IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI-2012-404-000443 [2013] NZHC 1526

IN THE MATTER OF	an appeal under s 116 of the Summary
Proceedings Act 1957

BETWEEN	DEPARTMENT OF LABOUR Appellant

AND	EZIFORM ROOFING PRODUCTS LIMITED
Respondent

Hearing:	11 March 2013

Counsel:	D G Johnstone and J W Wall for the Appellant
R P Coltman and A C N de Hamel for the Respondent

Judgment:	24 June 2013

JUDGMENT OF DUFFY J [Re Appeal Against Sentence]

This judgment was delivered by Justice Duffy on 24 June 2013 at 2.00 pm, pursuant to
r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Solicitors:	Meredith Connell, Auckland
Fortune Manning, Auckland

DEPARTMENT OF LABOUR v EZIFORM ROOFING PRODUCTS LTD [2013] NZHC 1526 [24 June 2013]

[1]       Eziform   Roofing   Products   Limited   (Eziform)   does   roofing   work   on residential and non-residential buildings.  During the course of doing some work on the rooftop guttering of a two-storey residence in Takapuna, one of Eziform’s employees fell off the roof, and suffered a serious injury.  The Department of Labour (the Department) prosecuted Eziform under the Health and Safety in Employment Act 1992 for failing to ensure the safety of an employee.  Eziform pleaded guilty to the charge, was convicted and ordered to pay reparation of $40,000 and a fine of
$18,000.   The Department now appeals to this Court against the level of the fine imposed, on the ground it is manifestly inadequate. The appeal is opposed.

Facts of offending

[2]       On 4 April 2011, Mr Paul and Mr McKay were directed by the managing director of Eziform to install replacement rooftop guttering for the two-storey residence.  When both men were on the roof, they encountered difficulty installing the guttering as it was too big.  Mr McKay tried to squeeze the guttering into place while in a prone position.  Mr Paul stood on the edge of the roof and attempted to stamp and push the guttering, while holding onto Mr McKay’s shoulders.  Mr Paul lost his footing and fell about 5.5 metres onto a scoria concrete surface below.

[3]       As a result of the fall, Mr Paul suffered multiple fractures to his lower right leg and left foot.  His right knee was severely fractured and he suffered two shattered vertebrae and spinal cord damage.  He was hospitalised for three months and had to undergo around 16 hours of surgery, involving the removal of a rib and the insertion of plates into his right knee, as well as two titanium vertebrae.  Mr Paul now suffers from a permanent limp, and bladder and bowel control difficulties.  At the time of sentencing, he was receiving physiotherapy twice a week.  He had not returned to work and is unlikely to ever be able to work as a roofer again.

District Court decision on conviction

[4]       In   Department   of   Labour   v   Eziform   Roofing   Products   Limited   DC North Shore CRI-2011-044-6779, 14 September 2012, Judge Sinclair found Eziform

guilty of two offences pursuant to ss 6 and 50(1)(a) of the Health and Safety in

Employment Act.  Each offence carried a maximum penalty of a fine of $250,000.

[5]       The Judge found that three practicable steps had not been followed by the respondent to ensure that its employees were not exposed to the risk of a fall from a height.  First, Eziform had failed to provide, and so to implement a general safe work procedure.  The safety processes and training that Eziform had initiated were only being implemented on larger commercial sites; they had not been transferred to the smaller routine maintenance jobs.  Also, whilst some of Eziform’s employees had received training in industry standards in fall arrest and fall restraint systems, neither Mr Paul, nor Mr McKay had been trained in this way.  The Judge found that specific training for routine sites was needed.  Secondly, Eziform had not formed a clear plan prior to directing its workers to the worksite.   The Judge found that insufficient planning had led to Mr Paul and Mr McKay deciding to ascend the roof without any safety methods in place.  Thirdly, Eziform had not identified the appropriate control mechanism to manage the risk involved in the work undertaken by Mr Paul and Mr McKay.  In this regard, the Judge found that the use of scaffolding would have been the most appropriate measure, and the inconvenience and cost of its use would not have been disproportionate to the risk involved.  The Judge rejected the idea that the use of safety harnesses would have been an alternative method of reducing the risk, as neither Mr Paul, nor Mr McKay had been adequately trained in their use. Thus, she concluded that Eziform’s failure to analyse risk and plan avoidance measures in advance of the work commencing was primarily responsible for the injury. At [73], the Judge found:

If [Eziform] had properly planned to establish how the work was to be carried out safely full consideration would have been made as to whether the risk could have been isolated and, if it could not, how it could have been minimised.   With planning Messrs Paul and McKay would not have been able to reach their own conclusion that harnesses were not needed.

Sentencing decision

[6]       Judge Sinclair noted that at the request of Eziform, there was a restorative justice conference.   She described this as a worthwhile and fruitful exercise.   She

referred to the victim impact statement, which outlined Mr Paul’s ongoing physical,

emotional and psychological issues.

