Increasing level of reparations

A number of recent judgments have demonstrated a tendency of increasing awards for Health and Safety breaches, in relation to both the fine for the breach and the reparations to those directly involved and to their families.

New Zealand’s Health and Safety at Work Act 2015 (the HSWA) is largely based upon pre-existing Australian statute (the Work Health and Safety Act 2011), a point accepted by WorkSafe.

The introduction of the HSWA led to an increase in the starting point for fines from a maximum of $100,000 under the Health and Safety in Employment Act 1992 to a new maximum of $1.5m, however the Australian courts generally levy lower fines than the New Zealand courts, generally under AU$150,000 and often far less.

The offences under the HSWA are strict liability offences, therefore the court does not need to consider the defendant’s intention when committing the offences.  Having been found guilty of an offence, the court will then consider both a sentence, a punishment and thus a deterrent, as well as reparations to compensate those the court agrees were affected by the offence.

Sentencing

When considering the severity of the sentence, the court shall consider the requirements of the HSWA which in turn refers to the Sentencing Act 2002.  One of the principles of sentencing under these is that the culpability of the offender must be considered, and therefore whilst the offence is strict liability, the court must undertake an analysis of the defendant’s state of mind and intention when considering the level of the fine. Deciding culpability is itself a complex consideration, taking into account aggravating and mitigating factors as including the seriousness of the office, the effect of the offending on the victims and the risk, or fact, of injury.

The Sentencing Act requires the court to consider the defendants ability to pay a fine.  The HSWA on the other hand requires consideration of the defendant’s financial capacity in consideration of increasing the fine.  As a result of the increase in the level of fines and a fine not being insurable, the courts have increasingly had to consider the defendant company’s finances and then reduce the fines to such levels that the defendant can afford.

Reparations

Reparations are also considered alongside the fine.  Reparations are compensatory in nature and are governed by the Sentencing Act.  When the court decides on the level of reparations, the ability of the defendant is also taken into account.  However, unlike the fine, reparations can be and indeed are often insured against by companies.

Whilst a fine may therefore be reduced due to an inability to pay by the defendant, where insured, the reparations are likely to remain without reduction.  Further following the introduction of the HSWA and the increase in maximum fines, the High Court stated in Stumpmaster & others v WorkSafe New Zealand, that the increase in the levels of the fines should not lower the size of the reparation orders.

Examples

The following cases are representative of the levels of fines and reparations awarded under the HSWA.

In Oceana Gold (New Zealand) Ltd v Worksafe New Zealand a worker was crushed to death by a loader in Oceana Gold’s mine in Waihi.  It was held that the company had failed to ensure as far as reasonably practicable the health and safety of its workers.  Whilst the maximum fine available was $1.5million, a fine after discount was made for $378,000, as being moderately culpable.  Whilst the company had already made payments totalling $660,000 in voluntary reparations, it was further ordered to pay reparations of $350,000, a total cost of almost $1.4m together.

Another recent case includes a case in which a Wellington harbour ferry hit an underwater rock (East by West Company Limited v Maritime New Zealand).  Whilst the collision resulted in a jolt to the passengers on board, no injuries resulted and indeed the operator had no previous convictions.  Prior to discounts, a total fine of $550,000 was awarded for the offences under the Act.  As there were no injuries, there were also no reparations, however the fine is substantial taking into account no injuries occurred.

Further whilst awards of reparations are becoming more generous, they are also being awarded to wider groups than previously permitted.  In the recently published judgment of Maritime New Zealand v Ocean Fisheries Limited, which related to the sinking of the fishing vessel, Jubilee, and death of its three members of crew, reparations were awarded to the estates of the three victims of the accident as well as being ‘limited’ to a further 19 ‘surviving victims’, being their family and dependants.  This led to a fine of $46,000 after a 42.5% discount, but with reparations a total penalty of $783,325.25 was awarded against the defendant.

Conclusion

The overall award is becoming heavily skewed by the reparations and as such the seriousness of the failure by the defendant and the damage actually caused by the incident is becoming less relevant.  Instead the number of people associated with those directly affected is becoming the prime decider as to the level of the total award made.

It is now becoming good practice and indeed normal to insure against reparations, with such premiums become just one further fixed cost of the business.  This in turn reduces the deterrence effect of the reparations.  As reparations awards increase however, the level of insurance required to cover the awards and legal costs will likely increase, something the Woodhouse Principles and subsequently the ACC sought in part to avoid.

Finally, it is worth mentioning that Ocean Fisheries Limited, the owners of the Jubilee, were found to have been in breach of health and safety due to the lack of a bilge alarm.  However, the Jubilee’s design and build, without a bilge alarm, had been reviewed and certified as safe by Maritime New Zealand.