HSWA: District Court convicts but discharges with no fine imposed

Late in the evening of 31 January 2020, Miss Fleur, a recreational fishing charter vessel operated by Tauranga Fishing Charters Limited (TFC), grounded on Mount Maunganui. There were no injuries and no pollution damage resulted.

Following an investigation, Maritime New Zealand (MNZ) laid charges against TFC under both the Maritime Transport Act 1994 (MTA) and the HSWA. The charge under s 67B(1)(a) MTA was that TFC operated a ship without the prescribed qualified personnel. In particular, that TFC caused or permitted Miss Fleur to be operated without a master holding an SRL or another appropriate ring-fenced certificate. The maximum penalty was a fine not exceeding $100,000. The charge under s 49 HSWA alleged a breach of a duty to have an adequate trip recording procedure in place, and more specifically to require the master to record the time of next contact and time of return. The s 49 HSWA charge had a maximum penalty of $500,000. TFC pleaded guilty to both charges. Separate charges were laid against the master.

The issue for the Court was the appropriate sentence. While the prosecution and defence agreed that discounts should be applied for early guilty pleas and other mitigating factors (though they differed in the value of that discount), there was significant divergence on the question of whether a fine should be imposed for either of the charges and, if so, the starting point for that fine.

MNZ initially argued that culpability should fall towards the middle to lower end of the ‘medium culpability band’ and attract a starting point of $150,000. During the hearing MNZ accepted that low culpability was appropriate, but sought a fine at the upper end, and otherwise maintained its position. On the MTA charge, MNZ argued for a starting point of $20,000. MNZ also sought 50% of its costs in bringing the prosecution.

In contrast, TFC submitted that in all the circumstances, a discharge without conviction on both charges was appropriate. If a fine was appropriate, the starting point should be in the lowest band, between $0 to $7,500 for the MTA charge and between $0 to $28,000 for the HSWA charge. In any event, TFC said it could not pay any fine or costs. Miss Fleur was its only income earning asset, and TFC had not been operating since it lost the vessel in the grounding (almost two years earlier).

The approach to sentencing for health and safety matters under the HSWA is well settled. The Court is required to take the four-step approach confirmed by the High Court in Stumpmaster v WorkSafe New Zealand (Stumpmaster):^[1]

• First, assess the amount of reparation.
• Fix the amount of the fine by reference first to the guideline bands, and then having regard to aggravating and mitigating factors.
• Determine whether further orders under ss 152-158 HSWA are required.
• Make an overall assessment of the proportionality and appropriateness of the combined packet of sanctions imposed by the preceding three steps. This includes consideration of the defendant’s ability to pay, and whether an increase is appropriate to reflect the defendant’s financial capacity.

When a Court is determining a sentence in relation to an offence under s 49 HSWA, the Court must also have regard to the matters set out at s 151 HSWA.^[2] The first step is to assess culpability. An assessment of culpability must look at both the level of carelessness or seriousness of breach, and the degree of harm that has occurred. The assessment of culpability is concerned with the degree of blameworthiness for the offending.

The starting point for a fine is to be fixed according to whether culpability is to be categorised as low, medium, high, or very high. In East by West Company Limited v Maritime New Zealand,^[3] the High Court adopted the following bands (for a company) under s 49 HSWA:

After fixing a starting point, the Court makes necessary adjustments, considering aggravating and mitigating factors, as well as the personal circumstances of the defendant. The final step in sentencing will involve an assessment of the company to pay the otherwise appropriate fine.^[4]

Regard must be had to the principles and purpose of the Sentencing Act 2002. This includes the principle that the Court must impose the least restrictive outcome that is appropriate in the circumstances, in accordance with the hierarchy of sentences and orders set out in s 10A Sentencing Act 2002.^[5]

Judge Mabey QC considered that it was appropriate to convict and discharge on both charges. His Honour’s assessment of the culpability was significant in his assessment of the least restrictive outcome.

Section 49 HSWA – Culpability

As the operator of a maritime transport operation, TFC’s operation was subject to regulatory requirements under the MTA and associated Maritime Rules. TFC held a maritime document issued by the Director of MNZ indicating its documented safety system (MTOP) met the prescribed rule requirements.

