WorkSafe New Zealand v Portage Management Ltd [2020] NZDC 1545 (28 January 2020)

Last Updated: 3 August 2022

IN THE DISTRICT COURT AT BLENHEIM I TE KŌTI-Ā-ROHE KI TE WAIHARAKEKE

CRI-2018-006-001127

[2020] NZDC 1545

WORKSAFE NEW ZEALAND

Prosecutor v

PORTAGE MANAGEMENT LIMITED Defendant

Hearing:	28 January 2020
Appearances:	S H Backhouse for the Prosecutor J Cochrane for the Defendant (via telephone)
Judgment:	28 January 2020

NOTES OF JUDGE A A ZOHRAB ON SENTENCING

[1] WorkSafe New Zealand brought a prosecution against Portage Management Limited alleging offending against the Health and Safety at Work Act 2015, ss 48(1), 48(2)(c) and 37 (“the Act”). The company was found guilty of the charge that between 4 April 2016 and 21 October 2017 at its premises in Kenepuru Sound, it being a person conducting a business or undertaking and managed and controlled a workplace, namely the deck at the Portage Resort Hotel, and having a duty to ensure so far as reasonably practicable that the workplace, the means of entering and exiting the workplace, and anything arising from the workplace were without risk to the health and safety of any person, it failed to comply with that duty and that failure exposed persons and including Ralph Jones, Michael Fitzgibbon, Rodney Eatwell and John Ahern to risk of death or of serious injury arising from a fall from height.

WORKSAFE NEW ZEALAND v PORTAGE MANAGEMENT LIMITED [2020] NZDC 1545 [28 January 2020]

[2] The particulars of the reasonably practicable ways in which the company failed in its duty were a failure to ensure regular preventive maintenance assessments were carried out by an appropriately qualified person, and ensure that the deck barrier was appropriate.

[3] The charge was proven by way of formal proof before Judge Mill on 13 November 2019. Rather than move to sentencing on the day, he set a sentencing date and gave the liquidators a final opportunity to file any further information that they had because the Court was at sentencing going to be required to make a finding as to reparation, and impose a fine, and the ability of the company to pay, and the existence of any insurance covering reparation were important matters to be looked at.

[4] So, in terms of this sentencing exercise today, as well as Judge Mill’s decision I have the prosecutor’s submissions as to sentence, and I also have from Mr Cochrane, as counsel for the liquidators, a memorandum as to the company in liquidation’s ability to pay reparations.

[5] Mr Cochrane states that as at the date of liquidation there are no assets immediately available to any creditors of the company in liquidation. The company in liquidation’s assets include a statutory liability insurance policy with Lumley Insurance, and potential claims against third parties including the directors and related parties, however, there are no other funds in the liquidation.

[6] On its face, I am told that the policy provides cover for a reparation order under the automatic extensions. Mr Cochrane in his memorandum submits that the combined effect of ss 303(2) and 308 Companies Act 1993 is that reparations if ordered, are not an admissible claim in the liquidation of a company. If the Court was to order reparation in this case the liquidator considers:

• (a) That WorkSafe will not have an admissible claim for the reparations as a creditor in the liquidation of the company and
  
• (b) As WorkSafe does not have an admissible claim in the liquidation there would be no obligation on the insurer to indemnify the company in

liquidation and therefore, no insurance proceeds included in the company’s assets.

[7] It is submitted, however, that WorkSafe’s claim for reparations would still be recoverable if they were to come out of liquidation, as at that point the insurer would be obliged to indemnify. It is suggested that that interpretation is supported by the decision of Heath J in EXFC16 Ltd, and also the liquidators have referred me to a decision of Doogue J in Zion.1

[8] My instinctive reaction as far as having looked at both of the decisions is that this is a situation where there is an insurance policy in place, and the effect of any liquidation, and how any reparation might be covered by the insurance policy as a consequence of Portage Management Limited’s liquidation, all of those matters will be determined by the policy wording.

[9] I am going to make a reparation order, but the reparation order that I am going to make will be on a principled basis. It is not ordered as payments to WorkSafe, rather reparation is for payment to victims of offences committed under this legislation. Reparation can be imposed in relation to loss or damage to property, emotional harm and relevant consequential loss or damage, and what is clear is that Mr Jones, Mr Fitzgibbon, and Mr Ahern all suffered emotional harm to various degrees, albeit that I do not have victim impact statements, and so any award of reparation is intended to assist those people. It is compensation for actual harm arising from the offence in the form of anguish, distress and mental suffering, so these are orders that are made for the benefit of the victims of this offending.

