Inspector Orr v Perilya Limited

[2018] NSWDC 29

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Inspector Orr v Perilya Limited [2018] NSWDC 29
Hearing dates:	4/7/17 - 7/717; 10/7/17 – 14/7/17; 17/7/17 – 21/7/17; 26/7/17 – 27/7/17; 31/7/17 – 4/8/17; 7/8/17 – 11/8/17; 14/8/17 – 15/8/17; 17/8/17 -18/8/17; 21/8/17-22/8/17; 27/9/17 – 29/9/17; 20/11/17-23/11/17
Decision date:	28 February 2018
Jurisdiction:	Criminal
Before:	Kearns DCJ
Decision:	The Second Amended Summons is dismissed. I shall hear the parties on costs.
Catchwords:	CRIMINAL LAW – PROSECUTION – WORK HEALTH AND SAFETY PCBU – subsidiary company owner and operator of mine – whether parent company with 100% shareholding in subsidiary company also owner and operator of mine
Legislation Cited:	Work Health and Safety Act 2011 (NSW); Mine Health and Safety Regulation 2007
Category:	Principal judgment
Parties:	NSW Department of Planning and Environment – Stephen James Orr, Investigator, Inspector and Manager, Regulatory Audit and Investigation (Prosecutor); Perilya Limited (Defendant)
Representation:	Counsel: Mr J Agius SC with Mr C Magee appeared for the Prosecutor; Mr B Hodgkinson SC with Mr M Shume appeared for the Defendant   Solicitors: Norton Rose Fulbright instructed by the Prosecutor; Colin Biggers and Paisley instructed by the Defendant
File Number(s):	2014/176345

Judgment

Charge and plea

1. Perilya Limited (Perilya) is charged with an offence under s 32 of the Work Health and Safety Act 2011 (Act). It is alleged that on 8 June 2012 it breached a health and safety duty it owed to Mr Pollard and to Mr Rowbotham under s 19 of the Act and exposed them to risk of death or serious injury.

2. Perilya has pleaded not guilty.

Proceedings against Perilya Broken Hill Limited

3. The proceedings in this case arise out of the same incident as that in proceedings against Perilya Broken Hill Limited (PBHL). Evidence in the case against PBHL also became evidence in these proceedings. The same analysis and conclusions I came to in the proceedings against PBHL, to the extent they are relevant to these proceedings, are also applicable in respect of these proceedings.

4. I incorporate, as part of my reasons in these proceedings, the reasons and findings I have just published in the PBHL proceedings.

Personnel of Perilya

Mr O’Connor

5. Mr O’Connor was a member of the Board of Perilya from 2006 to 2013. For a period up to 2008, he was Chairman in a non-executive capacity. He became non-executive deputy chairman in March 2009. He ceased performing duties for Perilya in December 2013.

Mr Marinko

6. Mr Marinko – In 2006/7, Mr Marinko was a consultant to Perilya. On 1 April 2007, he became General Counsel of Perilya and continues in that role. From November 2008, he has been the Company Secretary. In December 2008, he became a Director and Company Secretary of PBHL. He spent a lot of time in Broken Hill and met there with Mr Arndt and Mr Lord. [1]

Mr Lean

1. T1987.30

7. Mr Lean commenced employment with PBHL in February 2007. He is Manager, Health Safety and Environment for PBHL. He has held that role since approximately August 2008 [2] . The role focussed on safety and training services to employees. At August 2008, he had a staff of 13 people and he reported directly to Mr Lord who was the general manager of operations.

Mr Arndt

2. T1224.32

8. On 14 November 2007, Mr Arndt was offered by Perilya the position of Executive General Manager Operations and Development based in Perth. He accepted it on 19 November 2007. The letter [3] included the following:

Health, Safety & Environment

Create and maintain a culture of continuing improvement in safety performance and awareness – SAFE PRODUCTION, ZERO HARM

Implement and enforce necessary environmental controls

The Perilya website notes Mr Arndt was appointed Executive General Manager on 24 January 2008 and Managing Director on 25 November 2008. The website notes as follows [4] :

Paul was initially appointed to oversee performance improvements at the Broken Hill Operation in response to a significant global downturn in the base metals sector. The Board subsequently appointed Paul as Managing Director & CEO, which was ratified by shareholders at the 2008 AGM. During Paul’s time with Perilya he has been instrumental in delivering almost a doubling in productivity as well as significant reductions in direct operating costs at the Broken Hill Operation.

3. Prosecutor’s submissions, Tab 19

4. Prosecutor’s submissions, Tab 15, Executives

9. Mr Arndt went on to become Chief Executive Officer and Managing Director of Perilya and the group. He was also on the board of PBHL [5] . He was appointed Chief Executive Officer in 2008 [6] .

Mr Lord

5. 1865.07

6. T1864.17-.19, T2010.49

10. PBHL offered Andrew Lord the position of General Manager Operations on 5 March 2008 [7] . Mr Arndt undertook the vetting. Mr Arndt was then an employee of Perilya. As at June 2012, Mr Lord was employed by PBHL as General Manager and as a director of PBHL.

    7. Exhibit PX 1, Vol 18, Tab 461, p3819

The risks and the particulars

11. The risks to which the workers were allegedly exposed are the same in these proceedings as in the proceedings against PBHL. The particulars of breach in these proceedings are also the same as the particulars in the PBHL proceedings.

Elements of the offence

12. The prosecutor must establish beyond reasonable doubt:

1. that Perilya was conducting a business or undertaking;

2. that Messrs Pollard and Rowbotham were workers whose activities in carrying out work were influenced or directed by Perilya while they were at work at the business or undertaking;

(3)   that Perilya failed to comply with its health and safety duty to Messrs Pollard and Rowbotham;

3. that the failure exposed Messrs Pollard and Rowbotham to risk of death or serious injury.

All elements are in issue.

