By Brett Flower
This week, the Australian government claimed it does not owe welfare recipients a duty of care over the RoboDebt scandal. Only weeks before, documents revealed that the government had received legal advice that debts issued under the scheme were unlawful.
That is a lot to digest in one short paragraph, however, I will try.
For perspective, in 2012, I was made a Managing Director of a foreign-owned Australian Subsidiary. I took my obligations seriously. VERY seriously. The company performed high-risk work in a high-risk industry, and I was soon to learn that should the proverbial hit the fan (as has happened with the RoboDebt scheme) I would be personally responsible for any actions I took or oversight that occurred under my tenure as a director.
Unlike the RoboDebt scheme, Ministers (Government Directors) are not accountable under the Corporation’s act as Corporate Directors are. However, they are “obliged” (more recommended) to adhere to the Statement of Ministerial Standards. (SoMS). The latest version of SoMS was signed by the Prime Minister in August 2018.
My position is clear. If you are entrusted with a leadership role, the buck stops with you. You must endeavour to avail yourself of all information available to you to mitigate risk and execute your Duty of Care to your employees, customers, stakeholders and community. But what is meant by “Duty of Care”?
Duty of Care
I probably took my obligations duty further than most. To be honest, it frightened the crap out of me, however, I had a passionate desire to understand how I could perform a lifelong carer ambition, whilst protecting those around me… without surrendering everything that I believed in and had worked for.
After barely graduating from a week-long directors course and a further three weeks of study groups and in-depth research, I left the learning institute confused and with more questions than answers. Consequently, being “blessed” with an enquiring mind (a legacy from working 20 + years with engineers) and not the indoctrinated “she’ll be right” Australian version of accountability, I decided to gain further insight into this minefield called Corporate Governance. (CG)
I enrolled in and (barely again) completed a Graduate Diploma in Corporate Governance and then a Master’s degree in Corporate Governance research. Before completing, I took the bold but responsible and now very informed move and resigned as Managing Director. Quite simply, the Reward was not worth the risk.
The risk lies in the Directors Duty of Care.
The Detail is the Devil
Of the Many Acts a director is bound to abide by and instil is the WHS Act 2011 – Summarising, if you engage contractors to fulfil work responsibilities, or have students on work experience, apprentices, volunteers etc… all are classified as a ‘worker’ and therefore, fall under the ultimate duty of care of the director – (WHS Act 2011, section 7).
Remember, High Risk Work, High Risk Industry…
Among the prescribed text I studied for the CG courses was “Corporate Governance Principles, Policies and Practices by Bob Tricker
Page 103 3 states:
“The duty of care requires directors to exercise independent judgement with care, skill, and diligence.”
In Australia, courts DEMAND a duty of care that is expected of a person serving as a director. They recognise that ‘duty of care’ should also consider the knowledge, skill, and experience of that director.
Revisiting the government’s position, surely, a minister who is responsible for the Child Support Agency, Centrelink, Australian Hearing, CRS Australia and Medicare Australia would undertake his Duty of Care to “exercise independent judgement with care, skill, and diligence”, seriously?
It would seem not.
The Corporation Acts requires directors to follow the Business Judgement Rule which in summary requires directors to make any business judgement in good faith for a proper purpose; stay clear of conflicts of interest, inform themselves about the subject matter and, importantly, believe that the judgement is in the best interests of the corporation.
Just as a Managing Director is elected to serve a corporation by a board of their peers, so too a government is elected by its peers to serve its populace. Now, substitute the word “Corporation” with “people” from the last sentence in the last paragraph.
What our Laws and Standards State
Importantly, the 2018 Ministerial Standards states the following:
1.3. In particular, in carrying out their duties:
(i) Ministers must ensure that they act with integrity – that is, through the lawful and disinterested exercise of the statutory and other powers available to their office, appropriate use of the resources available to their office for public purposes, in a manner which is appropriate to the responsibilities of the Minister.
(ii) Ministers must observe fairness in making official decisions – that is, to act honestly and reasonably, with consultation as appropriate to the matter at issue, taking proper account of the merits of the matter, and giving due consideration to the rights and interests of the persons involved, and the interests of Australia.
(iii) Ministers must accept accountability for the exercise of the powers and functions of their office – that is, to ensure that their conduct, representations and decisions as Ministers, and the conduct, representations and decisions of those who act as their delegates or on their behalf – are open to public scrutiny and explanation.
(iv) Ministers must accept the full implications of the principle of ministerial responsibility.
Can you see the parallels between the corporations Act and the Ministerial Standards? Accountability, fairness, transparency, diligence…The question that must now be asked is quite straight forward
WHOSE INTERESTS ARE BEING SERVED?
Absolution from Responsibility
When a director or corporation absolves them/itself from responsibility, they are brought to bear by the courts and all too rarely, ASIC; the somewhat toothless Government Watchdog that has its investigative and enforcement power stripped away by successive governments. (That is another article in the works). As recently as the Banking Royal Commission, The Hayne report stated:
“A trustee has a duty to identify relevant considerations before making a decision and to use all proper care and diligence in obtaining the relevant information and advice relating to those considerations. It has been said that if the consideration of the trustee is not properly informed, it is not genuine. The duty to take these steps flows both from the best interests obligation and also from the duty of care, skill and diligence. (P58 fsrc-volume-2-final-report).
