Due Diligence To outline the concept of due diligence engineering - - PowerPoint PPT Presentation

Due Diligence Engineering

Richard Robinson 17th March 2015 Townsville Regional Group

To outline the concept of due diligence engineering particularly as it applies to engineering design.

Objective Curragh Boom Drop The Plan

• 1. What is due diligence?
• 2. How did the concept arise?
• 3. What is due diligence engineering?
• 4. How is it applied in design?

Due diligence is a legal concept. It represents an aspect

• f moral philosophy, that is, how the world ought to be and

how humanity should behave in order to bring this about. It is forensically tested by our courts with the advantage of hindsight, for example, using the ‘reasonable person’ test.

Due Diligence

The reasonable person is not any particular person or an average person… The reasonable person looks before he leaps, never pets a strange dog, waits for the airplane to come to a complete stop at the gate before unbuckling his seatbelt, and otherwise engages in the type

• f cautious conduct that annoys the rest of us… “This excellent but
• dious character stands like a monument in our courts of justice, vainly

appealing to his fellow citizens to order their lives after his own example.”

The ‘Reasonable Person’

J M Feinman (2010). Law 101. Everything You Need to Know About American Law. Oxford University Press. Page 159.

Conceptually, due diligence appears as a manifestation of the ethic of reciprocity or the golden rule, historically prevalent in major philosophies and religions, along the lines that one should treat others as you would like to be treated by them.

Due Diligence Due diligence is about the management of downside risk

business safety project

Due diligence (legally) seems to manifest itself in at least two ways:

• 1. As a defence against negligence in common (case)

law, and

• 2. In statute law, especially for fiduciary concerns,

environmental issues, and most recently, health & safety matters.

Due Diligence

How did the concept of due diligence legally arise?

Due Diligence Origins

According to (Sir) Tony Robinson (aka Baldric): The common law particularly flows from King Henry II (circa 1266) and a desire to extend the influence of the King’s justice by sending Lord Judges on circuits, consistently applying the ‘common’ laws observed in the various feudal fiefdoms, thereby superseding the justice systems of the local aristocracy and enhancing the power of the king.

The Common Law

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The case that launched the negligence tide is generally recognised as Donaghue vs Stevenson (1932). Essentially this tested the responsibility of a drinks manufacturer for a stomach ache resulting from a late discovered decomposed snail in an opaque soft drink bottle, purchased by one of two friends to share. Until that time, the liability for a bad product rested with the contractual arrangement between the seller and buyer, not a third party friend with whom the drink was shared and who fell ill.

Negligence

See http://www.bailii.org/uk/cases/UKHL/1932/100.html viewed 17 July 2013

M'ALISTER or DONOGHUE (Pauper) Appellant


• v. 

• STEVENSON. Respondent

• ------------


Lords Present
 
 Lord Buckmaster Lord Atkin Lord Tomlin Lord Thankerton Lord Macmillan
 
 Judgment

See http://www.bailii.org/uk/cases/UKHL/1932/100.html viewed 17 July 2013

Donoghue v. Stevenson (1932)

Interestingly, it was a split decision by the 5 judges in the UK House of Lords as to whether or not the case could proceed at all since the potential liability to the manufacturer lay outside the existing buyer- seller contract. The minority was concerned that a finding for the plaintiff would launch an uncontrolled avalanche of negligence claims in common law jurisdictions, a concern that has pretty much eventuated.

Due Diligence

The majority decision favoured to adopt the golden rule of most major philosophies and religions. This is usually expressed in the Christian tradition, as: do unto others as you would have done unto you (the principle of reciprocity). That is, it was felt that the soft drink manufacturer owed a duty of care to any reasonably foreseeable consumer, not just the one who purchased the soft drink.

Due Diligence

The rule that you are to love your neighbour becomes in law you must not injure your neighbour; and the lawyer's question "Who is my neighbour?" receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who then in law is my neighbour? The answer seems to be persons who are so closely and directly affected by my act that I

• ught reasonably to have them in contemplation as being so

affected when I am directing my mind to the acts or omissions which are called in question.

Lord Atkin

An action in tort law, the elements of which are: the existence of a duty of care; breach of that duty; and reasonably foreseeable damage as a consequence of the breach of duty.... Whether the defendant has breached this duty of care is determined by considering the standard of care a reasonable person would have exercised in the circumstances, including taking reasonable precautions to avoid the risk of harm.... The type of damage, not its extent, must be foreseeable.

