The Laws of Man vs The Laws of Nature & Safety Due Diligence
One of the odder confusions that R2A happens upon is the proposition that the laws of man are always paramount in all circumstances. It seems to occur most often with persons who work exclusively in the financial sector.
From an engineering perspective, this is just plain wrong.
When dealing with the natural material spacetime universe, the laws of nature are always superior.
After some cogitation, we suspect that this confusion results from the substance of which the financial parties contend, specifically, money.
Sometime ago, over lunch with a banker out of Hong Kong, it was pointed out by R2A that money wasn’t real. The banker expressed surprise and asked what we meant by that. Our reply was that money does not exist in a state of nature. For example, it does not grow on trees. It is a human construct which prosperous societies apparently need to succeed, but of itself, is not directly subject to the laws of nature.
The banker’s response was to ask us not to mention this to anyone.
From this, we conclude that for financial people at least, compliance with legislation and regulations made under it that directly applies to the concept and use of money does demonstrate financial due diligence since the laws of nature are simply not relevant.
However, in the case of safety due diligence, just complying with the laws of man and ignoring the laws of nature will just end in disaster after disaster since the laws of nature are immutable.
To demonstrate safety due diligence requires that the laws of nature are understood and managed in a way that satisfies the laws of man – in that order.
Remember that, legally, safety risk arises because of insufficient, inadequate or failed precautions, not because something is intrinsically hazardous.
For example, flying in a jet aircraft or getting into low earth orbit is intrinsically hazardous, but with enough precautions, it’s fine.
Leave a critical precaution out or let one fail and you will crash and burn. It’s inevitable.
Much the same has been happening with the Covid-19 crisis as discussed in our blog a few months ago (read article here).
Going directly to a political fix without understanding the science is going to hurt. Getting both right is necessary, but it has to be in the right sequence.
Overall, it’s always been no contest – the laws of nature have always trumped the laws of man, except when dealing with non-natural human constructs like money, debt and suchlike over which the laws of nature have no direct control.
Postscript: Risk, as a concept, has many of the same problems as money. It’s a human judgement about what might happen.
For example, consider the use of the popularly used heat map shown below.
Most users spot-the-dot to characterise the risk associated with a particular issue. But technically it is necessary to know the actual shape of the risk curve for that hazard (the wriggly line going from left to right) which is difficult for real spacetime hazards let alone human judgements of no-material constructs like money.
Strictly it’s also necessary to integrate the area under the risk curve (shown as the darkened area), which is never done. This just goes to show how flexible the concept of risk can be.
Criminal Manslaughter - Australian paradigm shift for engineers & standards
The rise of criminal manslaughter provisions in health and safety legislation, coupled with the registration of engineers in Queensland, New South Wales and Victoria, heralds a paradigm shift for engineers and the role of standards in Australian jurisdictions.
On July 2020, Victoria commenced the criminal manslaughter provisions of the 2004 OHS Act. Quoting the premier:
Workplace manslaughter is now a criminal offence in Victoria with tough new laws introduced by the Victorian Government coming into effect today.
Negligent employers now face fines of up to $16.5 million and individuals face up to 25 years in jail, sending a clear message to employers that putting lives at risk in the workplace will not be tolerated.
The new offence of workplace manslaughter will be investigated by WorkSafe Victoria, using their powers under the Occupational Health and Safety Act 2004.
The offence applies to employers, self-employed people and ‘officers’ of the employer. It also applies when an employer’s negligent conduct causes the death of a member of the public.
The last sentence suggests that a faulty product that kills a member of the public caused by the negligence of a designer, manufacturer or supplier as an employer is also included.
By negligence, Worksafe Victoria means:
Voluntary and deliberate conduct is 'negligent' if it involves a great falling short of the standard of care that a reasonable person would have exercised in the circumstances and involves a high risk of death, serious injury or serious illness. It is a test that looks at what a reasonable person in the situation of the accused would have done in the circumstances. The test is based on existing common law principles in Victoria.
https://www.worksafe.vic.gov.au/victorias-new-workplace-manslaughter-offences
It is understood that these new provisions have been legislated consistent with the recommendations of the 2018 review of the model WHS legislation to enhance the Category 1 offence (Recommendation 23a) and to provide for industrial manslaughter (Recommendation 23b).
This extends the criminal provisions beyond the recklessness (knew or made or let it happen) provisions that had applied in some jurisdictions (notably Queensland and the ACT) to include negligence (what ought to have been known).
Taken in the context of the registration of engineersin Queensland (RPEQ) and impending registration of engineers in Victoria andNew South Wales, these duties are likely to become extraordinarily onerous forthose who hold themselves out to be technical experts in particular fields ofendeavour.
Historically,many engineers have relied on Australian Standards to be the arbiter ofrecognised good practice. Indeed, many standards were called up by statutemeaning that compliance was prescriptive, and that compliance-with-the-standardwas de rigueur.
But things have changed in the last two decades. Parliamentary counsels’ advice has been consistent that it’s not appropriate to derogate the power of parliament to unelected standards committees.
This observation, coupled with the less than successful management of major disasters ranging from bushfires to financial crises, culminating in numerous Royal Commissions and judicial investigations including child sexual abuse, misconduct in banking and finance, aged care, as well as bushfires, all indicate that more could have been done and that many ought to have done it.
It seems that the question to our parliamentarians became; how can we make decision makers (and designers responsible) for their decisions?
And theanswer seems to be that, rather than just being responsible at common law fornegligence (a matter for which insurance can be purchased), make themcriminally responsible by statute (but always excluding state and federalministers).
Note relevant legal opinion such as in an article in Engineers Australia Magazine of March 2009 (Page 38):
Engineers cannot avoid liability in negligence or for Trade Practices Act contravention by simply relying on a current or published standard or code.
Leigh Duthie, Phillipa Murphy and Angela Sevenson of Baker & McKenzie, Melbourne
And also:
Engineers should remember that in the eyes of the court, in the absence of any legislative or contractual requirement, an Australian Standard amounts only to an expert opinion about usual or recommended practice. Also, that in the performance of any design, reliance on an Australian Standard does not relieve an engineer from a duty to exercise his or her skill and expertise.
Paul Wentworth, Partner, Minter Ellison (28th March 2011)
So, following the recommendation of the Review of the model Work Health and Safety laws - Final report December 2018, criminal recklessness (knew of made or let it happen) and criminal negligence (ought to have known) is being rolled out with Victoria being the most recent that commenced on 1 July 2020.
One imagines that a creative lawyer would use such a statement to include the products of engineering endeavours, which in an advanced technological society means most things.
Under the Professional Engineers Registration Act 2019 (due to commence on 1 July 2021), registered engineers are also obliged to comply with approved codes of conduct which one imagines will also reinforce all of this.
The importance of Safety Due Diligence: Keeping directors out of jail
Coroner's Finding into Dreamworld Thunder River Rapids
The death of four young people at Dreamworld in the Thunder River Rapids in October 2016 has brought the prospect of criminal prosecution of Directors for safety failures to the fore, or, as we say, Safety Due Diligence.