13. In my analysis of the evidence, it has become necessary to consider the first issue only as I have come to the view that the prosecutor has not established beyond reasonable doubt that Perilya was conducting a business or undertaking.

The legislation

14. Section 5(1) of the Act relevantly provides:

For the purposes of this Act, a person conducts a business or undertaking:

(a)   whether the person conducts the business or undertaking alone or with others …

15. Section 14 of the Act provides:

A duty cannot be transferred to another person.

16. Section 16 of the Act provides:

(1)   More than one person can concurrently have the same duty.

(2)   Each duty holder must comply with that duty to the standard required by this Act even if another duty holder has the same duty.

(3)   If more than one person has a duty for the same matter, each person:

(a)   retains responsibility for the person’s duty in relation to the matter, and

(b)   must discharge the person’s duty to the extent to which the person has the capacity to influence and control the matter or would have had that capacity but for an agreement or arrangement purporting to limit or remove that capacity.

17. Section 19 of the Act relevantly provides:

1. A person conducting a business or undertaking must ensure, so far as is reasonably practicable, the health and safety of:

1. workers engaged, or caused to be engaged by the person, and

2. workers whose activities in carrying out work are influenced or directed by the person, while the workers are at work in the business or undertaking.

2. A person conducting a business or undertaking must ensure, so far as is reasonably practicable, that the health and safety of other persons is not put at risk from work carried out as part of the conduct of the business or undertaking.

3. Without limiting subsections (1) and (2), a person conducting a business or undertaking must ensure, so far as is reasonably practicable:

1. the provision and maintenance of a work environment without risks to health and safety, and

2. the provision and maintenance of safe plant and structures, and

3. the provision and maintenance of safe systems of work, and

4. the safe use, handling, and storage of plant, structures and substances, and

5. the provision of adequate facilities for the welfare at work of workers in carrying out work for the business or undertaking, including ensuring access to those facilities, and

6. the provision of any information, training, instruction or supervision that is necessary to protect all persons from risks to their health and safety arising from work carried out as part of the conduct of the business or undertaking, and

7. that the health of workers and the conditions at the workplace are monitored for the purpose of preventing illness or injury of workers arising from the conduct of the business or undertaking.

18. Section 32 of the Act relevantly provides:

A person commits a Category 2 offence if:

(a)   the person has a health and safety duty, and

(b)   the person fails to comply with that duty, and

(c)   the failure exposes an individual to a risk of death or serious injury or illness.

Element 1 – that Perilya was conducting a business or undertaking

19. At the outset, I deal with a couple of submissions of Perilya. The first is that what the prosecutor was seeking to do was “pierce the corporate veil”. This is in the context that PBHL was a wholly owned subsidiary of Perilya. Piercing the corporate veil is not permitted, but it is not what the prosecutor is seeking to do. The prosecutor’s case is that the evidence establishes that the Perilya was a person conducting a business or undertaking (PCBU) within the meaning of the Act.

20. Perilya also submitted that PBHL was the nominated operator of the mine under the now repealed Mine Health and Safety Act 2004, and that PBHL solely conducted and operated the mine. That PBHL was the nominated operator of the mine does not establish that Perilya was not the, or an, owner of the Mine. Much less does it establish that it did not operate or manage the mine. In any event, these are not the issues. The issue is whether Perilya was a PCBU within the meaning of the Act. This will be determined by the evidence. Sections 5 and 16 make it plain that, despite PBHL being the nominated operator of the mine, and operating the mine, Perilya may also be a PCBU and be under the same duties as PBHL.

21. The first element to be established is that Perilya was conducting a business or undertaking.

22. It is not any business or undertaking that is at issue here. What is at issue is whether it was conducting a business or undertaking in the operation of the mine.

23. That requires an examination of the relationship between Perilya and PBHL and the role, if any, that Perilya had in the operation of the mine. The prosecutor’s submission was that Perilya was the, or an, operator of the mine.

Summary of the prosecutor’s submissions

24. To understand the evidence in its context, it is useful to summarise the prosecutor’s submissions on this issue. They are to the following effect.

1. Perilya published documents pronouncing that it owned and operated the mine.

2. The HSE Management System Overview was published in the name of Perilya and recorded that the Perilya Board had a role to ensure that effective and appropriate systems were in place to ensure safety controls were adequate. It also established that Paul Arndt was responsible for HSE in Broken Hill.

3. Mr O’Connor agreed that the HSE Management Systems Overview document [8] reflected the practice as far as HSE was concerned in June, 2012 [9] . The document lists the “HSE accountabilities of the Perilya Board” (to be distinguished from the Directors of Perilya subsidiaries). This document then envisaged and reflected a continuing role for the Perilya Board in HSE management and control at the Mine.

   8. Exhibit PX 1, Vol 5, Tab 156

   9. T1875.07-.10

4. There are no minutes of meetings of directors of PBHL.

5. Perilya’s Board Minutes demonstrate that it received HSE reports in relation to the operation of the mine.

6. Mr O’Connor’s evidence that when Mr Arndt appointed Mr Lord in 2008, Mr Arndt was then an employee of Perilya. Mr Lord reported to Mr Arndt as chief executive officer and he also reported to the board of Perilya [10] . I pause here to note that Mr Arndt did not make the appointment – see [10].

   10. T1864.39

7. The Perilya board could replace Mr Arndt. Mr Arndt could replace Mr Lord.

8. PBHL was a wholly owned subsidiary of Perilya.

9. A restructure which began in 2008 did not remove control of PBHL from the Perilya board. The PBHL and HSE Structure Review June 2011 is an example of the operation of the mine by Perilya [11] .

