Belinda Ryan

Eye-watering fine issued to WA welding company and its manager for severe injuries to worker

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A Perth-based sheet metal fabricator, PGQW Pty Ltd (PGQW), has received one of the highest fines ever handed down under Western Australia’s occupational health and safety laws. In an important reminder for supervisors, the company’s manager responsible for overseeing safety measures also received a sizeable personal fine.

The fines relate to an incident in which an employee of the company suffered burns to 30 percent of his body. The horrific injuries, which have required 13 surgeries, with more to follow, arose following glaring failures by PGQW and its manager, Bradley Shackleton, in carrying out shared safety responsibilities.

The facts

In November 2018, a new and young employee of PGQW was instructed to apply kerosene to 30 metal sheets and then sand them, in order to produce a non-reflective and corrosion-resistant finish. The employee was not given adequate induction, training or supervision to perform this task. Moreover, he was neither provided with nor wearing appropriate personal protective equipment (PPE), and was applying kerosene from an unlabelled plastic bottle which splashed off the metal sheets and onto his work shirt.

The following day, whilst wearing the same, unwashed work shirt, now contaminated with kerosene, the employee was tasked with welding shipping container handles, again without being provided nor wearing appropriate PPE. Soon after the employee began welding, his clothing caught fire. It was some time before the flames were put out, due to a delay in locating the fire extinguisher. The employee suffered burns from his face and ear down to both thighs.

Relevant factors taken into account by the Court were:

  1. PGQW had not established any safe systems of work for orbital sanding with kerosene;
  2. much safer systems of work for orbital sanding were available – other companies had stopped using kerosene and were either sanding the sheets dry or using a non-flammable alternative, and this alternative was actually present in PGQW’s workplace yet was not used;
  3. PGQW had not provided adequate induction, training or supervision to its employees;
  4. PGQW had a past history of non-compliance, having  received prior Improvement Notices due to its failure to provide sufficient safety induction, training and adequate labelling of hazardous substances.

The company pleaded guilty to failing to provide and maintain a safe work environment and, by that failure, causing serious harm to an employee. The company also pleaded guilty to two breaches of the Occupational Safety and Health Regulations 1996.

The penalties

PGQW was fined $600,000 in the Perth Magistrates Court, whilst Mr Shackleton was fined $50,000 for his personal neglect.

According to WorkSafe WA Commissioner Darren Kavanagh, Mr Shackleton, as manager of the workplace, “consented to actions that contributed to the hazard and neglected to do anything to make the workplace safer for employees”.

Key takeaways

The case is a clear example of an employer failing to take steps to both assess and control the risks, in order to satisfy the statutory obligation to protect the health and safety of its employees, so far as is reasonably practicable. The continuing non-compliance following a previous similar history is a recipe for large penalties. Employers and relevant managers  must take the safety of their staff seriously, ensuring that risks are adequately mitigated.

In this case the risk could have been eliminated by adopting a system of work that did not involve kerosene use, had the employer kept up to date with industry practice. Even if the risks could not have been eliminated, small, simple  safety measures, such as the provision of appropriate PPE, training, supervision of junior staff, and labelling of hazardous materials, could have minimised the risks and largely avoided the significant injury outcome that occurred.  Such measures could also have prevented  the substantial penalties imposed and the PR consequences to the business from publicity about the conviction and fines.

Need more guidance?

If you would like further information or advice on how to ensure your company’s compliance with workplace safety laws, please contact our team.

 

~ by Michael Timlin, Graduate at Law

Permanent Changes Afoot to Allow Virtual Meetings and Electronic Execution of Documents

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The Federal Government has signalled its intention to make permanent the temporary COVID-19 exemptions allowing virtual meetings and the electronic signing and sending of certain documents by companies.

If passed in its current form, the Corporations Amendment (Meetings and Documents) Bill 2021 (the Bill), introduced into Parliament on 20 October 2021, will permanently allow companies (and registered schemes) to:

  • hold virtual and hybrid meetings (including meetings of directors and meetings of shareholders (meetings of members, for a scheme), as the case may be);
  • digitally distribute notices and other meeting-related material to prospective attendees;
  • record, keep and store minutes of meetings electronically; and
  • electronically execute documents (including deeds).

The reforms follow from the temporary package of exemptions which have been in place during the COVID-19 pandemic.

Among other things, if enacted, the reforms will give company directors permanent assurance that documents can be validly executed electronically under section 127 of the Corporations Act 2001 (the Act).

Key changes

Whilst the proposed reforms in the Bill largely replicate the suite of temporary measures, there are a handful of minor changes. For example:

  • the Bill will amend section 126 of the Act to allow a company’s agents, such as its solicitors, to make, vary, ratify, discharge or execute deeds – this builds on existing powers for such individuals in relation to contracts; and
  • fully virtual meetings of a company’s members will only be permitted where this is expressly required or permitted by the company’s constitution. However, if the constitution does not require or permit, the company may nonetheless conduct hybrid meetings, by using both a physical venue and virtual meeting technology.

Until the Bill is passed into law, companies should continue to rely on the temporary rules which remain in place until 1 April 2022. We will provide updates as things progress.