Press reports have indicated that the Queensland Government has accepted the Coroner's findings and referred the matter to the independent Work Health and Safety Prosecutor to decide whether action would be taken against Ardent, the owners of Dreamworld. Presumably such action would likely be criminal proceedings under Section 31 Reckless conduct—category 1 of the Qld WHS Act 2011.
Reckless Category 1 offences are usually summarised as ‘knew or made or let it happen’. Simply put, it asks:
Did the Board (especially the Chairman and Managing Director of the day) know of the issue and ensure that all reasonably practicable precautions were in place, or had they downplayed it and relied on ‘luck’?
Based on press reports, it seems as though the ride’s safety issue was a known problem and despite the expressed concerns of employees, it was basically ignored or, at least, not taken seriously.
Criminal offences must be proved ‘beyond reasonable doubt’ which is a very robust test.
To give a feeling for what it entails, the prosecution of a General Manager in ACT in 2015[1] provides insight.
In this case the Director of Public Prosecutions acted on behalf of Worksafe ACT. Essentially, Mr Munir AL-Hasani was charged as an Officer (General Manager) of Kenoss Constructions, a small family owned (husband and wife directors) road construction company. over the death of a contractor.
For the most part, the charges were proved. However, during the hearing it became clear that despite the title of general manager, Mr AL-Hasani did not have the right to hire or fire and could not commit corporate funds. Accordingly, Magistrate Walker was not satisfied that Mr AL-Hasani’s role, beyond reasonable doubt, rose to that of an Officer of the company and so the charge was dismissed.
Such a governance detail seems unlikely to apply to the Dreamworld case. The Chairman and Managing Director would appear to be Officers for the purposes of the legislation.
According to the Coroner, the issue was known to the organisation and some precautions, but not all reasonably practical precautions, were established.
From R2A’s perspective, this would seem to be a form of failure based on the well-known ‘Rumsfeld manoeuvre’ or an ‘unknown known’. That is, known to the organisation but unappreciated by decision makers.
Can this be proved beyond reasonable doubt in the Dreamworld case? We don’t know, but we suspect that it will be a close-run thing.
At R2A we had anticipated that the rise of such WHS safety imperatives was likely to cause the appointment of technologically savvy Directors; at least in high tech industries subject to high consequence-low likelihood events and in those jurisdictions where proven failure was criminal (initially Qld and ACT). But since then most other Australian jurisdictions have also adopted criminal manslaughter provisions.
All in all, what happens in Queensland next will certainly have the undivided attention of Directors and their safety due diligence processes. As it should.
If you'd like to learn more about R2A's Safety Due Diligence approach, you may be interested in watching our Safety Due Diligence webinar recording.
[1]Brett McKie v Munir AL-Hasani & Kenoss Contractors Pty Ltd (In Liq).Industrial Court of the Australian Capital Territory before her Honour IndustrialMagistrate Walker.
Coronavirus Pandemic & Safety Due Diligence
A fabulous array of material has emerged on government websites regarding the Coronavirus (COVID-19). Worksafe Australia has published an interesting article on the connection to WHS legislation. This emphasises that employers have a duty of care to eliminate or minimise risk, so far as is reasonably practicable (SFAIRP).
There then follows numerous precautions described in enormous and voluminous detail. In an attempt to cut to the chase, R2A decided to apply our usual precautionary approach to the whole thing to see if we clarify what all this means.
So far as we can tell, the core difficulty with the new coronavirus is that it is very, very contagious. Much more so than ordinary flu.
This means it will escalate with startling speed and easily overwhelm our medical resources unless stringent measures to reduce the infection rate are implemented.
To calculate the infection rate, a probabilistic epidemiological model appears to be being used, conceptually shown above. That is, all the individual transmission pathways may not be fully understood, but an overall probabilistic transmissivity model can be created.
From a statistical viewpoint, if enough people are involved, the predictions should be quite robust and is presumably the basis of our governments’ concerns.
Causal workplace infection pathway single line threat barrier diagram
Following the hierarchy of controls, the threat-barrier diagram above identifies the elimination option (a vaccine), the precautions such as isolation and infection control prior to the loss of control point and then the mitigation options including hospitalisation which act after the loss of control point.
However, from the perspective of any single infection, there will likely be a single causal chain of events, which can be interrupted in various ways, particularly following the hierarchy of controls enshrined in the WHS legislation.
Such an understanding enables SFAIRP to be demonstrated. There would be different sequences for different paths; family, hospitals, workplace, team sports and the like.
From an employer /employee perspective, we think the single line threat-barrier diagram shown above is a reasonable first cut.
If you'd like to learn more about our Safety Due Diligence approach, read our White Paper here.
Australia’s Bushfires from a Due Diligence Perspective
Like you, we have been devastated by the recent bushfire events in Victoria, NSW and Queensland. We hope you have been able to stay safe and have not been directly affected. Richard and I have been reflecting on bushfires in history and if there are any key take away messages from a due diligence perspective.
Richard’s involvement with bushfire risk reviews commenced in the 1980s following the Ash Wednesday fires in Victoria. As part of a research project, Richard completed a threat and vulnerability assessment to see if there were any precautions that were missing from (then) current practices.
The outcome was that there were significant risk reduction benefits associated with improved town planning. This required the placement of huge fire breaks, such as golf courses and potato fields to the north and west of the town.
From the CFA website:
A change in wind direction is one of the most dangerous influences on fire behaviour. Many people who die in bushfires get caught during or after a wind change.
In Victoria, hot, dry winds typically come from the north and northwest and are often followed by a southwest wind change. In this situation the side of the fire can quickly become a much larger fire front.
Richard was then a member of the Powerline Bushfire Safety Taskforce that followed the Black Saturday fires in 2009.
My involvement continues on the Powerline Bushfire Safety Committee.
One of the key findings of the Black Saturday Royal Commission was that the majority of the fires were started by electrical assets and significantly contributed to the huge number of fatalities.
I am very proud to be involved in the roll out of REFCLs (Rapid Earth Fault Current Limiter) in Victoria, and their contribution to improving bushfire safety. Data from a total fire ban day in November 2019, revealed that REFCLs on the electrical network are working to reduce the number of fire starts from electrical assets.
Although bushfires of this magnitude were a new occurrence for NSW in 2019/20, there are many learnings from past Victorian fires that can be applied.
And, it is interesting to compare the community’s response to cyclones in the north of Australia to community responses in bushfire prone areas.
Buildings in cyclone prone areas are subject to more stringent building codes and during cyclone warning periods. It’s typically practice for people living in those areas to go home and prepare their house. All loose items of furniture are removed or tied down, shutters are closed, and communities are generally shutdown.
The same does not occur for bushfires prone areas.
As due diligence engineers we ask the question is there anything more that can be done?
The focus should always be on precautions rather than mitigations and we should certainly learn from past experiences.