   11. Exhibit PX 1, Vol 14, Tab 400

10. Employees of PBHL reported in person to the Board of Perilya regarding HSE at the Mine. [12] On one occasion Mr Arndt when reporting to the Perilya Board spoke of “the company’s ongoing drive to continually improve safety”. Mr O’Connor agreed that the reference to the ‘company’ was a reference to Perilya. [13]

    12. T1868; Exhibit PX 1, Vol 14, Tab 403 at 3320; Exhibit PX 1, Vol 14, Tab 406 at 3342

    13. T1869.18-.21

11. Although employed by PBHL Mr Lean was sent to Perilya’s mine in the Dominican Republic in connection with HSE matters there.

12. Mr O’Connor provided a response to a s 155 Notice [14] in which he set out what he had done to comply with his obligations as a director of Perilya. In respect to each of the answers that he provided, his response relates to the operation of safety at PBHL [15] and his involvement in a physical and practical sense with HSE at the mine.

13. There is evidence that Perilya controlled the financing of HSE for PBHL. This uncontested evidence came from Mr O’Connor. [16] The reference proffered does not support that Perilya controlled the financing.

Evidence in relation to Perilya’s control of the mine

14. PX 1, Vol 14, Tab 387

15. PX 1, Vol 14, Tab 387 at pages 3067-68

16. T1877.15-.42

25. Exhibit PX 2 [17] [3] states:

    17. Agreed Statement of Facts – Perilya Limited

Perilya Limited (PL) (the Defendant) was at all material times:

1. an Australian public company listed on the Australian Stock Exchange (ASX);

2. the holding company of approximately 10 proprietary companies incorporated in Australia and Perilya Broken Hill Limited (PBHL) which was an unlisted public company and approximately 10 other companies registered outside Australia; and

3. the owner of all of the shares in PBHL.

26. Exhibit PX 2 [4] states:

On the 8 June 2012 PBHL was the nominated operator of the Mine pursuant to the MHS Act.

27. The evidence of Perilya’s ownership of the mine lies in documents produced by Perilya [18] . There was also other, and more compelling, evidence that PBHL owned the mine [19] . I am not satisfied that Perilya owned the mine at the relevant time.

    18. Exhibit PX 1, Vol 14, Tab 395, p3191; Tab 396, p3192; Tab 294, p3177

    19. T1824.50; Exhibit PX 1, Vol 14, Tab 399

28. The prosecutor’s case that Perilya was a PCBU relied essentially on its alleged operation of the mine.

29. The first of the documentary material consists of documents in which Perilya stated that it owned and operated the mine [20] .

    20. Exhibit PX 1, Vol 14, Tab 395, p3191; Tab 396, p3192; Tab 294, p3177

30. Both Mr O’Connor and Mr Marinko supported the truth of that admission but gave it a context such that it did not mean that it was Perilya that owned and operated the mine.

31. The context was that this was a statement made as part of Perilya’s reporting and disclosure obligations.

32. Perilya’s disclosure obligations arose by reason of its being a publicly listed company. The ASX imposed duties of disclosure. There were also disclosure obligations under corporations legislation. Perilya’s duty and policy was to disclose anything that might affect the value of its shares or its reputation or its financial position. Its duty and policy was one of continuous disclosure. To comply with its duty and policy of disclosure, Perilya had ongoing review of its wholly owned subsidiaries. It needed to be ongoing as some disclosures were required to be made immediately on the happening of something requiring disclosure. Further the reporting obligations included reporting in respect of wholly owned subsidiaries. [21]

    21. T1824.40, T1844.37, T1993-1997; Exhibit DX 12A, 12B, 13, 14, 15, 16

33. In undertaking its disclosure obligations, Perilya used clear, concise, simple language [22] so that the message could be readily understood by the ordinary shareholder. That is why the expression “Perilya owns and operates” was used [23] . Perilya here referred to the Perilya group [24] .

    22. T1845.13

    23. T1846

    24. T1860.33

34. Also Perilya was under an ASIC class order for accounting purposes. That meant a consolidated set of annual accounts could be presented reflecting the financial activity of all members of the group [25] . There was a deed of cross-guarantee. Perilya had to be aware always of the financial position of its subsidiaries [26] . The effect of the deed of cross-guarantee was that each company in the group guaranteed the debts of each other company in the group. This meant that Perilya needed to be aware of the financial position of PBHL on an ongoing basis. Perilya published consolidated accounts and reported its activities as a consolidated entity [27] .

    25. T1841.48

    26. T1842.39

    27. T1999.18-.24

35. Mr Marinko said the statement that Perilya owned and operated the mine was true in the context of the ASX listing rules and that it was common practice for companies to report in that way [28] . The particular context here is that PBHL was a wholly owned subsidiary of Perilya. If the reality was that PBHL, not Perilya, owned and operated the mine, it seems strange that there was not some simple way of expressing that reality. However, particularly in light of the unchallenged evidence that it was common practice in these circumstances for the matter to be expressed the way it was and in light of the evidence I have referred to, the admission in these documents is an admission that has been explained.

    28. T2024.11-.30

36. In 2008, the viability of Perilya as a company came under scrutiny [29] as a result of the Global Financial Crisis. Perilya considered whether PBHL could remain operable. It asked the management of PBHL to evaluate options and make recommendations [30] . Changes were made to both companies and Perilya was involved in that.

    29. T1825.50-T1826.01

    30. T1826.23-.33

37. Perilya’s office based in Perth downsized from about 40 people to eight [31] . The Perth office no longer had the personnel to provide support services as it had been doing [32] . About eight management positions were removed [33] . The Broken Hill workforce went from 766 to 366. PBHL was to stand as a stand-alone business [34] . Perilya then had no staff to provide support services [35] .

    31. T1827.12, T1980.30

    32. T1827.17

    33. T1981.14-.23

    34. T1827.20

    35. T1827.14-.17

38. Before 2008, the Perilya Board had a number of committees:

• Audit and Risk Management;

• Diversity, Remuneration and Nominations;

• Contracts;

• HSE.