Negligence

LexisNexis Concise Australian Legal Dictionary (4th Edition)

Where it is possible to guard against a foreseeable risk, which, though perhaps not great, nevertheless cannot be called remote or fanciful, by adopting a means, which involves little difficulty or expense, the failure to adopt such means will in general be negligent.

Due diligence - a common law defence against negligence

Chief Justice Sir Harry Gibbs. Turner v. The State of South Australia (1982) (High Court of Australia before Gibbs CJ, Murphy, Brennan, Deane and Dawson JJ).

Some examples: Commonwealth Corporations Act (2001) Model Work Health and Safety Act/s (2011) Rail Safety National Law Act/s (2012) NSW Protection of the Environment Act (1997)

Due Diligence in Legislation

118 General defence for tier 1 offences

It is a defence in any proceedings against a person for an

• ffence under this Part if the person establishes:

(a) that the commission of the offence was due to causes over which the person had no control, and (b) that the person took reasonable precautions and exercised due diligence to prevent the commission of the offence.

NSW Protection of the Environment Act 1997

27 Duty of officers 
 (1) If a person conducting a business or undertaking has a duty or

• bligation under this Act, an officer of the person conducting the

business or undertaking must exercise due diligence to ensure that the person conducting the business or undertaking complies with that duty or obligation.

Model WHS Act/s

Due diligence engineering is the reverse engineering of the decisions of our courts. That is, discovering the technological principles of court decisions through analysis of their structure, logic and argument.

Due Diligence Engineering

This can be problematic for new legislation for which no test cases are apparent as, in such circumstances, convergent, pre-event legal opinion is unavailable.

Due Diligence Engineering is all about aligning the laws of man and nature

Societal objectives To be prosperous, safe, efficient, sustainable and happy Legal prescriptions Acts of parliament and the common law The laws of nature (scientists) The laws of man (lawyers) Due diligence (engineers) Physical reality Don't harm neighbours, either deliberately or inadvertently

Hazard vs precaution

Judicial Scrutiny Time Decision re hazard Unwanted Event/s Judgement Precaution focussed Hazard focussed Future uncertainty Future uncertainty Technical risk targets Safety critical

SFAIRP vs ISO 31000

Risk Management

• f downside (negative or pure) risk

Hazard identification (Foreseeability) Implementation

• f reasonably practicable

precautions Preventability Identify all practicable precautions for each critical hazard following the hierarchy

• f controls

Reasonableness Determine which practicable precautions are reasonable based on the High Court established balance (disproportionality) Hazard analysis and risk calculation process to determine the nature of risk and the level of risk (inherently unrepeatable) Compare against criteria process of comparing the results of risk analysis with risk criteria to determine whether the risk and/or its magnitude is acceptable (may eliminate further consideration of acceptable or tolerable risks) Selected risk criteria terms of reference against which the significance of a risk is evaluated (inherently subjective) Risk mitigation and management options process to modify risk. (may not follow the hierarchy of controls) Monitoring and Review (Quality assurance) Due Diligence

SFAIRP approach (precaution based and criticality driven) ISO31000 approach (hazard based and risk driven) SFAIRP ALARP

Criticality Establish critical hazards

The point is to ensure that all reasonable practicable precautions are in place, not to achieve an indefensible target level of risk or safety.

Hazard vs precaution

Establish the context Risk assessment (hazard based): (Hazard) risk identification (Hazard) risk analysis (Hazard) risk evaluation* Risk treatment Establish the context Risk assessment (precaution based): Identify credible, critical issues Identify precautionary options Risk-effort balance evaluation Risk action (treatment)

Hazard based e.g. AS/NZS ISO 31000 Precaution based Due Diligence

* From the definition in the standard: 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

Reasonableness

SEVERITY OF HARM UTILITY OF CONDUCT PROBABILITY OF OCCURANCE DIFFICULTY AND INCONVENIENCE MAGNITUDE OF RISK EXPENSE

What is ‘reasonably practicable’ is determined objectively. This means that a duty-holder must meet the standard of behaviour expected of a reasonable person in the duty-holder’s position and who is required to comply with the same duty. There are two elements to what is ‘reasonably practicable’. A duty-holder must first consider what can be done - that is, what is possible in the circumstances for ensuring health and safety. They must then consider whether it is reasonable, in the circumstances to do all that is possible. This means that what can be done should be done unless it is reasonable in the circumstances for the duty-holder to do something less.

