Late in 2025, the District Court overturned an improvement notice issued by WorkSafe New Zealand to Pharmalink Extracts Limited (PEL)[1].

The improvement notice concerned alleged non-compliance with certain requirements of the Health and Safety at Work (Hazardous Substances) Regulations 2017 (the Regulations). 

While the case involved a unique process and the interpretation of a specific provision in the Regulations, the Court’s reasoning is significant and has wider application because it:

• reinforces the relevance of interpreting health and safety legislation by reference to orthodox statutory interpretation principles – i.e. interpreting the text of legislation in light of its purpose and context;

• highlights that the Courts will seek to interpret the regulations made under the Health and Safety at Work Act 2015 (HSWA) consistently with the purpose of, and duties outlined in, the HSWA; and

• underlines the importance of having expert evidence in cases where there are technical/scientific processes at issue.

Background

PEL operates a supercritical CO₂ extraction facility that is used to extract high-value compounds from natural materials that are used in therapeutic applications. As part of one extraction process, PEL uses a co solvent mixture of supercritical CO₂ and molecular ethanol, known as CO₂ expanded ethanol (CXE). CXE exists at elevated temperature and pressure and does not have the same flammability characteristics as liquid ethanol while in use within the extraction system.

In November 2024, a WorkSafe inspector issued an improvement notice to PEL on the basis that ethanol, a class 3.1B flammable liquid, was allegedly “being used” in a building at PEL’s facility that did not comply with workroom requirements specified to control the risk of unintended ignition of flammable liquids. The improvement notice required PEL either to upgrade the building to meet workroom requirements or to apply for an exemption from the Regulations. Following an internal review, WorkSafe varied the notice but maintained that liquid ethanol was still “being used” and workroom requirements needed to be met.

PEL appealed the notice to the District Court, on the basis that the substance being used in the extraction vessels is CXE not ethanol, that in the (exceedingly unlikely) event of a leak of CXE to standard temperature and pressure in air, the correct risk to manage is a potentially flammable gas (a vapour of ethanol mixed with CO₂ gas and never a liquid), that PEL had extensive controls in place that complied fully with flammable gas regulations, and that applying workroom requirements designed for flammable liquids would undermine those controls and therefore expose staff to a serious risk that PEL was not prepared to take. PEL argued that Parliament could not have intended for the Regulations to be interpretated in such a way that would lead to an unsafe outcome, given the health and safety purpose of the legislation and the requirement in HSWA that, in furthering that purpose, regard must be had to the principle that workers and others should be given the highest level of protection against harm as is reasonably practicable. The appeal therefore raised a question about the proper interpretation of the Regulations.

The decision

When appealing an improvement notice, the relevant question for the Court is whether the decision to issue the notice was unreasonable in an administrative law sense (i.e. whether the decision-maker took into account irrelevant factors or erred in their interpretation/application of the law, including whether no reasonable decision-maker could have made the decision in question). 

The Court held that the WorkSafe decision-maker had misinterpreted and misapplied the Regulations by focusing on ethanol’s classification as a flammable liquid at standard temperature and pressure in air (STP), rather than identifying the substance actually “being used” in PEL’s extraction process. The proper question was not whether ethanol is classified as a flammable liquid at STP, but whether a flammable liquid was “being used” in the process as it in fact operates. On the uncontested expert evidence, the Court accepted that the substance in use was CXE, a fluid with different properties to liquid ethanol, and the relevant risk management measures that ought to be applied to any leak are those applicable to flammable gasses.

The Court found that WorkSafe’s approach involved taking into account irrelevant considerations and failing to take into account relevant ones. By treating the extraction vessels as if they contained ethanol and CO₂ as separate substances at STP, WorkSafe ignored the reality that CXE is a distinct substance created by the process conditions. The Court rejected the proposition that, absent a formal hazardous substance classification for CXE, WorkSafe was entitled to default to ethanol’s classification. In doing so, the Court said WorkSafe’s approach, amounted to “shoehorning” the process into existing categories rather than applying the Regulations in a manner consistent with their purpose.

Critically, the Court concluded that WorkSafe’s interpretation undermined the primary purpose of the HSWA by mandating control measures that would increase risk rather than minimise it. The evidence showed that credible leak scenarios involved a flammable gas or vapour risk, for which ventilation and gas detection controls were appropriate, whereas controls designed for flammable liquids could defeat those protections. Requiring PEL to seek an exemption from the Regulations in order to operate safely was inconsistent with the statutory scheme, which prioritises highest reasonably practicable protection for workers. 

For those reasons, the Court held issuing the improvement notice was unreasonable, including in the sense that no reasonable decision maker could have made it, and set the notice aside.

Matthew Ferrier and Mark Calderwood acted for PEL as the successful appellant in the proceeding.

Footnote
[1] Pharmalink Extracts Limited v WorkSafe New Zealand [2025] NZDC 25622.