39. The HSE board sub-committee was dis-established in 2008 under the restructure of Perilya [36] . After that, Perilya did not have any committee dealing with health and safety, either in its own operation, or in any of the operations of the entities which it owned [37] . Mr Marinko said that when the board HSE committee was dissolved under the constitution, the Perilya board resolved to leave the responsibility for HSE with the PBHL board for developing its own policies and procedures and taking responsibility for health and safety matters [38] .

    36. T1831.38

    37. T1831.41-.44

    38. T1983.20-.24

40. In dismantling its HSE committee, Perilya devolved responsibility directly to the PBHL board which was to report directly to the board of Perilya [39] . This was effected in 2008 [40] . The board and executives of PBHL were responsible for implementation and operational HSE performance [41] .

    39. T1831.30

    40. T1831.35-.44

    41. T1832.16

41. The Perilya board focussed on its oversight functions rather than hands-on management [42] . The Perilya board had no day-to-day involvement in the activities of PBHL [43] .

    42. T1832.30; Exhibit PX 1, Vol 14, Tab 400, p3298

    43. T1857.36-.47

39. After the downsizing the only operating asset was PBHL and it was made a stand-alone business unit. It had the necessary people, facilities, capability and assets to conduct its business activity without support from a corporate office [44] .

    44. T1827.21-.26

40. Under the name of Perilya and its logo, is a document entitled “PBHL Board and HSE Structure Review June 2011” [45] . This was prepared by Mr Marinko. It is a historical document. It records the downsizing and restructure history. It also records the resolution to dismantle the Perilya Board HSE Committee and devolve responsibility directly to the PBHL board which would report directly to the full board of Perilya. That devolution included [46] :

Implementation of a new integrated approach to HSE with the Perilya Board focussing on its “oversight functions” rather than “hands on” management, which is delegated to the relevant key management personnel.

The reference to “oversight functions” was a reference to Perilya protecting its shareholders’ interests [47] . The reference to the “relevant key management personnel” was a reference to PBHL personnel [48] . The idea was to place responsibility on executives who had intricate knowledge of the day-to-day operations and HSE processes at Broken Hill [49] .

45. Exhibit PX 1, Vol 14, Tab 400

46. Exhibit PX 1, Vol 14, Tab 400, p3298

47. T1985.06

48. T1985.02

49. Exhibit PX 1, Vol 14, Tab 400, p3299

44. Mr Marinko said the idea was to move everything back to site and give the site responsibility. The site personnel were to be responsible for their performance. [50]

    50. T1982-30-.35

45. The Structure Review document [51] noted changes and measures that were to be adopted. They included:

A full audit of the site HSE systems to ensure they were appropriate for the restructured organisation …

Elevation of role Manager Safety & Training to a senior management level and the appointment of Peter Lean to that role;

An employee-wide pro-active focus on HSE responsibility and a renewed focus on preventative measures including significant increase in safety interactions, FFW testing, training, workplace audits, task observations, hazard hunts, near miss reporting and toolbox safety meetings …

Following the daily site Management meeting, a teleconference between the GM Operations and the CEO to review daily performance including HSE;

A detailed monthly report on HSE performance, lead & lag indicators, highlights and lowlights reviewed and signed-off by the full PBHL Board and a summary report prepared for the Perilya Board’s consideration;

Automatic and immediate notification to the PBHL Board of all HSE incidents, with all material incidents reported through to the Perilya Board by the CEO…

51. Exhibit PX 1, Vol 14, Tab 400, p3299

46. The full audit of the HSE systems was to be undertaken by PBHL. The third matter above was driven by Mr Lord [52] . The teleconferences were not reported to the Board of Perilya [53] . Nor were discussions held between Mr Lord and Mr Arndt [54] .

    52. T1833.13

    53. T1834.15

    54. T1834.19

47. The fifth point was for disclosure obligations [55] . PBHL was able to change the HSE system without reference to Perilya [56] .

    55. T1835.49

    56. T1835.35

48. Perilya’s website contains a Board Charter prepared on 24 November 2011 [57] . It recorded that the Board was responsible for:

(f)   formulating and implementing appropriate policies and strategies for the Company including appropriate corporate governance, operational, employment and diversity, financial, safety, compliance and risk management policies and strategies;

(g)   monitoring the implementation of the Company’s policies and strategies and the achievement of relevant objectives and performance against the Company’s strategic plans and budgets;

…

(l)   ensuring that effective and appropriate systems are in place to assure the Board that corporate governance, operational, employment and diversity, financial, operational, safety, compliance and risk management controls and functions are adequate …

57. Exhibit PX 1, Vol 14, Tab 402, p3312

49. The next document for consideration was also published under the name and logo of Perilya. It is the HSE Management System Overview [58] . It is a significant document in the prosecution case and much of it bears setting out.

    58. Exhibit PX 1, Vol 5, Tab 156, p0735

Appendix Six – HSE Roles and Responsibilities

In general, line management is accountable for implementing Perilya BH’s health safety and environment policies and systems, and for HSE performance. Support roles are responsible for assisting with the design of management systems and providing specialist support and guidance to line management in carrying out their responsibilities. The responsibilities as described have been drawn from, and are consistent with, HSE legislation and regulation in NSW, South Australia, Queensland and Western Australia.

Role

Responsibility

Perilya Board of Directors

Responsible for Perilya BH’s direction, strategies and financial objectives

Has responsibility for charting Perilya BH’s direction, strategies and financial objectives and ensuring appropriate resources are available. The Board’s Charter includes:

• monitoring compliance with control and accountability systems, significant disclosures to the market, regulatory requirements and ethical standards

• reporting to shareholders and the investment community on the performance and state of the company

• ensuring that appropriate audit arrangements are in place

• ensuring that effective and appropriate systems are in place to assure the Board that, financial, operational, safety, compliance and risk management controls and functions are adequate

• considering the health, social, safety, ethical and environmental impacts of the company’s activities and ensuring appropriate policies and practices are in place

CEO

Responsible for HSE in Perilya BH

Has overall responsibility for the health, safety and welfare of all employees, contractors and visitors, providing safe workplaces and for preventing or otherwise managing adverse impacts on the environment from all Perilya BH operations, including:

• Ensuring that a senior executive (general manager, project director or other ‘responsible person’)* has designated HSE line accountability for each operation, project or exploration program.