[7]       To arrive at the sentence, the Judge followed the three-step approach set out in Department of Labour v Hanham & Philp Contractors Ltd [2008] 6 NZELR 79 (HC).   This entailed her assessing the amount of reparation; secondly, fixing the appropriate fine; and finally, making an overall assessment of the proportionality and appropriateness of the total imposition of reparation and fine.

Reparation

[8]       The Judge ordered reparation of $40,000.  The major factors considered by the Judge were:

(a)	The  extent  and  severity  of  Mr  Paul’s  injuries  and  his  subsequent

needs;

(b)       The respondent’s remorse, borne out by its efforts to improve safety procedures, its offer to re-employ Mr Paul as a safety officer, and its offer   to   make   amends   (a   sum   of   $25,000   offered   following conviction); and

(c)	The respondent’s ability to pay reparation.

Fine

[9]       The Department sought a fine of $75,000.  Eziform contended that a fine of

$5,000 would be sufficient.

[10]     In accordance with the direction given in Hanham & Philp, the Judge applied the methodology established in R v Taueki [2005] 3 NZLR 372 (CA).   She set a starting point; secondly, she considered the relevant mitigating factors; and thirdly, she considered the circumstances of Eziform.

[11]     In setting the starting point, the Judge had regard to the three-tier scale of culpability identified in Hanham & Philp:

(a)	Low culpability where a fine of up to $50,000 is recommended;

(b)	Medium culpability where a fine of between $50,000 to $100,000 is recommended; and

(c)	High culpability where a fine of between $100,000 and $175,000 is recommended.

[12]     The Department put Eziform’s culpability at the low bottom end of the high band and so it sought a starting point of $100,000.  Eziform proposed a starting point of $50,000 being at the low end of the medium band.

[13]     The Judge adopted a starting point of $60,000.   To arrive at this sum, she considered Eziform’s blameworthiness.  Here, the Judge referred to Eziform’s failure to take three practicable steps to counter the risk involved.  She considered the risk was obvious and Eziform’s actions involved a significant departure from industry standards.  She referred to the availability of safety harnesses and the general steps that Eziform had taken in training staff in their use, but countered that general finding with reference to her specific finding that Mr Paul and Mr McKay had no adequate training in the use of the harnesses.  She reminded herself of comments by the Full Court in Hanham & Philp regarding how serious injury or death can result from low levels of carelessness, hence, the need to take care when assessing culpability by reference to the outcome.   She then took into account Mr Paul’s actions on the roof, which she described as “foolish”.  Whilst acknowledging that Eziform’s  culpability  of  the  breach  was  independent  of  its  employees’ actions, relying on a comment made by Ellis J in Tranz Rail Ltd v Department of Labour [1997] ERNZ 316 (HC), the Judge also factored in Mr Paul’s actions, considering them  “relevant  to  the  full  assessment  of  blameworthiness  and  the  aggravating features of the offending”.

[14]     Then the Judge considered the mitigating factors to be taken into account. Here, she relied on Ballard v Department of Labour (2010) 7 NZELR 301 (HC), where the Court set out the appropriate deductions for certain mitigating factors and allowed for a total adjustment of up to 45 per cent, comprising, 15 per cent for reparation, 10 per cent for co-operation, five per cent for remorse, five per cent for remedial action, and 10 per cent for a favourable safety record.   The Judge acknowledged that the assessment in Ballard was generous and that other authorities had adopted a less generous mitigatory figure.  She adopted a mitigatory discount of
35 per cent, which reduced the fine to approximately $38,000.

[15]     The discount factors that went to make up the 35 per cent discount included the reparation payment of $40,000; remorse, which was shown through Eziform’s willingness to attend a restorative justice conference and its offer of re-employment to Mr Paul.  The Judge then referred to the countervailing factor that Eziform had only offered to make amends at a very late stage, however, she considered that this aspect of Eziform’s conduct could be taken into account by not giving any credit for a guilty plea.

[16]     The Judge referred to the significant steps that Eziform had taken since the accident to improve its safety procedures.   She referred to the Department’s submission that here, Eziform was only doing what the law obliged it to do.  She appears to have accepted this submission in terms of its legal accuracy.  However, she nonetheless went on to find that the steps that Eziform had taken after the accident were a “significant mitigatory feature”.   She saw such steps as being a genuine indication of remorse.  She then referred to Eziform as having a favourable safety record and to the company’s co-operation with the Department.

[17]     Next the Judge considered Eziform’s financial resources. The Judge accepted Eziform’s evidence that its financial circumstances were poor.   She considered it imperative that at a time when Eziform was suffering financially, it have sufficient funds available to it to continue to fund its safety programme.  In this regard, she noted that a heavy fine could jeopardise the company’s ongoing viability.  This led the Judge to make a further reduction of $20,000, which brought the fine down to
$18,000.

[18]     The Judge’s final step in fixing a fine involved her considering if the totality of the reparation and fine was proportionate to the circumstances of the offending and the offender.  She considered that the level of reparation and fine imposed on Eziform  were  proportionate  to  those  circumstances,  so  she  decided  against  any further adjustments.   Thus, the end-point sentences came to reparation of $40,000 and a fine of $18,000.

