Mobile Refrigeration Specialists Ltd v The Queen [2010] NZCA 543; (2010) 8 NZELR 183 (23 November 2010)

Last Updated: 12 January 2012

IN THE COURT OF APPEAL OF NEW ZEALAND

CA393/2010 [2010] NZCA 543

BETWEEN MOBILE REFRIGERATION SPECIALISTS LIMITED
Applicant

AND THE QUEEN
Respondent

Hearing: 11 November 2010

Court: Stevens, Gendall and Cooper JJ

Counsel: S P H Elliott for Applicant
N P Chisnall for Respondent

Judgment: 23 November 2010 at 4.00 pm

JUDGMENT OF THE COURT

The application for special leave to appeal is declined.
____________________________________________________________________

REASONS OF THE COURT
(Given by Stevens J)

Introduction

[1] Mobile Refrigeration Specialists Ltd (MRS) seeks special leave to appeal against a fine and reparation order in respect of offences under the Health and Safety in Employment Act 1992 (HSE Act). At issue is whether the means of a corporate offender’s shareholders should be relevant to the imposition or quantum of the fine and reparation order.

Background

[2] MRS, through its director and shareholder Mr Cook, was responsible for the installation of a dangerous hydrocarbon-based refrigerant in a coolstore operated by Icepak Coolstores Ltd. As a result, the coolstore exploded on 5 April 2008. A fireman was killed and several others were seriously injured.
[3] MRS pleaded guilty in the District Court to charges laid under the HSE Act. It was fined $56,000 and ordered to pay reparation of $175,000.[1] Heath J dismissed the substantive appeal.[2] The issue on that appeal was whether the District Court Judge took adequate account of MRS’s ability to pay the fine imposed. It was accepted that the fine properly reflected the criminality of the offending.

High Court decision on the substantive appeal

[4] The judgment of Heath J referred to the process for fixing fines and reparation orders set out in Department of Labour v Hanham & Philip Contractors Ltd,[3] which involves setting the reparation, setting the fine, then making an assessment as to totality. The Judge then referred to s 12(1) of the Sentencing Act 2002:

If a court is lawfully entitled under Part 2 to impose a sentence of reparation, it must impose it unless it is satisfied that the sentence would result in undue hardship for the offender or the dependants of the offender, or that any other special circumstances would make it inappropriate.

[5] The Judge noted that a fine will generally be appropriate for offences against the HSE Act. But the sentencing Judge retains a discretion not to impose a fine if satisfied that the offender does not or will not have the means to pay it.[4]
[6] Heath J then referred to the relationship between fines and reparation, and the principle that the Court may take into account the financial ability of the offender to pay.[5] The Court may order a report under the Sentencing Act to assess the offender’s capacity to pay reparation.[6] He also noted the ability of the Court to obtain a declaration as to financial capacity.[7]
[7] Next, the Judge referred to the proposition that it would be undesirable if corporate offenders were able to escape a fine on the ground of alleged financial impecuniosity,[8] and that an offender’s lack of means did not present a bar to the imposition of a fine.[9] The Court would need clear evidence of inability to pay before it would exercise its discretion to lower or refrain from imposing a fine for that reason. Even then, the Court retained a discretion to impose a fine beyond the company’s apparent means to pay if the conduct of the offender was serious and the company should not be in business.[10]
[8] The Judge concluded that there was no “clear and unequivocal material” before the District Court Judge to demonstrate that a fine at a particular level could not be paid.[11] The Judge emphasised the need to take a realistic view of the imposition of fines in cases where a company had been funded throughout its trading life through the provision of shareholder advances.[12]

High Court decision on leave to appeal to this Court

[9] MRS then sought leave of the High Court to appeal to this Court under s 144(2) of the Summary Proceedings Act 1957. The proposed questions on appeal were:

Question one

In the context of the requirement under section 40 of the Sentencing Act 2002 for the Court to take into account the financial capacity of the offender when fixing the amount of a fine, in what circumstances may a Court impose a fine which is beyond the capacity of a defendant company to pay, and which has the effect of putting the defendant company out of business?

Question two

Two parts:

(a) Where a defendant company is seeking to establish that it does not have the financial capacity to pay a fine above a particular amount, is it necessary for it to provide evidence as to the financial capacity of its shareholders (who are not defendants in their own right) in addition to its own? In other words, is the financial capacity of a company’s shareholders relevant to an assessment of the financial capacity of the company itself?

