Ballard v Department of Labour HC Auckland CRI 2010-419-25
[2010] NZHC 539
•14 April 2010
IN THE HIGH COURT OF NEW ZEALAND
HAMILTON REGISTRY
CRI-2010-419-000025
GRAEME VICTOR BALLARD
Appellant
v
DEPARTMENT OF LABOUR
Respondent
Hearing: 31 March 2010
Counsel: M J Hammond and M S King for the appellant
R G Douch and J Hopkins for the respondent
Judgment: 14 April 2010
JUDGMENT OF STEVENS J
This judgment was delivered by me on Wednesday, 14 April 2010 at 4pm
pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
M J Hammond, Tompkins Wake, PO Box 258, Waikato Mail Centre, Hamilton 3240 Almao Douch, PO Box 19173, Hamilton 3244
GRAEME VICTOR BALLARD V DEPARTMENT OF LABOUR HC HAM CRI-2010-419-000025 14 April 2010
Introduction
[ 1 ] This is an appeal against a sentence imposed by Judge E O K Blaikie in the
District Court in Hamilton in respect of a charge under s 6 of the Health and Safety in Employment Act 1992 (the HSE Act). The appellant, Graeme Victor Ballard, pleaded guilty on 3 February 2008 to failing to take all practicable steps to ensure the safety of an employee. The guilty plea was entered following discussions on the morning of the hearing, vacating the earlier plea of not guilty.
In a reserved decision, the appellant was ordered to pay reparation of $15,000 and a fine of $24,000. The appellant submits that the totality of the financial penalty imposed was manifestly excessive in light of all the circumstances of the case, including culpability, the guilty plea and other mitigating factors, and the lack of aggravating factors.
Background
The appellant is one of three trustees of the GV and RW Ballard Trust (the Trust), owners of a dairy farm in Ballard Road, Gordonton, near Hamilton. The Trust had employed Peter Bruce Clement (Mr Clement) as senior manager on the farm for approximately 11 years.
On 14 February 2008, Mr Clement and another employee were instructed by the appellant to carry out a cleaning operation in relation to an effluent well near an underpass on the farm. The well consisted of several concrete pipes stacked on top of each other and sunk into the ground, with dimensions of approximately 1200mm in width and three metres in height. At ground level there was a concrete lid on the tank with a manhole in it which was approximately 500-600mm in diameter. Metal rungs were bolted into the wall of the well.
Generally, effluent is pumped from the well, but from time to time solid effluent settles and accumulates. When this occurs, the solid material needs to be removed manually. The usual process involves two workers, with a 20 litre bucket on the end of a rope being lowered to the bottom of the well. One worker climbs
down into the well to shovel the effluent and solid material into the bucket, while the second person remains at the top of the well to haul the bucket up and tip it into a loader on a tractor.
On the occasion in question, Mr Clement had been working at the bottom of the well and after the effluent had been removed, he returned to the surface when he and his fellow employee realised that a rope had been disconnected and it remained at the bottom of the well. Mr Clement then returned down the well to retrieve the rope, and while doing so slipped on a wet and soiled rung, hurting his leg.
The appellant was notified and an ambulance was called. Mr Clement was eventually lifted out of the well by emergency services and was taken to Waikato Hospital where he received medical treatment for his injury. He was initially diagnosed with a bruised right femur and released from hospital that same day. Four days later, Mr Clement was still in pain and went to the doctor who transferred him to Waikato Hospital with a suspected fracture of the leg. He was diagnosed with a compound fracture of his right femur. He was in traction for a week and on 25 February 2008 had surgery. He remained in hospital until 5 March 2008.
The Department of Labour (the respondent) conducted an investigation into the accident, and concluded that the appellant was in breach of s 6 of the HSE Act, in that he failed to take all practicable steps to ensure the safety of his employee. Such steps involved the following alleged failures in:
a)Identifying the hazards involved in clearing out the well;
b)Providing an analysis, procedures and means for clearing the well from outside the well and having proper procedures in place and equipment (e.g. oxygen level monitors and rescue equipment) available if it becomes necessary for employees to enter the well; and
c)Providing appropriate instructions to employees on the hazards involved in clearing out the well, and instructing them not to enter the well unless they follow the correct procedures.
