DLA Piper successfully defends Fortescue Metals Group against Cyclone George charges

Employment Update (Australia)

By:
  • David Paton

DLA Piper recently represented Fortescue Metals Group Limited (FMG) and its wholly owned subsidiary, The Pilbara Infrastructure Pty Ltd (TPI), in the Supreme Court of Western Australia in an appeal by WorkSafe WA against the acquittal of FMG and TPI on 18 charges of contravention of the Occupational Safety and Health Act 1984 (WA) (OSH Act), having also represented FMG in its successful defence of the charges at trial in the Magistrates Court of WA. In an important decision, the Supreme Court dismissed WorkSafe’s appeal and confirmed the extent of the duty on principals to ensure the safety of contractor’s employees in situations where a principal is relying on a contractor’s expertise.

The facts
The charges arose from the tragic events of 9 March 2007, when Tropical Cyclone George struck a temporary accommodation village in the Pilbara region of WA, causing the deaths of two workers and serious injuries to a significant number of others. The village, known as 'Rail Village 1' (RV1), was used to accommodate contractor’s employees constructing the railway between the Cloudbreak mine and the port facilities at Port Hedland. FMG had engaged Spotless Services Australia Limited (Spotless) to project manage the design, installation and operation of RV1. Spotless prepared a Request for Tender (RFT), by which a tenderer was to be procured to supply and install RV1. 

The Building Code of Australia (BCA) divides Australia into four different wind regions. The closer to the coast, the higher the wind region; and the further inland, the lower the wind region and corresponding building design requirements. Wind region D is the 50km adjacent to the coast and is the area subjected to the most severe cyclonic winds. At the other end of the spectrum, wind region A is the area furthest inland (more than 150km) and has the least probability of severe cyclonic winds. Under the Building Code, buildings in Australia are required to be built to withstand the winds in the wind region in which the building is located. The RFT prepared by Spotless incorrectly specified that RV1 was located in wind region A, a non-cyclonic wind region, when it was in fact located in wind region C. 

No commercially acceptable tender was received in response to the RFT. However, Spotless recommended that another company, Spunbrood Pty Ltd trading as NT Link (NT Link), be approached to construct and install RV1. NT Link was an experienced builder of transportable buildings and had a past record of completing significant projects, including the provision of camps for the Federal and Northern Territory Governments, including for the Australian Defence Force.  For commercial reasons, Spotless withdrew its commitment to project manage the supply of the camps and FMG ultimately dealt directly with NT Link. NT Link was provided with a copy of the RFT and submitted written proposals to FMG, making representations that it had made allowance for an engineered tie-down system to ensure the accommodation units (known as 'dongas') would be a safe refuge in the event of a cyclone. Inexplicably however, no design for an engineer-certified tie down system was obtained by NT Link and in fact NT Link did not consult any engineer in relation to the design of the dongas at all. Further, an NT Link director, Mr Tony Smith had (according to his evidence at trial) actually checked the location of RV1 on a map of the region by using a scale ruler and had ascertained that it was at a distance of 97km from the coast which, on his understanding of the BCA at the time, brought into question whether RV1 was within wind region A. 

Notwithstanding this, NT Link continued to represent that all the buildings would be constructed and installed by skilled tradesmen to wind region A standard. NT Link submitted a building licence application with the Shire of East Pilbara and the Shire approved the plans, which provided the dongas were designed to wind region A standard. An FMG representative arranged for an experienced independent civil engineer, who had been engaged by TPI’s EPCM contractor WorleyParsons, to superintend and inspect the work done by NT Link in installing RV1. During construction, the engineer consistently reported to TPI that NT Link had been completing the work in accordance with specifications.  

Ultimately, some of the dongas were designed to wind region A standard and others were designed to wind region D standard, but many were not even installed (ie tied down) to wind region A requirements. Some of the work done in installing the dongas was performed by an unqualified welding tradesman employed by NT Link and aspects of the welding work was either not done or executed to a poor standard. Ultimately there were many wrongly designed and inadequately installed dongas at RV1. 

During the early hours of 9 March 2007, Tropical Cyclone George passed directly over RV1. In accordance with recognised safe practice in the Pilbara region, workers had been directed to take refuge in their accommodation, unaware that in the event of a cyclone some of the dongas installed by NT Link were not designed and installed to withstand a cyclone depending on its severity. The cyclonic winds of Tropical Cyclone George caused some of the dongas to lift and/or pull away from their foundations, with some overturning and colliding with other dongas. Several dongas were completely destroyed. A number of employees were either killed, injured or harmed while sheltering inside the dongas or when going to the assistance of other employees.

