Industrial Court of New South Wales CITATION: WorkCover of New South Wales (Inspector Farid (Known as Fred) Katf) v APC Socotherm Pty Ltd [2006] NSWIRComm 165 PROSECUTOR- Work Cover of New South Wales (Inspector Farid (Known as Fred) Katf) PARTIES: DEFENDANT- APC Socotherm Pty Ltd FILE NUMBER(S): 3452 of 2005 CORAM: Marks J CATCHWORDS: OH&S – guilty plea – objective seriousness - prior offence – failure to identify risk – deterrent effect of the imposition of penalty – assessment of the penalty - consideration of subjective factors – no prosecution of employer – capacity to pay fine – Held: Offence objectively serious –obligations imposed on defendant and employer were concurrent – defendant has capacity to pay – two offences are isolated incidents rather than systematic failure – penalty imposed. LEGISLATION CITED: Occupational Health & Safety Act 2000 Fines Act 1996 WorkCover Authority of New South Wales (Inspector Katf) v Skilled Warehousing (NSW) Pty Ltd and APC Socotherm Pty Ltd [2005] NSWIRComm 296 WorkCover Authority of New South Wales (Inspector Wong) v Aluminium Contractors Sales (NSW) Pty Ltd [2000] NSWIRComm 233 CASES CITED: Nesmat Pty Limited v WorkCover Authority of New South Wales (1998) 87 IR 312 Wong v Melinda Group Pty Limited (1998) 82 IR 118 WorkCover Authority NSW (Inspector Ankucic) v McDonald's Australia Limited and anor (2000) 95 IR 383 HEARING DATES: 11/05/06 DATE OF JUDGMENT: 05/22/2006 PROSECUTOR: Mr M P Cahill of counsel Solicitor: Mr N Correy Moray & Agnew LEGAL REPRESENTATIVES: DEFENDANT: Mr P M Skinner of counsel Solicitor: Ms K Grafenauer N J Papallo & Co JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Marks J Monday 22 May 2006 Matter No IRC 3452 of 2005 INSPECTOR FARID (KNOWN AS FRED) KATF v APC SOCOTHERM PTY LTD Prosecution under section 8(2) of the Occupational Health and Safety Act 2000 JUDGMENT [2006] NSWIRComm 165 1 The defendant, APC Socotherm Pty Ltd, has pleaded guilty to a charge that it has breached s 8(2) of the Occupational Health & Safety Act 2000 ("the Act") in proceedings instituted by the prosecutor, Inspector Katf of the WorkCover Authority of New South Wales. The charge is constituted by an amended application for order by which it is alleged that the defendant was an employer on 8 July 2003 at approximately 10:30am at its pipe coating plant in Kembla Grange, and that it failed to ensure that people not being its employees, including Colin Parkinson, an employee of the labour hire company Skilled Warehousing Pty Ltd, were not exposed to risks to their health or safety arising from the conduct of its undertaking whilst at its place of work. 2 An agreed statement of facts was tendered into evidence, which is in the following terms: "1. At all material times the prosecutor was an inspector duly appointed pursuant to clause 11 schedule 3 of the Occupational Health & Safety Act , 2000 under division 1 of Pt 5, and is empowered by s106 of the said Act to institute proceedings in the within matter. 2. At all material times the defendant, APC SOCOTHERM PTY LTD [ACN 083 944 843] ('the defendant') was a company duly incorporated and having its registered office at C/- NJ Papallo & Company, Level 6, 350 Kent Street, Sydney in the State of New South Wales. 3. At all material times the defendant was an employer. 4. At all material times the defendant was engaged in the manufacture of pipes for underground gas and petroleum lines. Its manufacturing process was conducted from premises at Lot 562, Reddalls Road, Kemblawarra in the state of New South Wales ('the premises'). 5. At all material times there was situated at the premises a number of different plants which performed different functions in the manufacturing process which it conducted. One of these plants was known as the external pipe coating plant. 6. At all material times within the pipe coating plant of the premises there was a machine known as a Carlo Banfi Brand Abrasive Blasting Machine ('the machine') which was used to clean rust from the exterior of the large diameter metal pipes. 7. At all material times there was attached to the machine a duct extraction system which removed the dust created during the abrasive blasting process and vented it through that system outside the factory premises. 8. Situated on the outside of the main factory building on the southern wall was the external plant components comprising of a dust extraction system which consisted of a cyclone dust collector bag house with interconnecting duct work. 9. Situated at the base of the dust collection bag house was a rotary valve. The outside steel casing of this rotary valve measured about 320mm in length, 400mm in height and 380mm in diameter. On one side of the rotary valve was situated an electrical motor and drive mechanism for the internal rotary valve impeller. 10. The flange at the base of the rotary valve measured 380mm in length and 260mm in width. There was an opening in this base flange which lead to the internal rotary valve impeller. The opening measured 280mm in length and 170mm in width. 11. The distance from the base flange to the rotary valve impeller measured between 65 and 100mm. There was a nip point between the rotary valve impeller and the inside of the rotary valve casing at a distance of about 100mm from the base flange. 12. The opening leading into the rotary valve impeller was not properly guarded. 13. The dust extraction system itself was supported on four metal legs on a concrete slab. There was a build up of dust above the concrete slab. The distance from the bottom flange of the rotary valve covering over the concrete area measured between around 960 and 975mm. 14. At all material times it was normal practice to place a 200 litre capacity steel drum directly beneath the opening in the base flange of the rotary valve in order to capture the dust from the manufacturing process. When a 200 litre drum was placed in position directly beneath the rotary valve opening, there was a distance of approximately 79mm between the top of the drum and the base of the rotary valve. 