• Maintaining an effective HSE management system that supports best practice and providing adequate resources.

• Reporting to the Perilya Board on HSE risks and performance.

Chairing the HSE Management Committee.

Directors of Perilya subsidiary companies

Responsible for the health, safety and welfare of all the company’s employees and for preventing or otherwise managing adverse impacts on the environment from the company’s activities

Have responsibility for the health, safety and welfare of all the company’s employees and for preventing or otherwise managing adverse impacts on the environment from the company’s activities. This includes:

• Compliance with all relevant laws and regulation

• Workplaces and any premises (including means of access to and exit from premises) are safe and without risks to health

• Risks to safety, health and the environment are effectively managed (identified and controlled)

• Any plant or substance provided for use is safe and without risks to health when properly used.

• Such information, instruction, training, authorisation and competent supervision as may be necessary are provided to employees and contractors and visitors to promote health and safety at work.

• Employees and contractors have the necessary skills and competence for the tasks they are to undertake.

• Adequate facilities are provided for the welfare of employees, contractors and visitors.

• Monitoring of the safety and health of employees and contractors and impacts of the operations on the environment is effectively implemented.

Effective means of communications for those working in the company.

General Manager Broken Hill

Responsible for HSE in all BH operations

Has responsibility for the health, safety and welfare of all the relevant operation’s employees, contractors and visitors, and for preventing or otherwise managing adverse impacts on the environment from Perilya BH’s activities, including:

• Compliance with all relevant laws and regulation

• Workplaces and any premises (including means of access to and exit from premises) are safe and without risks to health.

• Risks to safety, health and the environment are effectively managed (ie identified and either eliminated or where not reasonably practicable to eliminate are controlled)

• Any plant or substance provided for use is safe and without risks to health when properly used.

• Such information, instruction, training, authorisation and competent supervision as may be necessary are provided to promote employee, contractor and visitor health and safety at work.

• Employees and contractors have the necessary skills and competence for the tasks they are to undertake.

• Adequate facilities are provided for the welfare of employees, contractors and visitors.

• Monitoring of the safety and health of employees and contractors and impacts of the operations on the environment is effectively implemented.

• Effective means of communications for those working on the relevant operation.

Also has responsibility for

• Demonstrating visible leadership that provides appropriate consequences for safe working and environmentally responsible behaviours and for non-compliance.

• Developing, implementing and maintaining a management structure that promotes the health and safety of employees and contractors and protection of the environment.

• Ensuring that health safety and environmental responsibilities are properly described in all operational role descriptions.

• Developing, implementing and reporting on the mine safety, emergency and environmental management plans.

• Engaging the workforce and regularly reviewing performance to achieve continual improvement.

General Manager Broken Hill

Responsible for supporting the CEO with the design and review of the HSE management system

Has responsibility for providing support to the CEO in carrying out his duties as above, including assisting with:

• The design and review of the Perilya BH HSE management system.

• Developing and reporting on Perilya BH HSE action plans.

• Reporting to the HSE Board and management committees on HSE performance.

• Providing policy, strategic and specialist advice on HSE matters. Group HSE communication.

50. There was some confusion about version numbers and dates of version numbers of this document. It does not matter. It was originally a Perilya document and Mr Lord and Mr Lean approved the version that was in evidence [59] . This document, revision 4, was not considered by the Perilya Board.

    59. Exhibit PX 1, Vol 5, Tab 156, p0736

51. The prosecutor draws a number of things from this document.

1. Line management was accountable for implementing PBHL’s HSE systems and performance.

2. The Perilya Board had responsibilities as specified in the document. That included, in particular, ensuring that effective and appropriate systems were in place to assure the Board that financial, operational, safety, compliance and risk management controls and functions were adequate.

3. The CEO of Perilya, Mr Arndt, had the responsibilities designated to him. That involved a number of matters relating to health, safety and welfare.

4. The PBHL Board had the responsibilities designated to it.

5. The General Manager at Broken Hill had the responsibilities designated to him.

52. The prosecutor submitted there were differences in the responsibilities of each of these persons or Board with clear responsibilities lying with Perilya and with its CEO in matters affecting the operation of the mine and in particular its health, safety and environmental functions. There were also reporting responsibilities on the PBHL Board and its General Manager.

53. Mr O’Connor agreed that the material as set out reflected the situation as at 6 November 2009 [60] ; and as at June 2012 [61] .

    60. T1874.34

    61. T1875.10

54. On the other hand, Mr Marinko and Mr Lean gave evidence that the document did not reflect the reality. Mr Marinko said that a number of matters in the document accurately set out the roles and responsibilities, but not all. He gave evidence to the following effect:

• the Perilya Board was not actively engaged in the role set out in the document [62] ;

• the CEO had no role in this document. The only thing Mr Arndt was doing in the list of responsibilities was reporting to the Perilya Board on HSE risks and performance [63] ;

• the reporting referred to did not occur. There was no Perilya HSE Committee [64] ;

• the General Manager did not hold the responsibilities attributed to him concerning supporting the CEO with the design and review of the HSE Management System [65] .