As would be expected, an investigation by WorkSafe and the Coroner was undertaken into the failure of the dongas to act as a safe refuge. DLA Piper Partner, Simon Billing also travelled to the RV1 within 48 hours of the cyclone impact to coordinate FMG and TPI’s investigation and to liaise directly with the regulator Worksafe and Police Major Crime Squad Detectives assisting the Coroner. 

WorkSafe ultimately commenced proceedings against FMG and TPI, alleging that it had failed in its duty to do all that was reasonably practicable to ensure the safety of contractor’s employees. NT Link was granted an immunity from prosecution by WorkSafe in exchange for its director, Mr Smith giving evidence against FMG and TPI at trial. Charges had initially been brought against NT Link arising from its alleged failure with respect to its duty as the builder that installed the dongas.  As part of this immunity deal with Worksafe, when these charges were heard by the court, the prosecutor offered no evidence against NT Link and the charges were dismissed. 

The decisions
During the five-week trial in the Magistrates Court, FMG and TPI argued that they had engaged an expert contractor, NT Link to design and install RV1 and had relied on representations made by NT Link and other experts, including Spotless, the Shire of East Pilbara and the engineer engaged by WorleyParsons, that RV1 had been properly designed and installed. The Magistrate agreed and acquitted FMG and TPI of all charges, ordering legal costs against WorkSafe of approximately $1 million. In making his judgment, the Magistrate was critical of NT Link and its director Mr Smith, who the Magistrate described as having an attitude to safety of 'near enough is good enough'. 

WorkSafe appealed to the Supreme Court of WA, asserting that FMG and TPI were not entitled to rely on the expertise of external specialists (such as NT Link) and should have done more to ensure that the dongas would be safe refuges in the event of a cyclone. In particular, WorkSafe argued that TPI and FMG should have engaged the services of an appropriately qualified engineer to ensure that the dongas were built to relevant wind load specifications.  In other words, WorkSafe claimed that TPI and FMG should have engaged a further expert to review the design work of its expert, NT Link. The Supreme Court rejected WorkSafe’s contentions (see Kirwin v The Pilbara Infrastructure Pty Ltd [2012] WASC 99 (The Pilbara Infrastructure)), in effect following a series of cases in the WA Court of Appeal including Laing O’Rourke (BMC) Pty Ltd v Kirwin [2011] WASCA 117 (arising out of a related prosecution by WorkSafe against a contractor, Laing O’Rourke, whose employees were injured at RV1 in Cyclone George) and Reilly v Devcon [2008] WASCA 84 (another case in which DLA Piper successfully defended a corporate accused against a WorkSafe prosecution). The Supreme Court confirmed the principles enunciated in those cases: whilst TPI and FMG could not contract out of their duties under the OSH Act, they could perform those duties by ensuring that appropriately experienced and qualified experts were retained to deal with matters beyond their competence and expertise, provided the task reasonably appeared to have been carefully and safely performed by the contractor.

Baiada Poultry
Shortly after the Supreme Court decision in The Pilbara Infrastructure was handed down, the High Court also delivered its decision in Baiada Poultry v The Queen [2012] HCA 14 (Baiada). That case dealt with a prosecution by WorkSafe Victoria for breach of the Occupational Health and Safety Act 2004 (Vic) following the death of an independent contractor at a chicken farm. The Victorian Act is similar to the WA OSH Act in that both impose a duty on an employer and principal to ensure safety of employees and contractor’s employees so far as is reasonably practicable.

Baiada Poultry Pty Ltd had an arrangement with a farm owner for the supply of chickens for its chicken processing plant. Baiada had engaged a contractor, DMP Poultech Pty Ltd, to catch and cage chickens at the farm and then load the cages onto a truck using a forklift. Another contractor, Azzopardi Haulage, was engaged by Baiada to supply a truck and driver and to transport the chickens to Baiada’s processing plant. An unlicensed forklift driver was loading crates onto the truck when a crate fell and struck the truck driver, killing him.