15. At all material times Colin Parkinson ('the worker'), an employee of Skilled Warehousing (NSW) Pty Ltd [ACN 095 444 670] was engaged by the defendant to work at the external pipe coating plant. 16. At all material times the worker had been let on hire by his employer to the defendant.. 17. At all material times it was one of the worker's duties to ensure that the work area, including the area around the dust extraction system was clean. At about 10.30am on 8 July 2003 the worker, whilst carrying out general housekeeping and in the process of removing the bin from under the rotary valve of the dust extractor, thought he saw a piece of wood inside the chute and put his left hand up the chute to remove it. 18. As a consequence of the incident involving the worker's hand being trapped in the machine, he sustained serious injuries being partial amputations to three of his fingers on that hand. 19. Following the incident the worker's hand remained trapped in the machine for approximately 1½ hours and it was necessary to dismantle part of the discharge outlet to free his hand from it. 20. As a consequence of the injuries sustained by the worker, he was unable to resume his normal work for a period of in excess of seven days immediately following the accident. 21. Subsequent to the accident on 8 July 2003 the defendant installed a metal mesh guard across the opening of the valve outlet". 3 Included within the particulars of the charge, relevantly, were the following: "6. At the time the worker sustained his injuries the dangerous rotating impeller of the machine was not properly guarded whilst it was in motion or use. 7. At all material times there was no interlock device to prevent operation of the machine's rotating impeller whilst the worker was within the area of operation of such blades. 8. At all material times whilst the worker was conducting work in relation to the machine there was no warning sign on the discharge outlet to alert the worker to the existence of the unguarded rotating impeller close to the bottom of the discharge outlet. 9. On and prior to the incident on 8 July 2003 the defendant had not adequately provided such information, instruction and training in relation to the work involving the use of the machine including housekeeping in relation to its dust extraction system such as was necessary to ensure this work could be conducted safely by its employees and in particular the worker. 10. The system of work involving the cleaning of the waste from the area in and around the discharge outlet of the machine while its dangerous and moving parts were not properly guarded was unsafe". 4 In addition to the agreed statement of facts, the prosecutor tendered into evidence a number of photographs and other factual material. On behalf of the defendant, an affidavit of Paul Wilson, Project Director and Deputy Managing Director of the defendant, became evidence in the proceedings. 5 The defendant had a prior conviction for a breach of the Act, the details of which I shall refer to shortly. As a result, the maximum applicable penalty in these proceedings is $825,000. 6 The prior offence occurred at the defendant's plant on 17 January 2003. On this occasion an electrically-driven spray booth was activated, causing a spray nozzle to injure a person performing work whose services had been provided by Skilled Warehousing Pty Ltd. The worker concerned was not seriously injured. The defendant pleaded guilty because there was no interlock device to prevent the operation of the electrically driven paint cabin whilst the worker was in the area, there was no emergency stop device provided and the system of communication between the operator who activated the system and the person performing work nearby was deficient. The defendant was fined the sum of $84,500 subsequent to the plea of guilty entered. The proceedings are WorkCover Authority of New South Wales (Inspector Katf) v Skilled Warehousing (NSW) Pty Ltd and APC Socotherm Pty Ltd [2005] NSWIRComm 296, a judgment of Staunton J. 7 It was the evidence of Mr Wilson that the respondent was established in 1998 and commenced its pipe coating operations in November 1999. It is a wholly-owned subsidiary of an Italian corporation which operates throughout the world. It is asserted that hazard identification and risk assessment processes were undertaken in the design and construction of the defendant's plant in New South Wales. Because of the cyclical nature of the defendant's operations a small permanent workforce is employed with the supplementation of this workforce by persons supplied by Skilled Warehousing Pty Ltd. 8 Mr Wilson said that the defendant had a high commitment to its occupational health and safety obligations, that it had met certain standards by way of quality management and certification in terms of ISO requirements, that it had a documented and comprehensive occupational health and safety quality management system, had maintained weekly injury statistics records since November 2001, had initiated and maintained a safety induction program for all persons who perform work at its facility, had conducted regular "toolbox" meetings, and its managerial personnel were trained and accredited in occupational health and safety matters. 9 It was an agreed factual matter between the parties that, after the first incident which occurred in January 2003, the Skilled organisation had conducted a risk assessment survey which had failed to identify the fact that the particular equipment which was the subject of this incident had not been securely guarded. 