A payment of $4 million has been agreed in settlement of an unprecedented proceeds of crime case brought by the Commissioner of Police against a commercial business and its owners in a health and safety context. It followed the 2015 death of a contractor, which resulted in convictions against the business (Salters Cartage Limited (SCL)) and one of its owners, Mr Salter, for health and safety and hazardous substances offences.

The case was set to be the first substantive court decision on whether or not, under the Criminal Proceeds (Recovery) Act 2009 (CPRA), the Police can seize assets obtained from regulatory offending. The case had been described by judges variously as “novel” and “unusual”, and SCL was arguing that the Commissioner was seeking to apply the legislation to situations Parliament had not intended when it enacted it to eliminate the chance for persons to profit from undertaking or being associated with significant criminal activity.

While the case has settled for a sizeable sum, businesses are likely to take some comfort from the subsequent statement by Police regarding the unusual nature of the case and indication that they do not intend to routinely use the CPRA in the context of health and safety offences.

Background

Our April 2024 legal update sets out in detail the background to the case.

In essence:

• In 2017, SCL and its founder, chief executive and managing director, Mr Salter, pleaded guilty to criminal charges under the Health and Safety in Employment Act 1992 (HSE) [1] and Hazardous Substances and New Organisms Act 1996 (HSNO) following the 2015 death of a contractor who was welding a tank for SCL. At sentencing, the District Court imposed substantial fines on and orders for reparation against SCL and Mr Salter. Mr Salter was also ordered to serve four and a half months’ home detention.
• In 2019, two years after sentencing, the Commissioner applied to the High Court for orders restraining Mr and Mrs Salter, SCL and associated trusts from disposing of or dealing with four property assets, pending forfeiture action under the CPRA.
• SCL and the Salters then sought an undertaking from the Commissioner to cover any losses sustained by them in relation to the restraining orders if the Commissioner was unsuccessful in the proceeds of crime action. They were concerned that the orders could impact the sale price of SCL and hurt SCL’s ability to borrow money. In a welcome decision for businesses, the Courts ordered the undertakings be provided [2].
• In September 2022, the Commissioner applied under the CPRA for substantive civil forfeiture orders under the CPRA totalling almost $11 million, against Mr and Mrs Salter, SCL, and the trustees of two trusts.

The Commissioner’s application for forfeiture orders was acknowledged to be novel, never having been brought before in a health and safety context. The CPRA enables profit forfeiture orders to be made if the Court is satisfied on the balance of probabilities that the respondent has “unlawfully benefited” from “significant criminal activity”, and the respondent has interests in property [3]. “Significant criminal activity” is characterised by a criminal offence either a) punishable by a maximum term of imprisonment of five years, or b) from which a person (directly or indirectly) derived a profit of $30,000 or more [4]. Forfeiture orders are typically sought by the Police in situations like money laundering or drug dealing.

The Court of Appeal had (in its earlier undertaking decision) indicated their view that the Commissioner had an “arguable case” that could result in some form of forfeiture order [5].

In applying for the civil forfeiture orders, the Commissioner alleged that the Salters knowingly derived almost $11 million in benefits from “significant criminal activity”, namely [6]:

• the manufacture of hazardous substances without approval, and therefore contrary to the HSNO;
• failure to comply with regulations and controls governing the storage and handling of hazardous substances; and
• breaching a 2015 prohibition notice issued by WorkSafe regarding operation of the company’s distillation plant.

SCL and the Salters denied all wrongdoing beyond the matters covered by the 2017 convictions, or that they had derived benefits from criminal activity, or knowingly done so. They also argued that the four properties targeted (owned by trusts) were not under their effective control, and so outside the CPRA’s reach.

The settlement decision

The trial of the case started in mid-October, but was adjourned on the second day to enable settlement discussions to be finalised. As required by the CPRA, the High Court then considered (and ultimately authorised) the parties’ proposed settlement of $4 million, to be paid by Mr Salter and SCL, finding that this was consistent with the purposes of the CPRA and the overall interests of justice [7].

Interestingly, the settlement agreement proposed by the parties did not fully reflect the “significant criminal activity” alleged by the Commissioner. Instead, Mr Salter and SCL accepted they had benefitted from:

• the offending under HSNO for which they already had convictions following the WorkSafe prosecutions; and
• breaching the 2015 prohibition notice issued by WorkSafe,

and that this non-compliance was “significant criminal activity”, from which they could be found to have benefitted [8].

