Trust liability under the Health and Safety at Work Act

In September 2020, a child was fatally injured while visiting a dairy farm.  The dairy farm was owned by the trustees of a trust.

After investigation, WorkSafe’s view was that the farm’s operations were primarily carried out in the trust’s name, and liability for a breach of the Health and Safety at Work Act 2015 (HSWA) lay with it. It brought a charge against the trust, and in the alternative, identical charges against each of the three trustees.

In the District Court, the charge against the trust was dismissed. The judge ruled that a trust cannot meet the definition of a “person” (and therefore it was not a person conducting a business or undertaking or ‘PCBU’) under HSWA. This is because a trust is not recognised as a separate legal entity. The trust owed no duties under HSWA. 

WorkSafe appealed the District Court’s judgment to the High Court. Part of its argument was based on the assertion that a trust conducting a business should be subject to higher penalties than those of an individual. A PBCU who is not an individual is subject to far higher penalties, in this case a maximum penalty of $1,500,000 as opposed to a maximum penalty against an individual of $150,000.

The High Court was asked to resolve the question: can a trust (or its trustees collectively) meet the definition of a “person” in section 16 of HSWA which includes a “body of persons, whether corporate or unincorporate”?

WorkSafe was partially successful. The answer to the question is that:

1. A trust is not a “person” and therefore not a PCBU under HSWA. The orthodox position that a trust is not a separate or discrete entity was not displaced by the provisions in HSWA.

2. The trustees of a trust, collectively, are an unincorporated “body of persons” under HSWA. This means that the trustees can be charged collectively as a PCBU (as opposed to a charge against each individual trustee), and for enforcement purposes, WorkSafe can access the higher maximum penalties available. 

 What does this mean if I am a trustee of a trust that does work?

• Previously, WorkSafe has prosecuted trustees as individuals. That approach is consistent with the principle that the liabilities of a trust generally accrue to trustees. WorkSafe is now likely to charge the trustees as a “body of persons” to access the higher penalty regime.

• The Court noted that “[i]f there is a case of structural fault it will be the trustees’ collective actions that are responsible so criminal liability is appropriately apportioned jointly”. The judgment is not clear on:

• • What ‘structural fault’ means, and
  • What the liability of respective trustees would be where there is a breach of duty, but it was not a case where there was ‘structural fault’.

• The Court held that the prohibition on insuring against fines does not apply to a trust insofar as the trust deed indemnifies the trustees. Whether a trustee will be indemnified will “depend on the specific facts, the trust deed and the general law of trustee indemnity”.

• Check the trust deed or seek advice if you are unsure of your potential liability. The Court’s analysis on this point may be subject to challenge: the rationale was that as a trust is not a person, it is not captured by the prohibition i.e., it is not a person (trust) indemnifying another person (trustee). 

If you have any questions please get in touch with our Health and Safety Team or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.