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Changes to the Construction Contracts Act

December 2017

A First Decision

The Health and Safety at Work Act 2015 came into force in April 2017 bringing with it significantly increased penalties for breaches of health and safety duties. Now the first sentencing decision by the District Court under the Act has arrived to provide some insight as to how the new penalty regime will be applied.

Worksafe New Zealand v Budget Plastics (New Zealand) Limited involved a partial amputation of a worker’s hand after it was dragged into a plastic extrusion machine. Budget was charged in the Palmerston North District Court and pleaded guilty to failing to ensure, so far as reasonably practicable, the health and safety of its worker thereby exposing him to a risk of death or serious injury.

The charge was punishable by a maximum fine of $1.5 million. In comparison, the equivalent offence under the previous legislation carried a significantly lower maximum penalty of $250,000.

In considering the appropriate level of fine, the Court assessed Budget’s culpability as moderate. The incident had been foreseeable and the company had apparently failed to fully put into effect improvements that had been previously recommended by a health and safety expert. There was also the potential for a more severe injury.

The Court decided that the starting point for such offending under the new Act was in the range of $400,000 to $600,000. The starting point was significantly lower than that sought by Worksafe ($900,000) but also higher than that submitted by Budget ($200,000).

After credit was given for the $37,500 of reparation that the Court separately assessed Budget as having to pay, as well its remorse, co-operation, post-incident remedial action and prior good record, an end sentence between $210,000 and $315,000 was reached. However, while acknowledging that penalties under health and safety law had to “bite”, the Court ultimately reduced the fine to $100,000 after taking into account Budget’s ability to pay.

Of note is the fact that the sentencing judge declined to adopt the approach advocated by Worksafe which would have seen a starting point for the fine that was approximately nine times higher than an equivalent case under the previous law, but also declined to use the lower starting point sought by Budget which was calculated with reference to sentencing in Australia (from where the new legislation was modelled).

The sentencing judge made it clear that it would be for the higher courts to formulate any guidelines of general application for sentencing under the new law. However, the decision has at least confirmed that defendants who are found to have breached their duties under the Act can expect to receive significantly higher penalties than they would have under the previous health and safety regime.