High Court clarifies the approach to reparation in health and safety sentencing

The High Court has released an important decision clarifying the approach that courts are to take when determining reparation in health and safety sentencing.

The High Court’s decision clarifies that:

  • the Court has jurisdiction to make a reparation order directed at those who have suffered the loss of the deceased’s earnings; and
  • reparation for loss of earnings is to be calculated as the difference between the amount the victim would have received in net income and the compensation payable to them under the accident compensation scheme, limited to the period which they are entitled to such payments.  Click here to read the decision.

Background

Oceana Gold (New Zealand) Ltd v WorkSafe New Zealand [2019] NZHC 365 involved two appeals relating to orders for reparation.

In Oceana Gold, an employee died in an accident at the Waihi Mine.  Oceana Gold pleaded guilty to breaching the Health and Safety at Work Act 2015 (HSWA) and was fined $378,000.  The District Court also ordered Oceana Gold to pay $350,000 in reparation to the deceased’s family for lost earnings.  This was in addition to Oceana Gold’s direct payments of $200,000 and its employer provided insurance policy providing a further $450,000 to the deceased’s partner and family.  Oceana Gold appealed the reparation order.

In Cropp Logging, an experienced logger suffered both physical and psychological injuries following a “breaking out” incident.  Cropp pleaded guilty to breaching the HSWA and the Court assessed Cropp’s culpability as high in setting a starting point of $750,000.  The final fine of $100,000 reflected mitigating factors and Cropp’s financial capacity.  In ordering reparation of $80,000, the sentencing judge did not identify what part of the reparation order was for emotional harm as opposed to reparation for the shortfall loss after Accident Compensation entitlements.   Cropp appealed the reparation order.

The Court’s jurisdiction to make a reparation order for the deceased’s lost earnings

The first issue, which was relevant only to Oceana Gold, was whether an order for reparation under s 32 of the Sentencing Act 2002 for loss consequential on physical harm is limited to those who suffer the physical harm.

In the District Court, the Judge considered that the deceased’s life-time earning capacity was a loss suffered by the deceased’s family.  On appeal, Oceana Gold contended that the reparation award was outside the Court’s jurisdiction and should be quashed.  Oceana Gold submitted that reparation for loss of earnings is restricted to the person who suffered the physical harm.

The High Court rejected Oceana Gold’s reasoning, determining that the sentencing Court has jurisdiction under s 32 of the Sentencing Act to order reparation in favour of victims for loss consequential on the physical harm to another.

Quantifying consequential loss

The second issue related to the correct approach to calculating reparation for loss of earnings.  The High Court considered two approaches:

  • the statutory shortfall approach – reparation for financial loss would be constrained by the benefit that the victim would have received (calculated by reference to net income in the period before the incident), and limited to the shortfall between that amount and the victim’s entitlement to compensation under the Accident Compensation Act for the period which they are entitled to such payments; or
  • the open-ended approach – the victim would be entitled to the prospective future value of the financial loss suffered (calculated by reference to the anticipated life-time earnings on the basis of actuarial reports) for a period of time unconstrained by any time limit for which compensation may be payable under the Accident Compensation Act.

The District Court followed the open-ended approach.  In contrast, the High Court determined that the statutory shortfall approach was appropriate, taking into account other cases and the accident compensation scheme.  The High Court also noted that it avoided the need for both complicated actuarial reports and arguments about contributory negligence.

The appeals

The High Court agreed with Oceana Gold’s submission that the reparation order of $350,000 for consequential loss was excessive taking into account the insurance and voluntary payments made by Oceana Gold and the statutory shortfall in accident compensation payments for loss of the deceased’s income.  The appropriate figure for reparation for the statutory shortfall for loss of earnings was approximately $120,000.  The High Court also noted that an award of between $80,000 and $100,000 would have been appropriate for emotional harm.  So, at the most, reparation of $220,000 was appropriate.

The High Court agreed with Cropp that the sentencing judge failed to identify what part of the reparation order was for emotional harm as opposed to the statutory shortfall after Accident Compensation entitlements.  The High Court determined that an order for consequential loss of $7,500 and $50,000 reparation for emotional harm was appropriate.

Our view

The High Court’s decision provides welcome clarity regarding the correct approach to calculating reparation for loss of earnings.  In our view, the statutory shortfall approach provides a pragmatic and relatively straightforward way to calculate a victim’s loss of earnings, at least when compared to the detailed actuarial assessments that would have been required if the Court had adopted the open-ended approach.

We will continue to monitor further developments in this area. If you have any questions about this update or health and safety in general, our team would be happy to assist you.

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