It is convenient to note that the issue of oxygen level monitors and rescue
equipment was not referred to in the Judge’s decision. These issues were rightly not pressed by the respondent on appeal.
[ 10] Shortly after Mr Clement’s accident, the appellant had alterations carried out to the well. These had been arranged prior to the accident. The respondent accepts that, as a result of these alterations, the site and the well have been significantly improved from a safety perspective.
The District Court decision
[ 11 ] Judge Blaikie observed that the HSE Act had been substantially amended in 2003, with specific sentencing criteria being introduced and the maximum fine being increased from $50,000 to $250,000. He applied the leading decision of Department of Labour v Hanham and Philp Contractors Ltd & others [2008] 6 NZELR 79 (HC) where the Court set out a three step approach to sentencing: the first involving assessment of quantum of reparation, the second involving assessment of quantum of fine, and the third involving assessment of the impact of reparation and fine imposed in combination.
[ 12] In determining reparation, the Judge found that Mr Clement had suffered both emotional and economic harm. In calculating the economic loss component, the Judge found that, as a result of the accident, Mr Clement was unable to continue with his employment and had incurred additional rental costs, relocation costs and lawn mowing expenses between July 2008 and November 2009, all totalling $5,000. This figure took into account the fact that Mr Clement had received ACC compensation following the accident. The Judge considered the process of determining emotional harm was more difficult. Taking into account the victim impact statements of Mr Clement and his wife, and other factors including some uncertainty as regards to future employment, the Judge concluded that the emotional harm component should be $10,000. This brought the total reparation figure to $15,000.
With regards to the assessment of the fine, the Judge referred to the purposes and principles of sentencing under the Sentencing Act 2002 and noted the Hanham decision where the High Court accepted the need to fix a starting point in accordance with R v Taueki [2005] 3 NZLR 372. The Judge noted that there was a degree of common ground in considering the fine levels: for low culpability (up to $50,000) and medium culpability (between $50,000 and $100,000). The Judge considered the culpability of the appellant in this case to be in the low category and “not exceeding $40,000”. In assessing culpability, he noted at [17] that:
...Mr Clement has carried out work in the well on many previous occasions. His injuries consisted of a compound fracture to his leg and there appears to be an issue concerning the possibility of Mr Clement’s leg having had operations in the past.
The Judge then addressed factors in mitigation. He accepted that there was a plea of guilty, although noted that the plea was entered at the commencement of the hearing for the fixture. He also acknowledged that the appellant had been cooperative with both the authorities and the respondent throughout the investigation, that the appellant had expressed remorse and made an offer of amends to Mr Clement. He set a 15 percent discount for the reparation order component, a five percent discount for the plea of guilty (including remorse), and a 15 percent discount for co-operation and offers to make amends. The total discount applied was 40 percent, even though the total of the specific discounts amounted only to 35 percent. The discount reduced the fine from $40,000 to $24,000. There were no aggravating factors to be applied.
Finally, at [23] the Judge considered the overall financial burden on the appellant, being reparation of $15,000 and fine of $24,000. He considered this amount to be “not disproportionate to the offender’s circumstances” and stated that it was “to some extent ‘in line’ with orders made in other cases”. He added that the appellant had acted responsibly throughout and following the unfortunate event and accident.
Statutory context
[ 16] The relevant offence section of the HSE Act is as follows:
6 Employers to ensure safety of employees
Every employer shall take all practicable steps to ensure the safety of employees while at work; and in particular shall take all practicable steps to—
(a) Provide and maintain for employees a safe working environment; and
(b) Provide and maintain for employees while they are at work facilities for their safety and health; and
(c) Ensure that plant used by any employee at work is so arranged, designed, made, and maintained that it is safe for the employee to use; and
(d) Ensure that while at work employees are not exposed to hazards arising out of the arrangement, disposal, manipulation, organisation, processing, storage, transport, working, or use of things
(i) In their place of work; or
(ii) Near their place of work and under the employer's control; and
(e) Develop procedures for dealing with emergencies that may arise while employees are at work.