[10] As I say, it is not up to me to carefully characterise the harm in such a way that it might be caught within the wording of an insurance policy. It is clear what emotional harm reparation is intended to do, who is intended to receive it, and the purpose of it.

[11] Now, also I accept having read Mr Cochrane’s memorandum of counsel for the liquidators, that this is not a situation where the company in liquidation is able to meet

1 EXFC16 Ltd (in liq) v New Zealand Customs Service [2017] HZHC 577; Department of Labour v Zion Wildlife Services Ltd D C Whangarei CRN09088501178 CRN090885011, 2 December 2011.

any fines or costs, but I am asked to go through that exercise because the informant submits that any sentencing decision will have a general deterrent affect on others, and more particularly in the hospitality and tourism industry, because that is an important aspect of health and safety sentencings.

[12] Dealing first with the issue of reparation given the guideline decision of Stumpmaster v WorkSafe which sets out the four-step process.2 So dealing first with the issue of reparation. The High Court have reminded us in the Big Tuff Pallets decision that imposing reparation or emotional harm is an intuitive exercise.3 Its quantification defies finite calculation. The judicial objective is to strike a figure which is just in all the circumstances and which in this context compensates for actual harm suffering from the offence in the form of anguish, distress and mental suffering.

[13] I do not have victim impact statements from the three surviving victims. I have been referred to a number of cases and the purpose of being referred to various cases is so that any award of emotional harm reparation is done on a consistent basis, but of course that all depends on a number of things, the solvency of a particular defendant company, whether or not the defendant company is insured for the purposes of emotional harm reparation, and we do not always have all of that detail. So, a word of caution obviously, when looking at comparative cases.

[14] But given Mr Jones’ serious injuries as outlined in the submissions from Mr Fitzgibbon’s and I am looking here particularly at paras 5.12 to 5.14. I am content to conclude that there should be reparation orders given the nature of the injuries, Mr Jones recalls at the time the pain, the time spent in hospital and so there is an emotional harm reparation payment to be made to Mr Jones of $35,000. For Mr Fitzgibbon, $20,000 given he was knocked unconscious, given the breaks that he suffered, and then for Mr Ahern. Whilst he did not suffer any broken bones, but he did suffer strains and bumps and he recalls the fall and, observing Mr Eatwell who has sadly since deceased, and also Mr Jones lying injured, nominal award of reparation of

$5000 is appropriate in the circumstances.

2 Stumpmaster v WorkSafe New Zealand [2018] NZHC 2190.

3 Big Tuff Pallets Ltd v Department of Labour HC Auckland CRI-2008-404-322, 5 February 2009.

[15] I am acutely conscious of there being issues potentially about payment of reparation, but it is still important in my view to make reparation awards, even in the case of doubt.

[16] The second step involves assessing the quantum of the fine and the four guideline bands for culpability are set out in submissions and it is suggested that the offending here falls in the medium culpability range. I have been referred to the relevant considerations for assessing culpability, and Stumpmaster referred to the Department of Labour v Hanham & Philp, and I have been reminded in the submissions of the various things that I need to take into account.4

[17] The factors that need to be addressed are the identification of the operative acts or omissions at issue, and the practical steps it was reasonable for the offender to have taken in terms of s 22 of the Act, and one of the fundamental matters identified by the informant is that when the defendant company purchased the Portage it should have carried out a risk assessment to identify any risk to workers and patrons, and that it should have worked through how to best control those risks.

[18] It is plainly obvious that if this had occurred, the issues with the deck barrier would have been identified. Even to an untrained person they were “blindingly obvious”, and could easily have been rectified and right from the “get go” the defendant company should have had a maintenance programme with a competent person periodically assessing and maintaining the deck barrier. That would have ensured that it continued to be fit for purpose. Judge Mill in his decision identified how plainly obvious and easily addressed the issues were.

[19] In terms of an assessment of the nature and seriousness of the risk of harm occurring as well as the realised risk, here the risk was significant, and as Judge Mill rightly observed, the risk was probable given the deterioration of the timber, the inadequacy of the barrier fixings, and the top rail being at such a height that it permitted and as Judge Mill quite rightly stated, it invited people to sit or lean on it and the hazard was neither controlled nor assessed and no regular preventative

4 Department of Labour v Hanham & Philp Contractors Ltd [2008] NZHC 2076; (2009) 9 NZELC 93,095; (2008) 6 NZELR

79 (HC).

maintenance assessments had been carried out. The deck had been there for approximately 30 years and located close to the sea.