Appellant’s submissions

[19]     The Department made three key submissions: (a) the starting point adopted by the Judge was too low; (b) the Judge gave excessive credit for mitigating factors; and (c) the Judge gave excessive recognition of Eziform’s financial circumstances when she further reduced the fine.

Starting point too low

[20]     The Department argued that the Judge’s decision on fixing a starting point was wrongly influenced by an irrelevant consideration; namely, the “foolish” behaviour of Mr Paul while on the roof.   The Department contended that the comments of Ellis J in Tranz Rail, which suggested that an employee’s carelessness was a relevant consideration when assessing an offender’s culpability, related to an occasion where a worker had deliberately disobeyed rules, and so they should be confined to such cases.   Secondly, the Department argued that assessment of culpability factors in Hanham & Philp showed that the Full Court had considered the conduct of the offending employer and not the conduct of the injured employee. Thirdly, the Department argued that as liability is predicated on an employer not taking  all  practicable  steps  to  ensure  safety,  it  is,  therefore,  incumbent  on  an employer to prevent conduct by its employees that contributes to any risk, including taking steps to minimise the risk of “foolish” behaviour.   Thus, the Department contended that once liability is established, it is contradictory for foolish behaviour to be viewed as a factor in the assessment of the offender’s culpability.

[21]     The Department argued that the low starting point adopted was out of step with  previous  analogous  decisions,  namely  Arbor  Reman  Ltd  v  Department  of

Labour HC Auckland CRI-2010-404-101, 9 November 2010 and Ferg’s Rock-N- Kayak Limited v Department of Labour HC Wellington CRI-2010-485-25, 29 June
2010. Thus, the starting point was inappropriate in the circumstances of this case.

Excessive credit for mitigating factors

[22]     The Department  contended  that  the excessive credit  given for mitigating factors was manifest in three ways.   First, the Judge had erred by counting for remorse twice: once in assessing the level of reparation; and then as a mitigating factor for the purpose of fixing the fine.  Secondly, the Judge had erred by placing too much weight on the respondent’s offer of reparation, which was late and for the lesser sum of $25,000.   Thirdly, the Judge had erred by taking into account the respondent’s “co-operation with the Ministry”, given the circumstances in which that occurred.

[23]     The Department submitted that, in line with Ballard v Department of Labour, the following discounts would be appropriate: (a) for the offer to make amends: five per cent; (b) for remedial action to prevent the recurrence of the circumstances: five per cent; (c) for a favourable safety record: ten per cent; (d) other factors such as co- operation and remorse were said to warrant no discount.  Therefore, the maximum legitimate discount would have been 20 per cent; all of which shows that the 35 per cent discount given was excessive.

Excessive recognition of Eziform’s financial circumstances

[24]     Here, the Department submitted, in reliance on statements of this Court in Department of Labour v Street Smart Limited  (2008) 5 NZELR 603  (HC), that penalties for offences under the Act must “bite” and be at a “licence fee” level. Secondly, it submitted that the Judge had illegitimately double-counted financial incapacity, by taking it into account when assessing the level of reparation, as well as the level of fine.  Thirdly, it submitted that, in granting the reduction, the Judge had paid no attention to the core principles of sentencing, namely deterrence and denunciation.

[25]     In view of the above, the Department submitted that the sentence should be substituted on appeal and that a fine in the range of $70,000 to $75,000 would be an appropriate sentence.   In the alternative, the appellant submitted that the matter should be remitted to the District Court for re-sentencing.

Respondent’s submissions

[26]     Eziform submitted that informants’ appeals against sentence are not for cases where the matter is borderline: R v Cargill [1990] 2 NZLR 138 (CA), and that here the current sentence was well within the range of possible sentences, so it was not manifestly inadequate.

[27]     Eziform argued that the starting point was adequate.  Eziform submitted that it was reasonable and proper for the Judge to take Mr Paul’s conduct into account, as this approach fitted within the Hanham & Philp criteria of the “obviousness of the hazard”.   Eziform contended that the facts in this case were distinguishable from those in the authorities relied upon by the Department.

[28]     The Department’s suggested starting point was said to be out of line with other sentencing decisions under the Health and Safety in Employment Act and the Sentencing Act 2002 involving serious physical injury or fatality.  Thus, the starting point of $60,000 was said to be justifiably at the lower end of the middle band, given the  nature  of  the  harm  to  Mr  Paul  and  the  circumstances  surrounding  his  fall. Eziform referred to the nature of the harm, which involved a flat residential roof two storeys from the ground, the fact that the workmen were familiar with the roof, they were experienced and trained, safety harnesses were available for use, the injury was not fatal, policies for safety were in place, and Mr Paul had ignored them.  Eziform argued that the sentencing Judge had the benefit of hearing trial evidence and thus, she was better informed to reach a view on Eziform’s culpability.