[17] The object of the Act is relevantly described in s 5 of the HSE Act as follows: 5 Object of Act
The object of this Act is to promote the prevention of harm to all persons at work and other persons in, or in the vicinity of, a place of work by
(a)promoting excellence in health and safety management, in particular through promoting the systematic management of health and safety; and
(b)defining hazards and harm in a comprehensive way so that all hazards and harm are covered, including harm caused by work-related stress and hazardous behaviour caused by certain temporary conditions; and
(c)imposing various duties on persons who are responsible for work and those who do the work; and
(d)setting requirements that—
(i) relate to taking all practicable steps to ensure health and safety; and
(ii) are flexible to cover different circumstances; and
...
(f) recognising that successful management of health and safety issues is best achieved through good faith co-operation in the place of work and, in particular, through the input of the persons doing the work; and
(g) providing a range of enforcement methods, including various notices and prosecution, so as to enable an appropriate response to a failure to comply with the Act depending on its nature and gravity; and
...
[ 18] The definition of “all practicable steps” is set out in s 2A of the HSE Act as follows:
2A All practicable steps
(1) In this Act, all practicable steps, in relation to achieving any result in any circumstances, means all steps to achieve the result that it is reasonably practicable to take in the circumstances, having regard to—
(a) the nature and severity of the harm that may be suffered if the result is not achieved; and
(b) the current state of knowledge about the likelihood that harm of that nature and severity will be suffered if the result is not achieved; and
(c) the current state of knowledge about harm of that nature; and
(d) the current state of knowledge about the means available to achieve the result, and about the likely efficacy of each of those means; and
(e) the availability and cost of each of those means.
(2) To avoid doubt, a person required by this Act to take all practicable steps is required to take those steps only in respect of circumstances that the person knows or ought reasonably to know about.
[ 19] The duties of employers in relation to hazard management are set out in ss 7-10 of the Act. In summary, s 7 requires employers to ensure that there are in place effective methods for identifying hazards. Where there are significant hazards to employees, they are to be eliminated if practicable (s 8) or isolated where elimination is impracticable (s 9) or minimised, and employees protected, where elimination and isolation are impracticable (s 10). There is no dispute on the facts of the present case that elimination and isolation were not practicable. Therefore, the Court is concerned with issues of minimisation.
[20] As this case involved a breach of a provision of Part 2 of the Act (s 6), the maximum fine pursuant to s 50 of the Act is $250,000.
[21] Section 51A of the HSE Act provides guidelines for sentencing as follows:
51A Sentencing criteria
(1) This section applies when the Court is determining how to sentence or
otherwise deal with a person convicted of an offence under this Act.
(2) The Court must apply the Sentencing Act 2002 and must have particular regard to—
(a) sections 7 to 10 of that Act; and
(b) the requirements of sections 35 and 40 of that Act relating to the financial capacity of the person to pay any fine or sentence of reparation imposed; and
(c) the degree of harm, if any, that has occurred; and
(d) the safety record of the person (which includes but is not limited to warnings and notices referred to in section 56C) to the extent that it shows whether any aggravating factor is absent; and
(e) whether the person has—
(i)pleaded guilty:
(ii)shown remorse for the offence and any harm caused by the offence:
(iii)co-operated with the authorities in relation to the investigation and prosecution of the offence:
(iv)taken remedial action to prevent circumstances of the kind that led to the commission of the offence occurring in the future.
(3) This section does not limit the Sentencing Act 2002.
The parties acknowledged that the Court is required to apply the Taueki approach to sentencing: see Hanham at [50]. The Full Court also emphasised that the circumstances of offending under s 50 of the Act will vary and make fixing of the starting point difficult. But the application of the Taueki approach seeks to promote consistency and transparency and to ensure that the fines imposed “reflect the true level of culpability of the offender”.
