McKee v Worksafe New Zealand

[2020] NZHC 1002

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CRI-2019-404-408

[2020] NZHC 1002

BETWEEN

STEPHEN MCKEE

Appellant

AND

WORKSAFE NEW ZEALAND

Respondent

Hearing:	2 December 2019
Appearances:	P Wicks QC for the Appellant B McCarthy for the Respondent
Judgment:	15 May 2020

JUDGMENT OF POWELL J

This judgment was delivered by me on 15 May at 3 pm Registrar/Deputy Registrar

Date:

MCKEE v WORKSAFE NEW ZEALAND [2020] NZHC 1002 [15 May 2020]

[1]    The appellant, Stephen McKee, has appealed against a sentence imposed by Judge Sainsbury in the District Court after Mr McKee pleaded guilty to a charge of failing to ensure the safety of one of his employees, Sophia Malthus, Ms Malthus having been injured at work on 29 November 2016.1

[2]    On a charge brought under ss 36 and 48 of the Health and Safety at Work Act 2015 (“Health and Safety Act”)2 Mr McKee was convicted and sentenced to pay:

(a)emotional harm reparation of $110,000;

(b)reparation for consequential loss in relation to earnings $262,000;

(c)a fine of $30,000; and

(d)costs of $3000.

[3]    Mr McKee has  not  taken  issue  with  the  overall  approach  taken  by  Judge Sainsbury and, in particular, does not dispute either the calculation of the fine or the award of costs. Instead he contends that the sentence was manifestly excessive because:

(a)the consequential loss was incorrectly calculated because it did not reflect Ms Malthus’ actual earnings; and/or

(b)the reparation should have been reduced to allow for Ms Malthus’ entitlement to a lump sum payment under the Accident Compensation Act 2001 (“the Accident Compensation Act”).3

1      Worksafe New Zealand v McKee [2019] NZDC 16341.

2      Section 36(2) of the Health and Safety at Work Act 2015 (“the Act”) imposes a duty on a person conducting a business or undertaking to ensure, so far as reasonably practicable, that the health and safety of other persons is not put at risk from work carried out as a part of that business or undertaking. Section 48(1) of the Act makes it an offence to fail to comply with this duty and that failure exposes any individual to a risk of death or serious injury or serious illness.

3      Although Mr McKee’s notice of appeal and submissions identify the sentence being manifestly excessive as a separate ground of appeal it is clear from the submissions that the sentence is only manifestly excessive if Mr McKee is correct and either the consequential loss and/or reparation were incorrectly calculated.

Facts

[4]    Mr McKee had employed Ms Malthus as a stable hand from 26 July 2016. At the time of the accident, she was 19 years old and worked an average of 37 hours per week. Ms Malthus aspired to become a jockey. She had limited experience riding and caring for horses. She attended a riding course at an  equestrian  centre  in  November 2016. Her riding instructors advised her to gain experience on quiet horses as she lacked the strength and training to ride an average racehorse or a young horse.

[5]    As part of her training Mr McKee proposed that she would have her first ride on one of the racehorses. He had not made enquiries with the equestrian centre. An appropriate horse was identified, but when it became unavailable, Ms Malthus was permitted to ride a working race horse. Mr McKee had never seen Ms Malthus ride and understood that she had the experience to ride this horse having done the course. She fell from the horse and sustained serious spinal damage, which unfortunately has left her tetraplegic with limited use of her arms and hands.

[6]    The investigation by the respondent, WorkSafe New Zealand (“WorkSafe”), found that Mr McKee had been a horse trainer for 31 years and knew the risks associated with the industry. There was a lack of formal training in place whereby Mr McKee could monitor, supervise and progress Ms Malthus from the position of stable hand to safely riding a racehorse. Expert evidence obtained by WorkSafe indicated that Ms Malthus was a novice rider and did not have the competence (or the licence) to ride a working racehorse.

[7]    Ms Malthus is in receipt of weekly compensation from the Accident Compensation Corporation as a result of being incapacitated, and has been granted a lump sum compensation payment of $133,802 under Schedule 1 of the Accident Compensation Act for the permanent impairment resulting from her injury.

