Worksafe New Zealand v Central Siteworks Limited (in liquidation)
[2019] NZHC 2219
•5 September 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-1575
[2019] NZHC 2219
UNDER s 248(1)(c)(i) of the Companies Act 1993 BETWEEN
WORKSAFE NEW ZEALAND
Applicant
AND
CENTRAL SITEWORKS LIMITED (IN LIQUIDATION)
Respondent
Hearing: 30 August 2019 Appearances:
Ms Steel for the Applicant
No appearance for the Respondent
Judgment:
5 September 2019
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 5 September 2019 at 3.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
WorkSafe New Zealand, Auckland
WORKSAFE NEW ZEALAND v CENTRAL SITEWORKS LTD (IN LIQUIDATION) [2019] NZHC 2219
[5 September 2019]
[1] The applicant (WorkSafe) applies for an order under s 248(1)(c)(i) of the Companies Act 1993 (the Act) permitting it to continue a prosecution against the respondent (Central) that it commenced in the Waitakere District Court on 9 April 2018.
[2] The charge against Central was laid under ss 36(1)(a) and 48(1) of the Health and Safety at Work Act 2015. The maximum penalty for an offence under s 36(1)(a) is a fine not exceeding $1,500,000.1
[3] On 4 September 2018 Central pleaded guilty to the charge, and WorkSafe and Central agreed on a summary of facts which was submitted to the District Court. The prosecution was adjourned for sentencing following the guilty plea, but after a number of adjournments, and before the case came back on for the sentencing phase, Central put itself into liquidation by special resolution of its shareholders. That occurred on 31 May 2018.
[4] The sentencing in the District Court has been further adjourned to 26 September 2019, to allow WorkSafe to make the present application for leave to continue with the prosecution.
The need for leave to continue the prosecution — s 248(1)(c)(i) of the Act
[5]Section 248(1)(c)(i) of the Act provides:
248 Effect of commencement of liquidation
(1)With effect from the commencement of the liquidation of a company,—
…
(c)unless the liquidator agrees or the court orders otherwise, a person must not—
(i)commence or continue legal proceedings against the company or in relation to its property; or
…
1 Health and Safety at Work Act 2015, s 48(2)(c).
[6] WorkSafe accepts that s 248(1)(c)(i) applies in respect of a criminal prosecution, and I accept that that is the position.2 I also accept that the need for leave to continue a prosecution against a company in liquidation continues after the company has pleaded guilty to the criminal charge but has not yet been sentenced.3
The liquidators have not given their consent
[7] Central's liquidators are Mr Derek Ah Sam and Paul Vlasic. On 20 June 2019 WorkSafe sought their consent to continue the prosecution. On 10 July 2018 the liquidators advised that they did not consent to the prosecution continuing, but they provided no reasons.
[8] A follow up request was sent by WorkSafe to the liquidators on 15 July 2019. Mr Ah Sam replied on 18 July 2019, confirming that the liquidators did not consent. Mr Ah Sam said:
The Liquidators do not see any benefit in having the Court spend time considering this matter or quantifying the fine when there is no prospect of recovery of the same. Having the Court quantify the company's liability is unlikely to affect the liquidation of the company in any meaningful way given the limited prospect of any payments to unsecured creditors.
I appreciate that you may have other non-economic motivations to proceed with this matter and these will be a matter for you to raise with the Court if you seek leave to continue the prosecution. The Liquidators intend to simply abide by the decision of the Court should you choose to seek leave to continue with the sentencing hearing.
The offence to which Central pleaded guilty
[9] On 11 April 2017, the defendant was engaged in work clearing a piece of property described as the Hunter Road block in Waitakere (the Hunter block). The work involved the removal of large, unpruned and un-thinned, radiata pine trees, on undulating land. The trees were around 20 metres tall. The defendant agreed to undertake the felling and clearing work, and it arranged a group of subcontractors to
2 In McPhail v Durbridge Developments Ltd (in liquidation) HC Auckland M54/96, 9 March 1998, Randerson J held that leave is required under s 248 to commence or continue proceedings against a company in liquidation, whether the proceedings be criminal or civil in nature. The same conclusion was reached by Thomas J in WorkSafe New Zealand v Riverland Adventures Ltd (in liquidation) [2014] NZHC 1350, and Venning J was content to accept that position in Commerce Commission v Wild Nature NZ Ltd (In Liquidation) [2014] NZHC 2861 at [11] – [13].
3 Commerce Commission v Wild Nature NZ Ltd (in liquidation) [2014] NZHC 2861.
undertake the work. Central accepted that it made no enquiries about the competence of its subcontractor (Mr K) and his crew in terms of whether they could undertake the work on the Hunter block. Central engaged Mr K as a contractor, and Mr K in turn subcontracted a crew of four additional workers to carry out the work under his direction as foreman. An accident occurred, and one of the workers was seriously hurt when he was hit from behind by a falling tree. The worker suffered serious chest injuries, including multiple fractures to his ribs, and a punctured lung.
