Chain of responsibility and executive officer liability reforms – understand your liability under the changes to the Heavy Vehicle National Law

If you are a director or an executive of an organisation that supplies or uses heavy vehicles to transport goods, you must make sure that you understand your obligations and potential liability under the amended Chain of Responsibility laws taking effect on 1 July 2018. Under the new regime, penalties of up to $300,000 and 5 years prison for an individual, or fines of up to $3 million for a corporation apply to offences under the Heavy Vehicle National Law (HVNL or the Law).

What is the HVNL?

The HVNL regulates the use of vehicles over 4.5 tonnes gross vehicle mass, setting vehicle safety standards and imposing obligations for both on and off-road parties involved in the transport and logistics chain. The HVNL recognises the impact that off-road parties can have on compliance with road laws, and imposes duties on all parties in the supply chain to prevent breaches. Parties such as dispatchers, schedulers, packers, receivers, managers, directors, consignors and consignees can be held liable for breaches of mass, loading, speed, and work hour laws.

All Australian businesses that utilise heavy vehicles to transport goods, even indirectly, may be classed as consignees or consignors, and thus part of the chain of responsibility. Duties and obligations imposed under the HVNL can therefore extend to businesses across industries such as retail, agriculture, and construction.

Current landscape

The HVNL and associated regulations took effect across Victoria, New South Wales, Queensland, South Australia, Tasmania, and the Australia Capital Territory in 2014. Western Australia and the Northern Territory have not adopted the HVNL.

In Western Australia, the Road Traffic (Administration) Act 2008 (WA) and the Road Traffic (Vehicle) Act 2012 (WA) impose obligations on chain of responsibility parties similar to those found under the HVNL. In the Northern Territory the use of heavy vehicles is governed by a range of Acts, Codes, and Regulations. Although the Northern Territory does not have specific chain of responsibility laws, chain of responsibility parties including employers can be held liable for certain breaches of road and load laws.

What is changing?

Revised penalty regime

The amendments introduce a hierarchy of penalties for contraventions of the HVNL. Category 1 offences involve a reckless breach which exposes someone to the risk of death or serious injury/illness. Penalties of up to $300,000 and 5 years prison for an individual, or fines of up to $3 million for a corporation apply to Category 1 offences.¹ Category 2 offences involve a breach which exposes someone to the risk of death or serious injury/illness but which was not reckless. The penalty for Category 2 offences is a fine of up to $150,000 for an individual or $1.5 million for a corporation.² Category 3 offences involve a breach of duty only and attract a maximum penalty of $50,000 for an individual or $500,000 for a corporation.³

Enforceable undertakings have been introduced as an alternative to prosecution for offences other than Category 1 offences.⁴ Enforceable undertakings may be entered into where an investigation shows that the HVNL has not been complied with, but the offending party is prepared to take voluntary action to fix the issue and ensure future compliance.

Enforceable undertakings will require operators to implement measures to prevent future breaches such as maintenance management systems, internal audits, and increased staff training. Failure to comply with an enforceable undertaking attracts a penalty of $10,000,⁵ and may result in proceedings being brought for the original contravention to which the undertaking related.⁶ Where an undertaking is complied with, no prosecutorial action may be taken.

New information gathering powers

Information gathering powers have been strengthened under the amended Law, with authorised officers given the power to require information from persons regarding certain contraventions of the HVNL.⁷ Failure to comply without ‘reasonable excuse’ attracts a penalty of $10,000. The fact that complying may incriminate a person does not excuse a failure to comply. Persons required to give information are provided some protection in that the information cannot be used in evidence against them, other than in a proceeding for providing false or misleading information.⁸ The obligation to provide information also specifically excludes information protected by legal professional privilege.⁹

Positive safety duties

From 1 July chain of responsibility parties will have a positive obligation to ensure the safety of transport activities and not do anything that could cause a breach of road laws or the HVNL.¹⁰ The level and nature responsibility will depend on a party’s job function, the nature of the risk, and their capacity to control the risk.¹¹ The amended HVNL confirms these duties cannot be transferred to another person.¹²

Under new section 26C,¹³ each party in the chain will have a primary duty to ensure the safety of transport activities so far as reasonably practicable. Parties in the supply chain must:¹⁴

1. Eliminate public risks, and where this is not reasonably practicable, minimise public risks; and
2. Ensure their conduct does not directly or indirectly cause or encourage:
   1. the driver of a heavy vehicle to contravene the HVNL;
   2. the driver of a heavy vehicle to exceed the speed limit; or
   3. another person, including another party in the chain of responsibility, to contravene the HVNL.

