Department of Labour v Safe Air Limited

[2012] NZHC 2677

IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY

CRI 2012-406-15 [2012] NZHC 2677

BETWEEN  DEPARTMENT OF LABOUR Appellant

ANDSAFE AIR LIMITED Respondent

Hearing:         24 September 2012

Counsel:         J M Webber with S Cohen for Appellant

G N Gallaway for Respondent

Judgment:      12 October 2012

JUDGMENT OF THE HON JUSTICE KÓS (Appeal against sentence)

[1]      A grievous tragedy.  On 8 August 2011 Mr Miles Hunter, an aircraft engineer employed by the respondent Safe Air Limited, was ingested into the air intake of a Hercules C130 aircraft engine.  The engine was mounted, with its propeller removed, on an outdoor test bed at Woodbourne Airfield, Blenheim.  The injuries suffered by Mr Hunter were unsurvivable.  He died at the scene.

[2]      Safe Air was charged with failing to take all reasonable steps to ensure the safety of an employee at work, contrary to s 6 of the Health and Safety in Employment Act 1992 (the Act).   That offence carries a maximum penalty of a

$250,000 fine.  Safe Air pleaded guilty.  On 30 May 2012 Judge Zohrab sentenced Safe Air to pay a fine of $56,250 (from a starting point of $100,000), together with reparation of $22,250.  In all, $78,500.

[3]      From that sentence the Department of Labour appeals.  It contends that the sentence is manifestly inadequate.

DEPARTMENT OF LABOUR v SAFE AIR LIMITED HC BLE CRI 2012-406-15 [12 October 2012]

Facts

[4]      Safe Air is a wholly-owned subsidiary of Air New Zealand.  It began life as Straits Air Freight Express Limited (hence “Safe”).  For 40 years its bumble bee-like bullnose Bristol Freighter and Argosy aircraft were a distinctive feature in our skies.1

In 1990 its focus switched exclusively to engineering services.  One of its frequent tasks is the maintenance and overhauling of aircraft engines. An engine it specialises in working on is the Rolls Royce T56 engine, used on the Hercules C130 aircraft. That is a turboprop engine.  The air intake cowling for that engine lies beneath the propeller shaft.  To ensure air reliability, engines are run through a set of rigorous tests.  These tests can be done on the aircraft.  But to maximise flying time, engines are removed from the aircraft and run separately on test beds on the ground.

[5]      In 2002 Safe Air purchased a second-hand test bed unit in the United States. It  refurbished  the  test  bed  and  installed  it  at  its  site  at  Woodbourne  Airfield,

Blenheim.  Safe Air made several modifications to the test bed.

1      Hope, Safe In The Skies (Lester Hope, Blenheim, 2000) 11–16.

[6]      The first photograph shows a standard mobile test bed similar to that bought by Safe Air, this time in the United States.  It will be seen in that picture the propeller is attached and spinning.  The engine necessarily is elevated. Access to the engine is confined to the rear and side only.  There are specific restricted gantries with ladder access. The air intake, below the propeller, cannot be approached.

[7]      The second photograph is of the modified Safe Air system. An elevated work platform has been installed.   It rises and falls depending on whether the engine is being tested with the propeller on.  If the propeller is not on, then a person working on the engine may walk right around the engine on the platform.  That contrasts with the original design shown in the first photograph, where access is confined to the side of the engine.  The consequence of this modification was that a person could walk around along the elevated work platform in front of the air intake cowling of the engine.  In practice, aircraft engineers would do this.  It will also be seen that the railing is not fully continuous.  There is a section with a chain in place of the railing

at the centre.2    The main function of the railing was to protect engineers from falling off the platform onto the ground.  But it also gave them a hand-hold when walking past the engine while it was running.  Given the nature of the railing design, I infer that to be a secondary purpose only.  There was a verbal (but not written) practice that engineers would hold on to (or at least touch) the handrail while the engine was running.

[8]      Prior to the incident on 8 August 2011, airflow from a running engine was recorded  as  a  hazard  in  Safe Air’s  hazards  register.    There  had  also  been  two incidents of foreign object debris being ingested by the air intake of engines on the test bed at Blenheim.   One was a wire stay that had been attached to a fence.   It caused significant damage to the engine.  The second was a rag left near the intake. When working on engines on the test bed, engineers were told to avoid wearing or carrying loose items to prevent them being ingested into the air intake on the engine. It is unclear whether that was because they might be sucked out of pockets, as the Judge thought, or in case they were dropped and then ingested.