In light of these recent events, we have revisited our Safety Due Diligence White Paper and Powerline Bushfire Safety Taskforce Case Study. We hope you find them interesting and insightful.
ALARP vs SFAIRP revisited
The ALARP (as low as reasonably practicable) versus SFAIRP (so far as is reasonably practicable) debate appears to continue in many places, for example, AS/NZS2885.6:2018 Pipeline Safety Management. The current position of many is that SFAIRP equals ALARP and that any view to the contrary is just arguing about the number of angels on a pinhead.Nothing could be further from the truth. For engineers, the meaning is in the method; results are only consequences.
SFAIRP represents a fundamental paradigm shift in engineering philosophy and the way engineers are required to conduct their affairs.
It represents a drastically different way of dealing with future uncertainty. It represents the move from the limited hazard, risk and ALARP analysis approach to the more general designers’ criticality, precaution and SFAIRP approach.
That is, from:Is the problem bad enough that we need to do something about it?To:Here’s a good idea to deal with a critical issue, why wouldn’t we do it?
Paradigm is a much misused word and it is perhaps necessary to clarify what it means. In Thomas Kuhn’s seminal work, The Structure of Scientific Revolutions, a paradigm is a universally recognised knowledge system that for a time providea model problems and solutions to a community of practitioners. He provides a notable series of scientific turning points associated with names like Copernicus, Newton, Lavoisier and Einstein. His point is that a new theory or approach is not accepted by the current practitioners since the theory often affects the work of a specialist group on whom the new theory impinges. And in doing so, reflects on much of the work that group has already completed. Its assimilation requires reconstruction of the prior approach and a re-evaluation of prior fact that is seldom completed by a single individual. In fact, it usually requires a generational shift.SFAIRP is paramount in Australian WHS legislation and has flowed into Rail and Marine Safety National law, amongst others. In Victoria, SFAIRP has now been incorporated into Environmental legislation. And, apart from the fact that SFAIRP is absolutely endemic in Australian legislation with manslaughter provisions to support it proceeding apace, SFAIRP is just a better way to live. It presents a positive, outcome driven design approach, always testing for anything else that can be done rather than trusting an unrepeatable (and therefore unscientific) estimation of rarity for why you wouldn’t.
If you’d like to hear Richard & Gaye discuss SFAIRP versus ALARP, check the below podcast episode.
Registration of Engineers (Victoria) & Why it's Important
The Engineers Registration Bill (Victoria) received Royal Assent on 3 November. This has always been a philosophically challenging matter for engineers. Many believe that it will stifle innovation in a shallow attempt to improve the status of engineers. Certainly, its implementation will be complex if the Queensland model is taken, as an example.
The primary reason for the registration of engineers is to protect the community and employers from unscrupulous and/or incompetent individuals claiming to be engineers.
The immediate purpose is to protect life, critical infrastructure and essential services.
Practically this comes down to ensuring that certain critical decisions must be transparently and diligently made by clearly identified responsible individuals, who recognise the possibility of their own negligence (you can’t always be right) with appropriate professional indemnity insurances, either by themselves or via their employers.
Such individuals include:
- Structural, civil and geotechnical engineers, for footings and structures including houses, high rise buildings, bridges, tunnels, dam design and operation, port and harbour design and the like;
- Mechanical engineers for high-rise lifts, cranes, boilers and pressure vessels, aircraft, road, rail and vehicle certification, high security bio-containment, defence munitions safety, pipelines etc;
- Fire Engineers for fire safe designs (hydraulic calculations, fire resistance, and the like);
- Chemical engineers, for process design particularly, to avoid major environmental contamination, toxic gas clouds, explosions and detonations;
- Electrical engineers, particularly for power station, substation and high voltage operations, and electrical safety generally;
- Mining engineers for underground, open cut and tailings dams’ safety and certification; and
- Aviation engineers for aircraft certification and naval architects for ship certification.
Historically, Engineers Australia has attempted to do this by ensuring, as far as possible, that such engineers have:
- Passed a recognised engineering course;
- Have relevant experience and continuing education; and
- Comply with The Code of Ethics which means at least ensuring that community safety is paramount, practicing within their area of competence, not accepting kick-backs (s/he who pays you is the client), being responsible for their own negligence (appropriate insurances) and giving credit where credit is due.
This 100-year-old view compares favourably with current financial governance being uncovered in the recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Presently, these requirements only apply to the one third of engineers who choose to be members of Engineers Australia. But registration, supported by a Code of Conduct, should address this deficiency.
As for us at R2A, we are members of Engineers Australia and practice in accord with the Code of Ethics oulined above. But, we also believe practising to these standards is the right thing to do!
Why the philosophy of compliance will always fail
A very popular pastime of Australian parliaments is to pass legislation and regulation on the basis that, once it becomes the law, everyone will comply and it will, therefore, be effective.A concomitant result is that many boards and their legal advisers conduct compliance audits to confirm that these legal obligations have been met and, having done so, declare that they are ethically robust, safe and societally responsible.This is a flawed philosophy at many levels.
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First, the sheer number and extent of laws and regulations in Australia means that the actual possibility of demonstrating compliance with each and every one is a logical impossibility.
Conceptually, the philosophy of compliance suggests that the more laws and regulations the better, even if the cost to demonstrate compliance continues to increase.
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Second, in safety terms, mere compliance can never make anything safe.
It is simply not possible for our parliaments and regulators to predict in advance all the possible existing concerns, let alone the circumstances of possible future problems.The objective should be to understand the purpose of something and to meet that need. Compliance is a secondary aspect.For a simple example: Pool fencing is designed to prevent children drowning, not to satisfy a building surveyor, although this may be necessary to satisfy society that it has been done properly.
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Third, compliance has always been about ensuring minimums; controlling the worst excesses.
It is seldom about promoting the best that we-can-do.The behaviour of the financial sector, the sex scandals in religious orders and the mistreatment in aged care are cases in point. From a societal viewpoint, the horrendous matters reported in the various Royal Commissions simply ought not to have happened.But, will increased legislation and regulation prevent such dreadful things from re-occurring in the future? Or is there a better way?
Interestingly, the engineers seem to have always understood this.
The Code of Ethics of Engineers Australia has always emphasised that the interest of society comes before sectional interests.These basic understandings, as articulated, for example, by the managing director of a major Australian Consulting Engineering firm to a young engineer in the 1970s, include:
1. S/he who pays you is your client.
A simple rule. Often overlooked. Having a building certifiers paid for by the developer easily leads to lazy certification. A better approach would be to have the (future) owners pay for the certification. The possibility of a conflict of interest would be functionally reduced by design.
2. No kickbacks.
A lot or rules and regulations can be written about this. But if a professional adviser does not understand that a hidden commission is morally indefensible, there is a problem that no amount of regulation can fix. It may not be illegal to pay a spotter’s fee, but it’s certainly morally suspect.