[20] So the potential for harm from a fall is well known, and was significant, given the heights involved, and it is well known and is basic common sense, anybody would know that a fall from that height could result in very serious injury or death. Also, the deck barrier gave patrons a very false sense of security which arguably increases the defendant’s culpability.

[21] As to whether or not death, serious injury or serious illness occurred or could reasonably have been expected to have occurred, this is a case in which serious injury could reasonably be expected to have occurred, and did in fact occur.

[22] In terms of the degree of departure from prevailing standards in the industry, it is clear that the defendant’s conduct departed from industry standards and guidelines given the applicable standards in the Building Act 2004 and the associated Building Code and the Building Code Handbook. In terms of obviousness of hazard, I have already covered that. The risk of serious injury from fall from height is obvious and one of the most significant factors here is that this was just not workers who were being exposed because of the nature of the industry, drinks and meals were frequently served on the decking area and patrons often sat on the balustrades.

[23] As to availability costs and effectiveness of the means necessary to avoid the hazard, because not only was this blindingly obvious in terms of the risk and serious risk that it posed, setting a new deck barrier and ensuring a maintenance programme was in place would not have been costly at all. As Judge Mill rightly observed, it would have been easy, and not costly, to put right, so this is most certainly not one of those situations where the cost was prohibitive and it all gets back to the fact that there was no initial risk assessment in identification of what was a “blindingly obvious” problem, which was going to end up with someone being seriously injured.

[24] In terms of fixing a start point, I have been asked to fix a start point of

$450,000. In terms of getting some guidance on that, I have been referred to a range of cases, basically for cross-checking purposes. I have got the Waipa Workingmens

Club, the Rickie Shore Building Limited, Rangiora Carpets Limited, and when considers all of those and more particularly the aggravating factor here of this is not just workers being exposed to the risk, this is patrons who are being lulled into a sense of false security, and with them being exposed to a real and significant risk, I would have thought that a higher start point of than $450,000, moving further up the range towards the top of the medium band might be appropriate, but in the circumstances I am conscious that if this is effectively a matter which is being dealt with by way of formal proof, and so I have not had the opportunity to hear competing submissions as part of the cross-checking process. So I am content to conclude based on the facts of this case. The aggravating features identified, that a start point of $450,000 is appropriate.5

[25] There are no applicable aggravating features, the company has previous good character, I have ordered reparation though there is some uncertainty about potential payment of that. I had wondered whether or not I could perhaps, in terms of good character, counterbalance that with the fact that the company has gone into liquidation and, on the face of it, potentially avoiding the significant fines that would have been imposed on it, and potentially avoiding reparation. Was that a tactical decision? I am unable to conclude that that was the reason for it, it could well have just simply been a business which was unsustainable.

[26] So, I am of a view that in line with the other cases and the traditional way of approaching things, that it is appropriate to give a discount for previous good character, and the fact that reparation has been ordered, and given there is some prospect of payment. In terms of remedial steps there is some information potentially about some attempts being made to comply or improve the situation, but I do not have any firm information that it was anything other than a temporary fix, so in my view it is not a case that there is scope for any discount for remedial steps.

[27] I would ordinarily award regulators costs, and what is sought is $2534.90, being 50 percent of the costs, but the reality of the situation is that the defendant

5 WorkSafe New Zealand v Waipa Workingmens Club [2016] NZDC 3291; WorkSafe New Zealand v Rickie Shore Building Limited [2016] NZDC 18215; WorkSafe New Zealand v Rangiora Carpets Limited [2017] NZDC 22587.

company is not in a position to meet that payment. So I simply make the observation that is what I would have ordered.

[28] In terms of the proportionality assessment, I am required to consider the defendant company’s financial capacity in relation to a fine. As I observed at the commencement of my decision, I have a memorandum from Mr Cochrane for the liquidators, and the company is not in a position to meet a fine or the costs, and in those circumstances I am not going to order a fine or costs, other than I would simply make the observation that I would have taken the $450,000 start point, there was a 10 percent discount of $45,000 and that would leave the appropriate fine and costs. As I say I make no formal order in terms of a fine or costs, the end result of the indicative fine and costs.

[29] There is the emotional harm reparation of $35,000 to be paid to Mr Jones, there is $20,000 to Mr Fitzgibbon, there is $5000 to Mr Ahern. As I observed earlier in my decision, those are emotional harm reparation payments, those are payments personal to the individual people, those are payments which are made for the purpose of compensating them for actual harm arising from the offence in the form of anguish, distress and mental suffering, and I would expect those costs to be covered by the insurance company.

A A Zohrab

District Court Judge