Relevant law

[8]Section 32(1) of the Sentencing Act 2002 provides:

(1)     A 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 —

(a)     loss of or damage to property; or

(b)emotional harm; or

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

…

(3)In determining whether a sentence of reparation is appropriate or the amount of reparation to be made for any consequential loss or damage described in subsection (1)(c), the court must take into account whether there is or may be, under the provisions of any enactment or rule of law, a right available to the person who suffered the loss or damage to bring proceedings or to make any application in relation to that loss or damage.

(4)Subsection (3) applies whether or not the right to bring proceedings or make the application has been exercised in the particular case, and whether or not any time prescribed for the exercise of that right has expired.

(5)Despite subsections (1) and (3), the court must not order the making of reparation in respect of any consequential loss or damage described in subsection (1)(c) for which compensation has been, or is to be, paid under the Accident Compensation Act 2001.

…

District Court Sentencing

[9]    The first of the two  matters in  issue in  this  appeal  is  the calculation  of  Ms Malthus’ consequential loss. On this issue Judge Sainsbury considered the recent judgment of Venning J in Oceana Gold (New Zealand) Limited v WorkSafe, 4 in which consequential loss was set by reference to the actual income of the victim prior to their accident.5

[10]   In order to ascertain Ms Malthus’ actual income Judge Sainsbury had before him a report prepared by PriceWaterhouseCoopers (“the PWC report”). This provided three calculations (Options A – C) for determining the difference between Ms Malthus’

4      Oceana Gold (New Zealand) Limited v WorkSafe New Zealand [2019] NZHC 365, [2019] DCR 870.

5      At [41] and [68].

loss of earnings and the 80 per cent earnings related compensation paid by ACC. The first of these, Option A, was  neither  supported  by PWC  or  the  parties.  Instead Mr McKee supported the Option B calculation based on Ms Malthus’ actual net income prior to the accident, while WorkSafe relied upon Option C which calculated Ms Malthus’ actual earnings on the basis of the adult minimum wage for a 40-hour week.6

[11]   In determining whether Option B or C reflected Ms Malthus’ actual loss Judge Sainsbury did not consider the approach in Oceana was determinative, as the situation of someone earning under the average minimum wage was not an issue in that case: “the issue was what is the better approach to take, statutory shortfall or open- ended”.7 Instead His Honour noted the emphasis placed by Venning J on consistency with the social contract in the Accident Compensation legislation and agreed with WorkSafe that Option C was so consistent, and indeed “consistent with basic fairness”.8

[12]   On the second issue, whether the reparation should have been reduced to recognise the Accident Compensation lump sum, having determined that an emotional harm reparation award of $110,000 was appropriate, Judge Sainsbury considered the application  of  s  32(3)  and  concluded  that  there  was  no  distinction  between  Ms Malthus’ tetraplegia and her spinal injury.9 His Honour therefore concluded the Accident Compensation lump sum was not compensation for consequential loss but “compensation for the damage done”:10

The impairment that flows from the damage to her spine, the loss of use of her body, her tetraplegia cannot be split apart, they describe the same thing.

[13]   As a result, Judge Sainsbury did not consider he “must or should take into account lump-sum reparation in determining the amount of consequential loss or loss of wages”.11

6      Worksafe New Zealand v McKee [2019] NZDC 16341 at [44]-46].

7 At [51].

8 At [52].

9 At [57].

10 At [58].

11 At [60].

Approach to Appeal

[14]   The Criminal Procedure Act 2011 sets out that a first appeal court must allow an appeal if satisfied that:12

(a)for any reason, there is an error in the sentence imposed on conviction; and

(b)a different sentence should be imposed.

[15]   This Court must point to an error made by the District Court, either in the Judge’s reasoning or shown by additional material considered on appeal.13 The error must be adequately significant for the appeal to be allowed – although the Criminal Procedure Act 2011 does not require the sentence to be ‘manifestly excessive’, this is a helpful concept when considering the seriousness of the error.14

Issue 1 - Were Ms Malthus’ actual earnings incorrectly calculated?

[16]   There is no  dispute that  Judge Sainsbury could  make an  order requiring  Mr McKee to pay Ms Malthus the difference between her actual earnings and the weekly compensation received from the Accident Compensation Corporation. Likewise, there is no issue with the calculation of Ms Malthus’ weekly compensation. The issue is with regard to the calculation of Mr Malthus’ actual earnings, whether this is limited to her actual earnings as Mr McKee contends or, as Judge Sainsbury found, because she was working an average of 37 hours per week, her actual earnings should be rounded up to the minimum adult 40 hour per week wage, so as to give effect to the principles underpinning the Accident Compensation scheme.