[9]      On the morning of 8 August 2011 Mr Hunter and a colleague were servicing the engine shown in the second photograph.  The testing process began in a separate control cabin.  The engine was warmed up and running at 92 per cent revolutions per minute.  Mr Hunter emptied his pockets before going outside, in accordance with the usual practice.   He walked up to the raised platform and checked one side of the engine.  He then checked the area towards the front of the intake near the gearbox. Then he walked near the rear of the engine, carrying out more checks.  After completing low ground speed idle checks, on both sides of the engine, he returned to the  control  room.    The  engine  was  then  increased  to  high  ground  speed  idle. Mr Hunter checked the right hand side of the engine before walking around the front of the engine towards the left hand side.   This required him to walk past the air intake.   The facts are slightly unclear, but it appears that Mr Hunter may have negotiated that passage successfully the first time and inspected the left hand side of the engine.  Mr Hunter was, I am informed, unusually tall and thin.  Well over 6 feet tall, but weighing only 53 kilograms. As he walked back in front of the air intake he

had both hands cupping his earmuffs.  He was not holding the handrail.  The facts do

2      Above the wreath in the second photograph.

not disclose how close to the handrail he was.  At this point, and most tragically, the effect of the air inflow was to draw Mr Hunter’s upper body into the air intake. Mr Hunter died at the scene.

Statutory framework

[10]     The object of the 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”.  This is to be done through the promotion of systematic management of health and safety, defining hazards  and  harm  in  a  comprehensive  way  “so  that  all  hazards  and  harm  are covered”,  imposition  of  duties  on  those  responsible  for  work  and  those  who undertake it, setting requirements that relate to taking “all practical steps” to ensure health and safety and providing a range of enforcement methods “to  enable an appropriate response to a failure to comply with the Act depending on its nature and gravity”. The phrase “all practical steps” is defined in s 2A as follows:

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.

[11]     Section 6 of the Act then imposes a duty on an employer to take all practical steps to ensure the safety of employees while at work.  It is in these terms:

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.

[12]     Non-compliance with the requirements of s 6 creates an offence of strict liability. The maximum penalty is a fine not exceeding $250,000.3

Sentencing framework

[13]     The guideline sentencing case for health and safety offending is Department of Labour v Hanham and Philp Contractors Limited & Ors,4  a decision of a High Court bench comprising Randerson and Panckhurst JJ. At [40] four key propositions are identified:

First, the object of the HSE Act is the prevention of harm in the workplace. Secondly, to achieve that object, sentencing under s 50 will generally require significant weight to be given to the purposes of denunciation, deterrence and accountability for harm done to the victim in terms of s 7 Sentencing Act. Thirdly, reparation must be a principal focus in sentencing.  Indeed, the Sentencing Act gives primacy to reparation where the financial capacity of the offender is insufficient to pay both reparation and a fine. Finally, both the

3      Section 50.

4      Department of Labour v Hanham and Philp Contractors Limited & Ors [2008] 6 NZELR 79 (HC).

HSE Act and the Sentencing Act require the court to take account of the financial capacity of the offender.

[14]     Hanham mandates a three-step approach to sentencing in health and safety cases:

(a)       assessing the amount of reparation; (b) fixing the amount of the fine; and

(c)       making     an    overall     assessment     of    the    proportionality     and appropriateness of the total imposition of reparation and fine.

The decision notes that reparation and fines serve discrete statutory purposes, and ordinarily both will be imposed.  If lack of financial capacity does not permit both, then reparation is to receive priority.

[15]     As to the second step – fixing the amount of the fine – the starting point is fixed by reference to the culpability of the offending, and then adjusted upwards or downwards for aggravating or mitigating circumstances relating to the offender. Assessment  of  a  starting  point  involves  an  assessment  of  culpability  for  the offending.   The decision suggests a tripartite scale, although there are in fact four parts:

(a)       low culpability: a fine of up to $50,000;

(b)      medium culpability: a fine of between $50,000 and $100,000; (c)      high culpability: a fine of between $100,000 and $175,000;

(d)      extremely high culpability:5 a fine in excess of $175,000.

[16]     As to culpability, at [54] Randerson and Panckhurst JJ said:

5      See at [58] of the decision.

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 means available to avoid the hazard or mitigate the risk of its occurrence.

[17]     Two points should be made.   First, the decision makes clear that the list is inclusive, not exclusive.   Other factors may conceivably be relevant to assessing culpability.  In this case no additional factor was suggested.  The second point is that the sixth and seventh considerations – both of which focus upon “current state of knowledge” of both risk and avoidance – to an extent overlap the earlier considerations.  They perhaps emphasise the need to bear in mind understanding at

the time of the accident, and the need not to be influenced by hindsight.6    In the

present case, counsel’s submissions on the sixth and seventh Hanham considerations did not add materially to discussion of the first five.  They can in appropriate cases be absorbed in the first five.  I will take that approach here.