(b) If the answer to (a) is yes, then in circumstances where:

(i) the financial position of the defendant company submitted at sentencing was never challenged, and

(ii) there was no suggestion at sentencing that the evidence supporting that submission was insufficient and ought to include evidence as to the financial capacity of the company’s shareholders, can the fact that evidence regarding the financial position of its shareholders was not put forward, be relied upon by a Judge on appeal in determining that the sentencing judge was not satisfied that the defendant company was in fact unable to pay a fine above a particular amount? In other words, is an inference able to be drawn from an absence of evidence as to shareholders’ financial capacity, in circumstances where the defendant company [has] been given no reason to believe that such evidence was required?

Question three

In the context of the requirement under s 31 of the Sentencing Act 2002 for the Court to provide reasons for the imposition of any sentence, to what extent is it open to a Judge on appeal to infer the reasons for a sentencing judge’s decision in the absence of anything express in the judgment (ie what is the scope of s 31)?

[10] Heath J refused the application.[13] The Judge correctly noted that there must be a question of law of general or public importance before leave should be granted. He held that the first and second questions were not questions of law relevant to the facts of the case.[14] The appeal by MRS had been dismissed because of a factual finding rather than a legal ruling. Further, he held that the third question was not arguable.[15] The wording of the question suggested it was not possible for an appellate court to infer the reasons for the lower court’s decision, when clearly this was not so. The Judge commented that it transpired during argument that the appellant’s real complaint was that it was irrational for him to have drawn an inference about what the District Court Judge intended. The Judge then observed, we think correctly, that this did not give rise to a qualifying point of law for which leave could be granted. Finally, the Judge referred to the availability of an alternative remedy to have fines remitted under s 88(3) of the Summary Proceedings Act. This militated against granting leave.[16]

Application for special leave

[11] MRS now seeks special leave to appeal to this Court under s 144(3) of the Summary Proceedings Act. Like subs (2), subs (3) of s 144 requires a question of law of general or public importance. MRS has altered the form of its proposed questions on appeal since the application to the High Court. They are now advanced as follows:

Question 1: Are the financial positions of a defendant company’s shareholders (who are not defendants in their own right) a relevant consideration to be taken into account by the Court when assessing the financial capacity of the defendant company for the purposes of imposing a fine under s 40 of the Sentencing Act?

Question 2: Is the existence of the Court’s jurisdiction under s 88(3)(h) of the SPA to remit a fine in whole or in part on the grounds of financial incapacity, a relevant consideration to be taken into account by the Court in determining the appropriate amount of a fine to impose on an offender under s 40 of the Sentencing Act?

Question 3: Was there any evidential basis for Heath J’s finding that the reason Judge Spear did not reduce the fine imposed on MRS at sentencing was that Judge Spear was not satisfied that the evidence before him demonstrated financial incapacity to a level that justified reducing an otherwise appropriate fine, in that it did not contain adequate information as to:

(i) the financial position of MRS’ shareholders (Warren and Sonia Cook); and

(ii) why their historical support of MRS would not be continued in order to allow the company to pay the fine that was otherwise appropriate?

Applicant’s submissions

[12] The real issue that the applicant seeks to argue by way of a second appeal is that the Judge in the District Court erred by not adjusting the fine downward based on the applicant’s purported incapacity to pay. This issue is perhaps best reflected in the reformulated Question 3.
[13] For the applicant, Mr Elliott submitted that both at the sentencing hearing and on appeal there was inadequate information about the financial position of the shareholders of MRS. He claimed that the reality is that neither of the shareholders has the capacity to support MRS in paying the fine. Thus, if the fine stands, MRS will be put into liquidation. Other financial implications for the Cooks were set out in the affidavit of Mr Cook filed for the purposes of the special leave application.
[14] As to the issue raised in Question 1, the applicant thereby sought to challenge the conclusion of Heath J[17] that the Judge in the District Court was entitled to take into account the financial position of MRS’s shareholders when fixing the amount of the fine. It was submitted that in so concluding, Heath J misdirected himself as to the relevant matters to be taken into account in determining the amount of a fine under s 40 of the Sentencing Act.
[15] Mr Elliott referred to the decision of East Bay Heli Services Ltd v R.[18] There, the High Court took into account the financial circumstances of a shareholder/director in determining the amount of the fine to be imposed on a small owner-operated company. However, the shareholder in that case was a co-offender together with the company. Therefore the decision in that case is distinguishable from the present.
[16] As to Question 2, the applicant submitted that it was a question of law that should appropriately be considered by this Court whether the jurisdiction of the District Court under s 88(3) of the Summary Proceedings Act to remit fines on the grounds of financial incapacity[19] should be taken into account when determining the amount of a fine. It was submitted that this was a question of law which is one of general or public importance.