Appellant’s submissions
Mr Hammond for the appellant focussed on three aspects of the sentencing process: the starting point, the discount for mitigating factors and the totality of the fine and reparation. Mr Hammond did not challenge the amount of reparation awarded, but submitted that the Court could, when considering the totality question,
take into account the fact that it was “high”, particularly in relation to the emotional harm component.
Mr Hammond submitted in relation to culpability that this was a minimisation case within the third of the categories in ss 7 – 10 of the Act. He noted that there was no mention of this important aspect in the Judge’s decision. Further, counsel submitted that culpability should be assessed having regard to the actual failure involved. This was a situation where the appellant had identified the existence of the hazard, had analysed what practicable steps were required to be taken to minimise the hazard and had communicated such analysis orally to Mr Clement in circumstances where he had successfully carried out work on the well on many previous occasions. The actual breach involved a failure to formally record the analysis and write it down, rather than just informing the employee by oral communication. It was against such a failure that the appellant’s culpability should be assessed in determining a starting point for the fine.
In relation to mitigating factors, Mr Hammond referred to the requirement to adjust the starting point for aggravating and mitigating circumstances as discussed in Hanham at [61] and [62]. There was no dispute that there were no aggravating factors present. The key submission for the appellant was that the Judge did not refer to, or make allowance for, the fact that the appellant had no previous convictions throughout a lengthy period as an employer of farm labourers. This factor ought to have been taken into account under the heading of “favourable safety record” when the Judge was considering the adjustment for mitigating circumstances. The presence of other mitigating factors meant that an overall allowance of 50 percent ought to have been assessed for discount purposes, consistent with the allowance made in the Cookie Time case discussed in Hanham at [ 140] and by Priestley J in Department of Labour v Areva T & D New Zealand Ltd HC Rotorua CRI-2005-463-0042, 9 November 2005.
Finally, Mr Hammond submitted that the overall impact of the reparation and the fine, totalling $39,000, was manifestly excessive. Counsel invoked the approach referred to at [78] of Hanham requiring consideration of the total imposition on the appellant of reparation and the fine to be proportionate to the circumstances of the offender and the offending. Mr Hammond referred to the financial statements of the appellant for 2009 showing a significant trading loss. He noted that the appellant’s wife works for the company and that in 2009 the company debt had increased impacting upon the overall asset position. In terms of an updated financial position, there had been some improvement in the nine months of trading in the 2010 financial year, but the company was in a break-even situation but was not showing a profit.
By way of comparative cases, counsel cited Villages of New Zealand (Pakuranga) Ltd v Department of Labour HC Auckland CRI-2005-404-0248, 10 October 2005 and the District Court decision in Department of Labour v Fisher DC Waihi CRI-2008-079-001078, 25 February 2009. In the latter case, a fine of $10,000 was imposed.
Respondent’s submissions
Mr Douch for the respondent submitted that the Judge had correctly applied the sentencing methodology in Hanham. The process followed by the Judge involved dealing first with reparation, then considering the starting point for the fine and adjusting that for aggravating and mitigating circumstances of the offending and the offender. This could not be criticised. Mr Douch warned against the Court on appeal “tinkering” in matters of sentence.
Mr Douch strongly emphasised the object of the Act in s 5 as being to promote the prevention of harm to all persons at work. He submitted, correctly, that this placed a positive obligation on employers to prevent harm by, inter alia, promoting excellence in health and safety management and defining hazards and harm in a comprehensive way. In terms of culpability, Mr Douch accepted that this was a minimisation case but submitted that the focus of the Act is upon requiring employers to prevent harm. In other words, employers must do all they can to protect employees or to use the wording of the Act (s 6) to take all practicable steps to ensure the safety of employees at work. He accepted that, if an employer failed to take all reasonably practicable steps, it is important to consider the nature and extent of the failure.
