Agricentre South Limited v Worksafe

[2018] NZHC 2070

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CRI-2018-425-000013

[2018] NZHC 2070

BETWEEN

AGRICENTRE SOUTH LIMITED

Appellant

AND

WORKSAFE

Respondent

Hearing:	26 July 2018
Appearances:	G N Gallaway and E Stone for Appellant D Brabant and N Szeto for Respondent
Judgment:	14 August 2018

JUDGMENT OF DUNNINGHAM J

[1]    Mr and Mrs Bastiaansen farm at Mataura, in Southland. In April 2016, the appellant, Agricentre South Limited (Agricentre), delivered a secondhand tractor to Mr Bastiaansen’s farm for a trial. Five days after receiving it, the tractor’s brakes failed when it was pulling a trailer up an incline. Mrs Bastiaansen, who was seated on the trailer, was thrown off it. The tractor then drove over her as it travelled backwards down the hill before coming to rest at the bottom. Mrs Bastiaansen suffered extensive injuries to her neck, arm and legs, from which she will never fully recover.

[2]    The cause of the accident was Agricentre’s failure to ensure that an identified problem with the brakes on the tractor had been properly rectified before allowing the Bastiaansens to use it. Agricentre pleaded guilty to an offence under ss 36(2) and 48(1) and (2)(c) of the Health and Safety at Work Act 2011.

AGRICENTRE SOUTH LIMITED v WORKSAFE [2018] NZHC 2070 [14 August 2018]

[3]On 18 April 2018, Judge Farnan sentenced Agricentre to pay reparations of

$60,000 for emotional harm to the victim and $73,459.75 in respect of consequential losses she had suffered.1

[4]    Agricentre takes no issue with the reparations imposed, save for one aspect of the assessment of consequential loss. It argues that the award of $30,000 towards purchase of a new automatic Hilux truck was:

(a)not in respect of consequential loss; and

(b)made with insufficient evidence before the Court, including of why there was no ACC entitlement for a replacement vehicle.

[5]    At the hearing, it was clear that Agricentre’s primary concern was whether in the circumstances the purchase of a new vehicle to replace an existing older vehicle could properly be categorised as a “consequential loss”.

The District Court decision

[6]    The District Court Judge discussed the provisions in the Sentencing Act 2002 that allowed the Court to impose a sentence of reparation. Taking account of the consequences of the offence, which included serious  emotional  impacts  on  both Mr and Mrs Bastiaansen as a result of her physical injuries, she awarded $60,000 to Mrs Bastiaansen for emotional harm.2 No issue is taken with that award by the appellant.

[7]    In assessing Mrs Bastiaansen’s entitlement to payment for consequential losses,3 there was no dispute over the obligation to pay $36,457.08 for loss of income and associated Kiwisaver contributions. It was also accepted that physiotherapy costs of $1,205 and the purchase of a new bed and mattress at $5,797.67, to ease her physical discomfort, were payable.

1      Worksafe New Zealand v Agricentre South Ltd [2018] NZDC 7756. The issue of the quantum of the fine to be imposed was reserved pending resolution of appeals which were expected to give guidance to the Judge on that issue.

2      Under s 32(1)(b) Sentencing Act 2002.

3      Under s 32(1)(c) Sentencing Act.

[8]    The sum at issue relates to the purchase of a new automatic Hilux truck for the farm business. This was purchased because Mrs Bastiaansen was no longer able to drive a manual vehicle due to her leg injuries. The figure sought for the purchase of the new vehicle was $43,557. This amount was calculated by deducting the trade-in price for the old vehicle of $5,175 from the purchase price for the new vehicle of

$48,732.

[9]    The Judge noted the submissions made on behalf of Agricentre that the purchase of a new farm vehicle was neither a foreseeable nor reasonable measure of consequential loss, and that depreciation of the new truck’s value would be off-set against future farm profits which could also reduce any amount the Court might conclude was payable in this case. The Judge concluded:

[41]      I accept, in some small measure, what Mr Gallaway has said in relation to the consequential loss of the vehicle. I accept that a new vehicle was purchased and, in hindsight, that of itself might not have been foreseeable, in my view. I also factor in the tax issue which has been raised on behalf of the defendant.