What is ‘reasonably practicable’ is an objective test

INTERPRETIVE GUIDELINE—MODEL WORK HEALTH AND SAFETY ACT THE MEANING OF ‘REASONABLY PRACTICABLE’

Approved or common practice may or may not be reasonable. Compliance with standards and codes of practice is a starting point, not a goal.

Reasonableness

In ¡an ¡ar2cle ¡in ¡Engineers ¡Australia ¡Magazine ¡of ¡March ¡2009 ¡-­‑ ¡“Engineers ¡cannot ¡ avoid ¡liability ¡in ¡negligence ¡or ¡for ¡TPA ¡contraven2on ¡by ¡simply ¡relying ¡on ¡a ¡ current ¡or ¡published ¡standard ¡or ¡code”. ¡ ¡(Page ¡38) ¡ ¡Leigh ¡Duthie ¡is ¡a ¡partner ¡and ¡Phillipa ¡

Murphy ¡and ¡Angela ¡Sevenson ¡are ¡senior ¡associates ¡of ¡Baker ¡& ¡McKenzie ¡in ¡Melbourne.

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 exercise his or her skill and expertise.

Reasonableness

Paul ¡Wentworth, ¡Partner, ¡Minter ¡Ellison ¡(28 ¡March ¡2011) ¡ ¡ AS/NZS ¡7000:legal ¡status ¡of ¡standards ¡and ¡relevance ¡to ¡professional ¡liability

Defensible risk management or due diligence engineering. That is, aligning the laws of man with the laws of nature. In terms of safety, managing the laws of nature is logically prior to managing the laws of man.

R2A’s Approach

R2A’s Due Diligence Approach

SEVERITY OF HARM UTILITY OF CONDUCT PROBABILITY OF OCCURANCE DIFFICULTY AND INCONVENIENCE MAGNITUDE OF RISK EXPENSE

Credible, critical issues Precautionary

• ptions

Precautions QA system

Disproportionality decision making system

• 1. Completeness check - argument to establish all credible critical

issues.

• 2. Identification of all possible practicable precautions for each issue.
• 3. Determination of the reasonableness of the practicable

precautions - in the circumstances.

• 4. Implementation of a QA system to ensure that’s what’s been

agreed is implemented and sustained.

Engineering Due Diligence Grounding of the ‘Tai Ping’ at Southport

Loss of Control Outside

• perating envelope

Track, speed, leeway at channel abort points and in Reach 3. Preliminary Passage Plan error Threat Scenarios Passage Plan error Helmsman error Loss of visual nav aids Agreed Passage Plan error Vulnerabilities and Escalation Scenarios Pilot Execution Error Ship breakdown

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Lapstone Cutting c1920s

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HEADING GOES HERE Lapstone Cutting mid 2000s

!

Derailment potentials into the gorge Rockfall threat-barrier diagram

!

Koko

http://www.naturalnews.com/ 038743_primates_liars_gorilla.html viewed 27feb14

(Natural News) Koko the Gorilla, celebrated for her 1000-word sign language vocabulary, is known for her affinity toward

• cats. After she learned how to communicate

with her caretakers at the Gorilla Foundation in Northern California, she asked for a kitten to have as a pet. The cat came in handy on one particularly destructive day. When no one was around, Koko managed to rip a sink out of the wall in her habitat. When the humans returned, they asked Koko who ripped out the sink. Koko signed, "The cat did it."

If due diligence has been arguably demonstrated to a common law due diligence standard (the balance of the probabilities test) then being successfully prosecuted under statute law (beyond reasonable doubt test) is most unlikely. That is, that provided something is not prohibitively dangerous, to ensure that all reasonable practicable precautions are in place for all foreseeable, credible, critical issues.

R2A’s Understanding Exactitude

It is better to be vaguely right than exactly wrong*. Put another way, do not let probability theory mask your ignorance. You can’t be right all the time but you can always be diligent.

*Carveth Read (1898). Logic, deductive and inductive.

EEA-R2A

WORKSHOP AIM WORKSHOP OBJECTIVES

At the end of the workshop, participants will be able to

ENGINEERING DUE DILIGENCE WORKSHOP

DUE DILIGENCE ENGINEERS

PROUDLY PRESENTED BY

A Workshop for Directors and Senior Managers

DATES

Brisbane 18-19 March Melbourne 13-14 May Perth 29-30 July Sydney 12-13 August

R2A Due Diligence Engineers

R2A Pty Ltd Level 1 55 Hardware Lane Melbourne VIC 3000 Australia P +61 1300 772 333 F +61 3 9670 6360 E risk@r2a.com.au W www.r2a.com.au ABN 66 115 818 338