Judgment appealed from

[18]     In the District Court, the Department contended for a starting point of around

$150,000 – i.e. treating the case as one in the mid to upper range of high culpability. Following credit for mitigating factors, including remorse and the plea of guilty, the

6      As s 2A(2) requires: see [10] above.

Department  submitted  that  the  appropriate  end  sentence  was  a  fine  of  around

$80,000, together with an order for reparation.

[19]     Safe Air submitted that the appropriate starting point was a fine in the order of $80,000 – i.e. midway in the medium culpability range.  Following credit for the same mitigating factors, a fine in the order of $42,000 was the appropriate end sentence, together with reparation.

[20]     Mr Hunter was not married, and had no dependent children.  Reparation of

$22,500 was ordered by the Judge: $10,000 emotional harm in respect of each of his two sisters, and $2,500 in relation to his brother. There is no challenge to that order.

[21]     The Judge said that fixing the fine was the most difficult aspect of the case. Having identified the three culpability levels suggested in Hanham, the contest was really whether the culpability fell into the high range or not.  The Judge found the risk obvious and significant.   It had been identified in the hazards register of Safe Air.  It had effectively been created by the modification of the original American test bed, as we have seen above.  Steps taken subsequent to the incident to restrict access to the front of the engine while operating had been “relatively low cost and relatively easy”.  The Judge concluded that steps taken prior to the incident “fell well below what a responsible employer should have done in these circumstances”.

[22]     The Judge accepted that Safe Air was and is a responsible corporate citizen. And that it genuinely believed that what they had done was sufficient, based on personal experience and an audit.  But the Judge said that he could not accept that this was a “freakish incident”, because the risk of ingestion into the air intake of foreign object debris (including objects in the pockets of engineers’ clothes) was known. As the Judge put it:

It seems to me there was a real and significant risk here and there was a strong prospect of such an incident happening.

[23]     The Judge concluded that the level of culpability in this case was at “the top end of the medium or the bottom of serious”.  He concluded that a starting point fine of  $100,000  was  appropriate.    He  then  discounted  that  by 25  per  cent  for  co-

operation, remorse and the offer to pay reparation.  He then discounted that $75,000 output again by a further 25 per cent for the early plea of guilty.  The net result was a fine of $56,250, together with reparation of $22,250.

Informant appeals

[24]     In accordance with s 115A(2) of the Summary Proceedings Act 1957, the Solicitor General’s consent to appeal was required for this appeal to be brought. That consent was given on 27 June 2012.

[25]     Counsel were agreed that the approach to be taken on an appeal of this kind is correctly set out by the High Court in Hanham at [81].

There is no dispute as to the principles to be applied when an informant appeals against sentence. The court is more reluctant to increase than it is to reduce a sentence and will not do so in a borderline case: R v Wihapi [1976]

1 NZLR 422 (CA); R v Muavae [2000] 3 NZLR 483 (CA). The legitimate

scope of an informant’s appeal is confined to cases where there is solid grounding for treating a sentence as manifestly inadequate or inappropriate: R v Cargill [1990] 2 NZLR 138 (CA) at 140. Where the court finds that a sentence should be increased on the ground of manifest inadequacy, the increase will not be to a level that would have been imposed were the appellate court the original sentencing court. Rather, it is to be increased to the minimum required to remedy the manifest inadequacy: Sipa v R  (2006)

22 CRNZ 978 (SC) at [9].

[26]     The consequence of s 115 and 119 of the Summary Proceedings Act 1957 is that this is a general appeal to be heard by way of rehearing.  The onus lies on the Department to satisfy the Court that the grounds of appeal have been made out, and that the sentence was manifestly inadequate.  The appellate court has, here, all the material that was before the District Court Judge.  The District Court Judge had no advantage in terms of having seen or heard witnesses.   Having said that, the High Court on appeal from the District Court will not lightly alter a sentence imposed by an experienced sentencing Judge.  It is not the function of this Court to tinker with the sentences, or to alter them unless it feels that the sentence imposed is contrary to both principle and conscience.

Issues on appeal

[27]     The fundamental question in this case, against an agreed statement of facts and plea of guilty, is whether the Judge set the starting point too low.  There is no challenge to the discounts thereafter applied.   The answer to that question really depends on the level of culpability of Safe Air as offender.   The High Court in Hanham, as I have said, identified seven considerations relevant to culpability.7  As I have suggested, the first five are the most important.  The Department’s submissions, and those of Safe Air, traverse those considerations.   No additional considerations have been suggested as relevant to the assessment of culpability in this case.

