‘Sleeping’ Australian Director of a NZ subsidiary? Time to wake up and smell the potential liability…

On 4 April 2016, New Zealand’s Health and Safety at Work Act 2015 (NZ Act) comes into effect to seek to address New Zealand’s alarming workplace safety record.

When measured per 100,000 employees, workplace fatalities and accidents in New Zealand happen twice as frequently as in Australia and six times more frequently than in the UK.

The NZ Act is part of a package aimed at reducing the number of serious work-related injuries and deaths in New Zealand by at least 25 percent by 2020.

In a case of Australia showing our neighbours across the ditch the way, the NZ Act has been substantively based on, and indeed references, the Model Work Health and Safety Act passed by the Federal Government in 2011 (and since enacted by all States and Territories with the exception of Victoria and Western Australia) (Australian Act).

Whilst it is great to see the Kiwis catching up, why should directors in Australia be concerned?

For the most part, the news may only be of passing interest. However, if your company has a New Zealand subsidiary of which you are a director, then your responsibilities and liabilities are about to change.

Directors of companies in Australia will (and if not, should) be aware of their responsibilities under the Australian Act as an officer of a person conducting a business or undertaking to exercise due diligence to ensure that such person, so far as is reasonably practicable, ensures the health and safety of workers.

In contrast, a director’s liability under New Zealand’s existing Health and Safety in Employment Act 1992 is limited to instances where the director ‘directed, authorised, assented to, acquiesced in, or participated in’ the company’s health and safety failure.

With the introduction of the NZ Act, a positive duty on directors substantially similar to that in force in Australia will apply, leading New Zealand’s Institute of Director’s chief executive Simon Arcus to declare that “the age of the sleeping director is absolutely dead”. (The Dominion Post: 19 January 2016)

Whereas previously, a NZ director may have claimed that he or she had left health and safety responsibilities to management or other directors, all NZ directors are now at risk of personal liability for H&S breaches up to a maximum of 5 years imprisonment or a fine of $600,000 (or both).

These changes have reportedly led Sir Peter Jackson to resign as a director of Weta Workshop Limited, the special effects and design studio he co-founded, as the NZ Act would require him to be more involved in the company on a daily basis.

If you are a director of a New Zealand company, and historically have left matters such as health and safety to directors or management locally, then you should carefully consider your position over the next few weeks.

If duties in Australia mean that you are unable to devote the necessary time to be across all aspects of your role in the New Zealand company, then like Sir Peter, it may be appropriate to resign your directorship or else risk personal liability for the New Zealand company’s health and safety breaches.