10 The first task in assessing an appropriate penalty involves a consideration of the objective seriousness of the offence. It was the prosecution's position, put shortly, that the offence was a serious one because this particular item of equipment was clearly unsafe and was unguarded in circumstances where the installation of an appropriate guard was easily attended to. Furthermore, Mr Parkinson was engaged to perform general cleaning up work throughout the defendant's plant, including the area where the incident occurred. The defendant had failed to identify this particular piece of equipment as representing a danger. Accordingly, it had not been guarded and it followed that the defendant had failed to either warn or instruct anyone about the danger of inserting any part of the body into the bottom of the equipment. 11 The defendant characterised the breach as not being a serious one having regard to the fact that Mr Parkinson must have bent down in order to gain access to the chute and was required to put his hand up into the chute about 100mm before coming into contact with the moving impellor. 12 I reject the defendant's attempt to characterise the breach as anything other than serious. Mr Wilson deposed to the fact that: "The base of the dust collection hopper is tapered in design to allow collection of the dust through a relatively small discharge point at its base. However, during periods of high humidity and when large volumes of dust are being extracted, the dust can build up on the inside walls of the collector and it can become quite thick. In order to avoid the possibility of the rotary valve becoming choked with a single, large clump of dust, it is usual practice to loosen built up deposits on the inside walls by banging the outside walls of the collector to dislodge the build up". In these circumstances it must have been foreseeable that a person whose duties extended to ensuring that this area was clean and to removing any foreign object might have access to the bottom of the chute and be exposed to the danger associated with the unguarded moving impellor. 13 In characterising the offence as a serious one I should state for completeness that, I have also taken into account the fact that the injured person was not a direct employee of the defendant but a person whose services were supplied by a labour hire company, which arguably creates a heightened obligation to ensure that the person concerned has been adequately trained, instructed and warned about any potential risk. On the other hand, the prosecutor conceded that: "The failure of the independent inspection, review and risk assessment commissioned by the injured worker's employer provides support for the contention that the subject defect was not readily obvious or easy to identify in retrospect (i.e. after the plant had been installed and commissioned)". 14 Of course, the fact that the defendant, despite its comprehensive attention to occupational health and safety matters, had failed to identify this particular piece of equipment as creating an inherently dangerous situation, denied it the ability to consider the likelihood of a risk of injury being created by it. 15 In all the circumstances I conclude that the breach was a serious one when viewed objectively. 16 It is also necessary to take into account the deterrent effect of the imposition of a penalty, both generally and with respect to this particular defendant, and I shall do so in the assessment of the penalty. 17 There are, however, a number of subjective matters which I need to deal with. It was agreed that the defendant had pleaded guilty at the earliest opportunity and it is therefore entitled to a discount by reference to the utilitarian value of the early plea. Furthermore, it was agreed between the parties that the defendant had readily cooperated with the WorkCover Authority of New South Wales in connection with its investigations, had expressed contrition and remorse for what had occurred, and generally had a high commitment to occupational health and safety matters. In this latter regard I note that this is the defendant's second offence; however, on the basis of the evidentiary material tendered before me, it is more likely than not that these two incidents are of an isolated nature rather than representing any product of a systematic failure to adhere to occupational health and safety obligations. 18 There are, however, two other matters which I need refer to in terms of the subjective elements of the assessment of penalty which were contentious. The first was a submission made by the defendant that the WorkCover Authority of New South Wales had not brought any charge against Skilled Warehousing. This submission was based upon a number of authorities which are conveniently referred to in the judgment of Schmidt J in this Court in WorkCover Authority of New South Wales (Inspector Wong) v Aluminium Contractors Sales (NSW) Pty Ltd [2000] NSWIRComm 233. After referring to the principle of parity, her Honour observed: "[23] Prosecutions under the Act may, of course, be launched against a Department of the Crown. One can readily appreciate a sense of disquiet arising when another defendant enters a plea of guilty to an offence, which has arisen out of the same factual circumstances which have led to a prosecution being launched against the Crown, only to later learn that the prosecution of the Crown has been abandoned. [24] Here it was the Department who had control of the site in question, while the work which gave rise to the prosecution was being performed, at a time when the defendant was not involved in either the performance or supervision of the work, yet the prosecution of the Department has been abandoned. [25] That there might be some effect upon public confidence in the integrity of the administration of justice flowing from such circumstances can be readily appreciated, especially in the absence of some explanation for the discontinuation of the proceedings against the Department. In the circumstances, it is not open, in my view, for the Court