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OSH Tracker

Department of Labour v Ontrack Infrastructure Ltd (DC, 02/07/08)

Sentencing Tracker

Principal Offences:
Failing to ensure safety of employee (s 6 and s 50(1)(a) Health and Safety in Employment Act 1992)
Plea:
Guilty
Non-Custodial Sentences:
$36,000 fine plus Court costs of $130 and solicitor's fee of $2S0
Aggravating Factors:
Victim impact - death of victim and emotional harm to victim's family
Mitigating Factors:
Reparation payment totalling $277,000
Remorse
Early guilty plea
Co-operation with authorities
Remedial action
Willingness to attend restorative justice
Victim:
Male

OSH Tracker

Defendant:
Ontrack Infrastructure Ltd
Employers who take out insurance against the cost of HSE Act reparations should not be penalised for doing so, a district court judge has ruled. 
Sentencing rail network operator Ontrack Infrastructure Ltd for an incident in which a rail worker was killed, Judge Melanie Harland rejected Department of Labour submissions that the penalty should make no allowance for the $277,000 already paid to the victim’s family because the company was insured. 
“It is, in my view, in the interests of employees that employers are insured, so that [reparation] payments can be made regardless of a defendant’s financial situation,” the judge said. “The informant’s interpretation [also] ignores the cost of insurance to an employer by way of premiums, particularly where a claim has been made.” 
The judge ruled that the payments already made – $107,000 from an insurance policy that was part of the victim’s employment package and an additional $170,000 in ex gratia payments and to assist with legal bills – meant there was no need for further court-ordered reparation. She convicted Ontrack under s6 and fined it $36,000 ( Huntly DC, July 2). 
The Department of Labour said the company’s culpability for the June 2007 incident, in which a worker was knocked beneath the wheels of a train when it hit the boom of the crane he was operating, was high. By failing to close the section of main trunk line where the work was being done, the company had overlooked a “glaringly obvious” hazard, it said. 
The judge said the defendant had clear OHS systems but the ganger overseeing the work had failed to complete the required job plan. She noted, however, that there was no safety net to monitor such non-compliance and expressed the view that, in such a hazardous environment, work should not have been able to commence until a plan was filed. 
Industry:
Transport and Storage
Sub-Industry:
Rail Transport
Risk:
Struck by moving object
Harm:
Death
Penalty Amount:
$36000.00
Reparation Amount:
$0.00
Appeared in Safeguard issue 113

Judgment Text

RESERVED JUDGMENT OF JUDGE M HARLAND [Sentencing under s 50(1)(a) Health and Safety in Employment Act 1992] 
Judge M Harland
Introduction 
[1]
On 19 June 2007 Sean Smith was tragically killed at Ohinewai when a passing train struck the crane upon which he was working. His employer, Ontrack Infrastructure Ltd (“Ontrack”) is the defendant in these proceedings and has pleaded guilty to failing to take all practicable steps to ensure Mr Smith's safety while he was recovering rail in the course of his employment. The maximum penalty for this offence, which is a breach of s 50(1)(a) of the Health and Safety in Employment Act 1992, is a fine not exceeding $250,000.00. The question for me to determine is the level of fine which is appropriate to impose on the defendant company. 
Factual background 
[2]
On 19 June 2007 a work train left Te Rapa to recover rail lying between the north (“up main”) and south (“down main”) railway lines on the main trunk line at Ohinewai. At Ohinewai, six cranes were positioned at right angles to the rail recovery train to effect the purpose of picking up a number of lengths of rail, each measuring approximately 76 metres. Once all six cranes were in position the rail was attached to each of them by a scissor-type clamp and all cranes operated together to lift the rail. Once the rail was raised to the correct height, it was manually wound along the crane boom by a hand winch attached to the crane and then lifted to the recovery train deck. The work required the rail recovery equipment having to reach at right angles from the recovery train across and into the airspace above the up main rail. 
