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Safeguard OSH Solutions - Thomson Reuters

Safeguard OSH Solutions - Thomson Reuters

Safeguard Magazine

Regulator Report—Are fines high enough?

MICHAEL HARGREAVES on a recent High Court decision which he says raises a critical question about the level of fines imposed for OHS offences.

The Ministry prosecuted Safe Air Limited for failing to guard a Hercules C130 aircraft engine which it was servicing. The engine was set up on a test bed which, as a result of a modification following Safe Air’s purchase of it, allowed employees access to the air intake. As a result of the failure, an engineer was ingested into the air intake and killed.

In the District Court, the Ministry submitted that Safe Air’s culpability was high, warranting a starting point of $150,000 and ending at $80,000. The Court largely accepted the Ministry’s submissions, but adopted a starting point of $100,000; the bottom of the available range. Following discount for mitigating factors, a fine of $56,250 was ultimately imposed, together with reparation of $22,250.

The Ministry successfully appealed the sentence in the High Court on the basis that the fine was manifestly inadequate. Key aspects of Justice Kós’ decision were that:

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    Neither Safe Air, nor the firms involved in carrying out the modification to the test bed, had identified the need to guard the air intake as a result of the modification;
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    The potential risk of harm from this omission was serious;
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    By modifying the test bed, without adequate regard to the safety implications, Safe Air had departed from prevailing industry standards;
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    The installation of a guard was neither difficult nor expensive.
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    Safe Air’s procedure manual and hazard register both referred to the risk of severe injury or death through ingestion;
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    Employees had been trained to walk around the platform using an outer hand rail which indicated that Safe Air appreciated the risk of injury from getting too close to the air intake.

Justice Kós determined that culpability was high and identified that an appropriate starting point for a fine in the District Court could potentially be as high as $140,000. On the basis that this was a Crown appeal against sentence, Justice Kós adopted a starting point of $125,000. After mitigating factors were taken into account, the result was a fine of $70,000. The reparation order was not disturbed on appeal.

The approach taken by Justice Kós to sentencing was consistent with the approach taken by the High Court in Hanham and Philp, which established the current sentencing framework for health and safety offending. Justice Kós also undertook a careful (and useful) analysis of other sentencing decisions. This analysis confirmed that his assessment of Safe Air’s culpability, and the starting point adopted, was consistent with those other cases.

While the Safe Air decision is undoubtedly correct in terms of the current law as regards sentencing for health and safety offending, it subtly raises a question as to the adequacy of the current sentencing regime and its effectiveness as a lever to achieve better health and safety outcomes.

Safe Air’s culpability was assessed by High Court as being “within the second quartile of high culpability”. The factors identified by the High Court in Safe Air provide a sound basis for that assessment. However, the Safe Air decision confirms that, applying the current sentencing methodology and case law, offending of this nature at first instance in the District Court:

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    Would not justify a starting point for a fine of more than $140,000 (56% of the maximum fine available); and
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    Would not have resulted in a fine of more than $78,750 (31% of the maximum fine available).

Courts in sentencing need to bear in mind the potential for a subsequent “worse case” and so will rarely (if ever) impose the maximum penalty for an offence. At the same time however, the Sentencing Act requires them to impose a penalty near to the maximum penalty, if the offending is near to the most serious of cases for which that penalty is prescribed (unless circumstances relating to the offender make that inappropriate). The factors identified in Safe Air clearly make it near to the most serious of cases under section 50. If a case of this nature was to result in a fine at 31% of the maximum in the District Court, the question is raised as to what sort of case could be more than three times as bad – which is what the end point of the fine leaves provision for?

As noted, the Safe Air decision was in line with Hanham and subsequent cases. The High Court’s decision in Hanham was recognised as a watershed in increasing the fines for health and safety offending, and thus increasing the effectiveness of prosecution as a tool for the regulator. While Hanham increased fines, whether it did so to a sufficient degree, as illustrated by Safe Air, is a different question. Further, those increases have not been consistent throughout the sentencing range. Following the 2002 amendment to the HSE Act (which increased the maximum penalty to $250,000) but prior to Hanham, 52% of all fines imposed were less than $5000. Since Hanham, the percentage of fines less than $5000 has fallen to 9%. Further up the range however, the change in fine levels is far less remarkable. After the 2002 amendment but prior to Hanham, 99% of the fines imposed were less than $50,000. Post Hanham, 92% of all fines are still less than $50,000; 20% of the available maximum.

The Safe Air decision indicates further change is required. If the correct application of current sentencing authorities in a case of this nature will result in fines at such low levels, one is inevitably driven to the conclusion that those authorities must be reviewed. It may be that Hanham will soon have had its day.

MICHAEL HARGREAVES is the manager of litigation with MBIE’s legal service.

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