[28]     Accordingly, this appeal raises the following issues: (a)         Issue 1: What required act did Safe Air omit?

(b)      Issue 2: What risk resulted (and how serious was it)?

(c)       Issue 3:  How did Safe Air’s omission depart from prevailing industry

standards?

(d)      Issue 4:  How obvious was the hazard?

(e)       Issue 5:  How easy was it to avoid the hazard?

(f)       Issue 6:  In light of the above, how culpable was Safe Air? (g)           Issue 7: Was the sentence manifestly inadequate?

Issue 1: What required act did Safe Air omit?

[29]     It is agreed that the practical step required, but omitted, by Safe Air was to have adequately guarded the air intake of the aircraft engine. The agreed mechanism

7 See [16] above.

to achieve that protection was the installation of a rail guard (or other type of guard)

to prevent a person from getting close enough to the engine to be ingested.

[30]     It is common ground that this omission arose from modification made to the original  test  bed  imported  from  the  United  States.   The  original  access  cradles (which, according to the Department – and not denied by Safe Air – resembled those in the first photograph) were removed and replaced with an adjustable platform.  It was that platform that permitted access to the front of the engine.  I was told that the platform design was based on an earlier testing facility at Mangere, Auckland.   It apparently had operated without incident for some 30 years.   (It appears that the railings used on the Woodbourne platform came from that former Mangere facility.) The modification work was designed by an external registered engineering consultancy firm.   It was certified by another.   Neither those firms nor Safe Air identified the need to guard the air intake as a result of the modification.  Nor had the need for such a guard been identified previously at the Mangere facility.

[31]     It is clear that the omission in this case was to prevent physical human access proximate to the air intake while the engine was running. An outer guardrail (against falls from the platform) was provided. An inner guardrail to prevent proximity to the air intake should also have been supplied.   It is also a concern that procedures to retain a grip on the outer handrail, as employees were walking in front of the air intake, were a matter of informal, rather than formal, training and requisition.  It is a further concern that, if retention of a grip (or the ability to grip) the handrail was important,  the  handrail  itself  was  not  fully continuous.    Instead,  as  the  second photograph shows, there was a break immediately in front of the engine mounting, with a chain slung across instead.  Finally, it is certainly a matter of concern that it seems that employees had an impression that they could walk with safety within 18

inches of the air intake while the engine was running.8    Almost certainly what has

happened in this case has disproved that premise.

[32]     As Safe Air’s counsel, Mr Garth Gallaway, acknowledged:

With  the  benefit  of  hindsight,  the  respondent  accepts  the  appellant’s

submission that the procedure was insufficient to address the hazard.

8 See [45] below.

Issue 2: What risk resulted (and how serious was it)?

[33]     Creditably, Safe Air acknowledges that the potential risk of harm from its omission was serious. As Mr Gallaway put it:

The injuries suffered by Mr Hunter were fatal and therefore at the highest end of realised risk.  The respondent accepts there was a risk of serious harm occurring.

Issue 3:   How did Safe Air’s omission depart from prevailing industry standards?

[34]     Limited evidence was before me as to what prevailing industry standards in this case were.  I would have expected more evidence on this particular point.  There was some information before me about how test bed models operate in the United States.  They have confined access cradles – as shown in the first photograph.  There was little reliable evidence about the Mangere facility, which was similar to the modified Woodbourne setup.   But the exact design, safety features and relative training and safety regime in the case of that facility were not in evidence.

[35]     The short point, as the Department’s counsel, Mr Jackson Webber, submitted, is that the test bed used by the respondent “is the only one in the industry that is known to have been modified to install a platform at the front”.  Where an employer purchases a standard second-hand facility, and then modifies it, the employer must ensure that the modification adequately controls hazards associated with the equipment.

[36]     As Mr Webber submitted, the Act establishes a “hierarchy of controls” in ss 8

to 10 for dealing with significant hazards. Where such a hazard is identified:

(a)      The employer’s first duty is to take all practical steps to eliminate it

(s 8).

(b)Where it is not practical to eliminate the hazard, the employer is required to take all practical steps to isolate the hazard (s 9).

(c)      Where neither elimination nor isolation of the hazard are possible, the employer is required to take all practical steps to minimise the likelihood that the hazard will be a cause or source of harm (s 10).

[37]     The Department accepts that elimination of the hazard was not possible in this case.  But that meant Safe Air had a duty under s 9 to take all practical steps to isolate the hazard from its employees.

