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The leasing and subleasing of land, buildings and infrastructure is commonplace in New Zealand business and commerce, but what happens when something goes wrong? Do landowners have health and safety obligations, and if so, to what extent?
The recent High Court decision of Whakaari Management Ltd v WorkSafe New Zealand (Whakaari decision) deals with these questions in the context of the 2019 Whakaari Island eruption, which tragically killed 22 people and seriously injured 25 others. We explain the legal significance of this decision and provide some comments about the decision below.
“Manage and control” – a potted history
The Health and Safety at Work Act 2015 (HSWA) imposes various health and safety duties on a “person conducting a business or undertaking” (PCBU). The term PCBU is intentionally broad, as are the health and safety duties which are principles-based and imposed on organisations captured by the definition of a PCBU.
Section 37 of HSWA requires a PCBU “who manages or controls a workplace” to ensure, so far as is reasonably practicable, that all aspects of the workplace are free from health and safety risks. This section of HSWA was at the centre of the Whakaari decision.
HSWA is largely based on the Australian work health and safety law. However, the equivalent provision in the Australian Model Work Health and Safety Act is worded slightly differently; it requires the person “with management or control of a workplace” to ensure, so far as is reasonably practicable, that all aspects of the workplace are free from health and safety risks.
New Zealand’s Health and Safety Reform Bill had initially been drafted using the wording of the Australian Act, but the wording of s 37 was tweaked to what we still have today.
The difference is subtle, but perhaps explained in the following excerpt from a Select Committee Report in the process of HSWA becoming law:
We recommend making the language in these clauses active. The duties should apply to PCBUs who manage or control workplaces, fixtures, fittings, or plant in a practical sense, rather than PCBUs who merely have an ability to manage these things.
Emphasis added.
In other words, the Select Committee recommended that s 37 should be focused on PCBUs with active control, rather than being so broadly worded as to capture PCBUs who merely have an ability to manage. This is relevant to the application of s 37 in the context of the Whakaari decision.
Background
Whakaari Island is a mostly submerged volcano off the coast of Whakatāne. It has been owned by members of the Buttle family since 1935 and has been a tourist attraction since the 1990s.
At the time of its eruption in 2019, Whakaari Island was owned by Whakaari Trustee Limited (a company that had been incorporated by members of the Buttle family) and held on trust for Buttle descendants. The Buttle family had incorporated another company, Whakaari Management Limited (WML), to “manage” Whakaari Island and to generate revenue through this “management”.
WML did this through granting licences to tour operators. In 2019 five tour operators had permission to conduct paid tour guides for tourists on the crater floor of the island. WML and the tour operators shared responsibility for developing tourism on the island, and WML attended meetings to stay up to date with what was happening on its land. Other than that, the tour operators were free to make their own decisions (within the parameters of their licences) in respect of day-to-day operations, including, for example, where to land their boats, and whether and where to conduct walking tours on any particular day.
WML was convicted in the District Court for a breach of s 37, fined $1,045,000 and ordered to pay reparation to the victims of $4,880,000. WML subsequently appealed this decision to the High Court.
The issues and decision
The central legal issues considered on appeal in the Whakaari decision were: (1) what it means to be “a PCBU who manages or controls a workplace” under s 37 of HSWA; and (2) did WML, as the landowners of Whakaari, “manage or control” the workplace within that meaning.
In considering the first issue, the High Court looked at the legislative history of s 37, including the recommendation made by the Select Committee set out above. The Court considered that s 37 was clearly intended to impose a duty on PCBUs who have the power or capacity to actively control or manage workplaces, in a practical sense.
The Court therefore considered that a s 37 inquiry should focus on what the relevant workplace is, what it would mean for a PCBU to have the power to actively manage or control that particular workplace, and whether or not it did have the power to do so (whether in whole or in part) as part of its own business or undertaking.
This inquiry necessarily means that the type of workplace is important, and the Court commented that what it means to manage or control a building will be different to what it means to manage or control bare land, for example.
In applying this inquiry to the facts, the Court was not convinced that WML actively managed or controlled the workplace. Aside from granting the leases, which the Court commented is incidental to ownership and not indicative in and of itself that the PCBU manages or controls the workplace, there was nothing for WML to manage or control on Whakaari but the work itself, which it did not do. Instead, the tour operators had autonomy to conduct the tours as they saw fit.
The Court also rejected an argument that the fact that WML generated revenue through the leases meant that it had management or control of the walking tour. Once again, the Court was not convinced that there was anything in the licence agreements or other evidence to give or show that WML had the ability to direct and control the workplace on a day to day or practical way.
Given the lack of evidence of active and practical control and management, the Court ultimately overturned WML’s conviction.
Comments
As we all know, the geography and location of New Zealand make the country prone to natural dangers such as earthquakes, volcanoes, tsunamis, and extreme weather.
In this context, there are some possible reservations about the Court’s application of s 37 of HSWA. It has been made clear in the Whakaari decision that the inherent dangerousness of a workplace cannot dictate a s 37 inquiry. Instead, the analysis must begin with whether there was management or control in the first place. So for Whakaari, it did not matter that the island was an active volcano in need of risk management; what mattered was whether WML had the ability to direct and control what was happening at the walking tour workplace.
The fact that WML did not have any rights under the licence agreements to direct how the tour operators’ activities were conducted in a practical sense was a key factor in the Court’s ultimate decision that s 37 did not apply. The Court subsequently stressed that it would be “antithetical to the purposes of HSWA if being responsible was a path to liability and being irresponsible (or electing not to be responsible) was an escape from it”. However, there is a question of whether the Court’s focus on the licence agreements inadvertently results in that very outcome; had the licence agreements contained more active rights, for example, it seems as though the outcome of this case may have been different. If there was no licence agreement WML would have had every ability to direct and control what occurred on Whakaari.
In any case, the Court did stress that the Whakaari decision involved incredibly unique facts, and that its application did not consider how the s 37 HSWA duty may arise in other situations, for example tenancy situations, or where a landowner not only owns the land but also buildings on that land which is also a workplace. So, it remains to be seen how courts will apply this duty in future, and what the true extent of landowners’ obligations will be in different factual circumstances.
If you have any questions about health and safety obligations, 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.
