Industrial Court of New South Wales CITATION: Inspector Valdis Leinasars v Larry Sault and Inspector Valdis Leinasars v Malsong Pty Ltd [2006] NSWIRComm 197 PROSECUTOR: Inspector Valdis Leinasars PARTIES: DEFENDANTS: Larry Sault and Malsong Pty Ltd FILE NUMBER(S): IRC 5845 and 5846 of 2005 CORAM: Haylen J CATCHWORDS: Occupational Health & Safety Act 2000 - s 8(1) - s 26(1) - corporation and director separately charged - pleas of guilty entered - relevant corporation a labour hire company operating exclusively for family company - defendant corporation a related corporation to family company sharing common directors - defendant involved in roofing speciality - domestic roofing contract undertaken involving working at height and work close to overhead power lines - inadequate risk assessment undertaken - failure to provide edge protection - failure to recognise risk of working near overhead power lines - failure to properly supervise inexperienced and young employee - serious breach - general and specific deterrence considered - financial position of defendant corporation - large turnover but small returns to family members - no prior convictions - co-operation with WorkCover investigation - early plea - substantial discount for subjective factors - penalties imposed HEARING DATES: 13/06/2006 DATE OF JUDGMENT: 06/16/2006 PROSECUTOR: Mr D O'Neil of counsel SOLICITORS: Phillips Fox LEGAL REPRESENTATIVES: DEFENDANTS: Mr J Phillips SC SOLICITORS: Oliver Campbell Lawyers JUDGMENT: - 4 - INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Haylen J 16 June 2006 Matter No IRC 5845 of 2005 INSPECTOR VALDIS LEINASARS v LARRY SAULT Prosecution under s 8(1) of the Occupational Health and Safety Act 2000 by operation of s 26(1) of the Act Matter No IRC 5846 of 2005 INSPECTOR VALID LEINASARS v MALSONG PTY LTD Prosecution under s 8(1) of the Occupational Health and Safety Act 2000 JUDGMENT [2006] NSWIRComm 197 1 On 19 November 2003, Malsong Pty Ltd (Malsong) was acting as a labour hire company, providing the services of workmen exclusively to a company then known as Ateod Pty Ltd (Ateod). Ateod Pty Ltd later became known as G E Sault & Sons Pty Ltd (G E Sault & Sons). At this time, Ateod and Malsong were related bodies corporate sharing the same directors, with Larry Sault being one of two directors who owned and controlled 50 per cent of the shareholding of both companies. Mr Sault was a working director and the manager responsible for work that was then being undertaken at a house in Morpeth Road, Raworth. On that day, the work involved the removal of an old metal roof as well as supplying and installing a new metal roof and guttering at the premises. At the front of the premises, the work involved removing the old roof in close proximity to an overhead electric wire. Generally, the work involved three employees, with two of them working at height, and one employed as a "ground boy". 2 In mid-November 2004, Inspector Leinasars commenced proceedings alleging a breach of s 8(1) of the Occupational Health and Safety Act 2000 by Malsong, and by operation of s 26(1), a breach of s 8(1) of the Act by Larry Sault. In mid-March 2006, on the second listing of both matters to receive a plea from the defendants, both defendants entered pleas of guilty but indicated that two of the seven Particulars supplied by the prosecutor were not accepted. In light of that position, the Court set the matter down for hearing for two days, giving sufficient time for the calling of evidence in relation to the two contested Particulars. 3 Shortly before the matters were listed for hearing, the Court was notified that the prosecutor would now be proceeding on an Amended Application for Order in each case and that the defendant in each matter would continue their pleas of guilty. It became apparent on the day of the hearing that the prosecutor was no longer pressing the two Particulars to which the defendants had taken objection, and the defendants confirmed their pleas of guilty in relation to the Amended Application for Order. 4 The Amended Application for Order alleged that, on 19 November 2003, Malsong, had contravened s 8(1) of the Occupational Health and Safety Act 2000 in that on a worksite in Morpeth Road, Raworth, the defendant, being an employer, failed to ensure the health, safety and welfare at work of all of its employees, in particular, Michael Coombes, Michael Walker and Ashley MacNeill. The same allegation was made against Mr Sault by operation of s 26 of the Act by virtue of his position as a director of Malsong. In each case, the Particulars of the alleged contravention were as follows: (1) failure to ensure a safe system of work for its employees in relation to work performed at heights at the premises; (2) failure to ensure a safe system of work for its employees in relation to work performed in the vicinity of an electrical power line at the premises; (3) failure to ensure that an adequate risk assessment was undertaken in relation to safety hazards to its employees arising from work performed on the roof at the premises; (4) failed to ensure that its employees received adequate training and instruction in relation to the safe method of working within the vicinity of an electrical power line; (5) failed to ensure that its employees received adequate training and instruction in relation to safety measures to be adopted when performing work at heights; (6) failed to ensure that Michael Coombes received adequate supervision whilst performing work on the skillion roof at the premises. It was alleged that, as a result of these failures, Michael Coombes, Michael Walker and Ashley MacNeill were exposed to risk of injury. 5 At the hearing to receive evidence and submissions on penalty, the prosecutor tendered an extensive Agreed Statement of Facts, a factual report by Inspector Leinasars, a number of photographs depicting the premises and the roof area involved in the work, a standard form work method statement for G E Sault & Sons, a risk assessment for G E Sault & Sons in relation to the work at Morpeth Road, Raworth and a number of extracts from the WorkCover Code of Practice for Safe Work on Roofs - Part 2, Residential Buildings. A WorkCover certificate indicated neither defendant had a prior record for breaching occupational health and safety legislation. 