Need more guidance?

If you would like further information or advice on how these changes could assist your company, please contact our Corporate & Commercial Team at Hunt & Hunt.

~ by Michael Timlin, Graduate at Law

Stapled super funds – do you have your procedures in order?

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Superannuation reforms introduced by the Federal Government and effective from 1 November 2021 alter the superannuation choice situation for new employees.

Until 31 October 2021, employers could have contractual arrangements in place providing that a new employee’s super contributions could be paid into the employer’s default fund, where the employee does not choose a super fund into which the contributions should be paid.

Now, if the new employee either does not choose their own super fund or does not choose to use the employer’s default fund, then employers are required to request stapled super fund details from the ATO.  This applies to new employees who start on or after 1 November 2021.

A stapled super fund is an existing super fund used for contributions for the new employee in a previous job.  This super account will be linked, or “stapled”, to the employee so it follows them as they change jobs.  The intention is to reduce account fees and avoid new super accounts being opened every time an employee commences a new job.

These obligations also apply to new contractors who are employees for super guarantee purposes (ie contractors paid mainly for their labour).

In addition, employers are required to request stapled super fund details for some employees who are not eligible to choose their own super fund.  This includes employees who are:

  • temporary residents; and
  • covered by an enterprise agreement or workplace determination made before 1 January 2021.

Employers do not need to request stapled super fund details if the new employee chooses either their own super fund or chooses the employer default fund.

Steps for your business to be compliant

Employers should take the following steps:

  • educate their HR and payroll staff about these issues, including relevant communications with job applicants who are offered positions;
  • arrange for a designated person to familiarise themselves with the ATO process for obtaining stapled super fund details; and
  • amend the super clause in their letters of offer/employment contracts to cater for these changes.

If you need assistance with these issues, please contact our team.

Vale Lynne Grant

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We are sad to farewell our dear friend and colleague, Lynne Grant, who passed away through illness on Wednesday, 3 November 2021.

Lynne was a much loved and respected principal in our corporate and commercial team.  She joined Hunt & Hunt as a young university law graduate in 2004 and quickly impressed with her “can do attitude” and empathy with clients.  She rapidly rose through our ranks and was promoted to principal lawyer in July 2019.

Tragically, Lynne was diagnosed with an aggressive melanoma in 2019.  She fought the disease courageously and until the last never let the disease destroy her positivity and dreams for the future.

Lynne leaves behind 2 beautiful daughters in Louise and Emma who will be well cared for her by her loving husband, Tyson.

We thank all Lynne’s clients and colleagues (former and current) for their kind thoughts and wishes which we will pass on to Lynne’s family.

ASIC brings action against small amount credit lender for licence breaches

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ASIC has brought civil penalty proceedings against Ferratum Australia Pty Ltd, the Australian arm of the Finland-based financial services company Multitude SE, offering mobile and digital financial services in approximately 25 countries mainly in Europe, including, in Australia, a SACC (‘payday’) lending products.

Ferratum offers loans of between $500 – $1,900 for up to 12 months.  ASIC alleges a number of breaches of Ferratum’s Australian Credit Licence which have implications for all credit licensees.

Small amount credit contracts (SACCs) are regulated differently from other loans under the National Consumer Credit Code.  Only a limited number of fees of particular kinds can be charged on SACC loans.  Further, while a consumer is entitled to pay a SACC loan out at any time, the the calculation of the early payout fee or cost that may be charged for doing this is prescribed.

ASIC alleges that Ferratum breached the National Credit Code in three ways:

  • charging fees not permitted under the Code;
  • overcharging early payout fees; and
  • failing to comply with the general obligations to
    • do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly;
    • comply with the Act and the Code; and
    • maintain the competence in engage in the credit activities authorised by the licence.

Fees not permitted under the Code

The Code prescribes the fees that may be charged by SACC lenders as follows:

  • a permitted establishment fee or monthly fee under the Code;
  • a default fee or charge; and
  • Government fees charges or duty.

Ferratum charged a number of additional fees including fees payable for making changes to the DDR arrangements for repayment of the loan, manual direct deposits, returned mail, and returned payments due to the provision of incorrect bank information. ASIC alleges that almost 11,000 contracts between March and September 2019 were affected.

In addition, ASIC claims that a “DDR Alteration Fee”, payable when a change to DDR arrangements is requested ‘after you are in default’ is prohibited.  The fee was charged almost 34,000 times between October 2019 and August 2021 and is alleged not to be a default fee or charge payable ‘in the event of default’.  It is, rather, payable at any time after any default had occurred, including if default had been remedied and the request was made for reasons unrelated to it.  As this is not one of the fees permitted for SACC loans, it is prohibited under ss 23A and 24(1A).

A civil penalty of up to $1.11M potentially applies to each of these thousands of violations .

Overcharging Early Payout Fees

In addition to charging fees that are prohibited under the Code, Ferratum is alleged to have miscalculated the fees it was permitted to charge.