[3]
At approximately 11.00am on 19 June, a north bound train running at full track speed of 80 kilometres per hour struck the boom of crane number one, which moved it clear of fouling the up main. The train then missed cranes two, three, four and five which were clear of the up main, but collided with the boom of crane number six, which was operated by Mr Smith and which was set in such a position that it fouled the up main. At the time, Mr Smith was standing on the south side of the crane close to the up main side of the wagon. The force of the impact of the train hitting the crane boom snapped its manual locking pin and sent it spinning at speed in a clockwise direction. Mr Smith was struck by the rotating boom of the crane and was knocked into the path of and under the passing train on the up main, with tragic consequences. 
[4]
Clearly this case exemplifies the most serious of harm able to be suffered. 
Rail Operating Rules and Procedures 
[5]
The defendant is solely responsible for managing New Zealand's railway network. As the rail industry in New Zealand involves a small number of operators, Ontrack is a significant employer within the industry. 
[6]
Ontrack has an extensive series of health and safety procedures which are embodied in its Rail Operating Rules and Procedures (“the Rules”). The Rules comprise a volume appropriately bound in red which are supposed to be readily available for reference purposes, not only in every office, but on site. The company employs a health and safety manager and the safety procedures are audited regularly. Spot checks are undertaken without warning on a regular basis and all workers are assessed at least three times in every 24 month period to ensure that they are aware of the relevant rules and safety procedures. 
[7]
By virtue of the Rules, an application must be completed in every circumstance where a work train is required. As with any agency of the size of the defendant, there is a requirement that responsibility be delegated down the chain of command. In this case, the field engineer was responsible for completing the application for the work train, selecting the appropriate gang and appointing the foreman, or “ganger”, which he did. The ganger is responsible for ensuring that all of the defendant's safety requirements are put in place in the field. 
[8]
The ganger is required to complete a “job plan”, but often it is impractical to have the job plan in place well in advance of a job being undertaken. There is a standard job plan process to be followed on-site on the day the work is required, but prior to the work commencing. The primary purpose of the job plan is to ensure that all employees involved in the job know what the hazards are and what precautions need to be taken to ensure safety. All gangers, including the ganger responsible on the date in question, are trained in the use of job plans, which were introduced by the defendant in 2006. Such training includes basic hazard identification and control processes. Refresher training is also undertaken. The ganger concerned was fully trained and assessed on his understanding of the defendant's track occupancy rules and warrant controls and he had passed his assessments well. He was thought to be a competent and compliant employee. Monitoring of his performance did not give rise to any concern. 
[9]
On 19 June 2007 for reasons unknown, the ganger in charge did not complete a job plan as required at all. It was clear that he was the person-in-charge and that he was responsible for the safe operation of the work area. His responsibility was to ascertain information about hazards on the site, including movement on adjacent lines. He was responsible for communicating with train control. On arrival at the site the Rules required him to assess any additional unanticipated hazards present, but he did not do this. 
[10]
The defendant accepts that on 19 June the following forms of hazard protection should have been used: 
a)
A compulsory stop protection: This involves track-side signage which warns that all rail vehicles must stop and obtain authority from the person in charge before travelling through the work site 
b)
Signals held at “stop”: The signals at either end of the work site could have been held at “stop”, similar to temporary traffic lights, preventing trains from entering the work area 
c)
MIS60 track and time permit: This is a formal process for closing a designated section of the track to all rail vehicles for a stipulated time. This process would have closed the up main line from Huntly north and given the right of occupation to the Ontrack workers. 
The defendant accepts that if the Rules had been followed and the above measures had been put in place, the accident would not have occurred. 