In considering the HSWA charge, His Honour distinguished between those cases involving a complete omission of an available safety procedure and the circumstances of this case, which he agreed involved a failure of degree. The Court described the practicable step as requiring:

no more than a tweaking of an approved procedure in circumstances where TFC has taken care to create safety procedures which have been approved and which it had applied.

Although there was an approved procedure that could have been improved in a practicable way, Judge Mabey QC noted:

that could be said of most safety procedures in nearly every industry if one was to look closely enough.

Judge Mabey QC considered that a failure of degree in the trip reporting procedure had been:

elevated by MNZ beyond what is justified. The failure did not cause the collision and the practicable step of including a next call-in time and time of arrival would not have changed anything.

When assessed against the Stumpmaster categories, the Court concluded that each factor could be decided in favour of TFC:

• The failure was one of degree not omission.
• There was no identified departure from an industry standard.
• No significant risk of harm and no harm in fact resulted.

Even when assessed against other authorities involving cases in the low culpability band:

TFC’s culpability is distinctly minor, involves a single omission only in circumstances where it was, as the Stumpmaster court said: “otherwise carrying out its business in the correct manner”.

The Court’s assessment that a single practicable step which was not taken for the purposes of the HSWA charge was “minor in the extreme” and “could not be any less serious”.

MTA Charge

Prior to his employment, TFC had asked Mr O’Reilly to provide evidence of his seafarer qualification. Mr O’Reilly had provided a copy of his Commercial Launch Master Certificate (CLM).

Because of a rule change to those for seafarer certification, the CLM was a legacy document that had become subject to a ‘ringfencing’ requirement. This required holders of existing legacy certificates to notify the Director of MNZ they wished to ‘ringfence’ their qualification for its validity to be preserved. Mr O’Reilly had not ringfenced his certificate, with the consequence it has ceased to be valid by operation of law.

While Miss Fleur operated without a duly certified skipper, that failure could not be said to risk safety at sea, one of the principal purposes of the MTA. TFC had contracted a competent and experienced skipper who held a CLM. The fact that Mr O’Reilly did not take the administrative step to preserve the validity of his CLM did not mean that he was less competent than when the CLM was valid:

A technical error does not create risk, nor does it amount to significant culpability. To the contrary it is minor.

If a starting point had been appropriate, Judge Mabey QC considered that having regard to all the circumstances of the case, the principles and purposes of sentencing and by reference to the authorities referred to, the appropriate start points for a fine would have been:

• HSWA charge: $10,000.
• MTA charge: $2,000.

This would reflect the lowest known starting points for an offence under either the MTA or HSWA.

This decision should give some comfort to those who are generally carrying out their health and safety duties in the correct manner. Compliance with health and safety requirements is a core component of every business. The decision recognises that while every business is likely to be able to identify improvements to its health and safety procedures at any time, not every failure to implement an improvement is a serious breach that warrants the full force of the law.

The decision is of relevance for those conducting (and insuring) businesses in the transport system. Commercial maritime and aviation operators are subject to specific regulatory regimes that require an operator to satisfy the regulator that certain safety requirements are met before it is entitled to carry out its operation. Compliance with other regulatory requirements does not mean an operator is meeting all its obligations under the HSWA. But where an operator has demonstrated compliance, and there is no departure from any prevailing industry standard, that compliance can and will be considered when assessing the nature of any failure under the HSWA and the culpability of the operator.

The decision may give regulatory agencies some pause in deciding what compliance action, if any, is an appropriate response where a breach is minor, and an operator is generally carrying out their health and safety duties in the correct manner. If there is thought to be a risk to safety, but there is no identified departure from a prevailing industry standard, that might suggest an agency should be considering a different regulatory response.

When a prosecution is brought, a regulatory agency has implicitly determined that the nature of the breach involves an element of criminality. This engages the principles of deterrence and denunciation and a financial penalty under the criminal law. This decision confirms that the Court will not shy away from making its own assessment.

This publication is intended as a general overview and discussion of the content dealt with. It should not be used in any specific situation, in which case you should seek specific legal advice.