Discussion

[17] Counsel for the respondent opposed the grant of special leave. Mr Chisnall submitted that none of the questions, even as presently reformulated, ought to be permitted for a second tier of appeal. In particular he contended that the third question is not a question of law at all. Rather, it asks us to determine whether Heath J’s decision was factually correct. The issue of the financial position of MRS and the director/shareholders as related to the alleged incapacity of MRS to pay the fine was intensely fact-specific. Mr Chisnall emphasised that the determination of the amount of a fine under s 40 of the Sentencing Act requires a sentencing Judge to take into account a range of factors[20] including the financial capacity of the offender.
[18] We agree with these submissions and consider that the assessments necessary for the imposition of a fine in a given case will be infinitely variable, case-specific and fact-dependent.
[19] We note that Heath J’s decision to decline leave was premised on the need for the sentencing Judge to take a realistic view where a company has been funded throughout its trading life by the provision of shareholder advances.[21] We are satisfied that it is a legitimate approach to take into account shareholder advances.
[20] Heath J’s decision to dismiss the appeal was also based on the fact that there was no clear and unequivocal material before the District Court to demonstrate that a fine above a particular level could not be paid.[22] This confirms that the issues arising on sentencing and on appeal were essentially fact-based and turn on the particular circumstances of each case. Thus the first question is not one in respect of which leave should be granted.
[21] With respect to the second question, the respondent submits that Heath J did not conclude that the existence of the fine remittance procedure under s 88 of the Summary Proceedings Act relieved the sentencing Court of the obligation to undertake the financial capacity assessment under s 40 of the Sentencing Act. Again, there was no ruling on the relevance of s 88 and it cannot be taken as a point of law on appeal. Rather, all the Judge did was to accept that in imposing a fine the financial capacity of the offender to pay a fine was relevant and the Court may decide, under s 14, not to impose a fine if “satisfied” that the offender “does not or will not have the means to pay it”.
[22] In this context we note and agree with the Judge when he said:[23]

[That] means the Court’s decision is discretionary in nature. There is no jurisdictional bar to imposition of a fine, even in circumstances where it appears the company lacks financial capacity to pay. Where clear evidence to justify a reduction in an (otherwise) appropriate fine exists, the discretion must be exercised judicially and on a principled basis. Financial capacity to pay a fine falls for consideration in that context.

[23] Further, we consider that Heath J’s reference to s 88 of the Summary Proceedings Act was merely recognition of the fact that an offender might seek remittance of its fine, should it meet the statutory criteria. Such an application has now been made by MRS in this case. Overall, we can find no fault with the reasoning of Heath J in dismissing the appeal.
[24] Despite the comprehensive submissions so ably presented by Mr Elliott in support of the application for special leave, we are satisfied that this is not a case where special leave should be granted. While it might be possible to construct artificially a question of law, we consider that the decisions both in the District Court and the High Court were based on the nature of the evidence available at the sentencing hearing and are highly fact-specific. Accordingly, while the issues might be extremely important to the shareholders of MRS, they do not give rise to a question of general or public importance that should proceed to further appeal.

Result

[25] The application for special leave is declined.

Solicitors:
Crown Law Office, Wellington for Respondent

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[1] Department of Labour v Icepak Coolstores Ltd DC Hamilton CRI-2009-019-11343, 15 December 2009.

[2] Mobile Refrigeration Specialists Ltd v Department of Labour HC Hamilton CRI-2009-419-94, 29 March 2010.
[3] Department of Labour v Hanham & Philip Contractors Ltd [2008] NZHC 2076; (2008) 6 NZELR 79 (HC).
[4] Sentencing Act, s 14(1).
[5] Sentencing Act, s 35 (for reparation) and s 41 (for fines).
[6] Sentencing Act, s 33.
[7] Sentencing Act, s 42.
[8] At [54].
[9] At [57].
[10] At [58], citing R v F Howe & Son (Engineers) Ltd [1999] 2 All ER 249 (CA).

[11] At [55], [60] and [61] applying R v Khan CA312/05, 7 March 2006 emphasising the need for full disclosure in respect of any claimed financial incapacity.
[12] At [60].

[13] Mobile Refrigeration Specialists Ltd v Department of Labour HC Hamilton CRI-2009-419-94, 4 June 2009.
[14] Leave judgment at [21] to [24].
[15] Leave judgment at [25]–[26].
[16] Leave judgment at [27].
[17] Appeal judgment at [52].
[18] East Bay Heli Services Ltd v R HC Rotorua AP 53/03, 13 November 2003.
[19] Appeal judgment at [53] and [62].

[20] The section also makes specific reference to ss 7 to 10 of the Sentencing Act dealing with the purposes and principles of sentencing, aggravating and mitigating factors and offers to make amends.
[21] See leave judgment at [32].
[22] Referred to in R v Khan.
[23] Appeal judgment at [57].