Mr Douch submitted that a significant feature in the case was the fact that, at the time of the incident, the appellant had planned and was awaiting implemention of changes to the design of the well. He submitted that the appellant, despite the planned changes, nevertheless allowed the employee to use a system that he knew to be inadequate. Thus, the appellant failed to protect the employee in the interim.
With respect to the adjustments for aggravating and mitigating factors, Mr Douch accepted that the approach discussed in Hanham at [61] and [62] should apply. He also accepted that the Judge did not expressly deal with the appellant’s favourable safety record and also made a mathematical error in totalling those factors that he did consider. Despite such errors, counsel submitted that the total adjustment for all mitigating factors should be no more than 40 percent.
In relation to totality, Mr Douch acknowledged that the appellant’s business suffered a trading loss. But he submitted that the appellant was the defendant, not the business and he would have assets from which to pay reparation and a fine. Overall, he submitted that a total of $39,000 for reparation and fine was not manifestly excessive, particularly when the sum for reparation was covered by insurance.
Discussion
The first step is to deal with reparation. There was no direct challenge to the total sum allowed. But I note the observation of Mr Hammond that the emotional harm component was “high”. Perhaps a more accurate characterisation of the reparation sum of $15,000 was that it was generous. This aspect requires further assessment when considering the question of financial capacity.
Assessing the fine
The second step is to fix the amount of the fine. The driving concept here is the assessment of culpability based on the degree of blameworthiness for the offending. Importantly, the assessment of culpability requires the Judge to consider a number of factors. These have been helpfully summarised by the Full Court in Hanham at [54] as follows:
The assessment of culpability is concerned with the degree of blameworthiness for the offending. We see the assessment of culpability as including:
·The identification of the operative acts or omissions at issue. This will usually involve the clear identification of the “practicable steps” which the Court finds it was reasonable for the offender to have taken in terms of s 2A HSE Act.
·An assessment of the nature and seriousness of the risk of harm occurring as well as the realised risk.
·The degree of departure from standards prevailing in the relevant industry.
·The obviousness of the hazard.
·The availability, cost and effectiveness of the means necessary to avoid the hazard.
·The current state of knowledge of the risks and of the nature and severity of the harm which could result.
·The current state of knowledge of the mean available to avoid the hazard or mitigate the risk of its occurrence.
It is in this respect that I consider the Judge made an error. There is no doubt that he identified, correctly in my opinion, that the offending in this case was low culpability. But the analysis does not stop there. The factors identified in Hanham relevant to culpability and blameworthiness then need to be assessed. In the short passage (quoted at [13] above) that followed the reference to a figure “not exceeding $40,000”, the Judge dealt only with two aspects, namely, the many previous occasions on which Mr Clement went down the well without incident, and the nature of the injuries suffered. Importantly, there was no consideration of, or attempt to analyse, the operative acts or omissions at issue, or other aspects related to culpability.
Within the category of low culpability, it is relevant that this is a minimisation case. The risks of this hazard could not be eliminated or isolated. Moreover, the nature of the hazard was obvious and its existence had been identified by the appellant and explained orally to the employee by the appellant. What the appellant had failed to do was formally record the analysis of the hazard and provide a copy of such written record to the employee. This is the critical aspect to focus on when considering culpability. As Mr Douch acknowledged, the Court must assess the nature and extent of the failure.
It is also relevant to take into account the availability cost and effectiveness of any means to avoid the hazard. I have already noted that the hazard could not be eliminated or isolated. But even prior to the accident, the appellant had put in train plans to improve the system. I see this as a positive aspect. It is true that the employee was allowed (or required) to use a less than optimal system in the meantime. But there is no suggestion that the work being done by the employee was unnecessary or avoidable. Therefore, this aspect of blameworthiness is at worst neutral when considering the relevant factors.
Therefore, applying the seven factors identified at [54] of Hanham and as discussed above, I agree that the level of culpability is within the “low culpability” level of seriousness. But I assess the starting point as marginally above the midpoint. On that basis, the starting point for the fine should be $28,000. It follows that the sum of $40,000 adopted by the Judge was too high.