[10] WorkSafe investigated the incident, and immediately identified two unsafe log stacks. They ascertained that Mr K and his crew had undertaken removal of trees from properties, but not in the forest context. WorkSafe concluded that Central had not appreciated or understood the risks associated with tree felling, which are well known both inside and outside the forestry industry. WorkSafe referred to the provisions of the Approved Code of Practice for Safety and Health in Forestry Operations, which provided relevant provisions for the safety of those engaged in forestry operations.
[11] WorkSafe also referred to Regulation 9 of the Health and Safety at Work (General Risk and Workplace Management) Regulations 2016, which provides:
9Duty to provide information, supervision, training, and instruction
(1)A PCBU [person conducting a business or undertaking] must ensure, so far as is reasonably practicable, that every worker who carries out work of any kind, uses plant of any kind, or deals with a substance of any kind that is capable of causing a risk in a workplace—
(a)either—
(i)has adequate knowledge and experience of similar places, and work, plant, or substances of that kind, to ensure that the worker carrying out the work, using the plant, or dealing with the substance is not likely to adversely affect the health and safety or cause harm to the worker or any other person; or
(ii)is adequately supervised by a person who has that knowledge and experience; and
(b)is adequately trained in the safe use of—
(i)all plant, objects, substances, or equipment that the worker is or may be required to use or handle; and
(ii)all personal protective equipment that the worker is or may be required to wear or use.
[12] WorkSafe concluded that Central did not have a complete health and safety plan for the site, and that none of the workers could demonstrate that they were trained or were undertaking training. It took the view that, as a PCBU, Central had a duty to assume, so far as was reasonably practicable, responsibility for the health and safety of workers who worked for it, while the workers were at work in the business or undertaking.4
[13] As set out in the agreed Statement of Facts filed in the District Court, WorkSafe contended that Central had failed to ensure:
… the health and safety of workers as it was reasonable practicable to:
a. Assessed the [Hunter block] and determined based on the nature and scope of the work whether the workers were competent to undertake the forestry operation given the nature of the stand of trees and the hazards associated with felling at the block:
·Confirm and be satisfied that the crew were capable and qualified to complete the work required.
·Ensure the person in charge of the site was competent to supervise and ensure the work was performed in a safe manner.
b. Ensured that workers engaged to undertake tree felling were competent and able to undertake forestry work at the [Hunter block].
c. Develop and implement appropriate safe working methods relevant to the work being undertaken, including ensuring that there was:
·A harvest plan and five step felling plan;
·A health and safety policy;
·Training and supervision;
·Hazard management: including hazard and risk assessment and implementation of the appropriate controls including the use of radio communications.
4 Health and Safety at Work Act 2015, s 36(1)(a).
Discussion and conclusions
[14] Section 248 of the Act gives the Court a discretion as to whether a legal proceeding against a company in liquidation should continue.
[15] Factors which may be relevant to an application under s 248 involving a criminal charge, will include any significant delay in applying for leave, and whether there is good reason to proceed against a company which may have no remaining assets. Whether a director of the company is facing a prosecution arising out of the same circumstances may also be a relevant consideration. Where the prosecution involves issues of safety, in which the public has a substantial interest, that will also be a factor.5 A need to denounce the relevant conduct and deter others, may also be important factors informing the broader question of whether there is a public interest in the charge continuing.6
[16] Commerce Commission v Wild Nature (NZ) Ltd (In Liquidation) was a case concerned with charges laid under the Fair Trading Act 1986.7 A number of companies were charged, convicted and sentenced, with fines of up to $200,000 imposed. The issue was the same as it is in this case, whether a prosecution should be allowed to continue against a company that has pleaded guilty to an offence, where liquidation has intervened between the date of the guilty plea and sentencing. The Commerce Commission relied on the general public interest in the circumstances of the offending, and on considerations of deterrence and denunciation. Venning J noted that Wild Nature was considered to be the most culpable of the offenders.
[17] Venning J concluded that leave should be granted. First, His Honour accepted that the relevant conduct was serious, involving as it did the potential to damage New Zealand's reputation in the tourism market. His Honour then noted that the proceedings were well advanced. As in this case, all that remained was the sentencing hearing. While the liquidator was concerned to avoid the cost of the sentencing hearing, His Honour noted that those costs would be limited, and that submissions
5 WorkSafe New Zealand v Riverland Adventures Ltd (In Liquidation) [2014] NZHC 1350 at [17] – [20].
6 At [32].
7 Commerce Commission v Wild Nature (NZ) Ltd (In Liquidation) [2014] NZHC 2861.
should have been largely prepared given that sentencing had been adjourned several times. Delays to date in dealing with the matter had not been of the Commission's making.