3. Stick to your area of competence.
Don’t provide advice or opinions without adequate knowledge. Does this really need legislation and regulation?
4. Be responsible for your own negligence.
That is, recognise that you can’t always be right. Amongst other things, advisers need professional indemnity insurance, in part, to remedy honest mistakes.
5. Give credit where credit is due.
That is, don’t take credit for what others have achieved.
There is nothing new or novel about these basic understandings. But rather than legislating and regulating with a list of things not-to-do, it may be better to re-design the commercial environment so that virtuous behaviour is rewarded.Certainly, the old ACEA (Association of Consulting Engineers, Australia) used to do this. ACEA required that member firms were controlled by directors who were bound by the Engineers’ Code of Ethics.This meant that in the event of a decision between the best interests of the consulting firm and the client’s, the client’s interests normally held sway.
What are the Unintended Consequences of Due Diligence?
In my article Why Risk changed to Due Diligence & Why it’s become so Important, I briefly described the principle of; do unto others, otherwise known as the Principle of Reciprocity, and how Governments in Australia have incorporated the concept in legislation in the form of due diligence. With this in mind, it’s important to consider the unintended consequences of due diligence.
Below I examine two examples of the logical consequence set of the due diligence approach.
Unlicensed persons doing electrical work
Due diligence in safety legislation requires that risks be eliminated, so far as is reasonably practical, or if they can't be eliminated, reduced so far as is reasonably practical.The bane of electrical regulators in Australia is the home handyman working in a roof space and fiddling with the 240V conductors. Death is a regular result. The fatalities arising from the home insulation Royal Commission also spring to mind.Most of us have been replacing dichroic downlights in our existing houses with energy efficient 12V LEDs. And although it may be unreasonable to retrospectively replace the 240V wiring in the roof space with extra low voltage (ELV) conductors for existing structures, it is obviously quite achievable for new dwellings. And if all the wiring in the roof is 12 or 24 V (and all the 240V wiring is in the walls) then the possibility of being electrocuted in a roof space is pretty much eliminated, which is the purpose of the legislation. In fact, the most likely thing to happen next is that all lights will get smart and be provided with power over Ethernet (PoE) (up to 48V).What all this means is that, in the event of an electrocution in a roof space, the designer of domestic dwellings that did not install ELV lighting in houses built since the commencement of the WHS legislation will, most likely be considered reckless in terms of the legislation since the elimination option is obviously reasonably practicable.
Global warming & the City of Melbourne
Does the Parliament of Victoria have a duty of care to Melbournians? Not just current, but future ones? The High Court of Australia has been clear that future generations (yet unborn) can be considered neighbours for the purposes of having a duty of care.If that's the case, when it comes to global warming (whether it's real or not is an interesting question but it's certainly credible) if the Greenland ice sheet melts, which is arguably what will happen if temperatures increase by two or three degrees, the sea level in Port Phillip Bay will rise about seven meters.Seven meters in a low-lying city like Melbourne would be significant. You could forget Flinders Street Station as your meeting point.Due diligence is all about options analysis for credible (foreseeable) hazards and I can tell you of at least three, just from a preliminary internet search.
- NASA wants to put in space sun shields and actually shield the planet from the sun. This option is in the $trillions, probably, but quite do-able.
- Cambridge University engineers want to increase earthshine by squirting vapor at high altitude increasing the cloud cover and, thereby, reflecting more energy away from the planet, which is entirely practical. This would probably cost $20B or so to cool the planet.
- The cheapest option is one which an American decided to try by taking a ship load of fertilizers out to sea and dumping it into the ocean to see what would happen. The result was a plankton bloom.Applying this idea in the Southern Ocean, you would get lots of plankton, and then lots of krill, and consequently, fat whales. But much of the plankton and krill would die before being consumed and sink to the Antarctic ocean floor thereby creating a giant carbon sink. To cool the planet (and de-acidify the oceans as well) will be less than probably $10B or so based on the last estimate I’ve seen.
The Victorian desalination plant cost over $5B and ultimately $18B or so all up during the 27 year lifetime of the plant. It was built to deal with the credible, critical threat of Melbourne running out of water if a 10 year drought persisted.All this means that the Government of Victoria has the resources to implement at least one of the options described above. And following its own legislation, it seems the government has committed itself to seriously considering if it should cool the planet to protect the citizens of Melbourne against flooding due to the credible possibility of global warming.These examples, along with many more, along with the tools we use to engineer due diligence, are detailed in our Due Diligence Engineering textbook that’s available to purchase here.If you’d like our assistance with any upcoming due diligence, contact us for a friendly chat.
Why Risk changed to Due Diligence & Why it’s become so Important
At our April launch of the 11th Edition of Engineering Due Diligence textbook, I discussed how the service of Risk Reviews has changed to Due Diligence and why it’s become so important for Australian organisations.
But to start, I need to go back to 1996. The R2A team and I were conducting risk reviews on large scale engineering projects, such as double deck suburban trains and traction interlocking in NSW, and why the power lines in Tasmania didn't need to comply with CB1 & AS7000, and why the risk management standard didn't work in these situations.And, what we kept finding was that as engineers we talked about high consequence, low likelihood (rare) events, and then we’d argue the case with the financial people over the cost of precautions we suggested should be in place, we’d always lose the argument.However, when lawyers were standing with us saying, 'what the engineers are saying makes sense - it's a good idea', then the ‘force’ was with us and what we as engineers suggested was done.
As a result, in the 2000s we started flipping the process around and would lead with the legal argument first and then support this with the engineering argument. And every time we did that, we won.
It was at this stage we started changing from Risk and Reliability to Due Diligence Engineers, because it was always necessary to run with the due diligence first to make our case.
Since we made this fundamental change in service and became more involved in delivering high level work, that is, due diligence, it has also become part of the Australian governance framework.Due diligence has become endemic in Australian legislation. In corporations’ law; directors must demonstrate diligence to ensure, for example, that a business pays its bills when they fall due. It's in WHS Legislation. It's in Environmental Legislation. Due diligence is now required to demonstrate good corporate governance.And what I mean by that is that there’s a swirl of ideas that run around our parliaments. Our politicians pick the ideas they think are good ones. One of these was the notion of due diligence that was picked up from the judicial, case (common) law system.There’s an interesting legal case on the topic going back to 1932: Donoghue vs Stevenson; the Snail in the Bottle. When making his decision, the Brisbane-born English law lord, Lord Aitken said that the principle to adopt is; do unto others as you would have done unto you.The do unto others principle (the principle of reciprocity) was nothing new; it’s been a part of major philosophies and religions for over 2000 years.Our parliamentarians took the do unto others idea and incorporated it into Acts, Regulations and Codes of Practice as the notion of Due Diligence.That is, due diligence has become endemic in Australian legislation and in case law, to the point that it has become, in the philosopher Immanuel Kant’s terms, a categorical imperative. That is, our parliamentarians and judges seem to have decided that due diligence is universal in its application and creates a moral justification for action. This also means the converse, that failure to act demands sanction against the failed decision maker. I discuss this further along with two examples in the article What are the Unintended Consequences of Due Diligence.To learn more about Engineering Due Diligence and the tools we teach at our two-day workshop, you can purchase our text resource here.If you’d like to discuss we can help you make diligent decisions that are safe, effective and compliant, we’d love to hear from you. Contact us today.