New section 26E prohibits requests or contracts that would have the effect of causing a driver to:

1. Exceed a speed limit;
2. Drive while fatigued;
3. Drive in breach of a work or rest hours requirement; or
4. Drive in breach of another law in order to avoid driving while fatigued or in breach of a work or rest hours requirement.

Executive officer responsibility

The HVNL reforms introduce a positive due diligence obligation for executive officers, who must ensure chain of responsibility parties comply with their duties. Where an entity has an obligation under section 26C, its executives must exercise due diligence to ensure the entity complies with that duty.¹⁵ An executive who fails to do so may be convicted of an offence even if no proceedings are taken against the entity.¹⁶

In order to exercise due diligence, an executive must take reasonable steps to:

• Understand the entity’s transport activities and associated hazards and risks;
• Ensure the entity has appropriate resources and processes in place to eliminate or minimise those risks; and
• Verify that the entity has implemented and is using the risk elimination/minimisation resources and processes.

Post 1 July, the onus will be on the prosecution to prove the executive did not exercise reasonable due diligence. Courts will take into account the extent to which the executive was in a position to influence the corporation’s conduct in regards to any offence, and any action the executive took or could reasonably have taken to prevent the conduct constituting the offence.¹⁷

You may be classed as an executive under the HVNL if you are a director, or involved in the management, of a corporation which controls or directs the use of heavy vehicles, even if you are not physically present for any transport related tasks. Similar provisions apply to those in management positions of partnerships and unincorporated associations.

Who does it impact?

The changes to the HVNL will impact all parties in the chain of responsibility, including:

• Drivers’ employers;
• Prime contractors;
• Vehicle operators;
• Vehicle schedulers;
• Consignors and consignees;
• Packers;
• Loading managers; and
• Loaders and unloaders.

What do you need to do?

Organisations and individuals in the chain of responsibility are advised to take a proactive approach to the reforms. It is recommended that parties take steps now to prepare for the 1 July changes, including:

• Assessing the road safety risks associated with the organisation and determining whether they can be minimised or eliminated;
• Consulting with supply chain partners to ascertain and control road safety related risks in the supply chain;
• Reviewing, and where necessary, amending, contractual responsibilities with supply chain partners so that chain of responsibility obligations are adequately addressed. Contractual provisions may be required to address issues such as fatigue and time slot management, safe loading practices, speed compliance, and vehicle safety. As parties cannot transfer their duties under the amended HVNL, contractual provisions that provide for the transfer of chain of responsibility risks may not protect parties entitled to the benefit of them;
• Documenting organisational policies and procedures for managing road safety related risks;
• Conducting audits to assess compliance with organisational road safety policies and procedures;
• Implementing systems for risk reporting, assessment, and management;
• Ensuring processes are in place to confirm the accuracy of load weights and ensure that loads are properly restrained;
• Confirming systems are in place to assess driver fitness for duty and manage driver fatigue;
• Implementing systems to remedy breaches and take corrective action; and
• Ensuring that all parties in the chain of responsibility are appropriately trained in their responsibilities under the HVNL.

This article was written by Teresa Torcasio, Partner, Graeme Traves, Partner and Katherine O’Brien, Law Graduate.

¹ New section 26F of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
² New section 26G of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
³ New section 26H of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
⁴ New Part 10.1A of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s96.
⁵ New section 590B(2) of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s96.
⁶ New section 590D(4) of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s96.
⁷ New section 570A of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s91.
⁸ New section 570A(7) of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s91.
⁹ New section 735A of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s111.
¹⁰ Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
¹¹ New section 26A of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
¹² New section 26B of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
¹³ Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
¹⁴ Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
¹⁵ New section 26D(1) of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
¹⁶ New section 26D(2) of the Heavy Vehicle National Law as inserted by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s10.
¹⁷ Section 636 of the Heavy Vehicle National Law as amended by the Heavy Vehicle National Law and Other Legislation Amendment Bill 2016 s103.