[29]     It also referred to fines imposed in other cases where the general pattern was for the adoption of a starting point of under $100,000 in non-fatal accidents.

[30]    Eziform submitted that the deductions given for mitigating factors were appropriate.   Here, the company argued that the Judge did not “double-count” remorse.  Whilst remorse was a factor examined as part of the assessment for both the reparation and the fine, Eziform draws attention to the fact that a specific deduction for remorse was only given in relation to the fine, not the reparation.

[31]     Eziform submits that its offer to make amends by payment of reparation of

$25,000 was not arbitrary, but based on other analogous cases.   Eziform contends that the offer could only be viewed as inadequate by the Department, in light of the final decision on reparation by the Judge.   It also contends that the respondent’s assumption that the Judge’s “unspecified discount” for the respondent’s co-operation was in the order of 10 per cent is unwarranted.

[32]     Eziform   argued   that   the   reduction   for   financial   circumstances   was appropriate.  Section 40 of the Sentencing Act 2002 requires the Court to take into account the offender’s financial capacity.  The fine was consistent with the totality principle.

General principles relating to sentence appeals by an informant

[33]     An appellate court will not lightly interfere with a sentence on an informant’s appeal.   The principle was well expressed in  Department of Labour v Safe Air Limited [2012] NZHC 2677 where at [26] Kós J stated:

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 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.

[34]     As a matter of general principle in sentencing, an appellate 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, therefore, to cases where

there is solid grounding for treating a sentence as manifestly inadequate or inappropriate: R v Cargill at 140.

[35]     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] NZSC 52, (2006) 22 CRNZ 978 (SC) at [9].

[36]     In R v Wilson [2004] 3 NZLR 606 (CA) at [41], the Court of Appeal noted:

Whether a sentence can be said to be manifestly inadequate turns firstly on the maximum sentence for the particular offence; then on a consideration of comparable sentences, to the extent that those are considered to be appropriate; and above all, the focus is required to be on the totality of the offending and the culpability of the offender in the particular case.

[37]     Though it is the “finishing point” rather than the starting point that matters, where a sentence is challenged as manifestly inadequate, an appellate court must try to ascertain how the sentencing Judge reached his or her final conclusion: see Department of Labour v Fletcher Concrete and Infrastructure Ltd t/a Golden Bay Cement (2007) 8 NZELC 99,001 (HC) at [19].

Approach to sentencing under the Health and Safety in Employment Act

[38]     Section 51A provides statutory guidance for sentencing under the Health and

Safety in Employment Act:

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.

[39]     The latest guideline judgment on sentencing under the Health and Safety in Employment Act is the Full Court’s judgment in Department of Labour v Hanham & Philp Contractors Ltd.  The Court (at [50]) confirmed that the Taueki approach is to be adopted when fixing fines for offending under s 50 of the Act.  At [80] the Court summarised the approach to be followed:

(1)        Both  s  51A  HSE  and  the  Sentencing  Act  are  relevant  to  the sentencing process.

(2)	The sentencing process involves three main steps:   Assessing the amount of reparation.
   Fixing the amount of the fine.

   Making an overall assessment of the proportionality and appropriateness of the total imposition of reparation and the fine.

(3)        Reparation  and  fines  serve  discrete  statutory  purposes  and  both should ordinarily be imposed. But where lack of financial capacity does not permit both the payment of appropriate reparation and a fine, the former is to receive priority.

(4)        The first main step is to fix reparation. It involves a consideration of the statutory framework, taking into account any offer of amends and the financial capacity of the offender.

(5)        The second main step is to fix the amount of the fine. This should follow  the  methodology  established  by  the  Court  of  Appeal  in Taueki, namely fixing a starting point on the basis of the culpability for the offending and then adjusting the starting point upwards or downwards for aggravating or mitigating circumstances relating to the offender.

(6)        The  assessment  of  a  starting  point  for  the  fine  involves  an assessment  of  the  culpability  for  the  offending.  Starting  points should generally be fixed according to the following scale:

   Low culpability: a fine of up to $50,000.

   Medium   culpability:   a   fine   of   between   $50,000   and
$100,000.
   High culpability: a fine of between $100,000 and $175,000. (7)	The starting point for the fine is then to be adjusted for any relevant
aggravating and mitigating factors relating to the offender.

(8)        Reparation is then to be taken into account in fixing the fine.

(9)        Financial capacity to pay a fine is also to be considered in fixing the fine.

(10)      The  third  main  step  is  to  assess  whether  overall  burden  of  the reparation and fine is proportionate and appropriate.

[40]     As the appeal does not concern the level of reparation that Eziform was ordered to pay, my consideration of the sentencing process can commence at the second step of fixing the fine.  At the same time, I recognise that within the context of this step, the level of reparation is one of the considerations to be taken into account.

Fixing a starting point

[41]     The  fixing  of  a  starting  point  entails  an  assessment  of  the  offender’s culpability.  In Hanham & Philp at [54], the Court stated that such an assessment is concerned with the degree of blameworthiness for the offending:

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.