Worse Case Scenario versus Risk & Combustible Cladding on Buildings
BackgroundThe start of 2019 has seen much media attention to various incidents resulting from, arguably, negligent decision making.One such incident was the recent high-rise apartment building fire in Melbourne that resulted in hundreds of residents evacuated.The fire is believed to have started due to a discarded cigarette on a balcony and quickly spread five storeys. The Melbourne Fire Brigade said it was due to the building’s non-combustible cladding exterior that allowed the fire to spread upwards. The spokesperson also stated the cladding should not have been permitted as buildings higher than three storeys required a non-combustible exterior.Yet, the Victorian Building Authority did inspect and approve the building.Similar combustible cladding material was also responsible for another Melbourne based (Docklands) apartment building fire in 2014 and for the devastating Grenfell Tower fire in London in 2017 that killed 72 people with another 70 injured.This cladding material (and similar) is wide-spread across high-rise buildings across Australia. Following the Docklands’ building fire, a Victorian Cladding Task Force was established to investigate and address the use of non-compliant building materials on Victorian buildings.Is considering Worse Case Scenario versus Risk appropriate?In a television interview discussing the most recent incident, a spokesperson representing Owners’ Corporations stated owners needed to look at worse case scenarios versus risk. He followed the statement with “no one actually died”.While we agree risk doesn’t work for high consequence, low likelihood events, responsible persons need to demonstrate due diligence for the management of credible critical issues.The full suite of precautions needs to be looked at for a due diligence argument following the hierarchy of controls.The fact that no one died in either of the Melbourne fires can be attributed to Australia’s mandatory requirement of sprinklers in high rise buildings. This means the fires didn’t penetrate the building. However, the elimination of cladding still needs to be tested from a due diligence perspective consistent with the requirements of Victoria’s OHS legislation.What happens now?The big question, beyond that of safety, is whether the onus to fix the problem and remove / replace the cladding is now on owners at their cost or will the legal system find construction companies liable due to not demonstrating due diligence as part of a safety in design process?Residents of the Docklands’ high-rise building decided to take the builder, surveyor, architect, fire engineers and other consultants to the Victorian Civil and Administrative Tribunal (VCAT) after being told they were liable for the flammable cladding.Defence for the builder centred around evidence of how prevalent the cladding is within Australian high-rise buildings.The architect’s defence was they simply designed the building.The surveyor passed the blame onto the Owners’ Corporation for lack of inspections of balconies (where the fire started, like the most recent fire, with a discarded cigarette).Last week (at the time of writing), the apartment owners were awarded damages for replacement of the cladding, property damages from the fire and an increase in insurance premiums due to risk of future incidents. In turn, the architect, fire engineer and building surveyor have been ordered to reimburse the builder most of the costs.Findings by the judge included the architect not resolving issues in design that allowed extensive use of the cladding, a failure of “due care” by the building surveyor in its issue of building permit, and failure of fire engineer to warn the builder the proposed cladding did not comply with Australian building standards.Three percent of costs were attributed to the resident who started the fire.Does this ruling set precedence?Whilst other Owners’ Corporations may see this ruling as an opportunity (or back up) to resolve their non-compliant cladding issues, the Judge stated they should not see it as setting any precedent.
"Many of my findings have been informed by the particular contracts between the parties in this case and by events occurring in the course of the Lacrosse project that may or may not be duplicated in other building projects," said Judge Woodward.
If you'd like to discuss how conducting due diligence from an engineering perspective helps make diligent decisions that are effective, safe and compliant, contact us for a chat.
Why your team has a duty of care to show they've been duly diligent
In October and November (2018), I presented due diligence concepts at four conferences: The Chemeca Conference in Queenstown, the ISPO (International Standard for maritime Pilot Organizations) conference in Brisbane, the Australian Airports Association conference in Brisbane (with Phil Shaw of Avisure) and the NZ Maritime Pilots conference in Wellington.
The last had the greatest representation of overseas presenters. In particular, Antonio Di Lieto, a senior instructor at CSMART, Carnival Corporation's Cruise ship simulation centre in the Netherlands. He mentioned that:
a recent judgment in Italian courts had reinforced the paramountcy of the due diligence approach but in this instance within the civil law, inquisitorial legal system.
This is something of a surprise. R2A has previously attempted to test ‘due diligence’ in the European civil (inquisitorial) legal system over a long period by presenting papers at various conferences in Europe. The result was usually silence or some comment about the English common law peculiarities.
The aftermath of the accident at the port of Genoa. Credit: PA
The incident in question occurred on May 2013. While executing the manoeuvre to exit the port of Genoa, the engine of the cargo ship “Jolly Nero” went dead. The big ship smashed into the Control Tower, destroying it, and causing the death of nine people and injuring four.
So far the ship’s master, first officer and chief engineer have all received substantial jail terms, as has the Genoa port pilot. It seems that a failure to demonstrate due diligence secured these convictions
And there are two more ongoing inquiries:
- One regards the construction of the Tower in that particular location, an investigation that has already produced two indictments; and
- The second that focuses on certain naval inspectors that certified ship.
It's important to realise everyone involved -- the bridge crew, the ship’s engineer, ship certifier, marine pilot, and the port designer -- all have a duty of care that requires, post event, they had been duly diligent.
Are you confident in your team's diligent decision making? If not, R2A can help; contact us to discuss how.
What you can learn about Organisational Risk Culture from the CBA Prudential Inquiry
R2A was recently commissioned to complete a desktop risk documentation review in the context of the CBA Prudential Inquiry of 2018. The review has provided a framework for boards across all sectors to consider the strength of their risk culture. This has been bolstered by the revelations from The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Specifically, R2A was asked to provide commentary on the following:
- Overall impressions of the risk culture based on the documentation.
- To what extent the documents indicate that the organisation uses organisational culture as a risk tool.
- Any obvious flaws, omissions or areas for improvement
- Other areas of focus (or questions) suggested for interviews with directors, executives and managers as part of an organisational survey.
What are the elements of good organisational risk culture?
Organisations with a mature risk culture have a good understanding of risk processes and interactions. In psychologist James Reason’s terms[1], these organisations tend towards a generative risk culture shown in James Reason’ s table of safety risk culture below.
| Pathological culture | Bureaucratic culture | Generative culture |
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How different organisational cultures handle safety information
Key attributes include:
- Risk management should be embedded into everyday activities and be everyone’s responsibility with the Board actively involved in setting the risk framework and approving all risk policy. Organisations with a good risk culture have a strong interaction throughout the entire organisation from the Board and Executive Management levels right through to the customer interface.