The settlement acknowledged weaknesses in the Commissioner’s case, in particular likely difficulties in proving the necessary knowledge [9] of Mrs Salter of much of the “significant criminal activity” (as she was not prosecuted by WorkSafe) and (if such knowledge were not proved), the resulting exclusion from recovery of her share of the property. The $4 million settlement sum was therefore broadly equivalent to what the Commissioner considered would be available if the Police case succeeded against only Mr Salter.

Our view and key points for businesses

This was a sizeable settlement figure ($4 million) for a novel case, said by the parties to reflect the inherent litigation risks. It was however a case brought against a backdrop of a worker’s death, and a District Court finding at the preceding sentencing of “extremely high” culpability. The reported details of the HSNO offending, in particular, also suggest a reasonably clear link between the offending and profit given SCL was operating a business that included receipt and storage of waste material, knowing that it was not compliant with regulations intended to ensure the safety of this type of operation and, at one point, in contravention of a prohibition notice issued by WorkSafe in relation to an aspect of the business.

Following the settlement, the Police issued a statement noting their “pragmatic” decision to settle the case. They noted their awareness of concerns within the business community about the application of the CPRA in the circumstances of the case and said [10]:

This is helpful clarification for businesses that breaches of the HSWA are not normally likely to result in action under the criminal proceeds regime. That is supported by the fairly limited situations in which such CPRA action can be brought. As noted above, under s 6 of the CPRA, “significant criminal activity” means an activity engaged in by a person that, if proceeded against as a criminal offence, would amount to offending:

• that consists of, or includes, one or more offences punishable by a maximum term of imprisonment of five years or more; or
• from which property, proceeds, or benefits of a value of the “threshold amount” (currently $30,000) or more have, directly or indirectly, been acquired or derived.

In that respect:

• the only offence under HSWA which meets the five year imprisonment aspect of the CPRA test is section 47 (reckless conduct in respect of duty), which is relatively infrequently used; and
• we consider that, in most health and safety related cases, proving a causal link between the offence and profit, and quantifying the profit, is likely to be more difficult than e.g. in drug dealing cases, as there will likely be a mixture of both lawful and unlawful business activity. However, there is presently still no Court guidance on that.

It is also worth noting the Police recognition in the settlement of the difficulties of establishing there was “knowledge” by Mrs Salter of deriving a benefit from significant criminal activity (she was a part owner of the business but not charged by WorkSafe).

The earlier Court of Appeal decision – requiring the Commissioner to provide an undertaking to cover losses resulting from restraining orders if the criminal proceeds recovery action is unsuccessful – is likely also to be a factor mitigating against future such Police action except in clear cases.

This article was co-authored by Nicole Burt, a Senior Solicitor in our Litigation team.

Footnotes

1. The predecessor to the current Health and Safety At Work Act 2015 (HSWA). The HSE Act was in place at the relevant time.
2. This followed High Court and Court of Appeal decisions requiring the Commissioner to give the undertaking. See Commissioner of Police v Salter & Ors [2024] NZCA 6 and our summary of the decision at https://www.minterellison.co.nz/insights/court-of-appeal-weighs-in-on-novel-proceeds-of-crime-action-commissioner-must-cover-commercial-bus 
3. Section 55 Criminal Proceeds (Recovery) Act 2009
4. Section 6 and section 5 Criminal Proceeds (Recovery) Act 2009
5. Commissioner of Police v Salter & Ors [2024] NZCA 6 at [99]
6. Commissioner of Police v Salter & Ors [2024] NZHC 3069 at [11-12]
7. Commissioner of Police v Salter & Ors [2024] NZHC 3069 at [28]
8. Commissioner of Police v Salter & Ors [2024] NZHC 3069 at [16] and [27]
9. To have “unlawfully benefitted”, the person must have knowingly, directly or indirectly, derived a benefit from the significant criminal activity, whether or not the person undertook or was involved in the significant criminal activity: section 7 Criminal Proceeds (Recovery) Act 2009
10.  Millions to be forfeited following workplace death | New Zealand Police