Sentencing Act 
[11]
The Sentencing Act requires accountability for the harm done by the offending, the promotion of the interests of the victims, consideration of reparation, denunciation, deterrence both specific and general and the protection of the community. In addition in this case the principles I need to take into account include the gravity of the offending, which includes an assessment of the degree of culpability of the offender, the seriousness of the type of offence, the effect on the victims and the desirability of consistency. Section 51A of the Health and Safety in Employment Act provides specific sentencing criteria in the health and safety context which I must take into account which has essentially codified the criteria set out by the full High Court and Department of Labour v De Spa and Co Ltd [1994] 1 ERNZ 339Has Cases Citing which are not known to be negative[Green] 
[12]
It is against this background that I must set a starting point for the level of fine which is appropriate, taking into account the offending itself. This includes a consideration of the defendant's culpability for the offending. It is common ground that there are no aggravating factors relating to the defendant which would require an uplift from the starting point. There are however matters of mitigation which will need to be considered. 
Reparation 
[13]
Section 40(4) of the Sentencing Act requires the Court to first consider a sentence of reparation. All are agreed and it is clearly the law that reparation to the victim's family is a primary consideration (Department of Labour v Ferrier Wool Scours (Canterbury) Ltd [2005] DCR 356Has Cases Citing which are not known to be negative[Green] ). Reparation is fixed on a stand alone basis by reference to the amount which is properly claimable and the offender's means. Reparation includes not only economic or financial loss, but also considerations of emotional harm. 
[14]
In this case Mr Smith's death has left behind a partner who is 26 years of age and a daughter who is now 2 years of age. Mr Smith's partner lives alone in rented accommodation and is a fulltime mother although she is undertaking further training two days a week. She is in receipt of ACC compensation and will be eligible for such payments for another four years. There was a contribution by ACC towards funeral expenses but a balance of $2,895.01 was paid by Mr Smith's partner for the balance. 
[15]
The defendant has made payments totalling $277,000.00 to Mr Smith's partner and his estate: 
a)
An initial payment of some $17,000.00 to Mr Smith's partner; and 
b)
A payment of $107,000.00 to Mr Smith's estate; and 
c)
A further payment of $150,000.00 to Mr Smith's partner; and 
d)
Payments of $3,020.00 in respect of Mr Smith's partner's legal fees 
[16]
The $107,000.00 was paid by an insurer, the liability for which arose under the collective agreement that covered the terms and conditions of Mr Smith's employment with the defendant. The $150,000.00 was paid on a ex gratia basis by the defendant's Board to Mr Smith's partner for compassionate reasons. 
[17]
Mr Smith's partner, who was present in Court, advised that the amounts she received personally from the defendant have been placed on term deposit. 
Assessment of economic loss 
[18]
An example of how an assessment for economic loss is calculated was outlined in Health & Safety Inspector v Carter Holt Harvey [2006] DCR 731Has partially negative history or cases citing, but has not been reversed or overruled[Yellow] . In that case Judge Weir performed the assessment by taking into account the deceased's age, assuming a likely retirement age of 65, and, after deducting ACC receipts, came to a figure which was determined by him as the appropriate reparation to be paid, taking into account the shortfall to the victim's family as a result of his death. Taking into account payments that had been made by the defendant company in that case, the Judge felt able to assess $100,000.00 as a suitable figure for economic loss. In addition he set a figure of $50,000.00 for emotional harm, deciding that was appropriate as effectively half of the direct financial loss. The total amount of reparation including economic loss and emotional harm considerations was therefore $150,000.00. 
[19]
The Carter Holt Harvey case exemplifies the view that assessments of economic loss are always difficult and are fact specific. The deceased in the Carter Holt Harvey case was assumed to be no more than 50 years of age and his employer had made payments of approximately $90,000.00 which included ex gratia payments, a payment towards funeral expenses and a payment through the deceased's membership of the employers employee benefit plan. In addition there were ACC payments made. 
[20]
In the current case the assessment for economic loss is more problematic. A pay slip was provided to me which indicated an amount of $1,481.57 after deductions. It is not clear whether this was a weekly pay slip or not. No actuarial assessment has been obtained to estimate what the economic loss might be in this case. One cannot assume on a simplistic basis that Mr Smith would have been employed with the defendant company until retirement. In addition the vagaries of life are such that it would be quite inappropriate in my view to place at the door of the defendant a responsibility to cover financial loss for the length of time that might have been the case had Mr Smith been older. I make these comments without denigrating in any way from the impact that such a loss will have, on Mr Smith's partner and his young daughter, but as against this, in time there will be the ability for Mr Smith's partner to re-establish herself. 