6 The Agreed Statement of Facts covered numerous area in relation to the company structure and the work being performed at the premises and it is convenient to set out the immediately relevant parts of that document: 1 ... 2. The proceedings relate to circumstances surrounding work performed on 19 November 2003 at a work site located at 267 Morpeth Road, Raworth in the State of New South Wales ( premises ), in which Michael Coombes ( Coombes ), 15 years of age, Michael Walker ( Walker ), 51 years of age, and Ashley MacNeill ( MacNeill ), 27 years of age, were exposed to risk of injury. 3. At all material times, Malsong Pty Limited (ACN 082 763 577) ( Malsong ): 3.1 Was an incorporated company with its registered office located at 69 Pendlebury Road, Cardiff, NSW, 2285; 3.2 Carried on a labour hire business which included the provision of the services of employees to perform work at the premises; 3.3 Employed Coombes, labourer, Walker, roof plumber and MacNeill, roof plumber to perform work at the premises; 3.4 Was engaged by G.E. Sault & Sons Pty Limited (ACN 001 972 621) (then Ateod Pty Limited) ( Ateod ) to provide the services of Coombes, Walker and MacNeill to perform work at the premises; 3.5 Provided labour hire services exclusively to Ateod. 4. At all material times, Ateod: 4.1 Was an incorporated company with its registered office located at 69 Pendlebury Road, Cardiff, NSW, 2285; 4.2 Carried on a roofing and guttering business trading as 'GE Sault & Sons'; 4.3. Contracted with home-owner Jamie Richardson to provide roofing and guttering services at the premises; 4.4 Engaged Malsong Pty Limited to supply all the labour required to conduct the business of 'GE Sault & Sons'; 4.5. Engaged Malsong to supply the services of Coombes, Walker and MacNeill to carry out work at the premises in the course of its undertaking. 5. At all material times, Ateod and Malsong were related bodies corporate sharing the same directors. 6. At all material times Larry Sault of 229 Coal Point Road, Coal Point, New South Wales: 6.1 Was a joint director, with Brett Sault, of Ateod and Malsong; 6.2 Owned and/or controlled 50% of the shareholding of Ateod and Malsong; 6.3 Was a working director and the manager responsible for the work performed at the premises. Background 7. Coombes, Walker and MacNeill had the following work history as at 19 November 2003 ( relevant date ): 7.1 Coombes commenced employment on a trial period for a position as a roofing apprentice on 5 November 2001. This was approximately two weeks before the relevant date. Coombes had some previous work experience with his father, who was a roofer. 7.2 MacNeill had been employed for approximately four months. He had been working as a roof plumber since finishing his apprenticeship, including three years of technical college, in 2001. 7.3 Walker had been employed for approximately six months at that stage but had also been working on and off for the business trading as G E Sault & Sons for approximately 15 to 18 years. He had approximately 23 – 24 years' experience as a roof plumber. Work at the premises 8. Ateod successfully tendered to remove the old metal roofing and supply and install new metal roofing and guttering at the premises ( the services ). 9. Walker was responsible for supervising the services for the duration of their performance. He was allocated a work crew to assist with the services when required. 10. Larry Sault was Walker's supervisor and the manager of the services. 11. The services commenced before 19 November 2003 and were completed by early to mid December 2003. 19 November 2003 12. On the relevant date, Coombes was instructed by Larry Sault to assist Walker and MacNeill at the premises. 13. It was Coombes' first day working at the premises. Walker and MacNeill had worked at the premises on two previous days. 14. Walker and MacNeill worked predominately on the roof, with Coombes assisting on the ground. Notwithstanding the fact that Coombes was not meant to be on any part of the roof, he climbed on to the skillion roof and was permitted to remain on the skillion roof. 15. An overhead electrical power supply line was connected to the premises within a close distance to the front left hand corner of the roof. 16. Tasks performed by the work crew on the relevant date included: 16.1 Stripping the front and right hand side of the roof and lowering the sheets to the ground (Walker and MacNeill); 16.2 Collecting the sheets and putting them in the back of the truck (Coombes); 16.3 Installing guttering (Walker and/or MacNeill); 16.4 Loading 32 metal sheets up to the skillion part of the roof (Coombes); 16.5 Passing sheets to Walker to nail onto the roof (Coombes and MacNeill); 16.6 Stripping sheets off the back section of the roof (Walker); 16.7 Stripping sheets from the back ridge of the roof (MacNeill); 16.8 Cleaning sheets on the ground (Coombes); 16.9 Working on the outside of the hipped roof, stripping the side of the roof (Walker); 16.10 Working on the apex of the top part of the roof (MacNeill). Investigation 17. The Prosecutor conducted inspections of the premises on 12 December 2003 and 7 September 2004 and observed as follows: 17.1 The site was located on approximately the south-east side of Morpeth Rd, Raworth, NSW, 2321. 17.2 The site appeared to 'gently' slope from the rear of the property downwards to Morpeth Rd. 17.3 On the site was a single level building (to be referred to as a bungalow). Excluding the rear elevation of the bungalow, it had brick outer walls and a pitched corrugated metal roof. 17.4 The front of the bungalow was facing approximately slightly west from north. For the ease of orientation, these findings referred to the major compass cordial points, Hence, it was considered that the front of the bungalow was facing north. Subsequently, all other aspects were identified as being 'rotated' accordingly. 17.5 Attached along the entire front of the bungalow was a timber floor veranda with a 'bull nose' corrugated metal roof. 17.6 It appeared that several additional structures had been attached to the rear of the 'original' bungalow. 17.7 Located on the adjoining 'nature' strip and approximately 17 metres north-east from the front north-east corner of the bungalow was a timber pole supporting overhead 'mains' electrical power lines. 