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First project order

19 June 2019

Under s155 of the HSW Act, courts may impose a project order as part of the penalty.  Hamish Kynaston (partner) and Bridget Sinclair (solicitor) examine the first use of this provision.

Alongside the usual financial penalties, the order was imposed in WorkSafe New Zealand v Nicks Components & Accessories Limited for the ‘general purpose of work health and safety’ – much like some of the positive obligations being assumed by PCBUs via enforceable undertakings.  The company was prosecuted following a machine guarding accident in which one of its employees, Mr Button, had his thumb amputated and half of one finger and the tip of another removed, and was unable to work for nine months.  The company pleaded guilty.  Sentencing, Judge Down imposed a fine and reparation order accordingly.  He acknowledged that it is a small business with limited resources, and the efforts it had made to support Mr Button in his recovery.  After nine months he returned to work for the company and accepted an offer of $40,000 reparation.  Judge Down noted that at times since the accident Mr Davies (the sole director) had not taken full salary so he could continue to pay his employees, including Mr Button.  With these factors in mind, the Judge held – and the prosecution accepted – that a project order was appropriate.

Fine and reparation

Judge Down imposed reparation of $35,000 for emotional harm and $4,642.85 for consequential loss, being the shortfall between Mr Button's normal income and his weekly ACC compensation.  On top of that, the company was fined $60,000.  The judge acknowledged that the total was substantial for a company with its resources, but considered that it was justifiable as the injury was as a result of a clear, avoidable and preventable breach.  This represented a significant reduction from the $281,250 that would otherwise have been imposed for this medium culpability offence.  Judge Down started at $500,000 and discounted for mitigating factors, being cooperation, remorse, a good safety record, the size of the company and the remedial steps already taken.  A further discount was applied as the Court did not want to put the company out of business and cost six employees their jobs – including Mr Button.

Project order

The Court required Nicks Components to prepare a safety presentation to students at an institute of technology, produce a safety training film about its experience relating to the incident, and provide that film, together with a video of the safety presentation, to the Toi Ohomai Institute of Technology as a training resource.  The company has to provide WorkSafe with an outline in advance of the proposed content of the safety training video.  It also has to provide WorkSafe with a six-monthly monitoring report outlining compliance with the project order, and then must file an affidavit to confirm the order has been complied with.  The project order against Nicks Components is similar to the ‘projects’ that are sometimes assumed by PCBUs via enforceable undertakings.  For example, following a quad bike fatality Zespri committed to certain initiatives, including facilitation of grower H&S education; health and safety reviews of Zespri's contractors; information campaigns; sponsoring and promoting the Horticultural Health and Safety Forum; and establishing a tertiary scholarship for accredited H&S studies.

Overall penalty

There is a cost that comes with projects such as these, which should go to the amount of the overall financial penalty imposed on the PCBU.  This was taken into account in the overall assessment in the case of Nicks Components, albeit expressed very briefly.  The public benefit should have some relevance also.  In terms of enforcement, if Nicks Components fails to comply with the project order without reasonable excuse, it can be charged under s159 of the HSW Act and fined up to $250,000.  This is the same penalty available under s126 for non-compliance with an enforceable undertaking, although there is no exception of ‘reasonable excuse’ in that instance.  It will be interesting to see the extent to which the approach taken in Nicks Components is followed and developed by WorkSafe and the courts in other decisions.  The case should be seen as a positive development, given the focus that project orders have on the improvement of work health and safety.

This article was originally published on the Safeguard website.