[21]
Bearing in mind the amount that has been paid already by the defendant to Mr Smith's partner, in my view sufficient reparation has been made to cover any issues of economic loss which could reasonably arise, based on the information before this Court. 
Emotional harm 
[22]
Clearly it is appropriate for there to be a figure attached to emotional harm. This is always difficult to assess because money can never compensate for the loss of a loved one. In my view however, the sum of $50,000.00 which was talked about in the Carter Holt Harvey case is appropriate. 
[23]
Taking into account again the amount that has been paid by the defendant to Mr Smith's partners, I am of the view that it encompasses and is sufficient to cover emotional harm as well. 
Fine 
[24]
The next consideration is what fine should be imposed, bearing the mind the reparation that has already been paid. In this regard the informant submits that if insurance meets part of the reparation, this should be disregarded in setting the fine. The informant submits that s 40(4) of the Sentencing Act contemplates that the amount payable under the sentence of reparation is payable by the same person who may be fined. 
[25]
The defendant submits that whether an employer is insured or not is entirely irrelevant given the purposes of the Health and Safety in Employment Act. It is submitted that the intention of Parliament was to enhance safety for employees in the workplace by increasing the maximum fine levels, whereas the purpose of insurance is for a caring employer to ensure that there are funds available for reparation, even if the employer becomes insolvent. Furthermore the defendant submits that there is obviously a cost to insurance, which would include if a claim is made, an increase in the cost of an employer's premiums. It is submitted that if the Court effectively penalised insured employers in such a way as suggested by the informant, it would discourage employers from insuring and would also treat employers who did not insure more leniently, which could potentially disadvantage future victims. 
[26]
Section 40(4) provides: 
“If a Court imposes a sign in addition to a sentence or reparation, it must, in fixing the amount of the fine, take into account the amount payable under the sentence of reparation. ”
[27]
The requirement in s 40(4) is obligatory. In other words a Court must take into account the amount payable by reparation in fixing the amount of the fine. I do not agree with the interpretation urged upon me by counsel for the informant. To do so would be to read into s 40(4) words which are not there. In order to accept the informant's view I think there would need to be inserted into s 40(4) the “by the employer” after “payable”. Obviously those words are not included and it would be wrong in my view to read them into the section. 
[28]
Even if I were to be wrong on that issue, I think that the aspects of denunciation and deterrence can properly be met whether an employer is insured or not. It is in my view in the interests of employees that where possible, employers are insured so that payments can be made regardless of a defendant's financial situation. I am also of the view that the informant's interpretation ignores the cost of insurance to an employer by way of premiums, particularly where a claim has been made. 
Starting point 
[29]
Counsel for the informant submits that an appropriate starting point for a fine is $170,000.00. The informant argues this should be the case because:- 
a)
The offending is very serious 
b)
Culpability is high (described by the informant as “glaringly obvious”
c)
The degree of harm is obviously the worst possible in terms of health and safety and employment 
d)
Deterrence is required 
[30]
The defendant submits that a starting point of less than $80,000.00 would be appropriate because:- 
a)
It has low corporate culpability in respect of the accident 
b)
It has responsibly paid reparation 
[31]
It is clear that fines should not be seen to be imposed at a “licence fee” level (Department of Labour v Fletcher Concrete and Infrastructure Ltd T/A Golden Bay Cement (unreported 10 August 2007) Whangarei Registry, CRI-2007-488-000001, Justice Gendall. In other words, they must be set at a level which reflects deterrence where appropriate. 
[32]
Counsel have referred me to a number of cases in support of their respective positions. It is clear that consistency is required, bearing in mind however that the facts of each individual case are all important. (Department of Labour v De Spa) In particular Tipping and Fraser JJ in that case held at pages 342-343: 
“Whilst of relevance we do not think too much should be made of the proportionate increase in maximum fines, whether ten times or five times … It is important to remember that sentencing is not a mathematical exercise. While the underlying philosophy behind the increase must be carefully borne in mind, the circumstances of the individual case are all important. ”
[33]
I mean no disrespect to counsel in not referring to each of the cases cited by them to me. Their respective submissions have been helpful, but have served to remind me that whilst general assistance can be gained from other cases, each case is very dependent on its own facts. 
