Mr Ming Ly concerning the management of the company or concerning any safety matters. 48. Neither Mr Ming Ly, Mr Siva nor Mr De Vries sought or received any instruction or advice from Ms Ly or Mr Sunny Ngai in respect of safety. 49. Mr Ming Ly had an unlimited budget in respect of any safety matter. 50. The budget in respect of safety was authorised by Mr Henry Ngai. 51. Mr Ming Ly employed others to assist in respect of safety, including Mr Siva Siva and Mr Daryl De Vries. 52. Qualifications of Mr Siva Siva were as follows: BE Mechanical Engineering, Masters in Manufacturing. 53. The Qualifications of Mr Daryl De Vries were as follows: Bachelor of Engineering (Mechanical), Grad Dip in Engineering, Maintenance Management. 54. Prior to 2005 neither of the defendants had any knowledge of occupational health and safety breaches nor did they have any knowledge of any improvement notices or prohibition notices served on the company. 55. Prior to being interviewed by Inspector James neither of the defendants had any knowledge of any improvement notices. 56. Neither Sunny Ngai nor Ms Ly had any knowledge of any prohibition notice. 57. At the time of interview Ms Ly had no knowledge of hazard or incident reports. 58. At the time of the hearing Ms Ly said she did not have the knowledge to make a contribution to make the company safe. 59. At the time of interview Ms Ly had no knowledge of the meaning of responsibilities under the Act. 60. Ms Ly was never consulted in relation to any safety issues and had no role to play in any safety issues. 61. Ms Ly was not allowed to take part in safety issues. 62. Ms Ly had no conversations with any person or persons in relation to safety issues. 63. Neither of the defendants had any knowledge of the particular breaches giving rise to the contraventions by the corporation. 65. Ms Ly had no knowledge or expertise in respect of safety. 66. Mr Henry Ngai held the view that it was wrong to allow directors to involve themselves in areas they didn't know about including safety areas. His evidence included the following: "You not know about or understand safety maybe you do something wrong" "Not involve in something you not understand" 67. There was no system in place prior to 21 February 2004 regarding the directors generally nor Mr Henry Ngai himself being told of: - prosecutions - prohibition notices - improvement notices - injuries 68. Mr Sunny Ngai did not seek approval from Mr Henry Ngai to learn or become involved in safety matters. 69. He did not do so because it was not his role. 70. Ms Ly did not do so because it was not her role. (e) Relevant Events Post-Incident 71. After the contraventions by the corporation giving rise to these charges Mr Henry Ngai required My Sunny Ngai to have involvement and responsibility in respect of safety. 72. Mr Sunny Ngai had no authority in respect of the management of safety issues in the company until told by Mr Henry Ngai to get involved in safety. This occurred in approximately 2006. 73. Mr Henry Ngai, in 2007, told Ms Ly to resign as a director. 74. Since about 2005 Mr Sunny Ngai became involved in finance. These additional duties were allocated to him at the direction of Mr Henry Ngai. 75. After 2005 Henry Ngai established the new system of all directors needing to know about safety. Consideration 88 The elements of an offence under s 50(1) of the 1983 Act, the predecessor to s 26(1), were found by the Full Bench in Morrison v Powercoal & Anor (2004) 137 IR 253 at [157] to be: ... 1 There is a corporation; 2 The corporation has contravened, by act or omission, any provision of the Occupational Health and Safety Act 1983 or the regulations made pursuant thereto; 3 The person charged is a director of the corporation or a person concerned in the management of the corporation. The onus of proving these elements beyond reasonable doubt falls on the prosecutor. However, the onus of proving the exceptions, namely, that the person charged: (a) was not in a position to influence the conduct of the corporation in relation to its contravention of the provision, or (b) being in such a position, used all due diligence to prevent the contravention by the corporation, falls on the personal defendant. 89 Spigelman CJ (with whom Mason P and Handley JA agreed), sitting as the NSW Court of Appeal in Powercoal Pty Ltd and Anor v Industrial Relations Commission of NSW and Anor (2005) 145 IR 327; 156 A Crim R 269; 64 NSWLR 406, (in finding no error of law had been made by the Full Bench) said: [109] The structure of s 50(1) is to reverse the onus of proof with respect to persons who are directors or otherwise concerned in the management of the corporation. The original defence in s 50(1)(a), now repealed, was to the effect "the corporation contravened the provision without his knowledge". Together with the continuing provisions of s 40(1)(b) and (c), (sic s 50(1)(b) and (c)) the effect is to require persons to whom the section applies to establish, on the balance of probabilities, matters which would otherwise be required to be established by the prosecution beyond reasonable doubt.

[110] The position is similar to that which the High Court determined to exist in Hookham v The Queen (1994) 181 CLR 450 where, with respect to s 8Y(1) of the Taxation Administration Act 1953 (Cth), the Court was concerned with the formulation: "A person … who is concerned in, or takes part in, the management of the corporation shall be deemed to have committed the taxation offence and is punishable accordingly." [111] In this respect the joint judgment of Deane , Dawson and Gaudron JJ stated at 459: "Section 8Y, in providing that the person is 'punishable accordingly', is not providing for punishment for an offence which was really committed by the corporation and is only 'deemed' to have been committed by that person; it is providing punishment for an offence to which that person is deemed to be a party because of his or her complicity in it." [112] Although the words "and is punishable accordingly" do not appear in terms, the provisions of the defence in s50(a), as originally existing, and (b) and (c) are to similar effect. The Court is concerned with a person who has a level of complicity in the commission of the offence by the corporation. Such complicity arises in a context where persons in a managerial role could have taken steps to ensure that the object of the Act are achieved. 90 The Court of Appeal then went on to discuss the objects of the Act commenting at [116]: The objects of the Act, and the general nature of the duties imposed by the Act, suggest that Parliament did not intend to give the language of s 50(1) a narrow, let alone a technical, meaning. The purposive approach to interpretation required at common law, and now by s 33 of the Interpretation Act 1987 (NSW) , suggests that the words "management of the corporation" should not be read down so as to apply only to central management. 91 The Full Bench in Inspector Jorgensen v Daoud (2005) 143 IR 170 said as follows: [25] We agree with counsel for the prosecution that s 26 does not, of itself, create an offence. Rather, the actual offence that the individual is taken to have committed is the same offence committed by the corporation (for example, an offence under s8(1) of the Act). However, that does not suggest that s 26 is not necessary. As counsel for the prosecution correctly identifies, s 26 is the mechanism by which a director or person involved in the management of the corporation is taken to have committed the same offence that the corporation has committed. ...