- The organisation has a formal test of risk ‘completeness’ to ensure that no credible critical risk issue has been overlooked. To achieve this, R2A typically use a military intelligence threat and vulnerability technique. The central concept is to define the organisation’s critical success outcomes (CSOs). Threats to those success outcomes are subsequently identified and are then systematically matched against the outcomes to identify critical vulnerabilities. Only the assessed vulnerabilities then have control efforts directed at them. This prevents the misapplication of resources to something that was really only a threat and not a vulnerability.
- Risk decision making is done using a due diligence approach. This means ensuring that all reasonable practicable precautions are in place to provide confidence that no critical organisational vulnerabilities remain. Due diligence is demonstrated based on the balance of the significance of the risk vs the effort required to achieve it (the common law balance). This is consistent with the due diligence provisions of the Corporations, Safety (OHS/WHS) and environmental legislation.
Risk frameworks and characterisation systems such as the popular 5x5 risk matrix (heat map) approach are good reporting tools to present information and should be used to support the risk management feedback process. Organisations should specifically avoid using ‘heatmaps’ as decision making tool as that is inconsistent with fiduciary, safety and environmental legislative requirements.
Risk Appetite Statements for commercial organisations have become very fashionable. The statement addresses the key risk areas for the business and usually considers both the possibility of risk and reward. However, for some elements such as compliance (zero tolerance) and safety (zero harm), risk appetite may be less appropriate as the consequences of failure are so high that there is simply no appetite for it. For this reason, R2A prefers the term risk position statements rather than risk appetite statements.
To get a feel for the risk culture within an organisation, R2A suggest conducting generative interviews with recognised organisational ‘good’ players rather than conducting an audit.
We consider generative interviews to be a top-down enquiry and judgement of unique organisations rather than a bottom-up audit for deficiencies and castigation of variations for like organisations. R2A believes that the objective is to delve sufficiently until evidence to sustain a judgement is transparently available to those who are concerned. (Enquiries should be positive and indicate future directions whereas audits are usually negative and suggest what ought not to be done).
Interview depth
Individuals have different levels of responsibility in any organisation. For example, some are firmly grounded with direct responsibility for service to members. Others work at the community interface surface with responsibilities that extend deep into the organisation as well as high into the community. We understand that the idea is that a team interviews recognised 'good players' at each level of the organisation. If a commonality of problems and, more particularly, solutions are identified consistently from individuals at all levels, then adopting such solutions would be fast, reliable and very, very desirable.
Other positive feedback loops may be created too. The process should be stimulating, educational and constructive. Good ideas from other parts of the organisation ought to be explained and views as to the desirability of implementation in other places sought.
If a health check on your organsational risk culture or a high level review of your enterprise risk management system is of interest, please give us a call to discuss further on 1300 772 333 or head to our contact page and fill in an enquiry.
[1] Reason, J., 1997. Managing the Risks of Organisational Accidents. Aldershot, Hants, England: Ashgate Publishing Limited. Page 38.
Managing Critical Risk Issues: Synthesising Liability Management with the Risk Management Standard
The importance of organisations managing critical risk issues has been highlighted recently with the opening hearings of the coronial inquest into the 2016 Dreamworld Thunder River Rapids ride tragedy that killed four people.
In a volatile world, boards and management fret that some critical risk issues are neither identified nor managed effectively, creating organisational disharmony and personal liabilities for senior decision makers.
The obligations of WHS – OHS precaution based legislation conflict with the hazard based Risk Management Standard (ISO 31000) that most corporates and governments in Australia mandate. This is creating very serious confusion, particularly with the understanding of economic regulators.
The table below summarises the two approaches.
| Precaution-based Due Diligence (SFAIRP) | ≠ | Hazard-based Risk Management (ALARP) | |
| Precaution focussed by testing all practicableprecautions for reasonableness. | Hazard focussed by comparison to acceptable ortolerable target levels of risk. | ||
| Establish the context
Risk assessment (precaution based): Identify credible, critical issues Identify precautionary options Risk-effort balance evaluation Risk action (treatment) |
Establish the context Risk assessment (hazard based): (Hazard) risk identification (Hazard) risk analysis (Hazard) risk evaluation Risk treatment |
||
| Criticality driven. Normal interpretation ofWHS (OHS) legislation & common law |
Risk (likelihood and consequence) driven Usual interpretation of AS/NZS ISO 31000[1] |
||
A paradigm shift from hazard to precaution based risk assessment
Decision making using the hazard based approach has never satisfied common law judicial scrutiny. The diagram below shows the difference between the two approaches. The left hand side of the loop describes the legal approach which results in risk being eliminated or minimised so far as is reasonably practicable (SFAIRP) such as described in the model WHS legislation.
Its purpose is to demonstrate that all reasonable practicable precautions are in place by firstly identifying all possible practicable precautions and then testing which are reasonableness in the circumstances using relevant case law.
The level of risk resulting from this process might be as low as reasonably practicable (ALARP) but that’s not the test that’s applied by the courts after the event. The courts test for the level of precautions, not the level of risk. The SFAIRP concept embodies this outcome.
The target risk approach, shown on the right hand side, attempts to demonstrate that an acceptable risk level associated with the hazard has been achieved, often described as as low as reasonably practicable or ALARP. But there are major difficulties with each step of this approach as noted in blue.
SFAIRP v ALARP
However, there is a way forward that usefully synthesises the two approaches, thereby retaining the existing ISO 31000 reporting structure whilst ensuring a defensible decision making process.
Essentially, high consequence, low likelihood risk decisions are based on due diligence (for example, SFAIRP, ROI, not trading whilst insolvent and the precautionary principle, consistent with the decisions of the High Court of Australia) whilst risk reporting is done via the Risk Management Standard using risk levels, heat maps and the like. This also resolves the tension between the use of the concepts of ‘risk appetite’ (very useful for commercial decisions) and ‘zero harm’ (meaning no appetite for inadvertent deaths).
Essentially the approach threads the work completed (often) in silos by field / project staff into a consolidated framework for boards and executive management.
If you'd like to discuss how we can assist with identifying and managing critical risk issues within your organisation, we'd love to hear from you. Head to our contact page to organise a friendly chat.
[1] From the definition in AS/NZS ISO 31000: 2.24 risk evaluation process of comparing the results of risk analysis (2.21) with risk criteria (2.22) to determine whether the risk (2.1) and/or its magnitude is acceptable or tolerable.
Energy Safety Report Released
The Release of the Final Report and Government Response - Review of Victoria's Electricity and Gas Network Safety Framework has occurred and is available at https://engage.vic.gov.au/electricity-network-safety-review.R2A is quoted a number of times in the report.Two of the key recommendations, supported in principle by the government, are:
34 All energy safety legislation should be consolidated in a single new energy safety Act, replacing the Gas Safety Act 1997, Electricity Safety Act 1998, those elements of the Pipelines Act 2005 that relate to safety, and the Energy Safe Victoria Act 2005.35 The general safety duties within the new consolidated energy safety legislation should be based around a consistent application of the principle that risks should be reduced so far as is “reasonably practicable” aligning with the definition adopted in the Occupational Health and Safety Act 2004.