[34]
I refer however to the following cases: 
a)
Department of Labour v Downer Construction (NZ) Ltd (DC North Shore CRN-4044500757 Judge Fleming, 13 April 2005). This was a case involving a fatality resulting from the boom of a crane collapsing. The informant sought a fine in the range of $100,000-$120,000.00. Culpability was assessed to be in the medium range. Bearing in mind the company's previous good safety record and safety programme which was described as comprehensive, and the remedial steps that were taken and the guilty plea, a fine of $55,000.00 was imposed, but no starting point had been articulated by the Judge in that case. 
b)
Department of Labour v Anderson & O'Leary Ltd (13 February 2008). A fine of $50,000.00 was imposed in a fatality case where culpability was assessed as being moderate to high. The fine was significantly discounted due to the defendant's guilty plea, its co-operation during the investigation, the degree of responsibility of the employee, the company's serious attitude to health and safety matters and its remorse and subsequent remedial action. Again no specific starting point was articulated by the Judge. 
c)
Department of Labour v Areva T & D NZ Ltd (9 November 2005, HC Rotorua, CRI-2005-063-42, Priestley J). The High Court upheld the District Court's view that $75,000.00 was the appropriate fine. The overall culpability of the respondent's offending was described as human error. The respondent had an excellent record and had pleaded guilty. A total reduction of just over 50% was granted including 30-35% for an early guilty plea, a further 15% to reflect reparation paid, with extra consideration for previous good record and co-operation. An end fine of $35,000.00 was imposed. 
d)
Health & Safety Inspector v Carter Holt Harvey (supra) Judge Weir assessed the defendant's culpability as medium to high. He determined a starting point fine of $100,000.00 which was reduced by 35% to reflect the guilty plea, co-operation and remedial steps, and a further 35% discount to reflect the $50,000.00 emotional harm reparation which was ordered. The end fine was $30,000.00. 
e)
Department of Labour v Alliance Group Ltd (DC Invercargill CRN-06025500369, Judge Crosbie, 13 November 2007). A fine of $80,000.00 was imposed where an employee died from falling through a canopy above a loading dock. Culpability was found to be in the medium range and the Judge found the company to have fallen short of its obligations to identify issues and providing training in areas of the company's operation. In that case a starting point was set at $150,000.00, together with an emotional harm reparation order of $35,000.00. 
Culpability 
[35]
The defendant submits that the ganger's omissions occurred despite adequate training and monitoring. It however submits that the omissions do not show systemic failure and that whilst human error was involved, its actual culpability in terms of the offending was low. 
[36]
The informant submits that the hazard was glaringly obvious, foreseeable and could easily have been controlled. It submits, replying on the doctrine of vicarious liability, that the defendant's culpability is high. 
Finding in relation to culpability 
[37]
There is no doubt that the defendant's written procedures were clear and should have been complied with by the ganger. The question is whether the actions of the ganger can transfer automatically to the defendant by virtue of the doctrine of vicarious liability. The defendant submits that the doctrine of vicarious liability applies so far as responsibility is concerned, but that this is a different concept overall from culpability. I agree with this statement in principle. 
[38]
This case highlights the importance of the practical management of written rules and procedures. The starting point must always be to have appropriate procedures in the first place, but they fail if they are not properly implemented. In terms of management I think there is a requirement for the implementation of procedures to be monitored effectively, especially in hazardous or potentially high risk working environments. 