[32] We also note that counsel for the defendant contended that their interpretation of s 26 was crystallised in the judgment of the Full Bench in Morrison v Powercoal in the following part of paragraph [163] (emphasis added): ... However, a person facing prosecution by virtue of s50 is not the subject of proceedings for an offence against the Act : under s 50, if a corporation has committed an offence against the Act, such a person shall be deemed to have contravened the same provision (subject to the particular requirements of s 50). The very fact of deeming the contravention assumes that the person has not, in his or her own right, actually committed an offence.

[33] Counsel for the defendant submitted that, whilst this related to s 50 of the 1983 Act, it has application for the operation of s 26 of the Act in that it is an almost identical provision to the former s 50 and the only difference is the replacement of the word "deeming" with the phrase "be taken". We agree that there is no material difference between the terms of s 26 of the Act and s 50 of the 1983 Act and, accordingly, turn to consider the statement made by the Full Bench in Morrison v Powercoal . ...

[37] In summary, we consider that an offence is created by virtue of s 26 of the Act but that the offence is a contravention of the actual provision contravened by the corporation (for example, a contravention of s 8(1)). 92 The majority in Newcastle Wallsend Coal Company Pty Ltd v WorkCover Authority (NSW) (Inspector McMartin) (2006) 159 IR 121 said at [470]: As the trial judge observed at [827], s 50 imposes on directors and managers of the corporation a liability for a breach of the Act where the corporation is in breach of the Act subject to the defences provided in s 50(1)(b) or (c). In providing for those defences, s 50(1) reverses the onus of proof that would otherwise rest with the prosecution. 93 Consistent with the Court of Appeal's reasoning in Powercoal at [116] set out at [90] above, it follows, in my view, that the words "each director of the corporation" should not be read down or given a narrow or technical meaning. 94 "Director" is defined in the dictionary to the Corporations Act 2001 in s 9 as follows: "director" of a company or other body means: (a) a person who: (i) is appointed to the position of a director; or (ii) is appointed to the position of an alternate director and is acting in that capacity; regardless of the name that is given to their position; and (b) unless the contrary intention appears, a person who is not validly appointed as a director if: (i) they act in the position of a director; or (ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes. Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body. 95 In this context, "director" has been held to include a person who knowingly assumes the office of director without having been properly appointed: Corporate Affairs Commission v Drysdale (1978) 141 CLR 236. Furthermore, the term "director" as defined in s 9 has been taken to include "de facto" and "shadow directors". These terms have been treated as alternatives and generally regarded as mutually exclusive: Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180; Secretary of State for Trade and Industry v Laing [1996] 2 BCLC 324. The term "director" is not limited in any way by the Corporations Act and I therefore see no reason why the term should be limited when considered in respect of s 26 of the Act. 96 The defendants acknowledged the corporation's contraventions as being established for the purpose of these proceedings. I formally find to the requisite standard that there is a corporation that contravened s 8(1) of the Act and that the defendants were Directors of the Corporation at the time of the contravention. The evidence discloses that Mr Sunny Ngai was appointed a director on 12 November 1991 and Ms Ly was appointed a Director on 8 July 1993. 97 Mr Dixon submitted that a person holding the office of a director of a Corporation which contravenes the Act is deemed liable unless he or she satisfies the burden of proving otherwise by reference to the matters in s 26(1)(a) or s 21(b). Directors may avail themselves of the defence in s 26(1)(a) and to exculpate themselves from liability where they are not in a position to influence the relevant contraventions of the Corporation. In other words, such persons must hold a position as Director which allows them to exercise a level of influence which is real and which relates to particular contraventions. To the extent that the defendants seek to read down the first internal option in s 26, that is, "each director of a corporation" by the second internal option being "each person concerned in the management of the corporation" would, in my view, involve an error of statutory construction. In determining the ordinary meaning of s 26, it is necessary to have regard to the purpose of the legislation and the context of the provision, as well as the literal meaning of the provision: In Saraswati v The Queen (1991) 172 CLR 1, McHugh J observed at 21: ... it is always necessary in determining "the ordinary meaning" of a provision ... to have regard to the purpose of the legislation and the context of the provision as well as the literal meaning of the provision. Sometimes the purpose of the legislation is expressly stated; sometimes it can be discerned only by inference after an examination of the legislation as a whole; and sometimes it can be discerned only by reference to the history of the legislation and the state of the law when it was enacted. It need hardly be said that a particular Act may have many purposes.

In many cases, the grammatical or literal meaning of a statutory provision will give effect to the purpose of the legislation. Consequently, it will constitute the "ordinary meaning" to be applied ...