[42]     I have no difficulty with the findings the Judge reached on the topic of Eziform’s blameworthiness.  She recognised that there were three practicable steps that, if implemented, would have removed the risk to Mr Paul and Mr McKay.  She recognised that the risk of working on a two-storey roof without scaffolding or safety harnesses posed an obvious and significant risk to the two men.  She recognised that their  presence  on  the  roof  without  those  safety  protections  was  a  significant departure from industry standards.   She also recognised that the means to protect them from the risk were available.  She did not expressly address the last two points identified in [54] of Hanham & Philp, but this would probably have been because the  obviousness  of  the  risk,  the  harm  that  might  result  and  the  knowledge  of available  means  to  remove  this  risk  are  so  well  known.    What  Mr  Paul  and Mr McKay were engaged in did not involve new or complex industrial practices where there might be room for doubt as to the risk involved and how to avoid it. Thus, the Judge’s analysis of these factors of blameworthiness was sound.  Where she went wrong, in my view, was her decision to adopt a starting point of $60,000.

[43]     A starting point of $60,000 puts Eziform at the lower end of the medium range of culpability, on the Hanham & Philp scale, whereas the strength of the factors of blameworthiness would put Eziform on the cusp of the medium to high ranges of culpability.  The very serious risk involved in having roofers on the roof of a two-storey building without any protection from the consequences of a fall was

obvious.  As was recognised in Hanham & Philp at [156], the risk of a fall of over four metres is very serious.   It was the type of risk that could, depending on how Mr Paul fell and struck the ground, have resulted in his death.   As it is, he has suffered serious permanent injury.  This risk could have been avoided completely if attention had been paid to good safety practice.

[44]     I consider that comparable examples of such bad work practice are:

(a)       The Black Reef appeal in Hanham & Philp where the accidental death of a worker resulted from a failure to take known and recognised precautions.   The Full Court put the employer’s culpability at the middle of the high range, with a starting point of $140,000;

(b)       The Cookie Time appeal in Hanham & Philp where the accidental injury to an employee (fractured arm, no permanent injury) resulted from an obvious and well-known hazard that could have been easily prevented.  The Full Court put the employer’s culpability at the cusp of the medium to high range and adopted a starting point of $100,000;

(c)       The Hanham & Philp appeal where the use of obviously inadequate scaffolding  led  to  an  employee’s  serious  injury  of  a  dislocated shoulder, which continued to trouble him, as well as lacerations and bruising  to  his  face  in  circumstances  where  adequate  scaffolding could have been used.  The Full Court put the employer’s culpability at the lower end of the high range and adopted a starting point of
$125,000;

(d)       In  Arbor  Reman  Ltd  v  Department  of  Labour,  which  was  a defendant’s appeal against sentence, Andrews J found that there were similar  factors  to  those  present  in  the  Cookie  Time  appeal  in Hanham & Philp (namely, a well-known hazard, limited training and failure to take steps that could have easily prevented the accident). These led Andrews J to find that the sentencing Judge’s decision to

put the employer’s culpability in the upper end of the middle range

and to fix a starting point of $85,000 was appropriate.

[45]     I accept the Department’s submission that in order to put the culpability of Eziform at the lower end of the medium range and to fix a starting point of $60,000, the Judge must have been influenced by the contribution of Mr Paul’s actions.  The Judge expressly referred to Mr Paul’s actions and to a passage in Tranz Rail Ltd which suggested that the contribution an employee’s conduct made to the accident was something that could ameliorate an employer’s blameworthiness.   This is the only explicable reason for the Judge adopting what, in the context of the comparable cases to which I have referred, appears to be an exceedingly low starting point.  The next question, therefore,  is whether the Judge has paid too much regard to the victim’s conduct when it came to fixing the starting point.

Relevance of the victim’s conduct

[46]     Under s 9(2)(c) of the Sentencing Act 2002, “the conduct of the victim” is cited as a mitigating factor to be taken into account in sentencing an offender.   In Mareikura v R [2012] NZCA 108, the Court of Appeal decided that  where the victim’s conduct was directly related to the circumstances of the offending, it was a matter to be factored into the starting point:

[10]      We consider it preferable to deal with both the starting point and the conduct of the victim together. Section 9 of the Sentencing Act describes aggravating and mitigating factors that are to be taken into account. Where, as in this case, the conduct of the victim is directly related to the circumstances of the offending, we consider the appropriate point to have regard to that factor is in fixing the starting point. That is consistent with the approach in Taueki, which involves the fixing of a starting point having regard to all of the circumstances of the offending, and then determining whether the aggravating or mitigating factors relating to the offender’s particular personal circumstances require an adjustment to that starting point. In Taueki at [32] this Court treated provocation and excessive self-defence as matters to be addressed in fixing the starting point.  (emphasis added)

[47]     In the context of the Health and Safety in Employment Act, there is divergent case law on how the carelessness of the victim and his or her workmates should be viewed when fixing the starting point of a fine.