[38]     The test bed facility originally purchased by Safe Air appears to have been similar to that shown in the first photograph.   That is, with the engine held well above ground, and with isolated access cradles to the side of the engine only.   I accept the Department’s submission that by modifying the original, safe, design, and adding a hydraulic platform which allowed employees to be on the same level as, and directly in front of, the air intake, that significant hazard was no longer isolated.

[39]     The modification was deficient.  The hazard could and should still have been isolated, by the use of appropriate guards.  Alternatively, to minimise but not isolate that risk, strict work methods should have been imposed to ensure that employees did not walk in front of the air intake while the engine was running at high speed, or to ensure that if they did so they were secure and not able to be drawn into the intake.

[40]     In my view the relevant prevailing industry standard for a test bed of this kind is to be assessed from international practice.  That practice provided adequate isolation by design, in accordance with the first photograph.   Safe Air had bought equipment  conforming  to  that  standard.    In  opting  then  to  modify  it,  without adequate  regard to  the  safety implications  of doing so,  Safe Air departed from prevailing industry standards.

Issue 4:  How obvious was the hazard?

[41]     There was considerable argument on this question.  The Judge found that the risk was an obvious one, and that it had been identified.

[42]     It is clear, as Mr Gallaway submitted, that no one at Safe Air or its external consultants had contemplated human ingestion into an engine on the test bed as a meaningful possibility.   But that depended on employees not departing from what appears to have been a relatively informal work practice.   It also seems to have depended on a doubtful premise that to depart from that practice was safe, so long as one did not walk closer to the air intake than 18 inches.

[43]     However it is also clear that warnings about the risk were there, were known, and should have been heeded.  The first is that the Safe Air Engine Starting Ground Run Procedure Manual refers to inlet and exhaust damage at paragraphs 10.2 to 10.4, and includes the sentence:

Personnel  are  warned  of  the  danger  of  ingestion  or  severe  injury  when walking near the intakes and exhausts when the engine is running.

[44]     Secondly, it is an agreed fact that airflow from an engine, when the engine is running, was recorded as a hazard in Safe Air’s hazards register:

Multiple hazards in test cell from running engines: ingestion, burns, high pressure, fuel/oil leakage.

In the register the probable frequency score assigned to the hazard was 2, meaning that it had happened in the past (although plainly that did not involve human ingestion).  The potential severity score assigned was 4, meaning possible fatality. The risk rating (frequency multiplied by severity) was 8, the highest risk rating to be found in that section of the hazard register.

[45]     Thirdly, the fact that employees were trained to walk around the platform holding (or at least touching) the handrail while the engine was running indicates that the risk of injury from getting too close to the air intake was appreciated by Safe Air.  Some suggestion was made by Mr Gallaway that the danger zone was known by the aircraft engineering team to be “18 inches out from the front of the engine. Beyond this distance there is insufficient suction to create a hazard of ingestion into the intake”.  The source of this belief is unclear.  It appears to be informal folklore rather than a formal test-based assessment.  Indeed, given what happened here, the belief was almost certainly wrong.

[46]     Mr Gallaway’s submissions focused on the fact that no one had contemplated the risk of ingestion.  The reference in the hazards register may indeed have been based on an engine running with the propeller operating (which creates a much greater inflow).  But that qualification certainly does not appear on the face of the register.   Nor does it satisfactorily explain the reference in the Engine Running Procedures Manual.

[47]     Mr Gallaway’s submissions also referred to an internal company audit on the Woodbourne system, conducted in July 2004, using Australian Defence manuals as a point of reference.  Those manuals did not refer to the hazard of ingestion.  The audit was said to cover some evaluation of risk exposure and hazards in the system.  The lack of an inner guard rail was not identified in that audit as a practical step that could be taken.  Mr Gallaway accepted, however, that little could be made of this particular assessment.  It appears it related more to running of the engines than a full safety audit  of the test  bed  facility.   To  the  extent  that  the Australian  Defence manuals did not identify risk of ingestion as a risk, that is of course due, conceivably, to the fact that the Woodbourne configuration was unique for such test bed facilities. Other such facilities prevented direct frontal access to a running engine.

[48]     At the end of the day, it is clear that Safe Air was on notice that there was a risk of ingestion and consequent serious injury or fatality from the proximity of employees to the air intake.

Issue 5:  How easy was it to avoid the hazard?

[49]     There was some argument also over this issue.  But not much.  Mr Gallaway was disposed to argue that the practical steps taken to rectify the risk were not “easily taken”.  However, it appears that the guard put in place cost some $39,260 to design and construct.

[50]     In the circumstances that is neither a difficult nor expensive solution.

Issue 6:  In light of the above, how culpable was Safe Air?