Recommendation 35 does not sit well with a significant number of Australian Standards which continue to use an ALARP (as low as reasonably practicable) approach, supported by a target or tolerable level of risk and safety instead of the ‘so far as is reasonably practicable’ approach of the 2004 Victoria OHS Act and the model WHS legislation adopted in almost all other Australian jurisdictions, and in New Zealand.Such standards particularly include AS2885 (the pipeline standard), AS5577 (electricity network safety), AS (IEC) 61508 (functional safety) and its derivatives.R2A has previously commented on this issue. We (also) regularly have had to overturn the ALARP approach in these standards based on relevant legal advice.I'll be presenting the basis for this need to the Chemeca 2018 conference in Queenstown on 2nd October in a session entitled: Gas Pipelines and the Changing Face of Australian Energy Regulation.
Australian Standard 2885, Pipeline Safety & Recognised Good Practice
Australian guidance for gas and liquid petroleum pipeline design guidance comes, to a large extent, from Australian Standard 2885. Amongst other things AS2885 Pipelines – Gas and liquid petroleum sets out a method for ensuring these pipelines are designed to be safe.
Like many technical standards, AS2885 provides extensive and detailed instruction on its subject matter. Together, its six sub-titles (AS2885.0 through to AS2885.5) total over 700 pages. AS2885.6:2017 Pipeline Safety Management is currently in draft and will likely increase this number.
In addition, the AS2885 suite refers to dozens of other Australian Standards for specific matters.
In this manner, Standards Australia forms a self-referring ecosystem.
R2A understands that this is done as a matter of policy. There are good technical and business reasons for this approach;
- First, some quality assurance of content and minimising repetition of content, and
- Second, to keep intellectual property and revenue in-house.
However, this hall of mirrors can lead to initially small issues propagating through the ecosystem.
At this point, it is worth asking what a standard actually is.
In short, a standard is a documented assembly of recognised good practice.
What is recognised good practice?
Measures which are demonstrably reasonable by virtue of others spending their resources on them in similar situations. That is, to address similar risks.
But note: the ideas contained in the standard are the good practice, not the standard itself.
And what are standards for?
Standards have a number of aims. Two of the most important being to:
- Help people to make decisions, and
- Help people to not make decisions.
That is, standards help people predict and manage the future – people such as engineers, designers, builders, and manufacturers.
When helping people not make decisions, standards provide standard requirements, for example for design parameters. These standards have already made decisions so they don’t need to be made again (for example, the material and strength of a pipe necessary for a certain operating pressure). These are one type of standard.
The other type of standard helps people make decisions. They provide standardised decision-making processes for applications, including asset management, risk management, quality assurance and so on.
Such decision-making processes are not exclusive to Australian Standards.
One of the more important of these is the process to demonstrate due diligence in decision-making – that is that all reasonable steps were taken to prevent adverse outcomes.
This process is of particular relevance to engineers, designers, builders, manufacturers etc., as adverse events can often result in safety consequences.
A diligent safety decision-making process involves,:
- First, an argument as to why no credible, critical issues have been overlooked,
- Second, identification of all practicable measures that may be implemented to address identified issues,
- Third, determination of which of these measures are reasonable, and
- Finally, implementation of the reasonable measures.
This addresses the legal obligations of engineers etc. under Australian work health and safety legislation.
Standards fit within this due diligence process as examples of recognised good practice.
They help identify practicable options (the second step) and the help in determining the reasonableness of these measures for the particular issues at hand. Noting the two types of standards above, these measures can be physical or process-based (e.g. decision-making processes).
Each type of standard provides valuable guidance to those referring to it. However the combination of the self-referring standards ecosystem and the two types of standards leads to some perhaps unintended consequences.
Some of these arise in AS2885.
One of the main goals of AS2885 is the safe operation of pipelines containing gas or liquid petroleum; the draft AS2885:2017 presents the standard's latest thinking.
As part of this it sets out the following process.
- Determine if a particular safety threat to a pipeline is credible.
- Then, implement some combination of physical and procedural controls.
- Finally, look at the acceptability of the residual risk as per the process set out in AS31000, the risk management standard, using a risk matrix provided in AS2885.
If the risk is not acceptable, apply more controls until it is and then move on with the project. (See e.g. draft AS2885.6:2017 Appendix B Figures B1 Pipeline Safety Management Process Flowchart and B2 Whole of Life Pipeline Safety Management.)
But compare this to the decision-making process outlined above, the one needed to meet WHS legislation requirements. It is clear that this process has been hijacked at some point – specifically at the point of deciding how safe is safe enough to proceed.
In the WHS-based process, this decision is made when there are no further reasonable control options to implement. In the AS2885 process the decision is made when enough controls are in place that a specified target level of risk is no longer exceeded.
The latter process is problematic when viewed in hindsight. For example, when viewed by a court after a safety incident.
In hindsight the courts (and society) actually don’t care about the level of risk prior to an event, much less whether it met any pre-determined subjective criteria.
They only care whether there were any control options that weren’t in place that reasonably ought to have been.
‘Reasonably’ in this context involves consideration of the magnitude of the risk, and the expense and difficulty of implementing the control options, as well as any competing responsibilities the responsible party may have.
The AS2885 risk sign-off process does not adequately address this. (To read more about the philosophical differences in the due diligence vs. acceptable risk approaches, see here.)
To take an extreme example, a literal reading of the AS2885.6 process implies that it is satisfactory to sign-off on a risk presenting a low but credible chance of a person receiving life-threatening injuries by putting a management plan in place, without testing for any further reasonable precautions.[1]
In this way AS2885 moves away from simply presenting recognised good practice design decisions as part of a diligent decision-making process and, instead, hijacks the decision-making process itself.
In doing so, it mixes recognised good practice design measures (i.e. reasonable decisions already made) with standardised decision-making processes (i.e. the AS31000 risk management approach) in a manner that does not satisfy the requirements of work health and safety legislation. The draft AS2885.6:2017 appears to realise this, noting that “it is not intended that a low or negligible risk rank means that further risk reduction is unnecessary”.
And, of course, people generally don’t behave quite like this when confronted with design safety risks.
If they understand the risk they are facing they usually put precautions in place until they feel comfortable that a credible, critical risk won’t happen on their watch, regardless of that risk’s ‘acceptability’.
That is, they follow the diligent decision-making process (albeit informally).
But, in that case, they are not actually following the standard.
This raises the question:
Is the risk decision-making element of AS2885 recognised good practice?
Our experience suggests it is not, and that while the good practice elements of AS2885 are valuable and must be considered in pipeline design, AS2885’s risk decision-making process should not.