to simply infer from the fact that the prosecution has been abandoned, that the Crown had no responsibility in respect of the risk to safety in question. Nor, however, do I consider it open to infer that the prosecution would have been successful, had it been pursued. [26] Questions of parity of sentencing only arise if there is a conviction arising out of the prosecution of separate offences flowing out of the same circumstances. Nevertheless, it cannot be doubted that the proper course in circumstances such as this is to take note, as a relevant agreed fact, that the prosecution against the Department has been abandoned. This is consistent with the discussion of the Full Court in Nesmat Pty Limited v WorkCover Authority of New South Wales (1998) 87 IR 312 at pp322-323, where it was observed that: 'On appeal, we were advised that the prosecution which had been commenced against a member of the staff of Public Works had been withdrawn, and that Public Works was never prosecuted in relation to the tragic accident despite what was, on the evidence, the instrumental part played by it. The absence of prosecution of other parties, on whom the appellant had reasonably relied, underlines the cogency of argument presented on appeal that the sentence gave rise to a justifiable sense of injustice.' [27] This approach was applied by Hungerford J in Wong v Melinda Group Pty Limited (1998) 82 IR 118, where his Honour concluded that there had been no prosecution of those with whom the real culpability for the risk to safety being in question lay. In that case, the defendant pleaded guilty and received the benefit of s556A of the Crimes Act 1900, (see now s10 of the Crimes (Sentencing Procedures) Act 1999 ) . A similar approach was discussed by Walton J in McDonald's at p437. In accordance with that approach, I have taken note of the fact of the pursuit of this prosecution against the defendant, in circumstances where the prosecution of the Department has been abandoned". 19 These authorities point to the need, as was emphasised by Walton J, Vice-President, in WorkCover Authority NSW (Inspector Ankucic) v McDonald's Australia Limited and anor (2000) 95 IR 383 (at page 437), to be careful, when considering the objective seriousness of the offence, to examine to the extent possible the respective contribution to culpability where more than one actor is involved. In my opinion, the circumstances involved in these proceedings are relevantly different to those which applied in MacDonald's, Nesmat and the other authorities referred to. This is not a case where more than one entity made a contribution to the manner in which particular activities were carried out, especially by reference to a system of work. This is more a case where the obligations imposed on the defendant and the Skilled organisation were concurrent, rather than separate. Both were required to ensure that persons performing work were adequately instructed, trained and supervised. Both had concurrent obligations with respect to the safe operation of equipment and the safety of that equipment. On this basis, the only relevance in terms of the assessment of penalty in these proceedings concerning the Skilled organisation relates to the concession made by the prosecutor with respect to the risk assessment survey carried out which failed to identify the particular risk created by this particular piece of equipment. That is a matter which I have already taken into account in terms of the objective seriousness of the offence, but which, in my opinion, should not be taken into account in terms of any subjective element. 20 There was annexed to Mr Wilson's affidavit some financial material which indicated that the defendant's operations had been conducted at a loss. Mr Wilson said that: "…it is my opinion that the company has limited resources to pay a large fine. Certainly, a large fine will exacerbate the company's efforts to achieve a sustainable financial position and will have a negative impact on the overall viability of the company and whether or not the company will continue its operations in New South Wales". However, the company's most recent financial statement shows that it has assets of almost $14 million, that it has in place credit facilities of almost $2 million, of which approximately $660,000 had been used as at 31 December 2005, and that its Italian parent had indicated its willingness to continue to support the defendant financially for the year ended 31 December 2006. The defendant submitted that its capacity to pay should be taken into account pursuant to s 6 of the Fines Act 1996, which requires a Court to consider "such information regarding the means of the accused as is reasonably and practicably available to the Court for consideration" when fixing the amount of any fine. In my opinion, nothing which is contained within the defendant's financial statements is indicative of any inability or incapacity to pay the penalty which the Court intends imposing in these proceedings. 21 Having regard to the discount to which the defendant is entitled with respect to the early plea of guilty, which I assess at 25 percent; having regard to the other subjective matters to which I have referred and having regard also to the objective seriousness of the offence which I have described by reference to the maximum penalty of $825,000, I intend imposing a monetary penalty of $110,000. The prosecution sought costs and a moiety, which were not opposed by the defendant. 22 I make the following orders: 1. The defendant is found guilty of the offence with which it is charged, and convicted accordingly. 2. The defendant is fined the sum of $110,000 with a moiety to the prosecutor. 3. The defendant is to pay the costs of the prosecutor as assessed by the Court in default of agreement. 4. Liberty to apply with respect to costs. 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.