98 As the Full bench observed in Morrison v Powercoal at [170]: It is quite apparent why the legislature included s 50 in the Act; without it those natural persons who direct a corporation's acts or omissions that are contrary to the requirements of the Act would avoid prosecution. The section recognises that it is not only directors who may be the guiding lights of corporations but also "persons concerned in the management". 99 The Full Bench of this Court and the Court of Appeal in Powercoal and the Full Bench in Newcastle Wallsend Coal Company Pty Limited were not concerned with whether a personal defendant was a director, but whether the personal defendant fell within the second internal option in s 26, being a person concerned in the management of the corporation. The words of s 26(1) are clear and unambiguous. The section is concerned with firstly, directors, and secondly, management of a corporation. Any doubt is removed by the language of s 26(1)(a). 100 The central issue, therefore, for determination in this matter, is whether the defendants, as directors, were in a position to influence the conduct of the corporation in relation to its contravention. The defendants submit that in light of the role and duties allocated to the Directors, the manner in which they conducted themselves at the relevant time and the terms of the Memorandum and Articles of Association of the Corporation, analysed separately, or together, prove to the requisite standard that the defendants were not in a position to influence the conduct of the Corporation. 101 The Articles of Association provide for the powers and duties of the Directors in articles 37 to 44. Those powers and duties are, however, only exercisable under article 130 if and when Mr Henry Ngai no longer holds the office of Governing Director. 102 Article 130 provides as follows: During his lifetime KEI SHING NGAI (Mr Henry Ngai) shall assume the office of Governing Director of the Company and in that office shall have the powers hereunder:- (1) The Governing Director shall so far as the law allows have power to exercise all the powers conferred upon the Company by the Memorandum of Association and by the Articles and shall have authority to exercise all the powers authorities and discretions by the Articles expressed to be vested in the Board or in the Directors jointly and all other Directors for the time being of the Company shall be under his control and shall be bound to conform to his directions in regard to the Company's business or in respect of particular matters or classes of matters or by way of particular or general limitation of authority. The Governing Director shall not be required to devote any specific amount of his time to the management control and superintendence of the business of the Company. In addition to the other authorities expressly or by implication hereby conferred on a Governing Director as aforesaid the Governing Director shall have to the exclusion of general meetings and of the Board absolute authority (subject to the Code) to do the following: (a) appoint any persons as Directors of the Company; (b) define and restrict their powers and fix their duties and remuneration; (c) determine his own remuneration as Governing Director; (d) remove any Director however appointed; (e) convene a general meeting of the Company; (f) appoint and remove the Managing Director, Secretary and other officers of the Company; (g) determine who shall be admitted as shareholders; (h) determine what resolutions shall be proposed at general meetings and Board meetings respectively; (i) determine what mode of valuing the Company's assets shall be adopted; (j) determine what amounts shall be carried to the Reserve Fund and the Depreciation Fund respectively and how those Funds shall be dealt with; (k) determine the dividend to be declared on individual shares and in this context he may declare dividends; (i) on one or more classes of shares to the exclusion of other classes; (ii) at different rates on different classes of shares respectively; (iii) on any particular share or shares to the exclusion of other shares; (iv) at different rates on different individual shares; (l) determine what business within the scope of the Memorandum of Association shall be undertaken or given up by the Company; (m) determine when and to what extent and in what manner and upon what terms and conditions and for what purpose the Directors may exercise their powers of borrowing or raising any such or sums of money; (n) determine what amounts (if any) may be withdrawn from the loan accounts of the various shareholders and what amounts may be called up on any of the shares of such shareholders; (o) appoint by deed under his hand a Governing Director in his place who shall as from the date or time specified in such deed have the like rights and powers. (2) A Governing Director shall have the right to exercise at any general meeting (whether on a show of hands or on a poll) votes equal to three quarters of the total votes which could be exercised by all shareholders of the Company if present at such meeting. (3) The Governing Director may appoint an alternate (being a member or non-member) to exercise all or any of his powers and may limit and define such of his powers as are to be conferred on such alternate and the remuneration payable to him; he may revoke such appointment and may further appointments from time to time; an alternate shall not have power to appoint an alternate in his place. (4) A resolution in writing under the hand of a Governing Director shall be as valid and binding on the Company as a resolution of the Board. Whilst a person occupies the office of Governing Director the provisions of this Article shall prevail and override all other provisions of these Articles or parts of Articles inconsistent with it. 103 It is clear that this article vests in Mr Henry Ngai, all powers and authorities of the Board; gives Mr Henry Ngai control over the other Directors in regard to the corporation's business, or in respect of particular matters or classes of matters; renders other Directors under his control, such that they are bound to conform with his direction in respect of the corporation's business, or by way of particular or general limitation of authority and gives Mr Henry Ngai, to the exclusion of the Board, absolute authority to define and restrict the powers of the other Directors and to fix their duties and remuneration. 104 In Whitehouse and another v Carlton Hotel Proprietary Limited (1986) 162 CLR 285, the High Court considered a company's Articles of Association, which provided that so long as a named director held office as Governing Director the powers of the Board of Directors were vested in him alone. The issue that arose for consideration was whether the Governing Director had exercised such powers for an impermissible purpose, that being, the allotment of shares to his sons to ensure that his former wife and their daughters would not gain control of the corporation on his death. Mason, Deane and Dawson JJ (Wilson and Brennan JJ dissenting), held that the allotment was made for the impermissible purpose of defeating the voting power of existing shareholders by creating a new majority. Wilson and Brennan JJ dealt with an additional issue (referred to below) of whether the article investing the Governing Director with the powers of the Board, was inconsistent with s 114 of the Companies Act 1961 (Q). The majority did not find it necessary to deal with the s 114 issue, but indicated that they were in general agreement with the views expressed in respect of this issue by Wilson and Brennan JJ. 105 The article, the subject of consideration in that case (article 127), provided that: "all powers and authorities and discretion vested in the Board of Directors by the Companies Acts or these Articles shall be vested in (the Governing Director) alone and all other Directors ... shall exercise such powers only as the Permanent Governing Director may delegate to them and they shall be under his control and direction in regard to the company's business ... ." 106 In considering an argument that the Governing Director could not exercise the power of allotment of shares, except at a meeting of the Board and that no meeting was held, Brennan J stated at 313: ... There is nothing in Art 127 to suggest that the valid exercise of the powers thereby conferred is conditioned upon the summoning of directors to a meeting of the board or upon his giving of a hearing to the views of other directors. I respectfully agree with the view expressed by Jacobs J in Levin v Clark [1962] NSWR 686, at 701 that the general principle that every director has the right, and the duty, to deliberate upon the affairs of the company, even if he is not entitled to vote must give way to any contrary express provision in the articles. Article 127 vests in Charles (Governing Director) "all powers and authorities and discretion vested in the Board of Directors", gives him control over other directors and empowers him to appoint and without notice to remove any other director from office. Article 127 authorizes Charles to exercise powers untrammelled by the need to consult with other directors. The want of notice to Mary Olivia of Charles' intention to allot further "B" class shares and the exercise of the power to allot them otherwise than at a meeting of the board provide no grounds for invalidating the allotments, provided the operation of Art. 127 remained unaffected by the amendment to s 114 of the Companies Act 1961 (Q) introduced by s 117 of the Companies Act Amendment Act 1971 (Q). 107 And at 314: True it is that, so long as Charles continues to hold office as Permanent Governing Director, no other director may exercise any power unless the power is delegated to him by Charles, but the other directors are eligible to have power delegated to them and they assume the full powers of directors when the Permanent Governing Director ceases to hold office. In my opinion, that is sufficient to show that the other directors satisfy the statutory definition of directors. Once it appears that a person is a director, the Companies Act may impose on him particular duties and functions - indeed the 1971 amendment Act contemplated that, in consequence of its provisions, there would be some statutory duties or functions which would thereafter be required "to be exercised or performed" by more than one director... 108 Importantly, Brennan J further observed: ... It may be that the statutory imposition of a duty or function imports the power to exercise the duty or perform the function irrespective of the provisions of a company's constitution but it is not necessary to consider that question. The power to allot shares is not such a duty or function. 109 Jacobs J in Levin v Clark [1962] NSWR 686 considered, among other matters, an article which provided that a governing director shall have the authority to exercise all the powers, authorities and discretions of the directors generally, or in the corporation in general meeting and be bound to his directions in regard to the corporation and the corporation's business. His Honour stated at 701: ... It appears to me that every director of a company has the right, and the duty, to deliberate upon the affairs of the company, even if he is not entitled to vote. However, such a principle, in my view, must give way to any express provisions in the Articles of Association of the Company. Article 81 vests in the Governing Directors the authority to exercise all the powers, authorities and discretions by the Articles expressed to be vested in the directors generally, or in the company in general meeting. I am of such an opinion that such a provision displaces the right and duty of other directors to exercise the powers of deliberation upon the affairs of the company as well as the powers of voting thereon. 110 His Honour observed that s 120 of the Companies Act 1936 required a proprietary company to have at least two directors and observed that it may well be that because of s 120 that the provision for a single governing director contravenes that section. His Honour went on to say that he did not find it necessary to express a final conclusion on the question because of the opinion he held as to other aspects of the case. 111 Holland J considered a similar article in Welch v Welch (1971-73) CLC 40-068 at 27,511. His Honour, after referring to Jacobs J observations in Levin v Clark and observing that there was a lot to be said for the view that there is some inconsistency between the statute requiring at least two directors and Articles of Association providing that the sole management of the company may be exercised by one person only, stated at 27,514 - 27,515: ... However, it seems to me that one would look for some express provision in the legislation if there was an intention by the legislature to preclude the members of a company from electing to vest in one particular person overriding powers of management of the company's affairs. It has been commonplace for a very long time to find in the Articles of Association of a company provisions for governing directors and provisions for reposing the whole of the powers of the directors and the whole of the management of a company in one or more individuals. This practice must be taken to have been well known to the legislature at the time of the passing of the Companies Act 1961 as well as at the time of the passing of the amendment in 1971, which replaced the provision requiring only one director of a proprietary company by a provision requiring two. In the absence of any express indication in the Act as amended that it was the intention of the legislature to abolish this practice, I am not prepared to hold that the amendment has so changed the law as to give effect to the views that were expressed by Jacobs J. I think it would be too drastic a revision of accepted company practice for me to hold that what was a view tentatively expressed and a view unnecessary for the decision in Levin v. Clark was intended to be given effect to by the 1971 amendment of sec. 114(1).