[51]     There are two approaches to this issue.  The first is to consider the facts of this case alone. The second is to then relate them to other leading s 6 authorities.

Provisional assessment of culpability

[52]     In summary, the hazard in this case was not present in the test bed in its original form.  It was introduced by the modifications effected by Safe Air, albeit in conjunction with external engineering advice.   The potential risk of harm was, as Safe Air accepts, potentially serious.  The modification was by definition a clear and substantial departure from prevailing industry standards.   The original test bed represented  the  relevant  industry  standard,  and  was  safe  because  it  isolated employees from risk.   The modification removed that isolation and was seriously deficient.  The risk of ingestion into aircraft engines was a hazard known to Safe Air, recorded in its operating manuals.   It was also reflected in the informal practice adopted to have engineers holding or touching the handrail as they passed the front of the engine.  There was an inaccurate and inconsistent prevailing belief that in the absence of the propeller, ingestion was not a hazard more than 18 inches away from the air intake.  The hazard was easily and inexpensively avoided by the introduction of an inner guardrail.

[53]     In all these circumstances, the Judge’s allocation of culpability at the cusp between medium and high does not seem to me to be correct.   In particular, these circumstances: the inadequately thought through modification of an otherwise safe system, the failure in doing so to isolate or minimise the consequent risk (harm from which might be serious or fatal), the inadequacy of the non-continuous outer hand rail and the informal and inconsistent practice as to the need to hold the handrail and the safe separation distance.

[54]     While it is a matter of impression, my provisional assessment is that the degree of culpability by Safe Air in this case was high.

[55]    The next thing to do is to consider that provisional assessment against comparable authorities.

Leading s 6 authorities

[56]     There are three leading s 6 cases relevant here.

[57]     The first is Department of Labour v Hanham v Philp Contractors Limited9

That  is  a  compilation  of three separate  cases.    The most  relevant  involved  the defendant Black Reef Mine Limited.  It had purchased Tiller’s Mine at Greymouth in early 2005.  It employed Mr McGowan as a miner and contracted Mr Haddow as the mine manager. Beside Tiller’s Mine was the Baddeley Mine.  It had been abandoned in 1939 and then flooded. The two mines were separated by a fault.   After encountering difficulties in Tiller’s Mine, it was decided to move mining operations towards the fault.  Plans were drawn up.  Consultations occurred to ensure there was no connection with Baddeley Mine.   However, Mr Haddow was unaware of the flooding in Baddeley Mine.  He received advice from a consultant geologist and was found to be entitled to rely on this advice.

[58]     On 8 March 2006 Mr McGowan and Mr Haddow were working underground to develop a new area of the mine.  Explosive charges were set off.  They created a sudden in-rush of water from Baddeley Mine.  Mr McGowan did not survive.

[59]     Black Reef pleaded guilty to two charges; one  under s 6 of the Act for failing to take all practicable steps to ensure the safety of Mr McGowan and one under s 18(1)(a) of failing to take all practicable steps to ensure Mr Haddow was not harmed. Each offence attracted a maximum fine of $250,000.

[60]     The High Court assessed Black Reef ’s culpability at about the middle of the high band.  They considered this was an accident that was avoidable if the known and recognised precaution of drilling ahead had taken place, or by ceasing mining activities in the new area until a geologist had prepared an accurate plan showing the

location of the mining activity in relation to the Baddeley Mine. Black Reef had to

9      Department of Labour v Hanham v Philp Contractors Limited (2008) 6 NZELR 79 (HC).

accept responsibility for the adverse findings  against Mr Haddow.   The serious consequences  of  death  were  pertinent,  but  were  to  be  balanced  by  the  fact Mr Haddow was not aware the mine was flooded.

[61]     The District Court Judge adopted a starting point of $30,000.  On appeal the

High Court indicated a starting point of about $140,000 was more appropriate.

[62]     The second case is Department of Labour v Street Smart Limited.10     Street Smart Limited ran a business of collecting and managing refuse and recyclable rubbish.  In 2006 a new truck was purchased that was designed for the collection of recycling, rather than rubbish.  Unlike an ordinary rear loading rubbish truck, it was loaded from the side, where there were steps leading up to an alcove behind the cab. I repeat the Court’s description:

The steps did not cover the full width of the alcove, and were positioned in line with the rear wheel of the truck. The bottom step was a 430 millimetre wide platform, creating a footboard on which a person could comfortably stand. There was a single handrail on the side of the steps nearest to the front of the truck.