[48]     In Tranz Rail v Department of Labour, Tranz Rail had been found liable for not taking all practicable steps to ensure the safety of its worker who died in a “shunting” accident.  Ellis J (at 322-323) viewed the carelessness of the victims as a mitigating factor:

As I have said, the burden on Tranz Rail cast by the Act is an onerous one. This is not a case where it did nothing. It appreciated the risks created by loose shunting with a crew of less than three and prohibited it at Gracefield
... However, the requirement to take all practicable steps was not satisfied. I
should add that at no time did Tranz Rail claim that lack of resources would have  made  further  steps  not  practicable.  As  an  employer  Tranz  Rail  is entitled to feel it was let down by careless employees, men of experience who should  have  appreciated the  risks  but  adopted  a  quicker  but  dangerous practice.  Not  only  that,  they  attempted  to  attach  a  moving  wagon  to  a moving train, which was also in breach of Tranz Rail's rules. I think too that Tranz  Rail's  response  after  the  accident  cannot  be  criticised. They  took appropriate, even excessive steps to make sure such a situation could not arise and they made an ex gratia payment of $19,000 to the family of the deceased. In imposing sentence these mitigating circumstances must be balanced against the death of a worker. The further steps Tranz Rail should have taken would have reduced the possibility of harm to the shunter, but would   not   necessarily   have   avoided   it.   Shunting,   like   driving   or manoeuvring any heavy vehicle, is an inherently dangerous occupation and the employer must rely on the care and skill of their employees to a substantial degree.  (emphasis added)

[49]     In Hanham, however, the Full Court refused to use the victim’s careless conduct as  a mitigating factor of the offending.   In the  Cookie Time  appeal in Hanham,  an  employee’s  hand  was  caught  in  a conveyor belt.    Counsel  for the respondent,   Cookie   Time,   accepted   that   the   employer   must   take   primary responsibility for  the  accident,  but  had  noted  that  the  victim  had  disobeyed  an instruction not to go under the conveyor belt while it was in operation to undertake cleaning work.   The Full Court rejected the idea that the victim’s conduct should minimise Cookie Time’s culpability:

[138]    It is no answer to say that the employee was partly at fault for disobeying instructions. The requirement for a guard over the dangerous parts of machinery is to avoid the risk of the very sort of accident which happened in this case where the employee, attempting to carry out her duties, fell victim to a known hazard. This was therefore a case of an obvious hazard which could easily have been prevented. The injuries sustained were serious and could have been much worse but for another employee taking quick action to stop the conveyor belt.

[50]     Similarly, the Full Court in Hanham & Philp did not see the careless conduct of other employees as something that could minimise an employer’s culpability:

[156]    … We regard Hanham & Philp's culpability in this instance as in the high category but towards the lower end of that band. The conclusion cannot be escaped that the construction of the temporary scaffold was obviously inadequate. The reaction of the company's management on that issue speaks volumes. The company is obliged to accept responsibility for the failures of its employees which were inexplicable given their level of experience.

[51]     In Department of Labour v Street Smart Ltd, the 13 year old of a driver of one of Street Smart’s trucks that was inappropriately used for a particular method of rubbish collection was killed when he fell from the truck his father was driving. Street Smart knew the boy was riding on the truck and had directed the deceased boy’s father not to take him on the truck.  In sentencing at the District Court, it was suggested by Street Smart that the boy’s father should share part of the blame for the fatality.  This was rejected by the District Court and neither at that stage nor in the appeal   to   this   Court   was   it   suggested   that   such   conduct   could   minimise Street Smart’s culpability.

[52]     The nature of a victim’s conduct is relevant when it comes to considering such conduct as a mitigating factor in the offending, or the weight to be attached to it.  Not all such conduct should be treated the same.  A victim’s intentional or wilful disregard for safety practices may well mitigate otherwise seriously culpable conduct on the part of an employer.   But guarding against workplace accidents that result from the foolish carelessness of employees is part of the role of the Health and Safety  in  Employment  Act.     So,  to  allow  such  carelessness  to  minimise  an employer’s culpability would undercut one of the policy objectives of the legislation. This is why the Full Court in Hanham & Philp refused to place any weight on the careless conduct of the victim in the Cookie Time appeal.   It is also why the carelessness of the young victim’s father in Street Smart was not understood to diminish the employer’s culpability. As was recognised in Street Smart (at [59]), and approved by the Full Court in Hanham & Philp (at [56]), workplace accidents are a cost to, and burden on the community.   Yet the community has no means of monitoring workplace safety, other than through the Health and Safety in Employment Act.   Particularly in light of the accident compensation scheme’s no fault principle, the fines imposed under this Act must act as a real deterrent on employers to avoid workplace accidents, including those involving the foolishness and carelessness of employees.   Unless employers are influenced by the means of

this Act to change the culture of employees who display a cavalier attitude towards safety precautions, the community will continue to bear the cost of the harm that results.   It would be wrong, therefore, to permit employers to rely on an injured employee’s foolishness or carelessness to mitigate the employer’s culpability.   It follows that in matters of workplace health and safety, to attach little, if any, weight to a victim’s carelessness will not be inconsistent with the requirement in s 9(2)(c) of the Sentencing Act.  Indeed, to do otherwise would subvert the policy of the Health and Safety in Employment Act.  Thus, the Judge was wrong to take into account the carelessness of Mr Paul and Mr McKay when she came to fix the starting point.