  62. T2004.10

  63. T2005.22

  64. T2012.41

  65. T2018.45-T2020.28

55. In cross-examination it was pointed out to Mr Marinko that the responsibilities for the Perilya Board of Directors in the document reflected five items from Perilya’s Charter. He acknowledged that. He was asked why the reader of the document should not understand that the document was setting out what was happening, that is that the Perilya Board had responsibility for charting PBHL’s directions, strategies, objectives, and ensuring financial resources were available. He said that view could be formed if the document were read out of context. The context is it was prepared when Perilya had 40 odd people at head office capable of carrying out these functions, but that was not the case in 2009 [66] . The document is redundant and should not have been carried over. [67]

    66. T2014.20-.40

    67. T2006.38

56. Mr Lean was asked about the document. He did the bulk of the work in carrying out the revision [68] . It was intended to be a safety management system for PBHL [69] . The Perilya system was intended to be turned into a PBHL system [70] . Mr Lean said the implementation of the system was done by PBHL at the mine without reference to Perilya [71] . The references to Perilya were not meant to be there [72] .

    68. T1226.05

    69. T1237.30

    70. T1249.35-.40

    71. T1251.01-.04

    72. T1238

57. The continued references to Perilya in the document were the result of Mr Lean failing to complete properly and fully the task of documenting the HSE system for PBHL [73] . He did not think clearly enough about making the differentiation between Perilya and PBHL. An example of a document prepared by PBHL at the mine without receipt of any document from Perilya or any other form of input from Perilya and without any referral to Perilya is the Safety Awareness Package [74] . It is a document that nevertheless refers to Perilya Limited. It is a reference that should not be there [75] . Some Perilya text had been extracted from the old system documents and PBHL text added in [76] .

    73. T1252.09

    74. Exhibit PX 1, Vol 5, Tab 158

    75. T1253.34

    76. T1237.36

58. Mr Lean could not explain why he referred to Perilya Board and Directors of Perilya Subsidiaries when he did not mean to distinguish between the two entities [77] .

    77. T1239.29-.33

59. The PBHL Board could adopt and change its own HSE systems [78] . The Perilya Board was giving no direction as to the systems to be utilised at Broken Hill post-2009 [79] . Day-to-day operations were left to the judgment call of the executives of the subsidiary [80] . Perilya had no involvement in the day-to-day activities of its subsidiaries [81] . PBHL was responsible for looking after any structural issues [82] . The Board placed responsibility on PBHL and particularly on Mr Lord and Mr Lean who had intricate knowledge of the operation of the mine [83] . Perilya could have controlled everything that happened at Broken Hill but did not have the resources to [84] .

    78. T1835.33

    79. T1836.46

    80. T1840.20

    81. T1857.35-.47

    82. T1841.09-.15

    83. T1986.39

    84. T2025.35-2026.01

60. The prosecutor submits that a close review of the HSE Management System Overview Document [85] indicates that the evidence of Messrs Lean and Marinko that it was an historical relic and did not apply in 2012 should not be accepted. In particular:

1. at the beginning of the first paragraph of Appendix Six the document speaks of the HSE system as reflected in similar terms to the review document referred to above, i.e. line management at PBHL is accountable for implementing HSE policies and systems;

2. the document [86] speaks of the responsibility for HSE at PBHL in terms of the roles of the CEO and the General Manager. Those positions were created as part of the restructure. Mr Arndt was the first CEO. It would make no sense that the document would be referring to a role for the CEO if this was a document of historical interest only;

3. The role of the General Manager of PBHL is defined in terms which mirror those described by Mr O’Connor and Mr Marinko. [87]

   85. Exhibit PX 1, Vol 5, Tab 156

   86. Exhibit PX 1, Vol 5, Tab 156, p0764

   87. Exhibit PX 1, Vol 5, Tab 156, p0766

61. Whatever view one takes of this document, there are anomalies. At the time it was created, it referred to a position (CEO) yet to be created. On the other hand, it referred to a committee (Perilya HSE committee) that no longer existed. I do not think the point about line management goes very far. It depends on what the line is and where it stops. It is consistent that this document is referring or intending to refer to a line of management within PBHL.

62. I think Mr Marinko’s evidence that the document was a redundant document is probably correct. That evidence is corroborated, in effect, by Mr Lean. Of the witnesses who gave evidence on this issue, Mr Marinko and Mr Lean were the ones with the closest connection to what was happening in the day-to-day operations of the mine. They were best placed to speak about how the mine operated and who operated it. They were best placed to speak about the extent to which, if at all, the matters in the HSE Management System Overview were carried out.

63. The prosecutor also relies on a chain of command and Perilya’s control over PBHL. The prosecutor also relies on Perilya and PBHL having the same registered office being Level 8, 251 Adelaide Terrace, Perth, WA 6000.

64. In evidence were minutes of meetings of the board of Perilya for 23 April 2009, 8 November 2010, 5 May 2011, 7 July 2011, 19 August 2011, 24 November 2011, 20 December 2011, 1 March 2012, 9 May 2012 and 22 November 2012.

65. They reveal:

• different persons, including Mr Arndt and Mr Lord, presenting HSE reports to the Board. Sometimes there was comment on the reports, sometimes not;

• Mr Lean had been seconded in 2011 from the Broken Hill mine to a Perilya mine in the Dominican Republic. That was noted, as was also noted, a significant improvement in safety as a result [88] ;

• there were occasions of comments on injuries at the Broken Hill mine [89] ;

• on one occasion, Mr Arndt referred to the company’s (Perilya’s) ongoing drive to continually improve safety [90] .

  88. 5 May 2011 - Exhibit PX 1, Vol 18, Tab 471

  89. 7 July and 19 August 2011 - Exhibit PX 1, Vol 14, Tab 404, Tab 405

  90. 24 November 2011, Exhibit PX 1, Vol 14, Tab 406

66. The Perilya board considered HSE reports, but did not make any decision on them [91] . The HSE reports considered by the Board were the consolidated group reports rather than the individual reports from the subsidiaries [92] . To comply with its disclosure and reporting obligations, Perilya would need to keep abreast of matters that could affect its share value, financial position or reputation. HSE would fall within that. It was by reason of Perilya’s disclosure obligations [93] that it received reports.