In my opinion, therefore, the first defendant is presently the governing director of the second defendant and has been validly appointed as such and the Articles which confer upon him the powers of governing director are valid and effective Articles. 112 The defendants rely on the above authorities to argue the Memorandum and Articles and the rights and powers they conferred upon Mr H Ngai, deprive any other director from exercising any power, unless delegated to them by the Governing Director. The defendants, it is submitted, cannot exercise the power of deliberation upon the affairs of the corporation. 113 The facts of this case are different to those considered in the above cases. Levin v Clark dealt with whether a governing director article was consistent with s 120 of the Companies Act 1936 that required a proprietary company to have at least two directors. In Welch v Welch, Holland J agreed with the obiter dicta of Jacobs J in Levin v Clark in considering a challenge for the removal from a Board of Directors. In Whitehouse, the Court considered whether a governing director used his power for an impermissible purpose. It was not necessary as Brennan J observed in Whitehouse for the Court to consider whether a corporation's constitution can override a director's obligation to exercise a duty or perform a function imposed by Statute. What is clear however is that Articles of Association may make provision for a governing director. 114 Austin R P and Ramsey I M, Ford's Principles of Corporations Law, 13th ed, LexisNexis Butterworths, Sydney, 2007 (at 427), in discussing the duties of directors, observed: ... Certainly, duties imposed on an auditor by the Act could not be reduced. Nor could duties imposed by legislation on directors and other persons be limited without legislative authority. Thus, s 181 (of the Corporation's Act) imposes duties on company officers to act in good faith in the best interests of the company and to act for a proper purpose in the exercise of their powers and the discharge of their duties. There is no express legislative authority to a company to lessen that duty. There have been judicial suggestions that the constitution may narrow down the range of a director's duty of good faith: ... 115 It is trite law that in carrying out the functions as a Member of a Board, each Director is individually subject to statutory and common law duties to act in good faith in the best interests of the Company, to act for a proper purpose and to act with reasonable care and diligence (see s 180 and s 181 of the Corporations Act 2001). 116 However, in relation to a director's obligation to act with reasonable care and diligence and as they relate to delegation, Santow J in Australian Securities and Investments Commission v Adler & ors (2002) 168 FLR 253 provided a convenient summary of these obligations of directors. His Honour observed as follows: [372] I commence by setting out as a series of summary propositions, the principles applicable to the duty of care and diligence, now as enacted in s 180 of the Corporations Act and as they relate to delegation. The principles applicable to the duty to act in good faith and for proper purpose (s 181) and to avoid making improper use of position or information (ss 182-3) are to be found later in this judgment at [458], [735] and [738] - [740]. The principles applicable to s 180 now follow: (1) Directors owe a duty of care and skill at common law and in equity: Permanent Building Society (in liq) v Wheeler (1994) 14 ACSR 109; Daniels v Anderson (1995) 37 NSWLR 438; 118 FLR 248.

(2) However, the equitable duty to exercise reasonable care and skill is not properly classified as a fiduciary duty: Permanent Building Society (at 158) per Ipp J.

(3) The statutory duty of care and diligence, s 180, is framed in similar terms to its predecessor s 232(4). It has been said of the latter that the duties imposed upon directors by it are essentially the same as the duties of directors under the common law: Sheahan v Verco (2001) 79 SASR 109 per Mullighan J; Daniels v Anderson (at 603; 408-409) per Powell JA; see also Lockhart J in Australian Innovation Ltd v Petrovsky (1996) 21 ACSR 218 at 222.

(4) In determining whether a director has exercised reasonable care and diligence one must ask what an ordinary person, with the knowledge and experience of the Defendant might be expected to have done in the circumstances if he or she was acting on their own behalf: Permanent Building Society v Wheeler (at 159) per Ipp J; ASC v Gallagher (1993) 10 ACSR 43.