17.7.1 Located against the timber power pole was a sign labelled: 'WATCH THIS ROOF LYSAGHT COLORBOND BY G.E. SAULT & SONS 4954 8399' 17.7.2 It appeared that an overhead electrical power supply line was connected from this pole and suspended across the property's driveway. The other end was attached to the approximate north-east corner of the bungalow's front veranda – just above the veranda's roof . 17.8 The 'original' bungalow had an 'L' shaped floor plan whereby the corresponding 'external' recess was in the south-west quadrant. The external 'floor plan' measurements were: 17.8.1 Approximately 9 metres along the north front aspect. 17.8.2 Approximately 12.5 metres along the east wall/side aspect. This includes the front veranda width of approximately 1.8 metres. From the south east corner, the 'original' bungalow's external rear wall projected at right angles approximately 3.4 metres westwards . 17.8.3 Approximately 9.5 metres along the west wall/side aspect. This includes the front veranda width of approximately 1.8 metres and did not include the skillion roof extension at the rear of the bungalow 17.9 Excluding the roof on the veranda, the outer perimeter roof height of the 'original' bungalow (when measured vertically from below the roof gutter) was: 17.9.1 Approximately 2.9 metres above ground level at the south-east external corner. 17.9.2 Approximately 4.2 metres above ground level at the north-east external corner and approximately 3.2 metres above the veranda timber floorboards (when projected outwards). 17.9.3 Approximately 4.2 metres above ground level at the south-west external corner. 17.10 The 'original' bungalow had a multi-hipped, double valley pitched roof. The roof's ridge was parallel to the front wall of the bungalow. At each end, the ridge projected to the bungalow's rear at approximate right-angles. This revealed at the front of the roof, an external hip on each corner and a corresponding internal valley on the other side. The two rear projecting pitched roofs were enclosed at their ends with corresponding hips. 17.11 The front veranda had the following: 17.11.1 A 'bull nose' corrugated metal roof that was attached to the bungalow's front wall. 17.11.2 The top of the veranda's roof was below the bungalow's eaves. 17.11.3 The 'bull nose' corrugated metal roof was supported around its perimeter by horizontal timber 'top plates'. At each of the two ends of the support structure was a horizontal diagonal timber rafter that was located underneath the metal roof's corner ridge. No other horizontal beams/rafters were observed. With the bull nose corrugated metal sheeting removed, this would have revealed an opening of approximately 5.7 metres along the mid length of the roof's support structure and approximately 1.5 metres wide immediately adjacent to the bungalow's front wall . 17.12 The recess created at the rear south-west quadrant of the 'original' bungalow's 'L' shaped floor plan was enclosed by a building extension with a metal corrugated skillion roof. This skillion roof abutted the two respective 'original' bungalow's walls. The east end side of the skillion roof projected south and outwards approximately 850mm past the rear wall of the 'original' bungalow. This projection then also traversed approximately 370mm further eastwards across the 'original' bungalow's rear south wall. At this location: 17.12.1 The height of the metal corrugated skillion roof was approximately 2.6 metres above the concrete 'courtyard' floor; and 17.12.2 The top of the gutter line of the 'original' bungalow's hipped roof projected approximately 450mm vertically above the skillion roof; and 7.12.3 On the concrete 'courtyard' floor was a LP Gas cylinder approximately 350mm in diameter and approximately 1200mm high. It was located next to the 'original' bungalow's exterior rear south wall and in a 'U' shaped recess created by an external brick chimney . 17.13 This external brick chimney was located approximately in the mid section along the 'original' bungalow's rear south wall. At its base it was approximately 1500mm wide and projected approximately 600mm outwards from the wall. The chimney was approximately 3.7 metres tall. The 'U' shaped recess that was created between the west side of the chimney's base and south-east corner of the metal corrugated skillion roof was approximately 400mm wide. 17.14 A pot approximately 660mm in diameter and approximately 400mm high was located on the concrete 'courtyard' floor next to the chimney's south aspect. The pot's outer rim (west side) was approximately 200mm from the south west edge of the chimney. The pot was approximately half filled with water and had at least one fish in it. 17.15 Immediately adjacent and east of the chimney was a timber clad, gabled roof 'shed'. It was approximately 950mm wide and projected approximately 1120mm outwards from the 'original' bungalow's south rear wall. The apex of the roof's gable was approximately 2.6 metres above ground level. 17.16 The external west wall of the metal corrugated skillion roof extension was in line with the 'original' bungalow's west aspect side wall. The extension's west wall abutted the 'original' bungalow at the south west corner and was projected approximately 4.7 metres towards the rear/south. The height of the metal corrugated skillion roof extension (as measured vertically) along its west outer wall was approximately 3.3 metres above ground level where it was attached to the rear wall of the 'original' bungalow. The skillion roof sloped downwards and away from the rear wall of the 'original' bungalow to a height of approximately 2.6 metres above ground level where it abutted the north wall of a gabled roof 'outhouse'. 17.17 The 'outhouse' had an external rectangular floor plan that projected approximately 3 metres across the rear of the skillion roof. The 'outhouse's' gabled roof projected above the extension's metal corrugated skillion roof. The apex at the south end of the gable roof projected vertically approximately 3.2 metres and each side sloped down to approximately 2.2 metres above ground level. 17.18 Prior to the addition of the skillion roof extension, it appears that this outhouse may have been self-standing from the 'original' bungalow. 