High Court confirms liquidators may not rely on the peak indebtedness rule
In the case of Perilya Limited v Nash [2015] NSWSC 706, Perilya Limited (Perilya), the holding company of Perilya Broken Hill Limited (PBHL) was ordered to pay $40,000 for two offences of not complying with a notice to produce under s155 of the Work Health and Safety Act 2011 (NSW) (the Act) by claiming that the documents were commercially sensitive and contained confidential information. Perilya was also ordered to pay approximately $74,000 in costs.
Background
The plaintiff, Perilya, is an Australian company that has its registered office in Perth and operates mining operations at Broken Hill. In June 2012, an employee of PBHL fell approximately 14 metres down a shaft at the mine at Broken Hill and sustained serious injuries including the amputation of his right leg. The State Department of Trade and Investment (the Department) began investigating the incident. The investigator issued two notices under s155 of the Act requesting minutes from all board meetings between May 2008 and December 2012. The board meeting minutes were provided but the commercially sensitive and confidential information had been redacted. A second notice to produce under s155 was issued requesting ‘un-redacted copies’ of the documents previously requested to be produced.
Perilya was charged with two counts of failing to comply with both notices under s155 of the Act, which amounted to $20,000 for each offence. Perilya appealed to the Supreme Court of New South Wales where it argued that the s155 notices were invalid because the inspector’s power to compel documents to be produced is limited to documents relating to health and safety matters in or related to NSW.
The arguments
It was argued by Perilya that there were limitations to the power under s155 of the Act. Those appearing on behalf of Perilya submitted that because the power is contained in a New South Wales Act, it is confined to New South Wales. Perilya further submitted that the powers under s155 do not extend to a notice compelling production of documents not relating to health and safety. Perilya therefore argued that the Department did not have authority or power under s155 to request production of documents that contained confidential information or commercially sensitive information.
The Department submitted that it requested the documents as it believed the documents may contain relevant information due to the fact there was an accident in 2008 which was thought to have similarities to the accident being investigated in 2012.
Judgment
It was noted that the functions of the regulator under the Act are “wide-ranging”. Justice Hall stated that the provision of s155 are enlivened where the regulator has reasonable grounds to believe that the person is capable of providing the information, the information concerns or relates to a possible contravention of the Act or the giving of information will assist the regulator to monitor or enforce compliance with the Act. Any information relevant to mine safety at the Broken Hill mine therefore would be relevant and “the fact the particular documents, such as minutes of board meetings of the plaintiff company, may contain information relevant to matters other than mine safety does not, in my opinion, result in the validity of the Notices issued by the Regulator.” It was further noted by Justice Hall that statutory protection is provided under ss 269 and 271 of the Act to preserve confidentiality and legal professional privilege of such information. Board meeting minutes of a company would therefore have relevance to such investigations and in a case such as this one where there is a history of particular accidents, “issues such as the reporting to, supervision by, and response of, the Board of Directors of the company on health and safety issues and for the allocation of financial resources, may have relevance to issue of compliance.” His Honour further found that the regulator does not need to know in advance the actual contents of the documents called for under the notice but must have a belief, on reasonable grounds, concerning a subject matter under s155(1). After such a belief is held, the regulator has a right to issue a notice under s155.
Justice Hall also did not consider there to be territorial limitations to notices issued under s155.
Justice Hall distinguished this case from the Federal Commission of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499 (Smorgon case) and the Deveson v Australian Broadcasting Tribunal (1991) 32 FCR 124 cases which were both relied upon by Perilya in their submissions. In the Smorgon case, the High Court was considering the power under ss 263 and 264 of the Income Tax Assessment Act 1936. Justice Hall held that the power under s155 has a broader scope than under ss 263 and 264 because of the phrases “a possible contravention of this Act” or that will “assist the regulator to monitor or enforce compliance with this Act.” These phrases were held to be broader than under the Income Tax Assessment Act 1936 which requires a “reasonable grounds to believe” provision. Justice Hall went further to describe the power under s155(1) as being so broad that it enables a regulator to obtain and examine documents called for in a notice where there is a belief on reasonable grounds that they may be relevant in some way or that they do or may assist in determining a contravention of the Act has occurred and/or for monitoring or enforcing compliance with the Act. This was held to apply to Perilya. It was further determined that s155 cannot be read as “subject to a qualification or limitation that the person to whom a s155 notice is addressed has an unrestricted right to determine for himself or herself whether document have a connection or a sufficient connection with the matter under investigation.”
As to the case of Deveson v Australian Broadcasting Tribunal the circumstances were very different, particularly as the inquiry being conducted by the tribunal in that case had a “limited ambit”. However, in this case, s155 does not have a “limited ambit” and therefore the scope of the matters is not restricted.
In summary, it was held that the fact that the documents requested would deal with issues other than those concerned with health and safety does not itself put the documents out of reach of s155. The documents are subject to the power under s155 and may be protected by the Act’s protective measures of confidentiality and legal professional privilege.
As to the penalty, it was submitted by Perilya that the second breach caused no additional harm. It was held however that each contravention of s155 was a separate offence, both of which having the effect of delay or hindering investigations into the accident. They were held to be “separate acts of non-compliance such that the criminality involved in one could not comprehend or reflect the criminality in the other.” The offences were held to be in the low to medium range of objective seriousness. The maximum penalty for such an offence is $50,000 and therefore $20,000 imposed for each offence is appropriate as it is a little less than half the maximum penalty.
What does this mean for you?
Where a workplace accident occurs and an employer is being investigated, it is imperative that the employer complies with any notice to produce. This is regardless of whether the employer considers the documents requested might not be relevant to health and safety matters. As is made evident in this case, the power to request information under s155 of the Act is wide-ranging and therefore a wide range of information and documents are permitted to be requested. If the company is concerned that the information requested contains commercially sensitive or confidential information, such information may be protected by the protective provisions provided by ss 269 and 271 of the Act. If the company is still concerned about provided the requested documents, it should seek legal advice.
For a full copy of the Supreme Court decision, click here.