[53]     I am satisfied that when the present offending is placed in context with other comparable cases, what occurred here was on the cusp of the medium and high range of culpability, so a starting point of $100,000 would have been a reasonable.

[54]     The next step is to consider the credit the Judge gave the mitigating factors of the  offender.    The  Department  contends  that  the  Judge  wrongly paid  regard  to Eziform’s remorse twice: first, in relation to assessing reparation; and secondly, in fixing the fine.  On the other hand, Eziform argues that it was only in fixing the fine that the Judge made a specific deduction for remorse.

[55]     At [32] of the sentencing notes, the Judge specifically refers to Eziform’s demonstration of remorse, in her assessment of the amount of reparation to be paid. She referred to remorse again at [48] of the sentencing notes, as one of the mitigating factors relating to the offender.   Thus, remorse influenced the assessment of the quantum of both reparation and fine.  I accept, therefore, the Department’s argument that there has been a double-counting of remorse.

[56]     Section 10 of the Sentencing Act provides that the Court must take into account an offer, agreement, response or measure to make amends in sentencing, or otherwise dealing with an offender.   It is open to a Judge to take remorse into account either when assessing the amount ordered to be paid as reparation or in the fixing of a fine.  But I consider it wrong for remorse to be taken into consideration for both reparation and fine.  Since, here, remorse was undoubtedly a feature of the assessment of reparation to be paid, I consider that it should not have also featured in

the fixing of the fine.   In this case, the double-counting of remorse has led to excessive credit being given for remorse as a mitigating factor when it came to fixing the fine.

[57]     The Department also argued that too much weight was placed on Eziform’s offer of reparation, given the lateness in which it was made and given it was for a lesser sum.   The Department also argued that Eziform’s co-operation with the Ministry should not have been taken into account.  However, I consider that it was open to the Judge to place weight on Eziform’s offer of reparation and to take into account Eziform’s co-operation with the Department.  Eziform could have chosen to put the Department to proof of the offences.

[58]     This is a case where the Judge adopted an overall discount of 35 per cent for mitigating factors of the offender, without quantifying the percentage amounts for each factor.   The double-counting of remorse means that the 35 per cent discount will require some adjustment.  I consider that the other factors the Judge correctly took into account (offer of reparation, remedial action to prevent future occurrence of such accidents, Eziform’s favourable safety record and its co-operation with the Department) would ordinarily have led to an overall maximum discount of somewhere between 20 to 30 per cent, depending upon whether a five per cent credit was given to each factor or something over and above that.  Such a level of discount makes the 35 per cent  given by the Judge appear excessive.   Given this is  an informant’s appeal against sentence, I consider that I should prefer the discount that leads to the greatest credit being given to Eziform, as that will result in a lower increase in the level of fine.  Thus, I find that a discount of no more than 30 per cent would be appropriate.

[59]     The  final  factor  for  assessment  is  whether  or  not  there  was  excessive recognition given to Eziform’s financial circumstances.  The Department contends that the Judge double-counted financial incapacity by taking it into account when assessing the level of reparation, as well as when she reduced the level of fine to be imposed. The Department submitted that in making this reduction, the Judge paid no attention to the core principles of sentencing, namely deterrence and denunciation. Eziform, on the other hand, argues that the reduction for financial circumstances was

appropriate,  given  the  evidence  put  before  the  Judge,  and  that  s  40  of  the Sentencing Act  requires  the  Court  to  take  into  account  the  offender’s  financial capacity.

[60]     At  [31]  of  the  sentencing  notes,  the  Judge  recognised  that  Eziform  was insured against reparation payments.  Thus, it needs to be recognised that Eziform will  not  be directly responsible for making  payment  of the  $40,000  reparation. Despite noting this fact, the Judge did not then go on to address its impact on her assessment of the financial circumstances of Eziform and its ability to pay a fine.  I consider that the presence of reparation insurance has a significant and recognisable impact.  The presence of reparation insurance must necessarily reduce the financial impact of the reparation order on Eziform.  This in turn will affect the size of the fine that it can pay.

[61]     In Mobile Refrigeration Specialists Ltd v Department of Labour (2010) 7

NZELF 243 (HC), which was an appeal against sentence by offending employers, at [57] Heath J considered the requirement in s 40 of the Sentencing Act for a Court to take into account the financial capacity of an offender to pay a fine and, in essence, found that this requirement did not positively require the Court to tailor a fine to the financial circumstances of a particular offender.   I agree with those comments and the further comment by Heath J at [57] that where there is clear evidence of strained financial circumstances justifying the reduction of an otherwise appropriate fine, the discretion to do so “must be exercised judicially and on a principled basis”.