17.19 Abutting the east side of the 'outhouse' was a timber framed, corrugated 'fibreglass' roof pergola. The pergola's roof abutted and traversed approximately 3.5 metres across the entire remaining south end of the metal corrugated skillion roof. The pergola's roof height above the ground was approximately 2.25 metres along its south aspect. In combination with the roof sloping upwards and a step located in the courtyard, it was approximately 2.6 metres above the ground were it abutted the metal corrugated skillion roof. 18 On 12 December 2003, during the Prosecutor's site inspection, Coombes produced the shoes that he was wearing on 19 November 2003, at the time of the incident. The Prosecutor observed these shoes to be labelled 'Dunlop, Volley' and that they had a herringbone tread pattern. Risk assessment 19. In the course of the investigation the Prosecutor received a documented risk assessment for the premises, completed by Walker. Coombes had not seen or been provided with this document. McNeill signed the risk assessment approximately two days after the relevant date. The investigation was unable to establish if the risk assessment occurred before or after the relevant date. The details of the risk assessment were not communicated to Coombes and MacNeill prior to the relevant date. Under the risk assessment: 19.1 There was no identification of certain areas of high risk, such as areas of the roof where the height exceeded 3 metres above ground level. 19.2 The only relevant controls were that harnesses were necessary and rubber sole shoes were to be worn. 19.3 There were no details as to when and where harnesses should be worn. 19.4 There was no consideration given to the method to be used to safely attach the harnesses' lanyards (safety lines) to appropriate anchorage points. 19.5 Whilst the roof pitch was identified as 28 degrees, no edge protection measures were adopted. 19.6 The risk assessment failed to identify a risk or relevant control measures in relation to the insulated point of entry power lines. Systems of work – work at heights 20. The height of the perimeter of the roof from ground level exceeded 2 metres, varying between 2.2 to 4.2 metres. The skillion part of the roof which was the only part of the roof accessed by Coombes was 2.6 metres above the concrete 'courtyard' floor and sloped upwards to the rear wall of the 'original' bungalow to a height of approximately 3.3 metres above ground level. 21. Clause 56 of the Occupational Health and Safety Regulation 2001 ( Regulation ) requires an employer to control the risks associated with falls from height by use of measures including: 21.1 fencing, handrails or other forms of physical barriers that are capable of preventing the fall of a person; or 21.2 other forms of physical restraints that are capable of arresting the fall of a person from a height of more than 2 metres. 22. Malsong did not ensure that employees utilised fall protection or prevention measures such as edge protection or harnesses on the relevant date. 23. The WorkCover Code of Practice (Safe work on roofs – Part 2 Residential buildings) ( Code ) provides, amongst other things, that: 23.1 Edge protection should always be provided where the pitch of the roof exceeds 25 degrees, regardless of height; 23.2 Edge protection should always be provided where a person is exposed to a risk of falling three metres or more; 23.3 A system of edge protection would include guardrails or scaffolding or a combination of these safeguards; 23.4 Fall arrest systems may be used where a compliant risk assessment or the provisions of the Code do not require edge protection. 24. Neither Malsong nor Ateod ensured compliance with the Code on the relevant date in that: 24.1 No edge protection was provided to parts of the roof where the pitch exceeded 25 degrees, in particular, the front part of the roof that Walker estimated was pitched at 28 degrees; 24.2 No edge protection was provided to parts of the roof more than three metres in height, including the front area of the roof and the exposed west side of the skillion roof. Systems of work – work near electrical power lines 25. In relation to electrical power lines, the Code provides that: 25.1 The minimum clearance between power lines and workers should be 4 metres where any metal material is being handled and 1.5 metres where any non-conductive material such as dry timber battens is being handled; 25.2 Guidance should be obtained from the local electrical supply authority where there is a risk that minimum clearances may not be maintained. Measures may include disconnecting or insulating the relevant power lines. 26. Neither Malsong nor Ateod ensured that formal precautions were taken in regard to observing minimum clearances between workers and electrical power lines at the premises. This was despite the work crew handling conductive materials such as metal guttering and metal roof sheets in close proximity to electrical power lines. The work crew informally adopted the approach of keeping as far away as they could from the power lines. Training and instruction 27. Coombes was not provided with training by his supervisor or co-workers prior to or at the time of attending the premises. Coombes was performing labouring duties as a ground boy and was not supposed to be on the roof. As a consequence, there was no discussion or instruction about harnesses or lanyards or other methods of fall protection or fall prevention. 28. Walker had received limited training in relation to fall arrest systems prior to the relevant date. Walker was engaged in discussions with Larry Sault in relation to safety precautions for work at heights, however, these were not implemented prior to or on the relevant date. 29. No training was provided to workers as to safe work practices on the area at the front of the roof where the electricity supply cable hung. There was no discussion or instruction about maintaining adequate clearances between the power line and the workers and materials they were holding. 30. In relation to Ashley MacNeill, it was assumed that he had received sufficient external training. 31. The workers had not been provided with copies of the WorkCover document "Code of Practice – Safe Work on Roofs Part Residential Buildings". Supervision 32. Walker permitted Coombes to work on the skillion roof. It was Walker's intention that Coombes should not access dangerous parts of the roof. However, Walker admitted that he did not always keep Coombes in sight. 33 ... 34 ... 