[17]   While Judge Sainsbury’s conclusion is readily understood in terms of the dreadful injury suffered by Ms Malthus and the obvious effect that this will have on the future earning capacity for one so young, it does not satisfactorily explain why the loss suffered by Ms Malthus is ostensibly able to be increased with reference to the calculation of weekly compensation under the Accident Compensation Act, and I am unable to follow Ms McCarthy’s argument on behalf of Ms Malthus as to why or how

12     Criminal Procedure Act 2011, s 250.

13     Tutakangahau v R [2014] NZCA 279, [2014] 3 NZLR 482 at [30].

14 At [35].

this should be so. The submission seems to be that because adjustments are made to the level of compensation for low income earners in fulltime employment15 for the purposes of calculating weekly compensation, this should also require an adjustment to Ms Malthus’ pre-injury earnings for the purpose of calculating consequential loss reparation. Such an approach is not provided for in either the Health and Safety Act or the Accident Compensation Act, and, in the absence of such a specific statutory provision requiring such approach, it is difficult to see how reference to the Accident Compensation Act and in particular the fact that the Accident Compensation Act has a minimum level of compensation for those working in excess of 30 hours per week, can inform Ms Malthus’ actual level of loss for which s 32 of the Sentencing Act provides a mechanism to recover.

[18]   In the absence of a wider calculation of the type Venning J specifically excluded in Oceana,16 the measure of loss for Ms Malthus, as Mr Wicks submitted on behalf of Mr McKee, must be the amount Ms Malthus was actually earning at the time of her injury. The calculation of Ms Malthus’ loss (which by definition must be her actual earnings) and the calculation of the compensation under the Act are clearly distinct. The fact that the Accident Compensation Act formula means she is entitled to a greater level of compensation relative to her actual earnings cannot change the level of those actual earnings at the time of the accident. An approach based on actual earnings is entirely consistent with the “statutory shortfall” approach identified by Venning J in Oceana when he noted that any shortfall:17

… is to be calculated as the difference between the pecuniary benefit the victim would have received and the compensation payable to them under the Accident Compensation Scheme, in accordance with the entitlements set out in Schedule 1 of the Accident Compensation Act limited to the period that the payments are made under that Scheme.

(footnotes omitted)

15 Detail in s 6 of the Accident Compensation Act as being 30 hours or more per week. See also s 42 of the Accident Compensation Act for the provision adjusting the level of compensation for low income full-time employment.

16 Oceana Gold (New Zealand) Limited v WorkSafe New Zealand [2019] NZHC 365, [2019] DCR 870 at [68]. The alternative approach excluded by Venning J was identified at [42] as being an inquiry that would “entitle a victim to the prospective future value of the financial loss they have suffered (calculated by reference to anticipated life-time earnings on the basis of actuarial reports), for a period of time unconstrained by any time limit for which compensation may be payable under the Accident Compensation legislation (the “open-ended approach”).”

17 Oceana at [68].

[19]   On the contrary to accept WorkSafe’s submission would lead to a number of anomalies. There are many reasons why both employers and employees would in different circumstances agree that an individual would be employed for less than 40 hours per week. On WorkSafe’s logic someone working 30 hours per week would also have their reparation entitlement based on a 40-hour week even though that would represent a 33 per cent increase in what they were receiving prior to the accident. In contrast someone working 29 hours per week’s actual earnings would remain what they earned for 29 hours work.

[20]   The position is not altered by Ms McCarthy’s references to potential earners under the Accident Compensation Act or the position of high-income earners. While specific provision is made for potential earners under the Accident Compensation Act, these apply where a claimant for accident compensation is not eligible for weekly compensation and thus, by definition, cannot be relevant to Ms Malthus. It is moreover the type of calculation that Venning J concluded would be inappropriate to pursue in this type of exercise, nor indeed did Judge Sainsbury’s application of s 32 purport to do so, the calculation carried out by his Honour was correctly focussed on determining Ms Malthus’ actual income for the purpose of determining her consequential loss.

