New Zealand - Substantially Increased Reparation For Emotional Harm

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Steamship Mutual

Published: August 09, 2010

August 2005

A recent decision of a New Zealand court involving a local ship owner appears to signal a shift to increased awards to injured employees for breaches of health & safety in employment legislation.

New Zealand is one of the few places in the world where court claims for damages for personal injury are severely restricted. Such a concept will be alien to most readers whose court systems enable claims to be made for breach of duty, to obtain compensation for loss of income, general damages and the like.

However, in return for the restriction on recovery, the state pays compensation under a system known as ACC at rates determined by legislation, in respect of loss of earnings and also lump sums for loss of amenity. This system is overlaid by health & safety legislation which enables courts to award compensation to employees for losses which are not covered by ACC.

Facts

The case is Maritime Safety Authority v Sealord Group Limited¹.

Mr Hope, aged 58, was employed by Sealord Group Limited based in Nelson, a major New Zealand fishing port. He worked on board the FV "Aoraki" a vessel recently acquired by Sealord. Mr Hope was a fishmeal plant operator. He was engaged in cleaning the fishmeal cooking machine and became trapped in the blades of the machine's auger. He suffered extensive injuries. The attempts of Sealord staff to save Mr Hope were described by the judge as 'truly heroic', but he died 18 hours after sustaining his injuries.

The Health & Safety in Employment Act 1992 (the Act) in New Zealand requires employers to take all reasonably practicable steps to ensure the safety of employees while at work. So far as shipping is concerned, the Act only applies to New Zealand ships or foreign ships carrying coastal cargo while the foreign ship is on demise charter to a New Zealand-based operator.

Breach of the Act by ship owners is policed by Maritime New Zealand, the local maritime state regulatory body. The maximum penalty for each offence renders a person liable on summary conviction to a fine not exceeding NZ$500,000 (US$345,000) in cases where employers have knowledge that any action is reasonably likely to cause serious harm, otherwise NZ$250,000. Historically, past awards had not exceeded $90,000 for emotional harm.

In addition to a fine, the court can award reparation, that being a sum paid by way of compensation to the injured party or relatives.

When serious injury occurs, perhaps especially in the case of death, it is often difficult to defend such a charge. As the court noted in this case, industrial accidents are never intended, but owing to the vagaries of nature, the fishing industry is a particularly difficult and hazardous industry at the best of times, particularly in the southern oceans. However, the judge said he was left with the clear impression that the risk of entrapment in the fish cooker was 'an accident waiting to happen'. Prudently, Sealord pleaded guilty to two charges, one relating to a failure to take all reasonably practicable steps to ensure safety, and another for failing to provide adequate supervision and training for Mr Hope in the use and operation of meal plant procedures.

The Court started assessment of penalty on the first charge at $150,000 but gave credit of $25,000 for its guilty plea, remorse, offer to pay reparation and remedial steps taken. On the second charge, the starting point was $100,000 and the Court gave credit of $20,000 for the same reasons. The total fine was $205,000 of which $195,000 was paid to the family as reparation and $10,000 in fine to the government.

A number of factors were relied on by the court in fixing the relatively high starting point for assessment of penalty. Aggravating factors were that, as the judge said, 'you would not have to be a "rocket scientist" to work out exactly what was required to be done to remedy the situation' and that Sealord were in breach of Maritime Rules by failing to have a steel platform alongside the cooker and a ladder to the cooker. While the company had a 'pretty good' record (2 previous convictions balanced by the large scale of the operation), there had been several previous incidents involving injuries in fishmeal plants for which warnings had been given, rather than prosecutions taken. A recommendation to fit 'dead man' alarms to fishmeal plants and to provide safety induction training for all employees had not been implemented on this ship or with this employee.

Discussion

Section 32 of the Sentencing Act 2002 deals with reparation orders. In part it provides:

(1) A court may impose a sentence of reparation if an offender has, through or by means of an offence of which the offender is convicted, caused a person to suffer-

(a) loss of or damage to property; or

(b) emotional harm; or

While the level of fine under the Act is capped, reparation under the Sentencing Act is not: an award is supposed to reflect a victim's loss.

Furthermore, in determining sentence, case law² provides that the court should first fix the amount which the offender should pay in reparation, by reference to the means of the offender and the amount warranted by the damage suffered. The amount of the reparation sentence is then taken into account when assessing the fine (paid to the Crown).

It is inferred that in this case the award was made to Mr Hope's family for the emotional harm they suffered as a result of Mr Hope's ordeal, rather than any property damage.

An award of $195,000 in respect of emotional harm far exceeds any previous award in any forum in New Zealand.

Prior to the Sentencing Act of 2002 awards in the case of death ranged from about $15-25,000, which by international standards might be seen as small compensation for loss of life.

The emphasis on reparation changed under the Sentencing Act. Where the court has the power to make a reparation order, it must impose it. The only grounds for not making an order are if it would result in undue hardship for the offender or the dependents of the offender, or any other special circumstances would make it appropriate. It must also impose reparation in preference to a fine if it appears to the court that the offender has or will have the means to pay a fine or make reparation, but not both.

Also relevant is that amendments were then made to the Health & Safety in Employment Act in 2003 raising the maximum fines tenfold.

Given that Parliament clearly intended to raise potential exposure for employers, it is perhaps not surprising that in cases of death in the work place, prosecutors have pressed for the starting point in assessing penalty at $100 - $150,000. That is what occurred in this case, the judge starting at $150,000 on the first charge.

However, the amount of reparation for emotional harm is perhaps open to criticism given that it should reflect actual loss. It is difficult to see how, in ordering $195,000 in respect of emotional harm, this is consistent with awards for similar harm made by the courts in New Zealand. The leading case of Attorney General v Gilbert³ involved a claim for stress related-injury which led to Mr Gilbert being assessed at 90% disabled. In that case, the Court of Appeal upheld the claimant's general damages award against his employer of $75,000 for stress-related harm.

While nobody would dispute the extreme circumstances of Mr Hope's case, it is difficult to see why compensation to his family for emotional harm should be over 2½ times greater than the award to Mr Gilbert.

If the decision is not appealed, defence lawyers will argue that this case is an 'outlier' and is not binding on courts in future cases. While that is true, it will also be relied upon by prosecutors as reflecting a shift upwards in the awards that should be made against employers in extreme cases.

With thanks to Neil Beadle of Phillips Fox, Aukland, for preparing this article

1. Unreported, 24/6/05, Zohrab DCJ, Nelson, CRI-2005-042-732

2. Police v Ferrier 18/11/03 Harrison J, HC Auckland CRI2003-404-000195

3. Attorney General v Gilbert [2002] 2 NZLR 342