The Insider’s Second Annual Due Diligence Scorecard-Part 1

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Justice Potter Stewart of the U.S. Supreme Court once famously said that although he couldn’t define “hard-core pornography,” he knows it when he sees it. The same might be said for due diligence. The OHS laws and regulations don’t even mention due diligence much less explain what it is. And if you ask a room full of judges to define “due diligence,” you’re likely to get a wide variety of answers. In essence, when it was all said and done, you’d be back to the I-know-it-when-I-see-it test.
If you’re a safety coordinator trying to keep your company in compliance with OHS laws, this lack of a precise definition of due diligence is very frustrating. The good news: There is a way to come to grips with due diligence. As the Insider has said many times, to understand what due diligence really means you must look at actual cases where companies raised a due diligence defence and see how the courts ruled in those cases. What did the successful defendants do that caused them to prevail? And what didn’t the unsuccessful defendants do that caused their due diligence defences to fall short? When you see due diligence “in action,” you’re in a better position to decide if your own company’s safety program can withstand a due diligence analysis.
But that’s easier said than done. Going out and finding all of the cases where due diligence was decided—let alone reading each one—is a tedious and time-consuming process and few safety coordinators have the time, training or inclination to do it. So the Insider has done it for you. This year’s Annual Due Diligence Scorecard picks up where last year’s left off—in August 2005. We found nine cases from around Canada in which a company raised a due diligence defence—some successfully and others not so much. Here’s a look at the results.

Due Diligence Basics

First, let’s briefly explain how due diligence works: To convict a company of a safety offence, the prosecutor must prove “beyond a reasonable doubt” that the company violated an OHS law. If the prosecutor meets this burden, the company can still avoid liability by proving that it exercised “due diligence”—that is, that it made all reasonable efforts to protect its workers’ health and safety and to ensure compliance with OHS laws and the company’s safety program.
A company can raise a due diligence defence when it’s charged with any safety offence, not just ones based on accidents or injuries. And a due diligence defence isn’t just available to companies; it can also be raised by officers, supervisors and even workers accused of safety offences.

How Courts Analyze the Due Diligence Defence

To decide if a company exercised due diligence, courts consider the specific facts of the case at hand and weigh a number of factors. The primary factors a court typically considers are the following:
Foreseeability: Could a reasonable person have foreseen (or did the defendant actually foresee) that something could go wrong? A due diligence defence may be successful if the incident or accident was so unlikely that the company could never have expected it to occur. However, companies are expected to know about and protect their workers against the hazards associated with their particular industry.
Preventability: Was there an opportunity to prevent something from going wrong and, if so, was an effort made to do so? If a company has a chance to prevent an incident or event from happening, it should take all reasonable steps to do so, such as identifying hazards, preparing and enforcing safe work procedures, and training workers and supervisors. But if a company can show that it took such steps and the incident or event happened anyway, it may be able to make out a due diligence defence.
Control: Who was the person present who could have prevented what went wrong? For example, workers sometimes violate a company’s safety rules and procedures and get hurt as a result. In such cases, it may be easier to prove due diligence because you can argue the worker had control of situation and could’ve prevented the injury if he’d only followed your safety rules and procedures. But note that worker fault isn’t always clear or decisive.

The Due Diligence Scorecard

Due diligence is often raised in safety violation cases. But courts don’t always focus on the due diligence aspect of the case when making their decisions. Our Scorecard (see below) only includes cases in which the due diligence defence was the deciding factor in the case. We found nine cases decided since August 2005 where a court had to decide if a company successfully made out a due diligence defence, eight reported and one unreported.
In last year’s Due Diligence Scorecard, we included the following quote from Norm Keith, a leading OHS lawyer who has defended literally hundreds of companies in prosecutions: “It seems like the courts are setting the standard for due diligence ever higher.” Last year’s Scorecard was 4 “wins” and 8 “losses.” This year’s numbers are even more decisively in favour of prosecutors and against companies (and other defendants). Of the nine cases:
Wins: Companies “won” only twice, both in Ontario.  
Losses: Companies “lost” the other seven cases, which came out of Alberta, British  Columbia, Ontario and Saskatchewan.
Insider Says: There were also two cases—from Ontario and British Columbia—where the company and another person–an owner, supervisor and worker–was also charged and raised  a due diligence defence. See the sidebar on p. x to find out how those cases turned out.

Conclusion

The Scorecard below gives you the key details of the nine cases mentioned above. It tells you whether the company won or lost, what happened and how the court analyzed the company’s due diligence defence. Next month, we’ll analyze the cases in detail and show you the lessons to be learned and how those lessons apply to your own company’s safety program.

 

INSIDER SOURCE
Norm Keith: Gowling Lafleur Henderson, LLP, Ste. 4900, Commerce Ct. West, Toronto, ON M5L 1S3.