[39]
Whilst I find that the defendant's written procedures were clear, in my view there was no safety net provided by it to ensure that non-compliance with its rules was able to be effectively monitored. The environment in which Mr Smith was working was a potentially dangerous and hazardous environment. Where such an environment exists, it is my view that there need to be effective back-up procedures in place to ensure that non-compliance is immediately detected. In this case I think there could have been a procedure in place which effectively meant that if a job plan was not filed, the work was unable to commence. From what I have heard there was no checking of the ganger prior to work commencing and I think at the very least, given the nature of the environment concerned, the field engineer should have been in a position to check that the safety procedures had been identified and implemented. It is for this reason that I am unable to agree that the defendant's culpability is low. 
[40]
The informant has submitted that the defendant's culpability is high. I do not agree with this either. 
[41]
The comments I have made about providing a safety net are able to be made with the benefit of hindsight. In normal circumstances an employer who provides procedures, rules and training in respect of safety matters, should be entitled to rely on its employee's compliance. I think the defendant's culpability was in the lower end of the medium range and the penalty I impose will reflect this. 
Decision on starting point 
[42]
When viewed against the cases cited to me, the informant's starting point is clearly too high. I have found that the defendant's culpability is in the medium range but at the lower end. I have rejected the informant's argument about insurance. I am mindful that fines must not be seen as being at the level of a “licence fee”, but also I am mindful of the significant amount of reparation that has been appropriately and promptly paid to Mr Smith's partner or his estate. I am mindful of the need for deterrence, but also the need for consistency. I do not think it is correct in principle to apply a mathematical approach to sentencing as the informant submits. On the issue of deterrence, because of my comments about the need for monitoring the implementation of safety rules and procedures, it will be clear that general deterrence is a significant factor in my assessment of the starting point. Bearing in mind all of these matters, in my view the starting point for the fine should be $90,000.00. 
Mitigation 
[43]
The defendant has pleaded guilty at the earliest opportunity. It is entitled to a full credit of 30% for this. It has a very good safety record and is entitled under s 8 to have its previous good character taken into account by way of mitigation. 
[44]
The defendant has been co-operative with the informant and has taken significant steps to review its own procedures in light of the accident. Immediately after the accident it removed wagons from the network which had an adverse impact on it by delaying maintenance renewals and engineering work that needed to be done. In addition a team was established to investigate and record all matters that may have contributed to the accident. Specifically it: 
a)
Released an incident alert to all staff on 18 July, reinforcing the requirements of rules in cases where the track is fouled. This alert emphasised the need to undertake a formal job plan briefing and hazard analysis of tasks review 
b)
Amended the application for work train form to enhance the identification of track protection that may be required for other tracks 
c)
Re-evaluted communication for such operations by a working party, made up of representatives from the defendant and Rail and Maritime Transport Union. This has resulted in radios with ear pieces having been ratified for use 
d)
Investigated the logistics of including the hazard analysis of task document and job plan packs or job cost planning packs 
e)
Modified the job plan book to strengthen the prompt to employees to specifically consider the hazards of adjacent tracks to the work site. 
[45]
The defendant was prepared to attend restorative justice, however Mr Smith's partner did not wish to partake in that process. Whilst this comment should not be seen as a criticism in any way of Mr Smith's partner, it is a factor I can take into account in considering mitigation on behalf of the defendant. 
[46]
The defendant has expressed remorse and has made significant and appropriate reparation efforts. In addition the defendant's then chief operating officer and now its chief executive, flew from Wellington immediately upon hearing of Mr Smith's death to offer his personal sympathy to Mr Smith's partner. The defendant has kept in contact with Mr Smith's partner and has offered transport to and from sentencing hearings. It delivered a Christmas hamper of toys to Mr Smith's daughter and is planning a memorial for the anniversary of Mr Smith's death. All of these steps are consistent with what I find to be a genuine expression of remorse. The defendant has acted extremely responsibly in a difficult and tragic situation and deserves appropriate recognition for this. 
[47]
In my view an additional 30% should be allowed for other mitigating factors, over and above the 30% credit for the guilty plea. 
End result 
[48]
The defendant will be convicted and fined the sum of $36,000.00, and ordered to pay Court costs of $130.00 and a solicitor's fee of $250.00. 

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