[18] Venning J also considered that deterrence and denunciation were still important considerations, even if the Commission might not be able to recover a fine, or the District Court did not impose a fine at the level the Commission sought: one of the purposes of a fine is to mark the seriousness of offending.
[19] A further point considered relevant by Venning J was that companies facing prosecution by regulatory authorities should not consider that they can avoid prosecution or penalty by voluntary liquidation. Liquidation should not be seen as a means of escaping or avoiding the consequences of criminal activity. His Honour considered that that point also provided an answer to a submission that the defendant's director was separately facing charges.
[20] Commerce Commission v Appenture Marketing Ltd (In Liquidation) was a similar case, in which Appenture had been prosecuted for alleged breaches of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) and the Fair Trading Act 1986.8 Appenture entered not guilty pleas, but was subsequently put into liquidation. Venning J identified the following relevant considerations:
(i)The importance of the prosecution, involving as it did the prosecution by a regulatory agency involving the enforcement of public rights.
(ii)The seriousness of the offending (vulnerable consumers were affected).
(iii)Potential delay to the liquidation of the company that might be caused by the continuation of the criminal proceeding.
(iv)Whether there was any alternative to continuing the prosecution against the company that would achieve the same result.
8 Commerce Commission v Appenture Marketing Ltd (In Liquidation) [2017] NZHC 1515.
(v)Whether there was a point in the prosecution, and whether conviction would achieve the principles of deterrence and denunciation, even if ultimately a fine could not be imposed due to Appenture's financial position.
[21] Applying the above authorities in this case, I consider that WorkSafe has made out a case for granting leave. I do not consider that there has been any undue delay caused by WorkSafe, and the criminal proceeding is well advanced — all that remains is to hold a sentencing hearing, and Ms Steel tells me that written submissions on sentencing have already been submitted by WorkSafe. As in Commerce Commission v Wild Nature (NZ) Ltd (In Liquidation), it seems likely that sentencing submissions have probably also been prepared for Central for one of the earlier occasions on which the sentencing has been adjourned.
[22] The most compelling point in favour of granting leave relates to the seriousness of the offending. This appears to be a case where the injured worker could easily have been killed, in an industry where it is acknowledged that there have been significant risks and a large number of fatalities and work-related injuries over the years. The maximum fine for the offending is, at $1.5 million, substantial.
[23] In my view there is a clear public interest in promoting safety in the forestry industry, and more generally in ensuring that breaches of the Health and Safety at Work Act which expose workers to serious risk of death or injury are brought before the courts. Of course whether a fine is imposed, and if so how much, will be matters for the sentencing Judge in the District Court.
[24] Another point favouring the grant of leave is that this is not a case where the apparent seriousness of the offending can be marked by the imposition of a significant penalty on a director of Central. There was no charge against any Central director, and Ms Steel tells me that WorkSafe would now be out of time to commence a prosecution against a director.
[25] A possible consideration might have been any unfairness to Central's creditors if leave were granted. But I do not consider that is a serious consideration in this case.
It appears from Mr Ah Sam's email of 18 July 2019 that there will be little or nothing for Central's unsecured creditors anyway. And as in WorkSafe New Zealand v Riverland Adventures Ltd (In Liquidation), any prejudice to creditors is in any event outweighed by the public interest in WorkSafe continuing with the charge.9
[26] The allegations in Riverland were not dissimilar to the allegations Central has admitted in this case. They involved the safety of equipment hired for use, in circumstances where a fatality had ensued. Thomas J considered that the issue of whether practical steps had been taken to avoid the danger was one of significant public interest.10
[27] For all of the foregoing reasons, I am satisfied that the application for leave to continue the prosecution against Central commenced by WorkSafe in the District Court at Waitakere on 9 April 2018 under the Health and Safety at Work Act 2015 should be granted. I make an order accordingly.
[28] WorkSafe also applies for costs. I will follow the approach adopted by Venning J in Commerce Commission v Wild Nature (NZ) Ltd (In Liquidation), and apply the ordinary principle that costs should follow the event. Costs were awarded in that case on a 2B basis, but in this case the liquidators have not opposed the application for leave. In the circumstances, I award costs against Central on a 1B basis, with disbursements as fixed by the Registrar.
Associate Judge Smith
9 WorkSafe New Zealand v Riverland Adventures Ltd (In Liquidation), above n 5, at [37]. Addressing the issue of whether the imposition of a fine would advantage the Crown over other creditors, Thomas J said: "Whether or not a fine is imposed and the amount of the fine is not relevant to a decision as to whether a criminal prosecution should continue."
10 At [33].
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