WorkSafe alleged that Baiada did not have safe systems in place for loading and unloading trucks, and for managing the use of forklifts. Baiada argued that it did not have control in relation to how forklifts were operated, and that it had engaged apparently experienced and competent contractors to carry out those operations. Baiada was found guilty by the Victorian Supreme Court (upheld on appeal to the Court of Appeal), but appealed to the High Court on the ground that the judge had misdirected the jury at trial. The High Court held that there had been a substantial miscarriage of justice and ordered that there should be a new trial. In the course of the decision, the High Court also made observations about the reasonableness of principals relying on independent contractors. The court held that the words 'reasonably practicable' meant that Baiada was not required to do every possible thing that it could to prevent risks to health and safety. The mere fact that Baiada could have issued directions to its contractors about safety matters did not necessarily mean that it was reasonably practicable for it to do so, or that the issuing of those directions would necessarily ensure that the working environment was safe.

The effect
The Pilbara Infrastructure and Baiada confirm that there are reasonable limits on the duty of a principal to ensure the health and safety of contractor’s employees in situations where they have engaged specialist contractors to perform a task that is outside the principal’s area of expertise, and where it reasonably appears to the principal that the contractor is performing the task carefully and safely. 

The decisions clearly demonstrate the vital importance of:

  • Having an appropriate contractor management strategy that requires contracts between the principal and the contractor to clearly set out the obligations of contractors in relation to matters concerning safety. For example, the contract could specify the specialist area of expertise of the contractor and the reliance that the principal is placing on the contractor in relation to safety matters arising within that area of expertise
  • Implementing an effective incident response plan to be used in the event of an incident
  • Obtaining legal advice as soon as possible after an incident to assist with the company's legal response to the incident and its interaction with the regulator (eg WorkSafe) during any investigation
  • Engaging appropriate experts at an early stage in response to an incident so that in the event that prosecutions are instituted the company has a well-informed group of experts who can provide beneficial evidence (FMG and TPI had retained eminent structural engineering expert Professor Len Stevens AO of Melbourne University who inspected the damaged buildings a few days after the cyclone and whose expert evidence was heavily relied on by the court at trial).

The principles derived from The Pilbara Infrastructure and Baiada are of clear relevance for principals engaged in operations in Western Australia and Victoria, because the cases deal with those states’ safety legislation. The decisions are therefore binding on courts in the respective states, also considering the extent of the duty of principals in similar situations.

Likely application to harmonised laws
Importantly, the cases are also likely to be of relevance in jurisdictions which have implemented the nationally harmonised Workplace Health and Safety (WHS) laws. The WHS laws are intended to harmonise OSH laws by implementing uniform legislation in each state and territory. The WHS laws have recently commenced in five jurisdictions: Queensland, New South Wales, Northern Territory, the Australian Capital Territory and the Commonwealth, and will come into effect shortly in Tasmania and South Australia. Western Australia and Victoria have noted objections to aspects of the legislation and it is unclear when, or if, the WHS laws will be implemented in those jurisdictions. 

The new WHS laws impose a general duty on each Person Conducting a Business or Undertaking (PCBU) to ensure safety of workers so far is 'reasonably practicable'. Because the new WHS laws draw on the same concept of 'reasonable practicability' as found in the WA and Victorian legislation, it is therefore likely that principles derived from The Pilbara Infrastructure and Baiada will be highly persuasive to courts dealing with the application of the WHS laws. 

However, the new WHS laws also impose a range of other duties, some of which are not found in WA or Victorian safety legislation or in earlier safety legislation in jurisdictions that have implemented the WHS laws. For example, the laws impose a positive duty on company officers to exercise 'due diligence' to ensure the company meets its safety obligations under the legislation (see our previous article). There are significant penalties, including imprisonment, if this duty is breached. Further, the WHS laws also impose a positive duty on all duty holders to 'consult, cooperate and coordinate activities', contravention of which can result in a $100,000 fine for a corporate accused. Taking a scheduled maintenance shutdown of a piece of plant by way of example, this duty would require the plant owner (ie the principal), the contractor who the plant owner engages to actually perform the maintenance work, the designer of the particular piece of plant, the manufacturer of the piece of plant and the importer of the piece of plant, to all consult, cooperate and coordinate the maintenance work. Unless some reasonable limits are placed on the extent of this duty by the courts, it may prove to be an onerous obligation in practice.   

For more information, please contact Simon Billing.