    91. T1852.46

    92. T1857.07; Exhibit PX 1, Vol 14, Tab 391; Vol 18, Tab 464

    93. T1986.20

67. The Perilya Board received a budget from PBHL annually or more frequently. The budget had an impact on Perilya. [94] Likewise, for reasons of disclosure and reporting, Perilya necessarily had to receive this information.

    94. T1837.40, T1838.20

66. Perilya published a number of documents in its reporting to the ASX and otherwise. It is sufficient to take one document as an example. The Quarterly Activities Report for the three months ended 30 June 2012 [95] included:

The continuation of solid operating results and sustained control on costs at both the newly acquired Cerro de Maimón mine and the Broken Hill operations in a difficult operating environment of a very strong AUD against the US dollar and weak metal prices particularly for zinc and lead, is a testament to the Company’s strategy in response to the current economic and global metal price environment. [96]

95. Exhibit PX 1, Vol 14, Tab 395, p3191

96. Exhibit PX 1, Vol 14, Tab 395, p3178

69. It then reported on aspects of the Broken Hill mine and the Dominican Republic mine. It added [97] :

MD/CEO’s comments

I am pleased to report that during the June quarter Perilya’s Broken Hill Operations achieve its best production quarter since December 2009. Further the Broken Hill Operations has continued to maintain its strong control on costs …

97. Exhibit PX 1, Vol 14, Tab 395, p3179

70. The report goes on to address safety at the Broken Hill mine and includes the following paragraph [98] :

The safety system implementation continues to drive a review of training packages using risk management techniques and refresher training for operators using the new material. The same approach is being used to gain accreditation of Perilya Broken Hill as a Rolling Stock operator by the independent Transport Safety Regulator, the government body in charge of rail operations. Training of supervisors and support staff in Front Line Management continues with the latest group of 12 participants commencing in July. Those who have completed this training over the last two years are undergoing a ‘refresher’ through two day workshops that cover the tools and techniques already learned.

98. Exhibit PX 1, Vol 14, Tab 395, p3181

71. The document likewise reported on the Dominican Republic mine.

72. The document added a company profile at its end:

Perilya is an Australian base and precious metals mining and exploration company, which owns and operates the iconic Broken Hill zinc, lead, silver mine in NSW Australia and, with the successful takeover of GlobeStar Mining Corporation in December 2010, the Cerro de Maimón copper, gold and silver mine in the Dominican Republic. The Company’s operations at the Broken Hill mine went through a resizing in 2008 which has resulted in significant improvement in productivity, profitability and cashflows resulting in an extension to the life of mine to approximately 10 years.

In addition to its mining operations, the Company has an active exploration and development program which includes exploration and development programs in the Broken Hill region in NSW Australia and in the Flinders region of South Australia in the vicinity of its Beltana zinc silicate project. The Company also has extensive exploration programs underway on its Dominican Republic mining and exploration concessions that include a lateral nickel project and highly prospective copper, gold & silver targets near its Cerro de Maimón mine.

The Company is reviewing options for the development of the Mount Oxide Copper Project in the Mount Isa region in Queensland. In addition, the Company has a 60% interests in the Moblan lithium project located in Quebec, Canada, which is currently undergoing a development study (the remaining 40% is held by SOQUEM, which is an investment company owned by the Quebec Government in Canada).

73. In light of what I said at [27] to [35], those statements and like statements in other documents should not be read as evidence that Perilya operated the Broken Hill mine.

Other evidence of control

74. In response to a s 155 Notice to Mr O’Connor, the solicitors for Perilya responded on 18 March 2014 with information that included the following [99] :

    99. Exhibit PX 1, Vol 14, Tab 387

At the outset we set out, in general terms, the manner in which Mr O’Connor has discharged his obligations in relation to health and safety matters as a non-executive director of Perilya Limited (Perilya)

…

The processes by which Mr O’Connor discharged his obligations were:

acquiring and keeping up-to-date knowledge of work health and safety matters by reviewing reports prepared by Perilya BH management and other such documents during boards meetings and as necessary from time to time and attending briefings on Work Health & Safety laws;

gaining an understanding of the nature of the operations by receiving appropriate reports from management at board meetings, being involved in site inspections and receiving other information from time to time;

ensuring that Perilya BH had available for use, and used, appropriate resources and processes to eliminate or minimise risk to health and safety by reviewing, considering and approving Perilya BH Health Safety & Environment (HSE) management system as a member of Perilya’s board;

ensuring that Perilya BH had appropriate processes for receiving and considering information regarding incidents, hazards and risks and responding by reviewing, considering the Perilya BH HSE management system as a member of Perilya’s board;

ensuring that Perilya BH had, and implemented, processes for complying with health and safety duties by reviewing reports and other such documents prepared by Perilya BH management for the Perilya board; and

Verifying the provision of resources for the above processes by reviewing and approving the Perilya BH budget as presented by Perilya BH management to the board and receipt of Reports and site attendance

75. Mr O’Connor acknowledged the correctness of the answers in his evidence [100] . He said, however, that PBHL prepared their own budget and the reference to Perilya HSE Management System in other areas meant PBHL’s HSE management system. Budgets were reviewed by the CEO and CFO of Perilya before being approved by Perilya [101] . It would be brought into a consolidated position [102] .

    100. T1878

    101. T1877.34

    102. T1838.09-.18

76. Mr O’Connor attended the mine once or twice a year from 2006 to 2012. He there attended board meetings which included discussions about safety matters [103] .

    103. Exhibit PX 1, Vol 14, Tab 387, p3070

77. Mr O’Connor said that in 2011-2012 Perilya was not giving any direction as to the structures that ought to be adopted by PBHL in the operations at the mine relevant to health and safety.