[62]     I also agree with the comment of Heath J at [58] of Mobile Refrigeration Specialists that in appropriate cases, “fines may be imposed at a level beyond the company’s means”.  In this regard, Heath J was referring to a principle expressed in R v F Howe & Son (Engineers) Ltd [1999] 2 All ER 249 (CA) at 255 that “there may be cases where the offences are so serious that the defendant ought not to be in business”.  Heath J also recognised that provisions are available for a company to be given time to pay a fine by instalments, and the Summary Proceedings Act 1957 allows fines to be remitted on grounds of financial incapacity.

[63]     In Mobile Refrigeration Specialists, Heath J identified at [54] the “dangers in interpreting the Sentencing Act in a manner that allows corporate offenders to readily escape financial penalties on grounds of alleged impecuniosity”.   For example, a company might structure its affairs so that it operated at a loss.

[64]     In Arbor Reman at [58], Andrews J described the comments of Heath J in Mobile Refrigeration Specialists as “sending a strong message that the Court should not shy away from making orders that prima facie may not be able to be met by a company”.

[65]     The   concerns   identified   in   Mobile   Refrigeration   Specialists   and   in Arbor Reman have led courts to require clear evidence of financial impecuniosity before there is a reduction in the level of a fine on the ground of financial impecuniosity.  In Mobile Refrigeration Specialists, Heath J noted at [52] that there was nothing before the District Court Judge to suggest that the company would be placed in liquidation if a fine above a particular amount was imposed and, at [60], he said that he required “clear and unequivocal material” before he could be satisfied that a fine above a particular level could not be paid.   As this was lacking, he dismissed the appeal against sentence.

[66]     In the present case, there was evidence before the District Court of Eziform’s financial circumstances.  The evidence showed there was a total income after cost of sale of $897,223, but that Eziform was currently operating at a deficit of $169,556. The reasons for this were outlined, the major one being bad debts of $126,525, with the possibility of more bad debts due to debtors of Eziform going into liquidation. Eziform’s accountant deposed that the company could not afford to pay a fine, but he stopped short of saying that Eziform would go into liquidation if a fine was imposed.

[67]     Given what I consider the correct starting point to have been and with a discount of 30 per cent for mitigating factors, and with no allowance made for Eziform’s  financial  circumstances,  the  appropriate  level  of  fine  would  come  to
$70,000.    This  is  significantly  higher  than  the  fine  of  $38,000  reached  by  the District Court  before  taking  Eziform’s  financial  circumstances  into  account,  and certainly much higher than the end point fine of $18,000.

[68]     The reduction from $38,000 to $18,000 was made at the Judge’s discretion on the ground she was concerned that a heavy fine might jeopardise the company’s ongoing viability, which would be of no value to its employees or its creditors.  She also thought it imperative that Eziform continue to inject funds into its safety programmes.

[69]     The reduction was just over 50 per cent.  This is in circumstances where two employees were placed at unnecessary and avoidable risk, and where one of them has suffered serious permanent injury.  This was not a case where a higher level of fine would have precluded Eziform from paying the reparation ordered.   The insurance would cover the reparation.  All Eziform had to find payment for was the fine.   Nor is it a case where there was clear evidence that Eziform would go into liquidation if ordered to pay a fine.   The Judge placed excessive weight on her concerns about the company’s financial viability; not enough weight was placed on the need to ensure workplace safety through the deterrence and denunciation that follows the imposition of a stiff financial penalty.

[70]     In accordance with the approach taken in Mobile Refrigeration Specialists and Arbor Reman, I see no basis for giving Eziform a substantial discount for its financial circumstances.  Indeed, given the seriousness of the workplace accident, I consider that it would have been open to the sentencing Judge to have decided to give  no  discount  for  financial  circumstances.     It  follows  that  I  accept  the Department’s submission that excessive account was paid to Eziform’s financial circumstances.  At the most, a reduction of just over 10 per cent for impecuniosity may have been permissible.

[71]     The result is that a fine of $18,000 was imposed when a fine of between

$60,000 and $70,000 is the likely outcome of a correct analysis of the relevant factors.  The difference is so great that it shows the fine imposed to be manifestly inadequate. Thus, the appeal is allowed.

[72]     As this is an informant’s appeal, the fine to be substituted should be set at the minimum required to remedy the inadequacy.  I propose to fix the fine at $60,000.

Had I been the first instance sentencing Judge, the fine would have been set at a higher level than that.

[73]     There is the final step in the process of setting a fine of standing back and looking at the totality of the amounts ordered as reparation and fine.   Here, the combined effect on Eziform will be no greater than the fine of $60,000, as the reparation will be paid by Eziform’s insurer.  In any event, I do not consider that a total payment of $100,000 is inappropriate, given all the relevant circumstances.

Result

[74]     The appeal against sentence is allowed.  The sentence of $18,000 is set aside and substituted by a fine of $60,000.  The reparation order of $40,000 is unaffected by the appeal.

Duffy J