Recent case addresses income from criminal activity stemming from workplace safety breaches
The High Court has approved a $4 million settlement of a proceeds of crime case in which the police sought to forfeit profits allegedly made through health and safety breaches. The settlement comes one week into what was due to be a seven-week hearing, in which the Commissioner sought recovery of up to $11 million from Salters Cartage Ltd., the two shareholders and associated trusts.
The police brought this case under the Criminal Proceeds (Recovery) Act. This legislation is often used to recover assets acquired with the income from significant criminal offending, such as drug dealing or money laundering. It was the first time the Act had been applied to a legitimate business that had committed health and safety or hazardous substances offences.
The Salter case represents a new approach to health and safety liability in New Zealand. There were, however, some unusual features relating to the underlying health and safety breaches and it remains to be seen whether proceeds of crime cases will be pursued more broadly.
Salters Cartage Ltd, wholly owned by Mr and Mrs Salter, specialises in the disposal and recycling of waste oil and other hazardous substances. In 2015, a young worker was killed at the company's premises when a tank containing petrol, diesel, kerosene and oil exploded.
In 2017, Mr Salter and the company pleaded guilty to six charges under the Health and Safety in Employment Act (which was in force at the time of the accident) and the Hazardous Substances and New Organisms Act (HSNO), including breaching a prohibition notice by resuming distillation after the explosion.
Mr Salter was sentenced to four-and-a-half months' home detention and a $25,000 fine. The company was fined $258,750 and ordered to pay $128,000 in reparations to the family.
Two years later, in 2019, police obtained restraining orders under the Act over four properties associated with the Salters and in 2022 sought civil forfeiture orders amounting to almost $11 million against the company, Mr and Mrs Salter, and associated trusts.
The police alleged that the Salters knowingly derived benefits totalling $10,928,000 from the breaches of the Health and Safety in Employment Act and HSNO.
The settlement involved forfeiture orders being made against Mr Salter and the company only, recognising the "benefits derived from significant criminal activity" of $4 million relating to breaches of HSNO and of the 2015 prohibition notice.
It is notable that the agreed payment far exceeds the criminal penalties under the legislation in force at the time of the offending. Fines were substantially increased under the Health and Safety at Work Act (HSWA), but the agreement is much higher than any fine ever awarded and exceeds even the maximum fine ($3 million for companies and $1.5 million for officers of PCBUs).
Health and safety breaches do meet the statutory definition of “significant criminal offending,” but the Salters argued that the Act did not apply to this kind of situation (as well as raising other defences).
The settlement means that a ruling on the application of the Act was not required, leaving real uncertainty about its potential application to health and safety offending.
This case has been followed closely in the business community and the settlement is likely to create more uncertainty for businesses and individuals, including those facing prosecution for health and safety breaches.
However, it is unlikely that such applications will become a regular feature following HSWA prosecutions. The head of the Financial Crime Group has pointed to what were described as "unique features and aggravating circumstances" of the case while noting that future decisions would be considered on a "case-by-case" basis.
Forfeiture orders are available in cases where someone has knowingly benefitted from the significant criminal activity (or where property has been derived from such activity). In the health and safety context, that is likely to require deliberate contraventions where those contraventions have enabled profits to be made. Claims against individuals are most likely in closely held companies where the shareholders profiting are well aware of the operational decisions.
Deliberate breaches of this kind are likely to lead to significant penalties under HSWA, including the potential for imprisonment, but Salter has demonstrated that the police are prepared to take additional steps to recover assets.
While uncertainty is never welcome, at its most basic, the lesson from Salter is one no one should still need to learn – don't ignore significant health and safety breaches.
Emma Peterson is a partner in the Litigation team at Russell McVeagh in Auckland, specialising in employment law and health and safety. Mark Campbell is a special counsel in the Litigation and Corporate Advisory teams at Russell McVeagh in Wellington, specialising in health and safety, insurance, and data protection/privacy issues. Caitlin Walker is a solicitor at Russell McVeagh.