7 For the defendants, two affidavits were read. Melissa Campbell was a chartered accountant and a director of Buxton Cummings Campbell Pty Ltd practising in Newcastle. Ms Campbell was the accountant for Malsong, G E Sault & Sons and Ateod. G E Sault & Sons had been incorporated in August 1980 and, in May 1998, had changed its name to Ateod. Ateod acted in a trustee capacity only for a discretionary trust until 30 June 1998. From 1 July 1998, Ateod operated as a trading entity. 8 On 24 December 2004, Ateod changed its name back to G E Sault & Sons. The shareholding of G E Sault & Sons was: Deborah Sault - 1,668 ordinary shares; Larry Sault - 3,336 ordinary shares, and Brett Sault - 5,004 ordinary shares. 9 Malsong was incorporated in May 1998 and acted solely in a trustee capacity for a discretionary trust until 30 June 2003. From 1 July 2003, Malsong undertook to employ all staff and hire those employees back to G E Sault & Sons. The directors of Malsong were Brett Sault and Larry Sault. The sole shareholder of Malsong was Grimali Pty Ltd as trustee for Pendlebury Trust. The general beneficiaries of the Pendlebury Trust were persons related to George and Amber Sault who were the parents of Brett and Larry Sault. 10 Ms Campbell annexed to her affidavit the financial statements for the years ended 30 June 2005 and 30 June 2004 for both G E Sault & Sons and Malsong. Ms Campbell proffered the view that both G E Sault & Sons and Malsong were, what were commonly referred to as, "family companies" and that any fine that might be imposed on Malsong would ultimately be paid by Larry Sault, Brett Sault and their families. 11 The financial statement for G E Sault & Sons showed a trading income in 2004 of $2,220,342 and for 2005, $2,676,430. Deducting costs of sales and closing stock, the gross profit from trading in both years was $1,380,518 (2004) and $1,741,809 (2005). While having an income of $1,462,772 in 2004 and $1,811,696 in 2005, after deduction of expenses there was a profit from ordinary activities before income tax of $1,066 in 2004 and $31,019 in 2005. In relation to current assets, in 2004 the company had current assets totalling $215,959, and in 2005 assets totalling $294,349. With the addition of non-current assets and intangible assets, the total assets in 2004 amounted to $552,376 and in 2005 amounted to $636,876. Current liabilities for 2004 were listed at $349,114 and for 2005, $433,645. Total equity for each year was $146,867 in 2004, and $167,814 in 2005. 12 In relation to Malsong, in 2004 there was total income of $1,163,296 and in 2005 a total income of $1,402,876. The largest item of expenses in those years was $887,022 in 2004 for wages and in 2005, $1,006,854 for wages. The statement recorded that, in 2004, there was a profit from ordinary activities before income tax of $70,973 in 2004 and a loss of $8,043 in 2005. As at 2004, there were net assets of $29,981 while, in 2005, there were net liabilities of $33,297. 13 Larry Sault provided an affidavit stating that he was a director of Malsong and was 54 years of age. In 1949, his father had commenced a roofing specialist business trading as G E Sault. 14 Mr Larry Sault had three brothers, Joe Sault, Brett Sault and Perry Sault. In 1967, he left school at 15 years of age and, about a year later, commenced working for his father. Larry Sault had worked for the family business since that time. In 1971, his brother Brett left school at just under 15 years of age and commenced working for the family business from that time on. In 1974, Perry Sault, at the age of 15 years, left school and commenced working for the family business. Joe Sault obtained a degree of Bachelor of Commerce from Newcastle University after he left school but commenced working in the family business in approximately 1968 or 1969. 15 In August 1980, Mr Sault's father incorporated the business then known as G E Sault & Sons Pty Ltd. At that time, the directors were his father and mother holding 49 per cent of the shares, with the brothers Brett, Perry, Joe and himself holding 51 per cent of the shares. In 1988, his father retired and the parents' shareholding was transferred to the children. In 1989, Joe Sault ceased to work for the business and transferred his shares to the remaining three brothers. In January 2001, Perry ceased to work for the business and transferred his shareholding to the remaining two brothers. 16 Larry Sault's wife was employed in the business as a secretary and had been so employed since September 1990. His daughter, presently 25 years of age, was also employed in the business as a secretary and had been so employed for 12 months. Brett Sault had two children, Chad and Craig. Chad, 21 years of age, had been employed in the business since he was 16 years of age and had completed his four year apprenticeship, while Craig Sault commenced work for the business in 2005 and was 19 years of age and presently undertaking an apprenticeship. 17 Malsong was incorporated in May 1998. A few days later, G E Sault & Sons Pty Ltd changed its name to Ateod Pty Ltd. On 24 December 2004, the name of the company was changed back to G E Sault & Sons Pty Ltd. Between May 1998 and December 2004, all staff were employed by Malsong. Malsong currently employed 29 people, with two employed as directors/estimators, one estimator/mechanic, five office staff, one cleaner, 19 tradesmen and labourer roofers and one storeman. The average number of employees engaged ran from nine in the year 1995-1996 to 26 in the year 2004-2005. 18 Mr Sault produced a document certifying training for the correct use of safety harnesses at roof heights, a course conducted for a number of employees. There was a code of behaviour circulated to employees on G E Sault & Sons letterhead, dealing with alcohol and drugs and preventing work if an employee was under the influence, including effects from the night before. A copy of a document sent to Mr Coombes in November 2003 prior to his commencing work asked about his general fitness and whether or not he had a WorkCover accredited general Occupational Health and Safety induction certificate for construction work - which he did possess. Mr Coombes had provided a copy of that certificate dated 23 August 2003. 