(5) However, under the implied term in a contract of employment of an executive director, the director (such as here Mr Williams and Mr Fodera) will be taken to have promised the company that he or she has the skills of a reasonably competent person in his or her category of appointment and that he or she will act with reasonable care, diligence and skill: Permanent Building Society v Wheeler (at 287-8).

(6) Although the standard of reasonable care is generally said to be that of an ordinary prudent person ( Re City Equitable Fire Insurance Co. Ltd [1925] Ch 407 per Romer J) there is some suggestion that directors of a professional trustee company owe a higher duty of care: Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 693.

(7) In determining whether a director has breached the statutory standard of care and diligence (s 180(1)), the court will have regard to the company's circumstances and the director's position and responsibilities within the company: see also Explanatory Memorandum to the CLERP Bill 1999 (para 6.75).

(8) In accordance with these responsibilities directors are required to take reasonable steps to place themselves in a position to guide and monitor the management of the company: Daniels v Anderson (at 664). That is to say (at 666-67): (a) a director should become familiar with the fundamentals of the business in which the corporation is engaged; (b) a director is under a continuing obligation to keep informed about the activities of the corporation; (c) directorial management requires a general monitoring of corporate affairs and policies, by way of regular attendance at board meetings; and (d) a director should maintain familiarity with the financial status of the corporation by a regular review of financial statements. Indeed, he or she will be unable to avoid liability for insolvent trading by claiming that they had never learned to read financial statements: Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 at 125. (9) A director appointed to a company because of special expertise in an area of the company's business is not relieved of the duty to pay attention to the company's affairs which might reasonably be expected to attract inquiry, even outside that area of expertise: Re Property Force Consultants Pty Ltd (In liq) [1997] 1 Qd R 300.

(10) At general law, a director is entitled to rely without verification on the judgment, information and advice of management and other officers appropriately so entrusted. However, reliance would be unreasonable where directors know, or by the exercise of ordinary care should have known, any facts that would deny reliance on others: Daniels t/as Deloitte (at 665-666).

(11) Although reasonableness of the reliance or delegation must be determined in each case, the following may be important in determining reasonableness: (a) the function that has been delegated is such that "it may properly be left to such officers": Re City Equitable Fire Insurance Co Ltd per Romer J; (b) the extent to which the director is put on inquiry, or given the facts of a case, should have been put on inquiry: Re Property Force Consultants Pty Ltd per Derrington J; (c) the relationship between the director and delegate, must be such that the director honestly holds the belief that the delegate is trustworthy, competent and someone on who reliance can be placed. Knowledge that the delegate is dishonest or incompetent will make reliance unreasonable: Biala Pty Ltd v Mallina Holdings Ltd (1994) 15 ACSR 1 at 62; (d) the risk involved in the transaction and the nature of the transaction: Permanent Building Society v Wheeler (1994) 14 ACSR 109 (although in this case the Chief Executive Officer in question also had a conflict of interest); (e) the extent of steps taken by the director, for example, inquiries made or other circumstances engendering "trust"; (f) whether the position of the director is executive or non-executive: Permanent Building Society v Wheeler per Ipp J, though, in Daniels v Anderson (supra), the majority have moved away from this distinction.

(12) That general law explains what the Corporations Act now requires when referring (s 190(2)) to "reasonable grounds" in codifying the directors' responsibilities for the actions of the delegate. Thus under s 198D of the Corporations Act directors may delegate any of their powers to a committee of directors, a single director, an employee of the company or any other person (This delegation must be recorded in the company's minute book: see s 251A). Moreover, the director will be responsible for the delegate's exercise of power if he or she did not believe on reasonable grounds and in good faith, after making proper inquiries if the circumstances indicate the need for it, that the delegate was reliable and competent in relation to the power delegated and would exercise the power in conformity with the duties imposed on the directors of the company by the Corporations Act : s 190(2).

(13) For the purposes of s 180(1) and relevantly in the present case, failing to ensure that a company makes loans only in accordance with its authorised practices and failing to ensure that the company has a proper system of controls and audit in its business to avoid any defalcation by officers and employees may amount to breaches of the statutory duty of care and diligence: Cashflow Finance Pty Ltd v Westpac Banking Corp [1999] NSWSC 671 per Einstein J.

(14) Where there is a transaction involving the potential for conflict between interest and duty, as here arose, the duty of care and diligence falls to be exercised in a context requiring special vigilance, calling for scrupulous concern on the part of those officers who become aware of that transaction to ensure that any necessary corporate approvals are obtained and safeguards put in place. While the primary responsibility will fall on the director or officer proposing to enter into the transaction, this does not excuse other directors or officers who become aware of the transaction.