[63]     This truck was only safe to be used as a recycling truck operated by a sole driver.  If used as a rubbish truck, with additional workers, it lacked the necessary safety features to protect those workers being run over should they stumble or fall under the wheels.  Street Smart knew that and was planning to modify it.  Despite this it decided to use the truck for rubbish collection, without modifying it to make it safe for use, because of high New Year demand for rubbish collection.

[64]     In January 2007 Mr Houia, an employee, was driving the truck in Paeroa on a rubbish collection.   Two other employees were acting as runners.  Against the company’s repeated directions to him on this very issue, Mr Houia had his 13 year old son, Sommers, riding with him.  Sommers decided to assist the runners.  After grabbing a bag he attempted to jump onto the step just as the truck jerked forward. He was unable to maintain a grip on the rail and fell into the gap adjacent to the step.

He was run over by the rear wheel and injured fatally.

10     Department of Labour v Street Smart Limited (2008) 5 NZELR 603.

[65]     It was found that the platform, grab handles, and steps did not provide a safe working platform on which runners could safely stand.  Furthermore, there was no railing or barrier to prevent the runners from going under the truck’s wheels should they slip off the step.  Street Smart pleaded guilty to a charge under s 15 of the Act of failing to ensure another person was not harmed by the action of its employee, the maximum fine of which was $250,000.

[66]     In the District Court a start point of $175,000 was adopted.  On appeal by the Department of Labour Duffy J considered the $175,000 start point appropriate.  This was a “very bad case of negligence” – Street Smart knew the truck was a hazard. And it knew that contrary to directives Mr Houia was allowing his son to act as a runner.  It also had a previous conviction under the Act.

[67]     The third case is Mobile Refrigeration Specialists Limited v Department of Labour.11   Icepak Coolstores Ltd owned a coolstore at Tamahere.   Refrigeration equipment had been installed and maintained by Mobile Refrigeration Specialists Ltd.  On 5 April 2008 a smoke detector in a plant room was activated.  The plant room  contained  relatively  new  refrigeration  equipment  which  was  hydrocarbon based (95 per cent propane, and 5 per cent ethane) and highly inflammable in certain circumstances.  Emergency services arrived, but were not warned of this fact.   On entry firemen saw a “mist or vapour” coming from around the plant room.  On entry into the room they noticed it was coming from a connection in the piping.   A substantial explosion then occurred. The buildings on the coolstore site were completely destroyed.  One fireman was killed.  Others were seriously injured.  One received burns to 71 per cent of his body.  He was hospitalised for six months, 10 weeks being in an induced coma.   Two received severe injuries to their head and face; one had an eight month memory loss, the other had a finger amputated.  Four others also suffered significant but recoverable injuries.

[68]     Icepak faced one charge under s 6 of failing to take all practicable steps to ensure the safety of its employees by failing to take steps to warn employees of the nature of the refrigerant, and to ensure a safe workplace.  That was the lead charge

and was subject to a maximum penalty of $250,000.  Two charges of failing to take

11     Mobile Refrigeration Specialists Limited v Department of Labour (2010) 7 NZELR 243 (HC).

all practicable steps to ensure no hazard in the premises harmed any person (s 16) were also laid.  These related to the failure to warn the firemen of the flammable nature of the refrigeration equipment.   The maximum fine for these charges was

$10,000.

[69]     Mobile Refrigeration was charged with failing to take all practicable steps to ensure that no act or inaction of its employee while at work harmed any other person (s 15).  This offence also attracted a maximum fine of $250,000 and was the lead charge. It faced one other charge of failing to take all practicable steps in relation to the  design  of  pressure  equipment.12    That  too  attracted  a  maximum  penalty  of

$250,000, but was seen as a wash up charge.  Mobile Refrigeration was found to be responsible for installing equipment that failed to meet the relevant standards.  There was no continuous ventilation system.  The electrical equipment was not explosion- proof.    The  gas  detection  device  was  inadequate.    There  were  no  means  of eliminating all sources of ignition on detection of a leak. The Judge found these errors were not the result of callous indifference but due to Mobile Refrigeration’s director getting out of his depth technically.

[70]     In the District Court Icepak was assessed as having a “low to medium level” of culpability and Mobile Refrigeration as high.   A starting point of $50,000 was taken for Icepak’s fine on the s 6 charge.  The Judge accepted that more could have and should have been done by Mobile Refrigeration to ensure that the system operating at Icepak was up to the mark and that it met the statutory standard.  The Judge rejected a submission that culpability was “extremely high”.  That would be the case where there was callous disregard for safety features, or recklessness as opposed to what was careless, sloppy or inadequate work.   He found that it must have been realised at some stage that Mobile Refrigeration’s director’s expertise in this field was being tested to the limit.   Professional assistance from a specialist engineer should have been sought. The Judge adopted a starting point of $140,000.