[42]      I form a view that a sum of $30,000 is appropriate. That takes into account the deduction for the trade-in which you received directly, but also is not for the full amount. It is my view that that is an appropriate payment in this case.

[10]   The issue is whether the Judge was in error in awarding this sum as a consequential loss under s 32(1)(c) of the Sentencing Act.

Consequential loss

[11]   Section 32(1)(c) of the Sentencing Act provides that the Court may impose a sentence of reparation:

…if an offender has, through or by means of an offence of which the offender is convicted, caused a person to suffer-

…

(c)loss or damage consequential on any emotional or physical harm or loss of, or damage to, property.

[12]   The Court of Appeal in R v Donaldson, discussed the distinction between imposing a fine and a reparation order during sentencing, saying:4

A fine is punitive. It is a pecuniary penalty imposed by and payable to the state. By contrast, an order for reparation is compensatory in nature. Reparation is intended, wherever possible, to restore the victim’s position in relation to property loss or damage, emotional harm, or consequential losses.

[13]   Having noted that a sentence of reparation should be compensatory in nature, the Court observed that it:5

…may be appropriate to have regard to common law principles of causation. The statutory phrase, “through or by means of an offence”, is of wide expression and its outer limits are not immediately obvious. It may, therefore, prove helpful to have resort to the concepts of remoteness, materiality and intervening act… at least in analysing more difficult factual situations. However, we endorse the viewpoint that reparation is to be approached in a broad commonsense way, and resort to refined causation arguments is not to be encouraged.

[14]   In deciding whether or not there has been a loss, s 32(3) Sentencing Act requires the Court to consider whether the victim has any right to bring proceedings or to make any application in relation to that loss or damage. Relevantly, in this case, if any payments have been, or will be, made in respect of any consequential loss or damage under the Accident Compensation Act 2001, then the Court must not make an order for reparation in respect of that loss.6 It can, however, make an award for any shortfall between the ACC entitlement and the actual loss.

Appellant’s submissions

[15]   Mr Gallaway submitted that, in the circumstances, there was inadequate evidence to warrant classifying the cost of purchasing a new vehicle to replace the existing vehicle as a consequential loss. While he accepted that technical arguments should be avoided where possible, the Court must nevertheless be satisfied that there is evidence establishing a loss and that reparation is required in order to put the victim in the same position as if the offending had not occurred.

4      R v Donaldson CA227/06, 2 October 2006 at [34].

5 At [36].

6      Section 32(5), Sentencing Act.

[16]   He says in this case, the only information regarding the manual Hilux vehicle that was owned at the time of the accident is that its trade-in price was $5,175 including GST. The absence of information makes it impossible to determine the age, condition or market value of the existing vehicle. This means it is impossible to assess the true consequential loss (if any) or enquire into whether proper steps to mitigate the loss were taken. Indeed, the award of $30,000 could be described as a windfall.

[17]   While he accepts that a change of vehicle was necessary, the consequential losses flowing from this would be any costs associated with changing the vehicle, not the purchase of a brand new vehicle to replace what clearly must have been (having regard to the trade-in value), an old, low value, manual vehicle.

[18]   Alternatively, he submits that if the Court is satisfied that a loss was established, then the extent of this loss was not a foreseeable consequence of the offending, or even closely connected with it. The Judge herself acknowledged that the purchase of a brand new vehicle as a replacement for an old vehicle might not have been foreseeable.7 The purchase of a new vehicle to replace an old one could, in the circumstances, be characterised as the victims’ failure to properly mitigate their loss by purchasing a vehicle of equivalent age and condition to their existing vehicle, albeit an automatic.

[19]   In any event, he says the purchase of a new vehicle can be contrasted with the costs of modifications required to a vehicle or house. The latter are foreseeable consequences of a workplace accident, but the former is not.

