Industrial Relations Commission of New South Wales in Court Session CITATION : Inspector Schultz v Leonard J Williams (Timber) Pty Ltd [2002] NSWIRComm 165 PROSECUTOR Inspector Arthur Schultz PARTIES : DEFENDANT Leonard J Williams (Timber) Pty Ltd FILE NUMBER: IRC4503 of 2000 CORAM: Peterson J CATCHWORDS : Occupational health and safety - s16(1) - penalty - plea of not guilty - financial state of the defendant - subjective features - assessment of penalty. LEGISLATION CITED : Occupational Health and Safety Act 1983 - s16(1) CASES CITED : Independent Cargo and Wool Services Pty Ltd v Inspector F P Mingare, Industrial Court of NSW, 10 March 1994, unreported. HEARING DATES: 04/24/2002 DATE OF JUDGMENT: 07/19/2002 PROSECUTOR Mr M P Cahill of counsel SOLICITOR Phillips Fox SYDNEY. LEGAL REPRESENTATIVES: DEFENDANT Mr D P Robinson of counsel SOLICITOR Fishburn Watson O'Brien COFFS HARBOUR. JUDGMENT: - 5 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: PETERSON J DATE: 19 JULY 2002 Matter No IRC 4503 of 2000 INSPECTOR ARTHUR SCHULTZ v LEONARD J WILLIAMS (TIMBER) PTY LTD Prosecution under s.16(1) of the Occupational Health and Safety Act 1983 JUDGMENT AS TO PENALTY 1 By judgment given on 9 November 2001 the defendant, Leonard J Williams (Timber) Pty Ltd, was the subject of a finding that a charge brought by the prosecutor on behalf of the WorkCover Authority of New South Wales had been proven. This judgment concerns the issue of penalty which has now been the subject of further hearing. 2 The facts of the offence were dealt with extensively in the earlier judgment and I do not intend to repeat them in detail. The defendant is a company operating in the timber industry; it buys and sells timber and from time to time harvests it. The offence involved an accident at a logging site when an ironbark sapling was caused to fall by another tree hitting it after that tree had been pushed over by a skidder machine. The ironbark sapling struck a contract timber feller causing him injuries which have produced a condition of paraplegia. 3 The system of work which was operating at the time left it to workers to ensure that they were not within proximity of each other. The way in which that operated was informal and depended to a significant degree upon the reliance by the defendant company and its directors upon the experience of the timber feller and the skidder operator as men with considerable backgrounds in bush work. 4 The particulars of the charge which were found to have been made out are as follows: (a) the Defendant carried on the logging of timber at the logging site; (b) the Defendant employed Raymond Frank Tagget as a machinery operator operating a skidder machine at the logging site; (c) the Defendant contracted with Jeffrey Darren Barnett to provide his services as a log feller at the logging site; (d) the Defendant failed to ensure that Tagget operated the skidder machine in a manner that did not expose Barnett to a risk to his health and safety while carrying out timber felling, skidding and snigging operations at the logging site ("logging activities"); (e) the Defendant failed to ensure Tagget received adequate instructions and training in the institution of a safe system of work for carrying out logging activities at the logging site; (f) the Defendant failed to ensure Barnett received adequate instructions and training to ensure a safe system of work for carrying out logging activities at the logging site; (g) the Defendant failed to ensure that adequate procedures were put in place to ensure a safe system of work for carrying out logging activities at the logging site; (h) the Defendant failed to ensure an adequate system of communication was established between Barnett and Tagget while carrying out logging activities at the logging site; (j) the Defendant failed to put in place measures to ensure that no person remained in the danger area in front of and beside a log or tree being snigged by Tagget while operating the skidder machine at the logging site; (k) the Defendant failed to put in place measures to ensure that adequate warning signals were given by Tagget to Barnett while carrying out log snigging operations at the logging site; 5 The evidence tendered by the prosecutor on the matter of penalty was limited to the record of the defendant which illustrated that it has not come under notice previously in relation to any work safety matters. 6 The evidence in the defence case on penalty comprised the oral evidence of Shane Leonard Williams, a director, together with his brother, of the defendant since 1979. The business was founded by their father and the defendant first registered in 1966. 