19 In October 2003, G E Sault & Sons had contracted to perform certain work on a property at Morpeth Road, Raworth involving removal of an old roof and replacing it with a new roof, except for the skillion roof. Prior to 19 November 2003, a risk assessment had been adopted by Malsong, although the risk assessment was entitled "G E Sault & Sons". Mr Coombes was not required to sign the risk assessment because he was employed as a "ground boy", and was directed not to go onto the roof. That document indicated that the risk assessment did not look for overhead power lines and that the roof pitch was 28 degrees. Harnesses were regarded as necessary but there were no other safety concerns, nor was scaffolding required. It was assessed that there was a safe position to pass roof sheets and that rubber-soled shoes were to be worn. Of the four tradesmen/labourers working under supervisors, two had signed the risk assessment. 20 On 9 January 2004, WorkCover had issued 14 improvement notices to Malsong. Since that time, Malsong had arranged for the Master Builders' Association to give a course to staff members on safety procedures with that course taking place between 30 January 2004 and 10 November 2005. It became a condition of employment that a worker obtain the OHS "green card" and all employees were required to sign a declaration before commencing employment that they had obtained that card. Larry and Brett Sault had completed the training course "work activity occupational health and safety supervision" and the work activity - occupational health and safety supervision course had been completed by 11 employees. All employees were provided with hard hats, non-slip shoes, earmuffs, safety glasses and sunscreen although the company had always provided hats and sunscreen. At the end of April 2004, Chad Sault was appointed as the Occupational Health and Safety representative. At the end of January 2004, an occupational health and safety plan had been prepared for residential and commercial roofing for Malsong and G E Sault & Sons. That document dealt with working at heights and referred to compliance with regulations, codes of practice and Australian Standards. Each site was to be assessed for possible risk of falling objects as well as the potential risk of personnel falling. Since January 2003, G E Sault & Sons had used work a method statement and risk assessment form of four pages, raising a number of standard questions, including issues of working at heights and the use of harnesses. In January 2004, at a G E Sault & Sons occupational health and safety meeting, a first aid officer was elected and it was noted that occupational health and training was to be reviewed every six months. All employees were to receive a copy of the G E Sault & Sons Occupational Health and Safety policy, the code of practice, safe work on roofs Parts 1 & 2, as well as safety glasses, earmuffs, non-slip shoes and hard hats. A summary of the Occupational Health and Safety Regulation 2001 was to be in all company vehicles. An instructor was present to deal with training and instruction in site-specific work method statements, and risk assessments, including tool box meetings. Also, in January 2004, all employees had been issued with a full body safety harness and had been instructed and trained in how to wear the safety harness, the installation of necessary anchor points and the connection of a personal energy absorber. 21 Mr Larry Sault gave evidence of expenditure incurred in providing plant and equipment, protective clothing, staff amenities and training. G E Sault & Sons between August 2001 and May 2006 had spent nearly $14,000 in relation to protective clothing; between November 1999 and August 2005, $1,800 had been expended in the purchase of first aid kits for employees; between March 2001 and October 2005, nearly $900 had been expended in relation to OHS safety courses; and between January 2001 and March 2006, nearly $33,000 had been expended in obtaining safety plant and equipment. In March 2003, 20 employees of Malsong attended an asbestos removal course conducted by TAFE at Newcastle and all employees completed their course. The cost of the course was nearly $2,300. 22 Mr Sault said that before WorkCover had brought deficiencies to his attention, he had recognised the need for safety harnesses and, if he observed one of his workers not wearing a harness, he would have raised the matter with him. He had examined the circumstances as particularised in the Application for Order and felt confident that, as a result of measures implemented and with the assistance of WorkCover, the chances of any employee having an accident were remote. Mr Sault said that he had ensured that employees had participated in occupational health and safety courses and that he himself had become more vigilant so as to ensure that a safe system of work was in force. He appreciated that he had a duty to look after employees not complying with directions and he would not tolerate non-compliance with directions as to safety practices, especially in relation to new employees. There was a cultural change in the operation of the business and Mr Sault stated that he recognised that working on a roof might be dangerous and that he insisted that appropriate safety equipment, such as harnesses, were available and that employees were directed to use the appropriate equipment. He now made it a habit to attend various worksites so as to ensure that employees were using the safety equipment provided, and he also directed all employees to ensure that, where there were power lines, the power was turned off before work commenced. Mr Sault said he recognised the company's responsibility to "guard its workers". The business was a family business with the present operators being sons of the founders with grandsons of the founders now employed in the business. Mr Sault described Malsong as a family company with any dividends being divided equally between himself and Brett Sault. 23 Mr Sault was cross-examined in relation to his affidavit. Mr Sault's attention was drawn the risk assessment made in relation to this job and the entry that indicated that no danger was seen in relation to overhead powerlines. Mr Sault said that he saw the overhead power lines when he quoted on the job and believed that the power lines were new, well insulated and that nothing further was needed. He did not write the risk assessment but had instructed the workers to complete a work method statement: He thought the work was quite safe. The work method statement was the same document as the risk assessment and there was no other document. 