Section 82(2) of the Code prescribes the elements of the amount a consumer may be required to pay out their credit contract early, which include ‘early termination charges, if provided for in the contract’.  ASIC reviewed a sample of 147 loan contracts which were repaid early between March 2019 and July 2020.  Of this sample, 40 consumers were overcharged by between $2.16 and $608.  In six of these cases the overpayment exceeded $100.

ASIC alleges that because of calculation errors Ferratum required payment of amounts in respect of a monetary liability that could not be imposed consistently with the Code, and is in breach of section 82(2) and section 24(1A)(b) of the Code.  The statement of claim details fees overcharged in the aggregate sum of $14,000. Again, a civil penalty of up to $1.11M potentially applies to each of these 40 violations.

Breaches of the general licence obligations

In  addition to those that were overcharged for paying out their loan early, ASIC found that a further 59 of the 147 were undercharged, and only 48 were charged the correct amount.

A key point for all credit licensees raised by this enforcement action is the analysis by ASIC that by correctly calculating the early payout amount in only one of every three cases, Ferratum breached its general licence obligations to provide credit activities efficiently, honestly and fairly, to comply with the Act and the Code, and to maintain the competence to engage in the authorised credit activities.

It is alleged that Ferratum calculated these fees manually using an Excel spreadsheet and kept no records of its calculation of the Early Payout amounts charged to consumers.  ASIC drew the high error rate in the calculation of these amounts to Ferratum’s attention in late 2016 and called on it to automate the calculation of these fees and eliminate the risk of human error.

ASIC alleges that Ferratum failed to implement any system to ensure, record or monitor the proper calculation of the Early Payout amounts owing by consumers to it which is therefore a breach of the general licence obligations to conduct the credit activities efficiently, honestly and fairly and to maintain the competence to engage in the authorised credit activities.

As for imposing a monetary liability that is prohibited under the Code, the maximum civil penalty for a breach of the general licence obligations is 5,000 penalty units or $1.11 million.

Conclusion

ASIC is seeking pecuniary penalties in respect of over 45,000 separate violations of these Code provisions, implying a potential maximum liability of $50 billion.

With credit licensees now also subject to breach reporting obligations, if these circumstances were to occur again and the calculation errors were not reported as they occurred, the licensee would also risk prosecution for failure to report significant and systemic breaches of their obligations, as well as for the violations themselves.

Tips to Take Away

  • Administrative errors in the calculation of fees and charges may be trivial in isolation but can attract significant penalties of up to $1.11 million.
  • Licensees breach reporting obligations make it imperative that all instances of such errors are detected and reported to ASIC in accordance with Code requirements, whether they are systemic or not.
  • Systems automation to the maximum extent possible to eliminate the risk of manual data handling is critical to effective compliance risk management, as is comprehensive record keeping, and a robust testing and monitoring regime to detect and address errors

New Director Identification Number Requirements Coming Soon

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From November 2021, directors will be able to apply for a Director Identification Number (Director ID), in an effort to prevent the use of false or fraudulent director identities and prevent director involvement in other unlawful behaviours, such as illegal “phoenix” activity.

A Director ID is a 15 digit unique identifier given to a director, or someone who intends to become a director, to trace their relationships to companies over time. A director will only need to apply for a Director ID once and will keep the same Director ID forever.

The newly established Australian Business Registry Services (ABRS) is in charge of implementing the Director ID initiative, centralising more than 30 existing ASIC registers and the Australian Business Register.

Who needs to apply for a Director ID and when?

A person will need to apply for a Director ID if they’re an “eligible officer” of:

  • a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act); or
  • an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

An “eligible officer” is a person who is appointed as a director, or an alternate director who is acting in that capacity. A person who is not an “eligible officer” may apply for a Director ID if the person intends to become a director within 12 months of applying. A company secretary who is not a director will not need to apply.

The date of appointment as a director determines when a Director ID must be applied for.

For Corporations Act directors:

Appointment date Date you must apply for Director ID
On or before 31 October 2021 By 30 November 2022
Between 1 November 2021 and 4 April 2022 Within 28 days of appointment
From 5 April 2022 Before appointment

For CATSI Act directors:

Appointment date Date you must apply for Director ID
On or before 31 October 2021 By 30 November 2023
Between 1 November 2022 Before appointment

How to apply for a Director ID

The ABRS website contains a useful guide on how to apply for a Director ID.

Directors will need to personally apply for their Director ID as they are required to verify their identity.

What are the new obligations?

A director must provide their Director ID to the company’s record holder. The company’s record holder could be the secretary, another director, contact person or authorised agent of the company. If the director is appointed as a director of another company, the director will also need to give their Director ID to the record holder of the other company. Any changes to the information attached to a Director ID must be notified to the ABRS.

Additional obligations a director has include:

  • applying for a Director ID if directed by the ABRS to do so;
  • not applying for more than one Director ID; and
  • not misrepresenting their Director ID information to another person or company.

Directors may be issued with an infringement notice and be subject to civil or criminal penalties for failing to comply with the new obligations.

Need more guidance?

If you would like to find out more on what the new Director ID requirements mean for you, or need guidance or assistance to ensure compliance with the changes, please contact Hunt & Hunt’s commercial team for further information.

~ by Peter Huang, Graduate-at-Law