[20]   He also queries whether the Judge made adequate enquiries to satisfy herself that the victim did not have a right to pursue compensation under s 81 of the Accident Compensation Act. That section provides for entitlements to social rehabilitation assistance, including with transport and the purchase of a new vehicle if required.

[21]   Mr Gallaway explained that, at the sentencing hearing, Mrs Bastiaansen was asked whether she had claimed the ACC entitlement to a contribution towards a new vehicle. She advised the Court that she had, and that the claim had been denied.

7 At [41].

Judge Farnan did not request any further information. Mr Gallaway argues that there is nothing in the Judge’s sentencing notes to show whether the existence of an entitlement was considered in determining whether to make an award for the new vehicle, arguing that where ACC has assessed the claim and exercised its discretion to decline it, it is not appropriate for the Court to intervene via the Sentencing Act to meet it, particularly when no supporting evidence has been provided. While he notes that Parliament enacted changes to the Sentencing Act to allow sentences of reparation to meet any statutory shortfall in the compensation provided, he says there is no indication that this was intended to allow the Courts to override ACC in circumstances where ACC has exercised its discretion to decline a claim.8

[22]   In this case, the Court was not dealing with a shortfall between ACC compensation and the loss suffered, rather, it was dealing with the situation where ACC declined the claim. At the very least, the fact that ACC has presumably considered evidence in support of the claim and declined it should be a relevant consideration that should still factor into an assessment of the loss.

The respondent’s submissions

[23]   The respondent’s first response to the appellant’s submissions is that the need to purchase an automatic vehicle was clearly consequential on the injury suffered and there was sufficient evidence to demonstrate this. The victim had produced a letter from her orthopaedic surgeon which stated that:

Because of her significant injuries, the patient has needed to purchase a mattress and base, as she has been unable to sleep well, because her old bed was too hard and small and the injured left leg was regularly being bumped during the night, causing significant pain and loss of sleep.

The patient has also purchased an automatic Hilux truck as the previous truck had manual transmission and the patient was obviously unable to drive a manual car, because of the significant left lower extremity injuries and is required to drive an automatic car.

Thus, there was sufficient evidence to prove that the expenditure was a consequence of the offending.

8      Victims of Crime Reform Bill (319-1) (Explanatory Notes) at Part 4.

[24]   That being established, the order made was open to the Judge and within her discretion on the evidence before her, taking into account the submissions from the parties and the enquiries made of the victim in Court. Furthermore, the Judge took into account the various factors raised by the defendant to reduce the reparation awarded from the net cost to replace the vehicle.

[25]   Even if the Court was to consider that an award of $30,000 was excessive and find that there was an element of betterment (although that was not accepted by the respondent), the respondent submitted that substitution of a lower award of reparation would be an appropriate remedy, as opposed to quashing the entire award.

[26]   In response to the argument that the ACC entitlement was relevant to whether reparation should be ordered, the respondent says that the fact the claim was not accepted by ACC “does not create estoppel in terms of the Court considering whether an award of reparation for consequential loss was able to be awarded”.

Discussion

[27]   The primary issue in this case is whether the difference (or a substantial part of it) between the trade-in value of the farm’s existing Toyota Hilux motor vehicle and the cost of a new Toyota Hilux motor vehicle can be characterised as consequential loss. In other words, is this a cost to refund the victim for expenses or losses she has incurred or will incur, as a consequence of the appellant’s offending?

[28]   In this regard, the respondent misunderstood an aspect of the appellant’s submissions. The appellant accepted that the need to have an automatic vehicle rather than a manual vehicle was a consequence of the offending. What the appellant did not accept was that the purchase of a brand new vehicle was a consequence of the offending.

[29]   Before reparations can be awarded for a consequential loss suffered by the victim, I consider the victim must:

(a)demonstrate financial loss or expenditure that he or she would not have incurred if the offending had not occurred; and

(b)demonstrate that the amount sought is required to put the victim in an equivalent but not better position to that they were in prior to the offending.