24 In relation to the work performed by Mr Coombes, he had been directed not to work on the roof and had been engaged as a ground boy. Mr Sault did not understand that he received roof metal passed to him from the roof but that he was just working on the ground. It was possibly important that Mr Coombes knew about the overhead lines but he should have been made aware of the risk assessment. In relation to the direction that Mr Coombes not go onto the roof, Mr Sault agreed that supervision of him was essential. 25 After this incident on 19 November 2003, the defendant had received Prohibition Notices from the WorkCover Authority in late April 2005. A matter raised was working at heights while employees were not attached to anchor points. A Penalty Notice had been received and paid in the sum of $1,000. DELIBERATION 26 In each case the defendant has pleaded guilty to the amended charge as particularised. Those Particulars indicated a worrying lack of attention to safety by the defendants. In essence, the charges concerned inadequate measures taken in relation to employees working at height, inadequate attention paid to employees working near power lines and the failure to properly supervise employees including a very young and inexperienced person, Mr Coombes. The Court has received a very full explanation of the work being performed through the documents tendered. The work was being performed at a level exceeding two metres and varying between 2.2 and 4.2 metres although it can be accepted that, in relation to work being performed using the skillion roof, only parts of that roof exceeded three metres such as to require protective edging. Nevertheless, the work at these heights presented a serious risk to employees in the absence of training as to the use of harnesses and anchor points, the absence of protective edging and the failure to assess the risk and provide adequate protection when work was performed near overhead power lines at the front of the premises. I accept the defendant's submission that the evidence did not place Mr Coombes at the front of the premises or near the overhead power lines that connected to the house near the edge of the front veranda, but it did appear that Mr Coombes was performing work on the skillion roof contrary to directions that he perform no such work: while the skillion roof was reasonably flat, it did rise to over three metres where it abutted the main premises and in that area at least there should have been protective edging erected. The failure to properly assess the risk of the overhead power lines was compounded by the fact that only Mr Walker the site supervisor had performed that assessment and, at the time of the incident, had not made the other two employees aware of it although there was evidence that after the event Mr MacNeill was made aware of the risk assessment. At no stage was Mr Coombes ever made aware of the risk assessment. Mr Walker was by far the most experienced worker, with Mr Coombes, an apprentice, being the most inexperienced worker having only recently commenced with Malsong. Mr MacNeill had been employed for approximately four months and had finished his apprenticeship in 2001. 27 I regard each of the failures as significant but their combination on 19 November 2003 amounted to a serious breach of the Occupational Health and Safety Act 2000. I accept the prosecutor's submission that the risk of serious injury, including death, was a real possibility. While the work was not being performed at great height, the operation of the Regulation and WorkCover's Code of Practice meant that there should have been some protections to stop a fall: a fall from these relatively small heights could nevertheless have resulted in quite serious injury. The presence of electricity at the front of the premises presented an obvious risk and one that should have been recognised in the risk assessment. Mr Sault regarded the state of insulation as presenting no risk and I believe he was in error in forming that view. The WorkCover Code contemplated the use of additional insulation or disconnection of the power as part of the appropriate steps to address the risk of working within a clearance distance of four metres of a power line. It was obvious that any work that involved removal of metal roofing from the front of the house would involve work within four metres of the power line and appropriate safety steps therefore had to be taken by the defendants. These risks were not only foreseeable but there were relatively simple steps that could be taken (and were set out in the various parts of the Code and Regulation) to address those obvious risks. 28 The defendants accepted that, in setting a penalty in relation to each breach, general deterrence was a significant issue. Although this work was being performed in a particular specialisation of the building and construction industry, it was being performed in relation to domestic premises. There is no reason to approach safety in those circumstances with any less diligence than if the work was being performed in a commercial or large scale setting. The performance of work at height, working near overhead electricity lines and the failure to supervise have general relevance for the building and construction industry. In relation to specific deterrence, both Malsong and Mr Sault have continued to work in the roofing industry and since 2002 - 2003 have employed more than 20 people with a high point of 29 employees. The defendants emphasised improvements made in the safety system since November 2003 and the money spent on occupational health and safety equipment and training. The effectiveness of those steps however, is called into question by the Prohibition Notices and penalty issued in 2005, especially the Prohibition Notice relating to deficiencies in the system regarding working at heights. While it may be accepted that the defendants have made a genuine attempt to improve their safe working systems, specific deterrence remains a very important aspect of an appropriate penalty in this case. 29 The defendants submitted that, while the particulars of the charges were accepted, it was nevertheless appropriate to note that an error