[21]   Similarly, in relation to high income earners, while the loss to a particular victim may in fact be considerable the Court clearly retains a discretion as to whether to order the full amount of consequential loss not only because of the various factors noted in Oceana, but also because it maybe inappropriate and/or unreasonable in terms of the totality of the offending for which the defendant is being sentenced.

[22]   I therefore conclude that on this first issue Ms Malthus’ actual earnings were incorrectly  calculated,  and  this  resulted  in  a  manifestly  excessive   sentence.   Ms Malthus’ actual earnings were required to be calculated on the basis of the 37 hours per week she was working at the date of her injury, being Option B from the PWC report as opposed to Option C, and requires the reparation to be reduced by $106,000 to $156,000. On the first issue the appeal is therefore allowed.

Issue 2 - Should the reparation have been reduced to take into account the lump sum paid by Accident Compensation Corporation?

[23]   In his written submissions Mr Wicks’ submitted that Judge Sainsbury failed to reduce the reparation payable to Ms Malthus to accommodate her entitlement to a lump sum payment under the Accident Compensation Act. In particular Mr Wicks noted s 32(3) of the Sentencing Act requires a consideration of whether there is any other claim “in relation to” consequential loss or damage. Counsel states that this phrasing is deliberate and anticipates that the types of compensation can be different but connected. If the intention had been simply to apply to the same compensation (to prevent double recovery) it would have been drafted to say precisely that in similar terms to s 32(5). Counsel therefore submits that the lump sum paid under the Accident Compensation Act needs to be considered under s 32(3).

[24]   On this second issue the case for Mr McKee is misconceived. As Ms McCarthy submitted a lump sum payable under the Accident Compensation Act is not compensation for lost earnings, with a result there is no basis on which to offset it against any reparation for consequential loss. Instead the legislation makes it quite clear that the lump sum is paid for permanent impairment – a loss, loss of use, or derangement of any body part, organ system, or organ function..18 The lump sum is assessed by reference to the American Medical Association Guides fourth edition (“AMA 4”), together with the ACC User Handbook.19 An assessment results in an identified percentage of impairment according to the tables contained in AMA 4, with a total percentage between 10 and 100 per cent entitling the claimant to a maximum lump sum payment of $100,00020 plus any additional amount for indexation.21

[25]   Importantly, as Ms McCarthy also noted, for the purposes of the second issue in this appeal, the level of impairment is not influenced or affected by the extent to which the impairment has affected an individual’s capacity to work or weekly compensation – it being clear that the same injury could have a minor or a significant

18     Accident Compensation Act 2001, ss 6 and 69.

19     Injury Prevention Rehabilitation and Compensation (Lump-Sum and Independence Allowance Regulations 2002, reg 4(2).

20     Injury Prevention Rehabilitation and Compensation (Lump-Sum and Independence Allowance Regulations 2002, Schedule – Scale of Lump-Sum Compensation.

21     Injury Prevention Rehabilitation and Compensation (Indexation) Regulations 2002, regs 11 and 15.

impact on a person’s capacity to work, depending on their occupation.22 While reparation can be awarded for losses suffered as a consequence of physical harm, it cannot be awarded for the harm itself. If s 32(3) intended the Court to consider any right available in relation to the underlying cause of the consequential loss, s 32(3) would have referred to ‘harm, loss or damage’ like s 32(1)(c) rather than just ‘loss or damage’.

[26]   Together, these provisions make it clear that the lump sum paid to Ms Malthus was in respect of her injury and was entirely unconnected to any reparation for consequential loss in relation to earnings. Section 32(3) is simply not wide enough to capture such payments because an application for a lump sum payable as a result of permanent impairment is not an application for loss or damage consequential to the harm suffered.

[27]As a result, on the second issue the appeal must be dismissed.

Decision

[28]   The appeal against sentence is allowed in part. For the reasons set out above the consequential loss was incorrectly calculated. The reparation for consequential loss in relation to earnings is adjusted to $156,000 to reflect Ms Malthus’ actual income at the date of her injury. The orders made by Judge Sainsbury are otherwise confirmed.

Powell J

22     Accident Compensation Corporation ACC User Handbook to the AMA “Guides to the Evaluation of Permanent Impairment” 4th Edition (1 May 2002) at 8.