[71]     An appeal against sentence in the High Court failed.  Leave to appeal to the

Court of Appeal was refused by that Court.

12     Health and Safety in Employment Regulations 1995, reg 18.

[72]     There are also a number of relevant District Court s 6 authorities, dealing with systemic failure leading to fatalities:

(a)      Department of Labour v Sir Edmund Hillary Outdoor Pursuits Centre of New Zealand:13 starting point $150,000.  That was the well known case  involving  a  flash  flood  in  which  six  teenage  students  and  a teacher died.   There was there a high level of culpability.   The defendant should have obtained adequate weather information and closed the gorge that day.  The obvious and dramatic breach of trust,

vulnerable victims and extent of harm were all aggravating features of the offending.

(b)Department  of  Labour  v  Fonterra  Co-operative  Group  Limited:14 starting point $140,000.   In that case an employee collapsed on a conveyer/stacker system and was crushed.   There was a failure to physically close off the area and install additional emergency stop buttons.   The defendant should have ensured the existing lock out procedure was followed and that there was effective communication and appropriate signage.

(c)       Department of Labour v Carter Holt Harvey:15 starting point $90,000.

The deceased employee was working on a heavy duty press when he became caught in it.  The Judge concluded the press was a dangerous machine per se, but it was a freak and unexpected accident.  Given the nature of the machine and the fact that the operator was experienced and trained, culpability fell at the higher end of medium culpability or

marginally towards the lower end of high culpability.

13     Department of Labour v Sir Edmund Hillary Outdoor Pursuits Centre of New Zealand [2010] DCR 26.

14     Department of Labour v Fonterra Co-operative Group Limited DC Hawera CRI 2009-021-958,

20 January 2010.

15     Department of Labour v Carter Holt Harvey DC Whakatane CRI 2010-087-1015, 30 November

2010.

(d)Department   of   Labour  v  Fletcher   Concrete   and   Infrastructure Limited:16  starting point $90,000.  An employee was cleaning inside an aggregate bin using sand inside as a working platform.   He was engulfed when sand was drawn from the bin and died at the scene. The  Judge  (the  same  Judge  as  in  this  appeal)  found  that  safety practices  were  in  places,  but  the  danger  here  was  obvious  to  the

untrained eye.  The bins had been identified as potential hazards and there were guidelines as to how those risks could be isolated and minimised.   Culpability was found to be at the top end of medium culpability.

Final assessment of culpability

[73]     My review of these cases confirms my provisional assessment that culpability of Safe Air in this case must be treated as high.   It also enables me to be more specific.  I conclude that the degree of culpability of Safe Air was within the second quartile of high culpability, i.e. between $120,000 and $140,000.   I accept that its culpability was less than that of Black Reef Mine, Street Smart, Mobile Refrigeration and the Sir Edmund Hillary Outdoor Pursuits Centre.   But it is not at the cusp between medium and high culpability.  Its culpability was clearly higher than that of Carter Holt Harvey and Fletcher Concrete.  It was perhaps more proximate to that of Fonterra, where a starting point of $140,000 was adopted.

[74]     In my view the appropriate range for penalty was $125,000 to $135,000.

Issue 7: Was the sentence manifestly inadequate?

[75]     It  follows  that  I  find  the  sentence  imposed  by  the  learned  Judge  to  be manifestly inadequate.

16     Department of Labour v Fletcher Concrete and Infrastructure Limited DC Nelson CRI 2009-

042-1043, 20 August 2009.

[76]     In accordance with the approach taken by the Supreme Court in Sipa v R17 the relevant starting point for sentencing in this case should have been $125,000 (rather than $100,000).

[77]     Save as to the starting point adopted by the Judge, there was no challenge to the approach he took.  The same approach can be applied therefore to the revised starting point.  No issues as to financial capacity arise and the reparation amount is relatively low.  The $125,000 starting point will therefore be discounted by 25 per cent for co-operation, remorse and the offer to pay reparation.  The product of that calculation will then be discounted by a further 25 per cent for the plea of guilty.  I shall therefore impose a fine of $70,000 (rather than $56,250), together with reparation of $22,250 and court costs of $132.89.

Result

[78]     Appeal allowed.

[79]     Respondent  fined  $70,000  plus  reparation  of $22,250  and  court  costs  of

$132.89.

[80]     The submissions of counsel were of a very high standard.  I thank them for them.

Stephen Kós J

Solicitors:

Crown Solicitor, Nelson for Appellant

Chapman Tripp, Christchurch for Respondent

17     Sipa v R [2006] 22 CRNZ 978 (SC) at [9]: see [25] above.