WorkSafe also filed charges against R.H. & J.Y. Trust (and the trustees as individuals in the alternative), arguing the trust was the legal owner of the farm. For all intents and purposes, farming was also carried out in the trust’s name, the High Court judgment read.
In February last year, the District Court dismissed the charge against the trust as typically prosecution requires a body of persons, a person, or a legal entity. As personal liability attaches to an individual, trustees couldn’t be charged collectively.
Trusts and health and safety legislation
For context, significant case law establishes that trusts aren’t separate legal entities insofar as they require a relationship between trustees and trust property, with obligations owed to beneficiaries.
Trustees are typically shielded from civil liability for the actions of their co-trustees (if they had no part in any wrongdoing). Deeds may contain clauses that indemnify trustees unless - as per the Trusts Act 2019 - there’s a breach in dishonesty, wilful misconduct or gross negligence.
The Health and Safety at Work Act (HSWA) requires a “person” conducting a business or undertaking - commonly referred to as a PCBU - to protect workers and others against harm to their health, safety, and welfare by eliminating or minimising risks resulting from work. Under the act, a “person” could include “the Crown, a corporation sole, and a body of persons, whether corporate or unincorporated”.
In the context of the case, failing to ensure the workplace’s entry and exit were free from harm could lead to fines of up to $300,000 for PCBU individuals, $150,000 for non-PCBU individuals and fines of up to $1.5 million for all others (companies or collectives).
Many WorkSafe cases have involved school boards of trustees, but unlike trusts, they’re legal entities and are specifically mentioned in the HSWA.
The difference? Higher penalties
Here, WorkSafe argued the trust should be held primarily liable because it was conducting business, and the harm resulted from governance and management issues rather than the trustees’ personal failures.
In other words, it would be wrong to treat trustees as individuals as they often conduct business collectively according to a trust’s terms.
WorkSafe said trustees should be considered as a collective and thus be subject to higher penalties, especially since trusts typically have more assets.
On appeal, released just days shy of Christmas, Justice Layne Harvey pointed to a 2020 case that found a PCBU had a broad definition, noting companies, body corporates or even subcontractors could be held liable. A PCBU simply had to be contractually tied to the activity in question.
Same, same but different
For fear of straying from established trust law, Justice Harvey said trusts in and of themselves wouldn’t meet the criteria because Parliament would have included them in the legislation.
Instead, “trustees as a collective” could be prosecuted under the “body of persons … unincorporated” definition. In other words, they were an unincorporated group with “some form of internal structure which enables it to take and implement decisions as a collective”, the judgment read.
Although Justice Harvey agreed with WorkSafe’s position around the policy driving the purpose of the act, he saw no advantage in prosecuting a trust rather than trustees collectively as the higher penalty (in the millions) would be available in both circumstances.
“If there is a case of structural fault it will be the trustees’ collective actions that are responsible so criminal liability is appropriately apportioned jointly. Conversely, the conceptual and practical difficulties with prosecuting a trust are avoided.”
Ultimately, Justice Harvey said it was a matter for WorkSafe and the District Court to make the necessary adjustments.
The statutory interpretation headache aside, it now means trustees can be held jointly liable under the Health and Safety at Work Act and face higher penalties. Sure, operating a business through a trust may offer tax advantages, but that doesn’t mean trustees aren’t required to keep workers safe in the process.