(15) In order for the safe-harbour "statutory business judgment rule" to be relied upon, the director must first have made a business judgment. Then that business judgment must satisfy the following requirements, namely made in good faith for a proper purpose; after the director has informed himself as to the subject matter of the judgment to the extent he reasonably believes to be appropriate; in circumstances where the director does not have a material personal interest in the subject matter of the judgment and rationally believes that the judgment is in the best interests of the corporation (s 180(2)). The director's belief that his or her judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in that position would hold (s 180(2)). 117 Section 180 of the Corporations Act is concerned with the manner in which directors or other officers of a corporation must exercise their powers and discharge their duties. As it emerges from Adler, directors owe a duty of care and skill at common law and in equity and have a statutory duty of care and diligence pursuant to s 180 of the Corporations Act. The defendants emphasise that s 180 is concerned with directors' powers and it is necessary, therefore, to have regard to the corporation's circumstances and the directors' position and responsibility within the corporation. (See Adler [372] ((7), (8) and (11)). I agree with this submission. 118 Mr Docking relied on Article 37 of the Articles of Association of the Corporation submitting that it prescribes a traditional management structure for a corporation. It provides: The business of the corporation shall be managed by the directors who ... may exercise all such powers of the company as not ... required to be exercised in general meeting. 119 Mr Docking submitted that Article 130 does not expressly or implicitly negative Article 37, and that the last sentence of Article 130 provides only that it prevails to the extent of any inconsistency. The last sentence of Article 130 is in these terms: Whilst a person occupies the office of governing director the provisions of this Article shall prevail and override all other provisions of these Articles or parts of Articles inconsistent with it. 120 In my view, Article 130 clearly prevails over Article 37. However, Mr Docking contended that as there was no reference in Article 130 to removing the power to ensure compliance with the Act this power remained with the directors unless and until the governing director exercised his power to remove that from the Board and to control the other directors in relation to that subject matter. 121 There is no basis for asserting that the combined powers bestowed on the governing director in Article 130 are limited by operation of the Act. The powers in Article 130 extend to all aspects of the duties of the directors and the business of the company. A director who has no power under the Articles, or whose duties have been defined, or powers restricted, or whose duties have been fixed so as to exclude any role in regard to the business or in respect of particular matters in the business (such as its conduct in respect of safety), is not in a position to relevantly influence the conduct of the corporation. 122 As Santow J observed at 372, in determining whether a director has breached their statutory duty, the Court will have regard to the company's circumstances and the directors' position and responsibilities within the company. In light of article 130 of the Articles of Association, the personal defendants' duty of care and skill at common law is therefore limited by the powers given to them by the Governing Director. 123 The evidence of Mr de Vries, Mr Houy Ly, Mr Ming Ly, Mr Henry Ngai and Mr Sunny Ngai establishes that there was not in place, on or before the date of the incident, any system of safety audits or reporting of the state of machine guarding to the directors, including Mr Henry Ngai, or requiring directors to be told that fines had been imposed on the corporation for occupational health and safety breaches. Nor was there any system requiring directors to be told of injuries suffered by employees during the course of their employment. This, of course, was in circumstances where there was both a day and a night shift worked at the corporation. The evidence is that Mr Ming Ly, who was responsible for occupational health and safety at the corporation, did not have any discussions with Mr Sunny Ngai about any WorkCover safety notices, employees being injured in any way at work, or the fact that the corporation had been fined for breaches of the Occupational Health & Safety Act. Although this evidence seems somewhat implausible, the prosecutor has not discharged the onus on it such that I can be satisfied that Mr Sunny Ngai had discussions with Mr Ming Ly about WorkCover Safety Notices or employees injured at work which resulted in the Corporation being fined. Similarly, the evidence is, in circumstances where Article 130 vested all the powers of the Board of Directors in Mr Henry Ngai alone, that Mr Ming Ly did not inform Mr Sunny Ngai of a fine in the sum of $15,000 imposed by the Chief Industrial Magistrate in 2001 and four fines totalling $12,000 imposed in 2004 in respect of an incident in 2002. The evidence is that Mr Henry Ngai was only informed of these matters in 2005. Similarly, Mr Henry Ngai was not informed that WorkCover issued various improvement notices during the period 2001 through to 2004. In this respect, Mr H Ngai's evidence was: Q: ... Could you, as a director before March 2004, have made an election, or in other words made a choice, that you as a director had to be told about any occupational health and safety fine? A. I did not ask them to report it to me because I ask Ming to be wholly responsible for the matter. Q. You might not have asked but is there any reason that stopped you asking to be told as a director if there was an occupational health and safety fine? A. I told him if there was anything he needed to do he went ahead with that. I did not tell him to report it to me. Q. Could you have told him he had to report occupational health and safety fines to you as a director? A. If I had told him to report it to me he would have told me.

