First sentencing decisions under Health and Safety at Work Act 2015 – what can we make of them?

Health and safety | Print Article

November 2017

The Health and Safety at Work Act 2015 (‘HSWA’) came into effect on 4 April 2016.

It took until 22 August 2017 for the first sentencing decision of the District Court to emerge, WorkSafe New Zealand v Budget Plastics (New Zealand) Ltd [2017] NZDC 17395. The second, WorkSafe New Zealand v Rangiora Carpets Ltd [2017] NZDC 22587 was decided on 4 October 2017. Budget Plastics involved amputation after a hand was caught in machinery. Rangiora Carpets involved a fall from a height in which the victim suffered a broken arm, broken right shoulder, broken right collarbone, multiple fractures to her pelvis and a laceration to her head.

At a Health and Safety Conference in Rotorua on 5 September 2017, a WorkSafe representative said there were approximately another 75 sentencing cases working their way through the system at that time.

WorkSafe approach to enforcement

WorkSafe’s approach to enforcement has been to target ‘intelligence-led analysis of serious harm and/or fatalities’ of workers most at risk. Its prosecutions have been focused on manufacturing, construction, agriculture and forestry sectors, in that order.

Background – Health and Safety in Employment Act 1992 (HSEA)

Previously the leading case was Department of Labour v Hanham and Philp Contractors Ltd (2008) 6 NZELR 79 (HC). The defendant erected a temporary scaffold that was obviously inadequate and the victim fell four metres and suffered a broken arm, broken shoulder, broken collarbone, fractures to her pelvis and laceration to her hand.

The High Court said ‘a broad assessment is involved and that sentencing is not a mathematical exercise.’ Having regard to a maximum fine of $250,000, it adopted a ‘bands of culpability’ approach for fines. It assessed three bands of culpability with starting points as follows:

(a)        Low culpability: $0 to $50,000;

(b)        Medium culpability: $50,000 to $100,000;

(c)        High culpability: $100,000 and $175,000.

Even for Pike River, a case of extreme culpability, the starting point was only $210,000 before discounts were applied.

Health and Safety at Work Act 2015 (HSWA)

In WorkSafe New Zealand v Budget Plastics (New Zealand) Limited, a major portion of a worker’s left hand was amputated after it was caught in the auger of a plastic extrusion machine he was operating in his employer’s workplace. The incident occurred on 6 April 2016, two days after HSWA came into force.

In its investigation, WorkSafe identified a chapter of non-compliance with standards by Budget Plastics. The extrusion machine had insufficient guards on it. The emergency stop button was three metres away from the machine. The company did not have adequate systems in place for identifying hazards. It did not have an adequate safe operating procedure for use of the machine. It did not have adequate policies for training workers in the safe use of the machine. The sole director of the company had little awareness of or involvement in health and safety issues until six weeks prior to the incident when he received the results of an independent report he had commissioned, which identified a substantial number of improvements that were required. He had not actioned any of the measures in the report prior to the accident. Budget Plastics pleaded guilty. The quantum of reparation was fixed at $37,500 which is in line with reparation awards under HSEA.

WorkSafe argued the three-level culpability band approach to fines developed under Hanham and Philp should apply and adjusted the bands in line with the higher maximum fine regime. They put those bands at:

(a)        Low culpability: up to $500,000;

(b)        Medium culpability: $500,000 to $1,000,000; and

(c)        High culpability: $1,000,000 to $1,500,000.

They argued this was a case of high to medium culpability, and the starting point, based on a maximum fine of $1.5 million, ought to be $900,000. By contrast, under HSEA this would have meant a starting point for a fine of between $50,000 and $100,000.

The Court was not persuaded by Budget Plastics’ legal argument that the Court should follow the fine levels imposed by the Australian Courts given the similarities between the Model Law and HSWA, although the Australian Courts do not operate bands. Instead it leapt straight to the starting range of between $400,000-$600,000 for medium culpability.

The Court then followed the usual approach and discounted this starting range by 55% (to between $210,000 and $315,000) due to a number of mitigating factors, including Budget Plastics’ lack of a prior record, cooperation with WorkSafe, remorse, remedial steps and the guilty plea. Then, the Court took judicial notice of an affidavit lodged by Budget Plastics’ Chartered Accountant that outlined why anything more than a fine of $100,000 would cause significant difficulties for Budget Plastics’ business. Ultimately, the Court settled on a fine of $100,000. It observed ‘this case is not so severe as to justify a departure from the need to impose a fine within the offender’s ability to pay (i.e., not a case where the defendant should be put out of business).’ A low level award of costs in favour of WorkSafe was also made pursuant to section 152 HSWA.

The Budget Plastics case is unsatisfactory on a number of levels. The District Court specifically declined to make sentencing guidelines. It was unwilling to look at comparable Australian decisions. While adopting the bands of culpability approach, it did not give starting point ranges for low culpability or high culpability. It just plucked medium culpability figures out of the air of between $400,000 and $600,000 which is going to be difficult for lawyers to give their clients a reasonable estimate of their exposure, other than to say that penalties are going to be significantly higher.

The second sentencing decision, WorkSafe New Zealand v Rangiora Carpets Ltd provides some welcome clarity around the use and application of the culpability bands system. It also made specific reference to the new ancillary orders available to the Court under Part 4 Subpart 8 of HSWA, although it did not utilise them other than to impose a modest costs award in favour of WorkSafe.

The Court said three culpability bands are too few given the six-fold increase in the level of fines under HSWA, and would result in:

‘… enormous potential variation in levels of fine within each band. This will make the task of achieving consistency within the sentencing process very difficult.’

Instead, it accepted the defendant’s approach of six bands:

(a)        Low culpability: $0 to $150,000

(b)        Low/medium culpability: $150,000 to $350,000

(c)        Medium: $350,000 to $600,000

(d)        Medium/high: $600,000 to $850,000

(e)        High: 850,000 to $1,100,000

(f)        Extremely high: $1,100,000 +

Unlike Budget Plastics, the Court fixed a specific figure for its starting point of $300,000, before applying similar discounts and ended up with a fine of $157,500. This fine is to be paid by instalments having regard to Rangiora Carpets’ ability to pay. Costs of $1228 were awarded to WorkSafe.

What learnings can we take so far?

  1. The tiered bands of culpability approach in Hanham and Philp looks likely to stay.
  2. As the Judge in Rangiora Carpets says, three tiers is too wide to give any real clarity on where on the spectrum a particular case falls. Narrower bands such as the six tiers in Rangiora Carpets is more likely to find favour by the courts.
  3. Under section 151 HSWA the Court must apply the defendant’s ability to pay criterion to fixing the level of fine. However, ability to pay will not be a trump card. Penalties under HSWA should ‘bite’ and not be at a ‘licence fee’ level. Payment of fines by instalments will be a possibility.
  4. Modest costs awards look likely to stay.
  5. The Court’s focus in these two cases so far is on penal measures. It is still a ‘wait and see’ on the nature of any ancillary orders that emerge such as section 153 adverse publicity orders, section 154 orders for restoration and section 158 training orders.