7 The defendant has instituted new procedures and provided new equipment designed to militate against the occurrence of the risks to which the relevant worker was exposed in the incident the subject of this case. Those changes involved being an attempt to ensure greater commitment to utilising safety equipment, orange safety vests and hard hats to increase visibility in the bush. More particularly, the work of felling trees and skidding them, that is to say dragging the logs away by the use of a skidding machine, is no longer undertaken simultaneously. If that position be maintained then the risk involved here could not arise again. I mention also that different telephones have been provided, giving better coverage and avoiding black spots which were involved in the type used earlier. 8 The defendant has an otherwise good industrial record and cooperated with WorkCover in the investigation of the accident. 9 A significant part of the hearing on penalty involved evidence going to the financial state of the defendant and its relationship with another corporation, L J Williams Holdings Pty Ltd ("Holdings"). The financial statements for the defendant company for the years ended 30.6.2000 and 30.6.2001 were put in evidence thus providing information in respect of the three years 1999 to 2001 inclusive. The financial statements for Holdings for the year ended 30.6.2001 were also tendered thus providing relevant information for the years 2000 and 2001. That documentary evidence, together with the oral evidence of Mr Williams, makes plain that there is an inter-relationship between the two corporations to the extent that, as at 30 June 2001, the defendant was indebted in respect of a loan to Holdings in the sum of $490,898. The most significant asset in the balance sheet for Holdings is the loan due to Holdings from the defendant in that amount, the net assets of Holdings being $477,305. It further appears that were Holdings to call up that loan a serious question would arise as to the ability of the defendant to meet it. In those circumstances I consider the conclusion must be that the financial position of the defendant is dependent upon the support of Holdings. 10 The defendant has not argued that it is impecunious but that it is, upon an analysis of the financial statements, a marginal business which provides a not substantial income to the directors and family members involved. 11 The gross sales receipts for the defendant for the last three financial years have been $2,342,809, $2,579,296 and, for 2001 $2,589,236. Operating profit before income tax for 1999 and 2000 was $17,484 and $13,063, with a loss in the 2001 year of $28,835. However retained profits left the company in the 2001 year with unappropriated profit (after allowing for the loss) of $774,615. 12 This evidence does not persuade me that I should give any substantial discount to the defendant on account of its financial standing. The defendant is not without the means to meet what I consider an appropriate level of penalty in the circumstances of this case. I turn to that matter. The relevant and principal indicator of penalty is the objective seriousness of the offence which is determined by its nature and quality (per the Full Court of the Industrial Court of New South Wales, 10 March 1994, unreported in Independent Cargo and Wool Services Pty Ltd v Inspector F P Mingare). The assessment of penalty is not to reflect the tragic injury to Mr Barnett although that may point to the seriousness of the failure. 13 I accept the submission of the prosecutor that this case is distinguishable from those where the risk to safety was not addressed because of some inadvertent oversight or where there had not been recognition of the nature and extent of the risk. Mr Williams, in his evidence in the primary stage of this matter, recognised the existence of the risk and extent of it. In large part it was the misplaced confidence which he had in the workers, based upon their experience in bush work which caused him not to take any effective step to alleviate or eliminate that risk. Here, on my appreciation of the facts, there was a system operating between the skidder operator and the tree feller which broke down, probably as the result of the failure to communicate effectively with hand signals which put the skidder operator where he should not have been, within too close a proximity of the feller. 14 The offence in this case should be considered in the mid range of penalty. the maximum being $550,000. The applicant is entitled to the benefit of the subjective features to which I have referred, having their impact on penalty. Taking into account those subjective features I consider an appropriate penalty would be 25% of the maximum, namely $137,500. 15 The defendant is convicted and fined the sum of $137,500, with a moiety to the WorkCover Authority. The defendant should meet the prosecutor's costs in a sum as might be agreed. Should there be no agreement, I grant liberty to apply. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.