124 Specifically, in respect of the role and position of Mr Henry Ngai, the evidence enables me to make the following further findings, on the balance of probabilities: i) Mr Henry Ngai, the founder of the company, was the managing director and majority shareholder; ii) the Articles of Association authorise Mr Henry Ngai, during his lifetime, to exercise the specific powers set out in Article 130 of the Articles of Association of the company; iii) Mr Henry Ngai fixed the duties and roles of the directors; iv) Mr Henry Ngai defined and restricted their powers; v) Mr Henry Ngai gave very specific directions to the directors in regard to the company's business, which limited and restricted any involvement on their part in any matter outside of their specific areas of responsibility, duties and roles; vi) Mr Henry Ngai did not delegate to the directors any relevant authority or function in the management of the company or so as to enable them to influence the conduct of the corporation in respect of the contravention; vii) the directors confined themselves to their particular roles, duties and responsibilities; viii) in doing so, the directors conformed to the directions given to them by Mr Henry Ngai; ix) the directors did not act outside of their roles, duties or responsibilities that were allocated or delegated to them. 125 A person holding the office of "director" of the corporation which contravenes the Act is, as I have already observed, deemed to be liable for a breach of the Act unless he or she satisfies the burden of proving otherwise by reference to the matters in s 26(1)(a) or s 26(1)(b). In deeming directors liable, and thus imposing on them the burden of exculpation by satisfying the requirements of s 26(1)(a) or s 26(1)(b), the section expressly recognises that not every director will be held to have contravened the same provisions as the corporation. The section distinguishes between those directors who are in a position to influence the conduct of the corporation in relation to its contravention and those who are not and in respect of those who are in a position to influence the conduct of the corporation, those who used all due diligence to prevent the contravention by the corporation and those who did not. In my view, there is no basis for assuming that every director of a corporation is in the same position to influence the relevant conduct of the corporation. 126 Section 26 must be considered and interpreted in the context of the existing state of the law: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408. The legislature in passing the Act must have been aware that Corporations had the ability to allocate and/or limit the duties and responsibilities of directors by providing for a governing director to have all relevant powers of other directors: see Whitehouse & Anor v Carlton Hotel and the cases referred to earlier in these reasons on this issue. If the legislature wished to make each director directly or absolutely responsible, whether complicit or not, this could have been simply achieved by the use of words similar to that found in s 8. 127 In my view, the defence available in s 26 is designed to avoid a situation of persons being punished simply by reason of holding the office of director. In order for a director to be liable, it is necessary to establish that the director was complicit in the contravention. The evidence establishes that in respect of the practical position, the defendants, because of the limited powers, duties, responsibilities and defined roles provided to them by the Governing Director, were not in a position to influence the Corporation's contravention and were not complicit in the Corporation's contravention. Similarly, from a theoretical perspective, in light of the Articles of Association, these defendants were not in a position to influence the contravention by the Corporation. 128 The section provides for punishment for an offence to which the person is deemed to be a party because the person is not able to establish the matters of exculpation in s 26(1)(a) or s 26(1)(b). Whether a person was not able to influence (to the requisite degree), the relevant conduct of the corporation will depend on a range of matters, both legal and factual. 129 Mr Docking sought to rely upon the judgment in Inspector Aldred v Herbert and others [2007] NSWIRComm 170, where Backman J found that directors of a corporation were unable to discharge the burden of establishing matters under s 26(1)(a) and s 26(1)(b) of the Act in circumstances where the directors conceded that they had the capacity to direct management to attend to various operational matters and had the power or capacity to make decisions about all matters of safety which affected or may have affected the corporation's operations: (at [40], [44] and [63]). Her Honour also found that the directors had abdicated the responsibility they had and placed reliance on others: (at [60]). 130 Herbert appears to be a case which proceeded on the basis that each director had all the powers usually available to directors. The scope of those powers was therefore assumed by her Honour and their source was not analysed, referred to, or considered. This case, to my mind, is of little assistance in respect of the issues that fall for determination in this matter where the directors do not have the assumed powers that the directors had in Herbert because of the provisions of the Articles of Association. Herbert was not a case where specific directors had the requisite power to influence the corporation's conduct and others did not. Furthermore, when her Honour stated that "the fact that a person is a director, is enough, subject to the defences, to establish liability for the corporate defendant's contravention" and "[t]his conclusion is based on the responsibilities and duties of a director of a corporation and the clear words of s 26(1)" (at [53]), her Honour did not appear to recognise or make any allowance for a differentiation between directors as required by the terms of s 26(1)(a), namely, those directors who are in a position to influence the particular conduct of the corporation and those who are not. If s 26(1) is approached upon the basis that because a person holds office as a director, that person must be in a position to influence the conduct of the corporation, the defence available to a director under s 26(1)(a) is rendered meaningless. In addition, such an approach, fails to give effect, or proper effect to the source of, or limitations of that power. 131 In my view, to the extent that her Honour (at [54]) approached the availability of the defence simply by reference to the facts that directors are at the top of the corporation hierarchy to make decisions on matters of operations policy and management, and without examining whether the directors were in a position to influence the relevant conduct of the corporation, her Honour adopted too narrow a view of the availability of the defence under s 26(1)(a). 132 Reliance was also placed by the prosecutor on the decision of Kavanagh J in Inspector Stephen Gill v Wayne Thomas Fisher & Ors [2007] NSWIRComm 83, a case in which two directors pleaded guilty to a s 8(2) charge. Mr Docking referred the Court to [42] where her Honour observed: As to the criminal responsibility of the personal defendants, Starke J in Millner v Raith (1942) 66 CLR 1 said about a provision similar to s8(1) and s26(1) (at 5): They make a director or person concerned in the management of a body corporate responsible as a principal for any act or fact specified in those sections merely because of his relation to the body corporate. 133 This led Mr Docking to submit that "put simply merely because of his or her relation to the body corporate, each and every director of a corporation is responsible as a principal where 'a corporation contravenes, whether by act or omission, any provision of this Act or the regulation' ." 134 However, her Honour went on to observe at [44] that: The defendants expressed a sense of grievance that another director, who gave evidence for the prosecution, was not charged. It was revealed he was the financial controller of the corporation. While he was a director of a corporation he did not carry responsibility for the work procedures. His contribution was therefore de minimus . 135 The defendants were therefore, to my mind, because of the limitations imposed upon them by the Articles, not in a position to influence the conduct of the Governing Director and the corporation because they could only discharge such powers and duties as had been conferred on them by the Governing Director. The contraventions by the corporation involved failures in respect of the general guarding of machinery or specific guarding in respect of the Rewinder Machine No 1. I find that neither director had any role, responsibility or duties beyond those allocated to them and neither had any role, responsibility, powers or duties in respect of safety generally or any particular safety matters including in respect of the guarding of Machines. Nor were these defendants involved in any policy or decision-making relating to the affairs of the company in respect of these issues. In other words, not only did the directors have no involvement in occupational health and safety matters, these directors had no power or operational role in respect of the act or omission which gave rise to the corporation's contravention. 136 Mr Dixon submitted that the defendants do not contend that they are entitled to be exculpated by reasons solely of their lack of knowledge of the Corporation's contravention. This submission is clearly correct in light of the WorkCover Legislation (Amendment) Act 1995 which removed lack of knowledge or ignorance of the contravention as a defence. Senior counsel further submitted that the defendants do rely on their lack of knowledge about the management of safety issues, about safety generally and about any safety issues or concerns as demonstrating their lack of involvement with either the management of the company or any safety matter, as well as indicating their lack of involvement in the particular failures of the Corporation. 