had been made in the assessment of the risks at the site in that there should have been edge protection, that Mr Coombes had never been in danger of working near the overhead power lines but, in relation to his work, there had been a lack of supervision. All of these failures were the failures of the direct supervisor, Michael Walker. That submission appears to have an element of delegation from Mr Sault who, it was agreed, was the working director and the manager responsible for the work performed on the premises: delegation arguments have been rejected by the Court in numerous cases. Further, to the extent that Michael Walker was deficient in his supervision on this day, as well as being deficient in relation to the risk assessment and permitting the employees to work unsafely at heights and near electricity, there was no evidence detailing what counselling was given to Michael Walker in relation to these omissions and what further instructions, if any, were given to him about the performance of his supervisory tasks in the future. 30 In relation to the financial position of Malsong, the prosecutor submitted that the financial statements in evidence did not take the matter very far: while it could be accepted that Malsong was not a very large organisation, it seemed to be very successful. The evidence showed that the company generated substantial income but indicated no incapacity to pay a significant fine. The defendant analysed the financial statements to suggest that there were, ultimately, quite modest returns made, even though gross turnover was in the order of $1 - $1,500,000 for Malsong and more than $2,500,000 for G E Sault & Sons. Having regard to the number of people employed, the financial statements indicated that salaries paid to family members were not large and that there was no basis for treating the family members involved in these companies as "millionaires". The defendants' accountant was not required for cross-examination in relation to the manner in which Malsong and G E Sault & Sons operated nor was Mr Sault cross-examined on these matters or his own financial position. The Court is therefore uninformed about the reason for the creation of a separate labour hire company to employ workers for projects undertaken by G E Sault & Sons nor is it informed of the role of the Pendlebury Trust. I did not understand this evidence, however, to be put forward by the defendants as suggesting an incapacity to pay a significant penalty, but rather to put in context the nature of the operation as a "family company", the modest returns being made by the family members and the fact that it would be the family who would meet the penalty imposed. In a general sense, I am prepared to act on that basis although I note that all of the evidence suggested that this has been, and continues to be, a quite successful business, even though one conducted on a relatively small scale. I would not regard this business as being simply a husband and wife undertaking utilising incorporation for taxation benefits as has often been considered a relevant factor in assessing an appropriate penalty in occupational health and safety prosecutions. There was a sophistication about the corporate arrangements not usually found in simple husband and wife businesses. 31 In relation to other subjective factors, neither defendant had a prior conviction for a breach of occupational health and safety legislation although Malsong was not incorporated until 1998 and the record therefore spans a relatively short period of time. That record must be regarded as a good record, bearing in mind that the work is specialist roofing work which of necessity is likely to be performed at heights and in circumstances where a variety of risks may arise, including risks from the presence of overhead power lines. Malsong has been the employer of a number of workers, often employing 20 or more in a financial year, and so its clear record has to be appreciated in the light of that fact. I accept that the defendants took a number of steps after November 2003 to address occupational health and safety issues, especially those defects in the system which were exposed by the WorkCover investigation. The prosecutor also accepted that the defendants co-operated with the WorkCover investigation. All of these matters serve to mitigate the severity of the penalty to be imposed. 32 As previously indicated, on the second occasion these matters came before the Court, guilty pleas were entered in relation to five Particulars, thus acknowledging the elements of the offence. At that time, each defendant disputed two further Particulars which were to be the subject of contested evidence at the hearing. Prior to the hearing, however, the prosecutor agreed not to press those two further Particulars and the defendants adhered to their earlier pleas of guilty in relation to the confined Amended Application for Order. That Amended Application was filed in Court at the hearing of evidence and submissions on penalty. In those circumstances, it is appropriate that each plea be regarded as an early plea attracting the maximum discount of 25 per cent. ORDERS 33 A. In the matter of Inspector Leinasars v Malsong Pty Ltd Matter No IRC 5486 of 2005 : (i) the defendant is found guilty of the breach of s 8(1) of the Occupational Health and Safety Act 2000 as particularised in the Amended Application for Order in Matter No IRC 5846 of 2005, to which the defendant has pleaded guilty; (ii) the defendant is fined the sum of $68,250 with half that amount of be paid to the prosecutor as a moiety; (iii) the defendant is to pay the costs of the prosecutor in a sum agreed, or in the absence of agreement, as ordered by the Court. B. In the matter of Inspector Leinasars v Larry Sault, Matter No IRC 5845 of 2005: (i) the defendant is found guilty of a breach of s 8(1) of the Occupational Health and Safety Act 2000 by operation of s 26(1) as particularised in the Amended Application for Order in Matter No IRC 5845 of 2005, to which the defendant has pleaded guilty; (ii) the defendant is fined the sum of $10,500 with half that sum to be paid to the prosecutor as a moiety; (iii) the defendant is to pay the costs of the prosecutor in a sum as agreed, or in the absence of agreement, as ordered by the Court. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.