Sentencing in the Age of HSWA 2015

Those who breach their Health and Safety duties will be sentenced according to four sentencing bands which are much higher than those previously in place. Your insured will potentially be liable for significantly higher penalties

Sentencing Courts have been criticised for too readily applying uplifts in sentences for aggravating factors and applying discounts for mitigating factors. The prosecution and the Courts will likely require more compelling evidence to justify a discount, likely having defence cost implications

There is an increased cost benefit of a discount in light of the increased penalties

Three companies appealed against sentences imposed on them for breaches of the Health and Safety at Work Act 2015 (HSWA), Stumpmaster, Tasman Tanning and Niagra Sawmilling. They each appealed from separate proceedings but their appeals all dealt with the proper application of sentencing principles following enactment of the HSWA.

Under the previous legislation, the maximum fine for failing to comply with a workplace duty was $250,000. In the Hanham² decision the High Court established sentencing principles and bands against which offences were categorised. They resulted in fines for: Low culpability: Up to $50,000; Medium culpability: Between $50,000 and $100,000; High culpability: Between $100,000 and $175,000. This created a default fourth category of between $175,000 and $250,000.

The HSWA increased the maximum fine to $1.5m. It also introduced new sentencing considerations which emphasised the aggravating factors of any offence and allows for further orders not available under the old Act.³ In Stumpmaster the Court was asked to reconsider the current sentencing regime in light of these changes.

As it was dealing with companies the Court did not decide individual sentencing bands as they are dealt with differently under HSWA. The Court determined the proper sentencing parameters for fines for companies are:

• Low culpability: Up to $250,000
• Medium culpability: $250,000 to $600,000
• High culpability: $600,000 to $1,000,000
• Very high culpability: $1,000,000 plus

The Court recognised that these sentencing bands would likely result in onerous penalties for companies but considered that the HSWA was intended to produce that result.

It also determined a new sentencing methodology. The proper sentencing process is now to:

“(a) assess the amount of reparation;
(b) fix the amount of the fine by reference first to the guideline bands and then having regard to aggravating and mitigating factors;
(c) determine whether further orders under ss 152–158 of HASWA are required; and
(d) 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 also whether an increase is needed to reflect the financial capacity of the defendant.”

Otherwise, the criteria in Hanham for assessing the seriousness of the offending remain appropriate. The criteria are: identify the operative act or omission and harm caused; assess the risk of harm; the degree of departure from standards; obviousness of the hazard; ability to avoid the hazard; state of knowledge of the risk; and means to avoid the risk. If the risk and harm caused are serious, but would be easily avoided, the offence will likely fall into the high or very culpable band for offending. The Court considered it would be common for companies to face an initial fine of between $500,000-$600,000 before aggravating and mitigating factors were taken into account.

Although the Court did not determine whether reparation orders should increase to reflect the higher overall penalties, it indicated that was possible. It also considered there was scope to broaden the factors taken into account when determining reparation, referring to an article in support of that proposition.⁴ The authors reported an increasing tendency for prosecutors to use actuarial evidence to support increases in reparation payments. In this respect, if payment of reparation results in a 15% discount in penalty, then the amount awarded must be proportionately higher under the HSWA to justify such a discount.

Further, aggravating and mitigating factors are not currently being properly considered. There was criticism of the current practice of parties agreeing adjustments to penalties. The Court held that more detailed consideration is required to obtain such an adjustment to penalty, whether that be higher or lower than the starting point.

Finally, the Court decided that where a defendant had limited financial capacity, the priority ought to be to pay reparation over a fine.

The Stumpmaster decision has clarified how companies are sentenced under the HSWA. It also gives strong indications that the Court expects more onerous penalties to be imposed. In particular:

• Insureds will face an increased uninsured exposure to penalties. This will mean there is an increased incentive to meet health and safety standards.
• Insurers will face increased liability for reparation awards. Reparation calculations will become more complicated, especially where the prosecution obtains expert actuary evidence to justify higher a higher payment.
• Insurers will also face increased liability for defence costs. Applications for discounts to penalties will be subject to greater scrutiny with more robust evidence needed to justify a significant discount. However, the potential value of the discount is likely to offset the cost of obtaining it. •
• Insurers may be more motivated to investigate the possibility of the insured entering into enforceable undertakings with WorkSafe to avoid prosecutions and potential fines, a process that WorkSafe seems amenable to.

1. Stumpmaster v Worksafe New Zealand [2018] NZHC 2020 [9 August 2018]  
2. Department of Labour v Hanham and Philp Contractors Ltd (2008) 6 NZELR 79 (HC). 
3. HSWA sections 151-1
4. Mark Campbell and Charlotte Evans “Sentencing Under the Health and Safety at Work Act 2015” [2018] NZLJ 112  

For any further information regarding this please contact Peter Hunt, Andrea Challis or Kiri Harkess