Shareholders and directors of businesses with significant health and safety risks need to understand what is at stake if they breach health and safety laws.
Beyond criminal sanctions, an unprecedented case is testing whether assets acquired from business operations can be seized under the Criminal Proceeds (Recovery) Act 2009 (CPRA) for health and safety offences. The CPRA allows authorities to trace and seize assets believed to be derived from significant criminal activity.
Salters Cartage Case
In September 2015, Salters Cartage Limited, a company specializing in hazardous waste transport and disposal, faced charges under the Health and Safety in Employment Act 1992 (HSEA) and the Hazardous Substances and New Organisms Act 1996 (HSNO). The company's founder, Mr. Salter, was found to be responsible in connection with an incident where an employee of a contractor engaged by the company was killed in an explosion while installing a metal stairway on a storage tank containing combustible material. The fatality was due to a failure to take practicable steps to ensure the worker’s safety.
Salters Cartage and Mr. Salter pleaded guilty to charges under the HSEA and HSNO, which resulted in significant fines and penalties. The District Court imposed a sentence of reparations totalling around $128,000. The Court also fined Salters Cartage over $200,000 for pre-explosion offenses, and around $56,000 for post-explosion offenses. Mr. Salter received a 4½ months home detention sentence and a $25,000 fine for his involvement.
This case highlights the severe sanctions under the HSEA for serious offences by both the company and its director.
Health and Safety at Work Act 2015 (HSWA)
The HSWA, which has superseded the HSEA, introduces broader offenses and stronger penalties for breaches. For example:
- Offences involving reckless conduct that exposes individuals to risk of death or serious injury can result in:
- Up to five years' imprisonment or a $600,000 fine, or both, for individuals who are considered a person conducting a business or undertaking (PCBU) or an officer of the PCBU.
- A fine of up to $3,000,000 for companies.
- Offences involving failure to comply with duties that expose individuals to risk of death or serious injury can result in:
- A maximum fine of $150,000 for individuals who are not a PCBU or officer of a PCBU.
- A fine up to $300,000 for individuals who are a PCBU or officer of a PCBU, and up to $1.5 million for companies.
In other words, the HSWA’s penalty regime involves significant maximum penalties and potential imprisonment, depending on the nature of the offence.
Criminal Proceeds (Recovery) Act 2009
As mentioned above, Salters Cartage could potentially have its assets seized under the CPRA for health and safety offences. If it is ultimately found that the CPRA does apply to Mr. Salter, this will be of considerable concern to shareholders and directors of all businesses. Salters Cartage and Mr. Salter already received significant penalties and now may face additional financial consequences if the police successfully argue that the CPRA applies on the facts of the case.
Under the CPRA, the asset seized must be linked to the criminal activity. If the case against Mr. Salter succeeds, it could establish a precedent for increased legal risks in connection with health and safety offences for businesses, especially family businesses where profits flow through to owners' assets. The outcome of this case may change how businesses approach health and safety prosecutions, potentially discouraging guilty pleas to save costs or minimise penalties.
The CPRA allows authorities to trace and seize assets derived from or tainted by criminal activity, meaning asset protection structures may not prevent asset seizure.
In the Salter case, police have obtained temporary "freezing" orders on properties, including those owned by trusts, preserving these assets in the event the police succeed with the claim to forfeit those assets. The High Court will hear the case in October, and its outcome is highly anticipated.
Conclusion
Family businesses and their owners must be acutely aware of the severe consequences of breaching health and safety laws, or other statutes that might result in criminal sanctions. The Salters Cartage case underscores the significant penalties arising where serious health and safety breaches have occurred but also the potential for asset seizures under the CPRA. This reinforces the need for strict compliance with health and safety regulations to mitigate risks and protect assets.
Jackson Russell is one of New Zealand’s most respected and oldest law firms. They provide family businesses with legal expertise and guidance.
Disclaimer
The views expressed in this content are those of the author, who is also responsible for any errors and omissions. Family Business Association provides this article for your information only. The content of the article should not be taken as advice. If you wish to explore this topic, please consult an advisor who you consider to have the expertise to provide specific advice in relation to your family business.
