Significant court decisions around employer’s duty of care, proceeds of crime, safety breaches
Following the Whakaari/White Island tragedy, WorkSafe New Zealand (WorkSafe) charged 13 parties for breaches of their duties under the Health and Safety at Work Act 2015 (HSWA).
On 1 March 2024, in the decision WorkSafe New Zealand v. Whakaari Management Ltd [2024] NZDC 4119, five of these parties were sentenced, resulting in significant fines. Further, three parties were ordered to pay reparations totalling over $10m to the survivors of the eruption and the families of the deceased.
Whakaari Management Limited (WML) entered into licence agreements granting commercial tour operators access to the island. WML had a duty under s. 37(1) of the HSWA (as a PCBU that owned/managed Whakaari) to ensure that Whakaari was without risks to the health and safety of any person, so far as is reasonably practicable. WML failed to do so, including because it did not adequately undertake risk assessments nor obtain sufficient advice around risk.
In recognition that it was WML that "enabled the entire industry of tours to Whakaari," the court set a high starting point of $1.1 million for WML's fine, reflecting its high culpability, which was reduced by 5 per cent for co-operation during proceedings, resulting in a final fine of $1.045 million. Additionally, it was ordered to pay $4.88 million of the total reparations.
The judge commented on WML's apparent lack of assets to pay the fines and reparations, despite its owners, the Buttle family, profiting handsomely from tours to Whakaari, and said that the "world is watching" to see if the family will meet what the judge called "an inescapable moral" obligation to pay. However, since then, WML has appealed its conviction (and sentence) to the High Court, which is currently set down to be heard on 12 August 2024 for four days.
White Island Tours Limited (WIT) operated walking tours on Whakaari, accessed by boat. Together with the other tour operators, WIT was found to have breached its primary duty of care under ss. 36(1) and (2) of the HSWA, flowing from its failure to adequately undertake risk assessments and consult with others around risk.
Noting that WIT accounted for 80 per cent of all tourists to Whakaari (and all but five people on the island when it erupted), the Court set a starting point of $1.1 million. After reductions (15 per cent for a guilty plea, 7.5 per cent for co-operation and remedial action, and 10 per cent for remorse), and an adjustment around reparations/insurance cover, WIT was fined $517,000. Additionally, it was ordered to pay $5 million of the total reparations.
Volcanic Air Safaris Limited (VASL) had the exclusive right to helicopter tourists onto the island from Rotorua. As it accounted for only five people on the island at the time of the eruption, it faced a lower starting point of $750,000, which was reduced by 37.5 per cent (7.5 per cent for a guilty plea, 10 per cent for remorse, five per cent for previous good character, five per cent for co-operation, and 10 per cent for providing evacuation assistance), resulting in a final fine of $468,750. Additionally, it was ordered to pay $330,000 of the total reparations.
Aerius Limited (Aerius) had the exclusive right to helicopter tourists onto the island from the Bay of Plenty (excluding Whakatāne) accounting for about 250 tourists on Whakaari per annum. It faced a starting point fine of $375,000, reduced by 22.5 per cent (7.5 per cent for a guilty plea, five per cent for co-operation, five per cent for remorse, and five per cent for previous good character), resulting in a final fine of $290,000. No reparations were ordered.
Kahu (NZ) Limited (Kahu) had the exclusive right to helicopter tourists onto the island from Whakatāne, but it had no employees or customers on the island when it erupted. This meant that it faced a lower starting point of $375,000.
It received a total reduction of 47.5 per cent (7.5 per cent for a guilty plea, five per cent for co-operation, five per cent for remorse, five per cent for good character and 25 per cent for evacuation assistance, given there was no-one it was responsible for on the island at the time), resulting in final fine of $196,000. No reparations were ordered.
The ongoing Salters Cartage case keeps open the possibility that the Criminal Proceeds (Recovery) Act 2009 (CPRA) could be applied to criminal offending under the HSWA, which would leave those who fall foul of the legislation liable to having their assets seized or forfeited without the need for a conviction.
The CPRA establishes a regime to allow for the forfeiture of property that has been derived directly or indirectly from significant criminal activity, or that represents a person's unlawfully derived income. It was originally intended to address drug and gang-related offending and, until Commissioner of Police v. Salter, had not been applied in respect of health and safety breaches.
In 2017, Salters Cartage Limited (SCL) and its owner were convicted and fined for multiple breaches of the then Health and Safety in Employment Act 1992 and the Hazardous Substances and New Organisms Act 1996 after a fatal accident at SCL's premises: see WorkSafe New Zealand v. Salters Cartage Ltd [2017] NZDC 26277. Then, in what was a surprising and novel application of the CPRA, the Commissioner of Police (Commissioner) commenced proceedings against the Salters and SCL, pursuing their assets as "proceeds of criminal offending" under the HSWA.
The Commissioner was successful in obtaining restraining orders on several properties owned by the Salters.[3] In granting the application (Commissioner of Police v. Salter [2021] NZHC 1531) the High Court ordered the Commissioner to provide an undertaking in relation to damages and costs. This would protect the Salters against losses suffered as a result of the orders, if the Commissioner were to be unsuccessful in proving its case. The Commissioner appealed against the order to provide an undertaking.
In February 2024, the Court of Appeal dismissed the appeal (Commissioner of Police v. Salter [2024] NZCA 6). It rejected the argument that the undertaking would have an unsatisfactory "chilling effect" on the Commissioner's pursuit and administration of restraining orders, and acknowledged the significant impact the lengthy restraints were likely to have. However, this issue is secondary to the key focus of the case, which is whether the CPRA can be used in respect of health and safety offending to justify the making of forfeiture orders. That issue is likely to be heard in October this year.
Two recent decisions serve as useful reminders that claims for health and safety breaches can be brought in the employment jurisdiction with expensive consequences.
Earlier this year, the Employment Relations Authority released its determination of Parker v. Magnum Hire Ltd [2024] NZERA 85, awarding the employee $105,000 in compensation for his unjustified disadvantage grievances in respect of workplace bullying. This followed the December 2023 decision of Cronin-Lampe v. The Board of Trustees of Melville High School (No 2) [2023] NZEmpC 144, in which the Employment Court made the most significant award the employment jurisdiction has seen for over three decades (almost $1.8 million) in respect of the employer's failure to provide a safe workplace. In that case, the two plaintiffs were successful in establishing they had been subjected to significant workplace trauma over the course of their employment, for which they were not adequately supported.
While Cronin-Lampe was an exceptional case, where breaches of health and safety are concerned, we are expecting to see an increase in employee claims under both the personal grievance regime and for breach of contract, the latter being likely to lead to higher awards.
Sherridan Cook is a partner at Buddle Findlay’s Auckland office, specialising in employment, health and safety, and commercial litigation. Helen Pryde is a special counsel at Buddle Findlay in Auckland, specialising in health and safety, employment, and insurance. Tasha Ioelu is a senior associate at Buddle Findlay in Auckland, specialising in employment and privacy.
