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When fines are not enough – should workplace health and safety offending lead to seizure of assets as proceeds of crime?

April 28, 2020

Grant Nicholson Partner
Olivia Welsh Senior Associate
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A workplace fatality in 2015 resulted in multiple health and safety related convictions for a company and its managing director. The High Court is now being asked to decide whether proceeds of crime legislation can be used to seize millions of dollars in assets belonging to the director and his business. This begs the question – do we need this additional punishment to deal with health and safety offending, or is the existing penalty regime sufficient?

 

A workplace fatality

On 15 September 2015, a large fuel storage tank exploded at the Salters Cartage Limited (SCL) site in Wiri, Auckland killing 24 year old Jamey Lee Bowring. Mr Bowring had been engaged by a contractor to SCL to do some welding work in the vicinity of the tank, as part of a project to install a metal stairway, catwalk and handrails to enable better access to the tank and others around it. Mr Bowring was not inducted to the site, and was not told about the risks of doing welding work in the area.

 

WorkSafe New Zealand investigated the incident and unsurprisingly, identified multiple failings by SCL and its contractor.  SCL and its managing director, Ron Salter, were ordered to pay $128,074 in reparation and $283,750 in fines, and Mr Salter was sentenced to four and half months home detention.

 

Now, nearly five years after the accident, the Commissioner of Police is using the Criminal Proceeds (Recovery) Act 2009 (CPRA) to restrain and (potentially) seize Mr Salter’s personal and business assets in an effort to ensure no financial benefit arises out of the 2015 offending.

 

What is the Criminal Proceeds (Recovery) Act and what is it used for?

The CPRA allows the Police to restrain (and then forfeit) the proceeds of crime, or assets otherwise tainted by significant criminal activity.  It aims to stop people profiting from undertaking or being associated with significant criminal activity, to deter significant criminal activity, and to reduce the opportunity of people associated with crime or significant criminal activity to expand their criminal enterprise.

 

The CPRA starts by restraining assets that may be the proceeds of crime.  Then, the Police can ask the Court to seize those assets, forfeiting them to the Crown.  This is separate from, and additional to, whatever penalty the Court has already imposed for the underlying offending.  In fact, assets can be seized under the CPRA without the defendant being convicted of any offence at all (if the Police can prove the assets are nonetheless the proceeds of significant criminal activity).

 

Applications under the CPRA typically target criminals (and their associates) involved in supplying or producing drugs, gang activities, and money related crimes (e.g. benefit fraud, tax evasion, and money laundering).  At first blush workplace health and safety offending does not sit comfortably with these.  Health and safety offending is often a product of inadvertent regulatory non-compliance in the course of operating an otherwise legitimate commercial enterprise.  By contrast, drug and gang offences are classic criminal enterprises where the entire operation exists for the purpose of illegal activities.

 

While the Salter case is certainly unprecedented in attempting to bring health and safety related offending within the scope of the CPRA, it is not the first time regulatory based offending has resulted in applications under the CPRA.  There has been at least one previous case of offending against the Resource Management Act 1991 that resulted in the Police seeking a restraining order under the CPRA.

 

What does this mean for future health and safety offending?

If the Police succeed in seizing assets from Mr Salter and his business, this case will be a significant precedent for future health and safety offending.  In simple terms, businesses (and their owners) who fail to comply with workplace health and safety requirements will risk both penalties under the Health and Safety at Work Act 2015 (HSWA) and asset seizure if the business or its owners have unlawfully benefitted from that offending.

 

This would be a disturbing and detrimental development.  In our view, the penalty regime under the HSWA is sufficient to punish the various types of offending that can arise from poor health and safety practices without the need to also use the CPRA and seize the assets of offenders. 

 

When the HSWA came into force in 2016 it introduced significantly increased fines and the potential for individuals to be imprisoned for particularly serious breaches.  To the extent a “stick” was required to improve standards, that legislative change provided it.  Some commentators argue penalties are still too low, as bad practices continue.  We disagree and see the causes of bad practice as being more nuanced.  In any event, four years seems too short a period to draw definite conclusions from the available cases.  At present, many of the small to medium sized businesses (SMEs) that find themselves before the courts are “pleading poverty” in the face of the large potential fines that can already be imposed.  In many cases, these fines are being reduced significantly in order to ensure these businesses are not having to close and cause further detriment to employees and customers.

 

If applications under the CPRA become the norm then many SMEs will be forced to close their doors. The possibility of CPRA applications being used to seize personal assets will also deter others wanting to operate businesses in New Zealand.

 

Watch this space

If you are interested in hearing about the future developments in this case, or want to understand how your business might be impacted, please contact our team of health and safety experts who would be happy to assist.

 

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