[30]   Applying those principles to this case, clearly medical costs such as her physiotherapy costs fall into the category of consequential losses caused by workplace offending where injury ensues. That is, it is expenditure she would not otherwise have incurred but for the accident and the victim needs to be reimbursed this amount to put her in the financial position she was in before the offending. Similar claims that would fall within this category would include the costs of a nurse or housekeeper if the victim needed such assistance as a consequence of his or her injuries.

[31]   When there is expenditure on physical items, they too are claimable as consequential losses if that item would not have been needed but for the consequences of the injury. Thus, for example, the cost of installing a hoist or a stair lift in the victim’s home could be a consequential loss suffered by a victim who was physically injured. These are not items that the victim would otherwise have purchased or owned, and he or she needs to have the equipment to assist that person resume activities that he or she would not otherwise be able to do because of the injury.

[32]   However, more care needs to be taken with claiming, as a consequential loss, replacement of an asset already owned by the victim, particularly an asset used for business purposes, with another asset which is better suited to the victim’s needs. When the victim has purchased an asset at its market value and it is an asset they would own and use regardless of the offending it is not obvious that he or she has incurred a loss.

[33]   This was the case in IT Walker Holdings Ltd v Tuf Shoes Ltd, where the Court observed that “the plaintiff does not prove a loss by merely giving evidence of expenditure which has apparently produced a capital asset”.9 In IT Walker Holdings, the defendant’s breach of contract in failing to complete the construction of a factory in time meant the plaintiff instead purchased a lease in respect of another factory and never moved into the factory built by the defendant. Because the alleged loss was

9      IT Walker Holdings Ltd v Tuf Shoes Ltd [1981] 2 NZLR 391 at 401.

represented by “a capital asset in the plaintiff’s hands” the Court held that the onus then fell to the plaintiff to prove not only that he had suffered damage, but also its amount.

[34]   To translate this reasoning to a scenario closer to the present case, if a victim decides to sell his or her two-storied house and move to a single storey house, because that is better suited to their physical needs following an injury, that cannot readily be characterised as a consequential loss. If the victim sells a $500,000 two-storey house and moves into a $500,000 single storey house, they still have an asset of equivalent value. More importantly, if they choose to move to a $600,000 single storey house, the additional $100,000 they spent cannot be characterised as a loss, as they have a capital asset worth commensurately more than their original asset.

[35]   The only aspect of such a decision which could be characterised as a consequential loss from the injury is the transactional cost of selling one home and purchasing another. It is that cost which would not have been incurred but for the consequences of the offending that led to the physical injury. Alternatively, of course, the two-storey house could be modified to better meet the victim’s needs, for example, by installing a stair lift. That would be a consequential loss that falls into the category discussed in [31] above.

[36]   In the present case, I consider the decision to change the farm vehicle from a manual Toyota Hilux vehicle to an automatic one was clearly causally connected to the injury, as required by s 32 of the Sentencing Act. However, the loss of the ability to drive the existing manual farm vehicle would be fully mitigated if replaced by an equivalent value automatic vehicle. Seen in that light, it is the transactional cost of that change, rather than the difference in value between the two items which is the real consequential loss.

[37]   In this case, there was no evidence supplied to show why it was necessary to purchase a new vehicle, rather than a vehicle of equivalent value to mitigate the loss caused by the appellant. It seems instead that the Bastiaansens chose, for other reasons, to take the opportunity to upgrade their farm vehicle. Various factors unrelated to the offending may have played a part in this decision. For example, as

the appellant pointed out, there is the ability to offset depreciation of the vehicle in the first years against the farm profit to reduce the overall tax paid. Other benefits may include reduced maintenance costs and deferral of the time at which that vehicle, too, would need to be replaced.

[38]   I therefore accept that the decision to purchase a new or later modern vehicle, at greater cost, does not mean that those additional costs should be categorised as a “consequential loss”. It would only be in circumstances where it was impossible or impracticable to do anything other than purchase a new item that the Court might award that cost as a consequential loss, though even then, the Court may (as the Judge did here) make some reduction for betterment, as the victim has gained a more valuable asset as a consequence.