Adjustment for aggravating and mitigating circumstances of the offender
It is convenient to refer here to the observations of the Full Court in Hanham at [61] and [62]. The Full Court stated:
[61] The next step is to consider whether there should be an increase or decrease in the starting point for the fine by reason of aggravating or mitigating circumstances relating to the offender. In this exercise, regard should be had to the factors identified in s 51 A(2)(d) and (e) as well as, to the extent relevant, the factors under s 9 Sentencing Act. Aggravating factors relating to the offender may include:
· The existence of any previous convictions under the HSE Act.
· Any warnings or notices under s 56C HSE Act.
[62] Mitigating factors may include:
· A guilty plea.
• Co-operation with the authorities in relation to the investigation and prosecution of the offence.
· Remorse shown for the offence and any harm caused by it.
·Any remedial action to prevent the recurrence of circumstances of the kind that led to the commission of the offence.
·A favourable safety record.
[40] Mr Douch acknowledged that the Judge omitted all reference to the fact that the appellant had no previous convictions over 30 years of employing farm labour. He also accepted that, given the heavy burdens imposed upon employers under the Act, it was proper that full credit be given by the courts if the defendant has a favourable safety record. I consider that, in assessing an adjustment of 40 percent for the mitigating factors referred to at [ 18] of the decision, the Judge made a further error.
[41] Looking at the adjustments afresh, there is no doubt that allowances need to be made for:
a)the offers to make amends and reparation;
b)co-operation with the Department of Labour in the investigation and prosecution;
c)remorse shown by the appellant for the offence and the harm caused;
d)remedial action to prevent the recurrence of the circumstances; and
e)a favourable safety record.
[42] I consider that a total adjustment for all such factors should be 45 percent comprising 15 percent for item (a), ten percent for item (b), five percent for item (c), five percent for item (d) and ten percent for item (d). To that figure must be added an adjustment for the guilty plea, being the final aspect to be taken into account as required by the Court of Appeal in R v Hessell [2009] NZCA 450. I see no reason to differ from the Judge’s figure of five percent, even though he included “remorse” in that assessment. Therefore, I consider a total adjustment of 50 percent to the starting point is required. That would result in a fine component of $14,000, subject to financial capacity.
Financial capacity/totality
The Full Court in Hanham recognised at [75] – [77] that the financial capacity of the offender is a relevant factor. This aspect often requires to be taken into account in step 3, the overall assessment. As was said at [78] in Hanham:
This last step involves a consideration of the total imposition on the offender of reparation and fine. The total imposed must be proportionate to the circumstances of the offending and the offender. This assessment is to be made against the background of the statutory purposes and principles of sentencing as already discussed.
In this case, the appellant has insurance cover in respect of the reparation component. But the appellant is not to be penalised for having responsibly taken such precaution. There is a question of whether an additional allowance should be made to cover the annual cost of obtaining insurance cover. Like the Court in Hanham, I am satisfied that the allowance of 15 percent to cover the offers of amends and reparation is sufficient to allow for this factor.
Further, the appellant is not to be penalised because insurance has been arranged to cover reparation. But as noted at [72] of Hanham, “the existence of the cover is material in assessing the overall financial capacity of the offender to meet reparation and fines”.
As insurance will cover the reparation of $15,000, the financial burden of the fine on the appellant as fixed on appeal is $14,000. The fact that the reparation can be characterised as “generous” is offset, at least in part, by the fact that the bulk of such burden will be met by insurance. By way of overall assessment, I am satisfied that this is a proportionate penalty (together with the applicable insurance costs) to be imposed on the appellant in all the circumstances of the case. I am satisfied that the statutory purposes and principles of sentencing both in the Act and the Sentencing Act are met by a combined penalty for reparation and fine of $29,000.
Result
For all the above reasons, the appeal is allowed. I am satisfied that the overall penalty (reparation and fine) imposed by the Judge was manifestly excessive.
Costs
The appellant is entitled to costs calculated on a 2B basis.
Stevens J
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