78. Cross-examined on Perilya control in PBHL, Mr O’Connor agreed [104] :

    104. T1863-1866

• there was control as in 100% ownership;

• there was capacity to appoint directors and general manager;

• there was capacity to have general manager answer to managing director of Perilya;

• there was capacity for managing director to exercise authority over general manager;

• an assertion that the General Manager, Mr Lord appointed to PBHL “in effect” by Perilya became an assertion that Mr Arndt appointed him, Mr O’Connor agreed but this was wrong. PHBL appointed him;

• Mr Arndt was appointed on 14 November 2007 as Executive GM Operations and Development and employed by Perilya;

• Mr Arndt went on to become CEO of Perilya and Managing Director of the group and also on the Board of PBHL;

• Mr Lord reported to Mr Arndt. He had that responsibility;

• Mr Arndt had authority to receive reports;

• Mr Lord reported to Mr Arndt in Mr Arndt’s capacity as Managing Director and CEO;

• Perilya could ensure Mr Lord was no longer employed;

• Perilya could question Mr Lord on HSE reports and system; it could direct him to address faults; it could call on all HSE reports and documents and examine them. Mr Arndt could do that.

79. To the extent that there is any conflict between what Mr O’Connor says and what Mr Marinko and Mr Lean say as to operational matters, I prefer the evidence of Mr Marinko and Mr Lean.

80. Mr Marinko said that between 2008 and 2012, the PBHL board was not meeting formally, but informally. Mr Marinko would speak to the general manager, Mr Lord, and the managing director, Mr Arndt, most days together and separately.

81. Mr Marinko was also cross-examined about control Perilya had over PBHL especially the relationship between the Chief Executive Officer and the General Manager and the power of Perilya to remove persons from office at PBHL [105] . Again, these are neutral matters arising from the fact that Perilya had 100% ownership of PBHL.

    105. T2016-2018

82. Mr Marinko was asked the following question [106] :

Q. In fact, Perilya Limited could have overseen, had it chosen to do so, all of the occupational health and safety documents that contained the policies, directions and management in relation to HSE of Perilya Broken Hill Limited.

He answered [107] :

Yeah - it would have needed to engage staff, but yes, it could have.

106. T2017.45-.47

107. T2017.48

83. I do not think this goes anywhere. Perilya could have chosen to take over and run the mine [108] . That is a position it held in law by reason of being the sole shareholder of PBHL. That does not make it a PCBU. It is what was happening in practice that is important. Mr Marinko made it plain in his answer that with a staff of eight in Perth, it was impractical for Perilya to be involved in the operation of the mine.

    108. T2025.37

84. In response to a s 155, Anna Liscia provided some information. The relevant question and answers are as follows [109] :

15.   Please provide a complete account of any other steps you took during the time that you were an officer of Perilya to acquire an up to date knowledge of safety related matters at the mine.

A15.   Generally speaking I would raise any queries I had relating to safety matters either during meetings of the board of directors of Perilya or with the CEO direct. Without reference to Perilya’s documents, to which I do not now have access, I cannot recall further.

…

23.   Please provide a complete account of what processes were in place during the time that you were an officer of Perilya that were designed to ensure that you (and other officers) received information regarding safety hazards at the mine.

A23.   Every meeting of the board of directors of Perilya devoted a significant portion of time to a review and discussion of reports dealing with health and safety matters (including reports on incidents), causes and what steps taken to remove or minimise further incidents), statistics and trends. Where any director thought fit to do so, he or she would ask questions and seek clarifications and make suggestions for future action. In addition, it was a practice of Perilya’s CEO to immediately notify directors of any significant safety breaches, providing details of the incident, its cause (where known) and what steps were being taken as a consequence. Without reference to Perilya’s documents, to which I do not now have access, I cannot recall further.

109. Exhibit PX 1, Vol 18, Tab 467

85. It should be noted that these questions proceed on an assumption, at least inferred, that Ms Liscia was obliged to receive information about safety matters at the mine and keep up to date on that. The answers should be read as evidence of the practice that occurred, but not as evidence of the reason for that practice. Again, to the extent that there is any conflict between her evidence and that of Mr Marinko and Mr Lean, I prefer the evidence of Mr Marinko and Mr Lean.

86. Practically all matters of control relied on by the prosecutor are neutral arising from the fact that Perilya had 100% ownership of PBHL.

87. In the result, I am not satisfied the prosecutor has established beyond reasonable doubt the first element of the offence. In summary, this is because:

• the preferred evidence is that Perilya did not own the mine;

• Perilya did not operate the mine as the evidence reveals that:

Perilya was in a position in law to control PBHL in all possible legal ways, but that was a product of its 100% shareholding and was a position of control not put into practice;

Perilya did not have the resources or manpower to do so;

control of the mine was in the hands of PBHL;

day-to-day management of the mine was in the hands of PBHL;

frequent discussions and conferences took place between Mr Arndt and Mr Lord that were not reported to the Perilya Board;

HSE and other reports to the Perilya Board were obtained by the Perilya Board to enable it to comply with disclosure and reporting obligations;

publications to the ASX and other publications declaring activities Perilya was undertaking were reported in the way they were to satisfy disclosure and reporting obligations;

the HSE system (which was one of main points of control relied on by the prosecutor) could be changed without reference to Perilya.

88. This is not a case of Perilya transferring its duty to another. Nor is it a case of an agreement or arrangement purporting to limit its capacity to influence and control the matter in respect of which it had a duty. This is a case of Perilya ceasing to have control of the mine and its operations. Control must be more than a legal right to control otherwise every parent company with a 100% shareholding of a subsidiary would be, without more, under a duty under s 19.

89. For reasons given herein, the Summons must be dismissed.

ORDER

90. The Second Amended Summons is dismissed.

91. I shall hear the parties on costs.

**********

Endnotes

Amendments

05 December 2018 - formatting corrected

Decision last updated: 05 December 2018