First sentence under new H&S regime shows much higher penalties

​The first sentencing decision under the new Health and Safety at Work Act (HSW Act) was handed down this week and shows predictably that the Courts will apply much higher penalties than under the previous regime.

The outcome of the case has been keenly awaited because it was the first successful prosecution under the new Act and people were looking for guidance on what to expect from the Courts – but this opportunity has been largely missed.

The context

Budget Plastics (New Zealand) Ltd (Budget) had pleaded guilty to failing in its duty as a PCBU (person conducting a business or enterprise) to ensure the health and safety of its workers “so far as was reasonably practicable”.
This was in relation to the amputation of a worker’s hand, leaving only his thumb and half his forefinger, after he was caught in a plastic extrusion machine.

The Palmerston North District Court found[1] that Budget had failed to fit the machine with appropriate guards and emergency stops or have adequate hazard identification systems, operating procedures and safety processes in place for worker training.

Penalty regime

The “culpability bands” under the previous Act were:

Low culpabilityUp to $50,000
Medium culpability $50,000 to $100,000
High culpability$100,000 to $175,000\

 

WorkSafe argued for a new range ten times higher and pushed for the “full quantum of fines available” under the band to be used:

Low culpabilityUp to $500,000
Medium culpability $500,000 to $1 million
High culpability$1 million to $1.5 million


Budget submitted that New Zealand should be guided by the decisions of the Australian Courts, given that the two regimes are so similar, although the Australian Courts do not use bands.

WorkSafe sought a starting point of $900,000, arguing that the culpability of Budget was high/medium. Budget sought a starting point of $200,000.

It was accepted that the starting point under the old legislation would have been around $90,000.
Of significance, was that WorkSafe sought an order of costs in the sum of $3,621.55 against Budget. The Judge awarded costs of $1,000.

Decision

The Judge fixed reparation for emotional harm at $37,500. Unusually, there was no discussion whatsoever about the consequences to the victim which the Judge took into account in reaching this figure.

In relation to setting the fine, the Court specifically declined “to make sentencing guidelines”. The Judge observed that the available starting point under the new Act was between $400,000 and $600,000 but did not fix a starting point himself. Instead he reduced the fine by giving credit for mitigating factors and then said “the end sentence will therefore be between $210,000 and $315,000, depending on the starting point adopted”.

He then considered the ability of Budget to pay, taking into account submissions that a fine of over $100,000 would mean that Budget would be put out of business and reduced the penalty to $100,000 – this being, in his assessment “the maximum Budget can realistically pay namely the sum of $100,000”.

Chapman Tripp comments

We think that the decision will disappoint many. The sentencing Judge did not fix a starting point but, rather, suggested a range. This is very surprising.

No meaningful reasoning for adopting the range (between $400,000 and $600,000) was provided. While not expressly saying as much, it appears that the Judge has endeavoured to apply the band approach used for many years following the Hanham and Philp decision.

The award of costs is interesting and defendants are on notice that they now seem likely to be punished in this regard as well.

The decision highlights a certainty; that higher penalties will be imposed. As a result, we can expect to see fines against small businesses being reduced on a regular basis due to their inability to pay.
We anticipate that as further cases appear in the Courts, a selection of decisions will be taken to the High Court for it to establish some sentencing guidelines under the new regime. This will provide much-needed certainty.

[1] WorkSafe New Zealand v Budget Plastics (New Zealand) Limited [2017] NZDC 17395 [22 August 2017]

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Related topics: Health and safety; Health and safety prosecutions; Employment

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