Are you Starting to see a Pattern?
There are multiple laws and acts in place to hold Directors and Corporations accountable. However, there seems to be very little in the way of processes for holding Governments accountable. Yes, we have the opportunity every three years to voice our view, but let us not forget, it took just six years between 1939 and 1945 to cause generations of loss, destruction, genocide and ecocide. Caused by a government that was not initially held to account and it’s people surrendering to dangerous propaganda – a view used to promote a view or political cause…
Let’s also respect that not all have the will, drive or need to pursue a graduate diploma or master’s degree in their chosen area of responsibility or interest. The Minister for the National Disability Insurance Scheme and Government Services is no fool. He holds an MBA and Graduate Diploma in Information Analysis. He is aware of his duty of care and his ministerial obligations. It seems that his “corporation” is a willing and supportive co-conspirator, letting significant lapses in judgement care, skill, and diligence slide “through to the keeper”. Next ball, please.
It’s by Design
This same minister also made headlines for claiming nearly $3000.00 per month for internet access. Other transgressions include signing his father up to be a director – without his consent or knowledge -to his own Private Investment Company – that conveniently had won tens of millions of Government contracts.
Interestingly, under the 201D of corporations’ act, “Consent to act as director”, A company contravenes this subsection if a person does not give the company a signed consent to act as a director of the company before being appointed.
Lets not waste too much time talking about Rolex’s and conflict of interest…Once more, that’s another article for another time.
I hope you are seeing a pattern. It would appear that different rules apply to the elite few than to the egalitarian many.
The Rule of Laws is not a Law of Rules
We are indeed in very dangerous times. When a government Minster is empowered and supported by its “board and CEO” whilst flagrant breaches of its own Statement of Ministerial Standards occur. We are in real danger of abusing the Rule of law. This is where our democracy rapidly falls to pieces. Remember… just six years.
As Chief Justice Allsop AO wrote, The Rule of Law is not a Law of Rules.
“The Rule of Law lives in the recognition by society of the human character of law: its essential underpinning human values – honesty, equality of treatment, a respect for the dignity of the individual, the rejection of unfairness, and mercy; in the place of an independent judicature and an independent profession; and in the judicature’s exercise of its accompanying irreducible protective power.”
Let’s consider just one part of this very important text: “equality of treatment, a respect for the dignity of the individual, the rejection of unfairness, and mercy”
We can now complete the circle. In February 2020, our Government has claimed it does not owe welfare recipients a duty of care over the RoboDebt scandal; it claims no responsibility for equality of treatment or a respect for the individual; it rejects fairness and shows little or no mercy.
If you’re not infuriated by now, I’ll let you consider The Australian Department of Health’s handbook advice for its workers. It discusses responsibilities to “your clients and to other workers”.
“As a worker, you have a legal and moral responsibility to keep your clients safe from harm whilst they are using a service. This responsibility is known as ‘duty of care’.”
If only our elected “leaders” acted and behaved in a manner that they expect their public and public servants to… Uh, but alas, that would require accountability and transparency. Two qualities that have been sorely missing in politicians for too many years.
In February 2019, it was reported that more than 2030 people had died after receiving a Centrelink “RoboDebt” debt notice.
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 Abacus Trust co (Isle of Man) v Barr  1 All ER 705, ; Scott v National Trust for Places of Historic Interest or Natural Beauty 
 All ER 705, 717.  Finch v Telstra Super Pty Ltd (2010) 242 CLR 254,  citing Kerr v British Leyland (Staff) Trustees Ltd  WTLR 1071, 1079; Stannard v Fisons Pension Trust Ltd  IRLR 27, 31.
 1. Tricker, Bob. Corporate Governance: Principles, Policies and Practices (p. 103). Oxford University Press.
This article was originally published on The Blog.
Brett Flower has spent 30 years owning and managing businesses. His journey includes a humble trade background, where he started an HVAC business the day after he finished his Mechanical Engineering Cadetship; through to his most recent role as Managing Director of the multimillion-dollar Australian subsidiary Reinhausen Australia, the 2nd oldest subsidiary of the 118-year-old Global Electro-Mechanical Engineering German Icon; Maschinenfabrik Reinhausen.
Brett advises organisations on business turnaround, cultural reform, growth strategy, corporate governance and workplace health & safety (WHS), providing business owners, aspiring leaders and managers, officers and front-line staff with a pathway to growth, sustainability and long-term success.
Brett holds a Master of Business Administration (MBA) majoring in Corporate Governance Research (HD), a diploma in WHS, is a graduate of the Australian Institute of Company Directors (GAICD), a Certified SafeWork NSW Construction and Health Safety Representative (HSR) Trainer and is also a qualified Trainer and Assessor.
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