[39]   As I have noted above, the transactional cost (if any) of making that change would be a cost caused by the offending. The most likely transactional cost would be the difference between the trade-in price received for the existing vehicle and its actual market value. Given the need to transition seamlessly from one vehicle to another, it may well be unrealistic to expect a victim to spend time trying to sell the existing vehicle on his or her account, in order to achieve market value, and then look to purchase an appropriate replacement vehicle. There may, of course, be other transactional costs, such as transporting the replacement vehicle to a remote location, which would need to be demonstrated on a case by case basis. The onus would be on the victim to produce evidence of such transactional costs as a consequential loss.

[40]   The respondent raised a concern about what guidance they should be giving to victims in terms of producing evidence to support consequential losses. In my view, however, this concern was overstated. Most consequential losses for offending prosecuted by Worksafe will fall within the categories discussed in [30] and [31] above. Evidence of lost wages, or money paid on medical expenses, home support, or modifying the home and work environment to meet the needs of the victim, are all readily quantified. The issues discussed above where the victim is required to exchange a valuable capital asset that they currently own for a similar one which is better suited to their needs would arise infrequently. In such cases, the loss should be characterised as the transactional cost of effecting that change. However, the principle

should not be applied in a niggardly fashion. For example, I do not see it as applying to a purchase of a more suitable bed for Mrs Bastiaansen. The need for a new bed to ease pain is clearly required as a consequence of the injury, and it would be unrealistic to expect the victim to buy anything else but a new bed.

[41]   As the Judge did not approach the award of consequential losses in the way outlined above, I consider she was in  error  in  making  an  award  of  $30,000 to Mrs Bastiaansen. Accordingly, I set it aside and refer the matter  back  to  the  District Court to reconsider at the same time the issue of the fine is to be considered. At that hearing, Mrs Bastiaansen can present evidence of the transactional cost of making that change which, as I have said, may be the difference between the existing vehicle’s trade-in value and its market value, but may include other costs as well.

Was the effect of the Accident Compensation Act 2001 sufficiently considered?

[42]   A victim of a workplace accident may be eligible for a range of entitlements under the Accident Compensation Act and those entitlements would meet a range of expenses which might otherwise be categorised as consequential losses. For example, as Mr Gallaway pointed out, s 81 of that Act provides for an entitlement to social rehabilitation assistance, including with transport and the purchase of a new vehicle, if required. His concern in this case was that the Judge had no evidence about what application had been made to ACC in respect of an automatic vehicle, nor why ACC had declined that request. She simply relied on Mrs Bastiaansen’s oral advice that the request had been declined to make a reparation order against the appellant for a substantial part of the cost of acquiring a new vehicle.

[43]   In Mr Gallaway’s view, the Court should have considered the reasons for the request being declined by ACC, as those may well have been relevant to the Court’s decision to classify this as a consequential loss.

[44]   I accept it would have been preferable to have documentary evidence that the claim was made to ACC and declined, if only to satisfy the Court that an order for reparation is not excluded or affected by s 32(5) Sentencing Act. However, in my view, the fact ACC had declined the claim did not preclude the Judge from making an award of reparation in respect of any consequential loss flowing from the need to

change the vehicle. There was adequate evidence before the Court from the victim’s orthopaedic surgeon to justify the need for an automatic vehicle.

[45]   Accordingly, I accept the respondent’s submissions that the fact that ACC had declined a claim under s 81 is not relevant to whether the sentencing Court can consider it. The key is whether there is sufficient evidence before the Court to justify a claim for consequential loss. In this case, that required evidence that:

(a)the change in vehicle was necessitated by the injury which resulted from the offending; and

(b)there was a transactional cost in making that change which the victim would not otherwise have incurred.

[46]My conclusions at [41] reflect that.

Result

[47]   The appeal is allowed. The award of $30,000 for consequential losses in relation to the purchase of a new farm vehicle is set aside. The matter is remitted back to the District Court for assessment of what consequential losses were in fact incurred as a consequence of needing to replace the manual vehicle with an automatic vehicle.

Solicitors:

Chapman Tripp, Christchurch

Copy to: Worksafe New Zealand, Wellington