137 The evidence is that the defendants were fully aware of the limitations imposed upon them by Mr Henry Ngai and I find no basis for concluding that the defendants were in any position to do anything even if they had made enquiries in respect of the guarding of machines. Ms Ly, in particular, had no knowledge about safety or training and did not have any experience at all in relation to safety issues. Furthermore, Ms Ly was overseas for a substantial period of time prior to the incident, which clearly limited, in any event, her ability to influence the operations of the Corporation in respect of occupational health and safety, or any matters outside her area of responsibility. In my view, the issue is not one of ignorance, nor wilful blindness, as submitted by Mr Docking, but rather that the defendants had neither the powers nor the authority to deal with safety matters. The defendants have established, on the balance of probabilities, that their powers and duties were excluded by the Articles of Association and by the direction and conduct of Mr Henry Ngai. At all relevant times, Mr Henry Ngai was acting within the scope of the powers bestowed upon him as Governing Director and by complying with his authority and directions, the defendants conducted themselves within the constraints imposed upon them by the Articles. 138 Furthermore, the defendants' lack of knowledge about the management of safety issues and safety generally indicates, in my view, that the defendants meet the test as set down by the Full Bench in Powercoal (at [116]) that the defendant "had no real control over the Corporation's conduct so that they were not in a position to institute simple, practicable changes to a safety system well within the means of the Corporation". 139 Clearly, a director can be liable for a complete failure to act if the director is in a position to influence the relevant contravention. So much was acknowledged by Backman J in Herbert at [63] where her Honour observed: ... 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 ... 140 In other words, her Honour found the directors were in a position to influence the contravention, or were complicit in allowing the contravention because they had the power or authority to influence it. 141 Mr Docking submitted that the words "not in a position to influence the conduct of the corporation" must be read down so that they do not conflict with the obligations of directors generally to participate in the management of the corporation and in particular to meet their common law and statutory duties or obligations. Reference was made to a number of authorities which reflect the modern approach to directors' duties and responsibilities in the context of other bodies of law dealing with negligence, company and taxation law: Re Australasian Venezolana Pty Ltd (1962) 4 FLR 60; Rema Industries and Services Pty Ltd v Coad & Ors (1992) 107 ALR 374; Group Four Industries Pty Ltd v Brosnan (1992) 59 SASR 22 and Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113. 142 In rejecting this approach, I respectfully agree with the observations of Backman J in Herbert at [57] where her Honour observed: ... The issue whether the defendants were not in a position to influence the conduct of the corporation does not in my view fall to be considered by reference to cases on the law of negligence or company or taxation law, but rather by reference to the statutory context or regime in which the defence is found, namely s 26(1) of the 2000 Act. The words, "...not in a position to influence the conduct of the corporation..." must be assessed by reference to their statutory surrounds which would include the objects of the 2000 Act. The Court of Appeal in Powercoal v Industrial Relations Commission (NSW) rejected a similar attempt by the Claimant to invoke case law dealing with persons constituting the directing mind and will of the corporation and with various provisions of the Corporations Act 2001 (Cth), as being applicable to s 50(1) of the 1983 Act (at [95] - [99]): ... 143 Furthermore, in my view, such cases are of little assistance in that they do not consider the position of directors bound by a particular set out articles of association, as is the case here. In addition, the cases deal with questions of knowledge of or failure to enquire where directors had general and not restricted powers or duties. 144 To my mind, there is no warrant for reading down the defences available under s 26(1)(a), particularly where a director's obligation is removed or curtailed by the Articles of Association and the exercise of powers by a governing director under the Articles. In such circumstances, a director cannot be required to act contrary to or in breach of the Articles. 145 The evidence clearly establishes that neither of the defendants was in any way the directing mind and will of the Corporation in respect of occupational health and safety and was therefore not complicit in respect of the offences as they lacked the necessary influence. 146 Although Mr S Ngai may have been informed of the reason for the stoppage of a machine, there was no evidence that demonstrated that he had influence in respect of the safe operation of the machine(s). 147 Mr Sunny Ngai's evidence, which I accept, was that he did not participate in Board meetings prior to the incident where approval was given for a budget for safety matters. It follows, in my view, that Mr S Ngai was limited in his role and responsibilities by virtue of the decisions made by Mr Henry Ngai. 148 Mr Docking also relied upon the judgment of Haylen J in Inspector Ken Kumar v David Aylmer Ritchie [2006] NSWIRComm 323. In my view, that case is distinguishable from the facts and circumstances of this matter. Ritchie is a case where the Chief Executive Officer who was also a director gave quite detailed evidence of his involvement in developing the occupational health and safety policies of the Corporation. He relied upon his background in prior employment to indicate his experience of occupational health and safety systems and had taken steps to have occupational health and safety placed on the agenda of meetings at various levels of the Corporation. On commencement with the Corporation, he had reviewed the safety system. He had used his site visits to make enquiries about safety relevant to the work being performed at the site and had wanted to give the appearance to employees of a person committed to performing safety in the workplace. His Honour found that Mr Ritchie placed himself as being active at both a macro and micro level in the development of the company's safety policies (at [172]). 149 After considering these matters and that he had delegated his obligations to those at a lower level without specific expertise in safety, together with other submissions, his Honour held that Mr Ritchie had not made out a defence under s 26(1)(a). 150 His Honour (at [178]) accepted the general thrust of the prosecutor's submissions in that case that: It may be accepted that s 26(1)(a) allows consideration to be given to the particular position of the director and to do so in the context of the particular breach committed by the corporation. It might also be accepted that the word "position" in sub-section (1)(a) looks either to the status or standing of the director or to the particular circumstances of the director, but that status or the circumstances must result in the director not being capable of influencing the conduct of the corporation in relation to its contravention and that must be established objectively... It seems rather that there needs to be demonstrated something that is particular about either the status or circumstances of the director that leads such a director to be unable to influence the conduct of the corporation in relation to a particular breach... 151 I respectfully agree with these observations. 152 This was the reason, Mr Dixon observed, that the Corporation's Managing Director, Mr Henry Ngai and its General Manager, Mr Ming Ly, had pleaded guilty to charges brought against them. 153 I raised with the parties whether the defendants' lack of knowledge of the terms of the Articles of Association, and in particular, Article 130, excused the directors from meeting their obligations under the Act. Mr Docking submitted that this issue did not arise for determination in the proceedings because the Articles did not provide that no other director may exercise a power unless it is delegated to him by the governing director. Essentially, Mr Docking submitted that the directors, under the Articles of Association, had the same or similar powers and duties as provided in the Corporations Act in regard to managing the Corporation. 154 In my view, where the Articles of Association include a governing director's provision, the powers of the other directors to act, as they are required to, intra vires, the Articles of Association must be determined objectively and is not dependent upon the subjective views of the directors. The Articles of Association have effect as a statutory contract between the directors and the Corporation by reason of s 140(1) of the Corporations Act, enforceable by injunction and/or declarations: see Lipton and Herzberg, Understanding Company Law (Lawbook Company 2006) 13th Edition at 89 - 90 and 93; Smolarek & Anor v Liwszyc & Ors (2006) 198 FLR 257 at [39]. I have already found that Mr Henry Ngai, the Governing Director, defined and restricted the directors' powers, which limited any involvement on their part in any matter outside their specific areas of responsibility, duties and roles and that therefore they were not in a position to influence the conduct of the Corporation in respect of the contravention. The evidence establishes that at all times the defendants conducted themselves in a manner entirely consistent with the limitation of their powers under the Articles of Association. Furthermore, the evidence establishes that Mr Henry Ngai, in establishing the Corporation, gave instructions to his Accountant, Mr Yip, that he wanted to have total control of the Corporation and that other directors would only be entitled to exercise such control as he allowed. 155 The defendants, in the alternative, contended that they were able to establish a defence without the need to expressly rely on the Articles. They relied on the particular features of the Corporation, its history, development and responsibility for safety and that they were confined to designated areas of responsibility given to them by the Governing Director which did not enable them to influence the conduct of the Corporation in relation to the relevant contraventions. In light of the conclusion that I have reached, it is unnecessary to deal with the defendants' alternative submissions. 156 On the balance of probabilities, I find that each of the defendants have established a defence under s 26(1)(a) of the Act. The matters are dismissed. ORDERS 157 The Court makes the following orders: 1. The summons in matter Nos IRC 608 of 2006, IRC 609 of 2006, IRC 614 of 2006 and IRC 766 of 2006 are dismissed. 2. The usual costs order would be that the prosecutor pay the defendants' costs as agreed, or assessed. If there is any disagreement about the terms of that order, the parties have liberty to apply which should be exercised within 21 days.

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