[1] AS2885.6 Section 5: “... the risk associated with a threat is deemed ALARP if ... the residual risk is assessed to be Low or Negligible”
Consequences (Section 3 Table F1): Severe - “Injury or illness requiring hospital treatment”. Major: “One or two fatalities; or several people with life-threatening injuries”. So one person with life-threatening injuries = ‘Severe’?
Likelihood (Section 3 Table 3.2): “Credible”, but “Not anticipated for this pipeline at this location”,
Risk level (Section 3 Table 3.3): “Low”.
Required action (Section 3 Table 3.4): “Determine the management plan for the threat to prevent occurrence and to monitor changes that could affect the classification”.
Risk Engineering Body of Knowledge
Engineers Australia with the support of the Risk Engineering Society have embarked on a project to develop a Risk Engineering Book of Knowledge (REBoK). Register to join the community.
The first REBoK session, delivered by Warren Black, considered the domain of risk and risk engineering in the context risk management generally. It described the commonly available processes and the way they were used.
Following the initial presentation, Warren was joined by R2A Partner, Richard Robinson and Peter Flanagan to answer participant questions. Richard was asked to (again) explain the difference between ALARP (as low as reasonably practicable) and SFAIRP (so far as is reasonably practicable).
The difference between ALARP and SFAIRP and due diligence is a topic we have written about a number of times over the years. As there continues to be confusion around the topic, we thought it would be useful to link directly to each of our article topics.
Does ALARP equal due diligence, written August 2012
Does ALARP equal due diligence (expanded), written September 2012
Due Diligence and ALARP: Are they the same?, written October 2012
SFAIRP is not equivalent to ALARP, written January 2014
When does SFAIRP equal ALARP, written February 2016
Future REBoK sessions will examine how the risk process may or may not demonstrate due diligence.
Due diligence is a legal concept, not a scientific or engineering one. But it has become the central determinant of how engineering decisions are judged, particularly in hindsight in court.
It is endemic in Australian law including corporations law (eg don’t trade whilst insolvent), safety law (eg WHS obligations) and environmental legislation as well as being a defence against (professional) negligence in the common law.
From a design viewpoint, viable options to be evaluated must satisfy the laws of nature in a way that satisfies the laws of man. As the processes used by the courts to test such options forensically are logical and systematic and readily understood by engineers, it seems curious that they are not more often used, particularly since it is a vital concern of senior decision makers.
Stay tuned for further details about upcoming sessions. And if you are needing clarification around risk, risk engineering and risk management, contact us for a friendly chat.
Rights vs Responsibilities in Due Diligence
A recent conversation with a consultant to a large law firm described the current legal trend in Melbourne, notably that rights had become more important than responsibilities.This certainly seems to be the case for commercial entities protecting sources of income, as particularly evidenced in the current banking Royal Commission (Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry).It seems that, in the provision of financial advice, protecting consulting advice cash flow was seen as much more important than actually providing the service.Engineers probably have a reverse perspective. As engineers deal with the real (natural material) world, poor advice is often very obvious. When something fails unexpectedly, death and injury are quite likely.Just consider the Grenfell Tower fire in London and the Lacrosse fire in Melbourne. This means that for engineers at least, responsibilities often overshadow rights.This is a long standing, well known issue. For example, the old ACEA (Association of Consulting Engineers, Australia) used to require that at least 50% of the shares of member firms were owned by engineers who were members in good standing of Engineers Australia (FIEAust or MIEAust) and thereby bound by Engineers Australia’s Code of Ethics.The point was to ensure that, in the event of a commission going badly, the majority of the board would abide by the Code of Ethics and look after the interests of the client ahead of the interests of the shareholders.Responsibilities to clients were seen to be more important than shareholder rights, a concept which appears to be central to the notion of trust.
Role & Responsibility of an Expert Witness
Arising from a recent expert witness commission, the legal counsel directed R2A’s attention to Makita (Australia) Pty Ltd v Sprowles [2001} NSWCA 305 (14 September 2001), which provides an excellent review of the role and responsibility of an expert witness, at least in NSW.
Arising from an expert witness commission, relevant counsel has directed R2A’s attention to Makita (Australia) Pty Ltd v Sprowles [2001} NSWCA 305 (14 September 2001), which provides an excellent review of the role and responsibility of an expert witness, at least in NSW. The case cites many authorities outlining these responsibilities. For example, (at 59) it indicates that for the professor’s report to be useful, it is necessary for it to comply with the prime duty of experts in giving opinion evidence, that is, to furnish the trier of fact with criteria enabling evaluation of the validity of the expert’s conclusions. This is alternatively stated in a number of different places and ways, for example (at 60);Courts cannot be expected to act upon opinions the basis of which is unexplained. And again (at 69); Before a court can assess the value of an opinion it must know the facts upon which it is based. If the expert has been misinformed about the facts or has taken irrelevant facts into consideration or has omitted to consider the relevant ones, the opinion will be valueless. In our judgement, counsel calling an expert should in examination in chief ask his witness to state the facts upon which his opinion is based. It is wrong to leave the other side to elicit the facts by cross-examination. In keeping with what constitutes expert witness opinion in the above, it remains a source of frustration to R2A that legal decisions can be so opaque to non-lawyers that it requires legal counsel to direct R2A to the best decisions to provide insight in to the workings of our courts. From R2A’s perspective, judgements should ideally be available in plain English on searchable databases, so that the information is readily available to all. Apart from making the life of due diligence engineers easier, it would also enhance the value of the work of the courts to the society they serve. Interestingly, David Howarth (professor of Cambridge Law and Public Policy) whom R2A sponsored to Melbourne last year (2017), made a passing remark that there was a reason for this complexity. It is to do with the fact that judicial decisions can effectively become retrospective in the common law. To avoid this outcome, judges ensure that the detailed circumstances of each decision is spelt out so that any such retrospectivity can be curtailed. Editor's Note: This article was originally posted on 1 July 2014 and has been updated for accuracy and relevance.
Engineering As Law
Both law and engineering are practical rather than theoretical activities in the sense that their ultimate purpose is to change the state of the world rather than to merely understand it. The lawyers focus on social change whilst the engineers focus on physical change.It is the power to cause change that creates the ethical concerns. Knowing does not have a moral dimension, doing does. Mind you, just because you have the power to do something does not mean it ought to be done but conversely, without the power to do, you cannot choose.Generally for engineers, it must work, be useful and not harm others, that is, fit for purpose. The moral imperative arising form this approach for engineers generally articulated in Australia seems to be:
- S/he who pays you is your client (the employer is the client for employee engineers)
- Stick to your area of competence (don’t ignorantly take unreasonable chances with your client’s or employer’s interests)
- No kickbacks (don’t be corrupt and defraud your client or their customers)
- Be responsible for your own negligence (consulting engineers at least should have professional indemnity insurance)
- Give credit where credit is due (don’t pinch other peoples ideas).
Overall, these represent a restatement of the principle of reciprocity, that is, how you would be expected to be treated in similar circumstances and therefore becomes a statement of moral law as it applies to engineers.